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Local investors dilemma


With small returns on the Zimbabwe Stock Exchange (ZSE), local investors with limited funds have been urged to pool their resources and look for alternative investment options.

Since dollarisation three years ago, small investors have been searching for viable investment options with little success as returns on their investment has in most cases been insignificant.

Those that had invested on the stock market saw value being eroded after shares underperformed owing to economy-wide liquidity constraints and indigenisation worries.

Banks have not been offering favourable interest rates on savings, a development that has discouraged banking culture in the country.

Financial institutions, including banks, have also not been providing enough incentives for locals to invest.

Economist John Robertson said the possible way forward was for small investors to form partnerships.

Form partnerships. This is a characteristic that is missing in this country, said Robertson. People lack trust for each other in this country. Small investors can combine their skills and produce a product that they can sell.

There is no point in buying shares that will give you a few dollars when you can take $3 and sell something and get $10 and produce more. It however requires knowledge of what the market wants.

A few listed companies such as Innscor, Colcom, National Foods and Fidelity Life last year declared dividends.

Robertson said investors can either look at a start-up or buying into an existing business.

He said only blue-chip counters were currently declaring dividends while penny stocks were not.
Robertson said people may also invest in themselves especially in skills that they do not possess.

Another analyst said investing in unit trusts was another available alternative given that risk is spread over many counters.

A unit trust is a pool of funds that is invested in several companies as a way to spread the risk.
Investors can invest with as little as $100 in a unit trust and the risk is spread, the analysts said.

An official from the ZSE said only blue-chip counters were declaring dividend while small counters were not, meaning small investors could go for long periods without getting a dividend.

Money market fund managers minimum is $10 000 capital for 14 days or 90 days. The amount is prohibitive for investors, he said.

He noted the stock market may be a better option for small investors when the economic environment has improved.

Some listed companies have since dollarisation failed to declare a dividend, leaving small investors in a quandary as to what they should donext.

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