World Economy

Cash Crunch Scares Away Investors in Zimbabwe

Cash Crunch Scares Away Investors in ZimbabweCash Crunch Scares Away Investors in Zimbabwe

The Zimbabwe Stock Exchange weakened further last month as investors fled, spooked by cash shortages in the country, after turnover for the month declined by a massive 49% to $7 million (R101 million). Zimbabwe is struggling for liquidity and this has taken a toll on its economy, which is expected to further decline this year.

Investments have also taken a knock, with trade revenue on the ZSE hitting its weakest in the past seven years last month, IOL reported.

The cash crunch also hit tourism, one of a few growth areas alongside mining and telecoms, with tour operators saying tourists were worried about failure to access cash in the country.

The local stock market took a hard hit with traders saying despite assurances by the central bank last week that remittances of dividends were top priority, there was still apprehension.

Other sources added that this was affecting trade deals on the local equities market.

“The stock market has been struggling and we believe that foreign investors are still worried about the cash shortages and remittance restrictions by the central bank. Some have complained of delays in remittances,” said one trader on the ZSE.

While the ZSE turnover tumbled, market capitalization rose marginally by 0.36% to close at a total market capitalization of $2.86 billion.

  Some Indexes Gain

The mining index gained 2.33% to 26.32 points, sustained by a 7.14% gain in Bindura Nickel, but Falcon Gold, which has put up some of its assets for sale citing difficult operating conditions, took a 9.09% hammering.

Barclays Zimbabwe, the local unit of the international lender that is scaling down its investments in Africa, also saw its stock rise 20%, while crocodile farmer Padenga Holdings was up by 11.7% on stronger fundamentals in its industry.

But the gains were offset by losses in National Tyre Services, down 29.41%; hotelier African Sun, declined 19.33%; as well as Willdale, down 11.76%; and dairy concern, Dairibord Holdings, tumbled 10%.

Authorities are pushing mining companies to list on its stock market through a new mining legislation that is now being finalized.

Mining companies, among them units of Impala Platinum, Anglo Platinum, Sibanye Gold and Metallon Gold, are already required to give shares into the hands of employees and communities, in addition to retaining 75% of their earnings inside the country.

Zimplats, which also has a listing in Australia and is one of the biggest corporates in Zimbabwe, posted a $7 million profit for the year to June at a time when other Zimbabwean companies were struggling amid losses and massive profit declines.