Imara upbeat about Zimbabwe

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 a 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.

“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,” says John Legat, the head of Imara's asset management division.

“An economy greater than US$10 billion is more likely,” he says.

Legat adds that a stronger economy than expected has led to a larger tax take, with collections exceeding US$2 billion (in 2010), surpassing targets.

“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.

“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.

“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,” Legat adds.

PPPs in power generation and the railways are also possible.

“Both could see Indian influence and maybe Indian capital,” says Legat.

Indian experts are 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.

“We hope to see more companies looking to unbundle as Innscor successfully did with its crocodile subsidiary, Padenga, in December.”

Legat adds that it would also be good to see 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,” notes Legat, “thereby helping to increase trading volumes on what should be one of sub-Saharan Africa's more active markets.” - I-Net Bridge