SOUTH African asset management firm Investec has pumped more than US$170 million into Zimbabwean companies since 2010, with the most notable investment being the injection of more than US$12 million in listed retail giant, OK Zimbabwe.
Investec Asset Management investment principal in Zimbabwe, Richard Honey, told delegates to the Zimbabwe Pensions and Retirement Funds Investment Forum in Nyanga on Wednesday that following the global financial crisis, Africa was now offering global investors an opportunity to diversify their portfolios away from China and India.
“The case for investing in Africa has grown, as images of the dark continent have given way to a talk of Africa as a portfolio remedy and a route to risk diversification away from India and China,” Honey said. “Global investors are now looking for investments that deliver returns that are based on real economic growth. Africa gives opportunities based on real businesses not leverage, not financial engineering.”
He said the buzz around Africa had escalated following the global financial crisis of 2008, which made investors rethink the definition of risk.
“European sovereign bonds were considered risk-free investments, but given the meltdown in Europe, the world does not think like that any more,” he said.
Honey said Zimbabwe had significant potential as its economy was growing strongly despite on-going political instability, GDP growth of 6% in 2009, 9% in 2010, 9% 2011 and an estimated 5,6% in 2012.
He said Investec was of the view that the current economic growth was being driven largely by mining of gold, platinum, coal and diamonds amongst others.
According to Honey, the country’s resources in recent years have been relatively under-exploited and under-explored as compared to other countries in the region.
He said Zimbabwe’s mining sector grew at an average 35% between 2009 and 2011 and was expected to grow by 16,7% in 2012. Honey said the agricultural sector had grown strongly at an average 21% per year between 2009 and 2011 despite prior disturbances from land reform. This, he said, was being buttressed by strengthening domestic consumption of goods and services.
He said Zimbabwe had strong human capital — the highest literacy rate in Africa, at 92% — according to the UNDP.
Although Zimbabwe’s infrastructure was battered and required investment, it was better than many of its regional peers, he said.
The Zimbabwean economy has shown nascent signs of a recovery in 2009 and 2011 despite the prevailing uncertain political and macroeconomic environment, following a decade of unprecedented economic decline between 1998 and 2008.
Between 1998 and 2008, all of Zimbabwe’s neighbours excluding South Africa had their GDP growing at an average 5,7% per annum, whilst during the same period Zimbabwe’s GDP fell by 49%.
Honey said Investec had limited appetite for incremental investment at this stage, but was watching developments in Zimbabwe closely.
Investec is a global specialist asset manager. The asset management division is 21 years old, managed separately from the bank, has more than 700 employees and manages over US$100 billion across the globe.
In South Africa, Investec has more than US$40,2billion invested in debt and equity instruments and an additional US$3 billion across the rest of the continent, making it one of the largest investors, with a total Pan African investment of US$43,2billion.