Investors showing interest in Zimbabwe

  After often violent seizures of white-owned farms and slum clearances raised fears over the safety of any outside investments and with inflation officially at 100,586%, even most risk-hungry investors have avoided it in recent years.
  But with Mugabe failing to win a majority in an election for the first time in nearly three decades and prospects for a run-off with opposition Movement for Democratic Change (MDC) leader Morgan Tsvangirai, sentiment is beginning to shift.
  It is too early to tell but it looks like the endgame is very close, said Renaissance Capital strategist Richard Segal.
  It's impossible to tell what is happening behind the scenes but there is certainly more interest. Hopefully we'll have a unity government with a reasonable stance on property rights.That could work out quite well for foreign investors.
  Renaissance, a Russian investment bank aiming to become the market leader in Africa, says it has been pushing Zimbabwe as a good opportunity for around six months, with interest rising in the last six weeks in the run-up to the polls.
  Renaissance snapped up a shareholding sold by South African banking group Absa (ASAJ.J)(BARC.L)last year while Zimbabwean bank African Banking Corporation (ABC) says Citigroup (C.N) has approved a $25 million deal for taking a 20% stake.
  The end of Mugabe's rule would probably see a donor conference bringing in some $1,5 billion of international aid, Segal said, with the situation possibly resembling that in Serbia after the fall of Slobodan Milosevic.
  Over time, he said up to 2 million Zimbabweans who left during the economic crisis could return home, potentially bringing with them another $2-3 billion. An estimated 3 million people have fled the country in total.
  China says it invested $1,6 billion in Zimbabwe in 2007, and analysts say again it may increase its flows.
 
  EQUITY INTEREST
  Analysts say Zimbabwean equities already looked cheap and there is enthusiasm for stocks such as mobile operator Econet
(ECO.ZI) and retailer and hotel chain Meikles Africa (MEIK.ZI).
  African equity markets rose some 60% in 2007 and the continent expects ongoing growth of around 7%, but Zimbabwe has long bucked the trend.
  Zimbabwe's gross domestic product has contracted each year since 2000, the biggest decline in 2003 when it fell 10,4%. The IMF estimates that GDP will fall by 4,5% this year.
  Bond brokerage Exotix said it had received new enquiries from investors wanting prices for Zimbabwean traded debt, even though as far as it knew none existed.
  Zimbabwe's outstanding debt was $3,3 billion medium-term with $1 billion short term, it said, 95% of it official debt with the Paris Club of rich nations, World Bank or other multilateral lenders.
  But given the scale of Zimbabwe's decline, most remain cautious. Even if the MDC won outright and Mugabe was completely gone, some say it would take much more to tempt them in. The presence of established names from the ruling ZANU-PF party in a unity government could further spook investors.
  In a worst-case scenario, Zimbabwe could slip at least briefly into the kind of violence that damaged Kenya's economy and reputation for stability after a disputed December election.
  One Africa fund said it was simply refusing to comment on Zimbabwe, while another major bank said it would not talk about the country for fears over staff safety there.
  We have to meet the companies first, but in the short term it's not a place we will be rushing to take a look at, said Aberdeen Asset Management emerging equities fund manager Andrew Brown.
  You'd have to see inflation come under control and the business environment improve. Political change might be the catalyst for that but we want to stand back. It's probably more the sort of place you would find private equity.
 Some companies have already taken the plunge. Shares in London of Africa-focused miner Mwana (MWA.L), which has a nickel project in Zimbabwe, climbed 20% in early trade on Tuesday on talk of an opposition election victory.
  Once Bob (Mugabe) goes, there will be a rush to get in, said one South African analyst asking not to be named. People who are already positioned will make a lot of money.
 
  QUESTIONS REMAIN
  London-listed Lonhro Plc (LONR.L)(LAFJ.J) recently announced plans to raise around $140 million to expand in Zimbabwe.
  With its gold, nickel, platinum, palladium and steelmaking alloy ferrochrome reserves, Zimbabwe could potentially benefit from continued high global commodity prices.
  But huge constraints remain. Analysts warn the country's electricity system is already failing to properly supply its shrunken manufacturing sector, only 30% of the size it once was, making any sudden increase in production impossible.
  Even with high global food prices, suddenly rebuilding the devastated agricultural sector would also be difficult, with some former white-owned farms still under the control of squatters. Simply handing farms back to white control might be politically difficult if not impossible.
  There are still questions over property rights, said analyst Mike Davies at risk consultancy Eurasia Group.
  Some sort of commission of enquiry would have to be set up to establish that … people are going to be cautious given the history of land grabs. It will take time to clear that sentiment.