Zimbabwe ranked worst investment destination amid currency fluctuations

Zimbabwe has been ranked as the worst investment destination in Africa, according to the Rand Merchant Bank (RMB)’s latest report, due to its history of policy inconsistencies and currency fluctuations.

The RMB Where to Invest in Africa 2024 Report presents a comprehensive analysis of 31 African countries, identifying the primary drivers of each country’s performance and informing their subsequent ranking.

The report also offers expert guidance on how policy interventions can be strategically employed to enhance countries’ future performance and their relative attractiveness to investors.

Despite its rich mineral resources, Zimbabwe has been ranked as the worst investment destination in Africa, scoring number 31, the last.

The report mentioned the issue of policy inconsistencies that the government of Zimbabwe has been employing since the hyperinflation of 2007 and 2008 to today.

“Many will recall the painful height of Zimbabwe’s hyperinflation. The currency hit the second-most severe rate of devaluation ever recorded in 2008. The only example of a more dire devaluation is post-World War II Hungary,” the report noted.

“Between March 2007 and November 2008, Zimbabwe recorded a maximum monthly inflation rate of 7.96 x 100 percent. By contrast, Germany’s inflation of the Reichsmark in 1922/1933 reached a monthly peak of 29,500%.77

“The mineral-rich, former breadbasket of southern Africa halted the printing of its own currency in April 2009 and the country began relying on foreign currency.

“This introduced a period of stability. However, this was short-lived. A new domestic currency (ZWL) was launched in 2019, and rampant inflation ensued.”

The report further noted that in an effort to combat the ZWL devaluation, Zimbabwe’s central bank governor, John Mushayavanhu, introduced a new currency called the “Zimbabwe Gold” (ZiG) in April 2024 which is backed by gold and foreign currency reserves.

The report said that while the Zimbabwean authorities assure that the ZiG will be supported by equivalent values in gold or foreign currency, citizens and investors remain skeptical, having been promised a stable currency before.

“Authorities claim to be committed to ensuring that the ZiG is backed by the equivalent value in precious metals (mainly gold) or foreign currency. However, Zimbabweans have been promised a stable currency before.

“Markets will decide how much value the latest promises hold,” the report noted.

Meanwhile, the RMB Where to Invest in Africa 2024 Report ranks Seychelles as the best investment destination in Africa, followed by Mauritius.

The report, however, noted that the high rankings of Seychelles and Mauritius needed to be considered in the context of their small economies and populations, which may limit their attractiveness to investors despite their other positive attributes.

“The top rankings of the Seychelles and Mauritius need special context because of their small economies and populations. This is a more robust approach than lowering the weighting of these two measures across the board.

“In short, the limited size of these markets is a barrier that many investors will not overcome, despite the many other positives,” the report stated.