The multinational's local unit is uneasy after the Zimbabwean government targeted it to raise money for elections.
Though Zimbabwe is contributing to Old Mutual's growth in Africa, executives in Harare are increasingly becoming uncomfortable after the government recently forced the Zimbabwe unit of the global financial institution to fork out $20-million through a bond to raise cash for a constitutional referendum two weeks ago, industry sources said.
Zimbabwe last year provided the bulk of the expansion to Old Mutual Plc Southern Africa's customer numbers, outside of South Africa.
In his report accompanying financial results for the year ended December 31 2012, group chief executive Julian Roberts this month said: "Rest of Africa customer numbers were up 13% on 2011, with most of the growth in Zimbabwe and Kenya."
But behind the stellar performance in Zimbabwe are disconcerting developments for the global operation in the country.
Sources said Old Mutual Zimbabwe executives felt "unfairly targeted", but had to give in to prevent a fall-out that could expose the company to unfriendly policies, in particular, the indigenisation law that compels foreign-owned companies to cede 51% of their shareholding to locals.
Industry players say Old Mutual was the only private contributor to the $40-million Distressed Industries and Marginalised Areas Fund, a government initiative in which the financial services company put in $20-million, and the government contributed the rest.
The demand for cash for the referendum, an Old Mutual executive said, was made on the basis that Old Mutual Zimbabwe's portfolio did not hold enough prescribed assets, and the perception that, as part of a global operation, the company had enough resources for an immediate bailout.
Insurance and pension funds are required by law to hold an average of 30% of their assets in local registered securities and loans guaranteed by the government, or loans approved by the commissioner of insurances to local authorities. The assets are known as prescribed assets.
The minimum level of compliance with prescribed asset ratios is 25% for short-term insurers and pension funds, and 30% for life businesses. Old Mutual Zimbabwe offers both.
But an insider at Old Mutual in Harare said they believed Old Mutual Zimbabwe, which was forced to fork out the cash for government bonds alongside a government-controlled, compulsory pension fund, the National Social Security Authority, which also released US$20-million, was the casualty of a desperate government.
He said that Zimbabwe Stock Exchange-listed composite financial services group Afre Corporation, in which the National Social Security Authority now holds a controlling stake, had not been approached despite the fact that its insurance subsidiaries were also not in compliance with prescribed asset ratios.
Afre Corporation also has life, pension and short-term insurance businesses, the second largest after those run by Old Mutual Zimbabwe.
It would appear that Old Mutual is anxious not to upset the status quo because it is grappling with indigenisation worries among several of its operations in the country.
Though it has tabled an indigenisation proposal for approval by the ministry of youth, indigenisation and economic empowerment, Old Mutual Zimbabwe still has to contend with pressure to localise banking units in which it has an interest, such as MBCA Bank.
Nedbank Group owns 74% of MBCA Bank and Old Mutual Zimbabwe directly holds the balance of the stock. Nedbank Group is a unit of Old Mutual Plc, after Old Mutual Zimbabwe gave up its rights to Nedbank Group in 2010.
Since 2012, Old Mutual has been a shareholder in Ecobank Zimbabwe, which is owned by pan-African group Ecobank Transnational Incorporated (ETI), through Nedbank, which has subscription rights arising from a three-year facility made to ETI which, together with top-up investment by way of the anti-dilutionary provisions, may result in Nedbank holding 20% equity in ETI sometime between November 2013 and November 2014.
Nedbank, said Roberts, "has a deep strategic alliance with Ecobank providing clients of both institutions access to the largest banking network in Africa with more than 2 000 staffed outlets in 36 countries".
In Zimbabwe, that alliance is through MBCA Bank and Ecobank Zimbabwe. Old Mutual already owns 100% of Central African Building Society, Zimbabwe's biggest mortgage lender, which is now considered a commercial bank by the Reserve Bank of Zimbabwe.
So, considering that Old Mutual now has such an intricate shareholding in three different commercial banks in Zimbabwe, market watchers say the cash-strapped government may expect it to become more generous than it has been in the past.
Roberts said, as in South Africa, he wants "Old Mutual, Nedbank [which is MBCA in Zimbabwe] and Mutual & Federal to work together".
Last year, Old Mutual and Nedbank injected $3-million to increase shareholder equity in MBCA to $27-million, and the Zimbabwean bank has been given a "$75-million on and off balance sheet facility from Nedbank Group Limited".
Willard Zireva, the chair of MBCA, has already indicated that talks on localisation of shareholding have been unsatisfactory
"Consultations [on indigenisation] are in progress to ensure that an acceptable solution to all parties involved is reached," said Zireva.
Nevertheless, the pressure will remain on Old Mutual.