The AXiS XLV

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Catastrophically crippled

#Issue: XLV

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CONTENTS The AXiS XLV 16 September 2022

The Cover Economic News & Analysis

In October 2021, The UN Special Rapporteur 4 Special Rapporteur calls for lifting of sanctions
visited Zimbabwe on a mission to determine 6 Will 2023 be any any better economically?
the negative impact of unilateral coercive 8 Zimbabwe open to investors but closed for investnment
measures on the enjoyment of human rights. 9 Forget gold coins invest in the beef coin
From the 18th to 28th October 2021, Alena 10 Weak Zim banking sector Too much government red tape
Douhan examined the impact of unilateral
sanctions on the enjoyment of human rights to promote underground banking systems
in Zimbabwe and on people’s right to develop- 11 Is there a price cut on the Horizon?
ment. 12 Green economics: Africa's best defence against climate change
13 IFCR, ICRC warns of global crisis fatigue as hunger crisis deepens
Will 2023 be any better e
conomically? Business News & Insights

Going into 2023, it is going to remain challeng- 14 Mashonaland Holding Limited: Poor economic policies
ing finding that balance, government will cripple property market prowess
continue to explore domestic means of
managing the economic situation. These 15 NMB posts stronger earnings in HY’2022
measures will however mainly tinker on the 15 Acknowledges increased availability of forex in Zimbabwe
economic periphery and not address the
fundamentals of economic growth. Markets

Zimbabwe open to investors but 20 Markets Watch
closed for investnment 21 ZSE Weekly Commentary
23 Financial Markets at a Glance
The number of investors attracted by the 22 Weekly Commodity Pulse
country since the ushering in of the new
dispensation has been set off by the number World News
of investors leaving the country along with the
vast migration of the working-class population 18 Politics around the world
to other countries in seek of employment,
according to Zimbabwe Statistics Agency. 16 Business around the world
power, to which other social sciences may
add. Guest column

Mashonaland Holding Limited: Poor 19 Stabilizing alternative rates: What's next for authorities?
economic policies cripple property
market prowess ZSE ASI 14,365.64 ZSE TOP 10 8,720.74 MEDIUM CAP INDEX 29,500.23 ZSE TOP 15 9,695.40 SMALL CAP INDEX 520,512.00 ZWL INTERBANK 528.0554
14,071.03 8,470.26 29,448.41 9,453.99 520,804.34 532.0148
Leading properties investing outfit, Mashona- 13,974.84 8,408.55 29,312.16 9,387.75 501,262.69 535.9859
land Holdings Limited says the low economic 13,830.34 8,331.69 28,917.19 9,315.71 501,097.71 542.7004
progress within the nation, coupled with weak 13,705.12 8,209.35 29,026.80 9,199.73 499,251.50 546.8254
monetary policies, inflationary pressures and 13,747.45 8,230.73 29,149.75 9,222.06 500,174.12 551.9291
shortages of the greenback to import key raw -4.30% -5.62% -1.19% -4.88% -3.91% 4.52%
materials remain a major setback to the
growth and prowess of the property market.

