Bloodbath on Zim stock exchange

HARARE - There was a bloodbath on the Zimbabwe Stock Exchange last year as punters lost close to $1,3 billion after the local bourse’ market capitalisation fell from $4,3 billion in December 2014 to $3 billion in December 2015.

Market experts say the continued decline in listed companies’ shares by 30 percent year-on-year was a reflection of the deteriorating economic conditions in the country, where gross domestic product (GDP) growth was slashed from 3,2 percent to 1,5 percent in 2015 due to drought and decreasing international metal prices. 

“This is a real disaster and it seems nothing can stop it,” said an equities analyst with a local asset management firm.

This comes as the country’s economy, which grew by an average of 7,1 percent during the inclusive government era between 2009 and 2013, is on the brink of a recession due to government’s inability to effect strong economic reforms.

Over the last three years when the Zanu PF-led government took over the reins in a controversial plebiscite, deflation has taken root as consumer demand shrinks and the economy struggles with a shortage of dollars.

Once bustling factories in Harare and other major cities are now rusty shells due to controversial economic policies such as the Indigenisation Act that have kept foreign investors at bay.

In addition, the mines are reeling from the fall in commodity prices and a drought has left 16 percent of the population in need of food aid.

Formal unemployment is currently estimated at more than 80 percent and power shortages are getting worse.

In its quarterly economic reports, Old Mutual Securities noted that low productivity, steep labour costs, an unfavourable exchange rate and limited access to adequately priced and structured credit have significantly contributed to making uncompetitive products and a sub-optimal general business environment.

“In response, listed companies have continued to pursue aggressive debt restructuring and retrenchment exercises in order to adapt to the illiquid business environment,” the Old Mutual Zimbabwe subsidiary said.

With retrenchments on the rise, aggregate demand has continued to weaken heightening competition between firms and resultantly thinning margins and lowering profitability.

The securities firm added that the country’s consumer sector has also been negatively affected by tighter margins while the manufacturing sector was yet to adequately capitalise although some are exploiting niche opportunities.

“Mining firms have been negatively impacted by softer commodity prices while in the financial sector the slow-down in credit advances and regulatory compression of interest rates is limiting income growth.

Notwithstanding the tough economic environment some listed concerns have managed to aggressively grow their revenue lines through tapping into the now growing informal sector. Other manufacturing sector companies have capitalised on their proximity to regional neighbours and are exporting competitively based on lower transport costs,” read part of the report.

Comments (4)

Say what now? $3B? To put it in context...the 211th richest person in America can buy the whole lot. http://www.statista.com/statistics/201426/the-richest-people-in-america/ http://www.forbes.com/forbes/welcome/

Galore 123 - 5 January 2016

No the 211th richest person in America can not buy the whole lot. he has to sell first, pay gains tax, before going on the market again. All the same our Zim is no more. I am told you can see some of its pieces in Malaysia.

FORBESKA - 5 January 2016

or he can get a loan and buy the whole lot same time, when you are rich you don't have to sell in order to buy financial arrangements can always be made

Harare - 6 January 2016

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