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48 IMPACT OF COVID-19 ON LISTED EQUITY ASSETS

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16

2 EDITOR’S NOTE

4 THE NEW NORMAL- WHAT DOES IT MEAN TO ZIM INDUSTRIES

8 THE FUTURE OF STOCKS TRADING

12 INVESTMENT OPPORTUNITIES IN ZIMBABWE

16 CAPITAL MARKETS ARE FOR THE LONG HAUL

18 ZIMBABWE CURRENCY CONUNDRUM AND IMPLICATION ON EARNINGS

22 THE ALTERNATIVE POCKETS: COVID-19 AND DIGITALISATION

26 RISK MANAGEMENT IN THE 4TH INDUSTRIAL REVOLUTION

28 THE ZIMBABWE TOURISM SECTOR POST Covid-19

30 WILL ZSE REMAIN THE SAME POST 2020 DEVELOPMENTS?

32 ADJUDICATORS’ PAGE

34 AWARD WINNERS

36 SOCIALLY RESPONSIBLE: ECONET’S ROLE DESERVES RECOGNITION

40 RTG GATEWAY STREAM: CELEBRATING INNOVATION

42 SOARING THE SEED OF SUCCESS, SEEDCO

44 COVID-19 AND VIRTUAL CONFERENCING: THE ZSE STORY


50 CYBERSECURITY STRATEGIES IN THE NEW NORMAL

CONTENTS

2 2020 Zimbabwe Quoted Companies Survey PROUDLY SPONSORED BY


THE year 2019 is a historic one as it ended the decade-long multicurrency regime in Zimbabwe through the promulgation of SI 142 that reintroduced the Zimdollar as the sole legal tender.

Chronic liquidity challenges triggered by austerity measures introduced by the country in 2018 continued to characterise Zimbabwe’s intractable economic crisis.

During the same year, policy discord within government also became more distinct despite calls for increased impetus in embracing critical reforms that are vital to lure investment and spur economic growth.

Subsequently, International Financial Institutions (IFIs), dismayed by Harare’s slow pace of reform expressed concern over Zimbabwe missing key milestones under the International Monetary Fund (IMF) Staff Monitored Programme (SMP).

These policy missteps also militated against the performance of companies listed on the Zimbabwe Stock Exchange (ZSE).

Towards the end of 2019 the City of Wuhan in China was hit by the novel Corona virus, which rapidly spread across the globe, with Zimbabwe recording its first case in March 2020.

This changed everything from operation methodologies to prospects.

The year 2020 became a very unusual year. Normal methodologies in both the physical and analogical space were severely curtailed.

Of course, Zimbabwe’s economy cannot be described as normal. But the emergence of the novel Coronavirus otherwise referred to as Covid- 19 degenerated an already dysfunctional system.

Although listed companies could trade for limited hours, production was significantly diminished, threatening the viability of listed companies.

In 2020, Zimbabwe’s economic landscape

deteriorated with inflation going beyond 800%. Companies also had to endure the complexities of

policy inconsistencies, especially in relation to issues of currency that led to the adoption of hyperinflation accounting.

A number of companies had to take adverse opinions from their auditors during this period with currency reforms distorting the outcome of Zimbabwe’s financial results.

On another note, despite the government insisting that the country was de-dollarising, 2020 has seen the economy redollarising itself, posing challenges on pricing of product offerings especially in the insurance sector.

In the midst of all these economic challenges that quoted companies had to deal with, the advent of the economic scourge came with its own challenges, chief among them the need to devise strategies to work from home while ensuring business continuity under the “new normal”.

Spells of staggered lockdowns plunged the economy into turmoil, with the exchange rate remaining volatile. Inflation has been on an upward trajectory.

Severe headwinds arising from the deep-seated macroeconomic challenges resulted in the country going into hyperinflation of 837% in July 2020.

Listed and unlisted companies alike have had to embrace the new normal, which many were not ready for. Today it’s not yet certain how long the virus is going to be with us, compelling companies to adopt new ways of doing things.

The Quoted Companies Survey comes as companies are yet to recover from numerous economic shocks, while also struggling to adopt lasting solutions in the face of Covid- 19.

Against the backdrop of the Covid -19 pandemic, we coined this year’s quoted companies theme: Soaring above turmoil: Business post Covid 19.

Companies now have to devise new ways of doing business in the new normal.

Like it or not, technology has become the new norm that companies have to live with to stay afloat and to ensure business continuity.

Yet for third world countries like Zimbabwe, embracing technology as a tool to conduct business requires massive investment towards the supporting infrastructure.

In this issue we look at the role of technology in the new normal, investment opportunities, the future of stocks trading and what it really means to embrace this new normal for Zimbabwean companies, among other issues.

Is it really possible to invest in this new normal amidst a decaying economic background which makes a turnaround seem a far-fetched ideal?

This magazine would not have been a success if it wasn’t for the unwavering support we got from our sponsors, Nedbank Zimbabwe, our research, Equity Axis and all the contributors to this magazine.

To them we say thank you.

Happy reading.

Melody Chikono EDITOR

Quoted Companies Survey Magazine is Published by the

ZIMBABWE INDEPENDENT EDITOR:Faith Zaba MAGAZINE EDITOR:Melody Chikono CONTRIBUTORS:Clemence MachaduBatanai MatsikaJoyce BenzaVictor BhoromaRespect GwenziMutandani MakuyanaZSEBrett ChuluEnock Rukarwa

LEAD RESEARCH CONSULTANT:Equity Axis COMMERCIAL EXECUTIVE:Punish Murumbi MARKETING OFFICER:Olayayi JackEmail: [email protected] SALES REPRESENTATIVES:Talent MativengaValentine KatiyoKington MundondoLoyola NyangoniMitchel Ezra MAGAZINE DESIGN & LAYOUT

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STOCK TRADING 28 THE ZIMBABWE TOURISM SECTOR POST COVID-19


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By Clemence Machadu

The outbreak of the Covid-19 pandemic has shifted our way

of life in so many facets. As each day continues to bring new

infections, deaths and recoveries, with no vaccine in sight yet, the desire to find a

new equilibrium continues to compel us to interrogate new

possibilities and fresh perspectives.

If this is the new normal, then we should start mastering how to optimise our survival and that of our enterprises.

About a century ago, humanity was faced with the same tragedy when there was an outbreak of the Spanish Influenza, which swept across the globe and infected 500 million people, about a third of the world population that time; and killed 50 million people. There was no vaccine,

and, worse still, scientists had not yet discovered flu viruses. Some businesses went bust, but others survived. Those that survived chose to swallow the bitter pill of doing things differently.

In the present scenario, although we now have laboratory tests to detect and characterise these viruses, it is still unclear how this contagious virus will play out and when it is likely to be contained. This leaves our local industries at crossroads and it is not business as usual as they endeavour to figure out, which direction to take.

When Covid-19 arrived earlier this year, it struck an already-agonizing local industry. Capacity

The New Normal

What does it mean to Zim industries?

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utilisation, which had declined from 48% in 2018 to 36% last year, further dropped down to 33% this year. And while the 2020 national budget initially projected real growth of the manufacturing sector at 1,9%, this has since been revised down to a decline of -10,8% in the budget review.

All manufacturing subsectors (with the exception of chemical and petroleum products as well as textiles and ginning) are projected to decline this year, with the foodstuffs, beverages, paper, printing and publishing, non-metallic mineral products sectors bearing the brunt. Production of alcoholic beverages, for instance, declined by 27% during the first quarter of the year, with non-alcoholic beverages also declining 24%. This is just a tip of how the iceberg is big beneath.

One of the biggest challenges of this pandemic to the manufacturing sector is how it has significantly crippled domestic demand. Zimbabwe has the second largest informal economy in the whole world, according to the International Monetary Fund. The indefinite lockdown which has been in place since March 2020 disrupted the economic activities of many informal players who employ 94,5% of Zimbabwe’s labour force.

That significantly eroded disposable incomes of the majority of the populace, resulting in domestic demand going down. Demand plays a signaling function for production and low demand means low production.

And looking at how Zimbabwe is significantly integrated to the global economy, the disruption of global supply chains caused by this pandemic also posed another huge threat, and potential opportunity too, to the local industry. Most of the local manufacturing enterprises import their raw materials and the disruption of the transport sector also disrupted their production capabilities. Take sanitary wear manufacturers, for example, who import more than 70% of their raw materials from countries such as China.

This has not only affected source markets, but export markets as well. Take nickel production, for instance, which was also affected by the Covid-19 pandemic induced shutdown of the manufacturing sector establishments in parts of China that reduced consumption of base metals, resulting in declining nickel prices as well.

What makes the industry more vulnerable in this pandemic is the fact that the majority of its workforce is employed in on-site jobs that cannot be done remotely. And with the curfew measures being employed as part of the lockdown regulations, it becomes difficult for workers to be always on site. Most manufacturing establishments need to operate for 18 uninterrupted hours every single day, yet the curfew only allows them to operate for at most eight hours only per day. This automatically limits their operating capacity and productivity; not mentioning the plight of those subsectors that are classified as non-essential goods providers.

Further, issues of employee safety are also of particular concern, given the nature of the factories, whereby it is sometimes difficult to create social distancing in workplaces that are typically worker-dense. Employee morale is also very low, amid low to no incentives, as workers live with the fear of contracting the virus, which also lead to absenteeism and staff turnover. The

pandemic has also affected their mental health and productivity. Stigma and discrimination is also still a reality for employees that have recovered from the virus and return to work; which calls for more education about this virus.

Salvos are firing at the local industry, left, right and centre; and what we can realise from this moment of socio-economic distress is how it has resulted in capacity utilisation declining, production and productivity also falling down, rising cost of doing business, firms’ revenues going down, with employment levels also falling, resulting in poor overall performance of the manufacturing sector and its contribution to the national economy. Other sectors, which have strong linkages with the manufacturing sector, such as agriculture, mining and transport, have also been affected, and the ripple effects of such also cascade to the wider economy.

“Production of alcoholic beverages, for instance, declined by 27% during the first quarter of the year, with non-alcoholic beverages also declining 24%. This is just a tip of how the iceberg is big beneath.”

While the situation might seem to be hectic for the local industry, this is actually the time for Zimbabwe to be looking at how best to minimise the risks and maximise the opportunities presented by the Covid-19 pandemic. Firms that learn to quickly adapt and dynamically redefine their business models stand a chance at turning the corner. The first opportunity lies in government fully implementing all the policies that have a bearing on the manufacturing sector. Four policies quickly come to mind, two administered by the Ministry of Industry, Commerce and Enterprise Development and the other two administered by the Ministry of Foreign Affairs and International Trade.

Last year, the Ministry of Industry launched two long term policies, which have the potential to jumpstart the local industry during these difficult times, if measures and instruments therein are fully implemented. The Zimbabwe National Industrialisation Development Policy is one of the crucial policies seeking to grow the manufacturing sector’s growth rate by at least 2% per annum.

The policy also targets to increase the sector’s capacity utilisation to above 70% by 2023, anchored on value addition and beneficiation, upgrading and modernisation of industrial equipment and machinery, rural industrialisation, effective cooperation between government and the private sector, amongst other strategies.