0778167

& Analysis

UN Special Rapporteur
Calls for lifting of unilateral coercive sanctions on Zimbabwe
I n Zimbabwe, the idea of sanctions has
far-reaching consequences because the topic Foreign Assets Control reauthorized certain bank Zimbabwe, restricting access to key developmen-
has over the past two decades been transactions, and later de-listed two banks, in Feb- tal loans.
embroiled in partisan politics. Albeit political, ruary 2016. The United States currently lists 83 In 2001, official development assistance reached
sanctions are in most cases the precipice of individuals and 37 entities. a 20-year low of $160.2 million as external debt
economic deterioration. In essence, the argu- In February 2002, the European Union introduced reached 2.485 per cent of the gross national
ment is not really a political one, rather it is “restrictive measures”, which included an arms income, a level not seen since the early 1980s.
an economic one. The longer sanctions remain embargo, the freezing of funds and assets, travel For Zimbabwe, lost revenues reportedly exceeded
in place, the harder it is going to be to dig the bans and prohibitions regarding equipment used $42 billion from 2001 to 2019.
country out of economic despair. At the very for internal repression. The first European Union Zimbabwe historically relied on foreign trade to
least, we should agree on that as the citizenry. sanctions listed 79 individuals, including cabinet sustain its economy. It last registered a trade
In October 2021, The UN Special Rapporteur members and senior officials of Robert Mugabe’s surplus in 2000, at $155 million, representing
visited Zimbabwe on a mission to determine the Government, and any entities associated with approximately 74 per cent of its gross domestic
negative impact of unilateral coercive measures them. It expanded the list in February 2004 and product (GDP). Overall production increased 1.44
on the enjoyment of human rights. From the in 2011 to a peak of 163 individuals and 31 enti- per cent in 2001 after a shortfall in previous
18th to 28th October 2021, Alena Douhan ties. years. However, sanctions targeted various entities
examined the impact of unilateral sanctions on In March 2013, the European Union progressively in key productive sectors of the economy, includ-
the enjoyment of human rights in Zimbabwe suspended most of its sanctions until reaching ing mining, manufacturing, tourism and agricul-
and on people’s right to development. She con- zero active individual cases by February 2020. It ture, which made it challenging for Zimbabwe to
cludes that sanctions, including secondary sanc- also re-engaged with Zimbabwe under the Coto- rely on its trade and industry to promote growth.
tions, and different forms of over-compliance nou Agreement. During the first decade under sanctions, the coun-
by foreign banks and companies have had a In March 2002, Switzerland banned the sale and try’s trade balance spiralled to -23.8 per cent, in
significant impact on the population and the transfer of arms and related materiel for internal 2010, and has stayed negative since then.
Government, exacerbating pre-existing economic repression and imposed a financial flow and asset Sanctions facilitated deindustrialization, as key
and humanitarian challenges. She recommends freeze on 20 individuals. It gradually expanded agriculture, mining and manufacturing companies
lifting unilateral sanctions in line with the prin- the list of individuals to include 203 physical per- were barred from selling their products in the
ciples of international law; avoiding de-risking sons and 40 entities by 2009. United States and European Union markets. The
policies and over-compliance in accordance In 2020, Switzerland joined the European Union economic contraction went from -3.1 per cent in
with the due diligence rule; and engaging in in removing all listed individuals, while retaining 2000 to -17.7 per cent in 2008. Thousands of
meaningful structured discussions on political the asset freeze on one entity and a prohibition workers were forced out of employment in the
reform, the rule of law and human rights. This on goods susceptible to being used for internal formal economy, and multiple local companies
