By Victor Bhoroma| Despite the current economic headwinds and COVID-19 induced business downturn, Zimbabwe has one of the best untapped investment opportunities in the whole of Africa. As they say, the best strategy to ride an elephant is to mount whilst it is lying down and rise with it. Investing in Zimbabwe requires a long term view with an eye for value addition in raw commodities, export opportunities into the region, import substitution to satisfy local demand and take advantage of government deregulation in key economic sectors. The following are some of the best investment opportunities in Zimbabwe post COVID-19.
Investment opportunities beckon in the beneficiation of special minerals such as Diamond, Gold, Nickel, Platinum, Copper, Lithium and Chrome close to source. Forays into new found deposits of Rare Earth Elements (REE) can also provide rich pickings since investors can snap lucrative mining claims and secure Exclusive Prospecting Orders (EPOs) before there is a stampede for them. Zimbabwe’s lithium deposits are second to none in Africa and proven deposits are located in Bikita, Goromonzi, and Kamativi. The resurgent push for electric cars and renewable energy in high income markets will create a lucrative market for Lithium and REE metals produced in Zimbabwe. The rally in Gold price to over US$2,000 per ounce on the world market also makes the country’s old gold mines very appealing. Small scale and artisanal miners now contribute 60% of the produced Gold in Zimbabwe. These miners urgently need movable mining machinery and equipment such as excavators, compressors, dewatering and slurry pumps, generators, jack hammers and jaw crashers to ramp up production. Therefore lease financing, contract mining and exploration services are vital to these small scale miners.
Closely tied to mining are opportunities in steel manufacturing using locally mined chrome, iron ore, coal and limestone. Zimbabwe imports iron and steel products worth more than $160 million per year from neighboring South Africa as a result of the collapse of the country’s only integrated steel plant, Ziscosteel. Lucrative import substitution opportunities are also present in the manufacturing of agro chemicals. The country imports fertilizers and agriculture chemicals worth $295 million to sustain high demand from local farmers. Investors can test the market by buying into struggling but established fertilizer manufacturers owned by the government through Industrial Development Corporation (IDC). The growth in the local vehicle population to nearly 2 million has created a ready market for local production of motor vehicle spares such as suspension kits, tyres and lubricants. All of which are being imported at the moment. The following are some of the imported commodities (& their import values per year) that can be manufactured locally for established demand; Plastics and plastic related products ($263 million); Pharmaceuticals ($250 million); Industrial and Home chemicals ($198 million), Newsprint and paper products ($96 million) and Skin care and beauty products ($42 million).
Zimbabwe imports agricultural commodities such as maize, wheat, soya, soya bean oil and processed cereal worth over $350 million yearly. Low agricultural production, climate change and lack of capital in the sector provide investment prospects for contract farming arrangements and irrigation funding to produce the strategic crops above. Industrial consumers would be happy to cut their import bill by procuring raw materials locally at competitive prices.
Further, Zimbabwe still exports most of its tobacco in raw form to the Asian and European markets. Low hanging opportunities can be found in tobacco processing and cigarette manufacturing for the over 250 million kilograms of flue-cured tobacco produced in the country. Processing of agriculture products such as cotton, timber and tea also present prospects in the agricultural value chain.
Untapped investment potential exists in the funding and construction of public infrastructure in Zimbabwe. Private investors can partner councils and the government in self-financing Public Private Partnerships (PPP) such as in the upgrading of the country’s railway network, renewable energy plants, sports facilities, urban housing, mass media and telecommunications hardware, petroleum transportation and storage facilities, waste management, dams construction, water treatment and piping projects. Urban councils with large populations such as Harare, Bulawayo and Chitungwiza face funding constraints in the provision of public services such as water provision, street lighting, waste management and road maintenance. Investors in infrastructure development can easily get approval for national project status to import critical capital equipment and tax exemptions on PPPs.
Promising State Entities
The Zimbabwean government has placed a number of struggling state entities on the market. Some of these look very promising since they operate in deregulated economic sectors where there is huge potential for growth. Some also come at a bargain price due to the urgent need to wean them off from government shoulders and manage national debt. Promising state entities on the market include the POSB Bank, Infrastructure Development Bank of Zimbabwe (IDBZ), Netone, Telone and Zimbabwe Mining Development Corporation (ZMDC) mines. Foreign investors can setup joint ventures with government or snap majority shareholding in these assets since the amended Indigenization and Empowerment regulations now provide for such.
Overall, investors stand to gain from limited exchange risk since the local market is rapidly redollarizing. The forecast going forward is that the government will regularize the use of multiple currencies to curb inflation, bring stability and business certainty. Inflation has battered the local market and government efforts aimed at stabilizing the local economy will certainly improve disposable incomes and profitability for various businesses. COVID-19 may have changed global consumption patterns but it has not dented Zimbabwe as an investment destination with competitive advantages in agriculture and mining. Value addition for raw commodities from those two key sectors therefore provide mouthwatering opportunities for potential investors in the manufacturing sector.
Victor Bhoroma is an economic analyst. He holds an MBA from the University of Zimbabwe (UZ). For feedback: Email him on [email protected] or follow him on Twitter @VictorBhoroma1.