Also, given how global supply chains for both raw materials and finished goods have been affected, it is also time to gear up implementation of the Local Content Strategy, which was devised to encourage local value addition through utilisation of domestic resources and localisation of supply chains. This is the time to aggressively

pursue import substitution for both raw materials and finished goods, to ensure that we reduce our import bill, improve our balance of payment position, create employment and domestic demand, amongst other fundamental socio-economic desirables. We can make a big difference if the hundreds of millions we use to import goods and services start circulating within the local arteries of our economy.

It is also time to strategise on increasing exports and the Ministry of Foreign Affairs and International Trade should start to upscale implementation of measures contained in the Zimbabwe National Trade Policy as well as the National Export Strategy, targeting US$7 billion in export value by 2023 and US$14 billion by 2030. In retrospect, these policies are usually not implemented and just exist as a reminder of what we want to achieve; but this is not the time to be docile.

This is also the time for firms to think about the future of their businesses and, where possible, divest non-core or underperforming assets to structure their portfolios in a manner that reflects efficiency and value creation. This is a defining moment, which calls for firms to innovate and break new ground. The safety of employees should also be put on high priority to help them cope with the already difficult times. Activities that can be carried out remotely should be identified, with workers supported to do them while at home. It is also important to provide incentives for employees to pull through these difficult times and to boost their morale.

While some firms are still holding onto old ways and still struck by inertia to move out of their comfort zones and think outside the box, taking the business as usual approach and failing to quickly adapt might result in their demise, like what happened to those that failed to adapt during the Spanish Influenza era.

It is time to tame this new normal and find a new equilibrium where business is optimised. Covid-19 is upon us! And in the midst of triumph over recoveries, grief over deaths being experienced and hope for the situation to be contained sooner rather than later, captains of industries should carefully navigate their ships to avoid wreckage.

Clemence Machadu is an economist, researcher and consultant.

FROM PAGE 4



THE FUTURE OF STOCKS TRADINGBy Batanai Matsika

The world has been changing at an alarming rate and we now live in what is called the “information age”.

The internet has changed how business is being done as IoT (The Internet of Things) and Artificial Intelligence has taken centre stage.

In the same vein, global financial markets have been evolving with new instruments being introduced and traded, from CFDs (Contract for Differences), ETFs (Exchange Traded Funds) to REITs (Real Estate Investment Trusts).

The traditional stock markets have also shifted from manual to automated systems

given the shift to online trading platforms.Technology and finance are perfectly converging, and this has allowed

“anyone, anywhere”, who has an internet connection to participate on the stock market.

RETAIL ONLINE SHARE TRADINGOne of the latest developments on Zimbabwe capital markets has been

the introduction of C-Trade, a platform that enables anyone from anywhere to buy and sell shares on the Zimbabwe Stock Exchange (ZSE) and Financial Securities Exchange (FINSEC).

The C-trade platform also gives Zimbabweans in the diaspora a chance to invest in shares with enhanced simplicity.

This can be done via USSD, the Mobile App or Web-based solution. The C-Trade platform also enables investors interested in rich stock market

information, analytics, trends and share price movements to have all this

TO PAGE 10



information at their fingertips. The platform is in line with global trends given that it

makes use of the internet and cell-phone technology, which in turn opens up the markets to retail investors.

SOCIAL TRADING – THE LATEST TRENDSocial Trading is the latest trend that enables investors

and traders to be kept updated on market developments through social trading groups or communities. These are basically informal groups consisting of individuals who share ideas and news flow about a common interest, which in this case is stock market trading.

This trend has also been catapulted by the growth of social media platforms. For example, Twitter is currently revolutionising agriculture markets in the USA. Commodities brokers and traders are paying close attention to tweets as they can now gather real-time updates on planting intentions and yields and tracking a multitude of trends such as weather and flu outbreaks. Twitter also allows traders to follow news outlets and research groups, giving them tips and recommendations that can influence their trading decisions. Social media platforms also remain an important source of news despite the risks of “fake news”.

DIRECT MARKET ACCESS (DMA) FOR INSTITUTIONAL INVESTORS

The ZSE has also launched a DMA facility that permits the trading members of ZSE to provide direct trading terminals to their DMA clients (institutional investors). DMA is a mechanism whereby Fund Managers and Institutional investors can enter their orders directly into the Automated Trading System (ATS) through a Client Binding Terminal without manual intervention by the Broker.

This new development means a buyer can place their own orders to buy and sell instantly, and “advertise” the quantity and price of a stock at which they are willing to trade.

The major advantages of DMA are (i) traders have more control and full transparency of their order book, (ii) there is less potential for human error given the orders to not go through brokers or market makers,(iii) it offers more anonymity – often attractive to institutional traders who would prefer nobody to know what they are buying or selling, (iv) lower overheads for Brokers since all they are doing is allowing clients to place trades through their computers, (v) information leakage is also minimised because the trading is done anonymously, and (vi) lower transaction costs because only the technology is being paid for, not the usual order management and oversight responsibilities that come with an order being passed to a Broker for execution.

Overall, DMA platforms can be integrated with sophisticated algorithmic trading strategies which can streamline the trading process for greater efficiency and cost savings.

THE FUTURE: AUTOMATED TRADINGOne of the many technologies that is disrupting the

global financial markets is automated or algorithmic trading. The increased demand for speedy, reliable, and effective order execution as well as reduced transaction fees is expected to fuel the global growth of automated or algorithmic trading.

Automated trading refers to the use of a computer programme or software to create orders and automatically submit them to a market or exchange.

Automated trading systems and electronic trading platforms can execute repetitive tasks at speeds with orders of magnitude greater than any human equivalent.

For example, many hedge funds make use of “algorithmic trading” which is a fully automated order

entry based on a computer trading model. It is also worth noting that more than 75% of the stock

shares traded on NYSE( The New York Stock exchange) and NASDAQ (National Association of Securities Dealers Automated Quotations exchange) originate from automated trading system orders.

AUTOMATED TRADING: THE FUTURE OF STOCK TRADING

These systems can be designed to trade forex, stocks, options and futures based on a predefined set of rules which determine when to enter an order, when to exit a position and how much money to invest in each trading product.

Trading strategies vary, with some being designed to pick market tops and bottoms while others follow a trend or involve some complex random approaches.

When a predetermined signal emerges, the software actually places a trade automatically.

These softwares are also known as Expert Advisors (EAs) or Trading Robots.

EAs are programmed to automatically generate trading signals and notify traders of opportunities on the market.

However, another type of automated trading system is a Trading Robot which, like an EA is a programme that can identify market patterns and generate trading signals. However, unlike an EA, a Trading Robot can automatically place order on behalf of the trader. An EA, on the other hand, will always require a trader to manually authorise a trade.

As with any automated software, EAs and robots reduce the chance of making emotional and irrational trading decisions, which commonly affects novices or inexperienced traders.

These softwares follow a very strict and consecutive plan, free from any human intervention.

All in all, it appears that the future of stock trading lies in the use of softwares. The bottom-line is that ROBOTS DO NOT SLEEP. As markets deepen, we expect longer trading hours. However, humans cannot possibly stay up all day and night throughout the trading week just to keep track of price action.

A Robot can be programmed to watch market movements without the need to rest or even take breaks. The Robot simply follows a set of rules based on technical indicators or price action and can execute trades automatically.

Batanai Matsika is the Head of Research at Morgan & Co, and Founder of piggybankadvisor.com. He can be reached on +263 78 358 4745 or

[email protected] / [email protected]

“One of the latest developments

on Zimbabwe capital markets has been

the introduction of C-Trade (www.ctrade.co.zw), a

platform that enables anyone from

anywhere to buy and sell shares on

the Zimbabwe Stock Exchange (ZSE) and Financial Securities

Exchange (FINSEC).”

FROM PAGE 8

mailto:[email protected]




12 Zimbabwe Quoted Companies Survey 2020 PROUDLY SPONSORED BY

Despite the current economic headwinds and Covid-19 induced business downturn, Zimbabwe has one of the best untapped investment

opportunities in the whole of Africa. As they say, the best strategy to ride an elephant

is to mount whilst it is lying down and rise with it. Investing in Zimbabwe requires a long term view

with an eye for value addition in raw commodities, export opportunities into the region, import substitution to satisfy local demand and take advantage of government deregulation in key economic sectors.

The following are some of the best investment opportunities in Zimbabwe post Covid-19.

MINING

Investment opportunities beckon in the beneficiation of special minerals such as Diamond, Gold, Nickel, Platinum, Copper, Lithium and

Chrome close to source. Forays into new found deposits of Rare Earth Elements (REE) can also provide rich pickings since investors can snap lucrative mining claims and secure Exclusive Prospecting Orders (EPOs) before there is a stampede for them.

Zimbabwe’s lithium deposits are second to none in Africa and proven deposits are located in Bikita, Goromonzi, and Kamativi.

The resurgent push for electric cars and renewable energy in high income markets will create a lucrative market for Lithium and REE metals produced in Zimbabwe. The rally in Gold price to over US$2,000 per ounce on the world market also makes the country’s old gold mines very appealing.

Small scale and artisanal miners now contribute 60% of the produced Gold in Zimbabwe.

These miners urgently need movable mining

Investment Opportunities in Zimbabwe

post Covid-19

Victor Bhoroma

© IS

TOC

KP

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machinery and equipment such as excavators, compressors, dewatering and slurry pumps, generators, jack hammers and jaw crashers to ramp up production. Therefore lease financing, contract mining and exploration services are vital to these small scale miners.

Mining is now Zimbabwe’s economic mainstay

MANUFACTURING

Closely tied to mining are opportunities in steel manufacturing using locally mined chrome, iron ore, coal and limestone.

Zimbabwe imports iron and steel products worth more than US$160 million per year from neighboring South Africa as a result of the collapse of the country’s only integrated steel plant, Ziscosteel.

Lucrative import substitution opportunities are also present in the manufacturing of agro chemicals. The country imports fertilizers and agriculture chemicals worth US$295 million to sustain high demand from local farmers.

Investors can test the market by buying into struggling but established fertilizer manufacturers owned by the government through Industrial Development Corporation (IDC).

The growth in the local vehicle population to nearly two million has created a ready market for local production of motor vehicle spares such as suspension kits, tyres and lubricants. All of which are being imported at the moment. The following are some of the imported commodities (and their import values per year) that can be manufactured locally for established demand: Plastics and plastic related products (US$263

million), Pharmaceuticals (US$250 million), Industrial and Home chemicals (US$198 million), Newsprint and paper products (US$96 million) and Skin care and beauty products (US$42 million).

AGRICULTURE

Zimbabwe imports agricultural commodities such as maize, wheat, soya, soya bean oil and processed cereal worth over US$350 million yearly.

Low agricultural production, climate change and lack of capital in the sector provide investment prospects for contract farming arrangements and irrigation funding to produce the strategic crops above.

Industrial consumers would be happy to cut their import bill by procuring raw materials locally at competitive prices.

Further, Zimbabwe still exports most of its tobacco in raw form to the Asian and European markets.

Low hanging opportunities can be found in tobacco processing and cigarette manufacturing for the over 250 million kilogrammes of flue-cured tobacco produced in the country.

Processing of agriculture products such as cotton, timber and tea also present prospects in the agricultural value chain.

INFRASTRUCTURE DEVELOPMENT

Untapped investment potential exists in the funding and construction of public infrastructure in Zimbabwe. Private investors can partner councils and the government in self-financing Public Private Partnerships (PPP) such as in the upgrading of the country’s railway network, renewable energy plants, sports facilities, urban

housing, mass media and telecommunications hardware, petroleum transportation and storage facilities, waste management, dams construction, water treatment and piping projects.

