THE Zimbabwe Stock Exchange (ZSE) — as effective a barometer of the state of the economy as other bourses elsewhere — continued its retreat for the sixth month in a row to August, falling a further 7,19% to close at a total market capitalisation of US$3,74 billion.
This reflects the dire state of the economy as shown by the current wave of company closures and job losses despite futile attempts by government authorities to give the impression of recovery on the horizon. Officials are clutching at straws; touting long-term investments deals with China, Russia and now Africa’s richest man, Nigerian billionaire Aliko Dangote, whose net worth is US$17,5 billion, as the panacea.
Yet everybody, even those with just an elementary grasp of economic issues, knows only too well such deals by their very nature can’t be a cure-all. They are long-term and might be sabotaged by a harsh operating environment. What is need are broad political, economic and policy reforms to attract huge foreign direct investment to bring in new capital, liquidity, technology, boost production, create jobs, raise aggregate demand and ultimately economic growth. Disjointed interventions won’t work.
While authorities, mostly clueless busybodies and chatterboxes, behave like a drowning man grabbing at anything, even at straws or dry grass, in a bid to survive, the economic situation continues to deteriorate at an alarming rate. The industrial index last month dropped 6,82% to 135,43 on the back of losses by all heavyweights: Delta was down 14,58%, Econet 2,53% and Innscor 5,53%.
There were however some top gains. Meikles was up 49,63%, Proplastics 30%, CFI 28,21%, RTG 25% and Masimba 23,75%, but the overall picture was gloomy.
The mining index lost a further 10,21% as all counters recorded losses with Bindura falling 6,67%, Falgold 33,33%, Hwange 17,07% and RioZim 14,29%. Other significant losses were recorded at Ariston, down 60%, Turnall 16,67% and OK Zimbabwe 14,63%.
In July the country woke up to another heavy dose of bad news; the ZSE’s market capitalisation had crashed, losing value by at least US$1 billion in the first half of the year to US$3,8 billion.
In a country with a US$14 billion GDP and a paltry US$4 billion national budget, a billion dollar loss in securities value in six months is a bloodbath. It signals economic volatility and tailspin.
So the ZSE negative trend in the first half of the year — currently continuing unabated — shows Zimbabwe is going through serious economic problems. The market continued to retreat in June, falling a further 3,22% to close the month at a total market capitalisation of US$4,15 billion. It had remained bearish in May, falling 3,27% to close the month at US$4,29 billion. Prior to that, in April it had fallen 1,17% to close at US$4,44 billion.
Cumulatively, these losses topped a billion.
The ZSE, like other bourses, is a gauge of the economy. Share prices rise and fall depending, largely, on economics forces. They tend to rise or remain stable when companies and the economy show signs of stability and growth. A plunge in share prices signifies a problem. Given the bearish ZSE performance, policy mess and ineptitude in government, the economy simply won’t bottom out any time soon.