Zanu PF factional battles bleed ZSE $2,5bln

HARARE - The Zimbabwe Stock Exchange (ZSE) has lost more than $2,5 billion since President Robert Mugabe’s controversial re-election in the disputed 2013 national elections, in what analysts say is a clear sign of low business confidence in the country.

Economic and political experts who spoke to the Daily News yesterday also said the post-congress Zanu PF’s seemingly unstoppable factional and succession wars were worsening the situation and putting a damper on the upside potential of the local bourse.

Statistics from the ZSE show that the bourse had a market capitalisation of $5,96 billion in the first week of August 2013.

This had since plummeted to $3,4 billion by the end of day yesterday, with market watchers attributing the steep decline to weak foreign participation, liquidity constraints on the domestic market and Zanu PF’s deadly infighting.

Renowned economist, John Robertson, said the “pitiable performance” of the stock exchange reflected poor fundamentals in the econocapita which is being manifested by the ongoing company closures, retrenchments, the scaling down of corporate activities, negative inflation and limited access to affordable long-term capital.

“Activity on the Zimbabwe Stock Exchange was mainly being spurred by foreign buyers who have become disillusioned with the status quo and are now taking their money elsewhere where they can get better returns on their capital,” he said.

The local bourse, once regarded as one of the best performing in Africa, during the government of national unity between 2009 and 2013, was recently ranked by the African Development Bank as the worst performing on the continent due to continued lack of investor confidence.

Political commentator Francis Mukora said the ZSE had recorded a cumulative decline over the past two years as the twin challenge of policy inconsistencies and controversial indigenisation laws contrived to push even resilient investors out of country that was once seen as the breadbasket of Africa.

“The other major challenges behind Zimbabwe’s economic malaise are the controversial and disastrous land reform programme, rising costs of production and the indigenisation policies that are driving away investors,” he said.

In its latest monthly economic review, equities and research firm IH Securities said the local bourse fell for seven consecutive months to September this year, as the industrial index fell 2,58 percent to 131,93 — after heavy losses in blue-chip counters.

“Heavyweight counters recorded losses across the board with Delta down 2,34 percent, Econet down 4,64 percent and Innscor down 0,84 percent. The Mining Index lost a significant 31,07 percent, weighed down by a 50 percent loss in Bindura,” IH Securities said.

Virtually all the analysts also say that the drop in the local bourse’s value is to be expected as most big cap companies are struggling to sell their products amid the continued sharp decline in disposable incomes in the country.

Blue-chip counters such as Delta and Econet have already announced and started implementing plans to streamline their operations, a move seen by market watchers as a confirmation of the tough trading conditions ravaging the country.

Financial results of listed companies also show that the economy is struggling, with a majority of firms shutting down, while other listed companies are demanding that their suppliers reduce prices by between 15 to 20 percent. — Business Live

 

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