Urban councils with large populations such as Harare, Bulawayo and Chitungwiza face funding constraints in the provision of public services such as water provision, street lighting, waste management and road maintenance. Investors in infrastructure development can easily get approval for national project status to import critical capital equipment and tax exemptions on PPPs.

PROMISING STATE ENTITIES

The Zimbabwean government has placed a number of struggling state entities on the market. Some of these look very promising since they operate in deregulated economic sectors where there is huge potential for growth. Some also come at a bargain price due to the urgent need to wean them off from government shoulders and manage national debt. Promising state entities on the market include the POSB Bank, Infrastructure Development Bank of Zimbabwe (IDBZ), Netone, Telone and Zimbabwe Mining Development Corporation (ZMDC) mines. Foreign investors can setup joint ventures with government or snap majority shareholding in these assets since the amended Indigenization and Empowerment regulations now provide for such.

Overall, investors stand to gain from limited exchange risk since the local market is rapidly redollarising.

The forecast going forward is that the government will regularise the use of multiple currencies to curb inflation, bring stability and business certainty.

Inflation has battered the local market and government efforts aimed at stabilising the local economy will certainly improve disposable incomes and profitability for various businesses. Covid-19 may have changed global consumption patterns but it has not dented Zimbabwe as an investment destination with competitive advantages in agriculture and mining.

Value addition for raw commodities from those two key sectors therefore provide mouthwatering opportunities for potential investors in the manufacturing sector.

Victor Bhoroma is an economic analyst. He holds an MBA from the University of

Zimbabwe (UZ). For feedback: Email him on [email protected] or follow him on

Twitter @VictorBhoroma1.

INVESTMENT IN ZIMBABWE

“Investing in Zimbabwe requires a long term view with

an eye for value addition in raw commodities, export

opportunities into the region, import substitution to satisfy

local demand and take advantage of government

deregulation in key economic sectors.

FROM PAGE 12

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BY ZSE

The Zimbabwe Stock Exchange (ZSE), formerly Rhodesia Stock Exchange, having been established around 1894 has managed to recover from two world wars, the UDI sanctions of the 1960s, the 1997 Black Friday and the 2007 - 2008 hyperinflation. This in

essence has been due to the resilience of the underlying security issuers, whose diversity has enabled the ZSE to remain an avenue for long term capital creation and investment destination.

The profile and stature of the ZSE has, as expected, changed over the years but today the 61 currently listed entities represent the breadth of the Zimbabwean economy from primary extraction industries to service firms.

The Quoted Companies Survey has been part of the capital markets for 23 years and has provided an independent gauge on how the ZSE issuers have performed over those years.

Whilst the ZSE takes pride in all its issuers, it recognises the independent analysis that seeks to reward those that are deemed outperformers.

To the ZSE, all issuers are winners as they all have taken the bold step to make their affairs public by listing.

Listing is a hallmark of the intent to abide by the highest corporate governance standards and the willingness to be publicly scrutinised both at business and personal level.

Listing is also a testament to focus on sustainable business decisions and the consideration of all stakeholder concerns.

Listing is not an easy route when you have to expose yourself to competition and public scrutiny.

To all the issuers, the ZSE deems you our ambassadors and economic heroes.

This year’s theme of the Zimbabwe Quoted

Companies Survey; “Soaring above turmoil: Business post Covid 19” resonates with the history of our capital markets, which have gone through tumultuous periods but still remain strong.

Covid-19 needs no introduction as its impact is being felt both at business and personal level.

Not only has it hit the local economy, it has also led to bankruptcies and job losses in the most advanced economies. Focusing on the negative impact of Covid-19 will however not make it go

away, what is required are survival strategies to overcome the tempest. It is evident business models have to change and adaptability and flexibility become valuable in times like these.

Investment in technology and a healthy workforce has proven to be valuable. Strong balance sheets and access to finance have also proven to be needful when distress hits. Central governments have had to dole out trillions of dollars as rescue packages to prevent distressed firms from sinking into the oblivion.

What has been the impact of Covid-19 on capital markets may be the question? The Association for Financial Markets in Europe (“AFME”) report on the initial impact of Covid-19 on European Capital Markets indicate that European capital markets have continued to intermediate market liquidity and facilitate risk management for corporates and investors.

Increased volatility has however reduced Initial Public Offerings and the increased central bank support has disrupted liquidity in securitised assets.

A webinar hosted by Making Finance Work for Africa (“MFW4A”) focusing on the impact of Covid-19 on African Capital Markets revealed that most African Markets had witnessed dropping prices but increased domestic participation in the secondary market.

The reports from AFME and MFW4A indicate that despite the negative impact of Covid-19 on capital markets, there have been positive developments as well: the increased secondary market trading and the increased participation by domestic investors.

“The Quoted Companies Survey has been part of the capital markets for 23 years and has provided an independent gauge on how the ZSE issuers have

performed over those years.”

Going forward, corporations can take advantage of the increased secondary market trading and increased local investor participation to raise debt or equity capital through rights issues.

According to AFME a total of €10, 3 billion (US$12,157 billion) in secondary offerings was issued on European exchanges between January and 14 April 2020, just below €11 billion (US 12,977 billion) issued in the same period of 2019.

The main use of proceeds for the secondary equity offerings was for repayment of debt and general corporate purposes (including working capital).

Close inspection of companies’ offering documentation reveals that about €2,5bn (US$ 2,950 billion) of the €5,6 billion(US$6,610 billion) capital raised between March-April 2020 was explicitly attributed to Covid-19 use as a need to raise cash in the current market environment, for debt repayment, for working capital or to explore potential opportunistic M and A transactions.

The MFW4A webinar also indicated that there was increased appetite for alternative securities such as Gold ETFs and debt securities during the period.

Listed companies can also still reward shareholders through non cash strategies such as scrip dividend or bonus issues. Such strategies help companies to preserve cash and at the same time motivate investors.

In conclusion, Covid-19 has been disruptive and businesses will need to be agile in their response.

Capital markets have been impacted negatively but remain active and useful as an avenue for capital raising.

The ZSE has taken advantage of the period to work on broadening its services including the launch of the Receivables Marketplace, an SME receivables financing platform.

ZSE has also been working hard on establishing a hard currency exchange, the Victoria Falls Stock Exchange (“VFEX”) to ensure that corporations and other entities can raise capital in hard currency.

VFEX has already received important incentives such as the ability for issuers to keep capital in offshore accounts, lower dividend tax on foreign investors and exemption from capital gains withholding tax for investors.

For any further information, you can contactEmail: [email protected]

Website: www.zse.co.zw

CAPITAL MARKETS Are For The Long Haul




DELTA

Pay forFuneral policyStandsLife

Assurance



Zimbabwe’s Currency

CONUN-DRUM

& implication on earnings

TO PAGE 20



Since its flotation in February 2019, the local currency has depreciated by 97% against the US dollar, which was the reporting and reference currency

for Zimbabwe during the 10-year multi-currency era

(2009 - 2019).By Respect Gwenzi

The loss in Zimdollar value has been very detrimental to Zimbabwe’s economic sanity.

Production levels have significantly declined as evidenced by an economic growth of -10% (Equity Axis) in 2019 and yet another double digit negative growth rate for 2020.

Companies have failed to retain similar volumes performance as demand tapered. Aggregate demand, which is a function of purchasing power and income growth, has moved adversely in line with inflation.

Annual inflation for 2019 was seen closing the year at 521% sufficing to push the economy into

hyperinflationary territory. Into 2020 inflation has gone on to spike close to

the psychological 1000% mark at about 800%. The occurrence of high inflation has seen

consumers foregoing a great deal of their purchases and in turn driving broad sector wide production and sales level down. Consumer facing companies such as Delta, which is involved in the production of beverage drinks last reported that quarterly volumes suffered double digit loss in the 3 months period to June 2020. Lager beer volumes eased by 18%, while Sorghum beer volumes softened by 50%.

Only sparkling beverages showed a recovery. The company’s volumes performance has been on a cliff over the last two financial years, which coincides with Zimbabwe transitional period over which currency reforms and austerity were pursued.

Other bigger brands also reported a sharp decline in volumes performance. Natfoods reported a double digit decline in volumes of 14% for the quarter to March 2020. Volumes at Innscor’s bakeries division tumbled 40% in the nine months period to March while Colcom volumes eased by 13% over the same period.

Consumer facing businesses have been hit harder

as customers traded down the value chain, which essentially eat into margins and profitability.

It is particularly important to note that the inflationary pressure emanated from exchange rate weakness. Producers seeking to protect margins would rerate their produce in ZWL terms at an exchange rate which for most of the time mirrored the parallel market.

It is clear that the hurdle around achievement of price stability is currency stabilisation.

At the beginning of September, the Zimdollar achieved its first gains against the USD since the beginning of the auction trading system in June. Beginning of September, the Zimdollar gained 0,1% curtailing a 10 week losing streak.

Over the 10-week period, the Zimdollar lost an average of 5% per week. However as interestingly shown in the chart, the top and bottom bids showed a narrowing trend over the 10-week period.

In the first 5 weeks, the bottom bid was however worryingly narrowing at a faster pace to the top bid. Polated over a longer duration, this scenario would have seen the Zimdollar losing value at a similar or faster pace.

Most Zimbabweans are concerned about whether the currency will achieve stability against other currencies or will remain on a free-fall. Although there has been hope in recent sessions due to the reduced magnitude of inter-session depreciation, concerns are on whether the current momentum will be sustained. While there are still some off market trades, the level of trading activity currently going through the Interbank is convincing. Earlier concerns were on whether the supply levels could be sustained so as to anchor currency stability. To establish potential stability two key factors are worth analysing, these being the level of RBZ’s contribution to total market flows and the overall foreign currency inflows into the economy.

The bank’s exposure on the sell side has significantly reduced and private sector is now leading in terms of contribution, which is a healthier and more reassuring arrangement.

On the broader forex generating side, Zimbabwe has achieved an average of US$17 million in export receipts a day between January and May 2020.

This is comparable to an average weekly interbank demand of US$15 million over the last 11 auctions. These statistics give comfort on the sustainability of supply over the short term given

the bullish gold price performance in international markets, which further pushes upwards prospects of higher forex earnings.

Gold is Zimbabwe’s anchor export product contributing about 20% of total export receipts and is up over 30% year to date.

However, sustainability will also depend on some factors such as money supply and fiscal stability.

Gold production for 2020 has been grossly lower than the prior year and way below target.

Generally, we are encouraged by the Zimdollar but remain cautiously optimistic on the outlook given an unstable fiscus which is showing wide swings in either revenue or expenditure.

For 2020 it is unavoidable that general sales levels will grossly lag prior year given the sharp plunge in currency, year to date, even as prior year sales were also depressed.

A significant contraction of 2019 sales was largely a result of austerity measures and monetary dislocations which saw the country experience chronic forex shortages, but for 2020, the sharp erosion in purchasing power will see the market experience deeper cuts in sales volumes of double

digit magnitude. The plunge in sales, without a corresponding

swift realignment of costs, would naturally chop margins and drive net earnings weaker if not dire losses.

As in 2019, these losses would be covered in fair value adjustments gains and exchange gains arising from exchange rate movements.

If unadjusted for the 2020 earnings will show a grossly distorted bottom-line picture.

