Zim economy limps into 2021

The Zimbabwean Stock Exchange has had a tumultuous year in 2020, with various factors impacting market performance. CNBC Africa recently sat down with Batanai Matsika, Head of Research at Morgan & Co., to discuss the state of the Zimbabwean markets and what the future holds for 2021. Matsika highlighted the challenges faced by the economy, including policy changes, the introduction of an auction system for foreign exchange, and the impact of COVID-19 and droughts. In terms of economic performance, the Zimbabwean economy is estimated to have contracted by 4.1 percent, with some experts believing the actual figure could be closer to six or seven percent. However, there is optimism for recovery in 2021, with the agricultural sector expected to be a key driver of growth. Key highlights from the stock market in 2020 include a market capitalization of around $1.6 billion at the beginning of the year, presenting an opportunity for investors to capitalize on undervalued stocks. Despite the challenges, local institutional investors have shown interest in the market, leading to a growth in market capitalization to approximately $3 billion. The introduction of an auction system for the currency has been seen as an improvement from the previous interbank system, allowing for market forces to play a role in determining exchange rates. While there are still risks ahead in terms of foreign currency generation, the system has shown some positive outcomes, especially in terms of forex receipts. Looking ahead to 2021, there are discussions around potentially listing more companies on the Victoria Falls Stock Exchange. Currently, there is only one company listed, but talks have been ongoing with companies like PPC and Old Mutual Limited. However, challenges remain in attracting listings due to existing macroeconomic risks. Overall, the Zimbabwean markets have navigated a challenging year in 2020, but there are signs of resilience and potential for growth in the coming year. Market participants will continue to monitor developments closely and adapt to the evolving economic landscape.