Investment Quarterly Magazine Q4 2020

2020 – A year to forget P6 Why we are pessimistic about eco- What next after taming inflation P14 Economic stability - Are we there
/Jamaica Tongowona nomic prospects for 2021 P9 /Rufaro Zengeni yet? P16 / Ruramai Gatsi
/Ranga Makwata

INVESTMENT
QUARTERLY
Q4 Edition 2020

2020 - A Year to forget...
Any prospects for 2021?

www.zfn.co.zw Q3 Edition | Investment Quarterly 1

www.zfn.co.zw Q3 Edition | Investment Quarterly 2

Editor’s note

We present to you our fourth quarter edi- INVESTMENT QUARTERLY
tion of the Investment Quarterly Maga- MAGAZINE
zine of 2020.
In this issue we give an overview of the year 2020 as 10 Londonderry Ave
well as the preview for 2021. Is there any optimism for Eastlea, Harare.
the Zimbabwean economy in the New Year? Tel: +263 787 629 333
The authorities have claimed that the foreign currency Mobile: +263 733 016 576
situation has improved because the exchange rate has Email: [email protected]
been “managed” at around $81:1US$ for a prolonged
period. Those in the corridors of power have also Directors:
averred that this points to a stabilising economy. But Ranga Makwata, Rufaro Zengeni
is this much hyped economic stability sustainable going
into 2021? Managing Editor
We also have insights into the government‘s recently Jamaica Tongowona
launched blue print the National Development Strategy
1 (NDS1) and its precursor the Transitional Stabilisa- Staff writers:
tion Programme (TSP). Ruramai Gatsi / Ruth Dandawa
As always, happy reading and please feel free to write
back to us. We value your feedback. Tinashe Majiga / Tavonga Njaya
I take this opportunity to thank our readers, sponsors
and advertisers for the support in the year 2020. We val- Guest writers:
ue our relationship with you and will strive to keep you Courage Pahla / Caroline Chidziwo
informed with invaluable insights and ideas.
Here’s wishing you good health, good luck and God Simbarashe Mangwendeza / Gamu Pasi
Bless.
Tatenda S Majoni / Lavender Marisa
Jamaica Tongowona
Managing Editor Advertising:
Ruth Dandawa [email protected]
www.zfn.co.zw
+263 788 738 975, +263 787 629 333

+ 263 733 016 576

Editorial:
Jamaica Tongowona [email protected]

+263 772 768 364, +263 733 016 576

+263 787 629 333

Magazine design & layout:
+263 783 574 363 / +2633 719 697 070

[email protected]

[email protected]

Photographer :
Allen Matutu:

[email protected]

Q3 Edition | Investment Quarterly 3

9 Contents

30 24

38 6 2020 – A year to forget /Jamaica Tongowona

50 9. Why we are pessimistic about economic
prospects for 2021/Ranga Makwata
www.zfn.co.zw
What next after taming inflation
14. /Rufaro Zengeni



16. Economic stability - Are we there yet?
/Ruramai Gatsi


20. Is the government on track after TSP?
/Gamu Pasi

National Development Strategy 1:
24. Is this just another blueprint?
/Simbarashe Mangwendeza

The Thinking Man - Reading and
understanding maketh a full man!
28. /The Thinking Man

ZSE in 2020 - A tale of two halves
/Lavender Marisa

30.



34. 2020 Corporate movements

38. Will Covid19 stimulus packages
impact on economies going into 2021


44 /Ruth Dandawa

42. The hyped economic stability and the
banking sector /Tinashe Majiga


44. Energy sector – key economicgrowth

enabler /Courage Pahla

48. 5 Reasons for every Zimbabwean
to smile this festive season /Tatenda Samantha M.


50. The End of the Trump Error
/Rufaro Zengeni


52. The 2020 US presidential election
and us in Zim14. Yearly Market Statistics
/Tavonga Njaya



56. Zimbabwe Economic Data Page

Q3 Edition | Investment Quarterly 4

www.zfn.co.zw Q3 Edition | Investment Quarterly 5

kets. In Zimbabwe the Covid-19
pandemic exacerbated the situ-

2020 – A year ation.

In Zimbabwe the government

to forget announced partial lockdown at
the end of March by slashing
back on staff on active duty as
measures to mitigate against the
spread of coronavirus. Most com-
I panies closed shop, banks tempo-
n the first quarter of the rarily closed some of their branch-
year 2020 we expected es. The ZSE also cut short trading
more of the same. We hours as precautionary measures
projected the econo- for the safety and well-being of
my to decline further staff, stakeholders and capital inter-
in 2020, probably a much no- mediaries. A 21-day lockdown was
table shrinking than in 2019. declared which started on Monday
The main reason for this fore- March 30. The lockdown was also
cast then was premised on the extended by 14 more days to May
inherent lack of political will 3 and indefinitely thereafter. The
to do things differently. Thus, lockdown restrictions were further
we projected more of the relaxed as the number of cases de-
same, and even worse. While clined. The impact of the pandem-
all economic indicators were ic was not aggressive in Africa as it
pointing to a shrinking econ- did in most developed economies
omy, the minister of Finance in terms of case fatality rate as gov-
and Economic Development ernments in Africa enforced lock-
insisted the economy was go- down measures that helped control
ing to grow by 3% in 2020. the spread of the virus. But these
And now the government has lockdowns have resulted in massive
confirmed the economy will disruptions on supply chains and
decline by 4.1% in 2020. Will productivity and resultantly massive
2021 be any different? job losses and shrinking disposable

The year 2020 is one to forget for incomes.
many across the globe mostly due
Jamaica Tongowona to the coronavirus pandemic that The Covid-19 pandemic and the
ravaged nations infecting more lockdown restrictions presented us
than 65 million people and had by with an opportunity to reform the
early December 2020, killed more way we do business. The Reserve
than 1.5 million globally. Countries Bank of Zimbabwe announced
worldwide enforced lockdowns, on March 26 that consumers and
halted international travel and this businesses were free to trade in for-
resulted in battered financial mar- eign currency and suspended any

www.zfn.co.zw Q3 Edition | Investment Quarterly 6

2020 – A year to forget

increase in charges related to the
provision of electronic payments as
part of its monetary interventions
in response to the financial vulner-
abilities caused by Covid-19. The
central bank also shelved its ‘man-
aged floating exchange’ model and
adopted a fixed exchange rate sys-
tem at $25 to the US-dollar. Inter-
est rates were also slashed to 25%
from 35%. Following a run on the
exchange rate on the parallel mar-
ket the RBZ replaced the interbank
fixed rate of $25:US$ with a weekly
foreign exchange auction to deter-
mine the exchange rate on 23 June
2020. The RBZ governor argued
the auction would improve trans-
parency and efficiency in trading of ZWL$5000 (less than US$50) per rout of the nation’s currency. And
forex in Zimbabwe. day. there was political interference from
As the Zimbabwe dollar contin- The authorities also clamped the ruling Zanu-PF with acting par-
ued to weaken against the US dol- down on the capital markets with ty spokesperson Patrick Chinamasa
lar, authorities predictably pressed the Zimbabwe Stock Exchange or- quoted saying on 14 July 2020 say-
the regulatory overreach default dered to suspend trading on 26 June ing “Zanu PF is totally opposed to
button by descending heavily on 2020 through a government direc- the fungibility of the Old Mutual
alleged economic saboteurs mostly tive. The government said the sus- shares and to this end it reaffirms
in the financial markets. Authorities pension of trading on the ZSE was its policy position that the ZSE
blamed the weakening of the Zim- meant to allow investigations into should compulsorily de-list the Old
babwe dollar on illicit trading of illegal dealings connected with the Mutual Limited shares from trading
currencies via electronic transfers. foreign currency black market and on the ZSE.” At the centre of au-
The government on 26 June 2020, ostensibly to put in place reforms thorities argument was the Old Mu-
banned mobile phone-based pay- that restore mobile money plat- tual Implied Rate (OMIR) which is
ments to deal with what the alleged forms to their original purpose. We a rate used by investors as one of
‘economic sabotage.’ Cashing out saw this coming in Q2 2019 upon the the valuations methods. Old Mutual
would be done through banks, ap- reintroduction of the local ZWL$. shares were mostly used by foreign
parently to stop large sums of mon- Finance minister Mthuli Ncube had investors as way of repatriating in-
ey from being released onto the on 15 March 2020 suspended fun- vested funds through the Johannes-
parallel market. Individual transac- gibility in dual listed counters Old burg Stock Exchange due to foreign
tions were pegged at a maximum of Mutual, PPC and SeedCo Interna- currency shortages in the country,
tional as part of measures to stop a nothing else.

www.zfn.co.zw Q3 Edition | Investment Quarterly 7

2020 – A year to forget

from the ZSE ar- ities, currencies or any other asset.
guing that given Old Mutual Investment Group
the current en- Zimbabwe (Private) Limited wishes
vironment in the to establish an ETF that tracks the
country, a listing ZSE Top Ten Index. The ZSE Top
on the ZSE has Ten Index consists of the top ten
very little bene- (10) counters by market capitalisa-
fits and consid- tion that are listed on the ZSE. Old
erable costs. To Mutual Zimbabwe Limited is put-
give a perspec- ting initial seed capital on the day
tive, the ZSE had of listing. Additional investments
And for the whole month of July, 81 listed counters as at November from other investors will be used
the ZSE remained suspended and 2008 and these have since dropped to buy shares on the market and
trading only resumed on 3 August to 58 as at November 2020. Of the add to the portfolio. Investors who
2020 with 3 dual listed counters current 58 counters on the official wish to invest in the fund can do so
Old Mutual, PPC and SeedCo In- list 6 are currently suspended from through buying units in the ETF
ternational suspended from trading trading on the bourse. through any registered Stockbroker
pending forced delisting and listing The government also launched an or alternatively investing in kind by
on the mooted Victoria Falls Stock ambitious National Development delivering a basket of stocks in the
Exchange (VFEX) to trade in US$. Strategy 1 (NDS1) on 16 Novem- exact weights of the fund through
Finance minister Mthuli Ncube ber 2020. The NDS1 is an econom- an authorized participant. Current-
said the launch of VFEX was part ic blue print strategy that the gov- ly, the authorised participant is Old
of the solution by government to ernment intends to pursue over the Mutual Investment Group Zimba-
deal with the environment for do- course of 2021 to 2025 as a Strategy bwe (Private) Limited. All assets
ing business in the country and the to achieve a Middle-Income Coun- of the fund will be held by CABS
VFEX, would be a driver of invest- try by 2030. Custodial Services, who will act as
ments into the mining sector and And for something to look forward the Custodian for the fund, while
insurance companies that offer ser- to in 2021 for the investing public, Stanbic Bank Zimbabwe Limited is
vices to the mining sector and other the ZSE has approved the listing of the Trustee. Settlement of trades in
sectors that desire US$ insurance the Old Mutual Zimbabwe Stock the units will be done in electronic
products. Since its launch on 23 Exchange Top Ten Index Exchange format in accordance with the set-
October 2020, only SeedCo Inter- Traded Fund on the ZSE by way of tlement modalities approved by the
national has managed to successful- Introduction. The fund will be list- Zimbabwe Stock Exchange. Old
ly delist and list on VFEX. Mutual Investment Group Zim-

The capital markets have remained ing on the ZSE on 4 January 2021. babwe (Private) Limited, the ETF
largely unattractive as investors’ ap- Exchange Traded Funds (ETFs) fund manager, will be responsible
petite continues to wane and since are passively managed, fully fund- for periodically replicating the ZSE
the ZSE resumed trading on 3 Au- ed (unleveraged) open ended funds Top Ten index in line with the in-
gust 2020, a total of 2 counters, which track the performance of a dex Ground Rules as defined by the
Falgold and ZPI have since delist- specified security. These include but ZSE. The reference Top Ten index
ed from the bourse. Powerspeed are not limited to indices, commod- will be reviewed once a quarter.
has also initiated a process to delist

www.zfn.co.zw Q3 Edition | Investment Quarterly 8

Why we are pessimistic
about economic pros-
pects for 2021

W e largely terim economic policy, the Transi-
expect- tional Stabilisation Programme
ed 2020 (TSP). It obviously did not achieve
to be a much, if at all, but the policy draft-
difficult ers praise it for “providing for mac-
year. It is not because we are ro fiscal stabilisation and investment
prophets of doom. Not by any mobilisation to facilitate growth.” A
stretch of imagination. The strong macroeconomic foundation
writing was on the wall that was laid, we were told, now is time
even the most patriotic but re- to embark on a new blueprint called
alistic person would have seen – The National Development
that we were headed for diffi- Strategy 1 (NDS1), running from
cult times. So when some of 2021 to 2025. We have lost count of
the things we had anticipated these blueprints but one constant is
happened, we did not feel vin- that all of them have largely yielded
dicated but disappointed. As no meaningful results. There’s no
if our self-inflicted shortcom- prize for guessing what the fate of
ings were not enough, Mother NDS1 will be.
Nature also threw us a curve-
ball, which was Covid-19. The Since the independence in 1980
pandemic was global in its policy makers in this country have
reach and it was the last thing come up with quite impressive eco-
we needed after a cyclone the nomic policy documents which if
previous year added to our they had been pursued and imple-
economic woes.
mented sensibly could have resulted
in notable prosperity for the coun-
Ranga Makwata Whereas observers are seeing a try and its people. Sadly almost each
struggling economy wrought by and every one of them has failed
www.zfn.co.zw unfavourable policies, policy mak- at implementation stage. We do
ers believe they are making great not believe the current economic
strides. This is apparent as we come problems cannot be solved by more
to the end of the government’s in- blueprints but require policy makers