piece will look at the key issues outlined in the repression. In November 2002, Australia imposed closed down. This nurtured the expansion of the
Report of the Special Rapporteur. an arms embargo, a travel ban, and an asset informal sector as a method of resilience, estimat-
The History of sanctions in Zimbabwe freeze and restrictions on provisions of assets, 8 ed at 94.5 per cent in 2014 and 75.6 per cent in
In December 2001, the United States of Ameri- of which were eased in 2012 and 2013, following 2019.
ca enacted the Zimbabwe Democracy and Eco- the constitutional referendum. It currently lists six Foreign direct investments were affected as inves-
nomic Recovery Act, which was amended in individuals and one entity. tors avoided risks, given the negative perceptions
August 2018. It imposes restrictions on Zimba- In September 2008, Canada added its own sanc- about the economy and the country’s governance.
bwe regarding multilateral financing unless it tions programme by issuing an arms embargo, This led to increased unemployment, estimated at
makes certain reforms. For over 20 years, the asset freeze and travel ban on 177 individuals, 94 per cent in the formal sector by the end of
Act has mandated the United States to vote including their associates and family members, 2008,17 and to a significant loss of qualified pro-
against extending loans, credit or guarantees to and entities owned or controlled by them. The fessionals. From 2000 to 2008, the gross national
the Government of Zimbabwe, and against any sanctions programme also covered senior officials income per person fell by 35 per cent.
cancellation or reduction of debt to the United considered to undermine human rights and four There was a significant loss of public revenue,
States or any international financial institutions, entities. which was critically undermined by consistently
including the International Monetary Fund In 2020, Canada indicated that it would keep high inflation that surged from 56 per cent in
(IMF), the World Bank and the African Devel- sanctions in force until there were positive shifts 2000 to 599 per cent in 2003 and over 230 mil-
opment Bank. in Zimbabwean policy that resulted in improve- lion per cent in 2008.
In March 2003, the United States introduced ments in human rights, democracy, freedom and This fuelled the collapse of the public system and
sanctions on 77 individuals, blocking property the rule of law. The United Kingdom of Great resulted in the inability of the Government to
and interests in property of the individuals Britain and Northern Ireland imposed their own provide essential services, with serious ramifica-
listed, and of any other person (legal or natural) sanctions, including an arms embargo, travel ban tions for people accessing essential livelihoods
determined to be associated, owned or con- and asset freeze, shortly after leaving the Europe- and humanitarian needs, including food, water and
trolled by the individuals included in the sanc- an Union. The list currently includes four individ- sanitation, education and other public services.
tions list. The United States expanded the list uals, who are also listed by the United States, and
of individuals in November 2005; in July 2008, one entity. Humanitarian impact
it broadly extended the sanctions to cover, inter The Impact of sanctions on Zim so far
alia, any senior official of the Government of Zimbabwe has experienced an economic downturn Unilateral sanctions decimated the economic per-
Zimbabwe, spouse and dependent children, or since the mid-1990s due to the adverse impacts formance of the country, thereby aggravating the
anyone deemed to be supporting the Govern- of the IMF economic structural adjustment policy, humanitarian situation and consequently adversely
ment. 13 climate-related droughts, economic mismanage- impacting access to basic rights, including life,
The United States Office of Foreign Assets ment and civil unrest. In 1999, IMF and the food, water and sanitation, health and education,
Control also designated various key entities, World Bank suspended adjustment financing to and the rights of Zimbabwean residents, migrants
including two national banks. Shortly after the and refugees.
constitutional referendum of 2013, the Office of *To Page 5

