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The Rise of a Looting Class

Pablo’z Club & VIP Lounge is the place where the “big spenders in Zimbabwe meet”. It is one of Harare’s upmarket nightclubs located at Sam Levy Village in the elite surburb of Borrowdale. The most fascinating thing though are the luxurious vehicles that one finds in the parking lot, especially on Friday nights. Aston Martin, Rolls Royce and Lamborghini are some of the few brands that you might come across – not forgetting the SUVs and convertible BMWs. For a first-time visitor, it would appear as if you are not in Harare, bearing in mind the poor state of the infrastructure. Judging from deaths related to road accidents, Zimbabwean roads have become deadlier than HIV given the pot-holes and lack of street lighting. The infrastructure back-log is massive as a significant position of state resources are channelled towards recurrent expenditure (civil servant salaries). You will have to be good at skirting around potholes so as to maintain your Aston Martin in good working order! In a small country like Zimbabwe, with a USD26.0bn economy and c15.0million population, it is not difficult to infer who the owners of these luxurious cars are. It is definitely not the poor, middle or even high-income class. It is a new breed of ultra-rich individuals that are really good at wasting money and Piggy has classified them as “the Looting Class”

According to Transparency International, corruption, bribery, theft, tax evasion and other illicit financial flows cost developing countries USD1.26 trillion per year. This is roughly the combined size of the economies of Switzerland, South Africa and Belgium. The Transparency International Corruption Perceptions Index scores 180 countries on their degree of corruption – 100 is the cleanest possible, and 0 indicates endemic corruption.

Corruption Perception Index, 2019

Source: Transparency International

One does not have to do much research to find out that corruption is the number one cause of economic decay in Zimbabwe.  The stories are well-documented. Talk of the Wicknell Chivayo and Zimbabwe Power Company (ZPC) saga, criminal abuse of office charges against Former Labour Minister Priscilla Mupfumira over the alleged siphoning of USD95.0m from NSSA, nearly $3.0bn that is unaccounted for under Command Agriculture and involving Sakunda Holdings as well as clandestine activities by executives at the Zimbabwe National Roads Administration (ZINARA). The list of such corruption cases goes on and on but what is disturbing is that most of the culprits are either politicians or linked to politically-exposed persons. It appears that public service offices are being used to advance personal business interests. Put plainly, corruption has become endemic in Zimbabwe.

For a long time now, Piggy has wondered why the Zimbabwe Stock Exchange (ZSE) market capitalisation has remained below the historic averages of cUSD3.8bn. Stocks are looking cheap but most foreign investors will not touch Zim equities. Why? It is not just a case of multiples (PERs or MC/GDP), soft issues matter too! According to the Transparency International, the best performing region in terms of fighting corruption is Western Europe while the worst performing regions are Sub-Saharan Africa (average score 32), Eastern Europe and Central Asia. Zimbabwe-with a score of 24 (158 out of 180)-is below the Sub Saharan Africa average score of 32 which signifies a need for anti-corruption policies.  Zimbabwe needs to do all the things to attract foreign and regional partners. There is need to map out a visible commitment to anti-corruption as well as go an extra step to ensure implementation. Investors will need to see more of the “anti-corruption whip and crack down” on chronic corruption that has dogged economic activity for decades before committing long-term capital. Piggy considers soft issues such as corporate governance and the quality of management teams when picking stocks. Piggy likes companies that have strong corporate governance standards. In most cases, foreign strategic shareholders have strong influence in terms of upholding best practices. This includes counters such as Afdis (Distell), Delta (ABInbev), Old Mutual Zimbabwe (Old Mutual Limited), SeedCo and SeedCo International (Limagrain) and NMBZ (Arise). In the same vein, Piggy has a negative tone on listed companies that are linked to politicians or the Government of Zimbabwe. Again, one does not have to do much research to identify them.

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