Q3 Edition | Investment Quarterly 9

Why we are pessimistic about economic prospects for 2021

to change their paradigms towards in confusion with many critical ar- In our recent interactions with
prudent economic management eas missing out. Significant chunks foreign clients as part of our efforts
and eradicate social ills such as cor- were allocated to some farming op- to get them to invest in Zimbabwe
ruption and not to always blame erations for the benefit of the pol- again we got brutal but honest feed-
exogenous factors like ‘illegal’ sanc- iticians who constitute the majority back from them.
tions for our ineptitude. of people who got farms during the
Indeed the country has in the last fast track land redistribution. One of them told us he had no in-
terest in the local equity market add-
two years experienced some shocks The country has not seen much ing: “I’m sorry it is that way, Zimba-
such as drought, floods, cyclones in terms of investments in the last bwe has great potential, but without
and the Covid-19 but the impact of few years. Several foreign business- a coherent foreign exchange market
some of these could have been mit- es which had some operations in it is unlikely this interest changes
igated had we planned properly. For the country have been disinvest- anytime soon.”
instance, a good irrigation infra- ing citing the unfavourable oper-
structure reduces reliance on rains ating environment while none of Another painted an even sorrier
for cropping. Unfortunately little the mega deals reported regularly picture of massive disappointment.
investment is happening on farms in public media have materialised. He said: “We are currently exiting
because holders do not have securi- Similar trend of capital flight was our last remnants of Zimbabwean
ty of tenure with incidence of farm also noticeable in portfolio flows exposure after a long and painful
repossessions still occurring from on the capital markets. For instance, 7yrs stuck in the country and there’s
time to time. for the ten months to October little likelihood we return until we
The impact of Covid-19 has been 2020 selling by foreign investors see pretty profound change in the
devastating and it is worse for coun- on the Zimbabwe Stock Exchange country.”
tries like Zimbabwe which plunged outstripped purchases by 10 to 1. Without meaning capital flows, ex-
into the pandemic without mean- In dollar terms foreign selling was port of tobacco and precious met-
ingful reserves. So whilst the natu- ZWL5.56 billion while foreign pur- als have complimented remittances
ral response for other countries to chases amounted to only ZWL 590 as source of foreign currency. In
the economic dislocations caused million! The reintroduction of the 2020 the remittances have been low
by the coronavirus was to provide Zimbabwe dollar, suspension of and they are expected to remain
stimulus packages, we did not have Old Mutual shares’ fungibility and suppressed in 2021 as econom-
that luxury. A ZWL18 billion pack- the closure of the stock exchange ic conditions in sending countries
age was announced but its distribu- for one month in July this year all have tightened during the global re-
tion was not even and was shrouded contributed to the negative investor cession,
sentiment.

Figure 1: Economic policies timeline (1980-2025)

DATE POLICY PERIOD COVERED
01-Feb-81 Growth with Equity (GWE) 1981

Transitional National Development Plan (TNDP) 1982-1985; 1985-1990
18-Jan-91 Economic Structural Adjustment Programme (ESAP) 1991-95
20-Feb-98 Zimbabwe Programme for Economic and Social Transformation (ZIMPREST) 1996-2000
29-Mar-00 Vision 2020 And Long Term Development Strategies 1997-2020
01-Aug-01 Zimbabwe Millenium Economic Recovery Programme (ZMERP) 2001-2002
01-Feb-03 National Economic Revival Programme (NERP) 2003-2004
01-Nov-04 Macro-Economic Policy Framework (MEPF) 2005-2006
01-Apr-06 National Economic Development Priority Programme (NEDPP) 2006-2008
01-Mar-09 Short Term Emergency Recovery Programme (STERP1 ) March 2009 2009
2010-2012
Short Term Emergency Recovery PROGRAMME (STERP2 ) 2013-2018
01-Oct-13 Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset)
01-Oct-18 Transitional Stabilisation Programme 2018 –2020
30-Nov-20 National Development Strategy 1 2021-2025

www.zfn.co.zw 10Q3 Edition | Investment Quarterly

www.zfn.co.zw 11Q3 Edition | Investment Quarterly

Why we are pessimistic about economic prospects for 2021

As we come to the end of 2020 many have gone for more than 4 of 2020 had a surplus of US$938.9
the consensus is that for a second weeks after being allocated foreign million versus US$319.9 million in
year running economic growth will currency on the auction before the 2019. The overall current account
be negative. The most optimistic funds actually get transferred into balance for 2020 is projected to be
target obviously is from govern- their accounts. in surplus at about US$1,229.3 mil-
ment which expects economic de- lion. The surplus is unsustainable in
cline of 4.1% in 2020 after negative There are some laughable claims our view especially as the borders
growth of 6% in 2019. Less com- within official corridors that the are now being opened to allow for
plimentary estimates are well above foreign currency situation now is cross border traders, which would
10% negative growth for 2020, and better than between 2009 and 2013. push imports up. In the last nine
even those could still be a tad too Their argument is there is US$1.1 months in question, exporters were
optimistic! Our forecasts early this billion deposits in the banks now operational whilst imports were
year, before we knew there would compared to about US$40 million very negligible as most companies
be a global Covid-19 outbreak, was at some point in the comparative who ordinarily import stuff regu-
10%. Now factor in pandemic in- period. However, they still cannot larly were closed.
duced shocks either through lock- explain why foreign payments are
downs, reduced investment inflows, more difficult to make now than No cause for op-
lost production hours, closed bor- then. We have memories of walk- timism in 2021
ders, grounded distribution trans- ing into banking halls to withdrawal
port systems, and the inability of US dollar between 2009 and 2013 Official gross domestic growth
the state to provide a meaningful as which is something not possible (GDP) estimate for 2021 is 7.4%.
well as effective stimulus. National now. Then civil servants were earn- While some recovery is likely, 7.4%
economic output decline of up to ing US$450 per month of real dol- growth looks overly ambitious. The
15% is not impossible. lars compared to the US$40 they growth is premised on “strong re-
Prices have generally been sta- have been getting before the recent covery in agriculture, mining, elec-
ble with inflation declining thanks reviews which are approximately tricity, construction, transport and
to the stability on the foreign ex- between US$145 and US$190 us- communication as well as finance
change market. To their credit since ing the black market rate. There has and insurance.”
been unending tensions within the
July 2020, government has done civil servants who continue to de-
a good job of containing reserve mand better salaries. Government Rains will be good with normal
money with resultant low liquidity sometimes resorts to threats of job to above normal rainfall expected
stemming exchange rate deprecia- dismissal in some cases to force but it does not seem like farmers
tion. Year-on-year inflation in local them to the negotiating table. How were well prepared and resourced
currency for the month of Octo- reliable is the US$1.1 billion if it to achieve bumper harvests. Gov-
ber declined to 471% from 659% cannot be availed to those looking ernment efforts seemed focused
in September 2020, while month for currency? Already in the mar- on subsistence farming using the
on- month stood at 4.4%. Howev- ket, funds in local US dollar nostro experimental Pfumvudza concept.
er, we are less optimistic on the suc- accounts are discounted by around However, even if that was to suc-
cess of the foreign auction system 10% when exchanged for US dollar ceed, as long as big farms remain
because it looks obviously ‘gamed’. notes or real nostros. largely underutilised output will
Just as we saw earlier in the year the continue to be well below potential.

interbank market starting well with Payments are Mining sector has to deal with
the rate allowed to track the parallel balancing, artifi- rampant smuggling of gold as pro-
rate, before being artificially capped ducers, especially small scale, shun
at ZWL25 per US$1, the same has cially official buyers who are offering sub-
stantial discount to global prices. Fi-
happened with the auction rate
which seem to have been capped at One area of interest has been nancial and insurance sectors need
81, leading some people to joke that the external sector position which the productive sectors for them to
81 is now the new 25. Even more “continues to show improvement tick while infrastructure develop-
disconcerting are the stories that with the current account remain- ment will be limited due to capital
ing in surplus”. First nine months constraints. We do not believe that

www.zfn.co.zw 12Q3 Edition | Investment Quarterly

the promised 150,000 formal jobs 13Q3 Edition | Investment Quarterly
will be realised. Rather more jobs
could still be lost as the economy
sinks deep into decay.
Government is adamant that the
Zimbabwe dollar will anchor the
economy but the nation has large-
ly rejected it. Not even its current
scarcity has made it ‘likeable’ for
the simple reason that people do
not trust its long term stability. Any
attempt to vigorously push for its
acceptance and side-lining the US
dollar again will ignite the currency
depreciation and force inflation up
again. Chances of that happening
are high and as such we are project-
ing renewed currency slump and
inflation pressures in 2021. Sooner
rather than later, the auction rate of
ZWL81 which is not keeping pace
with parallel rates developments will
render the auction system imprac-
tical especially if delays in actual
funding of allocated currency con-
tinue to occur. Officially, annual in-
flation is expected to slow down to
an average of below 135% in 2021,
while average month-on-month in-
flation is expected to be below 1%.
We see inflation charging towards
1000% in 2021 unless the country
fully embraces multi-currency. The
parallel market exchange premium
which had fallen to 10% is likely to
start increasing again as the auction
rate remains stuck around US$1:
ZWL$81 while the parallel market
is inching up. The year 2021 is going
to be another turbulent period and
we are all better off bracing for the
tough times even as we hope for the
best.

www.zfn.co.zw

What next after
taming inflation

F or the most part, moved aggressively to tame the
on the econom- parallel market exchange rate and
ic front, the so- runaway inflation. Naturally, in their
called “Second panic mindset, they did some dumb
Republic” that things. Shutting down the local
declared Zimbabwe “open for bourse and clamping down on Eco-
business” after the coup that Cash transactions. Treasury moved
was not a coup has failed mis- away from the interbank market
erably. Bank balances were de- for determining the exchange rate,
based dramatically, losing at which they had emasculated by
least 80% of their value if we dictating rates to the banks, to an
are to take the official auction opaque weekly auction system.
rate a true reflection of the
value of the Zimbabwe dollar Notwithstanding the missteps
(ZW$). We witnessed a return above, Treasury did move to stop
to hyperinflation hardly a de- printing, restraining money supply
cade after disastrous central growth and reigning in inflation.
bank printing led to the whole This is commendable. It is howev-
rejection of the ZW$ version er important to point out that this
1.0. It never rains, but pours: is only a critical step in the right
an economy already in self-in- direction, but far from a panacea.
flicted freefall then had to deal The economy has many problems
with Covid-19 which decimat- beyond hyper-inflation and a vola-
ed the tourism and entertain- tile devaluing soft currency. Mate-
ment sectors. rial new investments are not going

Rufaro Zengeni While Treasury’s stewardship of to happen to increase production
the country’s finances, or rath- across sectors in the absence of
www.zfn.co.zw er lack thereof, is deserving of confidence around the consistency
much opprobrium, the psycholog- of government policy. Treasury has
ically important parallel market ex- done well in taming inflation over
change rate of 100 struck a nerve the last few months but they have
in the halls of New Government not yet engendered confidence in
Complex on Samora Machel. They the market that they have changed
their profligate ways.

