International investors are keeping a keen eye on Zimbabwe’s upcoming electoral process: if deemed free and fair, this could be the key to unlocking the kind of liquidity that the country needs, writes Shannon Manders.


As the world watches, Zimbabwe is preparing for its first elections without Robert Mugabe’s name on the ballot since independence from Britain in 1980. Although the exact date of the presidential and parliamentary elections had yet to be officially announced at the time of writing, former deputy-turned-new-leader Emmerson Dambudzo Mnangagwa, or ED as his supporters like to call him, has said they will take place sometime in July this year. He has invited western observers, who used to be banned from such proceedings under Mugabe’s rule, to monitor the poll.

As preparations for the elections are gearing up, so transactions are slowing down as international investors await the outcome.

“My own observation in terms of finalising transactions is that it’s taking longer,” says Lawrence Nyazema, commercial director of Barclays in Zimbabwe. “One gets the feeling that some of the international players could be waiting for the elections – that they want to have their foot in the door and then ramp up should the elections be internationally accepted.”

Nevertheless, speaking to GTR from his office in Harare, Nyazema says the level of interest among investors over the last couple of months has been significant. Visiting financial institutions – the likes of asset managers, hedge funds and regional players representing international capital – are all keen on resuscitating lines of credit.

“In the past three to four months I have met around 20 or so international players, and all of them are indicating willingness to offer trade finance lines in one way or another,” he says. “We’ve also had our old relationships out of Europe and the Americas knocking on our doors and walking down our streets.”

But there are some that are adopting a more restrained outlook. Omen Muza, the local representative of TFC Capital in Zimbabwe and who also runs SoundGarden, an information services company, believes the international community is cautiously optimistic. “In terms of trade, yes, there is potential – but there is still a fair amount of fence-sitting,” he tells GTR.

Meanwhile, Zimbabwean exports are surging, having increased 40% to US$3.5bn between January and November last year, up from US$2.5bn over the same period in 2016.

The figures are largely attributed to intervention from the central bank to neutralise the excess liquidity in its real-time gross settlement system (brought about by the issuance of treasury bills and heavy borrowing on overdraft, and not backed by hard currency) to boost domestic output. These measures include a 5% export incentive bonus scheme implemented in 2016. Earlier this year the country’s export promotion agency ZimTrade secured a US$100mn export development fund from the Reserve Bank of Zimbabwe to support the growth of small businesses and exporters with a view to growing the economy (see fact box).


Political hype

Since taking power in November after a military coup forced Mugabe to resign, President Mnangagwa and his administration have been making all the right political noises to persuade international investors: from scaling back Zimbabwe’s indigenisation act (which requires Zimbabweans to hold a majority stake in any business) to adopting a zero-tolerance approach to corruption, and setting the economy on a recovery trajectory by securing international investment (to the tune of US$3bn, Mnangagwa says in a video on his Facebook page).

Perhaps the most significant move took place in January, when the president attended the World Economic Forum in Davos in a bid to present the country’s investment case to the world, telling the audience: “On my day of inauguration, I mentioned economics and trade co-operation would be my priority in Zimbabwe, rather than politics, in order to catch up with the region… Zimbabwe has lagged behind in many areas as a result of isolation for past 16, 18 years. Now we are saying to the world: Zimbabwe is now open for business.”

On the sidelines of the conference, Mnangagwa met with top officials from the IMF, World Bank and the African Development Bank: a sign that, in return, the West may be warming to the new administration.

The critical next step will be transforming the political euphoria into “genuine economic change”, says Muza, adding that the conduct and outcome of the forthcoming elections will be a critical determinant of this transformation process.

“In a nutshell, government has succeeded in driving foreign investor interest, but I think the key will be following up the policy changes with clear legislative reforms. There have been a lot of positive announcements, but they need to be backed up by tangible actions,” he says.


Propping up the economy

Nyazema at Barclays believes that the 2018 elections are just “one of the steps” that will be essential in revitalising the economy. “From a purely trade finance perspective, the biggest risk has been commercial, rather than political,” he says.

Battling a currency crisis, over the last few years Zimbabwe has struggled to secure foreign currency, leading the central bank to establish a foreign exchange priority list to guide banks in the distribution of foreign currency towards competing demands. Lenders have been concerned that they may not be able to recover their investments.

“Politics will be important, but what will be more important is for us to ensure we are a viable import and export destination internationally, and that we meet our commitments when they come through,” says Nyazema.

In late-March, Afreximbank – a long-time supporter of the Zimbabwean economy – said that it plans to arrange up to US$1.5bn of funded and guarantee facilities to support businesses interested in investing in the country. Speaking in Abidjan at the time, the bank’s president Benedict Oramah indicated that the facilities would be arranged under ZimOpen, an inward investment support initiative which Afreximbank is putting in place in collaboration with the Zimbabwean government.

ZimOpen, he said, is aimed at de-risking eligible inward investment into Zimbabwe, catalysing trade finance inflows and increasing the availability of US dollar liquidity in order to assure investors of more predictability.

“As Zimbabwe opens its doors to business once again, many entrepreneurs and potential investors seem eager to join the party, but their enthusiasm is often constrained by risk considerations,” Oramah told delegates. “Afreximbank is working on a vast programme of guarantees which would mitigate the investment and country risks.”

