Pending Elections, Indigenization Law Said to Irk Zimbabwe Stock Market
The Distressed and Marginalized Areas Fund has largely failed to live up to expectations due to stringent conditions tied to it
The African Development Bank, or ADB, says the Zimbabwe stock market continues to be subdued because of pending elections and fears over the controversial indigenization program resulting in total capitalization loses of up to one billion dollars in the past 12 months. In its latest monthly report, the bank said market capitalization took a huge knock of $840 million from the $4.2 billion May 2011 figure down to $3.4 billion. It said this has basically been on the back of cautious trading by both foreigners and locals pending a clearer path the country is taking on polls and the black economic empowerment program. The bank said the mining index fell to below half its level compared to the same month in 2011. In May 2011, the index averaged about 200 and has been averaging below 100 in 2012. The industrial index fell though by a lower margin than its mining counterpart. “Although the number of shares bought by foreigners declined by 64.4 million shares, their value increased by $5.5 million, an indication of the increase in the average price of the shares for the comparative months,” said the African bank. George Nkiwane, president of the Zimbabwe Congress of Trade Unions said the Zimbabwe economy is failing to create jobs due to the subdued stock market. Economist Godfrey Kanyenze commended the bank for also noting that the bailout package for rescuing distressed companies has failed dismally. The bank said the Distressed and Marginalized Areas Fund has largely failed to live up to expectations due to stringent conditions tied to the facility. These conditions include the exclusion of companies under provisional liquidation and the 12-month duration of the loan. “This was also compounded by the fact that the fund was never fully constituted … it is thus important t ensure that the implementation of the policy is given the priority that it deserves,” said the bank.