Zimbabwe is likely to remain an unattractive destination for international investors as economic policy discordance continues to rear its ugly head.

Observers say foreign investors typically consider a stable political environment as a prerequisite for determining where to invest.

But Zimbabwe’s authorities are doing themselves no favors.

In March 2019, the Zimbabwean Government announced that foreign investors could repatriate their funds following a new directive by the Reserve Bank of Zimbabwe (RBZ) for commercial banks to prioritise 15% of all foreign payments towards disinvestment by portfolio investors on the ZSE.

For years, foreign investors on the ZSE have been struggling to take out their investments – now amounting to more than US$120 million – out of Zimbabwe.

This was after the release by the Reserve Bank of Zimbabwe (RBZ0 of an exchange control circular that said commercial banks must prioritise 15% of all foreign currency payments toward disinvestment by portfolio investors on the ZSE.

And now, just a year later, the Zimbabwean Government has issued an Exchange Control order whereby the fungibility status of Old Mutual Limited, Seed-Co International and Pretoria Portland Cement would be suspended for a period of 12 months effective 13 March 2020.
Analysts at Akribos Research Services say the move is the epitome of policy inconsistency.

“Policy uncertainty has been proven again as the gazette came as a surprise to most stakeholders. The directive restricts foreign investors’ ability to remit money to their bases and is a blight on the country’s credit counterparty risk status,” said Akribos.

“Suspicions by Government are that the Old Mutual Implied Rate was influencing parallel market rate movements as the Old Mutual Implied Rate traded at a persistent premium to both the parallel market rate and interbank market rate between the US dollar and the Zimbabwe dollar.

“This we suspect is the rationale behind the recent gazette which has suspended the fungibility of dual listed shares on the ZSE namely Old Mutual Limited, Seed-co International and PPC. The premium of the Old Mutual Implied rate over the parallel market rate was being exploited by some local investors through arbitrage as local investors accounted for 68% of all old Mutual Limited share trades.”

Although the ZSE has three such shares, Old Mutual has been the most prominent one that has allowed shares to move to and from the local bourse to the Johannesburg Stock Exchange and to the London Stock Exchange.

Critically, although local investors have been incapacitated to take advantage of arbitrage opportunities on the previously fungible stocks on the ZSE, foreign investors will no longer be able to utilize the Old Mutual Limited share, for example, to take their money out of the country.