Zimbabwe-exposed stocks rise on possible Mugabe exit

JOHANNESBURG - Zimbabwe-exposed shares surged this week, ramped higher by hopes of new leadership and an economic revival in what was once one of the star performers of Africa.

By (Reuters)

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Published: Thu 3 Apr 2008, 8:06 PM

Last updated: Sun 5 Apr 2015, 11:35 AM

And South Africa’s rand has bounced five percent against the dollar this week, partly on signs Robert Mugabe, the long-running ruler of neighbour Zimbabwe, may lose office after last weekend’s election.

Until now, investors have shunned the impoverished southern African country, repelled by the world’s highest inflation rate and laws stripping foreigners of company holdings.

Mugabe’s ZANU-PF has lost control of parliament and may lose the presidential poll, although no official results for that vote have been released.

Deputy Information Minister Bright Matonga said on Thursday Zimbabwe’s ruling party expects a runoff election and is confident that President Robert Mugabe will win.

But the prospect of political change has piqued investor interest. “Any Zimbabwe-related counters seem to be perking up, particularly over the last three days,” Investec Securities trader Roy Lamb said

Impala Platinum—the world’s second biggest platinum group that mines in Zimbabwe—rose nearly five percent in the past two days.

South African sugar group Tongaat Hullett’s share price surged more than 8 percent on Wednesday, when the parliamentary win was announced.

Mwana Africa—which has a nickel project in the southern African country—traded as high as 58 pence a share from a close on Friday of 41 pence.

FEARS MUGABE WILL NOT GO EASILY

Some shares retreated on Thursday, however, on reports Mugabe will fight in a run-off presidential poll.

Lamb said a change in Zimbabwe leadership could spread benefits throughout the region. “It is looking pretty upbeat for South Africa and the surrounds at the moment. It seems sentiment is improving ... and this is also seen on the currency (rand).”

South Africa’s currency has rallied this week to a one-month high, partly on Zimbabwe, together with easing global credit concerns and a rebound in foreign portfolio flows.

“Clearly there is a spillover effect from Zimbabwe,” said Leon Myburgh, Citigroup’s sub-Saharan Africa strategist. “We are not through the woods on the political side, but there is a glimmer of hope.”

Investors remain on edge, though, and the rand gave back most of its early gains on Thursday as Mugabe vowed to fight on.

Morgan Tsvangirai’s Movement for Democratic Change has replaced ZANU-PF as the largest party in Zimbabwe’s parliament.

However, the fear among investors is that Mugabe will try to cling to power, resorting to violence.

Critics blame Mugabe’s policies for Zimbabwe’s economic meltdown, that has seen unemployment leap to around 80 percent and chronic shortages of food, fuel and foreign currency.

Once one of the best-performing economies in Africa, economic growth has contracted for eight years, the currency has collapsed and inflation topped 100,000 percent in January.

A complete recovery may take years, but the change in sentiment from a peaceful transition may be immediate.

“Short of a civil war, I suspect that the worst-case scenario for most investors would be a quiet continuation of the status quo,” Roelof Horne, portfolio manager of Investec’s Africa fund, said.



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