A liquidity crunch, a steep drop in consumer spending and uncertainty over Zimbabwe policy has seen company stocks fall for the sixth day in a row.
Zimbabwe stocks, Africa's worst performers, fell for a sixth day to the lowest since January 2013 as a slump in consumer spending cut company profits and uncertainty over government policy lingered.
The Zimbabwe Industrial Index declined 1.5% by the close today in the capital, Harare on Wednesday. That extended losses this year to 18%, the most among 13 sub-Saharan African bourses, according to data compiled by Bloomberg.
The government of President Robert Mugabe, in power for the past 34 years after winning elections last July, is battling a liquidity crunch because of a foreign-exchange shortage and the threat of deflation, according to the finance ministry. Mugabe's administration is trying to revive an economy 49% smaller last year than in 2000, according to ZimTrade, a government agency that promotes trade and investment.
"There's the obvious liquidity crunch that we have seen demonstrated in poor company results," Lloyd Mlotshwa, head of sales at IH Securities in Harare, said by phone. "Then we have the fact that foreign investors haven't seen any policy change since the elections."
Delta Corporation, the country's biggest brewer, said on April 10 that lager sales fell 26% in the first quarter of the year, while Pioneer Corporation, a transportation and industrial company, said on April 1 its full-year loss widened as sales fell.
Consumer spending declined about 30% in February, the Finance Ministry said on April 7.
Concerns over Zimbabwe's indigenisation policy, which compels foreign-owned companies to sell or cede 51% of their shares to black citizens, continue to hamper investment, Mlotshwa said.
Indigenisation Minister Francis Nhema said on Tuesday that government may relax some of the law's conditions and treat companies on a one-on-one basis.
Mlotshwa said that Nhema's statement wouldn't encourage investors. "We've been saying to government that foreign investors want a clear-cut policy that applies across the board, that they don’t like these one-on-one deals," he said.
Foreign investors make up about 60% of the trade on the Harare-based bourse, according to its website. Zimbabwe has the world's second-biggest platinum and chrome reserves after South Africa. It also has deposits of gold, coal and iron ore. – Bloomberg