Foreign investors cautiously eye Zimbabwe with new interest
Thématique :
zimbabwe
By Peter Apps, Business Report, 03/04/2008
Having long written Zimbabwe off as one of the least appealing investment destinations, international investors are starting to show interest as they suspect the end of President Robert Mugabe's rule is approaching.
After iron-fisted farm seizures and slum clearances raised fears over the safety of outside holdings, even risk-hungry investors avoided an economy with 100 586 percent inflation.
But sentiment is starting to shift after Mugabe failed to win a clear majority in elections on Saturday, paving the way for a likely run-off with Movement for Democratic Change (MDC) leader Morgan Tsvangirai.
"It looks like the endgame is very close," said Renaissance Capital strategist Richard Segal. "There is certainly more interest. Hopefully we'll have a unity government, with a reasonable stance on property rights. That could work out quite well for foreign investors."
Renaissance, a Russian investment bank aiming to become Africa's market leader, says it has been pushing Zimbabwe as a good opportunity for six months, with interest rising in the run-up to the polls.
Renaissance snapped up a stake in CBZ Holdings sold by Absa last year, while African Banking Corporation says Citigroup has approved a $25 million (R195 million) purchase of a 20 percent stake.
Segal said the end of Mugabe's 28-year rule could see a donor conference bringing in about $1.5 billion of foreign aid.
And two-thirds of the 3 million Zimbabweans who had left during the economic crisis could return over time, he said, potentially bringing home between $2 billion and $3 billion.
China invested $1.6 billion in Zimbabwe last year, it says, and analysts say this may increase.
Zimbabwean equities already look cheap, according to analysts, and there is enthusiasm for stocks such as cellular operator Econet and retail and hotel chain Meikles Africa.
African equities rose 60 percent last year and the continent expects ongoing growth of 7 percent, but Zimbabwe has long bucked the trend. Its gross domestic product (GDP) has contracted each year since 2000, bottoming out at 10.4 percent in 2003. The International Monetary Fund expects GDP to fall 4.5 percent this year.
Bond brokerage Exotix said it had received new inquiries for prices of Zimbabwean traded debt, although as far as it knew none existed. The nation had outstanding medium- and short-term debt of $4.3 billion, it said, 95 percent of it official debt with multilateral lenders.
Given the scale of the slump, most are cautious. Some say it would take much more than Mugabe's exit to tempt them in. The presence of Zanu-PF names in a unity government could further spook investors.
With Kenya's debacle fresh in the mind, one Africa fund said it was refusing to comment on Zimbabwe, while another major bank said it would not talk for fears over staff safety.
"It's not a place we will rush to take a look at," said Aberdeen Asset Management emerging equities fund manager Andrew Brown. "You'd have to see inflation come under control and the business environment improve. Political change might be the catalyst, but we want to stand back. It's more the sort of place you would find private equity."
Others have taken a dip. London-listed Mwana, which has a nickel mining project in Zimbabwe, climbed 20 percent in early trade on Tuesday on talk of an MDC victory.
"Once [Mugabe] goes, there will be a rush to get in," said one South African analyst. "People who are already positioned will make a lot of money."
UK-based Lonrho last month unveiled plans to raise $140 million to expand in Zimbabwe.
With its gold, nickel, platinum, palladium and ferrochrome reserves, Zimbabwe could benefit from continued high global commodity prices, but huge constraints remain.
Analysts warn that the electricity system is failing to supply a manufacturing sector that has shrunk by 70 percent, ruling out a sudden spike in production.
Even with high global food prices, the devastated agricultural sector would also be difficult to resuscitate.
"There are questions over property rights," said analyst Mike Davies at risk consultancy Eurasia Group. "People are going to be cautious given the history of land grabs. It will take time to clear that sentiment."
Having long written Zimbabwe off as one of the least appealing investment destinations, international investors are starting to show interest as they suspect the end of President Robert Mugabe's rule is approaching.
After iron-fisted farm seizures and slum clearances raised fears over the safety of outside holdings, even risk-hungry investors avoided an economy with 100 586 percent inflation.
But sentiment is starting to shift after Mugabe failed to win a clear majority in elections on Saturday, paving the way for a likely run-off with Movement for Democratic Change (MDC) leader Morgan Tsvangirai.
"It looks like the endgame is very close," said Renaissance Capital strategist Richard Segal. "There is certainly more interest. Hopefully we'll have a unity government, with a reasonable stance on property rights. That could work out quite well for foreign investors."
Renaissance, a Russian investment bank aiming to become Africa's market leader, says it has been pushing Zimbabwe as a good opportunity for six months, with interest rising in the run-up to the polls.
Renaissance snapped up a stake in CBZ Holdings sold by Absa last year, while African Banking Corporation says Citigroup has approved a $25 million (R195 million) purchase of a 20 percent stake.
Segal said the end of Mugabe's 28-year rule could see a donor conference bringing in about $1.5 billion of foreign aid.
And two-thirds of the 3 million Zimbabweans who had left during the economic crisis could return over time, he said, potentially bringing home between $2 billion and $3 billion.
China invested $1.6 billion in Zimbabwe last year, it says, and analysts say this may increase.
Zimbabwean equities already look cheap, according to analysts, and there is enthusiasm for stocks such as cellular operator Econet and retail and hotel chain Meikles Africa.
African equities rose 60 percent last year and the continent expects ongoing growth of 7 percent, but Zimbabwe has long bucked the trend. Its gross domestic product (GDP) has contracted each year since 2000, bottoming out at 10.4 percent in 2003. The International Monetary Fund expects GDP to fall 4.5 percent this year.
Bond brokerage Exotix said it had received new inquiries for prices of Zimbabwean traded debt, although as far as it knew none existed. The nation had outstanding medium- and short-term debt of $4.3 billion, it said, 95 percent of it official debt with multilateral lenders.
Given the scale of the slump, most are cautious. Some say it would take much more than Mugabe's exit to tempt them in. The presence of Zanu-PF names in a unity government could further spook investors.
With Kenya's debacle fresh in the mind, one Africa fund said it was refusing to comment on Zimbabwe, while another major bank said it would not talk for fears over staff safety.
"It's not a place we will rush to take a look at," said Aberdeen Asset Management emerging equities fund manager Andrew Brown. "You'd have to see inflation come under control and the business environment improve. Political change might be the catalyst, but we want to stand back. It's more the sort of place you would find private equity."
Others have taken a dip. London-listed Mwana, which has a nickel mining project in Zimbabwe, climbed 20 percent in early trade on Tuesday on talk of an MDC victory.
"Once [Mugabe] goes, there will be a rush to get in," said one South African analyst. "People who are already positioned will make a lot of money."
UK-based Lonrho last month unveiled plans to raise $140 million to expand in Zimbabwe.
With its gold, nickel, platinum, palladium and ferrochrome reserves, Zimbabwe could benefit from continued high global commodity prices, but huge constraints remain.
Analysts warn that the electricity system is failing to supply a manufacturing sector that has shrunk by 70 percent, ruling out a sudden spike in production.
Even with high global food prices, the devastated agricultural sector would also be difficult to resuscitate.
"There are questions over property rights," said analyst Mike Davies at risk consultancy Eurasia Group. "People are going to be cautious given the history of land grabs. It will take time to clear that sentiment."
