Commercial Farmers' Union of Zimbabwe

Commercial Farmers' Union of Zimbabwe

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‘Time to get into Zimbabwe’ – Investors urged

‘Time to get into Zimbabwe’ – Investors urged


Economic growth estimated at 9.4%, with mining sector set to rise 15.9% this 
year and agricultural sector by 11.6%

‘Fortune favours the brave” is the adage printed on the cover of Imara 
Africa Securities’ Zimbabwe Stock Exchange overview. It might seem a little 
pithy, but it captures a growing ethos in South Africa’s northern neighbour.

As real returns fall to unsustainable levels in the world’s traditional 
safe-haven markets, investors have turned increasingly to emerging markets. 
And the truly brave are once again seeking their fortunes on the frontiers.

Last week institutional and private investors from Hong Kong, the US, South 
Africa and Mauritius gathered in Harare to hear about developments and 
expectations in corporate Zimbabwe. The stories from companies like BAT 
Zimbabwe, Seed Co, Dairibord and Econet make it clear that, despite an 
uncertain political future and the potentially deal-breaking policy of 
indigenisation, fortunes are likely to be made.

The World Bank expects the global economy to grow by 2.5% in 2012 and 3.1% 
in 2013. The eurozone is contracting fast and slowing growth in emerging 
markets, the average growth potential of which is expected to be less than 
5.4%. Meanwhile, Zimbabwe is growing at an estimated 9.4%, with the mining 
sector expected to grow 15.9% this year and the agricultural sector 11.6%.

Physical evidence of this growth is apparent in the now congested roads, the 
increased demand for telecoms services and the well-stocked shelves in 
upmarket clothing and food stores such as Edgars and OK. Money is trickling 
back in, from a returning diaspora, from economic pioneers with an appetite 
for risk and from the informal sector.

John Legat, head of asset management at Imara, which hosted the conference, 
said that since adoption of the US dollar as the single unit of currency in 
2009 most companies have remained afloat and are growing fast.

They are coming off a low base though, with most having ground to a halt and 
closed doors during the so-called “lost decade” of hyperinflation and price 
setting. While the GDP of many African countries has doubled in a decade, 
Zimbabwe’s has halved.

There are “elephants in the room” scaring off foreign investors who would 
otherwise be streaming into the country. One is the indigenisation policy, 
the final form of which is yet to be finalised. Another is uncertainty over 
President Robert Mugabe’s successor. His illnesses have been officially 
denied, but he is 88 and will not be around much longer.

There are two schools of thought about succession. One is that defence 
minister Emmerson “The Crocodile” Mnangagwa will take power following an 
apparent “gentleman’s agreement” with Mugabe. This would be unconstitutional 
and many believe unlikely because of Mnangagwa’s minimal support base. His 
unpopularity arises from when he was head of the ruthless intelligence 
service during the suppression of the rival Zapu party in 1980s, when 
thousands of civilians were killed. Mnangagwa has more recently been 
involved in the alleged arrangement of lucrative gold and diamond mining 
concessions. In March he went to Iran apparently to broker a deal in which 
diamonds and uranium would be swapped for weapons.

If the constitution is followed, Joice Mujuru, one of the two 
vice-presidents, will take charge for three months until elections are held. 
It is likely to be Mujuru, rather than counterpart John Nkomo, who assumes 
the position as the latter is elderly and unwell.

Mujuru is business friendly and has solid support. If she becomes her 
party’s leader, opposition leader and Prime Minister Morgan Tsvangirai’s 
position is likely to become less precarious – with the coalition government 
being revised and elections being held.

Imara says it is time to get into Zimbabwe. Companies are cheap, assets are 
valuable and there is a deep understanding of the environment – politically 
and operationally.

Murray Winckler, portfolio manager and co-founder of Laurium Capital, works 
with Gavin Vorwerg to advise the offshore Zambezi Fund that has $17-million 
in Zimbabwe.

The pair launched into the country in December 2009 and the fund has seen 
significant returns in just over two years.

The pros and cons

Why it’s hot

The country’s GDP growth is outstripping most regions of the globe at an 
anticipated 9.4%, largely driven by mining and agriculture, which are 
projected to grow at 15.9% and 11.6% respectively this year.

Zimbabwe has the highest literacy rate in Africa. Schooling continued 
against all odds during the so-called “lost decade” when the rest of the 
country slowed down or stopped altogether.

Inflation is low. It was pegged at 4.9% in December 2011. It fell to 4.3% 
for January and February of this year and in March it dropped further to 

The country has a wealth of natural resources, with about 30 different 
mineral deposits dispersed throughout the country. There are substantial 
deposits of coal, platinum and chromium ore, as well as smaller deposits of 
asbestos, gold, nickel, copper, iron ore, vanadium, lithium and tin.

Commodity prices came off to an extent in 2011, largely on the back of a 
contracting Europe and a slowing China. However, the IMF anticipates that 
prices will flatten for the rest of this year and into next. But the 
Zimbabwean economy, which is just back on its feet after an all-time low, 
will revive even if commodity prices drop further.

Zimbabwe was once known as the breadbasket of Africa because of its fertile 
soil and farmed produce made up a significant part of the country’s GDP. 
While drought has affected harvests this year, farmers such as BAT Zimbabwe 
and Tongaat-Hulett are ramping up operations in the country.

While little has been done to upgrade roads and power supply in the past 15 
years, a lot of infrastructure is still workable. Many of the mines that 
were shut down for years have operable equipment and minimal capital 
expenditure would be required to get them going again.

Why it’s not

The unclear political landscape regarding elections and succession and the 
policy of indigenisation which holds that 51% of any operation must be 
locally owned. The weak performance of the Zimbabwe Stock Exchange in the 
past year, in particular in the mining sector, is attributable to this 

Electricity is in short supply and what is available is erratically 
delivered. While efforts are being made to increase power security, this is 
still likely to be one of the biggest hurdles to growth in the immediate 

A serious dearth of liquidity is another stumbling block in the way of 
Zimbabwe’s recovery. Zimbabwe has no lender of last resort and the 
government uses a commercial bank for its operations, which becomes 
particularly problematic at year-end when bonuses need to be paid out and 
state departments rush to spend their quotas. Credit is not easy to get and, 
while deposits have increased, a great deal of mistrust still exists as a 
hangover from the days of hyperinflation.

The weather has also played a part in hobbling growth, increasing the trade 
deficit as the country is forced to rely on food imports, and exports are 
hamstrung. – Tina Weavind


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