Industrial index falls by 13 percent in first quarter


The Zimbabwe Stock Exchange , which received a boom last year with 10 billion shares valued at $650 billion changing hands, has been on a free fall with the key industrial index falling by 13 percent and the mining index by 27 percent in the first quarter of this year.

Share prices of a whopping 59 out of 82 counters declined, one by as much as 97 percent. Two counters, Barbican now under curatorship, and First Mutual were suspended. First Mutual is challenging its suspension, the second this year.

The industrial index kicked off at 103 495 last year and ended at 401 542 having peaked at 754 604 in August. It was down to 347 708 at the end of March.

The mining index which rose by 1854 percent last year to close at 127 571 was down to 92 555 at the end of March.

The market was largely driven by speculators who were trying to beat escalating inflation. The speculation was brought to an abrupt end by central bank governor Gideon Gono’s monetary policy with which he is trying to reduce inflation from over 600 percent to less than 200 by the end of this year.

Gono declared inflation the country’s number one enemy because it retarded growth and bred conflict between savers and borrowers.

He said the major cause of inflation were:

  • Foreign exchange shortages and parallel market activities which had effectively dollarised the economy from property rentals and purchases to many other non-forex consuming goods and services.
  • Imported inflation arising from the above, especially from the iniquitous parellel market forces in the country as opposed to major price changes at source.
  • Shortages of basic commodities due to factors such as drought, sheer greed as well as hoarding for speculative purposes, grey market forces reacting to ineffective and sometimes ill advised across the board price controls and inadequate output at factory level due to shortages of forex for essential capital and working capital purposes.
  • Loose monetary policies which had given rise to high money supply growth.
  • Self-fulfilling high inflation expectations, practices and behavior leading to inexplicable, fundamentally flawed pricing decisions, logic defying exercises and parochial actions by individuals, firms and sectors of the economy.
  • High and persistent government budget deficits.
  • Misuse of concessionary resources meant to support the productive sector but misdirected towards financing consumptive and sometimes speculative ventures and forex parallel market activities.
  • Everyone of grey market activities for goods and services, fuel, cash and other basic items.
  • Corruption to the extent that it involves externalisation of forex, undepricing, transfer pricing of goods and services produced in the country, smuggling of precious minerals, food, agricultural inputs and outputs as well as other forms and practices which diminish or rob the country of economic outputs produced from the country’s resources and inputs.
  • Side-kick effects from parastatal financings especially where the parastatals charge less than break-even prices for their activities and end up seeking support from the fiscusor directly from the central bank.
  • Asset-driven inflation arising from the diversion of savings from banks into real estate, forex purchases, equities, vehicles and other forms of consumptive spending due to lower than inflation interest rates. This scramble for property is crowding out credit from real productive activities thereby causing capacity constraints at the supply level.
  • Lack of international balance of payments support.
  • Inaccurate business, social and political reporting by the media which has tended to fuel rampant speculation and caused the populace to take positions that worsen the situation. Cooperation with the media and accurate media reporting of issues will be a key source of inflation stabilisation.



Top five performers in the first quarter
Old Mutual 209%
Falcon 208%
Wankie 90%
Barclays 71 %
Phoenix 53%




Bottom five performers in the first quarter
Finhold -97%
Gulliver -93%
M & R -75%
General Belting -73%
Radar -72%



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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.


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