Zimbabwe's country risk improves significantly

ZIMBABWE'S country risk has gone down in the past eight months, with investor interest growing following deposition of the country's former president Robert Mugabe, a British-owned stockbroking firm has said.

Morgan & Co local unit's director Lungani Nyamazama last week told The Financial Gazette that its foreign investor portfolio indicated that Zimbabwe's perceived political risk had gone down, despite a hotly contested general election which saw the opposition filing a petition to challenge president-elect Emmerson Mnangagwa's victory.

"The Zimbabwean risk premium has reduced and we are starting to engage the foreign end and international community.

"The risk is coming off and an investor is now looking at a trade off where it is now balancing," Nyamazama said in an interview.

He indicated that while the country had seen civil unrest immediately after the elections resulting in at least six deaths, investors were "still on standby ready to invest locally".

"The most interest has been from British investors who are ready to put in cash. The only people we see pessimistic about Zimbabwe's prospects are actually Zimbabweans," the Morgan & Co boss said.

Nyamazama said the time to invest in Zimbabwe was now.

"If you look at the risk and return trade off, you will see there are some risks you simply cannot afford to take. Usually that yields high returns.

"The downside here is also huge. There are some guys who like conflict areas, take for example companies getting into Syria now or those who went into Rwanda just months after the genocide.

"The risk is high, downside is high but upside will even be bigger. That is Zimbabwe now. Risk has gone down but it is still there but the returns are high so this is the time," he said.

While newly-elected Mnangagwa has declared Zimbabwe "open for business", analysts have said that reversing the disastrous investor exodus of the Mugabe years will require more than words of encouragement.

Considered one of southern Africa's most promising economies when Mugabe took over in 1980, it had become isolated by the time his 37-year rule ended last year.

Fitch group think tank, BMI, last week warned that Zimbabwe's political stability was not yet assured.

"While our core review remains that Zimbabwe is now politically well set up for positive economic reforms that will benefit the mining industry over the coming years, our political risk analysts highlight ongoing risks pertaining to civil unrest in the immediate aftermath of the election.


"While the election was largely seen as free and fair, the opposition Movement for Democratic Change (MDC) criticised the results as fraudulent and several international observers highlighting irregularities with the conduct of the election leading to violent clashes between the protesters and national security forces."Were this unrest to continue or escalate further over the coming weeks and months, the new government's political capital and therefore its ability to create a stable political environment under which to enact promised reforms, would be significantly hindered," BMI said.