A sense of what is to come?

In every generation and in every nation there are moments and periods where political and economic orders are considerably altered creating new opportunities. In such times, it is as if the economy has rebooted and almost everyone has been afforded a fresh start. Such is the time we find ourselves in Zimbabwe. While idealists may wait for perfect conditions politically and economically, the window of opportunity is often dynamic and known to close too soon.

History rhymes and we can’t afford to repeat past mistakes

In recent history, there are many such cases. During and post the great financial crisis, while many lost their wealth and well- being, others amassed great riches post the period. Fiscal stimulus package plus the monetary easing sprung many into millionaire status. By borrowing at near zero interest rates, many grew their money buying financial assets such as stocks which rebounded from near bottom levels. Real estate market which had triggered the calamity and subsequently tanked, rallied back as government poured money back into the asset class to shore up confidence.   Those who could tell commodities were where they did not belong, bought as much oil, gold and metals as their investors and lenders could permit. Of course they were generously rewarded afterward.

Foretelling some of the changes that occurred and the schemes that enriched many was not the preserve of a few geniuses. In fact, it was an open secret but many were just too traumatised to act. Fear imprisoned many from doing what was logical. As they say, “history rhymes”, and all that one needed to do was learn from history.

While we can learn from the West, the fact is the same with Zimbabwe. Three pivoting moments- when many either realised or lost great wealth can be recalled to memory. First, the post 1980 Independence period unravelled many opportunities mostly for black professionals and entrepreneurs. With the sudden opening of the economy, our parents could easily buy property with no money down. Teachers, Soldiers, Nurses and any other professionals could own multiple properties. With the departure of many white managers and businesses, suddenly there was an opening for even the vaguely qualified.

The second of such times was in the 90’s when a wave of indigenisation swept upon the black majority. Again, it was the bold and those that dared to be different that seized the opportunity of the day. Of all sectors, one was emblematic of this phenomena – the banking sector. For the first time multiple black owned banks emerged. With all sense of respect, some were viewed as undeserving to own and run banks, but like many things in life they seized the opportunity. It was a seismic change, one that will unlikely repeat itself.

A third wave of change was the early 2000’s. Notwithstanding the controversy surrounding implementation, the land reform programme engendered a new class of wealthy farmers mostly in tobacco, fresh produce and other crops. As many stood by, not sure whether to join the bandwagon, the instinctive jumped on the train and the rest is history.

Where do we stand today?

Is today any different from the other periods alluded to? Not that much. Except that today we have a lot more smarter people around. All the same, smarts only work when understands what is going on. In one of our posts, a few months ago Diaspora was implored to buy property in Zimbabwe at a time when the Dollar was trading at premiums of 70-85%. At 80% premium, one would be buying property at a 45% discount. But the risk tag that Zimbabwe was associated with then would have dissuaded many from having anything to do with motherland.

Pivoting for growth

The benefits of the political changes that may have occurred and the subsequent economic improvements will have disproportionate impact across different people. Sure, anticipated growth will lift up standards of living for the majority. But significant benefits of this change will only accrue to the few that can identify the direction of latest policy pronouncements and their impact on markets and prices.

For example, how will targeted major infrastructure projects such as roads, rail have on transport and logistics sectors? Will the developments give life to certain businesses and industries that had disappeared over the last one to two decades? And how will economic changes impact land prices? Where are we likely to see land prices changing dramatically- is it residential, industrial, offices, or hospitality related sites. By removing foreign ownership thresholds on all minerals other than diamonds and platinum how will capital markets, asset holders and potential foreign investors react? Will asset prices rise or fall?

As individual investors will not be able to compete with FDI and institutional capital, small investors may do well by focusing on plugin investments which aim to support large infrastructure related projects. As the old adage goes, “when there is a gold rush, better be the guy who sells shovels and hard-boots, than be lost in a crowd of gold panners.”

Important Information and Disclosures

The information contained herein is given as of the date hereof and this does not purport to give information as of any other date. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. This document is provided for information purposes only and is intended only for the person or entity to which it is sent. It must not be reproduced or circulated to any other party without prior permission of Emergent Capital Management.

Assumptions, opinions and estimates are provided for illustrative purposes only. They should not be relied upon as recommendations to buy or sell securities. Forecasts of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material has been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting, legal, or tax advice. The outputs of the assumptions are provided for illustration purposes only and are subject to significant limitations. “Expected” return estimates are subject to uncertainty and error. Expected returns for each asset class can be conditional on economic scenarios; This document does not constitute a distribution, an offer or solicitation to engage the investment services of Emergent Capital Management, or an offer to buy or sell or the solicitation of any offer to buy or sell any securities. www.ecminvest.com