Zimbabwe Stock Exchange Falling As Investors Pull-Out
“Last month we raked in about US$5 million while months before that we were raking in more than US$20 million a month.
“Since the regulations were gazetted we have seen a negative impact on trade. Last year our market was driven by foreigners, making up to about 45 -50 percent of the total turnover of about US$200 million on the ZSE,” said Munyukwi.
“Every company in Zimbabwe needs re-capilisation because they do not have working capital and we were beginning to see a number of transactions where foreigners were coming in to rescue these companies. Whether these transactions will proceed we do not know because they were coming in to under-write some of the transactions. I do know certain transactions worth about US$100 million have been put on hold because of the uncertainty,” said Munyukwi.
The regulations, gazetted unilaterally by the Minister of Youth Development, Indigenisation and Empowerment, Saviour Kasukuwere last month, have been roundly criticised for poisoning the investment climate in so much as they seek to empower only a few well-connected elites, such as Kasukuwere himself.
The Indigenisation and Economic Empowerment regulations, passed under a two year old legislation adopted by President Robert Mugabe’s Zanu PF government, require businesses capitalised to the tune of US$500 million to inform the administration of the racial mix of their shareholders by mid-April.
Business has felt the pinch, the Zimbabwe Stock Exchange (ZSE) retreated, investors put on hold the release of new money into the market while an investor flight has become apparent since the gazetting of the hastily crafted Statutory Instrument (SI).
Munyukwi, said in an interview that the bourse’s benchmarks lost up to 25 percent on trade as 79 listed companies face the “sanitised invasion”.
“Zimbabweans are net sellers at the moment because they do not have the capital. So a number of foreigners had been coming into the country after we had a number of investment conferences last year. We were now beginning to see the fruits coming into the market. We are now on a six month low from September last year attributable to uncertainty, people don’t know what is going to happen,” said Munyukwi.
Zimbabwe has failed to attract meaningful investment in the last two decades while companies have been failing to recapitalise mainly due to hyperinflation. Business could also not look outward for new capital because of the investment risk Zimbabwe posed.
The ZSE chief said the regulations will “shut foreign investors out”.
Said Munyukwi: “We had been inundated with inquiries especially up to February. Hardly a week went past without entertaining foreign investors from South Africa, Europe and United States. I have had to see any since (the regulations were gazetted).”
We were begin to attract the right calibre of investors such as Investec, and Rand Merchant Bank (RMB) but now they have said-hang on, what’s going on?,” said Munyukwi proposing that Government use the ZSE for indigenisation.
Meanwhile a special report on Zimbabwe said sluggishness in implementation of the terms of the Global Political Agreement (GPA), and the fact that President Robert Mugabe still remains at the helm of Zimbabwe’s affairs, makes the country a risky investment destination at present.
The Special Report was released in Washington DC in the United States of America (US), the industrial nation that passed the “unpopular” Zimbabwe Democracy and Recovery Act (ZIDERA) which has crippled the country’s once vibrant economy.
“The fact that President Robert Mugabe of Zanu PF widely blamed for the ruin of the country’s economy still remains at the helm is a problem for potential investors, donors and development finance agencies,” the report said.
“His Zanu PF party has not acted in the spirit or letter of the Global Political Agreement, signed in late 2008, which underpins the unity government.”
The report said the Movement for Democratic Change (MDC) had conceded too much to Zanu PF thus weakening its position. “It has been unable to rein in many of the problems being perpetrated by the old guard,” the report said.
“Seizures of commercial farmland have continued under the new unity arrangement, media reforms have yet to see the light of day, Constitutional changes are still being debated and MDC politicians are being hounded by State security agents, controlled by Zanu PF as part of the carve-up of ministries agreed to.”
It said investment had trickled in rather than a flood, partly because of concerns about the viability of the unity government and the indigenisation law.
“Although life has improved in Zimbabwe, it is certainly too soon to break open the champagne,” the report said. “The country remains a high-risk destination for investment right now, despite the massive potential of its private sector.”
It pointed out that the manufacturing sector was being constrained by the fact that companies reduced their output to a fraction of capacity during the hard times and are struggling to finance increased production in the improved operating climate.
“Their competitiveness is also undermined by a still high cost business environment,” the special report said. “Power, for example, is about five times more expensive than the regional price, and the agricultural sector, key for manufacturing inputs, is struggling to get going again.”
The report said as a result, Zimbabwe, that was the second largest exporter within the Common Market for Eastern and Southern Africa (COMESA) a decade ago, producing about 8 000 industrial products, was now battling to compete in its own backyard.