Industry awaits recovery blueprint

via Industry awaits recovery blueprint – The Zimbabwe Independent by Taurai Mangudhla September 13, 2013

THE general elections have come and gone, yet business is still at a standstill, awaiting the new government’s blueprint for economic revival.

President Robert Mugabe on Tuesday announced a 26-member cabinet with the key Ministry of Finance allocated to Patrick Chinamasa.

Analysts say with a few exceptions, most of the appointments do not inspire confidence.

Following Mugabe’s controversial victory in the presidential election and his party’s more than two thirds majority in Parliament, the Zimbabwe Stock Exchange index nosedived as its market capitalisation fell by more than US$1,3 billion in the first 21 days of trading while the banking industry lost in excess of US$1 billion in deposits over the same period.

Mugabe’s declaration of his intention to bring back the defunct Zimbabwe dollar as well as to vigorously implement the indigenisation programme in line with the Zanu PF manifesto sent shockwaves across the market.

Industry is waiting for cues from government on the strategy to rebuild confidence, particularly among foreign investors.

First Mutual Holdings Limited group CEO Douglas Hoto this week said Zimbabweans were beginning to develop a savings culture but the trend had since changed after talk of a return of the Zimbabwe dollar made daily headlines. Although uncertainty was still rife in the market, Hoto said his company was in a safe position.

“Since July 31, the market has been volatile but we don’t really worry. Some people are saying the Zimbabwe dollar is coming back next week, but we are not really worry about that,” he said.

Hoto believes the local currency could be re-introduced in about 18 months.

Zimplow CEO Zondi Kumwenda recently said the company’s outlook was premised on the new government’s policy on agriculture as well as the outcome of the rainy season.

SeedCo CEO Morgan Nzwere also told the company’s annual general meeting the group had pinned its future locally on a pro-agriculture bias by the new government.

He said a number of inquiries for seed supply were already trickling in after the election.

Economist Takunda Mugaga said one of the new government’s major challenges was to restructure the Indigenisation Act in order to accommodate foreign investors as the current 51% minimum local ownership threshold was generally on the upside.

He said indigenisation should not be the key policy in government at a point the country is in desperate need of foreign capital.

“In its current form, the policy is not sustainable, with the Zisco-Essar deal an example of how impractical the 51% stake is towards highly capital-intensive industries,” Mugaga said.

The new government should not allow implementation to continue without an audit of progress made so far, he added.

Bulawayo-based economic analyst Eric Bloch said indigenisation had to be dealt with in the post-election period to give the economy a clear trajectory.