The art of investing, Zim-style

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When Old Mutual had its initial public offering in Zimbabwe in the 1990s, everyone who had an insurance policy with them suddenly became a shareholder so there was a mad rush as ordinary Zimbabweans suddenly got a lot of cash for their shares.

Debrah Peters

Old mutual was really my first experience of selling shares and introduced me to investing.

I remember Philip Mataranyika sold my family those insurance policies from Old Mutual and he later went on to form Nyaradzo Group. The next big money craze in Zimbabwe were the pyramid schemes so everyone, including the hairdressers that my mother employed, were talking about ponzi schemes that had names like Joker 99.

The government ended up banning them because many people lost their money.

The most enduring savings method for black people in Africa and in the diaspora is the rotating collective savings scheme also known as rounds, stokvels, su sus etc.
Savings scheme are a way for one member to be paid out each month from the group members’ contributions so they can make a big payment, but overall there is no actual gain on each member’s total contribution. South African banks are realising that this is a huge market for their black customers so they are coming up with products for collective investment groups where they can earn interest.

Black Zimbabweans know very little about the stock market so they do not really venture into the Zimbabwe Stock Exchange (ZSE). They are far more interested in buying funeral policies because it is very important to be buried in style in our culture, even if you do not leave any wealth behind.

In the old days there were burial societies for migrant labourers from Malawi, Zambia and Mozambique because they did not have extended families but now there is a whole industry of funeral policies to help ordinary Zimbabweans deal with funeral expenses.

Nyaradzo, as the market leader in this field, when former minister Victoria Chitepo passed away, provided top-of-the-range portable restroom facilities.

When some wealthy men in Harare pass away, they often do not leave their wives financially secure.

Most of them drive fancy cars and own big houses, but as soon as they pass away, creditors close in to claim assets and whatever is left is claimed by the men’s families. I cannot think of any rich black Zimbabwean whose wealth out-lived him.

I can also never understand why African families want to claim the husband’s property from a widow, especially when there are children involved. When white women are widowed, their husbands usually leave them very comfortable.

There are insurance policies, investments and property, as well as little likelihood of family members coming to claim anything as everything is neatly spelt out in a will.
Over the years there have been many black empowerment groups that have claimed they build wealth for people

These include the Affirmative Action Group. Few people will remember the Access To Capital scandal — an investment vehicle that chief executive David Matanganyidze was accused of plundering at the turn of the millenium.

Many are, however, familiar with Gilbert Muponda and Nyasha Watyoka’s ENG where Zimbabweans lost their investment.

There were also many other get-rich-quick scams which served to destroy both local and international investor confidence. In spite of this, the ZSE is one of the most vibrant bourses in Africa. Historically it has always punched above its weight and even at the lowest point of Zimbabwe’s economy, foreign investors have always been active on the ZSE. Somehow black Zimbabweans are failing to get financial literacy about stock investing and are barely active on the ZSE.

I spent 10 years in the United States where retail investors are very active in the stock markets. As soon as I left business school and started working, I opened an online brokerage account where I used to trade my own stocks. Fortunately I worked in finance so I read the Wall Street Journal daily on my subway ride. I also subscribed to Bloomberg BusinessWeek, Fortune magazine and read most of the financial journals at work so I did my own stock research.

When I moved to South Africa I was not well-informed on the financial markets there, so I got a financial planner and bought some mutual funds, annuities and retirement products. It is easy to put money away when you have a steady paycheck each month.

I kept up with all my investments when I worked in Nigeria because I was being paid in US dollars, but when I came back to Zimbabwe where jobs are hard to come by, I had to let go of most of those investments. At least I had a small nest-egg to fall back on.

Despite what is happening in Zimbabwe, the stock market is having a rally. There are people making a lot of money now while most Zimbabweans do not understand how the stock market works. There are 65 companies listed on the ZSE and there are 15 brokerage companies which facilitate the buying and selling of those shares.

