LAST month JSE CEO Russell Loubser had a few words of advice for authorities here; investors have a choice. This is a message the Zimbabwean government has possibly forgotten.
For a government that should be aware that the performance of stock exchanges elsewhere often gauge an economy’s health, little has been done to encourage investment in this country. Only Finance minister Tendai Biti, a lone voice of reason in government on economic matters, seems to be in the know.
In his 2010 fiscal policy presentation last year, he educated his fellow legislators on the importance of the ZSE and gave them a crash course on its inner workings. Biti, like progressive bureaucrats around the world, realises that stock exchanges are barometers of economic performance. But developments on the market since the beginning of this year paint a picture of an economy in trouble. Market capitalisation has fallen from US$3,9 billion in December to last week’s US$3 billion, a value decline of US$900 million. This came after government gazetted Indigenisation and Economic Empowerment Regulations compelling foreigners to “cede” controlling stakes to “indigenous” Zimbabweans.
The announcement could not have come at a worse moment; about 40% of trades were linked to foreign fund managers. Despite the mayhem caused by these regulations since the end of January, government continues to watch with no resolution. In fact, government through its empowerment minister is adding salt to injury. Last week, Saviour Kasukuwere threatened to close 9 000 companies that had not complied with empowerment regulations.
Efforts to revise words such as “cede” have given little cheer to already apprehensive investors. This week the ZSE asked government to give listed companies an exemption. In essence, what the ZSE wants is a break for listed companies. This, the bourse reasons, can still attract rare investment into the country while government pursues its empowerment policy, a meaningful offer in a country governed by individuals bent on ensuring that no foreign direct investment comes in.
This could be a practical way of enticing investors back to the market.
But judging from government’s attitude towards foreign investors and the wall it has erected on the investment front, this proposal, like many others, will be ignored. Over the years it has become apparent that there are individuals in the past and present government intent on ensuring that the economy suffers for reasons better known to themselves.
Mines have made proposals that government has either ignored or disrespected, opting to pursue combative approaches to empowerment instead. Ask Zimplats and Anglo platinum. Their offers to swap mineral resources for empowerment credits have been ignored. With such tendencies and apparent arrogance, it is little wonder Zimbabwe is ranked lowly on the investment front.
Even Uganda, once an outpost of tyranny during Idi Amini’s time, has come around to becoming one of the largest recipients of foreign direct investment. Uganda, according to the World Investment Report, was the best investment destination in East Africa. Zimbabwe, with its vast resources that President Mugabe brags about at any given opportunity, got a paltry US$60 million last year.
In the absence of meaningful and sound economic policies that not only encourage growth but also attract investment, investors will simply go where they see value.
Biti, during his Mid-Year Fiscal Policy Review, blamed the empowerment regulations for scaring away foreign investors’ contribution to market turnover which dropped to a monthly average of 20% from 50%.
“The poor performance is a result of investors pulling out their investment, reflecting depressed investor sentiment over perceived financial risks, especially following gazetting of the Indigenisation Regulations on March 1,” Biti said.
Unless and until the government as a whole provides a friendlier investment climate we will continue to experience an under-performing economy.