THE Zimbabwe Stock Exchange last year registered its worst performance since the introduction of multiple currencies in 2009, closing out a rocky year that tampered with investors’ expectations in 2016.
The million-dollar question at this stage is how sick can the market get before the powers that be press the panic button and save the economy?
For how long will the bears continue to dominate the local bourse, one of the oldest on the continent?
Clearly, there was no respite for investors after the ZSE market capitalisation plunged to US$3 billion as at December 31 2015 from US$4,3 billion in January of the same year. The benchmark industrial index, which opened the year at 167,16 points, dropped to 114,85 points. The resources index, on the other hand dropped, to 23,72 points from 55,38 points.
Market watchers expect another bloodbath this year, a cue for government to come up with measures to restore confidence.
Agro-industrial stocks, for instance, could be hardest hit by the El Nino phenomenon as the country braces for one of its worst droughts in living memory. Wanton destruction of irrigation infrastructure and continued disruption of commercial agriculture activities in the name of land reform can only affect agriculture output and downstream industries.
High interest rates necessitated by high country risk have made the cost of borrowing unsustainable for business thereby making them uncompetitive. Resultantly, volumes for manufacturing concerns on the ZSE have been affected.
With the tone and sentiment being so negative for 2016, any positive surprise could create market gains. Surprise positive news such as a stimulus package from international financiers or a rebound in commodity prices could trigger a rally on the local bourse.
That capital is shy is something government now appears either ignorant of or arrogant towards. Government does not need to go any further to see what the market needs to stimulate activity on the ZSE.
While government has committed to reforms albeit at a slow pace, the market requires change now to turn the tide.
While “mega deals” signed between Zimbabwe and China could lay a solid platform for the economy, the sad thing is that the dividends thereof are not immediate. Zimbabwe badly needs a stimulus package, an intravenous therapy to revive the economy. Parking egos and driving statesmanship is the way out of this quagmire.
Fixing the problems will require more than a tweak here and there. One idea that could win converts would be more radical reforms backed by political will.
The powers that be should heed the wise words of former South Africa president and global icon Nelson Mandela made: “Poverty is not an accident like slavery and apartheid. It is man-made and can be removed by the actions of human beings.”