Economy worsens, as Mugabe remains mum

HARARE - Zimbabwe is paying a heavy financial price as the economy slows down under President Robert Mugabe’s Zanu PF government, with stocks and bonds on an unprecedented plunge.

The Zimbabwe Stock Exchange (ZSE) is sliding, driving equity prices lower across the board amid a punishing economic slowdown characterised by a biting liquidity crunch or cash shortage.

Economic experts warn that the stock market is falling, wiping out millions off the value of Zimbabwean companies.

The bankrupt central bank, devoid of any reserves, has failed to salvage the situation because it has not injected fresh capital to halt the slide as investors take fright at the economic slowdown and the indigenisation policy.

The latest slide comes after the equities market lost nearly $1 billion in one week following the controversial re-election of Mugabe on July 31 last year.

The southern African country’s bourse — which had a market capitalisation of $5,96 billion before 90-year-old Mugabe’s election victory — plunged a combined 15,68 percent to close the week at $5 billion.

The current market capitalisation stands at $4,8 billion.

Since the beginning of this year, most counters have been in the red.

The local bourse has failed to find direction in the New Year with market experts pointing to political and economic challenges coupled with the acute liquidity crisis prevalent in the country.

As at the end of February, the local bourse’s main industrial index had already shed nearly seven percent from the last day of the year in 2013, closing value of 202,12 points.

Last week, retail giant Innscor, grain processor National Foods, Colcom, Truworths, Lafarge and Nicoz Diamond lamented in their financial results the slowing economy as the main cause of the market plunge.

“Common at most briefings were results where companies were lamenting the slowing economy-wide demand, prompting structural changes involving either margin cuts or cost containment for survival,” said stock broking firm EFE Securities in its commentary.

“Overally, the financials have largely been within expectations as most companies were at best expected to put in similar performances to prior year on the back of the slowing down economy.”

EFE Securities said the industrial index slid further without support as the reporting season was devoid of stimuli as the market remains engrossed by a bleak macroeconomic outlook.

“Though liquidity in the economy has been tight, we believe the contextualised effects of the deflation may be minimal and short lived. Most are price corrections more than anything else on imported goods,” EFE’s commentary said.

Zimbabwe’s year on year inflation rate for February 2014 pared -0,9 percent  to 0,49 percent.

Market watchers say the continued bearish run on the ZSE is due to cautious trading by foreign investors who fear that Zanu PF’s boosted majority could embolden it to pursue even more radical economic nationalism of the kind that led to violent seizures of white-owned farms after 2000.

“The poor performance on the stock market is far less important than the big problems at hand,” said independent economist John Robertson.

“We first need to deal with encouraging a conducive environment for attracting investment rather than dealing with symptoms of a bigger problem.

“The money used to buy shares on the market does not in any way reach the companies but changes hands between buyers and sellers of shares.

“However, it is a true indication that some investors do not have faith in a Zanu PF-led government because of its long-standing history of implementing poor policies. It will take a long time for this government to be trusted.”

The market traditionally rallies ahead of the reporting period, which began last month for companies releasing December 31 financials.

Instead, the market has been bearish in 2014 as investors remain sceptical and are expecting disappointing earnings from listed companies.

Econometer’s head of research Chris Mugaga said the performance of the stock market is a reflection of that macro-economic environment.

“The liquidity crunch continues to bite at both individual and national level” Mugaga said. “This is also affecting listed companies as the high country risk is also affecting investors’ appetite which continues to get low.

“The market continues to trend southwards. Slowdown in economic performance has in turn started impacting negatively on companies’ performance.”

The ongoing reporting season has failed to stimulate activity on the bourse. Companies’ earnings are either flat or below 2013 levels.

Delta, BAT and Innscor are few examples.

“2014 is going to be difficult and small ailing companies are likely to close shop,” said an analyst with a local bank.

Comments (19)

What were you expecting from them,you can not extract water from a rock suffer continue.