14Q3 Edition | Investment Quarterly

There are simple measures that cut when they bring hard currency RBZ but if they are encoded into
Treasury and the Reserve Bank of into the country will they consider the law of the land and enforceable.
Zimbabwe (RBZ) can take to re- opportunities in this jurisdiction in The “open for business” mantra
store the confidence of potential earnest. It the moment, Zimbabwe rings hollow in the offices of many
investors. In spite of the price sta- is a no-no for frontier market inves- foreign investment houses and this
bility stemming from shutting down tors whose capital would be a pow- community needs to be re-engaged
the printing press, there is still sub- erful stimulus to kickstart growth in with honest conversations acknowl-
stantial arbitrage between the of- a shrinking economy. edging previous missteps. Part of
ficial auction rate and the parallel the conversation should involve
market. Why would any reasonable It’s not enough to commit to mak- the GoZ listening to feedback from
foreign investor bring in meaningful ing these positive changes. Sadly, the frontier capital markets and serious-
amounts of hard currency at the of- Government of Zimbabwe (GoZ) ly considering and adopting sugges-
ficial rate of 82 in an environment has a well-documented long track tions for reforms that would build
where the free but illicit parallel record of breaking promises. The confidence. The farcical launch of
market is indicating a rate of 115 – ruling party does however enjoy the Victoria Falls Stock Exchange,
a 29% discount to fair value? Trea- the advantage of controlling both which occurred without any stake-
sury and RBZ, should they be gen- the executive and legislative branch- holder consultation, should be a
uinely committed to discontinuing es of government. They therefore powerful memento mori and case
use of the printing machine, have have the power to enshrine their study in how not to execute re-
nothing to fear from a free-floating commitment to not printing and a forms.
exchange rate with a transparent free-floating exchange rate into law. Charity begins at home and the
and efficient price-discovery mech- After the traumatic hyper-inflation local business community and cap-
anism. experience during the Weimar Re- ital markets have a deep bench of
public, the Germans enshrined into
The notion that bad actors and law provisions that would make it a well-educated, talented and expe-
saboteurs are responsible for the criminal offense for public officials rienced operators and intellectuals
movement of the rate on the par- to take policy actions that would whose counsel is often given short
allel market does not comport lead to a recurrence in fiscal prof- shrift. Many of the ideas and sug-
with objective reality. The rate is a ligacy and massive currency deval- gestions in this essay are the col-
function of supply and demand. uation. lective wisdom of this crowd. GoZ
With Treasury out of the printing would do well to work closer with
business, the supply of ZW$ is Positive economic reforms are the local business leadership if they
constrained and they will be given much more likely to engender mar- are remotely seriously about turning
to holding their value. Only when ket confidence if they are not just around the economic fortunes of
foreign investors have comfort that announcements coming from se- this country.
they are not taking a material hair- nior officials in Treasury or the

www.zfn.co.zw 15Q3 Edition | Investment Quarterly

Economic stability
- Are we there yet?

Z imbabwe is start- mobile money transfers; outright
ing to get some banning of agents and bulk pay-
sense of stability ments through mobile facilities; and
with regards to integration of all national payment
the economy but systems with ZimSwitch.
many are questioning the sus- Resultantly, these measures helped
tainability of this stability, as improve market confidence, pro-
it was seemingly achieved on moted price stability, stimulated
the back of overregulation. A
number of policies were im- domestic production and reduced
plemented by the government annual inflation - all creating an en-
around mid-2020 and these vironment conducive for sustain-
have brought sanity and sta- able economic growth.
bility as the local economy is
undergoing re-adjustment. The country’s annual inflation rate
Efforts should therefore, be has been plummeting ever since.
fully directed to making the Data provided by Zimbabwe Na-
whole system sustainable. tional Statistics Agency (ZimStat)
showed that the annual inflation
The Reserve Bank of Zimbabwe was 471.25% down from 659.40%
(RBZ) introduced the foreign ex- in September while month-on-
change auction trading system on month inflation in October stood
17 June 2020 which became op- at 4.37%, after jumping from 3.83%
erational with effect from 23 June the previous month.
2020. This is at present the main
Ruramai Gatsi component promoting stability. In Prices of some basic commodities
the same month, the central bank remained stable and in some in-
www.zfn.co.zw also introduced other support mea- stances have marginally decreased,
sures aimed at discouraging the par- arresting the volatility and specu-
allel market and bringing stability. lative economic activities of the
These include tightening the leash pre-auction days. This is in line
on money supply; setting limits on with the stability being enjoyed by

16Q3 Edition | Investment Quarterly

acGnooepnltiyne

Contact
Ruth Dandawa Jamaica Tongowona
P: +263 788 738 975 E: [email protected]
E: [email protected] P: +263 772 768 364

www.zfn.co.zw 17Q3 Edition | Investment Quarterly

Economic stability - Are we there yet?

the Zimbabwe dollar (ZW$) against leading mobile money transfer drives investor confidence; sustain-
major currencies. For over two agent, EcoCash. The government ability is equally important.
months, the ZW$ has been trading should find ways of addressing
a little above $81 to the US dollar these disparities in order to create What needs to be done
against the highest recorded rate of a balance. to sustain the stability?

$83, 39 that was set on August 25. Transparency and accountabili- There is need for the authorities to
Meanwhile, there has been a signif- ty in the foreign exchange auction also put in place measures that pro-
icant improvement in the reduction trading system are also necessary as mote sustainability of this stability,
of money supply growth with latest they help build trust and confidence and these include:
figures released by RBZ indicating needed for sustainable economic
that month-on-month growth for growth. There have been insinua- Policy consistency – The
August was 10.50% at $146,147.15 tions from various quarters about
million against July’s growth of RBZ’s invisible hand in influencing Zimbabwean government has over
32.50% to $132,259.29 million. the direction of the exchange rate the years dismally failed to practice
It is important to note that these on the auction system, which has policy consistency and this has
measures also have some nega- been remarkably stable over the last resultantly made it difficult for the
tive impacts as acknowledged by four months. country to attract both foreign and
direct investment which are critical
the Zimbabwe Revenue Authority Calls were made by some market for sustainable economic growth.
(ZIMRA)’s 2020 third quarter re- players for the central bank to allow
port, which reported a 32% decline banks to take the lead role in the Reducing red-tape and
over-regulation – A key driver
on the 2% Intermediated Money management of the auction system of sustainable economic growth
Transfer Tax as a result of govern- in order to build confidence in the for both developed and developing
ment’s tough decision to market and also demonstrate the countries is Foreign Direct Invest-
throt- tle autonomy of the forex auction sys- ment (FDI), and this can mostly be
tem in market-led price discovery. encouraged by reducing red tape
However, there are those who in- and unnecessary regulation.
sist that there have been no sign Introducing tax reforms –
of manipulation or attempt to Taxation has been a thorny issue
influence the exchange by the for over 20 years in Zimbabwe due
central bank or its staff which to market upheavals witnessed by
insinuates that the exchange rate businesses in the economy. Zimba-
reflects the true sentiment in the bwe’s tax regime is considered as
market. one of the most difficult and ex-

Some players in the mar- pensive in the world. A Zimbabwe
ket have also questioned the Revenue Authority (Zimra) third
source of the foreign curren- quarter report released in October
cy. If the forex is sourced 2020 showing corporate tax trailing
from exporters, this may be individual tax contributions could
point to massive tax evasion. Taxes
sustainable but if it’s a gov- from firms ended the period at
ernment facility it might be 14.63% of total revenue, against
difficult to sustain as it may 15.26% remitted by individuals and
run the risk of drying up. 3.33% royalties. Recently, bankers

Stability helps cre- also contested the newly-intro-
ate certainty and confi- duced 2% Intermediated Money
dence which encourages Transfer Tax on foreign currency,
much-needed investment noting that it is inflationary and
in the economy. However, erodes the rising confidence in the
it’s not only stability that local currency. All this calls for

www.zfn.co.zw 18Q3 Edition | Investment Quarterly

the redesigning of the tax system 19Q3 Edition | Investment Quarterly
to promote sustainable economic
stability and growth.

Creating new markets –

Sustainability can also be achieved
by encouraging the formation of
new markets which exploit new
technology or new trading meth-
ods.

Building infrastructure –

Long-term development of infra-
structure projects is also central
to the promotion of long term
growth and development. Better
infrastructure enables output to be
transported at lower cost, as well as
generating jobs and other positive
externalities. All this promotes
sustainable economic stability and
growth in the long-term.

Expansion of the supply
side – Economic growth occurs

because of increases in aggregate
demand and supply. However,
long-term sustainable growth
ultimately depends on supply-side
improvements because balance
of payments and inflationary
problems are less likely when the
productivity of factors improves.
Suffice to mention that expansion
of the supply side is necessary to
sustain stability and, therefore,
confidence in the economy.

Increasing competitive-
ness and contestability –

Another important stimulus to
supply side growth and sustainable
economic stability is to increase
the degree of competitiveness in
the micro-economy by promoting
contestability, reducing barriers to
entry, and by deregulating markets
to encourage new entrants.

www.zfn.co.zw

Is the government
on track after TSP?

At a staff meet- print, the National Development
ing a colleague Strategy 1 (NDS1), commencing
once comment- January 2021 for the next 5 years
ed and said, before NDS2 takes over. Before
“You can’t as rushing to the NDS, it is very im-
a father and a breadwinner portant to interrogate the TSP and
claim at home that the family see how far we have gone in attain-
has realised grocery excesses ing the intended results.
and yet children are starving When TSP was introduced, its
and undernourished”. In light
of the above, and in relation to focus was on stabilising the mac-
what Finance and Economic ro-economy, and the financial sec-
Development minister Mthu- tor, introducing necessary policy,
li Ncube has proclaimed, we and institutional reforms, to trans-
take a look at the progress form to a private sector led econ-
made or lack thereof under omy, addressing infrastructure gaps
government’s Transition- and launching quick-wins to stimu-
al Stabilisation Programme late growth. During the TSP period,
(TSP). inflation surged in what the IMF re-
ferred to as “policy missteps” by the
As a recap, the TSP is not a stand- monetary authorities, which includ-
alone government programme but ed liberalising the foreign exchange
part of huge “Vision 2030” aimed market in line with the TSP and
at attaining a Prosperous and Em- increasing money supply. Authori-
powered Upper Middle Income So- ties have moved to correct that but
ciety by 2030. Vision 2030 is divided them admitting to their mistakes is
into TSP running from Oct 2018 to of paramount importance to gain
Dec 2020 followed by two five-year public trust.
Development Strategies, with the
first one running from 2021-2025, In a 2021 Budget Strategy Paper,
and the second covering 2026-2030. the Ministry of Finance and Eco-
nomic Development came up with
Gamu Pasi Apparently, media is awash with a long list of TSP ‘achievements’
reports of the new economic blue- over the 2.25 years.
www.zfn.co.zw
20Q3 Edition | Investment Quarterly

Some of TSP achievements in- the COVID-19 pandemic with no er SI which made it compulsory
clude: medicines or medical staff in public for import duty on luxury products
clinics and hospitals. Serious brain to be paid in United States dollars.
1. Fiscal deficit as a per- drain has been experienced in the In 2020; another SI came through
centage of GDP declined health sector during the period. In allowing businesses to charge in
from -10.5% in 2017 to a sur- short the ratio is misleading as it United States dollars and another SI
plus in 2019, and with al- does not show the negative social made it mandatory for businesses to
most balanced budget pro- impacts of this “good” ratio. Well, display prices in both local Zimba-
jected in 2020. maybe that’s the pain and sacrifice bwean dollar and the United States
prophesied by the minister during dollars at the official interbank rate.
Comment: While there has been the launch of TSP. Further; another SI was introduced
signs of more discipline budgetary 3. Current Account: From which made it mandatory to liqui-
control, this achievement was only a deficit of US$1.4 bil- date 20% of all receipts in foreign
helped by hyperinflation. It seems lion (2018) to a surplus of currency for non-exporting busi-
like the Ministry did cash account- US$311.2 mln in 2019 nesses and 30% for all export busi-
ing in their compilation as debts Comment: Current account sur- nesses and also made it mandatory
and payables were not settled. Zim- plus is a disturbing kind of a fig- for taxes to be paid in the currency
babwe still owes international cred- ure considering that we have legacy receipted.
itors about US$10 billion and owes creditors who have not been paid in As you can see the United States
local creditors a couple of billions so many years. dollar was banned and re-intro-
as well; therefore if we were to draw duced via backdoor in the name of
the balance sheet of the country, we 4. Restoration of monetary COVID and subsequently it was
are in negative equity; thus one can- policy: Introduction of lo- made part of the official curren-
not talk of a surplus. cal currency, restoring the cies without the proper legal frame-
2. Employment costs: Em- monetary policy instru- work to do so. Many products are
ployment costs/Total reve- ments in the process. now only available in the market
nue ratio from 78.3% in 2017 in US dollars such as fuel, accom-
to 41.9% in 2020 Comment: I don’t think this