5 The AXiS XLIII Friday 02 Sept 2022

*From Page 4 cent for vital items and 22 per cent and 36 per The lack of credits and low revenues have
cent for all essential categories of items under the prevented Zimbabwe from developing and
Poverty has increased sharply as a result, under- 2008 essential medicines list. extending its medical system to guarantee its
mining efforts to achieve Sustainable Develop- With hyperinflation and the lack of foreign overall accessibility. While infants are guaran-
ment Goal 1, ending poverty in all its forms reserves, the availability of essential drugs teed free access to medical care, a substantial
everywhere. With the coronavirus disease remained deficient. In 2014, only 42 per cent of number of adults are unable to pay the rele-
(COVID-19) adding to the problem, a survey by them were reportedly available in hospitals; inject- vant fees.
the Zimbabwe National Statistics Agency and the able antibiotics were the least available, at 31 per Access to education
United Nations Children’s Fund showed that cent. The loss of State revenue and the cumulative
almost half of the population was in extreme The lack of credits and low revenues have pre- impact of over-compliance measures have
poverty in 2020. vented Zimbabwe from developing and extending directly impacted the delivery of quality edu-
Access to food its medical system to guarantee its overall accessi- cation. Numerous testimonies explained the
Agriculture has historically ensured rural liveli- bility. While infants are guaranteed free access to challenges faced by teachers and school staff
hoods. It currently represents approximately medical care, a substantial number of adults are related to reporting to work, due to transpor-
14–17 per cent of GDP and employs and pro- unable to pay the relevant fees. tation and accommodation costs, which con-
vides income to approximately 60–70 per cent of Access to health tribute to the high vacancy rates in the sector.
the population. However, sanctions imposed on In general, the provision of primary health care is The average dropout rate increased from 6
key farms and agricultural companies and the delegated to municipal councils through polyclin- per cent in 2000 to 9 per cent in 2005 for
general decline of agricultural investments have ics and rural health centres, which focus on grades 1 to 6, with boys accounting for the
resulted in poor production levels since the early maternal, neonatal and child health. Prior to sanc- majority of those who dropped out of school
2000s, especially as regards cereals such as tions, these facilities were, to some extent, sup- prematurely. In 2009, the primary school
maize, sorghum, millet and others. plied with medicines, ambulances and qualified completion rate stood at 82.4 per cent.
While droughts, cyclones and other environmental personnel. In the 1990s, it was estimated that 85 Is there a legal basis for the imposition of
hazards influenced the decrease in food produc- per cent of the population had access to health sanctions?
tion, unilateral coercive measures also had a care. The Special Rapporteur considers that the
determining impact. Food insecurity has remained The structural economic and social challenges state of national emergency announced by the
a key concern since 2001, both in terms of acces- inherited from the late 1990s were aggravated by Government of the United States on 7 March
sibility and affordability. The proportion of food unilateral sanctions and the isolation of the coun- 2003 in its Executive Order 13288 as the
insecure people increased from 29 per cent in try, especially during the first decade under sanc- ground for introducing sanctions against Zim-
1995 to 58 per cent in 2003, 21 and measured tions, exacerbated by the consequences of babwe, and repeatedly extended, does not cor-
42 per cent in 2016, according to government over-compliance. As a result, the public health respond to the requirements of article 4 of
estimates. It worsened further, to 8.6 million system collapsed. Total health expenditure fell the International Covenant on Civil and Polit-
people or more than 60 per cent of the popula- from 10.8 per cent of GDP in 1996 to an average ical Rights, such as the existence of a threat
tion, at the end of 2020. of 7 per cent to 8 per cent in the period from to the life of the nation, the limiting of mea-
The estimated undernourishment of the population 2005 through 2013. Vacancy rates in the health sures to the exigencies of the situation, a lim-
was 42.2 per cent in 2005, which increased to sector were consistently high throughout the ited duration, and the absence of discrimina-
51.3 per cent in 2017, resulting in the worst mal- period under sanctions, reaching 69 per cent for tion, as referred to in the communication of
nutrition rate in 15 years, with 30 per cent of the doctors; 61 per cent for environmental health human rights experts of 29 January 2021.
rural population requiring food assistance. In technicians; over 80 per cent for midwives; 62 The Special Rapporteur is concerned that
2020, the food insecure population increased to per cent for nursing tutors; over 63 per cent for existing unilateral targeted sanctions as a
2.4 million people, up from 2.2 million in 2019, medical school teachers; and over 50 per cent for punitive action violate, at the very least, obli-
