Friday, May 18, 2012

Investing in Zimbabwe




AfrAsia Bank is pleased to post the following from guest blogger Nigel Chanakira. Nigel is the founder and anchor shareholder of AfrAsia Kingdom Zimbabwe Limited and here outlines Zimbabwe as the emerging market dynamo and the potential investment opportunities in the country.

Zimbabwe is being recognised largely as a re-bounding economy after a decade of lacklustre performance and the country still has some fundamental structural issues which need to be addressed from a policy perspective. Sub-Sahara Africa inevitably is a new and possibly, the remaining fast-growth frontier given the current global landscape and, Zimbabwe will be at the heart of growth within SADC.

Zimbabwe has for the past three years been churning out annual GDP growth rates of 5,7%, 8,1% and 9,3% respectively in a time of the global recession. The country may currently fit into a classic high risk, high return profile but without the exchange rate risks associated with an African developing country due to its multi-currency regime. Foreign investors who want to invest in Zimbabwe will find at least US$9,2 billion worth of opportunities over the next couple of years as identified by the 2011-2015 Medium Term Plan of government  in the following sectors. Click here to view the table.

As a matter of fact, many investors are concerned with the political upheavals in Zimbabwe. On the economic front the adoption of the multiple currency system in 2009 by Zimbabwe coupled with the cash budgeting policy by the government has brought the much needed macroeconomic stability. Although many new investors have entered into the mining, telecommunications and banking arenas, many others continue to watch from the sidelines anticipating to move in as soon as the signals are more position. Emphasis should now be placed on reducing Zimbabwe’s sovereign risk through working towards more stabilisation of the political environment so that we can harness international resources to augment domestic ones.

Following the direct involvement of SADC and the African Union, we expect that fresh elections will take place within the next year or so under a new constitution and these should be free and fair. This will foster a more conducive economic environment which creates space for significant infrastructural and private sector investments will drive sustainable economic growth allowing Zimbabwe to once again take its place as an African economic dynamo under a new dispensation. Interestingly, the appetite for investment by the Chinese in Zimbabwe remains very high and it is a strategic moment in time where global investors should focus more on Zimbabwe sifting between reality and the negative media frenzy because returns are very attractive.

Zimbabwe is undergoing some reforms by promoting local and foreign joint venture investments, tourism from the East, and exploiting its huge mass of a variety of valuable minerals (spanning 60 in number). Foreign savings and investment is now seen as a mechanism to compliment the domestic savings pool which was decimated by hyperinflation and dollarization of the economy. The ideal situation is for Zimbabwe to do business with all countries of the world especially the European countries that it had traditionally been doing business with like United Kingdom, etc. This is what will put Zimbabwe’s economy back on its feet.

Read more about 'Investing in Zimbabwe' in our Newsletter (page 8-9).

6 comments:

  1. It is with utmost respect to the author that I submit that this is an extremely optimistic and very subjective view made with the proverbial rose tinted glasses. Investors should take utmost care and perform due dilligence procedures applicable to a high risk country.

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  2. AfrAsia Bank Limited on behalf of Bill Nigh (New Jersey)May 25, 2012 at 9:30 AM

    I read the post. I wish the people of Zimbabwe all the best, and the possibility of prosperity IS there, but governance, transparency, corruption and stability are chronic areas of concern in many countries.

    Posted by: Bill Nigh, Content Creator and Technical Writer
    Source: LinkedIn Q&A

    ReplyDelete
  3. AfrAsia Bank Limited on behalf of Les DeGroffMay 25, 2012 at 9:36 AM

    by third hand hear say, No way....it is possible that it has stabilized enough to be again a valued resource provider...but such economies are not dynamos, the wealth is mostly consumed by imports and use.

    Posted by: Les DeGroff, Software Quality Assurance Lead (San Francisco Bay Area)
    Source: LinkedIn Q&A

    ReplyDelete
  4. AfrAsia Bank Limited on behalf of Hatred Farai Mandungumana (Zimbabwe)May 25, 2012 at 9:41 AM

    Always refreshing to hear from Nigel. Very optimistic and pointed analysis on the growth prospects in Zimbabwe

    Posted by: Hatred Farai Mandungumana, Channel Development Executive at Double A (1991) Public Company Limited - Thailand (Zimbabwe)

    Source: LinkedIn Group - VC4Africa.biz, the largest online community of venture...

    ReplyDelete
  5. Zimbabwe remains controversial and our comments section confirms that. I suppose I cannot argue with the underlying sentiments looking at just history. And yet..If one reads World Bank and other reports from the 1950s and 60s on what are now the Asian tiger economies, very much the same sentiments were expressed about them. I started working in HK and China in 1992 and in those few years after Tiananmen, well, the same sentiments were expressed on China. It was not for another ten years at least until 2002 or so that China became mentioned as the next superpower. By that time, an investor has missed the early tide. So, I would just say that change does happen. It has famously been said that “ something that cannot go on forever, will stop”. Clearly the famine and poverty and aid reliance that has marked Africa for decades now, cannot go on forever. But rather than that lead to a worsening of its condition we see it sowing the seeds of its renaissance.

    Time will tell.

    James

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  6. I certainly agree. There are immense opportunities in Zimbabwe, particularly when one considers the rebound and catch-up potential inherent in the country and economy. GDP per capita figures at a meagre $471 compared to South Africa at over $10 000 point to massive upside potential. Whilst I am generally sceptical about any targets that come from government, considering their poor track record when it comes to implementation, there certainly will be several billions' worth of opportunities should the political climate thaw even slightly. As any good investor knows, the best time to invest is when there is blood on the street, so spot on, with regards to investment timing!

    ReplyDelete