New price structure milks Zim business
ZIMBABWEAN businesses have started to institute a multitier pricing system, resulting in higher prices for payments effected through bank transfers and paid bond notes, while prices tagged foreign currency are much lower, experts said.
But market-watchers in Zimbabwe have said there is growing interest on the Zimbabwe Stock Exchange (ZSE) from local fund managers that are running away from money markets.
Financial woes have heightened disinvestments from money markets in Zimbabwe, traders and investment analysts said.
“The money market is collapsing and investors are running for cover fearing total collapse from the financial and liquidity crises Zimbabwe is experiencing,” a market analyst at a finance institution in Harare told Business Report yesterday.
Analysts at IH Securities said in a market report that interest on the ZSE has been firm.
“On the bourse, we continue to see renewed buying interest from local funds seeking better returns compared to their money market investments.”
Trade on the up
Trade deals on the ZSE have been firmer, propelled by rising trades and volumes in Delta Corporation, Tongaat Hulett’s Hippo Valley and Econet Wireless as well as Seedco. Turnover on the ZSE for the month of May rose 57.9 percent $17.58 million (R224.8m), with Econet, Seedco and Delta contributing 33, 10 and 9 percent, respectively.
As a result of Zimbabwe’s liquidity challenges, the stock market was “getting rather overvalued as a result of this bull run” and analysts expect this to continue, with notable values in blue chip counters.
Although the stock market has been seeing rising trade values, businesses in Zimbabwe have been hit hard by higher production costs as they have to pay a premium to procure foreign currency to pay for imported raw materials.
Inflation has also been mounting in Zimbabwe over the past few months, with the IMF also recently warning Zimbabwe that excessive state expenditure is fuelling inflation. Zimbabwe spends more than 70 percent of its revenues on recurring state expenditure, depriving the economy of infrastructure development.
“The sustained demand for hard cash is anticipated to be fuelled by the use of a multitier pricing system by retailers,” said the report.
The Reserve Bank of Zimbabwe is allocating foreign currency to businesses using a strict priority list. Foreign shareholders in Zimbabwean companies have been caught up in this crisis with some unable to get their dividends.