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Sep 2002 - Zimbabwe

Zimbabwe – Perceptions, Expectations and Reality

I recently visited Zimplats’ Ngezi operation and Aquarius’ new Mimosa acquisition in Zimbabwe in late July 2002 and found a totally different situation to that widely perceived from reading media coverage.

Just because some farms are still being repossessed and there are varying states of poverty in Zimbabwe (largely due to the farm closures or the inability to access foreign currency), does not mean that Zimbabwe is a total “basket case”, or as my wife commented to me on departure, “I hope they are paying you danger money, because no other analyst would dare go there.”

I encountered a similar situation in South Africa as in “You’re going where ?!”. So I was prepared for the worst, even when checking in my baggage at Jo’burg’s Jan Smuts and being told at check-in that “you can take your baggage to the steps (to board the plane) and it will be loaded if there is room”, and on seeing the mountain of suitcases on the transit bus, thought I had kissed my bag goodbye.

Although I had last visited Zimbabwe (which was once described as the jewel in Africa) on a DGD trip over 4 years’ ago, I thought that at worst it was probably like Zambia (when I worked there) in the mid-1970’s, namely farms being possessed and settled by local people, questionable majority voting at elections, shortages in which supermarket shelves only contained one or two products, etc.

So, I was totally surprised to arrive at Harare and find a flash new International Airport and terminal (the old grotty International terminal has become a half-used domestic terminal), that was better than Jo’burg’s Jan Smuts, and contained a shopping arcade too. Customs and immigration were painless, and outside the cabs were new vehicles as part of a “new” taxi fleet. Mobiles or cell phones work in Harare due to the 3 competing networks, the roads in most cases are relatively litter-free and are better than Sydney’s, being often relatively newly tarred.

There was no general curfew, and virtually no military presence apart from one casual military guard outside the presidential residence. There are radar traps, and parking fines are issued and paid.

Aquarius told me that they did not want me to drive in Zimbabwe. A comment echoed by Zimplats for Harare. The reason was quite simple, in Harare a number of the road signs have been melted down for pots, pans etc, as have some of the traffic lights at intersections (leaving 4 stumped pipes), the coloured glass is apparently used in discos. So until you know where you are driving to in Harare….

The arterial roads are excellent, but consequently typical driving speeds are 140 to 200km/hr and the occasional cow or goat can randomly wander across the road.

I can recall reading about the Zimbabwean salt shortages and sugar shortages in the media in Sydney, but Zimbabwe does not appear to get the shortages that occurred in Zambia, and often (if in say Harare) it is apparently able to simply just try another suburb.

Take the sugar shortage, I visited a shopping mall (there are two malls containing numerous shops in Harare stacked with goods and plenty of milling people and queuing cars), and while there was no white refined or raw brown sugar, there was a display packed with castor, icing and dark brown sugar. Similarly salt, there was no white refined, but plenty of the other varieties. There was also a display packed with all sorts of rice, but as my guide commented, “we do not eat rice, we are only used to maize-meal”.

Driving to Zimplats’ Ngezi operation south of Harare, you can pass numerous schoolchildren walking to school and all in a school uniform. You also pass a number of fields that have been left to waste, and some that are being still grown in defiance.

The Sydney Morning Herald on 14 August carried a front page article in which it stated that the policy on farm possession was unclear after Mugabe made a few omissions in a recent speech. In Zimbabwe, comments have been made that the farm possession has not worked with the war vets just farming their own requirements with no interest about providing for the rest of Zimbabwe or employing farmworkers to work larger areas, resulting in large areas of rich volcanic soil lying fallow, and higher unemployment.

Visiting Aquarius’ Mimosa Platinum mine, I was surprised to find virtually the entire workforce is black (there is one white consultant) and the educational standards and experience are very high. Even the team leaders on the mine are mining engineering graduates, and brainstorm with management ways to improve productivity, in which they are then included and feel part of the team to achieve the goals being set.

Also at Mimosa was a 1.4m high vehicle for transporting workers underground through the workings, solely manufactured in Zimbabwe. It underscored the capabilities of the country in much the same way that Zimplats was able to construct a 77km three-lane long road to top specifications capable of carrying triple road trains with 100t payloads every 20 minutes, including bridges over rivers. This road was completed in 6.5months solely using Zimbabwean contractors.

At some stage Mugabe is likely to be replaced, as was Kaunda in Zambia, but through that whole period in Zambia, the mines continued to run and a similar scenario appears likely in Zimbabwe. The platinum mines receive a concession such that their earnings can be kept outside of Zimbabwe in US$, possibly a similar concession may be negotiated for the gold mines too, and then they can be reopened again.

The issue of what access is available to foreign currency is very real when the black market (or parallel rate as it is called) is about 10 times the official rate for US$, A$, GBP etc. At that shopping mall, food prices for vegetables and bread etc were very similar to what would be paid in A$ in Sydney, while say an imported tin of soup would cost A$5 at the official rate…but only A$0.50 at the parallel rate.

The guide that took me round said it was common for Zimbabweans to work two jobs in the UK, save enough money and return and buy a house that would normally require 20 years’ of savings. A good quality house with garden, pool and tennis court apparently costs about Z15m to Z20m, or about 15,000 to 20,000 GBP on the parallel rate.

Regarding State ownership, there is a general expectation that Zimbabwe may gradually move to 15% ownership positions, possibly through loans, which are far less onerous than the potential ones proposed or contemplated in South Africa. Hard though it may seem to believe, there actually appeared to be more atmospheric tension in South Africa than in Zimbabwe.

Zimbabwe certainly appears to be misrepresented outside of the country, and capable of reclaiming its title as “the jewel in Africa”. It just has a few hoops to pass through on the way there.

Disclosure and Disclaimer : This article has been written by Keith Goode, the Managing Director of Eagle Research Advisory Pty Ltd, who has a Proper Authority with State One Equities, and with his associates, either has or expects to have interests in most of the stocks in this article, This e-mail address is being protected from spambots. You need JavaScript enabled to view it . The opinions expressed in this article should not be taken as investment advice, but are based on observations by the author. The author does not warrant the accuracy or completeness of any information and is not liable for any loss or damage suffered through any reliance on its contents.

  • Written by: Keith Goode
  • Sunday, 01 September 2002

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