Harare – A nosedive in turnover on the Zimbabwe Stock Exchange (ZSE) as well as apprehension over the introduction of local bond notes next month are worsening investor apprehension and denting confidence in the country's recovery prospects.
Zimbabwe
has dug in its heels over the introduction of local bond notes, which the central
bank insists are being introduced to incentivise exporters. But negative effects on
the economy have already begun to surface, with analysts and executives saying
investment on the ZSE has taken a knock.
“Confidence
in the economy and the financial services sector is declining. Visitors are
failing to use their cash cards in the country owing to liquidity challenges
and we will see this having an impact on business confidence in tourism,” a
business executive told Fin24.
The
ZSE declined by nearly 50% in August to $7m in turnover with fund
managers saying that apart from the blue chip companies, there is declining interest in most
counters. Most ZSE-listed companies have struggled to raise profitability, while
others have sunk into loss-making.
“The
state of the economy remained rather precarious during the month of August. For
starters, the economy slid further into deflation during the month of July, as
annual inflation shed 0.24% to -1.60% and the month-on-month inflation worsened
to -0.19%,” analysts at brokerage firm IH Securities said in a new report on
the local bourse.
Average
daily trades on the ZSE in August 2016 amounted to $336 690, with the “most significant contributions to total value” traded seen in SABMiller unit Delta, Econet Wireless and quick serve restaurant business Simbisa,
which contributed 57%, 9% and 6% respectively. However, this was not strong enough
to avert a 26.99% decline in total volume traded to 41.26 million shares.
Losses
were seen in Falcon Gold, National Tyre Services, African Sun and Willdale.
Dairibord Holdings, a state-owned dairy concern, was down by as much as 10%
for the month of August, with turnover for the period sinking to the lowest
levels in the past seven years.
Although
a gain in Old Mutual Zimbabwe on Monday saw the market open on a positive note
amid low trade volumes, Lynton Edwards said “trading was subdued with turnover
(for Monday) amounting to just $11 978”, further highlighting projected
weakness in investor sentiment.
On
Thursday Finance Minister Patrick Chinamasa will present the mid-term fiscal
policy review amid growing protests against government policies. News of
Mugabe's ill-health – and the subsequent failure to deal with succession fights
in his ruling Zanu PF party – as well as struggling companies and declining
productivity are also worsening recovery prospects, according to analysts.
Zimbabwe
has seen protests against import restrictions and introduction of bond notes
flare up, culminating in a two-week ban on demonstrations in the central
business district by the police. Zimstats recently reported that imports had
declined by 8% to $395m in August and exports are still subdued after
rising by only 4% to $184m, sustained by a 7.14% rise in gold
deliveries.
Zimbabwe however still has a high trade deficit that has ballooned to $1.6bn during the first seven months of the year, indicating the nation’s continued reliance on imports. Gross revenues for the first half-year from state revenue collector Zimra were 6% below the $1.65bn target. This has been attributed to the country's persistently difficult economic environment.
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