Monday, September 27, 2010

ZSE rebounds as foreigners return

Written by Vusimuzi Bhebhe
Saturday, 25 September 2010 13:38

HARARE – Zimbabwe’s stock market continues to be a boon among foreign investors despite negative sentiment about the overall political and economic climate in the troubled southern African country.

Latest figures from the Zimbabwe Stock Exchange (ZSE) show that net inflows from foreigners more than quadrupled in the four months to August.

According to the ZSE, foreign investors pumped in US$27.2 million to buy shares on the local bourse in August, up from US$17.7 million the previous month and an insignificant US$6.6 million in May.

The renewed foreign investor interest surpasses the performance of the ZSE before the introduction of Zimbabwe’s controversial black economic empowerment regulations in February which saw the market slip by at least 300 percent in one month under a cloud of uncertainty.

The empowerment regulations, which compelled foreign-owned firms to cede controlling stake to indigenous Zimbabweans over the next five years, have since been toned down following concerns by business and the MDC-T led by Prime Minister Morgan Tsvangirai.

Jitters over the regulations saw the bourse raking in only about US$5 million between February and March compared to more than US$20 million a month previously.

Critics fear Mugabe wants to press ahead with transferring majority ownership of foreign-owned companies as part of a drive to reward party loyalists with thriving businesses.

“We have seen an improvement in foreign inflows over the past month or so as the foreigners take positions in anticipation of the day when the country’s fortunes improve,” an analyst with a Harare-based stockbroking firm told The Zimbabwean On Sunday last week.

The improvement in foreign investor sentiment comes against the backdrop of a recent report by Netherlands-based Amstel Securities which labelled the ZSE the worst performing bourse in the sub-Saharan Africa.

Amstel said the Zimbabwean bourse declined by 7.5 percent between January and July compared robust performances by other African markets such as Kenya and Uganda which grew by more than 40 percent over the same period.

Concerns over Zimbabwe’s fragile coalition government have also lurked over the country’s economic horizon.

Constant bickering about the parties in the coalition regime has failed to restore confidence in an economy pummelled by a 10-year political crisis.

ZSE stocks remain under pressure

THE Zimbabwe Stock Exchange industrial index fell last week as stocks continue to suffer from pressures of tight liquidity and other economic challenges.

The benchmark index lost 1,2 percent compared to week ending 17 September 2010 while the mining index came off 7.10 points, a decline of 4,8 percent to close at 162.41 points.

Weekly turnover amounted to about US$6,6 million from 75 736 306 traded shares.

Econet was the most liquid counter with total weekly revenue of US$1,6 million.

It was followed by Delta at US$1 million, Interfin at 945 997, Innscor at US$426 588 and OK Zimbabwe at US$326 530.

There was a special bargain involving about four million Interfin shares.

The parcel traded at a special bargain price of US24c being 14,29 percent premium to the trading price of US21c.

Market capitalisation declined from US$3 338 646 185 during the week ended September 17 to US$3 302 214 185 implying that aggregate shareholder value lost US$86,4 million.

ZSE stocks are expected to remain under pressure due to liquidity constraints.

In the short term, the money market will continue providing better returns than the equities market.

Although it has been largely anticipated that liquidity could significantly improve after the sale of Chiadzwa diamonds, money supply has remained low and the situation would remain favourable for money market investors.

Analysts say the prevailing trading environment does not encourage a passive investment strategy on the stock market.

Since the beginning of the year, the money market has outperformed the returns from equities market.

As at September 1, the benchmark industrial index had posted a loss of 13 percent whilst the mining index had shed about 31 percent.

However, there is now growing participation by foreign investors.

Foreign trades have significantly improved amid indications that the value of shares bought rose by 309 percent between May and August.

According to statistics from the ZSE, foreigners bought shares worth US$6 612 312,20 in May and the value slightly increased in June to $6 667 649.33.

The purchases by foreigners rose to US$17 727 545,61 in July and in August the value shot up to US$27 203 071.40.

Most foreign traders, whose appetite for risk is generally on the lower end, have shunned the ZSE for other less risky stock exchange due to political uncertainties and lack of clarity on the country’s empowerment laws.

Volumes of trades from foreign investors has therefore remained relatively subdued than expected, a development that has also led to depressed activity on the ZSE.

Analysts said the growing participation by foreigners reflects renewed confidence among foreign investors who had shunned the market as a result of some uncertainties, particularly the country’s indigenisation and empowerment laws.

