Bulls rampage at Zimbabwe bourse as economy continues to plummet
December 10, 2006
By MacDonald Dzirutwe
In between scribbling, shuffling small pieces of paper and tapping calculators, the brokers yell loudly, clamouring for attention.
It's another busy day at the Zimbabwe Stock Exchange (ZSE).
The bull run here is an odd side effect of an economic crisis that has seen inflation spiral to over 1 000 percent - the highest in the world - while unemployment has hit 80 percent and poverty levels have soared.
The crisis has been blamed on President Robert Mugabe's government, but it denies responsibility and says it is a victim of a Western sabotage campaign over a controversial and sometimes violent land reform programme.
"In a normal economy, stock market performance should mirror the economic prospects of the country, but in our case it is a lot different … I think the good rally is because there are very few investment options that can provide real returns," says Patrick Saziwa, an analyst at Kingdom Stockbrokers.
The Africa Stock Exchanges Association (Asea) says the ZSE was among the bourses that offered investors the highest returns in Africa last year and most of this year, despite a deep economic recession.
Asea statistics show that the ZSE recorded a 1 545 percent rise last year and shot up by more than 2 000 percent between January and the first week of November this year. The ZSE has a market capitalisation of about $20 billion (R141 billion), with 9.6 million shares valued at $760 million traded last year.
Compared with the JSE, which had a market value of R3.5 trillion at the end of last year, this is tiny. But Zimbabwean investors say their exchange is one of the few places in the country to get good investment returns.
"People know where the good returns are. The stock market is one of the few [to offer these] and this is why we see it performing above all markets," says Emmanuel Munyukwi, the chief executive of the ZSE.
Reserve Bank of Zimbabwe governor Gideon Gono says the ZSE has become a haven for speculators, where "dirty" money from illegal foreign currency trading is used. Some companies have been accused of taking advantage of special low interest rates meant for troubled industries to borrow money cheaply and buy shares, instead of using the funds to improve industrial production.
The central bank's recent efforts to mop up excess liquidity from the market by hiking bank statutory reserve requirements to 60 percent from 45 percent and forcing the banks to invest more funds in long-term bonds have failed to halt the bullish trend. Shares can rise by more than 50 percent in a week, something not lost on investors scouting for opportunities to hedge against inflation of more than 1 000 percent.
busrep.co.za
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