DAVID - 20 March 2014

please daily news is it true that news without mugabe is not enough to you?you hardly go two days without mentioning mugabes name on front page.

knowledge - 20 March 2014

your article is full of figures and tachinacal language,its boring to read.

clemency takawira - 20 March 2014

Knowledge unenge usina kungwara iwe, hauzivi kuti he is the president of this country, he leads and we need to see him more often. Wakapata forget about politics

svinurai - 20 March 2014

iwe knowledge herald rinoburitsa tsvangira everyday wani ndiana akamboriti mazviitirei i think in their hearts tsvangirai is the president of zimbabwe

wasu - 21 March 2014

don't worry people of the Zimbabwe, Zanu PF will nikuv the economy and we will all live a happy ending

DON PABLO - 21 March 2014

These are the results of stealing.They don't have any clue to the economy at all,shame on these thugs,day light robbers to hell with zanu pf.

josefa chinotimba - 21 March 2014

zimbabwean economy shall continue to die daily unless some political changes and better gvt policies are introduced.

gaza - 21 March 2014

Two major things that are taking us back to the 1950's era are bad policies and corruption. If we manage to remove these two evils, everything will start to take shape. Foreign investors will be attracted to come and unemployment rates will be reduced. Infrastructure like roads, dams, schools, houses and railway lines will be constructed thereby improving the population's standard of living. The govt will have a bigger pool to get taxes which will improve the social life of people. The porous borders will be tightened to curb the smuggling of cheap imported clothes which will cascade down into encouraging farmers to grow cotton and fetch good prices. Ginneries will be built in areas close to the cotton growers like Gokwe, Magunje and Sanyati which will reduce the population explosion already being experienced in Harare and other towns as people will be employed in their small mining/farming towns. International media will start reporting on all the good things happening, generating an interest in Zimbabwe. They will be reminded that Victoria Falls is not in South Africa. The result will manifest in more tourist arrivals creating thousands of jobs in the services sector like Tour operators, Insurance and transporters. Let's get rid of these two evil sisters- Corruption and Bad policies.

Sinikiwe Shumba - 21 March 2014

Two major things that are taking us back to the 1950's era are bad policies and corruption. If we manage to remove these two evils, everything will start to take shape. Foreign investors will be attracted to come and unemployment rates will be reduced. Infrastructure like roads, dams, schools, houses and railway lines will be constructed thereby improving the population's standard of living. The govt will have a bigger pool to get taxes which will improve the social life of people. The porous borders will be tightened to curb the smuggling of cheap imported clothes which will cascade down into encouraging farmers to grow cotton and fetch good prices. Ginneries will be built in areas close to the cotton growers like Gokwe, Magunje and Sanyati which will reduce the population explosion already being experienced in Harare and other towns as people will be employed in their small mining/farming towns. International media will start reporting on all the good things happening, generating an interest in Zimbabwe. They will be reminded that Victoria Falls is not in South Africa. The result will manifest in more tourist arrivals creating thousands of jobs in the services sector like Tour operators, Insurance and transporters. Let's get rid of these two evil sisters- Corruption and Bad policies.

Sinikiwe Shumba - 21 March 2014

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Pumps - 21 March 2014

zimbabweans lets corruption and old polices are affecting our economy unless some better gvt policies are introduced.

MOYO - 21 March 2014

Why do you guys seem to celebrate the economic downturn? Why don't you proffer solutions instead of celebrating the people's suffering. ZANU (PF) government is an inescapable reality until 2018 so as Zimbabweans we need to rally behind the president and do what is best for us and future generations. As journalists you have great power to influence society and with that great power comes great responsibility. The regime change agenda is gone so lets just work on fixing our economy. Nyika ndeyedu iyi lets love it.

Mdhara - 21 March 2014

Aaah is this new we expecting new things from the same pipo who have plunged the country into the economic quagmire we are in Shame on us. These are unrepentant sinners mind you the worst of the lot Dear President do sumthing u can leave the country to burn like this.

protestor - 21 March 2014

Stop sprouting foolish rubbish Zimbabweans! There is only one solution and that is for the common "indigineous man to take himself by the scruff of his neck, get some balls and get rid of the piece of shit and his entire gang that is at the head of the criminal cartel that is running this country!! Yes! very simple yet they complain and make excuses!! Just do it!

Sabi - 21 March 2014

Our leader boasts of so many degrees but its unfortunate they cant help him to steer this economy back on track to its yesteryear glory. Realism has to be plugged right into his head or maybe old age has caught up with him, those socialistic, medieval and barbaric policies of his dont have any place in this modern day global village. We need a new generation of energetic and practical thinkers not the same old recycled goons, who are only good at lying and stealing from the citizens.

Machochonya - 21 March 2014

"This 3 legged creature called GNU is preventing us from implementing progressive policies". Remember who said that? Chitonga tione now that the creature is gone. Is this the progress you have been talking about? Please don't take us for fools.

Ini wacho - 21 March 2014

The main issue is incompetence on part of ZANU (PF). Madofo. But is the MDC able to grow the economy, reduce unemployment and improve the living conditions of Zimbabweans

Diasporan - 21 March 2014

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