HARARE – Zimbabwe’s stock market has grown by 30 percent in the first nine months of the year and 240 percent since dollarisation in February 2009 — driven by increased foreign investor participation — and is seen maintaining a similar trend in 2014 with more policy clarity, a leading investment firm said in its latest assessment.
Foreign activity has increased significantly in recent years from 37 percent in 2009 to over 60 percent in first half of 2013 and to 80 percent in the run up to the July 31 elections but interest has cooled in the aftermath in the absence of policy clarity, particularly how the government will implement its controversial empowerment law, Invictus Capital said.
Analysts say the government has already shown its flexibility in applying the legislation, which compels foreign-owned companies valued at over $500 000 to sell 51 percent shareholding to locals, in a deal involving Canadian-listed New Dawn Mining, whose local ownership was pegged at 42 percent, and its willingness to renegotiate the $971 million agreement with Zimplats.
“Uncertainty remains high post elections, with the lack of clarity making investors very nervous,” said Invictus, adding that the fragile economic recovery witnessed in the four years of GNU is under threat.
The market dropped 20 percent immediately after elections, but has since stabilised, driven by heavy weight stocks.
But Invictus said there has been a noticeable sharp slowdown in economic activity post elections which will have a negative impact on the market.
It said the outlook for the market will depend on the political attitude towards growth and development, social and economic policies — particularly indigenisation — and the government’s approach towards foreign direct investment.
“Zimbabwe desperately needs an injection of capital to kick start the economy.
“In the absence of domestic liquidity, attracting foreign investment remains critical,” said Invictus, adding that it was critical for the government to restore investor confidence, especially among local investors.
It was also important that government maintain confidence in the market given the significant increase in activity by foreign investors over the last year, Invictus said.
“Any change in sentiment is likely to have a negative impact on the market,” it said.