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Ambrose Evans-Pritchard writing in The
Telegraph yesterday published an excellent article on Zimbabwe titled
For
brave investors, Zimbabwe could be the ultimate turnaround story
With the economy virtually dollarised
prices have stabilised and companies can retain foreign currency
again. 100% foreign ownership is also welcome again.
With the economy completely decimated
there is definitely a recovery story here.
The question is when and what horse to
back?
I am not close enough to the situation
or have a large enough risk appetite to invest in Zimbabwe,
especially with Robert Mugabe still partly in power.
The whole article is worth 5 minutes of
your time.
Subsequent to writing the above I spoke
to a knowledgeable friend about Zimbabwe and he added the following:
Visibly
the change due to dollarisation in every day life over the past 4
months for the Zimbabweans lucky enough to be employed and therefore
now earning USD, has been massive.
Supermarkets
have gone from virtually empty shelves to well stocked.
Not
quite the range of goods that one gets South Africa but at least you
can buy most things now BUT at a price. As a general guideline I
would say that goods cost about 50% more than in South Africa on
average.
The
rich is getting richer and the general population is getting even
poorer.
Unemployment
is over 80%!!
The
power sharing deal between Mr. Mugabe's Zanu PF and Mr. Tsangarai's
MDC has unfortunately not changed much.
Mr.
Tsangarai, even though he clearly won the elections received no
meaningful backing from SADC or the African Union, who basically told
him “Go into a power sharing deal with Mugabe or you will be left
in the cold.”
Although
the PM, Mr. Tsangarai has little power, he is almost single handedly
trying to change things for the better.
Unfortunately,
Mr. Mugabe, who is a past master at the practice of 'divide and rule'
has successfully wooed over most of the MDC ministers with lavish
gifts.
My
concern is that even when Mr. Mugabe passes away, his hold on most things, including the police and armed forces,
that I personally don't see a change to a democratic government
headed up by Tsangarai, happening easily.
Agriculture
and Manufacturing is virtually dead and mining
is just about managing to struggle along.
Tourism,
which ten years ago had become Zimbabwe's second largest foreign
exchange earner, is now suffering really badly, with a large number
of hotels, guest lodges and private game parks, having closed.
Finally,
in recent days, Zimbabwe has decided to resurrect
legislation making it compulsory for all foreign companies operating
in Zimbabwe, to have a 51% local shareholding!!
To
summarize, I would be very careful before investing in Zimbabwe at present.
Tim du Toit is the editor of Eurosharelab.
Kindly note that this blog is published for information purposes and
is not investment advice. Please refer to our disclaimer.
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