International investors have been given a positive appraisal of Zimbabwe's economic prospects for the coming year, despite political challenges and concerns about politicking ahead of any election.
The upbeat briefing comes from Imara, the Pan-African investment banking group and source of in-depth investment research on the Zimbabwe market.
Imara has circulated its views to investors and fund managers in major international centres. The group points to numerous positives, including:
- better economic performance from a larger base than officially recognised
- much-improved tax receipts
- prospects for privatisation and public/private partnerships (PPPs), and
- a projected increase in stock exchange activity
John Legat, head of Imara's asset management division, notes: "Zimbabwe's 2011 budget predicts an economy of US$8 billion, a number that is more realistic (than previous estimates), although again too low in our view. An economy greater than US$10 billion is more likely...
"A stronger economy than expected has led to a larger tax take. Collections exceeded US$2 billion (in 2010), surpassing target.
"A higher revenue base for 2011 will imply higher wages for civil servants and greater capital expenditure. Higher wages will mean more spending."
Indigenisation concerns are played down. Says Legat: "This seems to be less of an issue as a number of deals have taken place where foreign investors have secured a majority holding."
Imara cites the November sale of government-owned Ziscosteel to India's Essar Group, which will take a majority stake in return for paying the steel business's foreign debt. Essar will also pay the government a token sum and inject capital into the business.
Legat adds: "The deal highlights that this government can and will privatise, that foreign debt can be repaid and that 51% local ownership as established by indigenisation regulations is negotiable! We hope to see more such privatisations in 2011."
PPPs in power generation and the railways are also possible.
"Both could see Indian influence and maybe Indian capital," says Legat.
India experts are currently advising on the refurbishment of Zimbabwe's Hwange power station.
Imara says India is increasingly active in Zimbabwe as the region's coal and rail infrastructure are strategically important to a country striving for high industrial growth.
Legat also foresees a surge in stock market activity.
"A number of companies are or will be looking for additional capital during the year," he says. "We hope to see more companies looking to unbundle as Innscor successfully did with its crocodile subsidiary, Padenga in December.
"It would also be good to see some mining companies dual-listing on the Zimbabwe Stock Exchange to raise US dollars from local investors while giving Zimbabweans the opportunity to invest in local mining operations."
Stock exchange infrastructure is expected to improve with the planned introduction of a central scrip depository.
"Electronic trading should follow," says Legat, "thereby helping to increase trading volumes on what should be one of sub-Saharan Africa's more active markets."
- Imara is an independent, Botswana-listed investment banking group that prides itself on objective decision making in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, NIC Capital in Kenya, Namibia Equity Brokers and Mac Capital in Dubai. The Group is an active participant in Africa's financial markets and maintains an extensive research coverage of regional equities. Funds under management exceed US$450m and assets under administration exceed US$1.77 billion. Imara provides a range of specialised financial products and services that can be broadly categorised as:
- Asset management (institutional and private client)
- Corporate finance and advisory services
- Trust and administration services
Imara Group subsidiaries are regulated by: NBFIRA in Botswana, the FSA (UK), the FSB, JSE, SAFEX (South Africa), SEC, ZSE and Reserve Bank of Zimbabwe, the FSC (Mauritius) and the Reserve Bank of Malawi.
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