HomeAnalysisThe quiet investors in Zim

The quiet investors in Zim

One of the ways in which top analysts assess the health of an economy is to simply walk down the street of a big city like New York, London, Paris or Hong Kong and count people carrying shopping bags.

Deborah Peters,Consultant

You can crunch numbers all you want but in the end you need to confirm your calculations with old-fashioned observations. The shopping bag counting technique does not work in Zimbabwe anymore except for counting supermarket shopping bags because people here rarely spend money on luxury goods anymore due to limited disposable income. There is a lot of talk about investment pouring into Zimbabwe post-November 15, 2017 but has it translated into real money yet? The Zimbabwe Investment Authority claims that almost US$1 billion was invested into Zimbabwe the first three months of 2018 which equalled almost the total amount of investment made in 2017.

Then state media claims almost US$15 billion of foreign investment since the new dispensation came into power, but anybody going into a local bank to withdraw money will tell you that money has not reached the ground yet. It is all a lot of promises, mostly memoranda of understanding. What I did observe after the change of government was that all roads led to Harare with potential investors jostling for opportunities.

There was delegation after delegation coming in to pay courtesy calls to the new president. The Chinese wasted no time in calling on both President Emmerson Mnangagwa and former president Robert Mugabe, while others like the African Development Bank focussed on Mnangagwa alone. I ran into former colleagues from the World Bank, who are forever claiming that they are preparing to lend to Zimbabwe, but they have maintained a full office in Harare throughout the years so I am not sure what those preparations involve.
I travel a lot and I do the Johannesburg-Harare route every month so I observe the type of people travelling into Harare as they give me an indicator of what is happening in the country. Observing the type of travellers coming into Zimbabwe is my equivalent of counting shopping bags. A couple of years ago most business flights midweek were filled with executives from the South African supermarket chains.

Because of the United States dollar, supermarket chains like Pick ‘n’ Pay, Food Lover’s Market and Spar could get price margins from selling in Zimbabwe that they could not even dream of in South Africa. South African companies are expanding aggressively into the rest of Africa and supermarkets are at the forefront. Dollarisation had put Zimbabwe as the largest battleground for South African supermarkets and they could mark anything up as much as they liked because of shortages of goods here. The switch to the bond note and the cash crisis have slowed down the supermarkets’ expansion in Zimbabwe.

Due to the cash shortage, Zimbabwe went cashless in a short space of time after which it became difficult to withdraw or remit money outside the country. The thing about Zimbabwe is that everything changes so fast. The business fundamentals can change overnight during which you can have the rug pulled from under you.

A couple of months ago I was at a cocktail party at the Swedish embassy when I met the principals from Spear Capital, a Scandinavian private equity firm that invested in Dendairy and Metro Peech Wholesalers.

I asked them how their investments in Zimbabwe were doing and was surprised to hear how well they were doing. In today’s climate in Zimbabwe you get used to hearing complaints about all investments sectors, but Spear Capital appears to be a happy investor is are looking for more Zimbabwean companies to invest in. They take a minority stake and provide financial and technical assistance. They say no news is good news, so maybe that is why I had never heard of them before. Their portfolios companies include Dendairy, the dairy producer and Metro Peech, the wholesaler, which are fast-moving consumer goods and food sector investment plays.

There are other investors who are quietly toiling away in Zimbabwe for so long that we now take them for granted. The Bhola family which owns the Bhola Hardware chain have recently opened Belvedere Mall on Bishop Gaul Avenue.

They moved from India about 20 years ago and recently Arif Bhola oversaw the construction of the mini-shopping mall in Belvedere without the use of outside funding. By local terms this may not be seen as new investment in Zimbabwe because Indian families integrate themselves so well into local society and they have informal ways of raising capital within their community but not even the National Social Security Authority has been able to build a shopping mall in Harare despite collecting large amounts of cash every month.

There are other long-term investors in Zimbabwe like the Russians who favour mining but today I want to focus on retail, fast-moving consumer goods and food sector investors. It does not matter how bad the economy gets, people always need to eat. If you stand by the KFC drive-through on Second Street Extension, the long queues of cars show no indication that Zimbabwe is undergoing economic challenges. Fast-food outlets, both local and international, are doing a roaring trade. Another Indian investor success story is Varun Beverages which is the second biggest franchise-holder of Pepsi outside the US. The chairperson, Ravi Kant Jaipuri, took a chance by investing US$30 million to US$40 million in a plant in Zimbabwe in 2016 which when it opened in March 2018, drove down carbonated beverage prices by half because some of them had been previously smuggled in.

When I was in Johannesburg last month I was delighted to find that a Starbucks had opened in Sandton City. It is the third one in the city since the coffee chain came into South Africa about a year ago. I was less than delighted with the long queue and had to rush off for my meeting before I got to the front of the line to get my coffee fix. There were similar long lines when Crispy Kreme opened but I do not care for doughnuts even though I ate the one I got as a free opening day giveaway. The major American food and retail giants have entered South Africa in a big way. You can find most major brands there, although at a premium. For these companies to invest in South Africa, the fundamentals have to be right. Zimbabwe is competing for the same international investors as South Africa and the rest of Africa so our country has to be more attractive for any investor to bring their money here. Investors look for the safety of their capital, high returns and a clear exit strategy.

Zimbabwe has been off most investors’ radars for decades because of the policies of the previous government. Apart from that, our population is very small compared to the likes of Nigeria and Kenya so it is not a large enough market to attract anyone wanting to do a large-volume business. Only Rwanda manages to punch above its weight in pulling investors, through sheer efficiency alone.

Any business with a pan-African strategy has to make sure they include South Africa, Nigeria and Kenya, as their markets so any investment opportunity in Zimbabwe has to outstanding to be get noticed. In the past South African firms like Woolworths came and went, but generally South African companies are being called the new colonialists in their relentless expansion into African countries north of their borders. Nando’s has been here for several years and expect more South African food outlets like Rocomama’s and Porto’s which have followed recently.

South Africans have perfected the shopping mall concept in their own country which has a high shopping mall density per capita and then started rolling them out to other African countries. There is a standard mall package that they put together with anchor tenants such as Shoprite and Game with the food outlets that they are building across Africa.

There is one in Mozambique, several in Kenya, Lusaka is full of shopping malls and by the time I left Lagos, there were three South African malls. I worked with teams of developers, financers and architects in the planning of these malls and international hotels. Speaking of hotels, Zimbabwe is long overdue for an international branded hotel but the hospitality industry is a topic for another day!

Peters is a real estate developer, investment consultant and Africa business expert with broad international education and career in the UK, US, South Africa, Nigeria and Zimbabwe. She is an expert at networking, an avid social media influencer, popular speaker and accomplished business event organiser. She is passionate about travel and has a large global network especially across Africa. She is a serial entrepreneur, author and now budding politician. She runs a consulting business in South Africa and Zimbabwe, where she works with clients such as banks on business development and strategy.

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