Elsewhere, US stocks soared in opening trade on Friday, led by Nike’s strong earnings and better than expected manufacturing data as well as a rise in German business confidence.

The Dow Jones Industrial Average jumped 1.5 percent or 158.29 points to 10,820.71 shortly after the opening bell, while the broader S&P 500 index was up 1,4 percent or 15.65 points to 1,140.39 points.

The tech-rich Nasdaq composite index rose 1,36 percent or 32.06 points to 2,359.26.

Nike saw its shares jump by nearly four percent after its quarterly earnings report exceeded expectations with a nine percent rise in net income and an eight percent rise in revenue to US$5.18 billion.
Traders were also digesting data released before the opening bell showing that orders for big-ticket items decreased in August at a slower than expected rate.

Excluding the transportation equipment, mainly aircraft parts, orders of items such as household appliances nevertheless rose by a more-than-expected 2.0 percent.

The manufacturing industry is seen as one of the main engines pulling the US economy out of one of its worst recessions in decades.

Wednesday, September 22, 2010

Investment remains doubtful despite PM's progress speech By Alex Bell
17 September 2010
Delegates at Thursday's Future of Zimbabwe summit have said that serious doubts remain about investing in the country, until there are visible changes on the ground.

The summit in Johannesburg looked at the investment environment in Zimbabwe, the impact of the country's brain drain, the future of agriculture and food security and the ethics of investment in Zimbabwe.

Prime Minister Morgan Tsvangirai was the keynote speaker and made an effort to encourage investment in the country, saying there was tangible progress in economic reforms.

While conceding the pace of progress has been slow and limited, Tsvangirai said the past 18 months under the unity government had witnessed steps forward in the implementation of political and economic reforms. He went on to cite a few examples of this economic turnaround, singling out the return of health workers and availability of medicines in hospitals, teachers and books in schools, food in supermarkets and granaries, as well as water, fuel, stable currency and a single digit inflation.

But the summit went ahead against a backdrop of worrying developments in Zimbabwe that are contrary to Tsvangirai's accounts of progress and change.

On Tuesday a farm illegally seized by a ZANU PF senator was burned to the ground, despite a bilateral investment protection agreement and a protective court order, as part of the ongoing onslaught against Zimbabwe's commercial farming community. Robert Mugabe also recently insisted that the controversial business indigenisation programme will go ahead, which will see foreign companies in the country forced to hand over 51% of their shares to pre-selected Zimbabweans.
Alongside this the exercise to gather public opinion on a new constitution has faltered marred by incidents of violence and intimidation.

At the same time, a deadline set by Southern African leaders for the unity government to implement the two year old Global Political Agreement

(GPA) has come and gone, and there is still no sign from either the MDC or ZANU PF that there will be any real change.

Despite all this Tsvangirai still moved to defend Robert Mugabe as his partner in the government, saying he was committed to change. Tsvangirai told a news conference after the summit on Thursday that Mugabe could rescue his legacy as the country's liberator.

I suppose Robert Mugabe has been portrayed as a demon, he said. He himself made a contribution to that caricature because I cannot defend what he did over the last 10 years in terms of violence, in terms of expropriation and all these other activities.

Tsvangirai continued: But there is also a positive contribution to our country that he has made. Remember that he was the national liberation hero, and so those are positive years. I suppose there is the personality conflict between a hero and a villain, of which you have to make an assessment.

History will have to judge him.

Zimbabwean businessman Trevor Ncube, who owns the recently launched NewsDay paper, said the government was yet to put together policies to entice investors into the country. Ncube was one of the speakers at Thursday's summit. He told SW Radio Africa on Friday that there was still doubt that the current reforms Tsvangirai was speaking about could be sustained.

Government has to create political stability that guarantees security for people to go back home and for investors to funnel money into the country, Ncube said. There is still understandable wariness about investing in the country, because there are no guarantees of any sustainable change.

John Worsley-Worswick from Justice for Agriculture (JAG) was another speaker at Thursday's summit, and he told SW Radio Africa that the summit appeared to be a propaganda exercise.

There is a great deal of scepticism about investing in the country, and it's understandable given the lack of normalcy in the country, Worsley-Worswick said. But what we found alarming was the deliberate effort to paint over the cracks.

PM describes progress at future of Zimbabwe summit
Written by SW Radio Africa -
Friday, 17 September 2010

As the farming community mourns the loss of yet another commercial farm in Zimbabwe, Prime Minister Morgan Tsvangirai  has described as tangible progress in the country.