Gwenzi is lead Analyst and Managing Director at Equity Axis

However, from the sixth week onwards the two started to move in inverse manner with the top bid coming off at a faster pace while the bottom almost flattened. A flattening of the bottom bid represents subsiding demand or improving supply. To support the notion of stabilisation, overall bid allotments have improved from US$11 million in the first week to circa US$18 million by week 8. This demonstrates the strength of supply.

Transactwith Ease

Sign up & GoBig with the ZB VISA card andexplore the world with convenience.

Shop • Travel • Make payments

Visit your nearest ZB Bank branch and get your ZB VISA card today!

FROM PAGE 18



Transactwith Ease

Sign up & GoBig with the ZB VISA card andexplore the world with convenience.

Shop • Travel • Make payments

Visit your nearest ZB Bank branch and get your ZB VISA card today!



BY Enock Rukarwa

The Covid-19 pandemic which originated in Wuhan Province in China has ravaged the whole world through morbidity and mortality notwithstanding the socio-economic implications of the pandemic on global economies.

Supply chains have been disrupted by this global pandemic as countries close their borders and effected lockdowns in a bid to contain the ailment. These disruptions are creating wide range of impacts on companies and

some have entered into financial distress.Covid-19 crisis has also exposed major

vulnerabilities in company operations and supply chains linked to conditions of work and disaster preparedness.

The government has taken extraordinary steps trying to contain the epidemic such as general confinements and large scale shutdowns of economic activity as well as issuing aid and recovery packages to support struggling companies and workers. Many listed and private companies have also stepped up to contribute to the containment effort and to soften the economic blow of workers and supply chains.

The virus strain is causing financial distress and liquidity problems for many companies as a result of reduction and cancellation of businesses.

This has impacted workers, whose income and livelihoods are at risk.

While some companies have been able to shield their workforce and chose to keep paying employees albeit suspension of operations, many companies have had to lay off workers or reduce working hours.

Many businesses struggle to identify the right balance of measures and safeguards to protect workers from being exposed or spreading the virus.

In the face of unprecedented changes and impacts on companies own operations and their own supply chains, enterprises have adopted a

variety of responses, many actively putting resources logistics, skill an innovative approaches at the service of fight against the pandemic.

ADAPTATION, POST COVID-19 AND DIGITALISATION

Coronavirus is a humanitarian crisis that continues to take a tragic toll on people’s lives. It is also acting as a catalyst for change economically, socially and at corporate level on a scale not seen since wartime.

The scale of change and speed at which it’s

happening is shining a bright light on the fact that companies are facing once in a generation shift.

The challenging economic outlook and continued uncertainty is forcing investors to contemplate some difficult choices.

Some are pulling in, making cuts and focusing on riding out the storm.

Others however are taking decisive action to make sure that when the crisis ends they’ll be stronger than they are today.

Enduring the pandemic, businesses need to safeguard and de-risk their operations for continuity and enterprise growth post Covid-19.

Devising response that is rapid and robust to maintain continuity is of paramount importance.

The alternative pockets: Covid-19 AND Digitalisation



Organisations are increasingly using platforms that support analytics, artificial intelligence and machine learning alongside greater automation to drive digital experiences that help their operations to gain insights and become more intelligent.

The world is now operating in a post–digital era, with digital technologies a basic expectation of consumers and businesses alike. Sustained business continuity and success will come to rely increasingly on more human focused experiences and continually adapting to the latest technologies.

For many companies, the only option is to accelerate digital transformation. This implies moving from active experimentation to active scale up supported by on-going testing and continuous improvement.

The disruptions of Covid-19 have underscored the crucial role of technology, from supporting remote working to scaling digital channels for surging customers. Despite the outstanding accomplishments in managing the technology response to the crisis, the many setbacks have highlighted systemic weaknesses.

Successful companies are looking beyond linear value chains and industry boundaries to create dynamic value map. They use technology to encourage collaboration and create shared value in broader digital ecosystems. The recent transformation of workforce is a crucial step forward for digital transformation. Organisations that have enhanced their IT capabilities and remotely engaged their employees are in a much better position to not only service the unparalleled circumstances but to overcome the short and long term challenges that will inevitably follow.

While it should be recognised that the immediate benefits of digital interventions may vary between sectors and firms, the adaption of digital solutions can generally help businesses tap new revenue streams, reduce overheads and eliminate pain points.

Zoom, a video conferencing app developed in USA has quickly become an essential tool for businesses. It boasts roughly about 200 million daily active users and has quickly surpassed rival solutions produced during the pandemic.

ENGAGING WITH CUSTOMERSOne of the core challenges for virtually all

businesses during the pandemic is remaining engaged with customers and acquiring new ones. Many consumer facing stocks and a number of B2B businesses now have Facebook pages with which they present brands, products and services. In addition, usage of platforms like instagram, where products can be featured visually is on the rise.

DIGITALISATION CHALLENGESThe benefits of digitalisation are clear and the

rapidity and scale, with which many digital solutions can be rolled out further, support their adoption.

However policy makers should remain cognisant of the complex challenges that are on the other side of the digital coin. These include cybercrime, data privacy, online misinformation, asymmetric market power, platform dominance, persistent digital divide and infrastructure related issues.

Threats of cybercrime and data privacy are both

clear and present danger- a nebulous fear stoking the anxieties of businesses and individuals alike.

Prior to the pandemic, reports of hacking incidents and data leaks were already abundant.

With covid-19 containment measures and significant increases in the adaption of digital tools, such incidences are likely to increase further..

Enock Rukarwa is a |Research and Investment Analyst at FBC Securities|

Email: [email protected] | website: www.fbc.co.zw

Mobile: 263777 193 053 | È+263719 193 053 |

COVID AND DIGITALISATION



Covering You in Trade Insurance



ABOUT INDUSTRY 4.0

AND WHY IS THIS SO IMPORTANT NOW?

CLIENT

CYBER RISK – HOLISTIC CYBER RISK APPROACH

HOLISTIC APPROACH

TRANSFORMING FROM CYBER SECURITY TO CYBER RESILIENCE

A holistic approach to cybersecurity strategy can be obtained by mixing integrated

security methods, impactful employee upskilling/reskilling,

robust infrastructure, best risk-analysis programs, effective

policies, and building a culture of cybersecurity as a shared

responsibility.

MARKET CONDUCT

AML/CFTCOMPLIANCE

PRIVACY &DATA PROTECTION

COMMUNITY

A NEW WORLD PARADIGM HAS

EMERGED WE NEED TO …

RISK MANAGEMENT IN THE 4TH INDUSTRIAL REVOLUTION “When an

eagle appears, you are on notice to be courageous

and stretch your limits. Do not accept the status quo,

but rather reach higher and become more than you

believe you are capable of. Look at things from a

new, higher perspective. Be patient with the present;

know that the future holds possibilities that you may not yet be able to see. You

are about to take flight.”

The fourth industrial revolution in its scale, scope and complexity has altered the way we live, work and even relate to one another is unlike anything humankind has ever experienced before.

Industry 4.0 is characterized by a fusion of technologies including AI, Internet of Things, biotechnology, nanotechnology and

autonomous vehicles often blurring the lines between the physical, digital and biological spheres. It is distinct in its velocity, scope, systems impact and speed. It has evolved exponentially rather than at a linear pace.

These 4.0 changes have introduced new, what are dubbed new ‘C suite risks.’

We also need to consider the new risk

which is all prevailing in our environments – Covid-19 the risks which have arisen therefrom and the approach we can take as business stakeholders to manage the impact and the approach.

What are these risks and how can we as organisations and a larger business community address them?

This is a snapshot of what are considered the traditional risks (left) and a set of new emerging or what we call C suite risks (right). Before going into detail around the impact and nature of these risks it is important to emphasise the continued importance of the

more traditional risks, the risk management of which remains critical to a business in the financial services industry and are considered mature risks. At Nedbank Zimbabwe risk management of these risks is established in line with best practice.

The C suite risks which have emerged as a result of the 4th industrial revolution include Climate, Cyber, Conduct, Client, Change/execution and Crime & Corruption risks.

CREDIT MARKET, LIQUIDITY, CAPITAL & CONCENTRATION, OPERATIONAL,

BUSINESS & MACROECONOMIC RISK

CLIENT/CONDUCT RISKCYBER RISK CRIME & CORRUPTION RISK CLIMATE RISKCHANGE (EXECUTION) RISK

THE EVOLUTION OF CLIENT CENTRICITY

THROUGH GOOD MARKET CONDUCT

Putting the customer at the centre of everything we do.

EXCELLENT CUSTOMER SERVICE CLIENT & PEOPLE CENTERED CULTURE

FAIR TREATMENT & ETHICAL CONDUCT LEADING TO POSITIVE CLIENT OUTCOMES

BE ACCESSIBLE UNDERSTANDING CUSTOMER NEEDS

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CROWN JEWELS - Crown Jewels Analysis (CJA) is a process for identifying those cyber assets that are most critical to the accomplishment of an organization’s mission.

ATTACK PATH MAPPING “Submarine Concept” - lets you evaluate the probability

of the hacker kill chain and quantify the risks, significantly reducing risks through more effective controls.

SWIFT Institute Carnegie Endowment for International Peace, IMF and other partners released a new Cyber resilience & Financial Institutions Capacity Building Toolbox that

provides senior management at financial institutions with actionable measures to improve cyber security which will prevent dangerous hacks to financial systems across the world.

THIRD PARTIES Nedbank Zimbabwe uses cybersecurity performance assessment and

By Adv. Neeta Joshi

Nedbank Chief Governance and Compliance Officer



CRIME & CORRUPTION RISK

CLIMATE RISK & GREEN CRIME

EMERGING RISKS IN

THE WAKE OF COVID-19

HOW TO GET OUT OF THE CRISIS

STRATEGIC RISK MANAGEMENT

How we do it at Nedbank Zimbabwe OUR RISK MOMENT

CHANGE (EXECUTING RISK) – TRANSFORMING safely & managing

unprecedented changeThe emerging practice of risk managing

change.

We need to turn our focus to cyber resilience. Cyber

risk management requires a proactive, comprehensive, responsive and in depth risk

based approach to cyber security with an aim to achieve robust

cyber resilience.

In a nutshell, change management refers to a process of formulating and

implementing corporate strategies, plans, procedures and techniques

to manage change originating from various internal and external factors.

We need to land change safely.

ratings to create risk profiles for third parties to mitigate accidental and intentional data losses, threats or breaches.

CYBER RISK APPETITE the level of tolerance that an organization has for risk cyber risk which defines how much an

organization is willing to invest or spend to manage the risk. The risk appetite sets the boundaries for prioritizing which risks need to be treated.

CYBER AWARENESS End users are considered the weakest link and the primary

vulnerability within a network. Nedbank Zimbabwe provides training for a personal awareness of cyber security including educating employees on current threats and how to avoid them.

Nedbank Zimbabwe adheres to the principles of the Basel regulatory framework. Commercial and violent crime are classified as operational risk and particularly as fraud risk (corruption as internal fraud and violent crime as external fraud). Nedbank Zimbabwe’s compliance with the requirements of the UK Bribery Act 2010 is managed through the UK Bribery Act Implementation Plan.

The General drivers of commercial and violent crime risk management require a robust financial management strategy as depicted in the figure .

Policies supporting the Crime risk management strategy

• Fraud and Corrupt Activities policy

• Whistleblowing policy • Physical Security Policy

• Executive and threatened staff protection policy;

• Code of Ethics and ConductCrime risk management principles dictate

that the key components of a good commercial and violent crime risk management programme are detection, prevention, response and reporting.

