Sure Kamhunga
22 August 2008
Johannesburg — POTENTIAL rich pickings await aggressive South African companies in a post-crisis Zimbabwe, but they might be forced to play catch-up by foreign investors eyeing projects in mining and retail sectors.
Analysts say Chinese companies and investors from cash-rich Gulf countries in particular are strategically placing themselves to be the first to invest in the country.
They say Zimbabwe provides lucrative opportunities for investors willing to take a long-term view.
This is despite its poor infrastructure, which has suffered from years of neglect, the world's largest inflation rate of 11200000%, which has rendered the Zimbabwean dollar virtually worthless, and a depleted skills base caused by the exodus of experienced workers.
"There are a lot of opportunities in Zimbabwe for South African companies which are best placed to take advantage, but they obviously will need to proceed in an informed and cautious way," says Svetla Stoeva, acting head of mission at the European Investment Bank in SA.
South African companies already represented in Zimbabwe include Group Five, Massmart and Tiger Brands, which say they intend investing in the country once stability returns.
Group Five CE Mike Upton says the construction and engineering firm is "ready to go" to Zimbabwe, while Tiger Brands is closely watching the unfolding political drama, as it believes its 26,7% stake in National Foods, the largest milling company, will pay dividends once normality returns.
"Zimbabwe is a country which has potential and as soon as there is stability, clearly we would be reviewing our investment strategy. It is a country that is definitely on our radar screen," says Tiger Brands spokesman Jimmy Manyi.
Stoeva says her Pretoria office is fielding enquiries for funding from potential investors in infrastructure, which she says will be the obvious starting point to revive Zimbabwe's economy.
Some investors are not waiting for the main political parties to form a new government and are already in business. They include Chinese conglomerate Sinosteel Corporation, which has acquired a 67% stake in ferrochrome producer Zimasco, reputed to hold the world's second largest reserves of chrome after SA.
Another Chinese firm, China Jiangxi Corporation for International Economic and Technical Co-operation, is partnering state-owned Zimbabwe Mining Development Corporation to mine chrome.
Zimbabwe boasts some of the world's richest mineral deposits of chromium, copper, platinum and other metals .
SA's largest company for refined petroleum, Engen, says it has confidence in Zimbabwe, where it recently agreed to take over Dutch firm Shell's petroleum distribution business. "While Zimbabwe's economy has declined sharply over the past decade, it still has good infrastructure, which we believe will form the basis of renewed economic growth, once the political situation is resolved," says CE Rashid Yusof.
Analysts say there are opportunities in the retail and services sectors because of their potential for rapid recovery, while the hotel sector could also rebound quickly on the back of a steady inflow of visitors and tourists.
Agriculture, from which the country used to derive up to 40% of its gross domestic product before the chaotic land reform, was also another area, but the issue of land tenure would have to be resolved.
John Legat, Harare-based CE of Imara Asset Management, says South African investors could scout for opportunities in the mining, tourism, agriculture, consumer products and financial services sectors.
"South African companies are already heavily involved in Zimbabwe's platinum industry, for example, Implats and Angloplat. Their ability to process product is an advantage. There's no reason South African companies should lose out to US or Chinese investors if the project and investment make sense ."
But he agrees it will not be a walk in the park given the amount of work needed to restore economic stability. Stoeva says nothing short of an economic policy overhaul will entice nervous international investors and donors.
"No major investment will take place until a new government seriously tackles hyperinflation and reforms the economy. This situation is so serious this cannot be done easily by Zimbabwe alone, but will require international capital support. This is unlikely to come from SA, Russia or China, but as ever from the US and Europe. They will have their own conditions before that support will be forthcoming," Legat says.
In the long term, he says the knock-on effects of a stable Zimbabwe will benefit the entire region, which has suffered from the contagion effects of the economic and political fall-out in that country.
"The knock-on effect would be highly positive especially at a time when the South African economy is weakening. Botswana, Zambia and Mozambique are already growing at over 5%. Should Zimbabwe do the same, demand for South African products and South African investment will increase further. So too though would be the regions demand for power," he says.
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