The moribund Zimbabwean economy, in particular its battered stock exchange, is showing signs of life. And though prime minister Morgan Tsvangirai's foreign trip - where he met with US and European heads of states, lobbying them for aid - was only a limited success, there are indications that now might be the time to invest. Changes in the political landscape, the reopening of the Zimbabwe Stock Exchange (ZSE) in February and, in particular, the dollarisation of the economy have moved a number of Zimbabwean companies from survival and into growth mode. Investor interest has sharpened.
"In mid-1997, the ZSE had a market capitalisation of a little over US$9bn," says Peter Townshend, co-manager of Coronation Fund Managers' Africa Frontier Fund. "When the market was shut down in November last year, it had fallen to $1bn. It opened again on February 25 this year [post-dollarisation] and the market capitalisation has since quadrupled to $4bn."
Dollarisation of the economy put an end to hyperinflation, unrealistic exchange rates, artificial interest rates and other distortions - such as price controls - in the market.
"At least now companies are able to sell their goods at realistic prices and earn some profits," says AMB Capital analyst Zenzo Lusengo. It also gives local companies stability and transparency and provides investors with a measure of safety, he says. "There are not many markets in the world where there is no currency risk."
It is by no means risk free: "The coalition government is fragile and there is a lot of uncertainty around the general direction of the politics," says Lusengo.
For those who got in early, there have been quick wins. Econet (Zimbabwe's mobile phone operator), for example, had a market cap of $200m. "This doesn't even buy an operating licence elsewhere in Africa and Econet has infrastructure installed across Zimbabwe and dominates the cellphone market," says Townshend. Econet now has a market cap of $500m.
Delta Corp was similarly valued and controls over 90% of the brewing and soft drink market in Zimbabwe. Today, Delta is valued at $425m.
However this growth has been off a low base and the value traded on a daily basis remains low at $1m.
Shares are also no longer trading at fire-sale prices.
Whether to invest in Zimbabwe is a difficult decision to make, says Townshend. Economic recovery will not occur overnight.
But, with a complete political transformation and substantial assistance from the West, Zimbabwe could still deliver decent returns.
This is what Imara Capital, the pan-African financial services group, is betting on. The company this week organised Zimbabwe's first in-country international investor conference since the formation of the inclusive government.
"Dollarisation decimated corporate capital reserves denominated in Zimbabwe currency," says Imara Capital MD Sean Gammon.
"International investment via the ZSE is vital to the growth and development of the country's biggest employers."
"Until recently, international owners had significant constraints on repatriating their Zimbabwe profits and did not consolidate these assets on their balance sheets," says Imara Holdings CE Mark Tunmer. "This all changes in a dollarised economy."
According to Imara, with a market cap of roughly $3,8bn, the Zimbabwean exchange is the seventh-largest market in sub-Saharan Africa - in other words it is tiny. But with 80 listed companies it has more depth and diversity than some other regional markets.