Risks to climate include climate change and Green crime and they are interlinked as they exacerbate each other. Organisational goals to address these risks are key and needs a proactive approach, increased focus on sustainability goals and the possible consultation with or appointment of specialist resources such as futurists to pinpoint emerging risks.

Up to now Green crime is estimated to be valued at approximately US258b PER YEAR

Significant impact on local communities, supply chains, threatens wildlife, poor communities and poses a security risk and danger to the stability globally. Covid-19 is a manifestation of this very risk. It is a watershed moment shining the spotlight on global wildlife trade as a breeding ground for disease.

Impact has seen the exploitation of the pandemic through supply chain fraud, cybercrime and investment scams.

May permanently alter global value and supply chains & international production networks;

Requires public and private sector engagement to mitigate the impact of future challenges.

Need to review the risk to business in a systemic context as these ecosystems are key to effectively mitigating these risks.

Avenues for overcoming the crisis being considered by world leaders are:

• Balancing act. This approach involves a staged reopening of the economy, controlling the virus spread within the capacity of the healthcare

system. • Near-zero virus. This path means

opening the economy while imposing virus-control measures that stop short of a lockdown; these appear to be effective in preventing

virus spread. • Transition act. This path involves

switching from a balancing-act path to a near-zero-virus path by implementing elements of near-zero-virus packages as soon as they are ready.

Arises from the system or evolution of emerging or future opportunities and threats that are so significant as to materially impact on the organization’s future success or sustainability OR it’s failure or distinction.

• Maintain our strong risk track record and foundations

• Maintain our core risk management objectives

• Continually refresh our risk culture, risk appetite and

portfolio tilt• Ensure fit for purpose

organizational structures • Embed the three lines of defence

roles and responsibilities• Co-ordinated assurance • DIGI RACE (Digitization of Risk,

Audit & Compliance)

• Revolutionize Risk Intelligence & Innovation using data, science and risk analytics

• Upskill of talent to ensure new skills adopted

• Refresh Internal Control Environment (ICE) & Operational Resilience

• Contagion risk • Impact on supply chains - needs supply chain resilience • Consumer demand & the energy sector – needs proactive approach better to prepare than repair or retrofit • Change in work styles through video conferencing etc. New ways of work must be assessed to measure whether long-term approach will be pragmatic as it will be more environmentally sustainable & cost effective. • Employee wellness must be measured and addressed • Business continuity plans to addressproximate, accumulating & contagion risks.

Key: collaboration & build resilience.

UNCERTAINTY SHOCK & ITS RELATIONSHIP WITH CONSUMER FOOT TRAFFIC

Uncertainty surrounding Covid-19 and its associated health risks has caused many individuals, households, and businesses to opt out of normal activity—even if no formal restrictions are in place. Eliminating that uncertainty is essential to restart growth…

Lockdowns alone will not restore confidence. Controlling corona virus will lead to economic growth • Consumer research carried out by McKinsey reveals the following factors will positively impact

consumer comfortand reengagement to pre-covid levels: • ¾ Of participants are seeking structural solutions such as Covid-19 vaccines and treatments. • Only 30 percent say they feel safer when government restrictions are lifted. • Three other indicators that would help to increase confidence: i) 75% say people wearing masks; ii) 65% saythe number of infections reducing in their area; iii) 56% say a determination from national public-health leaders that it is safe to reengage

The answer lies in creating confidence & crushing uncertainty

Attitude & perception shift & buy in from staff resulting in greater awareness & practice of desired behaviours

SIMPLE APPROACH – relevant & practical therefore key messages are landed with maximum impact

LEVERAGE OFF EXISTING TEAMS – minimal interruption of business as usual activities

Upskill sustainable resources across the enterprise to safely land future initiatives

BENEFIT OF CHANGE MANAGEMENT – landing change safely

REDUCE CARBON FOOTPRINT

ALIGN WITH MILLENNIALS & GEN Z

“We are going to see evidence over the long term that sustainable investing is going to be at least equivalent to core investments. I believe personally it will be higher,”

Fink CEO Blackrock

FIGHT AGAINST ILLEGAL WILDLIFE CRIME



THE Tourism and Hospitality sector is among the hardest hit economic sectors after the outbreak of Covid-19 induced travel restrictions, closure of hotels, airlines, among other associated value chain businesses.

The World Tourism Organization (UNWTO) reported that international tourism decreased by 22% in Q1 2020 and is further envisaged to

decline by 60-80% over the whole year 2020. International tourism receipts are expected to plunge by a significant

US$ 1 trillion, while the World Travel and Tourism Council (WTTC) has warned that the Covid-19 pandemic could cut 50 million jobs worldwide in the travel and tourism industry.

Globally, the immediate impacted sectors include transport, tour operators, airlines, hotels and accommodation, food service and restaurants, holiday resorts, business meetings and events travel.

The UNWTO projects modest recovery of international tourism demand mostly in 2021, with domestic demand expected to recover faster than international demand.

In the context of Zimbabwe, the sector is without exception as business has significantly been impacted.

While the direct impact of Covid-19 remains yet to be fully assessed, we review the impact of the pandemic on Zimbabwe’s tourism sector though the Tourism and Hospitality and business related counters listed on the Zimbabwe Stock Exchange (ZSE).

These include: African Sun Limited (Afrisun), Rainbow Tourism Group Limited (RTG), Meikles Limited, and other Real Estate and Property counters such as Dawn Properties Limited, Mashonaland Holdings Limited and, Zimre Property Investments Limited.

Covid-19 TRADING UPDATE IMPACT

Most of business trading updates published by listed companies reflected the negative impact of the Covid-19 pandemic and the resultant induced nationwide lockdown.

African Sun Limited: The group’s Q1 2020 trading update shows that it temporarily closed all its eleven (11) hotels and two (2) casinos effective 30 March 2020 following the declaration of nationwide lockdown by Government from 30 March 2020.

As of May 6 2020, review statistics revealed that the group had 31 907 room nights cancelled, a level which was quite substantial for the business.

As a result, the worldwide Covid-19 induced lockdowns and travel restrictions have resulted in significantly reduced occupancies, with the month of April 2020 recording nil for all hotels.

As the lockdown was partially relaxed, the Group however reopened its hotels on a phased approach, with four (4) hotels being (Holiday Inn Harare, Holiday Inn Mutare, Holiday Inn Bulawayo and Great Zimbabwe Hotel) reopened on 11 May 2020. However, going forward, the group anticipates continued disruption to travel and tourism in the months ahead.

Meikles Limited: The immediate impact of the pandemic saw the Victoria Falls Hotel closed, while the Cape Grace Hotel in Cape Town

The Zimbabwe Tourism Sector Post Covid 19:

A Case Of Tourism And Hospitality Listed Companies On ZSE

BY Mutandani Makuyana



was also closed. Under its hospitality business unit, room occupancy retreated by 20,79% in Q1 2020 and 9,66% for the full year against the comparative period for the operation in Victoria Falls. Room occupancy for the fourth quarter was adversely impacted by the outbreak of Covid-19.

Dawn Properties Limited: The Group which is primarily invested in hospitality properties saw travel restrictions imposed to curb the spread of Covid-19 negatively impacting foreign tourist arrivals, which in turn affected occupancies, especially in Victoria Falls. The gropup was mostly affected through African Sun Limited, -the Lessee for most of the Group’s hotel properties, which temporarily closed the hotels with effect from 30 March 2020, thereby affecting its cash flows.

Zimre Property Investments Limited (ZPI): The company reported that rental income performance for ZPI was on budget on account of the quarterly rental reviews being implemented.

However, the reduced capacity of tenants to service lease contracts due to the mounting economic challenges became more pronounced in March 2020 with the outbreak of the Covid-19 pandemic, which resulted in increases in void space and debtors.

Mashonaland Holdings Limited: The Group reported that its occupancy levels have remained unchanged at 79,2% in the 3rd quarter ended 30 June 2020.

However, the Covid-19 pandemic has seen

average collections to revenue decreasing from 95% in the previous quarter to 91% in the quarter ended 30 June 2020. Tenants’ rent paying capacity has been negatively affected by the Covid-19 related restrictions.

RESILIENCE, RECOVERY AND OUTLLOOK POST COVID 19

While global economies are partially opening up economies through lifting travel restrictions and lockdown measures as some airlines are flying again, it should take a prolonged period for the domestic tourism to start receiving significant foreign tourist arrivals. For quick wins, strategies for companies should target the domestic tourism market and product diversification.

In line with this thinking, African Sun Limited indicated that the Group expects domestic business to largely be driven by government and non-governmental organisations programmes centered on Covid-19 health responses, in the outlook. Further, the tourism and hospitality business need to be adaptive given that some travel behavior changes induced by Covid-19 can be permanent.

The economic impact of Covid-19 will further influence viability and profitability of the hospitality and tourism business, as consumers’ discretionary spending is expected to remain constrained.

Meanwhile, in an effort to minimise economic impact of the pandemic, government availed a

ZW$500 million guarantee facility for access by the tourism sector affected entities. Further, the declaration of Victoria Falls as a Special Economic Zone and the operationalisation of the Victoria Falls Stock Exchange should augment resilience of Tourism and Hospitality businesses concentrated in Victoria Falls, in the outlook.

Also, the operationilisation of the new tourism recovery strategy which seeks to achieve a US$5 billion tourism economy should facilitate robust investment and the enabling environment which should enhance tourism and hospitality business to thrive.

Mutandani Makuyana is an Economic and Investment Analyst and also Head of

Research (Invictus Securities Zimbabwe) Mobile- 0773 043 672. Email: mutsmarks@

gmail.com, [email protected]

R e n t a l L i t e

C e n t r a l i s e d P r i n t i n g

R e n t a l P r e m i u m

TA K E A D VA N TA G E O F O U R :

L o w C o s t P r i n t i n g

M a n a g e m e n t P r i n t S e r v i c e s

G e t t h e L a t e s t i n p r i n t t e c h n o l o g y

R e n t a l C a r e

U s e r A c c o u n t a b i l i t y

[email protected] [email protected]:+263 (242) 756931-8 Bulawayo: +263 (292)77810/12





The first half of 2020 saw the Zimbabwe Stock Exchange post a very strong performance underpinned by macroeconomic vagaries.

The benchmark, ZSE All Share Index mounted 628% in nominal terms and 120% in real terms.

This was perhaps the best stock market performance globally.

56 of the 59 counters listed on the bourse closed the first half with share prices trading ahead of year opening levels.

The Bull Run strengthened particularly in the second half of the year, over which most of the first half gains were accrued. Comparatively over the last five years, the ZSE has averaged less than 10% in per annum overall growth when moderated for the impact of inflation and exchange rate depreciation.

Over the five-year period, only in 2019 did the ZSE record an outlying outperformance in nominal terms. The stock market recorded a 56% gain which however reduces to a negative outturn when moderated for a 525% annual inflation outturn for the year.

For most of the 5-year period, the economy was largely dollarized and therefore experienced very low inflation levels.

The marginal average annual gain of less than 5% between 2015 and 2019, when compared to a 2020 half year performance of 120%, shows a huge variance and this piece looks at the key drivers of the performance and its long-term impact on the ZSE.

It is no rocket science that human beings are risk averse, which is to say common conscience naturally makes one avoid any potential loss either of life or wealth.

