Harare, September 27: Zimbabwe’s moribund economy is slowly stirring, with signs of life in once-shuttered businesses helping to revive a stock market that was closed amid scandal last year, analysts said.
Hammered by world-record hyperinflation, the Zimbabwe Stock Exchange was shut down last November as the central bank sought to curb traders using dud cheques as well as activities of market speculators.
Trading resumed in February, after the local currency was abandoned and a unity government was formed between President Robert Mugabe and his long-time rival, Prime Minister Morgan Tsvangirai.
Since then the value of monthly trade is up 20-fold, though that’s coming off a base of just 2.5 million US dollars. ZSE boss Emmanuel Munyukwi said that still shows signs of at least cautious optimism in the country.
“This is a sign that confidence is coming back to the bourse when compared to last year,” he said.
“There has been huge interest on our counters. Most of the buyers are foreigners especially from South Africa and United Kingdom.”
Monthly trading peaked in June at 57 million dollars but has since slowed. Munyukwi expects the September figures to register around 50 million dollars.
Without a local currency, trading is now conducted in US dollars, limiting currency risks for foreign investors, Munyukwi said.
That’s brought stability to a market ravaged by inflation estimated in multiples of billions last year, said Dzikamai Danha, an analyst with Renaissance Capital, a Russia-based company that tracks emerging markets.
“The real reason why the economy has stabilised and the real reason why the stock exchange has had a fine rally… is as result of confidence in the use of the US dollar, which does not fluctuate like the Zimbabwe dollar,” Danha said.
“Last year, the ZSE in terms of business was actually smaller to that of Botswana, Malawi and Zambia”, some of the world’s smallest markets, he said.
Danha expects ZSE market capitalisation to be 4.1 billion dollars by year end, representing a 138 percent increase over the quarter ending in June, but still tiny even compared to neighbouring South Africa’s bourse.
Significant political risks remain, as Mugabe and Tsvangirai publicly feud over key appointments, including the naming of the central bank governor.
“Although the political noise surrounding these disagreements has intensified in recent months, we do not believe any break in the government is imminent,” Danha said.
But Jonathan Waters, analyst at the economic and financial data group Zfn, said that despite the gains this year, the market remains far off its historic peaks.
The ZSE had a market capitalisation of about nine billion US dollars in mid-1997, before inflation began surging.
–Agencies