Comment: On employment economy has been exposed to so modation, gas for cooking etc. The
costs, yes, the government achieved many Statutory Instruments (SI) propensity of the government to
extreme impoverishment of civ- within a short period of time like collect US dollars from the public
il servants which is something we what has happened during the TSP via taxes and licencing many sectors
might not need to celebrate. The period. The local Zimbabwe dollar to charge exclusively in US dollars
bulk of 2020; Doctors, Nurses and was introduced via an SI which ef- while insisting that they can only
Teachers were on strike and not at fectively banned the multi-currency pay civil servants Zimbabwean dol-
work due to the poor salaries. The system which the country had come lars outs their duplicity in the mat-
situation was dire in the medical to love since 2009. Since then the ter. Clearly the government does
sector as the country battled with government has introduced anoth- not have faith in its own currency

www.zfn.co.zw 21Q3 Edition | Investment Quarterly

Is the government on track after TSP?idea

hence it demands taxes in foreign Auditor-General’s reports at a mac-
currencies. If the government does ro level and observed that there is
not have faith in its own currency rampant misuse of public funds in
why should it expect ordinary citi- violation of various Acts of Parlia-
zens to have faith in the same cur- ment and the constitution.
rency. Therefore it cannot be an
achievement to bring back the Zim- 7. Ease of doing business:-
babwean dollar in the economy. Improved online name
search in starting a busi-
ness, municipality business
5. Gvt Reforms: Repeal of licensing fee down from
AIPPA and replacing POSA US$300 to US$200, faster
with MOPA approval of construction

Comment: The repeal of (Ac- permits
cess to Information and Protection
of Privacy Act (AIPPA) was in the Comment: Whilst the above is
new 2013 constitution. The replace- true. The systems being used are
ments of Public Order and Security still archaic and need major revamp
Act (POSA) with Maintenance of to compete with similar systems
Peace and Order Act (MOPA) and being used in other parts of Afri-
AIIPA whilst they are of a different ca, e.g. in South Africa. There is still
tone; the enforcer of these pieces a lot corruption in the institutions
of legislation hasn’t changed. The which result in clients having to pay
law can therefore be interpreted to more than the official fees to get
still oppress freedom of speech, as- their paperwork.

sociation and expression in Zimba- The TSP period had its own un-
bwe as is evidenced by several court foreseen challenges including
cases of journalists, political activ- Covid-19 pandemic, impact of
ists and citizens. drought, cyclone Idai, lack of in-

6. Public Enterprise Re- ternational financial support, high
forms inflationary pressures, delays in for-
eign debt arrears clearance, delays in
Comment: Nothing was achieved project implementation according
here. Telecoms - Netone, Telone, to the ministry.
Africom, and Telecel are all loss
making State Owned Enterprises We have experienced so many
(SOE) and not performing well. policy interventions in Zimbabwe
No significant progress has been and the truth is that there is noth-
noticed since the start of the TSP ing new. ZimAsset, which was even
towards restructuring or privatizing more ambitious, just came and is
them. ZESA bundling is still no- gone. Yes, the ministry listed so
where near completion. many achievements but the gener-
al populace has experienced serious
The Auditor-General, through her downgrade in the quality of lives.
reports, has pointed out non-com- From a practical point, all the listed
pliance and lack of accountability achievements are useless with no di-
and transparency in State-owned rect improvements in the standard
enterprises as the major constraint of living for the average Zimba-
to public enterprise performance. bwean. Your pantry might be full as
The Public Accounts Committee you claim it – but we’re suffering,
on Compliance Issues for the Fi- “guardians”.
nance ministry has buttressed the

www.zfn.co.zw 22Q3 Edition | Investment Quarterly

www.zfn.co.zw 23Q3 Edition | Investment Quarterly

National Development
Strategy 1: Is this just
another blueprint?

T he National De- capita of US$1,390 in my hum-
velopment Strat- ble opinion was significant-
egy 1 (NDS1) ly overstated. This is backed
is an economic by the fact that during the
blue print strat- course of the year the premi-
egy that the government of um between informal market
Zimbabwe plans to pursue exchange rate and the official
over the course of 2021 to 2025 exchange rate narrowed to cir-
as a Strategy to achieve a Mid- ca 25-30% following a formal
dle-Income Country by 2030. devaluation of the currency by
A middle-income country is a 79% as at 30 November 2020.
country where the Gross Na- Simple math could similarly
tional Income (GNI) per cap- dictate that the GNI per capita
ita is between US$1,026 and for Zimbabwe should decline
US$12,475. Where the Gross by more than 79% as the most
National Income is the total conservative forecast is that
domestic production plus net Zimbabwe’s GDP would have
overseas earnings. According shrunk by 4.1% as 2020 ends.
to the World Bank, Zimba- If we are to follow the logic
bwe had a GNI per capita of above, then the GNI per capi-
US$1,390 at the close of 2019 ta for Zimbabwe would be be-
and this would rank Zimba- tween US$200-US$300 in 2020
bwe as a “Lower Middle In- and a gap of at least US$700
come” country. The calcula- would need to be closed be-
tion of this statistic however fore Zimbabwe is realistically
with respect to Zimbabwe had deemed a “Lower Middle In-
significant upward bias as the come” Country.
official exchange rate used to
Simbarashe calculate that number signifi- The NDS 1 document is a succes-
Mangwendeza cantly over valued the ZW$. As sor document to the Transitional
such, realistically the GNI per Stabilisation Program (TSP) and
www.zfn.co.zw
24Q3 Edition | Investment Quarterly

National Development Strategy 1: Is this just another blueprint?

predecessor to the National Devel- be true if the country’s industrial- ed more towards growth and away
opment Strategy 2 economic blue isation plans are to be effective in from austerity. On the inflation
print which is targeted at reaching substituting imports. Public debt front, where annual inflation was
the aforementioned GNI per capi- as a percentage of GDP remaining supposed to be below 5% by 2020
ta target. As an executive summary more or less constant below 65% we are now likely to see inflation
overview, the NDS1 is supposed to points to responsible borrowing. closing the year above 300% and
attain the following headline macro- The government expects improved where the average GDP growth of
economic targets by 2025. foreign debt support as the current 5% was supposed to be attained for
account 2020 the World Bank forecasts neg-
2021 2025 Average Annual Growth/Decline balance ative GDP growth of 10.4% with
5 5% is im- the Ministry of Finance being the
Real GDP Growth % 7.4 proving more conservative at projecting a
34.5 41.9% despite decline of 4.1% for 2020. Thus, the
Broad Money Supply (US$ bn) 6 3,207 11.7% a nega- baseline performance requirements
5.8 -25.8% tive trade for the economy from which the
GNI per Capita (US$) 1,842 24.6% balance. NDS 1 is supposed to build from
6 4.7% has significant negative variances.
Annual Inflation Average % 134.8 6.8 9.4% These variances were caused by
8.3 rapid policy reforms on the cur-
Import Cover (months of cover) 2 0.5 rency front, two consecutive poor
61.4 agricultural seasons including a nat-
Exports (US$ bn) 5.4 ural disaster in the form of Cyclone
Idai and the negative impacts of
Imports (US$ bn) 5.3 -11.1% This will COVID-19 as well as dramatically
less foreign and local direct inves-
Current Account Balance (US$ bn) 0.9 -0.62% however tor support during the course of
the TSP’s tenure (2018 to 2020). On
Public Debt % of GDP 64.5 be a fac- the plus side, the government creat-
ed more fiscal space through a real
Source: NDS1 policy document, November 2020 wage reduction of the civil servant
salary bill (wage bill as a percentage
.We believe that some alignment tor reli- of revenue declined from 90% to
of the baseline numbers needs to ant on improved foreign relations 42%); increased capital expendi-
be done to get a real appreciation and a business environment that ture allocation to the fiscus (from
of the real growth numbers for the can attract foreign investor interest. 5% to 30%); attained a more or less
NDS1 going forward. A good ex- Another key number is the forecast balanced budget (marginal balance
ample is the GNI numbers that were that GDP growth will average 5% deficit of ZW$5bn (US$62m) ex-
explained earlier in this article. This throughout the forecast period. As pected for 2020); re-introduced the
is critically important for the perfor- GDP growth remains significantly local currency which enables the
mance assessment of the NDS1 to lower than projections for broad implementation of monetary poli-
be a fair as we believe that some of money supply growth (41.9%), we cies; and narrowed the trade deficit
the numbers are based on numer- expect inflation to remain high as whilst achieving a current account
ical anomalies. The average annual money supply growth is projected surplus.
growth in imports of 9.4% versus to exceed the Country’s product The number of economic blue-
export growth of 4.7% points to a output growth. prints that Zimbabwe has pursued
since independence are as varied
widening trade deficit throughout As we digest some of these head- as they are many with all of them
the NDS1’s tenure which is a worry line numbers it is important to note having different impacts on the
as we would expect the reverse to that the macro-economic targets for economy. Some more negative than
the TSP were others. The shared trait for most
not achieved
and these tar-
gets were sup-
posed to be the
jumping board
from which
the NDS1 and
NDS2 targets
were supposed
to build from
as the Coun-
try’s policy tar-
gets are direct-

www.zfn.co.zw 25Q3 Edition | Investment Quarterly

policies however has been poor im- 26Q3 Edition | Investment Quarterly
plementation and or a lack of po-
litical will to successfully conclude
the policy implementation require-
ments though the gestation period
of the policy. Economics 101 says
that policies have an implementa-
tion and impact lag and it is my view
that Zimbabwe has never really had
the patience to see through the ben-
efits of the impact lag of policies in
the past. The NDS 1 is quite com-
prehensive in showing dashboards
that the responsible line ministries
have to attain, some of which have
United Nations Sustainable De-
velopment Goals as targets which
if achieved will see to a more sus-
tainable growth trajectory for the
country. The NDS1 will be imple-
mented through successive Budget
Statements which have a reporting
framework that will be monitored
by the Office of the President and
the Cabinet. What has not been
made clear is what will happen if
a line ministry fails to achieve the
set targets. Whether the responsible
Minister will be re-assigned or let go
off or the reason for failure will be
investigated so that corrective ac-
tions can be taken is still a mystery.
As it is we do not see the direct mo-
tivation for the line ministry to at-
tain these targets if there is no form
of censure.
In conclusion, as much as we can
debate on the merits and de-merits
of the NDS 1, what is more imper-
ative are the governance processes
around the policy being implement-
ed. In a true democracy the failure
by the State to achieve certain mac-
ro-economic and or development
goal targets would lead to a loss at
the polls. We shall see whether this
resonates for Zimbabwe as we ap-
proach the next polls in 2023.

Simbarashe Mangwendeza is a Senior Investments
Analyst at First Mutual wealth.
email: [email protected]

www.zfn.co.zw

www.zfn.co.zw 27Q3 Edition | Investment Quarterly

The Thinking Man -
Reading and
understanding
maketh a full man!

T he controversy should have governed all the recent
surrounding the ZSE transactions. However, the
African Sun and ZSE still has the old act on its web-
Dawn Proper- site. One of the major highlights,
ties transaction which seems to have been missed
revealed a chasm between the by many is that the new Act no lon-
letter of the law, sharehold- ger has a “scheme of arrangement”
ers’ feelings and market as- provision as one of the methods of
sumptions. It is Will Rogers effecting a takeover. In the previ-
who said that “There are three ous act, a Scheme allowed for the
kinds of men. The one that offeror to use the target company
learns by reading. The few (offeree) to negotiate with its share-
who learn by observation. The holders collectively and then bind
rest of them have to pee on the them to the arrangement agreed to
electric fence for themselves”. by the 75% majority vote. Ordinari-
As a disclaimer, men here re- ly, the common law and company
fers to both male and female. law rights of the shareholders of
Many shareholders, especial- the target company could only be
ly those of Dawn Properties, modified with the consent of each
analysts, and commentators of them individually, however in
seem not to have read the new terms of a Scheme this was altered
Companies and Other Busi- because once implemented, the
ness Entities [24-31] which Scheme would also bind the share-
came into force in February holders who did not approve it.
2020.

