15 March 2014

Zimbabwe: Bad Policies Hindering Investment

BANK deposits and government revenues in Zimbabwe will grow by 75% and 45% to about US$8 billion and US$6,8 billion respectively in 2015 on account of a normalised economic environment, a leading local securities firm has said.

In its March 2014 Equities Market Review and Strategy Outlook, Invictus Securities Zimbabwe (Invictus) projects bank deposits will be slightly above US$5 billion at the end of 2014 while government revenues are expected to reach US$5, 2 billion.

Invictus Capital Zimbabwe MD Ritesh Anand said the projections can only be attained if the country is able to attract at least US$1 billion in Foreign Direct Investment (FDI) in the short term that will translate into increased deposits.

He said the country also needs policy certainty particularly on matters to do with ownership of property and companies under the Indigenisation Act.

"Unless we attract FDI the economy will remain in stagnation which means we cannot grow government revenues," he said.

"Unfortunately indigenisation continues to make it difficult for foreign investors to come in."

Anand said since the beginning of the year all indications are pointing to a slowdown in the economy due to unclear market conditions which will result in bank deposits barely exceeding US$4,5 million at the end of 2015.

Last week, trade experts said Zimbabwe needed transparent and attractive policies to avoid rent seeking behaviour in industry.

World Bank African region trade practice leader Paul Brenton said the economy was being hindered by unattractive investment laws and lack of policy consistency.

International Growth Centre country director Richard Newfarmer also said Zimbabwe needed policies that promote export diversity and value addition to grow the economy going forward.

According to the Invictus report, beverage consumption is seen almost flat at 3,5 million hectolitres by the end of 2014, while mobile telephone subscribers are projected to increase to 14 million in 2014 and 15 million in 2015.

The report notes a strong recovery in the agricultural sector since 2009 with tobacco production set to reach 170 million kg in 2014 from 166 million kg produced in 2013 while maize production will grow 63% to 1,3 millon tonnes on account of good rains.

Despite low producer prices prevailing in the market, cotton production is projected to grow to 180 000 tonnes from 140 000 tonnes in 2013 while annual milk production for 2014 is seen reaching 78 million litres from 70 million litres in 2013 and beef production remaining flat at 95, 000 tonnes in 2014.

The mining industry is a key economic contributor and is expected to drive growth going forward with initiatives for value addition underway.

Invictus said there has been a significant increase in mineral production since 2009. Growth is expected to be moderate due to lack of capital investment in mineral development and exploration.

The report said gold production was forecasted to reach 15 000kg in 2014 from 14 000 kg in 2013, while platinum production is also expected to grow by 1 000 kg to 14 000 kg in 2014.

Nickel production is seen reaching 15 020 kg from 12 000 kg recorded in 2013. Chrome figures are also projected to grow from 360 tonnes to 500 tonnes in 2014 and coal to reach 4 000 tonnes from 3 300 tonnes in 2013.

Invictus see shares remaining flat and giving back some of the gains recorded in 2013 on the back of slower economic growth reflected largely in weak consumer demand and tight liquidity conditions.

"We expect the industrial index to decline by 10% to 181,90 points and the market capitalisation to contract to US$4,68 billion," reads part of the report.

"We expect exporters as well as agricultural related stocks to perform well on the back of a good rainy season (and) our view is that foreign participation to continue to expand to around 60% by year end. We expect foreign investors to buy on weakness in 2014."

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