eBusiness Weekly
Enacy Mapakame
Zimbabwe Stock Exchange (ZSE) biggest company by market capitalisation — Delta — as well as biggest insurance group — Old Mutual have remained attractive to foreign investors despite the challenges the economy faces.
In May alone, $18,5 million worth of Delta shares and $36,6 million worth of Old Mutual shares were snatched by foreign investors, although brokers say it’s not new money coming in but investors with funds already locked in Zimbabwe switching their portfolios. Old
Mutual has remained attractive to both locals and foreigners on its fungibility with investors using it as a way of repatriating funds from the country.
Repatriating sale proceeds from the ZSE has been a challenge of late, resulting in foreign investors using Old Mutual as a way of taking their money out of the country.
Old Mutual is a fungible stock, listed on the London and Johannesburg stock exchanges. A fungible stock like Old Mutual allows an investor to purchase shares for instance, on the ZSE and sell them on the LSE.
Last year millions of Old Mutual ordinary shares were transferred from the Zimbabwe register as both local and foreign investors used the counter to send money out of the country.
This comes as the country has been battling severe foreign currency shortages that have resulted in companies failing to meet their foreign obligations, with others downsizing operations. For instance, Delta, indicated it temporarily closed its sparkling beverages in the last quarter of 2018 due to foreign currency shortages which resulted in product supply gaps.
The challenge has also affected the equities market as portfolio investors trading on the ZSE fail to repatriate dividends and sales proceeds to their foreign investors.
This is despite the Reserve Bank of Zimbabwe having created a Zimbabwe Portfolio Investment Fund that is meant to facilitate repatriation of sale proceeds and dividends for foreign investors on the ZSE. Further to this, exchange control guidelines by the RBZ directs 15 percent of all foreign payments to be channelled towards ZSE investments.
In an earlier interview, ZSE chief executive Justin Bgoni, indicated the inability to repatriate funds was one of the major challenges deterring foreign investors from the local bourse.
“The main concern with foreign investors is on the repatriation of dividends, and policy issues. Investors do not want to invest in an economy where they will face difficulties to take out their money whenever they want to,” said Bgoni.
For Delta, the beverages giant has remained an attractive stock on the back of its strong capital base, product offering and consistent dividend policy.
The group reported turnover for the year ended March 31, 2019 grew by 26 percent to $722,4 million on the back of volumes which went up 11 percent to 7,741 million hl largely on buoyant trading in the first 9 months of the year where prices were stable.
However, at least 75 percent of the group’s revenue was recorded in the first nine months of the year as trading was constrained in the last quarter due to supply challenges and increases in wholesale and retail prices as highlighted above.
Inflationary pressures also eroded consumer spending which had already been constrained by the introduction of a 2 percent intermediated money transfer tax, a move that weakened consumer purchasing power and demand for products.
EBIT achieved was $175,5 million up 68 percent on prior year driven by the domestic beer segment. Meanwhile, EBITDA increased by 58 percent to $212,4 million while the attributable income also went up by 58 percent to $140,7 million.
Profit for the year grew to $143,23 million from $88,50 million. Delta is the market’s biggest counter worth $3,6 billion and accounts for 19,14 percent of the market’s total value.