The Thinking Man This new Act is the one that The normal procedure was that
the target company, having re-
www.zfn.co.zw
28Q3 Edition | Investment Quarterly

The Thinking Man - Reading and understanding maketh a full man!

ceived the offer, would apply to the the meeting vote. rights could amount to withholding
High Court for leave to convene a of information, by insinuating that
Scheme meeting of its sharehold- We, thus, would assume that ZPI there is no room for dissent and
ers to consider the Scheme. If leave was within its rights and that of the there is no other recourse.
was granted, the company would Act, not to call for an EGM, in the Another area in which minority
then send a circular to its sharehold- same manner, that Dawn was with- shareholder rights have the poten-
ers calling for the Scheme meeting. in its rights to call for an EGM. tial to be trampled upon is the hold-
If 75% of the votes exercisable by The Act presupposes that a share- ing of virtual shareholder meetings.
the shareholders present and vot- holders meeting is normally called AGMs provide essential opportuni-
ing at the meeting agree to the pro- to block the acquisition rather than ties for shareholders to interrogate
posed Scheme, then the target com- approve it. However, we would like management’s decision-making and
pany would apply to the court for to believe that the Dawn EGM was hold the board to account. Howev-
an order sanctioning the Scheme. misleading, as many shareholders er, virtual meetings rob shareholders
Although the courts routinely sanc- and even analysts assumed that the of the opportunity for face to face
tioned the Schemes provided the EGM was being held under the interaction and the chance to assess
75% majority was obtained, and no “Scheme of Arrangement” terms body language and other nonverbal
shareholder who voted against the which meant that once the reso- cues when the board and manage-
Scheme provided a material reason lutions were passed by a majority, ment are addressing questions.
why the court should not so sanc- they became binding. This was not Section 170 of the new Act allows
tion the Scheme, the decision was so, as even after the Dawn meeting public companies to permit the par-
not an automatic one. resolutions had been voted on, in- ticipation of members who are not
The new Act details the proce- dividual shareholders still had the physically present at the meeting,
dures of mergers, acquisitions, and right to reject the African Sun offer, in other words, participate virtual-
takeovers in Sections 226 to 240. In either by not signing the Form of ly, but imposes a condition that the
particular, the recent transactions Acceptance which was part of the shareholders should be heard and
African Sun/Dawn and ZHL/ZPI circular or approaching the Magis- be seen by the other members by
would have been undertaken in trate Court and showing good cause electronic means. A feat that can
terms of section 236 (takeovers). that the offer from African Sun was be difficult to achieve given the net-
The new legislation whilst not ex- not fair. work challenges faced by many in
plicitly providing for an EGM, as The above Dawn and ZPI trans- Zimbabwe. It has also been noted
would be in the case of a Scheme, actions were made difficult to un- in other countries that some com-
states that the public company in derstand by the fact that advisors in panies evade questions from the
receipt of an offer “ may stop the preparation of the circulars appear participants by not allowing them
acquisition of the control block, to have taken Sections 226 to 230, to submit questions in real-time,
by a decision of a shareholder which deal with “mergers” into ac- without moderation, and to choose
meeting within the thirty-day no- count but ignored the requirement whether to do so in writing or ver-
tice period, adopted by majority that financial statements may not be bally. Some even claim that there are
vote of the holders of ordinary more than 6 months old. no additional questions.
shares participating in the meet- What also seems to be missing
ing, excluding votes of shares
held by shareholders who intend from the circulars, including those Who wants to be a mi-
to acquire the control block, and of Zimplow and Unifreight is the nority shareholder?
requirement by the Act that circu-
excluding votes of shares held lars include; (a) a statement of the
by associates who intend to ac- shareholders’ right to dissent to the
quire the control block.” Share- transaction; and (b) a statement that
holders may also be able to stop the in the event that the transaction is
acquisition by applying for an in- approved, aggrieved shareholders
terdict stopping the acquisition of are entitled to the rights contained
the control block at the Magistrate in Section 233 of the Act. The omis-
Court, when they do not agree with sions of dissenting shareholders’

www.zfn.co.zw 29Q3 Edition | Investment Quarterly

ery from 2019’s pain was a strong
possibility. The ZSE has been

ZSE in 2020 - maintaining a constant upward tra-
jectory since December 2019.

A tale of two On the other hand, the volume
halves of shares traded declined by 46%
in the period ending 31 October
2020. However, the market indices
grew at a slower rate than inflation,
as year-on-year inflation stood at
676.4 % at the end of March 2020
while the ZSE All Share Index rose
by 275% between March 2019 and
T March 2020.
he Zimbabwe The ZSE’s market capitalisation,
Stock Exchange which stood at ZWL$16.08 bln
(ZSE) perfor- at the end of March 2019 rose to
mance in the ZWL$58.61 bln by March 2020.
year 2020 can be Despite being deserted by foreign-
summed up as a tale of two ers the ZSE indices exhibited ex-
halves. The first half that saw ceptional performance compared
the government introducing
a 21-day lockdown to try and to selected regional peers.
contain the coronavirus pan-
demic; then later on the sus- The strong performance of the
pension of trading on the eq- ZSE was buoyed by inflationary
uities market on June 26. The pressures, which have been un-
second half started on a low dermining sound macroeconomic
note as the market was sus- fundamentals. Notably, as prices in
pended from trading for the Zimbabwe continued to increase as
entire month of July. Trading most consumer goods are pegged
only resumed on August 3, in United States dollars, the volatil-
2020. ity of the Zimbabwe dollar parallel
market exchange rate increased in-
Equities trading in the first half flationary pressures. Amid wors-
was largely driven by foreign ex- ening economic situation, impact
change rate-induced hyperinflation of sanctions, absence of external
developments rather than by earn- funding support and critically low
ings generation as companies were industrial production, the Zimba-
already seeing massive declines in bwe dollar plummeted from 2,5:1 to
volumes. In reports by market an- 81:1 against the US dollar on the of-
alysts, beginning of year 2020 was ficial market, with the exchange rate
regarded to be the year for stock even steeper on the parallel market.
Lavender Marisa market investments, where a recov-

www.zfn.co.zw 30Q3 Edition | Investment Quarterly

www.zfn.co.zw 31Q3 Edition | Investment Quarterly

The swing from huge gains was In the first quarter of 2020, Zim- Fig 1: Volume and Value
hastened by sell-offs in dual listed babwe’s inflation was the highest in Turnover as at October 2020
counters Old Mutual Limited, PPC Africa followed by Sudan at 81.6
and Seed Co International follow-
ing the suspension of fungibility
on the local bourse. On 15 March
2020, the Zimbabwe Minister of
Finance issued the Exchange Con-
trol (Suspension of Fungibility of
Certain Shares) Order, 2020 [Gov-
ernment Notice 583 of 2020] (“the
Fungibility Suspension Order”).
The Fungibility Suspension Order
suspended every exchange control
authority, directive or order grant-
ed by any exchange control au-
thority allowing the fungibility of
the company’s shares listed on the
ZSE until 12 March 2021. A stock
is considered fungible if it can be
traded from one exchange into % and Angola at 19.62%. Oth- Extension, performance of
the other and vice versa. Between er regional stock markets declined companies, including listed ones,
March 13 and 17, 2020, Old Mutual sharply in response to effects of were severely affected hence share
declined 28%, while PPC shed 24% the spread of the coronavirus and prices were largely bearish. Inves-
and SeedCo International marginal- measures taken by governments in tors were opting for liquidity, thus
ly gained 3% over the same period. response, which resulted in slow- choosing sleek portfolios given the
Fungible stocks provided a means down in economic activities affect- uncertainties in the face of a pan-
for foreign investors to repatriate ing stock markets around the world. demic which caused a downturn on
their dividends and capital, given business operations. Persistence of
the acute foreign currency shortag- Share prices on the ZSE plunged the Covid-19 crisis has seen most
es in the country. However, the sus- during the national lockdown and businesses needing a cash cover to
pension has seen foreign investors beyond as companies engaged in sustain operations, while some busi-
losing confidence on the ZSE and massive sell-offs on the stock mar- nesses were grossly under-perform-
also dampening the attractiveness ket in the face of the global effects ing, thereby eroding their underly-
of the market for potential issuers of Covid-19. Even before the an- ing value.
from other markets, hence setting nouncement of the lockdown by Market analyst Ranga Makwa-
the market back in terms of region- the government, volatility had re- ta said the pandemic was going to
al initiatives, a decline in foreign mained high on the ZSE with stocks have a huge impact in terms of
participation and overall liquidity in shedding 7.24%. economic growth and share price.
the market.

www.zfn.co.zw 32Q3 Edition | Investment Quarterly

ZSE in 2020 - A tale of two halves

“The pandemic is expected to the government was not good to
have negative impact on economic the investment image of the coun-
growth in 2020 and, by extension, try as all the negative publicity may
performance of companies, includ- have caused potential investors to
ing listed ones will be severely af- be hesitant and lose confidence on
fected hence share prices will also our market.
be largely bearish. It is going to be
even tougher for fragile economies Moreover, many market partic-
such as Zimbabwe which already ipants were adversely affected by
had structural weaknesses even be- the suspension, including the gov-
fore the outbreak,” he said. ernment itself, ZSE, Securities and
Exchange Commission of Zimba-
Following the statement issued bwe (SECZ), and Central Securities
by the Secretary for Information, Depository (CSD) who were losing
Publicity and Broadcasting Services money daily as trading commissions
on 26 June 2020, the ZSE engaged and fees are their source of funds.
both the Securities and Exchange Payment to pensioners also was a
Commission of Zimbabwe (SECZ) challenge during the trading halt as
and the Ministry of Finance and more than half of the investments
Economic Development notifying comes from pension funds. The
the stakeholders on the suspension market resumed trading on 3 Au-
of trading on the ZSE, in an effort gust 2020, however with a subdued
to contain the collapse of the coun- turnover and also the three dual
try’s currency and trading of dual listed counters remained banned.
listed firms, Old Mutual in particu- Since trading resumption, market
lar, was believed to have been linked sentiment was largely negative as
to exchange rate instability leading the continued suspension of dual
to the suspension of trading across listed counters Old Mutual, Seed-
the entire stock exchange. Suspen- Co International and PPC spooked
sion of trading on the ZSE affect- investor confidence. The market
ed the actively listed firms on the has also been affected by the tight
local bourse. The depreciation of liquidity situation in the economy
the Zimbabwe dollar has seen some as the central bank tried to maintain
investors investing in the equities the stability of the local currency.
market but authorities contend
that this could have destabilised the Overall, 2020 has been affected by
markets. The suspension came at a series of undesirable events like
a time where there has been a bull the national lockdown, ZSE sus-
run on the bourse as investors were pension and fungibility suspension.
looking for a safe haven in stocks to In terms of the outlook for 2021,
flee hyperinflation which has erod- offshore investors are expected to
ed investments. remain net sellers making their ex-
its from the exchange. Speculative
The government’s argument was buying is likely to continue for small
that the growth on the ZSE was cap stocks. Launch of the VFEX,
speculative and there were several which was endorsed by internation-
transgressions by market players. al capital market experts as a game
However, they would have imple- changer could somehow see funds
mented regulations to deal with flowing into the country.
them without bringing the whole
market to halt in a way that preju-
dices investors. The move taken by

www.zfn.co.zw 33Q3 Edition | Investment Quarterly

2020 Corporate movements

As the year 2020 draws to an end, we take a look at the corporate activities in 2020. The high-
light in the year on the Zimbabwe Stock Exchange (ZSE) was the arbitrary suspension of
trading by the minister of Finance and Economic Development on June 26, 2020. There was
no trading for the whole month of July. Trading only resumed on August 3 with the suspen-
sion of trading in 3 dual listed counters Old Mutual, PPC and SeedCo International.

COMPANY CORPORATE ACTION

Afdis The company recorded a decline in volumes of 35% as consumer trends highlighted a shift from premium and main-
African Sun stream segments to value products due to declining disposable incomes.
Ariston
Art Discussions for the acquisition of 100% of the issued share capital of Dawn Properties Limited in exchange for African
Axia Sun Limited shares based on an agreed price are still in progress.
BAT
Bindura Tea exports are expected to be subdued as the movement of tea samples has been affected by the limited services by
Border Timbers airlines as demand for travel plummets.

The group’s volumes for the third quarter declined by 17% compared to the same period last year due to trading restriction
during the lockdown period.

The business is in the process of rebranding its Midas franchised stores to Transerv and is hoping to complete the exer-
cise by end of this calendar year.

