THE United States government has paralysed any future plans by two listed companies —— ZB Financial Holding and Zimre Holdings —— to invest in Atlantic markets for allegedly supporting President Robert Mugabe’s government.
This development comes at a time when most local companies are diversifying their portfolios to regional markets in an effort to escape the country’s operating environment which has been hostile over the last eight years.
But what does this mean to the investors and the company?
Analysts who spoke to businessdigest this week said the immediate danger the companies might face was having their “wings clipped” when dealing with American companies or trying to expand in regions that Americans dominate.
“Developments like (sanctions) will in the long term result in a number of investors being reluctant to invest in the company, for a bank it could send the wrong signal which might affect deposits and the banks liquidity,” an analyst told businessdigest yesterday.
Some analysts said investors would ignore the sanctions as they were “unjustified”.
“Listed companies’ main objective is to make money and when such sad developments happen one wonders the real motives (behind the move) and which companies where government is one of the major shareholders could be next,” a bank economist said.
Government has shareholding in Zimre Holdings of 44,5%, in the National Social Security Authority (NSSA), it has 19,89%, Spencer Colby Investment 9,82%, Nickdale Enterprises 9,15% and other minor shareholders.
ZB Financial Holdings major shareholders are NSSA (45,87%), Government of Zimbabwe (28,68%) , Old Mutual Life Assurance (6,58%) and Zimre Holdings (3,96%). The two listed companies traded differently to news of these sanctions which were revealed last Saturday.
ZB gained $45 billion ($4,5) this week to close at position 13 up from last week’s drop of 56. Zimre on the other hand only gained $2 billion (20c) for the week ending on yesterday. The reinsurance group closed at position 59 down from 35.
Other unlisted companies included on the sanctions are loss-making parastatals- Minerals Marketing Corporation of Zimbabwe, Zimbabwe Mining Development Corporation, Zisco, Agribank, Industrial Development Corporation of Zimbabwe which handles a number of projects and Infrastructure Development Bank of Zimbabwe.
Analysts warned that the inclusion of public companies on the latest round of sanctions would result in “catastrophic ripple effects.”
“The Reserve Bank which has become the redeemer of loss-making public enterprises will face the biting consequences of these sanctions,” said a financial analyst at a local bank.
“These effects could put thousand of jobs on the line and local investors alike will fell the pinch.”
The central bank, which is currently overstretched through its quasi-fiscal undertakings, aimed at mitigating effects of a bruised economy.
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) said it was imposing sanctions on the seventeen entities for their alleged support for President Mugabe’s administration which they accused of “undermining the democratic processes and institutions in Zimbabwe.”
“In light of the continued intransigence of the brutal Mugabe regime, the US is imposing further sanctions against this regime and its supporters,” said OFAC director Adam J Szubin.
“These actions send a clear warning to those who would protect Mugabe and his assets at the expense of the Zimbabwean people.” The MDC claims that more than 120 of its supporters have been killed with thousands displaced during and after last month’s polls.
Other analysts said the new sanctions were “ideal political tactics” by the super-power to question Mugabe’s sincerity on the talks.
Reserve Bank governor Gideon Gono criticised sanctions on listed companies as misplaced.
“That inclusion provides the clearest evidence to date that these sanctions do indeed seek to cause the suffering of ordinary people who have nothing to do with the conduct of the politics of the day in the country,” Gono said.
He said the trade blockade would negate the “path breaking negotiations” adding that the central bank would respond to these sanctions through collected calmness.
Acting World Bank country representative Mungai Lenneiye this week said the country’s lifeline could only extended if her creditworthiness improved. An earlier report by the institution indicated that there is more business risk in Zimbabwe than in strife-torn Iraq.
“The government of Zimbabwe is still a member of the World Bank,” Lenneiye said. “We still continue to wait for the Zimbabwe government to come up to discuss its economic management strategy.”
By Bernard Mpofu/Paul Nyakazeya