Born-again Zimbabwe bourse hostage to politics

With the Industrial and Mining indexes re-zeroed to a nominal value of 100 in February after the scrapping of the worthless Zimbabwe dollar, it is hard to assess their performance against other African bourses over the year.

However, the Industrial index, Harare’s main benchmark, is now at 148 points, nearly three times its level in March — testament to the revival that has taken hold since the birth the previous month of the fractious but vaguely functional unity government of Robert Mugabe and arch-rival Morgan Tsvangirai.

After a 50 percent economic contraction during the previous decade, Tsvangirai’s Finance Minister, Tendai Biti, was able this month to forecast growth of 4.7 percent for this year and 7 percent for next.

Barring a few politically fuelled wobbles, the INDZI has plateaued since May around 140-170, but looks hard-pushed to extend much beyond that until serious cash arrives to start patching up the rust-bucket economy.

Harare has been asking donors and investors for $10 billion, but little will land until everybody from the International Monetary Fund to global mining giants are confident Mugabe really is sharing power with his opponents.

Critics accuse the 85-year-old, in power since independence from Britain in 1980, of ruining a once prosperous economy through policies such as seizing white-owned farms to resettle landless blacks and threatening to nationalise mines and banks.

"There’s no question that they can’t turn back from the path they’re on but it might still take a long time," said John Mackie, head of Africa funds at Stanlib in Johannesburg. 

"Until there is better access to capital, there is always going to be a constraint," he said. "A lot of companies are running on equipment that hasn’t been maintained for 15 years and when that packs up, there’s no money to fix it. It’s as simple as that."


Underlining the fear of capital shortage, equity investors have veered towards firms with low costs, notably retailers, and largely avoided mining, real estate or agriculture, Mackie said.

Favourites have been brewer Delta, with a 90 percent market share, and consumer, food and distribution firm Innscor, which is well-placed to benefit from the middle-class that is expected to blossom as growth takes hold.

Telecoms firm Econet has also attracted outside interest due to the mobile phone penetration level in Zimbabwe, which at just over 20 percent compares very favourably to Kenya’s nearly 50 percent and South Africa’s 100 percent-plus.

Harare’s trading volumes also point to the bourse’s rapid revival in the eyes of specialist African funds and retail equity investors attracted by the absence of currency risk, a rarity in Africa.

Renaissance Capital estimates that foreigners own as much as 25 percent of the market, now valued at more than $4 billion, and Johannesburg-based brokerage Securities Africa says daily turnover regularly tops $2.5 million.

That may be a drop in the ocean compared to the $1.5 billion that changes hands daily in Johannesburg, but it puts Harare on a par with Kenya and well ahead of other frontier African bourses such as Botswana, Zambia, Uganda and Ghana.

"Since dollarisation in February, volumes have really picked up," said Tim Pongweni of Securities Africa. "The main factor is that Zimbabwe is your only dollar exposure in Africa."