Professor Hope C Sadza retired as a Non-Executive Director of BAT after serving since 2013.

Batirai Manhando stepped down as Managing Director on 9 November 2020, and Thomas Lusiyano took over on the
same date.

Remains suspended from trading

Cafca Year on Year volumes improved from 1735 conductor tonnes in 2019 to 1744 conductor tonnes in 2020.

Cassava The company is working with relevant authorities to implement processes and policies that enhance the integrity of the
financial system.
CBZ
The bank was cleared by the US Department of Treasury’s Office of Foreign Assets Control (OFAC) on allegations of
CFI flouting that country’s sanctions regime on Zimbabwe and was spared from a punitive penalty amounting to US$385 mln.
Cottco CBZ became the biggest counter on the bourse by market capitalisation. The share price reached a high of $56 during
Dairibord the year.
Dawn
Delta Remains suspended from trading
Econet
Remains suspended

Dairibord Holdings Limited is in discussion with an unlisted entity Dendairy, for a merger and acquisition transaction which
if successfully concluded will have a material effect on the price of the company’s shares.

The majority of the shareholders voted in support of the acquisition of the total issued of the company by African Sun
which will see Dawn Properties being delisted from the Stock Exchange.

The acquisition of United National Breweries, the leading producer of traditional beer and allied products in South Africa
was concluded with effect from 1 April 2020.

Data traffic increased as digital enablers were required in various sectors of the economy.

Edgars Linda Masterson left the group after 10 years and was replaced by Tjeludo Ndlovu. During the year, the Board of Directors
proposed a Renounceable Rights Offer to recapitalize Edgars by way of a rights offer of 274,745,630 ordinary shares of a
nominal value of ZWL$0.01 (1 ZWL Cent) each, at a Rights Offer price of ZWL$0.2548 (25.48 ZWL Cents) per share, on
the basis of five (5) new ordinary shares for every six (6) ordinary shares in issue as at the Record Date.

www.zfn.co.zw 34Q3 Edition | Investment Quarterly

2020 Corporate movements

Falgold Delisted after the company successfully applied for voluntary delisting.
FCB
The bank launched a money transfer service in partnership with Money Transfer agents RIA Financial Services, the 3rd
FBC largest remittance company in the world. The bank foresees challenges in the raising US$30 million capital requirement.
Fidelity Life
As part of digitalisation, the group launched Noku, a smart Digital Assistant equipped with capabilities to assist clients in
FML accessing banking and insurance services on WhatsApp at any time to the day.
FMP
GB Holdings Zimre Holdings has officially taken control of the majority shareholding in Fidelity Life. The company holds 67% of Fidelity.
GetBucks
Hippo The company undertook a capital raising exercise for its reinsurance businesses to house the capital in a stable economy,
Hwange in Botswana by selling a 29.1% stake in its 100% owned subsidiary, First Mutual Reinsurance Holdings (FMRE) to Aleyo
Innscor Growth Fund of Botswana.
Lafarge
Mash The group is engaged in a solar energy initiative at First Mutual Park, with implementation earmarked for Q1 2021.

Masimba Its major shareholder SMM Holdings (Private) Limited (under Reconstruction) sold its entire 43.22% shareholding in the
company.
Medtech
The proposal to restructure GetBucks Microfinance Bank establishing a holding company, was abandoned during the first
Meikles month of the year.
Nampak
Natfoods The government has assured the company that its application for a 99-year lease will be attended to with urgency and
NMB significant progress has been made in this process providing further confidence and stability to the operations.

NTS Remains suspended
OK Zimbabwe
Old Mutual The Competition and Tariffs Commission (CTC) ordered the reversal of a deal by Innscor to buy 49% of Profeeds, one of
Padenga the country’s biggest stock feed producers.

Precious Nyika was appointed as the company’s new Chief Executive Officer with effect from 1 March 2020.

Ronald Mutandagayi stepped down as Chairperson of the Board of Directorswith effect from 26 August 2020 and was
replaced by Grace Bema. Ngangariro Y. Mutizwa resigned, as the Chief Finance Officer of the Company with effect from
30 April 2020 and was replaced by Kudakwashe Musundire.

A number of works, including the Skyline to Chimanimani road, were completed in the quarter to 30 September 2020,
while the rest are progressing well and are on program.

The company is in discussion which involve a potential series of transactions at holding company level to transform Med-
tech into an investment holding company with the economic rights to separate investments or portfolios of investments
belonging to the owners of different classes of shares are on.

The company has embarked on a 7.5 Mega Watt solar project covering all estates and Mutare factory. Phases 1 to 3 of
the project covering Ratelshoek, Tingamira and Jersey estates are already under implementation.
Sales volumes were down across all sectors of business in the six months to 31 March 2020 despite firm demand.
Volumes declined by 25.3% in 2020 to 456,000 tons compared to the same period last year.
The group launched the NMBConnect suite of services which comprised NMBConnect Online, NMBConnect App and
a USSD *241#. As a result of the digital transformation drive, the Bank closed the Eastgate, Chitungwiza and Kwekwe
branches in the nine months to 30 September 2020.

The company announced the appointment of Benson Philip Hlungupi
Samudzimu as the company’s Managing Director with effect from 01 January 2020

The group’s capital expenditure programme continued during the period and store refurbishments were completed at OK
Avonlea and OK Machipisa.

Fungibility of shares suspended pending forced delisting
The company published its interim financial statements that highlighted that 61% of revenues was from the new mining
concern that it recently acquired.

Powerspeed The Board of directors has proposed to shareholders the delisting of the counter as they are of the view that in the current
environment in Zimbabwe, a listing on the Zimbabwe Stock Exchange has very little benefit and considerable costs

PPC Fungibility suspended pending forced delisting

www.zfn.co.zw 35Q3 Edition | Investment Quarterly

2020 Corporate movements

Proplastics The global shortage in the supply of PVC feedstock, a derivative of crude oil, due to closing of facilities as a result of the
Covid-19 pandemic has resulted in shortages and price increase of both the raw materials and finished goods. The imbal-
RTG ance in supply and demand is likely to spill over into Q1 of 2021 affecting the company’s operations.

RioZim Occupancy for the period under review (HY2020) closed at 25% compared to 43% recorded during the first half of 2019
due to the impact of Covid-19 on the operations of the business.
Seed Co
SeedCo Interna- The diversified miner announced suspension of its gold mining operations during the year due to an impasse between
tional the company, Fidelity Printers & Refiners and the Reserve Bank of Zimbabwe over outstanding payments for gold deliv-
Simbisa eries made by the company. The company resumed operations as RBZ and Fidelity have been making part payments
Star Africa to the company with a view to clearing outstanding amounts and have assured the company of timely payments for gold
Truworths deliveries going forward.
Turnall
TSL The company has entered into negotiations with Seed Co International Limited exploring the proposal to integrate SCL’s
operations under Seed Co International as part of the latter’s consolidation plan being pursued to strengthen the pro-
posed transfer of Seed Co International’s Secondary Listing ZSE to the Victoria Falls Stock Exchange (VFEX).

Delisted from the ZSE to list on the Victoria Falls Stock Exchange (VFEX).

In Q1 FY21, 3 counters were opened in Zimbabwe. Kenya opened 3 new counters and Mauritius opened one new
QSR-format Pizza Inn in the period under review. Simbisa closed the Quarter with 468 counters in operation.

A major shareholder is engaged in discussions that may result in a transaction that could have a material impact on the
value of the company’s shares.

Product availability was constrained during FY2020 due to foreign currency unavailability and pricing constraints.

Turnall appointed Bothwell Patrick Nyajeka as Board Chairperson following the retirement of Rita Likukuma.

Independent auction volumes at Tobacco Sales Floor at 5.7 million kgs were 73% below the prior year. TSF still holds the
largest market share in this segment and has the highest seasonal average price.

Unifreight The company is seeking the disposal of Clan Services (Private) Limited (a subsidiary of Unifreight Africa Limited) ’s 51%
shareholding in Tredcor Zimbabwe (Private) Limited in exchange for 18,399,564 newly issued ordinary shares in Zimplow
Holdings Limited, and the disposal of Unifreight Africa Limited’s 100% shareholding in Birmingham Investments (Private)
Limited in exchange for 15,744,446 newly issued ordinary shares in Zimplow Holdings Limited

Willdale The Board announced the appointment of Washington Chidziwo as Chairman with effect from 20 March 2020.
ZBFH
Zeco In line with the digital transformation strategy, the group formally launched its Contact Centre in August 2020. The group
Zimpapers also expanded its product offering by launching the “Kesto” Diaspora Banking unit, whilst issuance of VISA debit cards
has commenced.

The price of Zeco remained unchanged at ZWL 0.02 cents.

The Company’s focus will be on foreign currency generation, digitalisation strategy and new projects as the Company
diversifies to broaden its revenue base, whilst also focusing on maintaining the business viability of existing product
offering.

Zimplow The shareholders of the company approved the Acquisition of Scanlink (Private) Limited, acquisition of Tredcor (Private)
Limited, acquisition of Birmingham Investments (Private) Limited and acquisition of certain piece of land situate in the
ZHL district of Salisbury measuring 2, 0358 hectares.
ZPI
The Company purchased the entire issued share capital in Zimre Property Investments resulting in the delisting of the
latter on the bourse and increased its shareholding in Fidelity to gain a controlling stake.

Delisted from the ZSE after minority shareholders accepted new shares in its parent company ZHL.

www.zfn.co.zw 36Q3 Edition | Investment Quarterly

www.zfn.co.zw 37Q3 Edition | Investment Quarterly

Will Covid19 stimulus
packages impact on
economies going into
2021?

T he coronavi- media reports indicated that popu-
rus (COVID-19) lations feared hunger more than the
outbreak has virus itself. Yet, at the same time the
brought consid- government made use of the op-
erable human portunity to push through reforms
suffering and major economic of informal markets, making no at-
disruption in the whole world tempt to warn or consult vendors
since the first reported case whose stalls were bulldozed.
in China. Zimbabwe has not Various civil society actors have
been spared and this pandem-
ic that saw many countries demonstrated that both the pan-
reassess their priorities, with demic and government measures
many sacrificing travel, trade impact heavily on informal work-
and tourism activities as a pre- ers, who lose their livelihood due to
ventative measure against the lockdowns or slowing demand for
spread of the virus. their services and products in com-
The rapid deterioration of the plex international value chains.
global economy demanded a The abrupt announcement of the
prompt and vigorous response by lockdown gave vendors little time to
governments, enterprises and work- organise their savings and stock up
ers’ organisations worldwide, aimed on food. Vendors argued that they
at mitigating and stimulating the re- could not afford to be home and
covery of the real economy and of not work, whilst going out to work
labour markets. exposes them to police violence
and potentially contracting the vi-
Ruth Dandawa Soon after Zimbabwe imposed rus. Many have to reduce their food
lockdowns in an attempt to contain intake to two meals a day and the
www.zfn.co.zw the spread of Covid-19, various quantity of their food portions to

38Q3 Edition | Investment Quarterly

Will Covid19 stimulus packages impact on economies going into 2021

save the little they have. While the has failed to unlock significant re- nounced to pay up to US$1,200 in
government promised to avail an sources even in the face of a devas- cash for each adults of the house-
informal sector ‘stimulus package’ tating pandemic. hold who has less than US$99,000
to help vendors survive during the annual income – which roughly
lockdown, no financial assistance Covid-19 has dug its claws on the constitute 90% of the US popula-
has been received so far. economy of more than 185 coun- tion.
tries and territories. Earlier in April,
On May 4, 2020, the government, the World Bank and IMF made
through the Ministry of Finance alarming forecasts of our impend- China

and Economic Development, an- ing economic slump saying GDP China, however, didn’t jump in
nounced a ZW$18 billion Covid-19 growth may come down to 2% with attractive stimulus packages
economic recovery and stimulus from 3% due to the impact of the like the rest of the world. The Chi-
package. The stimulus package out- pandemic. nese leadership seems to have learnt
lined measures to provide liquidity
support to several sectors -- includ- On the backdrop of such gloomy a lesson from its liberal spending
ing agriculture, mining, tourism, predictions worldwide, countries after 2008 financial crisis which al-
small and medium enterprises -- as poured down trillions of dollars most doubled its government debt.
well as for the expansion of social in stimulus packages to save their Some analysts think they cannot
safety nets and food grants, and the economy and livelihood. The stim- afford an aggressive spending this
setting up of a health sector sup- ulus package will give a much need- time.
port fund. ed relief to the informal sector and
the overall ailing economy of the Japan