Over the last two decades Afreximbank has disbursed more than US$7bn to Zimbabwean entities in the public and private sectors.

“The central bank has acknowledged in black and white that if it wasn’t for Afreximbank, the country could have economically collapsed,” says Muza. “Most of what we have been relying on in terms of credit has come from the bank.”

Support has also come from smaller institutions such as the Trade and Development Bank (formerly PTA Bank), as well as some South African banks which, by supporting their own exporters, have been indirectly assisting Zimbabwean importers.

“It has not been at the level that we would want, but regional and continental banks have kept us going,” says Nyazema.

He suggests that, in future, the answer to these funding needs may be more readily available on the local front: local financiers’ ability to lend long term has improved over the past year or two.

Although long-term financing has thus far been predominantly limited to mortgages in the retail space, and medium-term (three to five-year) loans to property and capital projects in the corporate realm, it gives the “right signals to the market in a measured way”, Nyazema says, adding that the situation has changed dramatically from what it was five years ago when there was “literally nothing available in the market”. At least now, he explains, when clients ask for 10 to 15-year financing, it’s possible to have a “formal discussion”.

“There’s a general feeling in the market that for us to start offering long-term facilities, we need to draw foreign lines of credit. That is true, but I would want to encourage other Zimbabweans to also look at capital that is available locally. It’s not 100% of what we require, but if as Zimbabweans we can demonstrate that we’re at least meeting 25% of the demand, then international capital can always come in to sort out the remainder.”

With a few tried and tested cases under its belt, Zimbabwe may then be ready for if and when the much-awaited and debated international capital begins flowing in. “I would want to believe that the trajectory would be upward,” Nyazema ends.



ZimTrade talks exporting opportunities

ZimTrade, a joint venture between the private sector and the Zimbabwean government, is the national trade development and promotion organisation, established in 1991. GTR speaks to its acting CEO Norman Savado about how recent political developments are likely to affect the country’s export growth.


GTR: With a new government in place, seeking to restore confidence in the financial markets, how does this impact the country’s ability to trade cross-border (both intra-Africa or overseas)? Has the country turned a corner in terms of fulfilling its trade potential?

Savado: The change of government in November last year brought Zimbabwe into the international spotlight. The new incumbent, President Emmerson Mnangagwa immediately set about crafting and implementing an economic reform agenda and leveraged the renewed interest in Zimbabwe to spread the word that our country is open for business.

In terms of ‘brand Zimbabwe’, we have taken the vital first steps for the recreation of the national brand. Things don’t happen overnight though – there are numerous and complex economic, diplomatic and legal issues to be addressed. The diplomatic visits, including participating at the Davos conference, show that Zimbabwe wants to improve on its brand. One real positive was the president’s commitment to reversing the indigenisation laws that force companies to cede 51% ownership to Zimbabwean citizens. Though at a legislative level, this has yet to be ratified, the president’s firm commitment has been enough to get investors going with research and planning.

He has also addressed the issue of land tenure, promising to ensure 99-year leases are given to white commercial farmers who are now more able to access finance. Agriculture is vital to our country’s exports and the messages around security are exciting for the agricultural sector.

It will take time, but Zimbabwe has already made quick progress in terms of economic reform, with the improvement of our trade balance being very close to the heart of the government’s economic planning. We are turning the corner as we speak.


GTR: Could you highlight one of the most recent success stories in terms of Zimbabwean companies accessing international markets?

Savado: Samuneti Leathers is a small local company established in 2008 that specialises in genuine leather products such as belts, handbags, sandals and wallets. Through ZimTrade, they underwent export marketing training, received factory floor assistance and attended regional trade shows. To date, they have been able to export their products to Zambia, Botswana, Namibia and Mozambique.

Success stories like this are happening in other sectors and with businesses of all sizes. We work closely with many of them in export development and promotion.


GTR: Which countries and sectors represent the greatest opportunities.

Savado: The bulk of our trade has always been with countries in the SADC and COMESA regions. Even as we scale up production these will present the greatest opportunity for Zimbabwean products, especially for our processed foods, dairy products, clothing, textiles and horticulture.

Looking further afield, countries in the Middle East, Asia and Europe will become key markets as our horticulture and floriculture sectors expands. Our seasonal differences give us a great window to supply northern countries during their off-season. We have already proven an appetite for Zimbabwean produce such as mangetout peas, pineapples, macadamia nuts, tea, avocados and many other things in these places.

At ZimTrade, we support a lot of growers, and the focus on getting the many small and medium-scale producers into a state of export-readiness has intensified on the back of interest from buyers, and, of course, our farmers and our government.


GTR: How does/will the new political situation impact Zimbabwean companies’ ability to access the trade financing they need?

Savado: The Reserve Bank of Zimbabwe has already established an affordable finance fund targeting exporters and potential exporters in a range of sectors. ZimTrade is playing a facilitative role in identifying and capacitating our clients in terms of technical upskilling, market research and application advice as they seek to access this fund through the partner banks.


GTR: What kind of financing structures are local exporters looking for, and are banks able to meet their requirements?

Savado: It comes down to affordability and tenure of the finance. Companies are looking for long-term affordable finance. There is a huge need to retool and replace machinery in many industries, and this requires long-term finance at low interest rates. The issue of collateral has been a stumbling block in the past, and banks are being asked to consider other things as collateral than just immovable assets. We have seen progress in this regard.