It's not all doom and gloom in Zim | Fin24
 
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It's not all doom and gloom in Zim

Mar 02 2016 05:00
Malcom Sharara

WHEN stories about Zimbabwe are told, one can quickly dismiss the country as a failed state fit for junk status.

People describing the country's economic environment will make even those who have supped with the devil think twice before saying they can run a successful business venture in the country. And rightly so. Many have tried their luck, only to come out of the country with burnt fingers and vowing not to touch an investment in Zimbabwe with a ten foot pole.

Stock market investors who have dared put their investments on companies listed on the Zimbabwe Stock Exchange (ZSE) have since succumbed to despondency, as share prices continue to fall. Last year the ZSE's main Industrials Index dropped by 29.44% as foreign investors sold out of the market amid falling economic and company fundamentals.

In 2016, only two months into the year the ZSE's main Industrials Index is already down by more than 13%, with no signs of reaching support levels. Analysts are already predicting that the stock market will close the year down by about 20%, with investor apathy characterising the market since the beginning of the year.

Since dollarisation in 2009, investors have been investing at least US$80m in the first two months of the year, but those days are long gone. By end of February in 2015, inflows onto the ZSE amounted to $50m only, tumbling to $27m this year.

But is it all doom and gloom? Companies that beat the odds

While it has not been easy for most companies and individual investors, some companies continue to defy the odds and report pleasing results in spite of the difficulties characterising the operating environment.

CBZ Holdings Limited, Zimbabwe’s biggest banking institution, is one such company. In 2015, when the stock market was 29.44% in the red, CBZ was 9.8% up; it closed the year with a market cap of $75.53m from $68.23m at the beginning of the year.

This upsurge in the share price is also supported by the company’s fundamentals after it recorded growth in both assets and earnings for the year ended December 31 2015.

Results released by the company on February 25 2016 showed that total assets for the bank had grown by 18.20% to $1.97bn from $1.67bn, with a significant increase in money market asset contribution.

There was also growth in both interest and non-interest income at a time when the quality of borrowers has deteriorated, with banks risking an increase in non-performing loans.

CBZ, however, seems to be doing well in that respect with the level of non-performing loans having come down to 6.9% from 7.39% in the prior comparative year.

The bank has, however, been cautious in its lending, resulting in loans and advances coming down to $1bn from $1.1bn.

Deposits for the bank have also gone up to $1.68bn from $1.41bn as confidence in the banking sector improves.

BAT Zimbabwe is another example of a company that makes it work in the troubled southern African country.  The firm posted solid results despite the country's economic decline, with revenue rising by 2% to $45.2m despite a drop in sales volume.

Profit for the period amounted to $15.4m from $13.4m, while earnings per share were 75 US cents against 65c in 2014. The group declared a total dividend of 91c, more than the current earnings of 75c.

Still plenty of opportunities for making money

Analysts said that as much as Zimbabwe may not offer an environment conducive to doing business, there are still plenty of opportunities to be exploited for making money.

“Its all about making the right selection and risk calls. CBZ is lending heavily to the agricultural sector which is considered risky by many people - but they seem to be doing quite well,” said analyst Jerome Negonde.

A total 29% of CBZ’s loans and advances is to the agricultural sector, shied away from by many banks because most farmers who are beneficiaries of the fast track land reform do not have title to their land. Most banks are only comfortable giving loans to farmers with collateral in the form of assets outside their farms, such as title deeds for houses and business premises.

With companies such as CBZ recording success in their business ventures, other companies are looking in too.

Africa’s richest man and cement mogul Aliko Dangote is one person looking to exploit business opportunities in Zimbabwe.

Early this year his representatives, led by Dr Abdu Mukhtar, said the Dangote group is ready to roll out its projects in Zimbabwe.

“Everything is on track, we are back and happy. We will be coming in and out to do all sort of things as we kickstart the projects,” said Mukhtar in mid-January.

Other foreign companies such as Zimplats and Pretoria Portland Cement have also vowed to stay put and make hay, even in the absence of the sun. 

* Malcom Sharara is Fin24’s correspondent in Zimbabwe. Views expressed are his own.

                       

malcom sharara  |  zimbabwe  |  opinion
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