Equivalent to 9% of the country’s African nation which aimed target- Japan, however, has been one
gross domestic product (GDP), the ing and empowering its citizens, its of the most aggressive respond-
stimulus package was meant to put local entrepreneurs, businesses and ing countries in terms of stimulus
Zimbabwe on a recovery trajectory workers post-Covid-19. packages. On April 7, the cabinet
following the devastating impact of
Covid-19 which the World Health Below, we explore some of the ini- of Japan approved some JPY 108
Organisation (WHO) declared a tiatives several countries have taken trillion in stimulus packages which
global pandemic. This is a commit- so far to save their respective econ- is equivalent to $997 billion. The
ment by the government against a omies. country has increased the package
with nine more trillions of Japanese
background of complex monetary yen later, which finally accounted
and fiscal challenges that Zimbabwe South Africa for JPY 117.1 trillion – equivalent to

has suffered for over two decades The need for an economic stimu- roughly $1.09 trillion. In late April,
now. lus package is not in question. Glob- Japan’s central bank vowed to buy

Zimbabweans from all walks of ally, and even closer home, South “an unlimited amount of govern-
life have debated the economic Africa has done its own stimulus ment debt to double its purchases
stimulus package and raised con- package worth following the rest of of corporate debt.”
cerns focussing on three main is- the world, the country announced a To build back better, United Na-
sues: the priorities of the package; massive stimulus package of US$26 tions Development Programme
the legality of a stimulus package billion, which accounts for 10% of (UNDP) is also working with the
that has not been approved by par- the country’s GDP. World Bank and other United Na-

liament; and, the funding for the USA tions (UN) agencies to assess po-
stimulus package. tential socio-economic impacts and

History has demonstrated that The US Congress approved some make recommendations and pro-
Zimbabwe faces challenges with US$2.3 trillion to combat the pan- vide policy guidance to the recov-
raising resources locally, sometimes demic and economic fallouts. This ery process. The agency is also ex-
misallocates or wastes resourc- included billions of dollars bail out ploring alternative food distribution
es raised from domestic revenue to industries, rescuing of small busi- models with the informal sector to
streams and the broken internation- nesses, and packages in response to sustain key activities while adhering
al re-engagement framework that unemployment crisis. The US an- to Covid-19 mitigation measures

www.zfn.co.zw 39Q3 Edition | Investment Quarterly

Will Covid19 stimulus packages impact on economies going into 2021

will be fortify- travel or grounding of ships, which
ing health infor- transport the bulk of the country’s
mation system exports.
and promoting
good gover- According to Trade Map, Zimba-
nance in the bwe’s exports to Europe in 2018
sector. were US$60 million from prod-
ucts such as precious stones, cut
Closing of flowers, vegetables, raw hides and
borders has skins, leather, works of art and to-
been identi- bacco. As of now Europe became
fied as one of the epicentre of Covid-19 and the
the effective measures they have taken will have
ways to curb a negative impact on trade between
the spread of Zimbabwe and Europe as some or-
virus, coupled ders were to be cancelled.
with the need to
such as safe transport and markets. observe social China is one of the Zimbabwe’s
UNDP’s recommendations, which distance, where top trading partners, with Zim-
will inform programs and policies people work babwe exporting US$974 million
in response to the pandemic, in- from home in 2019 according to Trade Map.
cluded: making critical investments where neces- Currently, there are cases where
in basic services such as water and sary and restrict Chinese import companies are can-
sanitation and ensuring strict adher- movements. celling orders due to port closures
ence to practices including use of As the number and hence Zimbabwe’s exports to
face masks, regular hand washing, of bans within the country are affected. With Chi-
and social distancing. Africa increas- na having shut down its manufac-
The strengthening of the health es, trade within turing centres and closed its ports,
system by addressing chronic lack the region was there will be a resultant decrease in
of finances, shortages of trained affected in the demand for the Zimbabwean prod-
and motivated health workers and short term as ucts. At the same time, closed bor-
to improve service delivery, access counties will ders in China means Zimbabwean
to essential medicine and supplies reduce impor- manufacturers that rely on raw ma-
tation. This had terials and other consumables from
an immediate China will be affected and the spiral
impact on demand for Zimbabwe effect of reduced manufacturing in
exports like tobacco and manufac- China will have a toll on Zimbabwe-
tured tobacco, fruit and nuts, citrus an industries.
fruit, live animals, just to mention a Going forward, it is important for
few, to Africa. local companies to start considering
The intervention measures put in locally produced raw materials that
place by South Africa in combating can support businesses. This can be
the spread of coronavirus was felt easily achieved if stronger linkages
much by Zimbabwean exporters are created between suppliers and
since it takes about 49% of Zimba- buyers so that they can strike a bal-
bwe’s total exports. The good thing ance between supplying the quali-
is cargo was not affected. This sit- ty products and right prices. This
uation in Africa is almost the same import substitution will allow the
across the world where Zimbabwe- country to create employment and
an exports will likely be affected by at the same time preserve the scarce
restricted movements, ban of air foreign currency.

www.zfn.co.zw 40Q3 Edition | Investment Quarterly

www.zfn.co.zw 41Q3 Edition | Investment Quarterly

The hyped
economic stability
and the banking sector

All exaggerations ity include GDP, consumer Prices,
are right, if they un-employment rate. Using one
exaggerate the measure without considering the
right thing – others may lead to misinformation
Gilbert K Ches- which would result in exaggerations
terton. Economic stability when analysing the performance of
should never be exaggerated the economy. Looking at consumer
as it has a great impact on the price index alone and not consider-
banking sector of any given ing other measures has got the po-
country. Economic stability tential of distorting facts. This was
refers to an absence of exces- also followed by tight restrictions
sive fluctuations in an econo- on transferability of money and dis-
my. An economy with constant posable incomes have been shrink-
output growth and low and ing due to inflation. This alone has
stable price inflation is likely an impact on the GDP, when peo-
to be regarded as stable. Re- ple don’t spend the GDP is likely to
cently in Zimbabwe there has be negatively affected, showing lack
been stability for the past few of or no stability.
months in terms of the ex-
change rate. This has brought In stable economies the central
some temporary optimism banks tighten interest rates by in-
that the economy is finally creasing interest rates such that
stabilising which has a great there is no overspending and thus
Tinashe Majiga impact on the banking sector. reducing credit for businesses and
Some are however pessimistic individuals. The government would
www.zfn.co.zw suggesting that we might be reduce its spending at a time the
actually right at the eye of the economy needs money. Higher in-
storm as this touted stability terest rates increase the cost of bor-
was imagined as opposed to it rowing, reduce disposable income
happening as per the demand and therefore limit the growth in
and supply dictates of the consumer spending. There will also
market. be increase in mortgage interest

The measures of economic stabil- payments as failure to increase these

42Q3 Edition | Investment Quarterly

The hyped economic stability and the banking sector

interest rates will lead to bank bal- the general public.
ance sheet mismatches. More mon- It is thus clear that
ey in the hands of buyers leads to this economy is by
increase in demand and one way to far from being sta-
correct this is by increasing prices. ble.
In the case of Zimbabwe the man
of the streets has little or no money Banks contrib-
for spending. ute to economic
growth thus they
As afore mentioned above there are significant cred-
has been currency valuation sta- it generators. Peo-
bility. To maintain such in a stable ple deposit their
economic environment, if Zimba- savings in banks,
bwe was economically stable, the which are then
banking sector would be increasing channelised to enti-
interest rates to increase the value ties in need of funds in the form of Some businesses are even making
of the currency or to maintain the different types of loans. The issue investment decisions based on the
currency stability position. High- to do with economic stability at any current hyped economic stability
er interest rates increase the value given time has a great impact on the despite lack of sufficient econom-
of the country’s currency relative banking sector. Stability will pro- ic factors to prove the economic is
to nations offering lower interest mote businesses to produce more now stable. For example the CEO
rates. This however stands when and promote investments and thus for Willowton Group Zimbabwe
everything else is equal. Higher in- they need more money which the Bruce Henderson said they are tar-
terest rates tend to attract foreign banks are in the business of lending geting to increase capacity utilisa-
investment, increasing the demand at an interest. A stable environment tion by 30%. “We are targeting to
for and value of the home country’s means that the treasury and banks increase capacity utilisation from
currency. Conversely, lower inter- can plan without worrying about in- 40% to 70%. The current economic
est rates tend to be unattractive for flation as it will be almost a certain- stability being realised in the coun-
foreign investment and decrease the ty that one event follows the other try has provided a further impetus
currency’s relative value. A low cur- event economically. Banks have a towards business growth,” he said.
rency value means that a currency balance sheet to maintain, one in Quest Motors Corporation General
buys less foreign currency hence which the assets (loans to clients) Manager Tom Sarimana also cited
imports are most expensive and ex- must be greater than the liabilities the promotion of local content as
ports are cheaper hence imported (deposits from clients), the inter- key in creating employment thus by
inflation. The prices of imported est rates that they charge on loans backing the idea that there is stability
goods will go up as they would have must continue generating profits the group can employ more people
been bought at a higher price. All otherwise there will be an asset li- but if the prices pick up pace again
these are economic indicators in a abilities mismatch. As can be seen losses might be realised as there is
stable economy, our banking sec- here wrong interpretation of the a workforce to pay. There appears
tor cannot do the same because in- economic status has detrimental ef- to be a misconception of stability in
creasing interest rates would choke fects on banks. value of a currency and the stability
of the economy.

www.zfn.co.zw 43Q3 Edition | Investment Quarterly

Energy sector –key
economic growth
enabler

T he government During the NDS1 Period gov-
of Zimbabwe re- ernment intends to increase
cently launched power supply from the current
an ambitious installed capacity of 2317MW
National Devel- to 3467MW by the year 2025
opment Strategy 1 (NDS1), an and construction of addition-
economic blue print strategy al 280km of transmission and
that the government intends distribution network by 2025.
to pursue over the course This energy supply position
of 2021 to 2025 as a Strategy would mean that there will be
to achieve a Middle-Income no more energy imports by
Country by 2030. In the NDS1 2025. To achieve this there are
government notes that the plans to develop an Integrated
availability of reliable power
supply is a basic requirement Energy Resource Master Plan,
for all Zimbabwean citizens completion of ongoing energy
and the improved access to projects as well as construction
energy supplies is fundamen- of new energy generating ca-
tally important for all other pacity and upgrading, rehabili-
industrial and domestic ser- tation and maintenance of the
vices. Investment in energy existing energy infrastructure.
is of paramount importance Government will promote In-
since it is a key enabler of the dependent Power Producers in
economy becoming a deter- order to attract private inves-
minant in improving people’s tors into the sector. To drive
lives. An efficient and viable up efficiencies, priority will be
energy sector will ensure eco- to scale up regional integration
nomic stability and growth, and power purchase agree-
given the forward and back-
ward linkages with the rest of ments across SAPP members.
the economy.
Courage Pahla
44Q3 Edition | Investment Quarterly
www.zfn.co.zw

