Investor confidence wanes
By Editor
Monday, 25 July 2011 14:17
HARARE – Zimbabwe’s indigenisation policy has dampened foreign investors’
confidence and participation on the Zimbabwe Stock Exchange (ZSE), the
African Development Bank (AfDB) has said.
In its monthly economic review for July, the continental lender said shares
worth $13,1 million were bought by external investors on the local bourse
compared to those disposed with a value of $17,3 million – culminating into
a $4,2 million net capital outflow.
“This negative development reflects waning investor confidence, particularly
in view of intensified indigenization and economic empowerment initiatives
as well as uncertainty surrounding future elections,” said AfDB.
It said “the substantial disposal” happened or occurred around June 10 when
uncertainties about the outcome of the Southern Africa Development Community
summit held in Johannesburg, South Africa were heightened.
The regional development bank said about 350 million shares were traded on
the ZSE last month alone.
The indigenisation policy – which requires all foreign-owned firms to cede
at least 51 percent of their shareholding to black Zimbabweans – has majorly
affected sectors like mining.
Officials in President Robert Mugabe’s government, notably Empowerment
minister Saviour Kasukuwere, say the programme would be extended to several
other sector, including manufacturing and the sensitive banking industry.
As a result, foreign investors have taken a cautious approach and stance
towards Zimbabwe, yet its economy is mainly driven by resource or extractive
sectors such as mining.
The AfDB said the Zimbabwe Investment Authority approved nearly 75 projects
in the five months period to June, indicating a marginal increase from the
72 approved in a similar period last year.
The approved projects have an estimated value of $906 million, as compared
to those approved in 2010 and worth an estimated $104 million. Out of the 75
projects, 15 were mining.
In May, ZSE chief executive Emmanuel Munyukwi said the prevailing and acute
liquidity challenges, coupled with limited foreign investor participation,
were weighing down the local bourse.
He said the equities market remained depressed, with daily turnover touching
a lowly $600 000 per day from a peak of $1,5 million.
“We should know that foreign investors are the ones with the money. Their
increased participation means more activity on the market,” he said.
However, he said “foreign investors have not totally deserted the market, as
they remain very keen on Zimbabwe, but uncertainty had affected their
confidence.”
Munyukwi particularly singled out Kasukuwere’s indigenisation programme as
one of those policies causing investors to be jittery.
He said the ZSE recorded a net inflow – the difference between shares bought
and sold by foreigners – of $6 million in January and $4 million in February
this year, while net outflow was at $2 million in March and this reflected
lower investor participation during the month.
However, the inflows improved to $2 million in April. Market turnover,
meanwhile, has been on a similarly yoyo trend, with January’s figure hitting
$32 million, while it leapt to $47 million in February.
In March, it fell back to $36 million, while a figure of $35 million was
recorded in April.