According to veteran stock-broker Wellington Mapedzamombe, the current rally is caused by foreigners who are taking positions ahead of the elections, little or no return on the money market, hedging, speculation on the return of Zimbabwean dollar, hopes for a repeat of the 2009 scenario and discount of bond notes, mirroring the parallel market.
Discounting of the bond notes means that for a company that is dual-listed like Old Mutual, if the shares are US$3 in South Africa, they sell for US$6 in Zimbabwe since the bond notes are exchanging at a discount of about 55% to the US dollar on the black market.

Dual listed shares like Old Mutual and PPC are fungible, which means they can be bought in Zimbabwe and sold outside the country. There are no laws to stop that but liquidity or availability of shares for sale is usually the limiting factor.

The ZSE is a relatively small market:

Market Cap: US$11,386,785,469

Turnover: US$1,980,638,49

Foreign buys: US$1,014,067,60

Foreign sales: US$723,063,31 -ZSE.

It only trades for two-and-a-half hours a day from 10am Monday to Friday. Trading is still manual, but it will soon be moving to an automated trading system. There is renewed optimism in Zimbabwe, with the new adminstartion, and talk about new investment coming in so you can pretty much buy any share on the ZSE and it will go up in value if we have successful elections.

The best investment strategy is to buy and hold so in the long-term you will realise value. Zimbabwe has had some unique challenges though with currency devaluation and regulatory uncertainty.

Some Zimbabwean workers were issued share certificates by employers years ago and, by the time they tried to sell them, the companies were going under. Indigenous bank stocks were the worst offenders. Even now of the 65 listings on the ZSE, there are some whose assets are worth more than their market cap. This means shareholders are not selling in the hopes that the share price will go up one day so they can exit.

I have never made a stock market investment that I have had to regret.

However, I do regret some investments I never made.

I remember when I was in New York I was getting ready to buy Google when an investment banker friend of mine advised me against it and we all know that would have made me rich. Then in 2010 I went to see an investment banker in Harare with the idea of listing a microfinance institute, but he shot down the idea.

When I met him again last year he told me he regretted his objection since the concept was exactly the same as GetBucks which listed later. I am always a bit ahead of the times.

I hear everyone in Zimbabwe talking about bringing investors to rescue our economy but we have a very viable stock market that we can use to do that. There have been plans to launch a small-to-medium enterprises stock market by the ZSE like the smaller AltX on the Johannesburg Stock Exchange (now just known as JSE) and, once it goes live, small enterprises will find it easier to raise capital. As a fund manager I have been exploring the idea of setting up a publicly-listed fund, special purpose acquisition company (SPAC), which can be used to invest in other companies.

A SPAC can be used to mop up all the devalued stocks on the ZSE or even on the JSE. There is a shortage of listings on the local bourse, we have not had an IPO for years.

Investors are so hungry for liquidity you can list anything on the ZSE right now and it would sell. The challenge is how to bring ordinary Zimbabweans to invest in the market so as to build wealth locally.

South Africa solved the problem by allocating empowerment shares in certain listings which could be bought even through the post office. When I was in the US, I bought safe stocks like Pfizer through DRIPS, where I set up a small automatic purchase every month to build up my holdings.

I would like to list a real estate investment trust (REIT), where the proceeds of the stock sales would be used to buy real estate. Investing ought to be a lifelong practice, but in Zimbabwe it is a challenge because most people are not in formal employment.

It is possible to market an initial public offer to ordinary Zimbabweans, but it would need massive investor education and the brokers need to be committed to selling to small investors.

Peters is a business and investment consultant. She can be contacted on Twitter @debbienpeters.

One thought on “The art of investing, Zim-style”

  1. nhamoinesu says:

    I enjoy reading Debrah Peters’ articles which I find well-researched, simple to understand. The challenges she presents in her articles are quite engaging and gives food for thought. My views about the ZSE will never be the same after reading Debrah’s article. I have always considered the ZSE as a club of financial moguls trying to fleece hard earned cash fro ignorant investors. Not any more! I think I will now give it a go. Thanks Debrah.

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