When faced with potential risks human beings naturally avert the risk by taking routes with lesser risks or chance permitting no risks at all, although the latter is less likely.

In global markets such as commodities, trade tensions between the US and China which are the two foremost economic powerhouses, can cause currencies to move.

Heightened tensions over the last two years have

largely driven the US dollar weaker other currencies. When Boris Johnson won the recent election in UK and reaffirmed his position before initiating Brexit, the British pound lost a considerable 10% of value against the US dollar.

In most recent months, the USD has been hard hit against other major currencies due to massive stimulus packages pumped and promised by the US Federal Reserve and the US government.

The US stimulus package is seen at a record high of more than US$3 trillion. Experts predict that this form of quantitative easing will increase the level of USD balances in circulation and consequently weigh on its relative value to other currencies, which are seen injecting lesser packages.

Likewise, the move is expected to be inflationary and thus lower the real return of monetary assets and given prevailing record low interest rates, drive investment returns on money markets and bonds into negative territory. The reaction of investors in US has been such that they have foregone liquid monetary investments as evidenced by negative bond yield and moved to safe haven assets. Given the risk of inflation and negative yield, investors are dashing into buying gold and dumping the money market. Gold is now trading a historical record high.

This analogy lays bare the fact that investors are rational and therefore attempt to minimize risk to the best of their ability so as to preserve value or improve the yield on their investment. In Zimbabwe, what was experienced on the ZSE in the first 6 months of the year is a recurrence of the 2008 scenario. The strong rally in share prices is merely a culmination of inflation risk aversion and re-rating in line with Zimdollar depreciation. With annual inflation moving closer to 800% by the end of the first half of the year, Zimbabwe was seen as having the second highest inflation outturn globally. Such escalated levels of inflation were termed by the Professional Accountants and Auditors Board, as deserving of reclassification of Zimbabwe as a hyperinflation economy. In practice, the Zimdollar was losing value or purchasing power with each passing day as its exchange rate to the US dollar plunged in successive sessions.

The currency, which is barely a year old, has been failing a basic test of store of value and could therefore not impress investors who were looking for more than just a store of value but a positive return on their investment. With limited options in sight due a lack of depth in financial markets, Zimbabwean investors and speculators alike,

dashed into stocks which were seen as providing a better cover to inflation. The dash for stocks consequently stimulated share prices igniting the strongest rally on the ZSE in 10 years.

Trends on the ZSE shows that foreign investor contribution has been coming off over the last 5 years. In the formative years of dollarisation foreign buys contributed over 50% of total flows on the stock market but the contribution has since dwindled to below 30% as at end of 2019. During the first half of 2020, foreigners showed a general net selling trend, opting to dispose more than they preferred buying.

The preference to exit the market has been long standing and since 2016, foreign investors have struggled to exit the local market due to foreign currency challenges.

The strong rally in the first half of 2020, strengthened the equity investment values of these locked funds presenting, through capital gains, an incentive and net positive return, in the event of disposal.

On the flipside and as demonstrated in trades post the first half of the year, the ZSE easily counters as one of the most volatile exchanges in the world. The sharp swings in prices pre and post suspension increases the risk associated with the market and discriminates certain types of investors looking for stable returns.

The shape of the market on the near term outlook will be that local investors will become the major and almost exclusive players on the ZSE. The few foreign investors, wishing to give Zimbabwe a chance, will likely limit their exposure to the Victoria Falls Stock Exchange, but this too is subject to the quality of assets listed and an improvement in the country’s foreign currency liquidity position.

Gwenzi is the lead analyst and Managing Director at Equity Axis.

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Adjudi-cators' Page2019 was a very turbulent year as Zimbabwe’s economic landscape became more slippery in the face of entrenched economic reforms.

Currency reforms, introduced late in 2018, were scaled up early in 2019 leading to the phasing out of a 10-year multicurrency regime and a return of the Zimdollar. Subsequently a freefalling currency ignited hyperinflation and by the

second half of 2019 and the PAAB (Public Accountants and Auditors Board) recommended hyperinflationary accounting (IAS 29) given the macroeconomic conditions. During the adjudication process the complexity and inconsistencies replete in financial reporting in Zimbabwe for the period 2018 to 2019, made it very difficult to conduct an objective analysis of companies’ financials.

The 2018 and 2019 financial results received broad adverse opinions from auditors because the preparation was not in line with IAS 21 which was super-ceded by SI 33 of 2019. SI 33 of 2019 assumed parity between RTGS dollars and the converted USD balances as at February 2019. For accounting and other purposes, all assets and liabilities that were valued and expressed in USD

immediately before 22 February 2019 were deemed to be values in RTGS dollars at a rate of one-to one to the USD. These technicalities underpinned the irreconcilability of successive financials between 2018 and 2019 particularly in analysis.

The distortive effect of hyperinflation and exchange rate depreciation compounded with legislative technicalities grossly made it very difficult to apply conventional models in analysing the performance of listed companies as well as their share price performances within the same period. As an adjudication panel, we however moderated the financials using weighted average market rates for Fx and inflation and applied the Piotroski F-Score to grade the companies’ performance. The general outcomes were that most ZSE companies scored low on the 3 main categories covered by the Piotroski F- Score, these being profitability, leverage and liquidity as well as operating efficiency. Reduced real earnings were a result of contraction of volumes and value erosion due to inflation, leverage, liquidity and operating efficiencies were affected by exchange rate depreciation, limited foreign currency availability and broad macro volatility.

It is unsurprising that companies which scored better are those earnings foreign currency from their operations and among these are manufacturing companies. A liberalised and weakening exchange rate has helped locally manufactured finished goods fare better off in regional markets.

“The 2018 and 2019 financial results

received broad adverse opinions

from auditors because the

preparation was not in line with IAS 21

which was super-ceded by SI 33 of

2019.”

However, a few of the companies that exploited the weaker currency to spur regional sales and cushion the domestic earnings have committed higher capital expenditure levels to modernise their plants and processes.

This 2020 edition of the Quoted Companies Survey also introduces new categories in line with global dynamics. The foremost new award category is the Sustainability Award. Sustainability taps from the Environmental Social and Governance (ESG) criteria. Globally investors are increasingly aligned through a desire to understand a company’s long-term value creation plan and receive credible, standardised information to support long-term risk assessments.

We also added the Innovation award to rewards companies that have taken strides in introducing new, efficient and modern ways of operating their business.

Global trends show that increased innovation particularly in information technology has transformed business and the world in general.

The top four companies on the New York Stock Exchange and NASDAQ are all tech companies with high levels of innovation. It is imperative for local companies to modernise and catch-up or risk extinction.

The advent of social media and unicorns such as Facebook and Twitter and their impact on the Media industry has demonstrated that disruptions are inevitable unless companies increase their levels of innovation. We congratulate all the winners of 2020 as their defied odds which were largely titled in their disfavour. We also encourage all listed companies to remain robust in the face of the economic challenges and urge them to particularly focus on shareholder value preservation.

Equity Axis is a financial media company specialising in financial research ,

broadcasting and publishing of economic and business updates.

WINNER

ECONET WIRELESS ZIMBABWE



OVERALL 2020 QCS SECOND RUNNER UP– ZIMPLOW HOLDINGS LIMITED

The company had a good run in 2019 defying the odds of a severe and recurrent drought that has affected greatly Zimbabwe’s economy.

Although the company’s overall sales remain highly concentrated in Zimbabwe, the company looked beyond agriculture, spurring its sales through mining and infrastructure development projects.

The company leveraged its diversified geographical markets to cushion vagaries experienced in the core market.

Through a good-mix of exports and local products sold, the company was able to surpass prior year profitability in real terms.

OVERALL 2020 QCS FIRST RUNNER UP– MASIMBA HOLDINGS LIMITED

Despite an underperforming sector, which broadly shrunk by about 10% in 2019, the company saw its order book surge and consequently its net earnings in real terms.

This combination of growth in demand as seen through the order book and materialisation through growth in real earnings was exceptional for the period under review, given the vagaries of the environment. The company is recognised for the solid odds defying performance in a tough and volatile market. The company’s profitability matrices rank higher while its operating, leverage and liquidity matrices ranked fairly more favourable.

OVERALL 2020 QCS WINNER – SEED CO INTERNATIONAL LIMITED

The winner is one of the few exceptional companies that registered real growth in earnings and volumes in the year under review.

It leveraged its diverse markets and expansion

drive on the African market to achieve an exceptional performance, a year after its unbundling.

The company is recognised for its exceptional growth in earnings at a time 85% of the listed companies posted reduced earnings due to a slow-down in volumes and the impact of inflation on monetary values.

The company maintains favourably higher matrices on our financial stress score sheet which looked at three key categories over nine ratios operating efficiency matrices and fair liquidity ratios.

INNOVATION AND TECHNOLOGY AWARDSTHE AWARD RUNNER UP – TSL LIMITED

Through its Warehouse Management System, in 2019, the company invested in software that enables a more efficient management of its complex warehouse. The company is involved in the agro-processing industry and has high volumes of traffic in and outside of its warehouses. Investing in process efficiency will result in operational costs reduction and higher margins going forward.

OVERALL WINNER – RAINBOW TOURISM GROUP LIMITED’S GATEWAY STREAM

The award recognises highly innovative companies taking market leadership moves to introduce products and processes that help boost income and profitability.

Irrespective of geography, technology is changing the order in business and companies which adapt and streamline in sync, are seeing their businesses grow at exponential rates that have never been seen in the past.

When the company first made this innovation, it was simply a marketplace for hotels and restaurants products but it has since been upgraded and now offers a variety of products.

The product is set to start contributing significantly to the bottom-line by between 3-8% in 2020 cushioning income from hospitality, which has been affected by the Covid-19.

SUSTAINABILITY AWARD – ECONET WIRELESS ZIMBABWE LIMITED

The award is a new category which recognises strides made by listed companies in attending to Environment Social and Governance aspects around their business. Environmental, Social, and Corporate Governance (ESG) refers to the three central factors used in measuring the sustainability and societal impact of an investment in a company or business. This criterion help to determine better the future financial performance of companies and has gained traction in global investment markets. The company has made an impact on social indicators internally and outside in communities. It has also been a leader on environment aspects through renewable energy initiatives.

AWARD WINNERS




“Focus on your core business and leave everything else to us.”

WHO WE ARETSL Limited is an integral and intelligent handler of all movement

and commodities exchange in the agricultural value chain.

WHAT WE DOOf the approximately 24 touch points in the agricultural value chain – from seed

to shelf, we provide comprehensive solutions for at least 20 of them.

We provide agricultural inputs (chemicals, fertilisers and packaging), a market exchange platform and end-to-end logistics solutions to producers and

processors of agricultural commodities on our intelligent and integrated business, technology and industrial infrastructure platforms.

OUR VALUE PROPOSITIONWhen it comes to risk, cost and supply chain management, we are the only

integrated inputs, commodity exchange and logistics solutions provider that can say to the Zimbabwean agricultural industry:

WINNER

ECONET WIRELESS ZIMBABWE



Econet Wireless Zimbabwe is the 2020 winner of the Sustainability award. The award is a new category which recognises strides made by listed companies in attending the Environment Social and Governance aspects.

Environmental, Social, and Corporate Governance (ESG) refer to the three central factors in measuring the sustainability and societal impact of an investment in a company or business. These criteria help to better determine the future

financial performance of companies and have gained traction in global investment markets.