with global acute malnutrition levels increasing other health personnel, including pharmacy, radiol- gations arising from universal and regional
from 3.6 per cent in 2019 to 4.5 per cent in ogy and laboratory services. Recent data on human rights instruments, many of which
2020. vacancy rates indicate figures as high as 89 per have a peremptory character, including proce-
The agricultural sector’s inability to borrow funds cent for midwives, 64 per cent for government dural guarantees and the presumption of inno-
or perform bank operations has rendered it inca- medical officers and 49 per cent for nursing cence with a view that the grounds for their
pable of properly retooling, buying spare parts tutors. Most provinces have less than 10 health introduction do not constitute, for the most
and reagents, maintaining equipment and infra- professionals per 10,000 people. part, international crimes or comply with the
structure, or investing in better plant and machin- Disease-related mortalities have remained more or grounds for universal criminal jurisdiction.
ery technology. Foreign partners are also reluctant less stagnant. For over 20 years, the leading cause The designation of family members of listed
to sell seeds, equipment and spare parts directly. of death in the country has been HIV/AIDS; in individuals contradicts the prohibition on pun-
The main agricultural bank of Zimbabwe, Agrib- 2019, other major causes were tuberculosis and ishment for an activity that does not consti-
ank, could not finance the sector adequately with lower respiratory infections and neonatal condi- tute a criminal offence and constitutes collec-
credits due to its listing under United States sanc- tions. Nonetheless, HIV prevalence and AIDS-re- tive punishment prohibited by international
tions from 2003 to 2016. lated deaths significantly declined from 2010 to human rights law.
Regarding the impact on the country’s agricultur- 2020. The Special Rapporteur underlines that the
al infrastructure and the ability of people to fulfil Additionally, stocks of medicines, vaccines and listing of the majority of high-ranking State
their right to food, current government data indi- other essential drugs have been routinely deficient officials, and the possibility of designating
cate a decline in the number of functional tractors throughout the period37 while about 70 per cent property or companies that they own or con-
to 6,000 in 2021, against a national requirement of essential medicines are manufactured in third trol, affect nearly all economic sectors.
of 40,000. The lack of adequate supplies of vac- countries, especially in India. To meet the Imposing high fines on companies and banks
cines and other essential drugs also impacted demand, the Special Rapporteur was informed that for dealing with designated individuals or the
animal health and food exports, as well as the most hospitals have pharmaceutical manufacturing property those individuals control, based on
ability to produce food autonomously and carry units for compounding simple formulations such payments in United States dollars, results in
out adequate disease control measures. There as glycerine-ichthammol, gentian violet and silver increasing reputational risks and de-risking by
were also reports of a general lack of cold stor- sulfadiazine cream. the United States and third-country nationals
age infrastructure and limited availability of ade- In 2002, WHO reported that 73 per cent of essen- or companies as part of over-compliance.
quate packaging to facilitate exports. Functional tial drug stocks in health facilities located in The Special Rapporteur recalls that “targeted
irrigation schemes served only 206,000 hectares peripheral areas were severely depleted. The trend sanctions” cannot, in practice, be isolated
due to inadequate maintenance and rehabilitation. continued through 2008, with reductions in stocks from the negative consequences on Zimba-
Cereal and horticultural production declined of essential drugs and vaccines ranging between bweans of secondary sanctions, civil and
significantly between 2000 and 2021. 29 per cent and 58 per cent for vital items and criminal penalties for circumvention of sanc-
Access to water and sanitation 22 per cent and 36 per cent for all essential cate- tions regimes, de-risking policies and
Unilateral sanctions also contribute to the deterio- gories of items under the 2008 essential medicines over-compliance.
ration of the water and sanitation infrastructure, list. The cumulative effect of these is an import-
resulting in the reduced accessibility of clean With hyperinflation and the lack of foreign ant factor undermining the capacity of the
water and sanitation services for the majority of reserves, the availability of essential drugs Government of Zimbabwe to exercise its duty
the population, in addition to a reduction of remained deficient. In 2014, only 42 per cent of to maintain the functioning of critical infra-
effective sewage systems and disposal, waste them were reportedly available in hospitals; inject- structure, achieve the Sustainable Develop-
management and fire services. This has accelerat- able antibiotics were the least available, at 31 per ment Goals and ensure the enjoyment of fun-
ed disease epidemics, such as cholera and typhoid cent. damental human rights.
(notably in 2008 and 2018) with an estimated
reductions in stocks of essential drugs and vac-
cines ranging between 29 per cent and 58 per

