NEWS

 

Zim's dangerous optimism

A FEW weeks ago, Zimbabwe was in a celebratory mood. For a week or so the nation forgot about the bad corporate results that were being released and turned its focus on the latest deal in town.

The deal in question was the one in which former Barclays Plc chief executive officer Robert Diamond was proposing to acquire ABC Holdings Limited for US$210m through his company Atlas Mara Co-Nvest Ltd.

This was Mr Diamond’s first deal in his African venture, which he has continued by acquiring the Development Bank of Rwanda.

The entry of an investor with such a high banking profile was too good to be true for Zimbabwe, a country that has not seen much in terms of foreign direct investment. For a few days, business pages in Zimbabwe carried stories talking about how important that deal was to Zimbabwe.

Editors across media houses went into overdrive as they tried to outdo each other with headlines about the deal; “ABCH deal has banking sector turning green with envy” said one headline, while another one questioned “Could the Atlas-Mara deal be a catalyst for Zimbabwe FDI?”

Unfortunately I could not join my countrymen in celebration.

My failure to celebrate was not because I was not going to benefit from the 90.70% premium from Atlas Mara’s offer price of 82 US cents against the last trading price of 43c. I did not and still don’t hold any shares in ABCH.

My failure to celebrate was not because this is actually a Botswana deal. There are a mere 71 million or 27% of the shares left on the ZSE register, while 73% is on the Botswana Stock Exchange. Of the $210m deal payment, only $40m will go into Zimbabwe.

I am not by any means saying $40m is too little. It is certainly not small change for a country whose total revenue collection for February is only $248m.

I am, however, still not going to celebrate the ABC/Atlas Mara deal.

In my view, the deal will blind us from the reality on the ground. It will give us a false sense of hope that everything is okay.

Endorsing bad policies

I know politicians will look at the deal as a stamp of approval that Zimbabwe has the right policies for investment. My fear is that government will view it as an endorsement that our indigenisation laws are conducive.

Finance Minister Patrick Chinamasa was even quick to say that “the investment by Atlas Mara would send a signal that Zimbabwe was ready for business”.

I did not celebrate the deal because I know it’s more of a regional deal and should not be used as an endorsement for our policies. I know Altas Mara was looking for a bank that can give it access to several countries.

Although Zimbabwe is one of them, there are also Tanzania, Botswana, Zambia, and Mozambique. ABCH and Atlas Mara can easily dump Zimbabwe if things prove difficult.

I know our country is not ready to do business; the Essar/Ziscosteel deal is yet to come to fruition more than four years after President Robert Mugabe told the whole nation that it had been finalised.

Is the country really ready to do business, when MPs and ministers are accused by Mugabe of being corrupt - and nothing happens to them? Furthermore, when government just cancels import permits overnight, without warning companies of the impending move which threatens their viability? Some would have placed and paid for orders, only to be told they needed a new permit.

Evidence abounds across the country that things are worsening by the day. Revenue collector ZIMRA confirmed the predicament, warning us of tough times ahead.

Every economic measure you can think of is negative. Our inflation at -0.49% points to deteriorating aggregate demand. The country is in serious need of financial injection, but that will not happen until we change our negative and damaging policies.

The ABC/Atlas Mara deal should not blind us into believing that deals will start flowing in.

 

Source: www.fin24.com

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