Paul Nyakazeya, Group Digital Editor 
ZIMBABWE’S ongoing reforms make it a viable destination for private equity investment as the economy benefits from improved governance, transparency and management expertise, a local research firm has said.
In an outlook note for 2020, a local equities research firm, Akribos said the structural changes to the economy are expected to attract deal flow in the medium term through trust and the ease of doing business.
“The Zimbabwe economy still presents private equity opportunities largely in consumer facing, agro-processing and fin-tech industries. For investors with excess ZWL$ with a long investment horizon, the obtaining economic conditions in the short to medium term present good opportunities to venture into private equity investing. At a time when fixed income and listed equities’ returns are relatively volatile, we believe private equity investments are a viable option,” the firm said.
“Opportunities for private equity investors remain in foreign currency generating sectors that have ZWL$ cost bases. Partnerships with export oriented private businesses especially those in the horticulture space present another opportunity for PE funds. We are of the view that the private equity investment space has several opportunities in Zimbabwe given that several firms are facing liquidity and capacity utilisation challenges”.
“Bank lending and debt capital markets are yet to move from traditional models in Zimbabwe to models available in developed markets where capital is easily accessible at reasonable costs. The appetite for lending is still low given the current economic uncertainties thus creating an attractive market for private equity funds”.
During 2019 the value of the Zimbabwe Stock Exchange fluctuated from a low of $15.6 billion to a high of $31.3 billion, with the All Share Index increasing 57,3% despite inflation reaching an estimated 521%.
“Evidently the ZSE under-performed when compared to the inflation rate. Using the RBZ interbank rate, as at the end of 2019, the ZSE Market Cap was approximately US$1.72 billion a far cry from the US$4.76 billion at the end of 2016 when the economy was fully dollarized,” Akribos noted.
“The Market Cap fluctuated between US$ and US$5.64 billion from 2009 to 2016, however as at 31 December 2019 the Market Cap of the ZSE stood at US$1.72 billion, a drastic discount to its average value range. A quick look at the combined value of just the PPE (Property, Plant and Equipment) of Delta, Econet and Innscor as at 2015 amounted to US$1.27 billion”.
“Even if depreciation is taken into consideration it is difficult to fathom that all companies listed on the ZSE as at 31 December 2019 have a Market Cap of US$1.72 billion”.
The local bourse traded a total of $2.03 billion during 2019, with the month of February experiencing the highest turnover of $295.8 million.
The value was one of the largest traded since dollarisation and was dominated by Econet Wireless Zimbabwe and Cassava Smartech.