Launched on 10 July 1998 and listed on 17 September of the same year, Econet Wireless Zimbabwe has established itself as Zimbabwe’s largest provider of telecommunications services. The success story of the Company, including its key subsidiaries, transcends the financial muscle which has catapulted the group to become the heaviest counter on the Zimbabwe Stock Exchange (ZSE) in market capitalisation terms. The Group is

SOCIALLY RESPONSIBLE:

ECONET’S ROLE DESERVES

RECOGNITION

BY EQUITY AXIS

TO PAGE 38



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a pioneer of social and environmental initiatives.

CYCLONE IDAI RESPONSE INITIATIVES

In 2019, Econet wireless helped mobilise emergency relief support for the Cyclone Idai affected communities encompassing rescue efforts, medical emergency aid, food, water and blankets. Econet through its subsidiary companies donated RTGS$5 million assistance for victims of the deadly Cyclone Idai in Manicaland. The fund was disbursed through Higher Life Foundation, a charity organisation founded by Tsitsi Masiyiwa, wife to Econet founder, Strive Masiyiwa.

RUZIVO SMART LEARNING

Driven by smart technology learning, the platform aims to empower vulnerable children. A total of 600 000 beneficiaries accessed quality education through the Ruzivo Smart learning platform monthly, in 2019.

The programmes are in addition to various scholarships granted under the Higherlife Foundation which benefited more than 250 000 deserving beneficiaries.

FIGHT AGAINST CHOLERA

In 2018, Econet partnered with the Government, through the Ministry of Health and Child Care’s Department of Epidemiology and Disease Control, to offer centrally coordinated material support to

the nationwide effort to combat the cholera outbreak. The support included preventive items, such as hand sterilisation material, aqua tablets and special protective clothing for health workers, as well as case management supplies that include antibiotic medicines and IVR fluids.

The company launched a crowd funding initiative known as “Kanzatu-Nzatu” through Steward Bank, now a subsidiary of Cassava Smartech. The Company also raised awareness against cholera through sending out free SMS alerts to the public educating them on how the disease is contracted and spread. It also touched on how to avoid such proffering treatment education.

CLEAN CITY INITIATIVE

As part of the environmental, social and governance initiative, Econet also launched Clean City, a pan-African Mauritius registered entity under the Econet Group mandated to provide waste collection and disposal services.

Clean City offers Waste Collection Services, Recycling Services, Clean Water Services, Cleaning Services and Clean Energy. In light of Covid-19 pandemic, the company provide Covid-19 PPE (face masks, sanitizers, thermometers and latex gloves) to corporates in bulk.



“In 2018, Econet partnered with the Government, through the Ministry of Health and Child Care’s Department of Epidemiology and Disease Control, to offer centrally coordinated material support to the nationwide effort to combat the cholera outbreak.”

FROM PAGE 36

WINNER



Rainbow Tourism Group’s is the 2020 Quoted companies survey inaugural innovation and technology winner.

The award recognises highly innovative companies taking market leadership moves to introduce products and processes that help boost income and profitability.

Irrespective of geography, technology is changing the order in business and

companies which adapt and streamline in sync, are seeing their businesses grow at exponential rates that have never been seen in the past.

Globally technology businesses are leading the way as people change the way they do things. Customer tastes and preferences are changing and convenience, feel and costs are key.

When RTG first introduced Gateway Stream it was just a marketplace for hotels and restaurants. Through Gateway Stream RTG was envisaging creating a market gateway between providers of hotel services and those looking for satiation through these services.

You could think of it as Airbnb of Zimbabwe at this point. Airbnb is the world’s largest hotel group and this is the model RTG had at the point it introduced Gateway Stream in 2008.

RTG imagined an asset-lite future, where margins are very high and costs significantly lower, relative to income. Airbnb, without owning a single hotel property has taken over the global hospitality space through a virtual application and is now generating close to US$4 billion a year barely 12 years after the company launched.

For RTG the Gateway Stream business is proving to be more than an extension of the existing hospitality business as it has since diversified into other sectors and is now providing a gateway to a whole range of cross cutting services including an online shop selling a variety of goods, food and drink, experiences, events and venues and booking a ride.

The Gateway Stream enables users to book and pay for various services:

Hotels: The platform allows users to book for hotels/Lodges and pay online. There are currently over 15 000 rooms from 15 African countries listed on the platform.

“ RTG imagined an asset-lite future, where margins are very high and costs significantly lower, relative to income. Airbnb, without owning a single hotel property has taken over the global hospitality

space through a virtual application and is now generating close to US$4 billion a year barely 12 years after the company launched.”

Homes and Boats: These are alternative accommodation facilities from standard hotel rooms (Houseboats, Hostels and tents).

Online Auctions: The platform also has discounted prices for accommodation under the online auctions’ module.Holiday Packages: (Prepackaged and Custom made), Restaurants (Food & Beverages deliveries), Bars and Pubs, Shuttle services (Taxis and transfers), Groceries, Online Shopping, Events and Venues.

Benefits to partners include increased revenues from serviced markets, increased profitability, diaspora reach and earnings, customer retention, longevity of brand and a clearly defined trend of product on high and low demand. Benefits for customers include convenience, value, access anywhere anytime, on time deliveries by the door step, easy payments from across the globe and simplified shopping experience.



RTG Gateway Streamcelebrating innovation

RAINBOW TOURISM GROUP



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Soaring the seed

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is the winner

WINNER



SeedCo International is the 2020 overall Quoted companies top performing company.

SeedCo International produces and markets certified crop seeds, mainly hybrid maize seed across the Sub Saharan region. The company is dual listed on the Zimbabwe Stock Exchange and has a primary listing on the Botswana Stock Exchange.

SeedCo International was unbundled from ZSE listed SeedCo Limited, which owns 26% of the former, before its subsequent listing on the BSE and separate secondary listing on the ZSE. The pan African company expanded its footprint and widened its product offering across the region since the parent struck an equity deal with global seed giant Limagrain in 2015.

It has operations in more than seven African countries including Zambia, Kenya, Mozambique, Tanzania, Malawi, Nigeria and DRC. It also markets its products in the CCU region which includes South Africa and Swaziland among others.

The company’s diversified operations and markets helped stabilise its financial performance in 2019. Since its earnings do not include Zimbabwe, the company’s performance was not affected by the currency vagaries which affected most of the ZSE listed companies whose operations and markets are limited to Zimbabwe.

Likewise, its diversification moderated the impact of a recurring El Nino drought in most parts of Southern Africa. The

company continues to leverages on a growing African population and pivot role of Agriculture in achieving not only food sufficiency but economic growth.

In the period under review the company’s top-line grew by 19% while EBITDA and profit after tax soared by 59% and 62% respectively.

The performance was boosted by a double digit 37% increase in sales volumes as most of its SBU registered volumes growth.

The company’s solvency is not very healthy but given the high capitalisation levels expected to complete the expansion, we expect the condition to unwind in the mid-term as earnings growth outpace the growth in debt.

A favourable liquidity position however gives comfort on the short term outlook. We see the business as positioned for growth given the extensive research and development activities continuously being undertaken by the company leading to the introduction of new seed varieties, the roll out of technology driven plant and equipment as well as the support of agriculture by respective governments in most African countries.

SEEDCO INTERNATIONAL



SEEDCO INTERNATIONAL

SeedCo International

Masimba Holdings Zimplow Holdings

CCoonnggrraattuullaattiioonnss

ZSE Listed Companies

to the 2020 Zimbabwe Quoted Companies Survey Winners

FIRST RUNNER UP

WINNER

SECOND RUNNER UP

The Board, Management and Staff of the Zimbabwe Stock Exchange Limited (ZSE) congratulates all the winners of the 2020 Zimbabwe Quoted Companies Survey.

The Zimbabwe Stock Exchange Limited (ZSE) is a securities exchange regulated in terms of the Securities and Exchange Act (24:25) to provide for the listing and trading of securities.

The ZSE takes pride in all its issuers and you are all winners in our eyes.

Overall Winners



If Covid-19 is going to change the world as some have hypothesised, it surely will also change the way companies, particularly those that listed on the stock exchange, do investor conferencing.

Over the past two months we have witnessed a flurry of corporate activity online mainly limited to Annual General Meetings.

A majority of the 61 counters listed on the Zimbabwe Stock Exchange conducted their Annual General Meetings in virtual setups while those

COVID-19 &

Virtual Confer-encing

THE ZSE STORY

BY RESPECT GWENZI

Social gatherings have been cancelled, universities are moving classes online, and more companies are instituting mandatory telecommuting policies. These include social media giants Facebook and Twitter, Google, and Salesforce who have each asked their employees to work from home in recent weeks.

TO PAGE 46



© 2020. Deloitte & Touche. All rights reserved

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outstanding are yet to follow a similar route in line with their annual calendar.

These undertakings have followed mandatory obligations which listed companies have to follow.

Typically, most of the listed companies in Zimbabwe have a December year end and their Annual General Meetings are supposed to be held by June of the succeeding year.

The Zimbabwe Stock Exchange initially announced, late in March that it was giving listed companies an allowance to delay their scheduled AGMs.

With the realisation that Covid-19 was going to be with us for a prolonged period, the Zimbabwe Stock Exchange changed tact, encouraging companies to find ways of holding AGMs within the confines of Covid-19 regulations and laws guiding companies conduct.

The period between June and August saw companies reorganise with a view to conduct respective AGMs on virtual platforms. By end of August most the companies who had earlier indefinitely deferred AGMs rescheduled and successfully conducted these online.

Thanks to advancements in technology, a

number of video conferencing platforms have emerged over the years, which ultimately came in handy during this pandemic.

ZOOM, a Silicon Valley based video conferencing company started in 2011, stole the thunder. The application had a reported market share of 42,3% in video conferencing market share in the US as at April.

The number of daily users surged to 300 million in March 2020 as Coronavirus hit, which was 30% up compared to the December 2019 users.

Millions of people chose Zoom over other platforms, driven by its ease of access and good user experience.

However, the rapid growth in popularity has revealed some security flaws, including a vulnerability that allowed an attacker to remove attendees from meetings, hijack shared screens, and spoof messages from users. As a result, Zoom has been banned by governments for use on official business in Canada and Taiwan and numerous organizations including SpaceX and Nasa.

Be it as it may, most of the AGMs conducted by ZSE companies to date have been conducted via ZOOM.

Only First Mutual Life a listed financial services group, preferred a conventional AGM.

The majority shareholder NSSA, holds over 60% and its free float is not that significant, perhaps informing the preference for conventional conferencing.

The market solution for virtual AGMs in Zimbabwe has been mostly dominated by Transfer Secretaries.

Typically transfer secretaries maintain a company’s share register and are responsible for managing AGM proceedings.

Corpserv, a subsidiary of Escrow, dominated the space through its eagm platform. The company migrated the software solution from their related service in East Africa, where it has already been in use.

Corpserv thus achieved an early move advantage providing an online platform allowing shareholders to view AGM agenda items and on one half of the screen the visual presentation of proceedings by the board.

Typically, such systems would provide minutes of attendees and a transcript of the proceedings.

. Companies have increased their reach as more shareholders attend virtually without the hustles of travelling.

The cost of conferencing, which typically involve booking hotel ballroom venues, has been reduced, while the cost of time involved in the planning process has been reduced.

