[R-G] Investors Eye Zimbabwe with New Interest

[Yoshie Furuhashi]

<http://uk.reuters.com/article/topNews/idUKL0226593120080402>
Investors eye Zimbabwe with new interest
Wed Apr 2, 2008 4:34pm BST

By Peter Apps - Analysis

LONDON (Reuters) - Having long written off Zimbabwe as one of the
world's least appealing economies, international investors are
beginning to show signs of interest as they suspect the end of
President Robert Mugabe's rule approaches.

After often violent seizures of white-owned farms and slum clearances
raised fears over the safety of any outside investments and with
inflation officially at 100,586 percent, even most risk-hungry
investors have avoided it in recent years.

But with Mugabe failing to win a majority in an election for the first
time in nearly three decades and prospects for a run-off with
opposition Movement for Democratic Change (MDC) leader Morgan
Tsvangirai, sentiment is beginning to shift.

"It is too early to tell but it looks like the endgame is very close,"
said Renaissance Capital strategist Richard Segal.

"It's impossible to tell what is happening behind the scenes but there
is certainly more interest. Hopefully we'll have a unity government
with a reasonable stance on property rights. That could work out quite
well for foreign investors."

Renaissance, a Russian investment bank aiming to become the market
leader in Africa, says it has been pushing Zimbabwe as a good
opportunity for around six months, with interest rising in the last
six weeks in the run-up to the polls.

Renaissance snapped up a shareholding sold by South African banking
group Absalast year while Zimbabwean bank African Banking Corporation
(ABC) says Citigroup has approved a $25 million (12.5 million pounds)
deal for taking a 20 percent stake.

The end of Mugabe's rule would probably see a donor conference
bringing in some $1.5 billion of international aid, Segal said, with
the situation possibly resembling that in Serbia after the fall of
Slobodan Milosevic.

Over time, he said up to 2 million Zimbabweans who left during the
economic crisis could return home, potentially bringing with them
another $2-3 billion. An estimated 3 million people have fled the
country in total.

China says it invested $1.6 billion in Zimbabwe in 2007, and analysts
say again it may increase its flows.

EQUITY INTEREST

Analysts say Zimbabwean equities already looked cheap and there is
enthusiasm for stocks such as mobile operator Econet and retailer and
hotel chain Meikles Africa.

African equity markets rose some 60 percent in 2007 and the continent
expects ongoing growth of around 7 percent, but Zimbabwe has long
bucked the trend.

Zimbabwe's gross domestic product has contracted each year since 2000,
the biggest decline in 2003 when it fell 10.4 percent. The IMF
estimates that GDP will fall by 4.5 percent this year.

Bond brokerage Exotix said it had received new enquiries from
investors wanting prices for Zimbabwean traded debt, even though as
far as it knew none existed.

Zimbabwe's outstanding debt was $3.3 billion medium-term with $1
billion short term, it said, 95 percent of it official debt with the
Paris Club of rich nations, World Bank or other multilateral lenders.

But given the scale of Zimbabwe's decline, most remain cautious. Even
if the MDC won outright and Mugabe was completely gone, some say it
would take much more to tempt them in. The presence of established
names from the ruling ZANU-PF party in a unity government could
further spook investors.

In a worst-case scenario, Zimbabwe could slip at least briefly into
the kind of violence that damaged Kenya's economy and reputation for
stability after a disputed December election.

One Africa fund said it was simply refusing to comment on Zimbabwe,
while another major bank said it would not talk about the country for
fears over staff safety there.

"We have to meet the companies first, but in the short term it's not a
place we will be rushing to take a look at," said Aberdeen Asset
Management emerging equities fund manager Andrew Brown.

"You'd have to see inflation come under control and the business
environment improve. Political change might be the catalyst for that
but we want to stand back. It's probably more the sort of place you
would find private equity."

Some companies have already taken the plunge. Shares in London of
Africa-focused miner Mwana, which has a nickel project in Zimbabwe,
climbed 20 percent in early trade on Tuesday on talk of an opposition
election victory.

"Once Bob (Mugabe) goes, there will be a rush to get in," said one
South African analyst asking not to be named. "People who are already
positioned will make a lot of money."

QUESTIONS REMAIN

London-listed Lonhro Plc recently announced plans to raise around $140
million to expand in Zimbabwe.

With its gold, nickel, platinum, palladium and steelmaking alloy
ferrochrome reserves, Zimbabwe could potentially benefit from
continued high global commodity prices.

But huge constraints remain. Analysts warn the country's electricity
system is already failing to properly supply its shrunken
manufacturing sector, only 30 percent of the size it once was, making
any sudden increase in production impossible.

Even with high global food prices, suddenly rebuilding the devastated
agricultural sector would also be difficult, with some former
white-owned farms still under the control of squatters. Simply handing
farms back to white control might be politically difficult if not
impossible.

"There are still questions over property rights," said analyst Mike
Davies at risk consultancy Eurasia Group.

"Some sort of commission of enquiry would have to be set up to
establish that ... people are going to be cautious given the history
of land grabs. It will take time to clear that sentiment."

(Additional reporting by Eric Onstad, Sebastian Tong, Carolyn Cohn and
Daniel Magnowski; editing by David Christian-Edwards)

-- 
Yoshie
<http://montages.blogspot.com/>