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Investors undeterred by Zim
01/07/2008 07:52 - (SA)
London - Zimbabwe's much-criticised election may put some cautious investors off Africa in general, but those already in the region are unlikely to be deterred.
The handful who piled into Zimbabwe itself ahead of and
immediately after the first round of elections in March betting
on an eventual end to President Robert Mugabe's rule and
economic recovery are still hanging on, saying they are in it
for the long haul.
Mugabe himself was in Egypt on Monday to being pressured by
an African Union summit into negotiate with opposition leader
Morgan Tsvangarai, who withdrew from Friday's ballot because of
attacks on his supporters.
Having long remained quiet over economic collapse in what
was once a prosperous country, African leaders and states
are now keen to express distance from Zimbabwe, some - particularly in the region - expressing worries trouble there might harm them.
"It has effects, particularly in terms of (foreign direct
investment), because people are now classifying the region as
unstable," Swaziland central bank governor Martin Dlamini told
Reuters at a separate meeting in Switzerland.
"We actually lose out on any sort of possible investment...
I want to emphasise that what is happening in Zimbabwe is
nothing to do with the rest of southern Africa," he said.
Investors and analysts worry any further meltdown in the
country could send even more refugees pouring into neighbours
South Africa, Mozambique, Zambia and Botswana, raising already
worrying social tensions and potentially draining coffers.
But ultimately, they say it will not make enough difference
to change investment patterns in countries that have so far
shown no signs of being dragged into Zimbabwe's hyperinflation
- officially 164 900% in February but with an estimated
actual rate of 2 million percent.
In contrast, neighbour Zambia's inflation is 12%.
No contagion
"It simply will not have enough effect," said Veronica
Kalema, director of sovereigns for ratings agency Fitch. "It
will have some negative effect on the budgets of neighbouring
countries but not enough. It won't affect investment."
She said there was little chance events in Zimbabwe would
affect South African, Namibian, Botswana or Mozambique and
ratings. Other African economies further afield such as emerging
favourites Nigeria, Kenya and Ghana would be completely
unaffected, she said.
Investec Asset Management, which manages some $1bn across Africa outside South Africa, said it would not be making any portfolio changes on the back of events in Zimbabwe.
"Economic contagion from Zimbabwe has so far been almost
nil," said Investec portfolio manager Werner Gey van Pittius.
But he said that while the economic impact of chaos in
Zimbabwe on neighbours was low - and the impact on more distant
African countries non-existent - events there might colour some
investor perceptions towards the entire continent.
Staying in Zimbabwe
"In reality, Africa is more democratic and more stable than
ever before," said van Pittius. "But there is still a lot of
Afro-pessimism out there and Zimbabwe does that no favours.
People look at it and say Africa has always been a basket case
and always will be."
Some analysts say the sight of African leaders criticising
Mugabe more openly - even if they take no concrete action -
may help reverse that. Kenya's recovery from post-election
violence earlier this year is also seen helping.
High global commodity prices, perceived greater political
stability, few wars, better communications infrastructure
particularly mobile phone networks and economic growth of around
6.5% have helped prompt new fund flows into Africa.
Zimbabwe itself has also seen something of an investment
boom this year, with an estimated $150-250 million coming into
the country from investors keen to buy cheap assets and position
themselves for an eventual recovery.
Enthusiasm has since altered but those who have gone in say
they are staying put and probably the largest investment fund,
London listed LonZim says it still intends to raise another up to $100m to fund new purchase.
"I've had no nervous phone calls from investors," said
LonZim executive chairperson David Lenigas. "Quite the contrary.
There is a loss of enthusiasm for what LonZim is doing in
Zimbabwe. But it is a very long-term exercise."
- Reuters
- Reuters
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Zimbabwe Special Report
