Zimbabwean bank notes. Picture: BLOOMBERG/WALDO SWIEGERS
Zimbabwean bank notes. Picture: BLOOMBERG/WALDO SWIEGERS

Zimbabwean president Emmerson Mnangagwa’s assumption of office last November after the military intervention that led to long-serving dictator Robert Mugabe’s resignation sparked the dawn of a new era of hope in Zimbabwe.

Mugabe, who had run the nation’s economy into the ground through a series of disastrous economic policies, had also isolated the country internationally. With Mnangagwa’s rise to the most influential office in both the ruling Zanu-PF and government, and the discernible policy shift evident in his "open for business" mantra, optimism abounded.

That hope was not without reason. More than 90% of the country’s population was unemployed and industry was operating at half its installed capacity.

Perhaps to underscore the optimism, the stock market, which had risen to record highs as investors piled into stocks to preserve value, pulled down. Last year’s high was not supported by rising company fundamentals but by hedging that arose from currency weaknesses.

Inflation fears triggered by the issuance of bond notes by the central bank subsided amid a general feeling among asset managers and analysts that the central bank would stop flooding the market with money.

Bond notes were introduced in late 2016 to help ease the cash shortages. They were said to have a par value with the US dollar unit at introduction. (Zimbabwe had adopted the use of multiple currencies in 2009.)

With Mnangagwa in power, an era of economic hope and prosperity seemed to be beckoning.

And much has changed conspicuously in Zimbabwe. For one, the heavy police presence on the country’s roads is a thing of the past.

But other things have remained the same. Obtaining cash, for example, remains difficult. In fact, the cash situation has worsened, with banks giving just US$20 to desperate depositors. And the money is always in low-denominated coins.

A bank manager who spoke to the FM on condition of anonymity says the Reserve Bank of Zimbabwe is supplying only limited amounts of coins to banks. "And deposits are not coming either. Not even coins," he says. "We are not sure what is causing that."

Many desperate Zimbabweans are queuing outside banks to improve their chances of getting cash.

Analysts say central bank chief John Mangudya is deliberately shorting the market for bond notes to support their value.

Those desperate enough for cash are paying a high price: they have been willing to part with a 20% premium for bond notes — coins and notes — by using online payment platforms such as Zipit and EcoCash.

Zimbabweans who want dollars have to fork out even more. The dollar premium is as high as 50%. This means that bond notes have lost value by almost 50% against the dollar.

Evidence that not all is well in Mnangagwa’s new Zimbabwe is more pronounced on the stock exchange, where shares have started rallying again amid sentiment that little has changed.

MMC Capital co-founder and stockbroker Itai Chirume says the market could have been overly optimistic about the new dispensation.

"The activity on the stock market could be suggesting that the market overcorrected when share prices fell," he says.

"If you look at the peak market cap of around $4bn of [stocks such as] Delta and Econet and [their] current valuation, it would suggest that the counters are a bit discounted now."

Investors and asset managers seem to be convinced that nothing fundamental has changed, and this could be why stocks have begun to climb again.

"In other words, the market has just said: ‘Let’s work with what we have,’" Chirume says.

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