Economy worsens, as #mugabe remains mum - Zimbabwe Situation

Economy worsens, as #mugabe remains mum

via Economy worsens, as Mugabe remains mum – DailyNews Live by Kudzai Chawafambira  20 MARCH 2014

Zimbabwe is paying a heavy financial price as the economy slows down under President Robert Mugabe’s Zanu PF government, with stocks and bonds on an unprecedented plunge.

The Zimbabwe Stock Exchange (ZSE) is sliding, driving equity prices lower across the board amid a punishing economic slowdown characterised by a biting liquidity crunch or cash shortage.

Economic experts warn that the stock market is falling, wiping out millions off the value of Zimbabwean companies.

The bankrupt central bank, devoid of any reserves, has failed to salvage the situation because it has not injected fresh capital to halt the slide as investors take fright at the economic slowdown and the indigenisation policy.

The latest slide comes after the equities market lost nearly $1 billion in one week following the controversial re-election of Mugabe on July 31 last year.

The southern African country’s bourse — which had a market capitalisation of $5,96 billion before 90-year-old Mugabe’s election victory — plunged a combined 15,68 percent to close the week at $5 billion.

The current market capitalisation stands at $4,8 billion.

Since the beginning of this year, most counters have been in the red.

The local bourse has failed to find direction in the New Year with market experts pointing to political and economic challenges coupled with the acute liquidity crisis prevalent in the country.

As at the end of February, the local bourse’s main industrial index had already shed nearly seven percent from the last day of the year in 2013, closing value of 202,12 points.

Last week, retail giant Innscor, grain processor National Foods, Colcom, Truworths, Lafarge and Nicoz Diamond lamented in their financial results the slowing economy as the main cause of the market plunge.

“Common at most briefings were results where companies were lamenting the slowing economy-wide demand, prompting structural changes involving either margin cuts or cost containment for survival,” said stock broking firm EFE Securities in its commentary.

“Overally, the financials have largely been within expectations as most companies were at best expected to put in similar performances to prior year on the back of the slowing down economy.”

EFE Securities said the industrial index slid further without support as the reporting season was devoid of stimuli as the market remains engrossed by a bleak macroeconomic outlook.

“Though liquidity in the economy has been tight, we believe the contextualised effects of the deflation may be minimal and short lived. Most are price corrections more than anything else on imported goods,” EFE’s commentary said.

Zimbabwe’s year on year inflation rate for February 2014 pared -0,9 percent  to 0,49 percent.

Market watchers say the continued bearish run on the ZSE is due to cautious trading by foreign investors who fear that Zanu PF’s boosted majority could embolden it to pursue even more radical economic nationalism of the kind that led to violent seizures of white-owned farms after 2000.

“The poor performance on the stock market is far less important than the big problems at hand,” said independent economist John Robertson.

“We first need to deal with encouraging a conducive environment for attracting investment rather than dealing with symptoms of a bigger problem.

“The money used to buy shares on the market does not in any way reach the companies but changes hands between buyers and sellers of shares.

“However, it is a true indication that some investors do not have faith in a Zanu PF-led government because of its long-standing history of implementing poor policies. It will take a long time for this government to be trusted.”

The market traditionally rallies ahead of the reporting period, which began last month for companies releasing December 31 financials.

Instead, the market has been bearish in 2014 as investors remain sceptical and are expecting disappointing earnings from listed companies.

Econometer’s head of research Chris Mugaga said the performance of the stock market is a reflection of that macro-economic environment.

“The liquidity crunch continues to bite at both individual and national level” Mugaga said. “This is also affecting listed companies as the high country risk is also affecting investors’ appetite which continues to get low.

“The market continues to trend southwards. Slowdown in economic performance has in turn started impacting negatively on companies’ performance.”

The ongoing reporting season has failed to stimulate activity on the bourse. Companies’ earnings are either flat or below 2013 levels.

Delta, BAT and Innscor are few examples.

“2014 is going to be difficult and small ailing companies are likely to close shop,” said an analyst with a local bank.

 

COMMENTS

WORDPRESS: 8
  • comment-avatar
    zvichanaka 4 years

    Our Dear Leader will soon appoint his trusted financial juggler Gono as new finance minister. He will solve all the problems by printing US dollars……dont you think so Apolitical?

  • comment-avatar
    Peter tosh 4 years

    The ashore Apolitical has nothing to say this time. If ever he has to say something he will blame it on the opposition or sanctions.

  • comment-avatar
    Peter tosh 4 years

    Asshole

  • comment-avatar
    Roving Ambassador 4 years

    I do not feel sorry for these companies, they have been fueling the zanu corruption machine by dishing out ‘ donations’ to the party, Bob’s birthday, and weddings hoping the mafia will protect them. We now see the results. Shortsighted ness
    . Do not support this system in any way.
    The way zanu is running the country is no sustainable.
    Treasonous malcontents.

  • comment-avatar
    gizara 4 years

    politics of economics

  • comment-avatar
    Jono Austin 4 years

    Well they can’t print Zimbabwean dollars anymore so they can’t pay wages. I see economic catastrophe looming and when the reality hits Zanupf they will then approach the West with political talk like ‘hit the reset button’, ‘mistakes have been made by both sides’, ‘a new dawn’, ‘we always wanted friendly relations, but…’, ‘there has been overzealousness’,’we live in a global village and economic cooperation benefits all’, ‘we can learn from each other’. Should the West then buy into this and pump money in then Zanupf will tell the West to ‘go hang’ once the country is on a reasonable economic footing and the cycle will probably repeat.

  • comment-avatar

    For the West like China it’s about a level of control. The difference is that with the West comes job creation, skills and real long term investment. With China it is the opposite.I foresee the west putting it’s foot by the door to keep it from closing but not entering till they feel the time is right. China will walk in and out of the different doors and take what it can when it can.

  • comment-avatar

    Mr jacket and tie wont see all this as all is well with them,we the poor are feeling the heat be it mdc or zanu,we the poor especially from zanu then u say u have got a president ruling us whilstly his cronies steal during broad light and again wont complain but u staving by managing jus a meal a day (maize cob) that iz whistly them the mr jacket and tie eat daily what u will never eat in yo whole life.wake up black people of zimbabwe