The state's 'climbing up' and 'climbing down' on indigenisation is frustrating economic recovery.
Amid the chit-chat over coffee and sandwiches at an investment conference in Harare this week, foreign investors struggled to make sense of the headlines in the local press.
The government had just announced what was reported as a “review” of its controversial indigenisation regulations, but few were able to understand what it meant. In three days, the narrative had swung from “government had climbed down” on its law, to “government has actually climbed up” and also to fence-sitting interpretations that this was just a “refinement”.
The confusion came just as the Imara Group, the largest fund managers in Zimbabwe, opened a well-attended conference for foreign investors from around the world eager to invest their money in Zimbabwe.
Among all the big money from South Africa, Europe, the United States and the Middle East, there was excitement at the prospect of finding bargains in a market shunned by many, but still delivering some returns. But there was also a sense of frustration that Zimbabwe appears unable to make up its mind on how it wants to effect the indigenisation law.
“What investors are looking for is a degree of certainty. Regulation must be clear and predictable, not subject to the whims of politicians and so forth,” said Todd Moss, a Dubai-based fund manager who specialises in frontier markets.
Tino Kambasha, executive director of Imara Edwards, organisers of the event, says there is a lot for investors in Zimbabwe should they be willing to look past the headlines.
“Superficial understanding of the Zimbabwe market suggests there is little to get excited about. But a deeper assessment reveals significant opportunities. Zimbabwe remains on the ‘watch list’ of many asset managers,” Kambasha says.
There has been positive reception to the new empowerment models punted by the government this week.
If the proposed new approach is “indeed pinned down, published and gazetted, it could deeply impress investors and benefit Zimbabwe”, the deputy British ambassador, Chris Brown, tweeted on Tuesday. There were a lot of British companies waiting to invest in Zimbabwe, he said, and this would happen quickly once government policy was clarified.
Many foreign investors have taken the plunge over recent months. Atlas Mara bought BancABC, and AfrAsia Bank of Mauritius bought control of a local bank. Russian investors also bought into Tetrad, a local financial institution.
Rumours of a new bill
But uncertainty and contradiction are never far away in Zimbabwe. Just as foreign interest was growing in local banks, rumours emerged that government was planning a new bill to limit shareholdings in local banks. This would dash the hopes of local banks desperate for new capital to stay in business.
Bankers suggest government wants to limit institutions to owning 25% of banks, and that no single shareholder would be allowed to hold more than 5%. The law, treasury officials say, is meant to improve governance in a sector badly hit by scandal and insider loans. But to investors, it is yet another sign of “too much government, too much interference”, according to one fund manager at the Imara conference this week.
Diana Layfield, head of Africa for Standard Chartered, was quoted as saying it would be “very hard” to keep their Zimbabwe operation open should the law be enacted. Standard Chartered owns 100% of the Zimbabwe unit, and the law would also hit banks such as Barclays – 67.7% owned by its parent company – and Standard Bank, which wholly controls Stanbic.
Such a law would mean that investors, who just months ago were allowed more shareholding in local banks, would now find themselves on the wrong side of the law. Early this year, local bank AfrAsia Kingdom was on the brink of failure. Key shareholder, Mauritius-based AfrAsia, was allowed to raise its share in AfrAsia Kingdom from 36% to 62%, in exchange for $20-million in capital to pull the bank to safety.
The constant toing and froing on legislation is testing the patience of investors. Advance Emerging Capital, a London-based fund that specialises in emerging markets, has some interests in Zimbabwe but is now “less bullish on Zimbabwe than we have been”, according to one of its fund managers, Andrew Lister.
At the investment conference, locals pointed to what seems to be a softening Western stance on Zimbabwe as a sign the economy will turn. The International Monetary Fund plans to reopen its Zimbabwe office for the first time in a decade, and the European Union has lifted most of its sanctions on Zimbabwe. At the same time as the investment conference was happening, across town Finance Minister Patrick Chinamasa was hosting a seminar with the European Union.
But investors hope for more concrete assurances. “It takes more than headlines to win over investors,” one foreign fund manager said. “Zimbabwe must understand there’s a thousand other places money can go, and those places don’t have government officials shouting at investors.”