Tuesday, November 30, 2021

Post-Mugabe Zimbabwe presents investment opportunities- Investec

Investc Asset Management, the monied institution with global reach, said last week that Zimbabwe is standing “on the verge of change” which could be spurred by a possible change of government following a prolonged misrule by Robert Mugabe’s administration.

In his report last week, Roelof Horne, portfolio manger of the frontier markets team, said a change of government in Zimbabwe would raise investor confidence and ignite the flow on money into a country whose economy has been ravaged by rampant inflation and shortage of food and fuel.

“Should there be a change of government, whether electoral or negotiated, we would expect a substantial rally in assets related to ZimbabweÔÇöa rally that will probably over-anticipate the speed at which economic rebuild can follow any political change,” he said.

“As far as investments go, Zimbabwe is widely touted as a recovery play – the recovery which is expected once economic normality returns to the country. It is thus not surprising that Zimbabwe exposure stocks have started rallying in the last two days ( between April 1-2) as the opposition party started claiming a landslide victoryÔÇöinvestors are clearly optimistic that a change of government might be on the cards,” he added.

Zimbabwe is in a very disparate economic situation with inflation above 1000 000 percentÔÇöthe highest ever recorded inflation rate in history which even surpasses the levels of Germany during World War II.

“Fiscal, monetary and economic mismanagement has driven Zimbabwe Inc to its knees. Its people are starving and its companies are fighting for survival, while the connected elite grow rich from numerous opportunities for arbitrage created for them by, among other things, various attempts at price-fixing by government fast running out of economic options and capital stock deplete,” Horne said.

He said the Zimbabwean people are desperate for peaceful change while at the same time investors are wary that the country might plunge into a state of civil war should Mugabe’s administration hangs onto power for a long time. However, he stated that Investec is not yet ready to enter the country until the situation becomes clearer about the future of the country.
“Zimbabwe needs a change of leadership, a temporary funding for its budget deficit, a reversal of all ridiculous business killing rules, price control and exchange rate distortion that have driven the economy to the brink.
“So instead of hopping onto the bandwagon, we are quite satisfied to sit back for the moment, wait for change and miss the first wild scramble that will inevitably follow political positive change.

“The country has been starved of investment (internally and externally) for the last eight years. The economy will take time and capital to rebuild. We would welcome the opportunity to invest in a new post-Mugabe Zimbabwe. We will do so methodically, following our usual systematic analytical approach, searching for good companies with good management and prospects at good price,” he said.

RELATED STORIES

Read this week's paper