The virtual solution has also catalysed local companies’ adoption and acceptance of visual interfaces with stakeholders.

In the past most companies have been very hostile and against letting their engagements with analysts or shareholders beamed in visual form, perhaps for avoidance of scrutiny by the public.

Our take is that the preference for virtual platforms in the undertaking of business and conferencing is here to stay.

In other established markets, this had already been a preferred route as opposed to conventional physical engagements.

The global dynamics has been largely driven by geographical factors. The US has two prime stock exchanges the New York Stock Exchange and the NASDAQ which are both located in New York.

However the US markets attract investment from all regions across the world and over 20% of the stock market investments are owned or managed by entities outside the USA.

To effectively communicate with the investors, US companies have long used conference calls to address analysts and shareholders over which they present their results and attend to questions.

Gwenzi is the lead analyst and Managing Director at Equity Axis.

FROM PAGE 44



ZIMBABWEINDEPENDENT

Everyday News for Everyday People



THE latest available official price data shows that unblended (Zimbabwe dollar) inflation for July on a year-on-year basis sat at 837,53%.

The Zimbabwe Stock Exchange (ZSE) All Share index year-to-date grew by 503%. On a year-to-date (YTD)

basis, the ZSE grew by 735%. This writer expects year-on-year inflation for August to be around 800%. On that basis, the ZSE, as whole, treating it

as one compound equity asset has significantly fell short of preserving value against inflation. On a quarterly basis, the entire ZSE grew by 17,76% in the last three months. It is only in the July that the ZSE shed growth by 22,34% following the dramatic hiatus of trade on the bourse in compliance with a government directive. It is evident that the ZSE grew in defiance of Covid-19, but not enough to beat inflation.

Despite the ZSE failing to outgrow inflation, there are counters that registered real growth in share value on a year-to-date basis as at 31 August 2020.

REAL GROWERS

A total of 13 counters registered real growth in share value.The majority of shares in the real share value growth are pre-dominantly in the banking and financial sector, with a few in property and one in food.

Zimre Property is in the 900-1000% nominal growth range, marginally preserving value.

In the 1000-1500% nominal growth class we have seven counters,namely: Dairibord, Dawn, FBC, FMHL, FMP, ZB Financial and Zimre Holdings.These assets, not only managed to preserve value, but registered real growth but below a full multiple.

We have the double growers, growing

100% in real terms in the 1500-2000% nominal growth category. These are Art Holdings and Rainbow.

In the 2000-3000% nominal growth category we have Bindura. Bindura managed to more than doubleits share price growth in real terms.

Cafca and CBZ registered treble growth, registering two multiples of real growth.

Real growth in year-to-date share prices for property counters may reflect the tendency to acquire real assets to defend financial value against sustained inflation. As for banks and mining counters that registered year-to-date share value growth may reflect theentry of a powerful investor with deep pockets and outsized influence in the political economy.

REAL SHRINKERS

Forty counters experienced a negative growth in share prices on a year-to-date basisas at 31 August. Portland Pretoria Cement and Unifreight grew by less than 100% in nominal terms but shrunk in real terms. In the 100-200% nominal category are Edgars, Lafarge, Nampak and Old Mutual Zimbabwe. They were7 times out-paced by inflation, causing

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serious value destruction.

Cassava, Econet and Riozim grew by 200-300% in nominal terms, but value was destroyed in real terms.The first pair’s negative growth in share value in real terms is largely due to regulatory challenges surrounding its operation that cut sources of volume growth.

BAT, Delta, Innscor, MedTec and Simbisa grew by 300-400% in nominal terms, but still in shrikange in real growth terms.

In the 400-500% nominal share growth category are Afdis, Africasun, Axia, Fidelity, General Beltings, Masimba, Meikles, Natfoods, Padenga, StarAfrica, TSL and Zimpapers. In real growth terms, these counters registered a contraction.

500-600% Hippo, Truworths, Turnall, Willdale and Zimplow occupy the 500-600% nominal growthcategory, a contraction in real terms.

In the 600-700% nominal growth category we have Ariston, Barclays, MASH, NMBZ, NTS, Powerspeed and Proplastics. They experienced marginal shrinkage in real terms.

In the 700-800% growth group we have OK Zim and Seed Co Ltd. These almost matched inflation, growing almost at the same rate as the All Share index.

What is clear from the data is that the traditional bellwethers have failed to defend value against inflation. The blue chip counters are mainly in food, communication, agriculture and in cement. This largely reflects a shrinkage in disposal incomes among consumers. Most of the blue chips in their trading updates recorded a decline in

volumes of sales, reflecting a tough business environment for 2020.

“On a quarterly basis, the entire ZSE grew by 17,76% in the last three months. It is only in the July that the ZSE shed growth by 22,34% following the dramatic hiatus of trade on the bourse in compliance with a government directive.”

With the economy expected to shink by 10% as per the most current projections by the Bretton Woods Institutions, the ZSE growth trend in real terms is indicative of the underlying growth impendiments. Zimbabwe was already on a negative growth path before Covid-19 took root.

Covid-19 seems to have compounded the growth challenge. The story of share value growth performance in real terms on a year-to-date basis tells of a struggling economy. The projection by Treasury at the beginning of the year that 2020 would be twenty-plenty has proved to be elusive so far.

Brett Chulu is a management consultant and classic grounded theory researcher who has published research in

academic peer reviewed international [email protected]



JOYCE BENZA

A resilient Cybersecurity strategy must

continually evolve in order to remain

relevant to the environment.

The Strategies in the Covid-19 pandemic environment must also align with prevailing and possible future anticipated threats based on the “current and next normal”.

Yester-year strategies for may no longer defend the organisations against the

new evolved cyber-attack strategies. A former Cisco CEO, John Chambers once said,

“There are two types of companies, that is, those that have been hacked and those who don’t know they have been hacked”, and hence strategies that ensure identification of possible cyberattacks become pertinent.

Simply, Cybersecurity can be defined as the practice of defending computers, servers, mobile devices, electronic systems, networks and data from malicious attacks.

Cybersecurity is also aligned to the CIA (Confidentiality, Integrity and Availability) triad,

which is a benchmark model, used to evaluate the Information Security of an organisation.

Information and Data security classification is also critical in this regard.

In light of the pandemic, companies had to re-strategise and prioritise remote working frameworks and include them in their budgets.

This has necessitated patching up and upgrading existing virtual private network (VPN) and infrastructure designs with emphasis on security.

An analogy of someone boarding a flight can be applied to illustrate the possible levels of Cybersecurity required in an organization.

Imagine you are driving into the Airport car park, you are stopped at the entrance boom, and you obtain your parking ticket and proceed. That becomes your first level of security. You park your car and proceed to the Departure hall where your relatives accompanying you are requested to stop at a certain point, and only you are allowed to proceed to the check in counters. That becomes your second security check point.

At the check in counter you have to produce

Cybersecurity Strategies In The NEW NORMAL

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your passport and other identification, for the system and online check in verification.

The next point is at the immigration and customs counter security check before you proceed to the scanners. Your luggage and you are security scanned and allowed to proceed, if all is in order. If you are a first class or business class passenger you will proceed to the VIP lounge while if you are an economy class passenger you go to the general lounge.

All the check points in the above analogy can similarly be applied to the Cybersecurity levels as they relate to the security Framework required at each point, depending on an organization’s requirements and policies.

Since the pandemic has resulted in accelerated remote virtual working and collaborative processes, this has increased the Cybersecurity check points which now incorporate remote home working frameworks. The levels and number of checkpoints will vary based on the size and complexity of the environment and infrastructure to be secured.

Given below are some of the common checkpoints.

DATA CONFIDENTIALITY AND INTEGRITY

The confidentiality and Integrity of data is of paramount importance and the client data on state of health and other personal detail is considered highly confidential and hence needs protection.

The criticality in this regard becomes more relevant when the processing of such data for underwriting purposes has to take place from homes and other out of office locations.

Likewise, data processing is also considered highly confidential and the security of networks/wifis at the remote environments becomes an imperative.

As a basic requirement Virtual Private Networks (VPNs) for non-cloud bases systems have had to be upgraded to take care of this critical requirement.

END POINT SECURITY While remote access is a necessary imperative in the Covid-19 pandemic context, it can also be the weakest point of the process. The protection of the remote access environment to the

organisation’s network becomes very critical.

APPLICATION SECURITYThe actual Application System could also present

some risks, even if the networks have been secured, hence the security in relation to the transactions taking place at this level is a critical requirement.

E-MAIL SECURITYEncryption of sensitive information in transit,

such as via e-mails, offers protection and guards against phishing where the attacker can masquerade as a genuine entity / person but usually the domain would be misspelt, there is a suspicious attachment, or it creates sense urgency etc. Frameworks with Zero Trust policies, based on maintaining strict access controls will ensure that such mail is dropped or dumped in junk mail.

Database and Infrastructure SecurityMost of the information being accessed and

processed usually sits on databases and the transactions are accessed from these platforms. The security in this regard becomes a must.

Cloud SecurityMost companies in Zimbabwe have implemented

and are using Cloud based Systems. The protection of the data in this regard is also important as vulnerabilities in relation to IoT (Internet of things) could present major challenges compared to on premise environments. If we apply the airport checkpoints analogy above, consideration of the other cloud systems for online collaboration such as MS Teams, Zoom, Google Meet and others also fall under this checkpoint.

MOBILE SECURITYThe ubiquity of mobile devices and the extent

to which these have been enabled for key staff, Agents, Brokers, Customers and other stakeholders to access business applications, also requires that this checkpoint be managed and adequate security be implemented to ensure that there is adequate protection.

IDENTITY MANAGEMENTThis level of access also includes physical access

checks such as biometrics or physical entry check points to the organization. It can also include the

logical access to the systems through log ins, password protection and other authentication levels. What if the spouse and/or the child gets access to the system, in the home environment, where is the check point? The evolved Business Continuity Plans would obviously give guidance on what procedures to follow.

DISASTER RECOVERY IN THE REMOTE ENVIRONMENT

While all the logical monitoring and management can be done remotely either from the Office or the home environment of the technical staff, there is an element of the physical risks to items such as laptops, printers and other devices. The relevant recovery evolved procedures should take care of this requirement.

PREPARING FOR THE NEXT NORMAL Under the Next Normal, the Cybersecurity Strategies should ensure that the new security landscape is accommodated. Monitoring customer digital needs will be an imperative in order to craft an appropriate Cybersecurity Strategy for granting them access to the systems.

Permanent remote working for a certain group of employees is envisaged, while others, specifically lean front office teams will be expected to come back to the office. Limitation of visiting clients to offices will be maintained, which will mean that online and collaborative communication will be enhanced, thereby requiring Cybersecurity strategic focus supported by relevant budgets.

Joice is the Managing Consultant and CEO of X-Pert Solutions, which focuses on

delivery of Information and Communications Technology (ICT)

Solutions, Cybersecurity and Project Management. She is a Business Continuity Planning and Cybersecurity Expert and a Seasoned Project Manager with over 35 years diverse experience and expertise, gained locally and abroad, which spans

across the private and public sectors with special focus in the Financial Services

Sector where she successfully facilitated Digital Transformations through

implementation of a multiplicity of Business Solutions which include ERPs, CRM

Solutions and Cybersecurity.

Joice is the current Vice President of the Computer Society of Zimbabwe. She can be

contacted on

Telephone; +263 4 2006210, Mobile +263 772 239 842, [email protected]

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