ZSE bleeding very worrying

LATEST Zimbabwe Stock Exchange (ZSE) figures showing nearly US$2 billion in shareholder value was wiped out annually by the first quarter to March 2016 compared to the same period last year largely due to the indigenisation policy and hostile business environment are worrying.

Zimbabwe Independent Comment

The market fell 0,93% to close the day yesterday at a total market capitalisation of US$2,8 billion, according to Inter-Horizon Securities updates. ZSE figures later showed it closed at US$2,6 billion.

The industrial index was down 1,03% to 97,17 weighed down by a 0,07% loss in Delta — the largest ZSE counter with about US$700 million market capitalisation — offsetting a 0,41% gain by Econet.

The mining index remained unchanged at 19,53. The day’s top gains were recorded in ZB Financial Holdings, up 20%, NicozDiamond (6,67%), Old Mutual (3,4%), ZHL (2,86%) and OK Zimbabwe (1,45%). Top losers were Hippo, down 19,88%, Dawn (19,50%), Barclays (7%), National Foods (4,55%) and Padenga (0,83%).

Generally, the relationship between macroeconomic variables such as inflation, interest and exchange rates and stock price fluctuations is well-documented. This is currently being reflected on the ZSE. Stock prices are influenced by fundamental macroeconomic factors. The poor performance of the local bourse continues to reflect economic deterioration after total market capitalisation declined by US$2 billion annually since March last year, marking a persistent bearish run for 12 consecutive months.

While intensifying ZSE losses and capital flight reflect the damage being inflicted on the economy by current toxic politics, policy inconsistencies and failures, unfriendly business climate and the prevailing chaos, underlying structural issues are also part of the problem.

Since January, economic difficulties have deepened. Government cannot wait and needs to act now, but we are witnessing more hand-wringing, policy flip-flops and groping in the dark by President Robert Mugabe and his ministers. Apart from that, government is notorious for trampling on the rule of law and property rights.

To make matters worse, the El Niño-induced drought has hit the economy hard. Lower commodity prices and appreciation of the US dollar — now our main currency after the Zimdollar’s decimation by misrule and hyperinflation — compound the plight.

However, the main problem is government policy, particularly the indigenisation programme. There is no let-up in official policy madness. From today, foreign-owned companies risk being closed down for failing to comply with the manifestly daft and destructive indigenisation laws. Zimbabwe’s indigenisation circus, which is not funny at all as it is ruining the economy, has gone too far. The folly must stop.

Investors want a stable business environment, clear rules and predictability. However, indigenisation regulations tend to change from time to time, depending on who you are talking to. Patrick Zhuwao is conceitedly burying the economy through ignorant economics.

Indigenisation makes sense philosophically. Every other country in the world does it, but the difference here is crudity, greed by corrupt and incompetent ministers, and that the law in its current form is harmful to the country’s economic interests. That’s why it must be urgently repealed.