6 The AXiS XLIII Friday 02 Sept 2022

The battle for stability

Will 2023 be any better economically?

The economic rollcoaster which has been The factors driving inflation in Zimbabwe are status of economic activity, although the austerity
part of Zimbabwe’s economic discourse mainly inherent in the policies pursued by govern- pursued made the cake smaller and therefore the
for the past 2 decades is likely to remain ment and the weak base on which the economy size of government income shrunk with it, thus
in place at least upto the end of next year. This runs. Government has historically showed an indirectly influencing the exchange rate. it would
means the country should brace for further eco- appetite for debt and new money injection. The however be fair to say, the loss in Zimdollar
nomic volatility especially so as we head into government of Zimbabwe has also shown little value in the respective period of 2019 and 2020
an election year. the basic underlying funda- probity in economic management prefering a was merely a fair repricing which would follow
mental economic variables are showing signs of laisez faire approach where reforms are ignored any form of liberalisation.
resilience which is a positive, but the failure to and the status quo maintained. The 2022 currency repricing is however different,
profer an optimum and sustainable economic The only thing that government has done is to it is a reflection of the evolving dynamics centred
policy path had rattled markets, ignited inflation punish the hardworking civil servants by deflating around money supply. In a bid to redeem growth,
and most citizens worse off, financially. incomes through the reintroduction of the Zimdol- which was absent during austerity years, over
The Zimdollar continues to choke, albeit at a lar and alteration of the taxation regime in efforts which the economy contracted in back to back
reducing rate, while companies are beginning to to collect more revenue. High inflation which has years, the government initiated an infrastructure
feel the pinch, recording massive demand come with the weakening of the Zimdollar has spend driven plan, which demanded huge resourc-
cutbacks in the first half of the year, due to resulted in gross deflation of real incomes. In es injection. Along the way the necessary borrow-
purchasing power erosion. 2022 alone, the Zimdollar has pared 81% adding ings kicked in to sustain the run and likewise
What is at play to losses averaging 75% between 2019 and 2020 new money flooded the market driving the local
The economy is expected to growth by a mere and 28% in 2021. This has been the source of currency haywire. The inflationary pressure is not
2% in 2022 weighed by massive imported infla- hyperinflation in Zimbabwe in recent months and only emanating from the projects pursued by gov-
tion arising from the Ukraine war and a signifi- the challenge looking ahead is if the government ernment but other forms of excesses in the econo-
cant cut arising from a dearth in local aggregate has sufficient and reliable measures to end the my. either way the lessons drawn are that in
demand. Zimbabwe’s inflation is currently carnage. trying to restore growth, government relaxed aus-
above 200% and recorded as the world’s worst. The lessons from Zimbabwe have shown that terity and pumped in money without caution and
Comparatively average inflation for the SADC achieving economic stability is a sophisticated as a result, inflation returned. It is necessary to
region is presently in the range of 8% -12%, economic science which entails carefully manag- stimulate growth, however the stimulant is equally
despite all countries having recorded spikes. ing the monetary aspect of the economy as well as important. To achieve an optimal and sustained
The rise in regional inflation is also as a result The lessons from Zimbabwe have shown that growth, own resources should be supplemented by
of the imported inflation arising from strong achieving economic stability is a sophisticated cheaper external credit and direct investment from
global fuel prices, given the Ukraine war, as economic science which entails carefully manag- outside. These external funds puts a balance on
Russia leverages supplies. ing the monetary aspect of the economy as well own resources such that local currency injections
Likewise, the region’s reliance on food imports, as expenditure. In 2019 Zimbabwe pursued an will be matched by increased forex receipts.
of which Ukraine is a major supplier, has con- austerity path in a bid to rebalance the fiscus and
sequently necessitated the spike in headline stop the bleeding which was being worsened by Going into 2023, it is going to remain challenging
inflation. However, despite these pressures, unbridled open market borrowing, stimulating a finding that balance, government will continue to
regional inflation shows a steady and managed monetary implosion. explore domestic means of managing the econom-
growth compared to the runaway Zimbabwe The convenience of a weakening currency was ic situation. These measures will however mainly
scenario. This comparison points to stronger that it immediately tamed expenditure, reducing tinker on the economic periphery and not address
headwinds in Zimbabwe compared to the region imports and at the same time, naturally reducing the fundamentals of economic growth. utilisation
and these headwinds are outside of those inher- government’s wage bill as a percentage of budget. of gold coins as a means to moderate the pressure
ent in the war induced inflation as experienced In technical terms as government income rose in is a very dangerous route which may have the
by peers in the region. nomimal terms, the expected compensatory adjust- same consequence as a government securities
ments in wages to restore real purchasing power driven short term stability.
did not come. The wage bill ratio reduced to
levels below 35% of budget from about 65%
before 2019.

