Netherlands based investment research firm, Amstel Securities says it considers Zimbabwe to be “the final frontier market in Africa” and a high conviction idea ignored by investors.
In its market analysis of the country’s post-crisis investment opportunities, Amstel Securities, said “Zimbabwe’s economy can easily triple in size to over $12bn by 2015”, propelled by “dollarisation”.
The country’s economic planners see nominal gross domestic product (GDP) at $5,5 billion this year from $4,4 billion last year.
“A key driver for growth is the country’s mineral wealth, especially in low-cost platinum production with new projects worth over $1bn underway,” said Amstel.
“Zimbabwe offers significant opportunities in agriculture, hydro power and tourism.”
The company said following a decade of decline, it forecasts that tourism will generate over $1bn in revenues by 2015, despite Zimbabwe’s high perceived country risk.
The country’s mineral wealth is expected to be the major driver of growth through the exploitation of low-cost platinum production, compared to high-cost platinum production in South Africa.
Investments in platinum have already attracted over US$1bn in new investments this year.
The company notes that recovery potential of the country as large.
“As a matter of fact some estimates currently suggest that the Zimbabwe economy is already double the size of recent IMF estimates of just US$4,4bn (2009),” said Amstel.
Beyond mining Zimbabwe offers large opportunities in agriculture, cheap hydro power, and tourism, which after a decade of decline has finally revived.
Amstel forecasts tourism receipts to double in size to US$1bn by the year 2015.
At the end of 2008, the country was effectively bankrupt and de-facto the Zimbabwe economy had become dollarised by year-end 2008.
The dollarisation has provided significant benefits to Zimbabwe.
The economy has been fully re-monetised and financial re-intermediation has helped to enforce a new fiscal discipline in the country.
These improvements in monetary, fiscal and economic policies have made Zimbabwe a much more vibrant economy, with good further recovery potential.
Amstel said global politics is taking a new constructive view of the coalition government of President Robert Mugabe and Prime Minister Morgan Tsvangirai.
This may lead to substantial debt relief for Zimbabwe in the medium term.
The economic and monetary policies in Zimbabwe have been strengthened recently according to the IMF, while international relations have improved.
“While post-conflict Zimbabwe is regarded by many investors as a distressed investment play, we feel strongly that Zimbabwe has good further recovery potential.
“Investing in Zimbabwe, Africa’s final frontier market, therefore is likely to be highly rewarding. The economy is more vibrant and dynamic than what most investors believe.
“Zimbabwe’s vast mineral wealth clearly indicates that the country is much richer than what official macro statistics indicate at first sight.”
The country sits on one of the world’s largest deposits of diamonds, gold, nickel and platinum.
Investors should look at the success story of neighbouring Botswana in order to realise how large the investment potential of Zimbabwe in reality might be.
The Botswana economy shows many similar characteristics compared to Zimbabwe and applying Botswana GDP indicators to Zimbabwe imply a potential for Zimbabwe to be able to triple in size.
Amstel said applying a more conservative indicator for the country’s potential, an investor could also assume a return for Zimbabwe to its 1997 GDP levels, which was US$8bn, and implies a doubling of Zimbabwe’s GDP in the medium term.