Energy sector – key economic growth enabler

Moreover during the NDS1 Peri- currency situation. coming competitive with conven-
od there are plans to diversify the tional energy sources such as coal,
energy mix through promotion of According to the Zimbabwe En- gas and oil.
other sources of energy such as ergy Regulation Authority (Zera), United Nations research points at
renewable source, methane among the renewable energy sector in 13% of the global population still
others. This will be supported by Zimbabwe is picking up following lacking access to electricity while
performance monitoring and re- support from government, in try- three billion people are said to rely
search on energy supply and utili- ing to open up space for private on unsustainable sources like wood,
sation. Earlier this year the country players. It also states that there are coal, charcoal or animal waste for
launched the National Renewable around 18 licensed Independent cooking and heating.
Energy Policy (NREP) which sug- Power Producers (IPPs), seven are
gests that clean energy alone, in the already in operation and are gener- Solar
form of solar, hydro, biomass, geo- ating an estimated 103MW for own
thermal and wind, if implemented use and exportation to the national Solar is now being used after most
has the potential of satisfying the grid. The country has an Electricity homes and companies faced inter-
local demand and leaving a surplus. Act which allows the participation ruptions of electricity supply from
The Ministry of Energy Mines of private players, and government the grid, circumvented using diesel
and Development notes that the is drafting new regulations to enable generators. Due to the rising costs
policy aims to achieve an installed renewable energy investments. of diesel fuel they are resorting to
renewable energy capacity of 1,100 In energy investments, Zimba- the green energy.
MW (excluding large hydro) or 16.5 bwe is making strides by attracting According to government figures,
percent of total electricity supply, a huge interest in solar investments off-grid solar power is no longer
whichever is higher by 2025 and 2 from across the world and from lo- new for homeowners but despite
100 MW or 26.5 percent of total cal players, with solar power systems decades of power shortages, solar
electricity supply, whichever is high- installed in homes and companies energy companies are only starting
er by 2030. across the country proving to be the to catch on. In September 2019,
This comes against the backdrop most popular form of energy. the Zimbabwe Energy Regulatory
that Zimbabwe has suffered rolling In Zimbabwe, close to 60% from Authority said it had processed 39
power cuts owing to low water lev- a population of 14 million is not solar power projects with a capacity
els at the Kariba Dam, which pro- on the national grid at a time the to generate over 1,151MW with a
vides power to parts of both Zim- country’s power utility Zimbabwe combined cost of over $2.3 billion
babwe and neighbouring Zambia, Electricity Supply Authority (Zesa) in investments. The total invest-
as well as maintenance issues at a has been failing to meet the daily ment for all solar energy projects
coal-fired power station in Hwange. demand of 2 300 megawatts (MW) was valued at US$2 327 528 108
These two sources provide the bulk resulting in load-shedding forcing being US$9.985 million for projects
of grid power in Zimbabwe, and others to opt for that are operational.
the ongoing issues at both facili- solar and gas.

ties have led to widespread energy According to
shortages in the country. a UNDP report

Currently Zimbabwe produces “Transforming
1100 MW of power against a na- lives through re-
tional demand of 1500 MW. This newable energy
leaves a supply gap of 400 MW. access in Africa”,
The deficit is catered for by imports over the past de-
from Mozambique and South Afri- cade, the cost of
ca. providing electric-
ity through renew-
Power imports now constitute a able energy has
significant foreign currency outflow decreased consid-
and have put a strain on the foreign erably and is be-

www.zfn.co.zw 45Q3 Edition | Investment Quarterly

Energy sector – key economic growth enabler

Leading telecommunications com- tional grid. energy sources. Zimbabwe has over
pany, Econet Wireless, through 40 trillion cubic feet of potential-
its energy business, Ugesi Energy, Triangle Solar System (TSS), a lo- ly recoverable methane gas in the
launched a $45 million solar pow- cal consortium is also expected to Lupane-Lubimbi area.
er rural electrification programme build a 90 MW solar power plant Invictus the Australian energy gi-
under the first phase, targeting 100 in Chiredzi, a town in Zimbabwe’s ant has begun mobilising a drilling
growth points across the country. Masvingo province. The project will rig in Muzarabani for the explora-
cost the company US$ 88.1 million.
According to the Herald newspa- tion of gas and oil, which is estimat-
per Shanghai Stock Exchange-listed Coal ed to cost over US$20M.

CHiNT Electric Company has re- The ongoing coal mining projects Hydro-power
affirmed its commitment to seeing in Hwange District through invest-
through the successful implementa- ments from various companies and The US$294 million project in-
tion of the 100 Megawatt Gwanda government will ultimately translate volves reshaping the plunge pool
solar project after its local partner, into an increased national genera- at the foot of the 60-year-old Kari-
Intratrek Zimbabwe, won a con- tion capacity of over 6 000MW by ba Dam and refurbishment of the
tract dispute in the High Court. 2025 and this will see Zimbabwe spillway.

CHiNT has experience doing becoming a net exporter of energy. It is being funded through grants
projects in Zimbabwe including the Some of the power stations that and loans from the European
132Kv Norton sub-station, 132Kv use thermal power beside Hwange, Union, World Bank, African Devel-
Sherwood substation, 132Kv Gwe- include Harare, Munyati and Bul- opment Bank, the Swedish govern-
ru substation, 132Kv Zvishavane awayo. United Nations states that ment and ZRA on behalf of Zam-
substation and 132Kv Redcliff sub- Environment analyst remain critical bia and Zimbabwe.
station among others. to eradicate coal, one of the heaviest Last year two units were added to
Another Chinese company, China polluters of the environment. Coal, Kariba South, each with 150MW,
Nanchang Engineering, approached however, brings the much-needed taking to the overall installed capac-
the Harare City Council with a deal foreign currency into the country. ity to 1 050MW, but low water levels
to supply 600 green energy (so- have disturbed the production of
lar-powered) buses and additional Gas power.
fixed and working capital to service
Gas usage is still relatively low
routes in Greater Harare Metropol- in Zimbabwe, partly because it is
itan. The project will include a cen- more expensive compared to other
tral business district shuttle service
and the Harare Ur-
ban route will service
all suburban routes.

Centragrid, which
is based in Nyabi-
ra, about 40km
from central Harare,
has started feeding
2.5MW into the na-
tional grid, which
can provide power
to 1,200 households.
When completed the
plant will be pushing
about 25 megawatts
of power into the na-

www.zfn.co.zw 46Q3 Edition | Investment Quarterly

www.zfn.co.zw 47Q3 Edition | Investment Quarterly

in our means and appreciate what
we could gather at any given time.

5 Reasons for every In as much as there are some indi-
viduals who could not survive the
financial constraints of the year,
it is worth mentioning that most

Zimbabwean to could still make it through the day-
to-day routine using the resources

smile this festive that were within reach, albeit in a
challenging economic environment.

season This year taught most individuals
that savings are an important item
W on the budget list, and that with ev-
ith the way ery financial return; more streams
the year of income must be invested in and
has turned maintained.
out, I am
pretty sure 4. The rebirth after lock-
everyone has a tale to tell about down

how 2020 sneaked up from the It is strong symbolism that most
blind side and delivered a diz- Zimbabweans have had to prac-
zying slap of reality, generously tice social distancing for almost
seasoned with challenges and the whole year; shunning parties,
setbacks. gatherings and meetings that could
potentially exacerbate the spread of
To be sure, the world over seem- the coronavirus. This period was
ingly has one thing in common on for some; a moment to reflect on
the list and I dare not say it, for fear life’s progress and to check whether
of invoking a continuation of the or not one was meeting their vision
dread into the next year. I then de- for life.
cided that instead of focusing on
the negatives, I would wrap up the It was a moment to stop running
year on a positive note, and count and face the reality of what life
down 5 reasons to smile about in outside of society really was. I am
the year that has been. thankful that during this time, I

5. Lessons on staying rediscovered my passions and pur-
within budget pose in life. I learnt to tolerate my
family and realised that ‘vanhu bho
There has never been a time such wani’. I appreciated having people I
as this, when one could not depend could call friends and family, even in
on leaving the house and going out the times when mental breakdown
Tatenda to hustle for the next meal. This was too true a reality in confined
Samantha Majoni year, we all had to learn to live with- parameters.

www.zfn.co.zw 48Q3 Edition | Investment Quarterly

As I embraced the joys of new- it really is worth celebrating that we sold the $10 I had in single notes to
found freedom as the lockdown remained connected to the world, a desperate trader, for an extra dol-
regulations relaxed, I also learnt to be it through hash tags, creative lar. Please dear reader, no judgment
smile more and pay someone else a productions or simply comedy. The here, I had learnt from the best and
compliment because yes, it really is resilient Zimbabwean spirit indeed as they say, every dog has its day.
a good feeling to be alive. has a digital footprint in 2020.
I still stand guarded though, no
3. The arts, media & enter- 2. Months of a fairly sta- one knows if the stable exchange
tainment boom ble forex rate rate will be sustainable going for-

As a creative, I always appreciate After a long reign of the Forex ward. This means that I will always
when there is new talent discovered Trader and the trembling of the keep my ear on the ground on any
in the arts and entertainment indus- ordinary masses at their feet, I am movements in the ministry of fi-
try. This year was proof that Zim- happy to say that I have confident- nance; keeping track of any policy
babweans are truly talented, with ly experienced months of what formulation, discussions and devel-
new acts in film, music, comedy and can be roughly termed stable for- opments with regards to monetary
entertainment coming up. eign exchange rate. The forex auc- policy because one can never be too
An appreciation of local talent tion every Tuesday since June has prepared in Zimbabwe.
made me dare dream of a nation allowed citizens to at least try and 1. Mama, I made it!
that will be recognised for talent implement working budgets. Citi- Survival is the ultimate goal and if
and attract an international interest zens could finally be supported by a you are reading this, then it means
in what we could creatively produce. semblance of sanity in the financial you have survived the year, con-
At a time when the world required markets. gratulations! We must never take

a distraction from the pandemic, As I reflect, I surely do not miss for granted the gift of life; with all
Zimbabweans managed to connect the days of haggling with the in- the news from around the world to
via the Internet and share locally dividuals at every corner, fanning our own local celebrities, socialites,
produced content that was truly re- themselves with wards of bond close friends and family reaching
freshing. notes they would have in hand, life’s end, those remaining behind
awaiting trade with the evasive U.S
With my optimism, I envisioned a dollar. The permanent creases on must fully embrace and appreciate
time when Zimbabweans too would foreheads formed from frowning every moment and everyone who
have an entertainment industry that facial expressions during the rate has made life bearable. At this junc-
will positively affect the national negotiations have since relaxed, as ture, I would like to thank everyone
financial status through exporting there is some stability on the mar- who has stood by me, shared a smile
creative media productions wor- ket that has allowed the rate not to or a tear, and has been a part of my
thy of global recognition. This is fluctuate too much. happiness in 2020.
the year we feel in love with local I also hope that we have all learnt
talent, discovered new musicians One cannot help but recall when to live, laugh and love a little more,
whose high kicks had us glued to mobile money agents had rates that as tomorrow is never promised and
the screen, and whose shining stars sold the hard cash at almost double today is a gift. Let us take time to
saw international awards dedicated the price for the mobile money, ven- be kind to each other and ourselves,
to Zimbabwe. It goes without men- dors turning away from potential and to prepare for 2021 with a read-
tion that our rendition of globally clients flashing phones instead of iness and strength of character that
trending dance challenges was not cash meant that most citizens were every Zimbabwean is born with.
only exciting; it also gave us an op- shortchanged at every transaction. May we dare hope for better and
portunity to loosen up and keep it work towards progressive develop-
moving. Be that as it may, the stability of ment in all sectors, industries and
In as much as connectivity issues the market meant that opportun- institutions in the New Year 2021.
ists had to find a new method of
still hinder the closing of the digi- trading, and the trend morphed
tal divide in the country due to data into the scarcity of dollar bills on Until then, stay safe
rates that are out of reach for many, the market. One time, I confess I and stay smiling!

www.zfn.co.zw 49Q3 Edition | Investment Quarterly

The End of the
Trump Error

T rump’s political Republican base and enjoyed more
career was born support from them than any Re-
with much dra- publican presidential candidate in
ma, to laughter modern history. Even in defeat, he
and ridicule, at received more votes than any nomi-
the bottom of an escalator in nee in the history of American pol-
Trump Towers in June 2015. itics. As a political operative coming
It is hardly surprising that the from business with no previous ex-
end of the man-baby’s reign is perience in the game, Trump’s per-
a farcical spectacle as well com- formance has been a bravura. It is a
plete with fact-free assertions testament to the fervent adoration
and unprecedented disregard the man-baby enjoys in the GOP
for norms. that elected officials from his party

The media and punditry have em- who clearly know better have sup-
braced the controversy with hyste- ported the nonsensical claims of a
ria and hyperbole. On the far left, stolen election.

there are preposterous complaints Pre-Covid-19 Trump’s steward-
of an attempted coup. Their count- ship of the economy should be
er-parts on the right believe in a scored highly. Tax cuts, robust
conspiracy of epic proportions that GDP growth and the lowest un-
is completely untethered to reality. employment in more than half a

Rufaro Zengeni An objective obituary of the century. The Trump economy was
Trump Error will still make for an pumping and China was put on no-
www.zfn.co.zw interesting read without exaggerat- tice that their unfair trade practices
ing any of the many successes and would not be tolerated – a position
failures. It is important to note that that enjoyed bi-partisan support.
Trump presidency was impressive America’s European NATO part-
on many levels. To begin with, the ners were told in often undiplomat-
man-baby defeated a crowded Re- ic language that their skimping on
publican primary field in spite of defense spending had gone on for
not being taken seriously by the es- too long. It is thanks to Trump’s an-
tablishment. He resonated with the tics that North and South Korea’s

50Q3 Edition | Investment Quarterly