This measure alone ensured that government
reduce its borrowings and rebalance the fiscus. In
2019, Zimbabwe achieved a positive budgetary
balance for the first time in as many years and
went on to achieve another margining fiscal
surplus in 2020. These balance meant in essence
that the pace of credit growth which would other-
wise grow with the growth in borrowings, slowed
down. The losses in currency value seen in 2019
and 2020, were largely a reflection of repricing
based on the underlying monetary status that is
the balance between USD and Zimdollar supply
and demand. It did not reflect in much the pure

The AXiS XLIII Friday 02 Sept 2022 8

Zimbabwe open for investors
But closed for investment
After half a decade in office as a new
dispensation, the government of Zimba- Therefore, to ensure a strong revenue base, the bank- in turn inhibits the growth of new ideas. At a
bwe never tires to call out for inves- ing industry has increased commissions to record recently held Confederation of Zimbabwe
highs, which has inversely impacted reliance on Industries (CZI) congress in Harare this week,
tors, inviting them into a country where exist- formal banking channels as they involve a huge value Dr Alfred Mthimkhulu who is a Bard Santner
ing investors are fighting tooth and nail to loss in transacting. The hyperinflation has also led to Investors executive director, “I started trading
have a less costly exit. The number of inves- pricing inefficiencies as manufacturers, wholesalers on the Zimbabwe Stock Exchange (ZSE) the
tors attracted by the country since the ushering and retailers have resorted to forward pricing while mid-1990s as a finance student…What defined
in of the new dispensation has been set off by disposable incomes of consumers remain suppressed, that era is that the primary market function of
the number of investors leaving the country resulting in depressed demand.The other measure the capital market was alive as was the sec-
along with the vast migration of the work- fostered by the government wathe intervention by the ondary. We were raising long-term capital to
ing-class population to other countries in seek government in the stock market which is supposedly fund long-term projects. Our capital market
of employment, according to Zimbabwe Statis- a free market based mainly on supply and demand was also funding ideas, sheer ideas with no
tics Agency. factors. This has led to a bloodbath on the local stock track record, for example, Econet which to my
exchange as investors feared a further intervention reading today is a conglomerate.”
Notwithstanding, local existing investors have which would have weighed on their investments. The
also faced a hard time in maintaining a going uncertainty in government actions has resulted in However, as positivists claim, “there’s an
concern of their businesses. New local inves- depressed confidence in regulated markets, with inves- opportunity in any situation and place”. Keen
tors have had to opt for other destination tors opting for non-regulated avenues of investment investors have found a way to make money in
countries favourable for any type of invest- for the preservation of the value of their liquid the environment, and these are the remaining
ment. But how did it come to this? assets.The stocks on ZSE have plunged to all-time source of capital highlighted above as venture
lows as the overall bourse has lost about -80% of its capitalists. These are investors with high
Zimbabwe has, for over 3-years suffered from value in US$ terms since the beginning of the year. liquidity and financial muscles to fund a “new
a high macro-economic instabili- baby” in the business fraterni-
ty, exacerbated by command eco- ty. However, due to high vol-
nomics as the government was atility and uncertainty in the
issuing economic-related statuto- economy, most sectors
ry instruments on a daily basis. become unfavourable to
This has led to different eco- investors as they will not be
nomic challenges to the business predicted with high certainty
fraternity, most of which end up to remain viable and are at
transferred to the final user in least a 5-year long going con-
the distribution chains. cern. When a country is
highly unstable economically,
These horrendous economic chal- giant investors tend to exploit
lenges have been deeply delved the resources, worsening the
into in this publication’s prior prospects of growth. A “pri-
pieces, and if one thing is noted, mary producing country”
the challenges have heavily refers to virtually all develop-
weighed on the prospects of ing countries with the excep-
SMEs and fresh ideas. The tion of the semi-industrialized
highly regulated capital markets, ones. As highlighted above,
and lack of confidence in any- the transfer of costs and risks
thing formal, have scared away to the final user in distribu-
potential sources of capital. tion chains means the first
element in the chain is free