Tsvangirai was speaking at the Future of Zimbabwe summit in Johannesburg on Thursday, where delegates gathered for a one day conference to debate the country's economic future and investment potential. Tsvangirai, the key note speaker, said he believes the country is making progress in all sectors of the economy.

'We chose progress over violence, polarisation, decline and decay.

Zimbabwe is moving forward. From the darkness of madness and self-destruction, to the new dawn of a new Zimbabwe,' said Tsvangirai in his address.

'This progress is tangible. Yes, it is slow. But it is there.'

He went on to cite a few examples of this economic turnaround, singling out the return of health workers and availability of medicines in hospitals, teachers and books in schools, food in supermarkets and granaries, as well as water, fuel, stable currency and a single digit inflation.

He added however that the failed policies of the past government, led by Robert Mugabe and ZANU PF, continued to haunt the country.

'Disdain for the rule of law and property rights continue to undermine our image as a safe investment destination,' said Tsvangirai.

'Disdain' for property rights is the closest Tsvangirai came to mentioning the ongoing farm invasions in the country, which are making a mockery of any attempts to encourage foreign investors. Many of the farm attacks have targeted properties meant to be protected by Bilateral Investment Protection and Promotion Agreements (BIPPA) with foreign countries. But these BIPPA's have done nothing to persuade Mugabe loyalists from invading commercial farms and violently evicting farmers.

Some observers have commented that the Prime Minister is showing insensitivity by trying to promote Zimbabwe has a safe investment zone, when it is so clear that there are no guarantees of investment safety.

Robert Mugabe also said this month that he will press ahead with plans to transfer control of foreign firms to local Zimbabweans, as part of the controversial indigenisation exercise. But Tsvangirai on Thursday tried to downplay this threat, saying the process would be implemented gradually and without forced sales.

'What's being implemented are minimum thresholds. You can't start with 51 percent, Tsvangirai said. But you also have to say how, over time, you are going achieve the maximum threshold.'

But with the MDC so clearly lacking any power in the unity government, it is unlikely that Tsvangirai will have any say over how Mugabe's indigenisation plan should be implemented.

Friday, September 17, 2010

From John Robertson

Almost all the increases were countered by decreases in the prices of other goods and ten of these decreased by more than one percent. This left the overall index down by 0,15% at 94,96 for August, but compared to 91,66 in August last year, the figure is an increase of 3,6% for the year.

The Index has been decreasing every month since May this year, when it was 95,32. In the same months of last year, the Index was rising each month, so the narrowing gap has produced the falling year-on-year percentage change.

Comments about the Index in the last few months show that many people share the view that life in Zimbabwe is getting harder and therefore the easing inflation rate claim that is not supported by the perceived facts. Unfortunately, the very subjective perspectives that are brought into this debate make generalisations difficult, but many people agree that the hardships are mounting for reasons other than cost increases. They speak of increasing burdens imposed by family and extended family members who are unable to find steady employment and have found whatever efforts they can make in informal activities are yielding shrinking returns.

The difficulties are worsening, therefore, because the demands on those in steady employment are increasing. More jobs are needed, but employers are struggling too and a large number are more preoccupied with trying to fund retrenchment plans than with any thoughts of expansion. New investors are very few in number and the procedures and hurdles encountered by those trying to qualify for investment licences seem to have been designed to discourage them. For many families, remittances from family members working abroad were the main source of their spending power, but the evidence suggests that difficulties in Europe and South Africa have made the payment levels hard to sustain. Many are already returning from South Africa and most of them are likely to take some time to become contributors again.

Current conditions are unlikely to bring about the needed job creation. The labour unions have become particularly aggressive and very few wage settlements are reached without going to arbitration. The demands are making those employers who can fund any retooling exercise choose capital-intensive rather than labour-intensive production methods. As one example, new bottling plants in the major company referred to most frequently in claims that “the economy is recovering” need far fewer people to operate them. However, the limited bank finance available is holding back many of the business development plans, and the indigenisation policy has prompted many more of these plans to be shelved.

Even if prices remain steady for more months, the stresses at the household level seem likely to remain in place. As they will have their counterpart effects on government’s ability to collect increasing tax revenues and pay better salaries to public sector employees, we ought to be able to get government’s attention by offering thoughts on the ways that their own policy choices are to blame for many of these problems.

Kindest regards,