How things are likely to pan out in Zimbabwe in 2018

Economy: Slow progress, but progress

There is one thing that the economy has now, that it didn’t have a year ago; optimism, even if it is of the cautious kind. A survey of Zimbabwe’s mining executives, after the Mnangagwa takeover, showed that the Business Confidence Index moved from minus 6.6 to plus 21.9, meaning they have moved from pessimism last year to optimism.

This week, a survey by the Investment Professionals Association of Zimbabwe, a grouping of market analysts, showed 80% of investment managers believe the economy will perform better than in 2017.

Key mining investors such as Vast Resources have expressed confidence and ramped up investment plans. The new order “heralds more favourable prospects for the Group’s Zimbabwean assets”, according to group chairman Brian Moritz.

Zimbabwe is the world’s fifth largest producer of lithium, in demand for use in rechargeable batteries. Prospect Resources is now considering a new chemical plant in Zimbabwe, and has recently discovered new deposits.

A mining investment conference in Harare this February, to be attended by 300 investors according to organisers, will be one to watch as it will gauge global investor appetite for Zimbabwe’s resource assets, especially after proposed changes to the indigenisation law.

This is not something that Mnangagwa’s critics want to hear, but it’s true. Investors are finally giving Zimbabwe a second look, albeit with a cautious side eye.

Hasnain Malik, head of equity research at Exotix Capital in Dubai says “many of the ingredients of a great frontier market are in place in Zimbabwe.” There is a lot of work to be done yet, Malik says, but “the starting point for investor expectations is very low”. This low expectation need not be a bad thing; we can do better by setting even a low bar. We had no bar at all.

“I have done a few road shows in Dubai. For the first time in years, investors are interested in hearing Zimbabwe’s story. This is goodwill that Mnangagwa should build on,” a Zimbabwean investment manager, also in Dubai said.

It’s up to Mnangagwa to either grab or squander that small window of opportunity. The many long hours at work that his propagandists talk about will be a waste if he cannot get results from his Cabinet, which he stuffed with many proven failures. How he reacts to ministers’ 100-day plans will be an item on his own report card.

Still, with Zimbabwe getting a leader who at least stays awake during the day and appears to know how an economy works, the economy can’t surely be worse than it was. There will be no investment flood, but we will see some new projects from existing firms and new ones, especially in resources, retail and agro-processing.

Growth will be slower than what we need; certainly slower than Patrick Chinamasa’s 4.5 percent 2018 projection. But Zimbabwe may avoid recession, which on its own would be good progress.

Whichever way you look, 2018 will be a different year to any we have seen before. And it doesn’t take a prophet to see this. – The Source

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