The development of businesses of risk. Therefore, in unstable
in an economy depends on the markets, the primary stage of
availability of funding and production becomes the most
liquidity. When an economy lacks funding, The prices of shares on a stock exchange reflect a sort-after business line, while the second stage
development is stifled. Even the development very significant shift in the nation's economy. The and tertiary phase are transferred to other
of countries depends on funding, which is the increase or decrease in share prices reflects the econ- favourable environments or markets. In other
reason for the existence of global financial omy's boom or recession cycle. The stock exchange words, the unstable country is exploited for
markets. Businesses can finance their opera- is sometimes referred to as the "heartbeat of the econ- primary resources, which are extracted and
tions or growth internally, through their own omy" or "economic mirror," reflecting the state of a transferred to viable countries. The Democratic
reserves which include retained profits. How- nation's economy. The current situation on ZSE is Republic of Congo is a relevant current exam-
ever, for capital-intensive growth strategies, therefore indicative of a huge recession in Zimbabwe ple of exploitation of primary resources due to
businesses have to depend on external sources caused mainly by the Central Bank’s actions and economic instability, while South Africa is a
of capital. External sources of capital include, measures. good example of how the secondary and
but are not limited to, bank loans and over- tertiary stages of production can core exist in
drafts, venture capitalists, new partners, share The growth of companies is also premised on the the same environment as the primary stage if
issues, trade credit, leasing, hire purchase, and success of the stock market of the respective country. fundamentals are strong. The mining and
government grants. This is because stock markets enable businesses to farming industries in Zimbabwe have recently
raise funds by selling stock shares and corporate skyrocketed despite the decaying overall econ-
The recent measures by the Central Bank bonds, and enables investors to profit from the busi- omy, and now represent a huge source of
known as the Reserve Bank of Zimbabwe ness's financial success by purchasing stock and income and wealth.
(RBZ) and the government, aimed at tackling receiving dividend payments. The growth of most
inflationary pressures and the depreciation of conglomerates on ZSE came as a result of the success However, the products from these industries
the local currency, have rather resulted in a of ZSE in raising capital for expansion. Econet and are immediately transferred to other countries
worse-off economic position as most economic Innscor are currently in the top 10 biggest companies for value addition or processing. Countries
activities have been depressed. These measures on ZSE and yet listed on ZSE as very small compa- typically export products in which they have
include the constant increments in borrowing nies. The rapid expansion recorded in the days a competitive or comparative advantage. Some
costs (which are now at a record high), sus- following the listing was premised on capital raised reasons for the exportation of products from
pension of payment to government contractors on the stock market as investors were confident in one country to another include differences in
to pin on liquidity (which has resulted in value preservation and growth. The stocks have, how- technology, differences in resource endow-
depressed liquidity in the economy) and the ever, dipped to all-time lows due to hyperinflation, ments, differences in demand, the presence of
intervention of the government in the local which makes the “value preservation” factor not economies of scale, and the presence of gov-
stock market called the Zimbabwe Stock viable. With banks aiming to minimize loan books, ernment policies. The existence of all these
Exchange (ZSE). while stock markets and other regulated capital mar- reasons in the source country typically indi-
kets have lost their popularity, financing for growing cates underdevelopment of the economy, and
Due to the current hyperinflation, banks have companies is internalized with no other alternative. this is relatable to Zimbabwe. When a country
resorted to containing and reducing their loan- The remaining viable source of capital may be ven- depends on other countries for value addition
books as they tend to lose value from the ture capitalists. However, due to inconsistent and of its resources it means the value-benefit is
high volatility in the official currency, the unpredictable policies, most venture capitalists would transferred to the other countries while the
ZWL. not opt for ideas with a longer pay-back period. This source country remains underdeveloped.

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