Why ZSE investors love beer….and some telecoms too

In an economy dogged with liquidity challenges, company closures, adverse legislation and massive corruption one can only dream of a stimulant which can drive the taste buds of investors-whether foreign or domestic.

The once vibrant Zimbabwe Stock Exchange has struggled over the past few years and its performance has always been benchmarked by political developments in the country. Even through the storm the Zimbabwe Stock Exchange at one point in July 2013 moved up the rank to fourth position in terms of weekly turnover before angrily reacting to the 31 July election by shedding more than 10% of its value.

Since mid-2013 there has been no consistency on the Zimbabwe Stock Exchange in terms of trading activity. The liquidity challenges bedevilling the Zimbabwean economy have mainly been cited as the chief cause of investor apathy. Despite of all these sad developments there are two things which still drive interest on the ZSE – BEER and telecoms.

Delta Beverages and Econet Zimbabwe have been the main driver of the Zimbabwe Stock Exchange recently and it is not very intriguing as to the reasons why. From the face of it, Econet and Delta represent the minority of the corporates which have always followed good corporate governance as a religion. These two companies are led by leadership which has disassociated itself from the growing constituency corporate bad boys in Zimbabwe. According to numerous studies, company disclosures and constitution of board and management largely influence share prices. It is with this in mind that investors are attracted to Delta and Econet, the simple language being “invest in corporate governance.”

The advantage that these two major bulls of the stock exchange have in the market is that they are very dominant in the way the go about their business. Delta in its own way is like the monopoly of the beverages sector as it swallowed all competition through incorporating them into the giant they are but at the same time does not disturb the way these companies work but help them be more visible and competitive in the market. Econet also has been the symbol of innovation in the country as it leads by a far mile compared to its competitors and it’s the only mobile service provider that listed on the local bourse. Currently the listed mobile giant boasts the highest numbers of clientele in terms of use on EcoCash a mobile wallet that seeks to prop up financial inclusiveness in the country and region at large.

Looking closely at Econet and Delta one can see a monopolistic-like business structure which has been built around them. Econet controls the country’s telecoms market with 60% of the total market share in its books. Delta on the other hand faces little competition from imports mainly. It has got close to 90% of the beer market firmly under its arm. Market share commanded by these two firms might have charmed the investing community such that the two have become heavyweights on the ZSE. It is a fact really that the ZSE leverages its gains on these two firms.

For most Zimbabwean corporate profitability is just more than a dream. Posting a profit is more than a triumph for most companies but Econet and Delta have consistently posted good returns since dollarization of the Zimbabwean economy. This has added flavour to the investors taste in these two counters more because prospects of dividends are high with these corporates compared to any other.

Despite Econet and Delta being near monopolies the future prospects of the two companies shine bright. Despite slow economic activity people will continue drinking beer and texting their loved ones-won’t they! Delta has invested and continues to invest heavily in plant and machinery which can drive the company’s production capacity upwards. Econet has also widened its wings to other economic sectors with the recent acquisition of stake in Steward Bank making headlines and the EcoCash product becoming a resounding success. This clearly shows that the two corporates are looking to the future and investors always salivate when looking at such counters.

Above all in a country blighted by corruption and inconsistent policies the only way for local companies to be attractive to both local and foreign investors is to embrace corporate governance issues and have proper business ethics that fully erode corruption for fair and reliable business dealings. In an economy plagued with vices and hardship Delta and Econet provide an oasis of hope to the investors still willing to do business with the Zimbabwe Stock Exchange………..Hope the beer won’t get you drunk Mr Investor! At least for now investment in beer and telecoms is safe and offering rewards.