It can only get worse

via It can only get worse – The Zimbabwe Independent October 2, 2015

LATEST figures showing the Zimbabwe Stock Exchange (ZSE)’s market capitalisation plunged by US$2 billion to US$3,4 billion as at Wednesday year-on-year, weighed down mainly by the weak performance of blue chip counters, further demonstrate the extent of the current economic implosion.

EDITOR’S MEMO| DUMISANI MULEYA

The ZSE — a barometer of economic performance — lost US$1 billion in value in the first half of 2015, as the economy slipped further into recession slightly over two years since President Robert Mugabe and his ruling Zanu PF won controversial re-election in 2013.

The polls, like other previous ones, were clearly manipulated.

Evidence abounds to support that. Even those with blind loyalty to Mugabe that persists beyond reason or to a point where it becomes counterproductive know and now talk about it if there is no risk of reprisal for telling the truth.

Beverages giant Delta Corporation — Zimbabwe’s biggest listed company — share price shed 18% to 83 cents, while Econet, second largest counter, also retreated 56% to 26,7 cents, reflecting fragile performance by blue chips. Innscor and National Foods were also down 1,7% and 12% respectively.

Delta, a unit of South Africa’s SABMiller, the world’s second largest brewer, accounts for nearly a third of ZSE market capitalisation. As at September 30 this year, market capitalisation stood at US$3 444 530 965 compared to US$5 140 164 893 by September 30 2014.

This shows the economic climate is suffocating. If blue chip stocks, seen as less volatile investment given their institutional position compared to shares in companies without that status, are dramatically declining in value then it shows there is a bloodbath at the bourse.

Blue chip companies are known to weather economic storms and operate profitably in the face of adverse conditions, which help their record as safe bets.

Despite recording improved foreign participation, the benchmark industrial index retreated 11% in the third quarter ending September 30 compared to a gain of 4,7% registered during the same period last year.

The resources index also registered negative growth during the same period from a positive outturn last year.

The bearish trend has been running for months. The market slipped a marginal 0,02 during mid-week trading, settling at a total market capitalisation of US$3,63 billion before dropping to US$3,4 billion at the close of business yesterday.

This, coupled with the latest Global Competitiveness Index report compiled by the World Economic Forum which shows Zimbabwe declined one place to 125th out of 140 countries, paints a gloomy picture of the economic situation.

In the 2015/16 report released on Wednesday, Zimbabwe is ranked 15 from the bottom — the lowest since 2012/13 when it was 12 places from the base. This further proves the country’s business environment is hostile.

So slightly over two years after Mugabe and Zanu PF’s dubious election victory and the formation of a new government, Zimbabwe’s politics and economy are increasingly precarious.

Immediate prospects for a sustained recovery remain bleak, made worse by the dire economic tailspin, toxic leadership, policy somersaults and tensions over Mugabe’s succession.

The economic rebound in the multicurrency system has long ended and Mugabe has run out of excuses. This week he once again erratically revisited and wheeled out the increasingly threadbare and discredited sanctions mantra at the United Nations General Assembly meeting in New York.

Rather than addressing the deteriorating situation, Mugabe and his party bigwigs are consumed by succession infighting.

The president’s remarks yesterday upon his arrival from the UN, threatening ambitious succession hopefuls in his party who want to seize power through dubious means, bear out his party is embroiled in deadly internal power struggles.

All the while Mugabe’s options are running out. His costly trips around the world to get a bailout have yielded precious little. Without structural reforms, the country could soon slide into being technically a failed state. It’s clear it will get worse before it gets better.