ZANU-PF dismisses indigenisation fears – Zimbabwe dollar not returning soon
THE Zimbabwe’s Stock Exchange (ZSE) suffered a bloodbath this week blamed largely on apprehension over a ZANU-PF government, with critics blaming indigenisation fears and speculation of a return of Zimbabwe’s defenceless currency for the crush.
But the Reserve Bank of Zimbabwe (RBZ) and ZANU-PF moved in to quell any fears of disruptive economic policy, saying the new government would be preoccupied with ensuring growth and job creation.
Youth Development, Indigenisation and Economic Empowerment Minister Saviour Kasukuwere said it was baseless to aver that the run on the domestic bourse was due to indigenisation fears.
“It’s not that; the market had overheated and this was a self-correction,” he told The Financial Gazette.
“The ZSE has never been a barometer of our economy. We are conscious that we should get our economy to grow and create jobs. It’s going to be inclusive growth, inclusive indigenisation,” Kasukuwere said.
In a statement, RBZ governor Gideon Gono said there were no “near-term” plans to return the condemned Zimbabwe dollar.
Gono “emphatically” dismissed the “rumours…and uninformed pronouncements”, noting that “there are no plans whatsoever, within and outside bank, for the immediate or near-term introduction of new currency or reintroduction of the Zimbabwean dollar in our system”.
On Monday, the ZSE industrial index lost 11,09 percent to close at 205,57 points. The loss followed the announcement by the Zimbabwe Electoral Commission that President Robert Mugabe had won 61 percent of the vote while his ZANU-PF party had gained a two-thirds majority in Parliament that would allow it to temper with the Constitution or push through its legislative agendas.
The total market capitalisation tumbled to US$5,34 billion, from US$5,97 billion, a loss of US$630 million in a single day.
The drop was muted on Tuesday but industrials declined to 202 points.
The mining index fell by 2,6 percent to 63,2 points from 65 points on Monday.
Yesterday, the industrial index shed 2,02 points to close at 200,01 points.
Stock market sources said investors cancelled their buy orders, pummelling stocks and sending the market into panic.
Some of the stocks that lost ground were Delta down 20 percent, Econet down 14,71 percent, Hippo Valley down 4,76 percent, Edgars down 28,57 percent, and OK Zimbabwe down 13,33 percent.
“The stock market slump is the clearest sign of how jittery the business community is about the indigenisation policy. Another major worry among most investors is the reintroduction of the Zimbabwe dollar. There is no clear timeframe as to when the local currency would be reintroduced,” said AfrAsia Kingdom Zimbabwe in a note to investors.
Market analysts said foreign investor reaction was decidedly negative as the financial markets grappled to come to terms with the defeat of the Movement for Democratic Change leader, Morgan Tsvangirai, who had been tipped to win the vote.
Tsvangirai angrily reacted to the results and threatened to unleash a three-pronged approach in forcing a nullification of the results, including an uprising, court action and a diplomatic offensive.
“They (foreign investors) feared for the worst which has come to pass,” said Takunda Mugaga, head of research at Econometer Global Capital.
“One thing for sure is that in three weeks they will return after realising that Tsvangirai is fighting a lost battle. These are just the after effects of an election. Most stocks on the ZSE are growth stocks. They can’t ignore that,” added Mugaga, a critic of the indigenisation policy.
Indeed the domestic bourse has always confounded economists by usually going against sentiment and market fundamentals, making it an insignificant measure of the country’s economy and its health.
A local stockbroker who declined to be named said: “The market is dominated by long-term Pan African investors who invested when stocks were stretched. One may have bought into Delta at US120 cents expecting positive adjustment after polls. But they are now questioning if this will be achieved with ZANU-PF in power, and with the emerging disputes. I doubt if investors are worried with who has won, they are worried with the disputes.”
“However, I think the flight is short-term but their return will depend of ZANU-PF’s new policies,” he said.
Between 2000 and 2008, Zimbabwe’s economy plunged into its worst crisis in history, characterised by runaway inflation which disrupted all economic activities and precipitated market-wide commodity shortages.
The question appeared to be that if ZANU-PF presided over the collapse of the economy, how could it possibly preside over its repair?