HomeBusiness DigestMarket bears brunt of indigenisation fears

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WORRIES over empowerment threats compelling foreign-owned companies to sell 51% stakes to blacks dragged the industrial index on local bourse down.

Analysts say the market had been suffering since the Zanu PF politburo announced last month that the party would not be making further concessions on the outstanding issues of the global political agreement, denting hopes the coalition government would work smoothly.

The mainstream industrial index fell 10,85 % from 156,52 points on January 29 to yesterday’s 139,54 points.

The mining index suffered even more in the same period owing to heightened threats with the key mining benchmark declining by 19,9%.

Mines argue that government should encourage corporate social spending for mines and use such credits to determine credits and resultant shareholding thresholds.

The bulk of mining companies on the local bourse have foreign investors. Falgold is owned by Central Africa Gold, Rio Zim by Rio Tinto while Hwange and BNC both have local and foreign investors.

Indigenisation and Empowerment minister Saviour Kasukuwere gazetted a fortnight ago rules relating to thresholds companies should “cede” to blacks.

Stockbrokers too are unhappy. Turnover and volumes are down.

According to Zimbabwe Stock Exchange chief Emmanuel Munyukwi the market is recording an average US$500 000 turnover daily, down from US$2 million recorded before the empowerment regulations were gazetted.

He also said that market capitalisation has fallen from US$3,9 billion when the regulations were announced to yesterday’s US$3,5 billion.

Analysts say that the politburo’s decision on Wednesday cast Indigenisation in stone.
Investors are sitting on the fence amid growing uncertainty on how government is going to implement the Indigenisation plan.

Even local investors are not sure to pick depressed stocks on the market at the moment. 
A local investor said: “It is going to be tricky. The shares seemed a bit cheap but long-term investors are worried by uncertainty on whether Zimbabwe can shake off negative sentiment that has been created by this empowerment situation.”

Foreign investors, who had been picking up stocks on the market are hesitant, according to Munyukwi.
He said: “40% of business on the market came from foreigners. When the regulations were gazetted, foreign investors became hesitant.”

It is clear also government is losing in revenues on the market because of the uncertainty.

Stocks suffered further yesterday weighed down by Zanu-PF’s politburo decision okaying government’s Indigenisation policy compelling foreign shareholders and whites in the country to sell 51% stakes to blacks.

The industrial index slipped to 139,4 points from 141,26 points while mining stocks put up some resistance with the mining index closing at 175,29 points from 169,63 points previously.

 

Chris Muronzi

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