Lessons from history


The Zimbabwean economy is going through a lot and has been doing so for the better part of the last few years. However, what the economy is going through is not extraordinary. We have seen this before, and for many, this memory should be very clear as it was a little over a decade ago, we saw the culmination of what we refer to as Zimbabwe’s first economic crisis known colloquially as 2008. There are a great many signs to suggest that we are simply living a repeat of that period with minor differences.

In his critically acclaimed book, “The Alchemist”, Paolo Coelho writes; “if something happens once it can happen a second time and if it happens a second time it will certainly happen a third“. We need not worry about the certainty of the third time yet; our focus should be on the likelihood of the second time.  It requires no stretch of the imagination to say that everything being experienced was experienced at some point in the 2000s. As such, there is also a valid reason to anticipate a similar culmination.

Yes, there are differences and I will highlight a few. In the first economic crisis, Zimbabweans knew no better in terms of currency and held on to the Zimbabwean Dollar longer than they should have. Eventually, the economy dollarized, and the government was forced to follow suit. This time around having known the greenback, Zimbabweans will not hold the local unit sacred for very long, in truth they have probably stopped already. Another key difference is in the monetary space, our forced cashless society status makes it more difficult to see the effects of money supply growth on the ground. The printing press has gone electronic! Finally, Zimbabweans have gone through this before and whilst not every single citizen will learn from the past, it is evident the smart ones have and will.

Evolution of Zimbabwe Industrial Index

Turning our eyes to investing, which this article is about, assets in Zimbabwe are severely distressed. Their earning potential has been severely hampered by the economy. Look at the past may offer some guidance from investors on the Zimbabwe Stock Exchange (ZSE). In 2009, Zimbabwe dollarized through a multi-currency system and effectively reset the ZSE. Between 2009 and 2013, there was growth on the ZSE owing to both improving economic conditions and the promise showed by the companies on the exchange. On 27 February 2009, a month after dollarisation the ZSE Industrial Index stood at 81.20 points. On the 9th of August 2013, the Index was at 243.61 points (a tripling in the index over 4 years). While the ZSE did climb higher in later years, these  gains were marred by the introduction of bond notes and coins which hamper the reliability of the information. The same returns cannot be guaranteed given that the underlying factors may not be the same from a social, political and economic climate perspective. However, as the record shows so far, Zimbabwe is a nation repeating its history.

All evidence suggests the economy will “officially” dollarize again sooner or later. This will happen in much the same order as it did in the first currency crisis of 2008. We are fortunate enough to have seen what dollarisation brings with it in the short and medium-term. Investors with patient capital are well poised to take advantage of lightning striking the same place twice. The further the economy continues on the current path, the closer we edge toward a 2009-like reset. Those who snap up what is available on the ZSE are set to be big winners. Counters with future critical resources such as Econet or OK Zimbabwe with its huge retail footprint and distribution network represent potential good buys. There is potential in export-based counters and primary producers in the food value chain.  The writing is on the wall and those who can afford to head the message will become the victors of the next economic reset.

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About the Author

Kudzai Godfrey Changunda is an Accountant, Editor and Writer in South Africa. His full profile is available on; www.about.me/kgchangunda

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