Bullish Thoughts: In search of political and economic alpha

Mon Feb 19 12:11:33 CAT 2018

 <mailto:info at bulls.co.zw> 

It has been long since the last Bullish Thoughts column. A lot has happened and will summarize it by saying for the first first time since the new millennium, the ballot paper won’t be bearing the names of Robert Mugabe & Morgan Tsvangirai.

May Robert enjoy his “retirement” with his two grandchildren and may Morgan Rest In Peace. We have seen enough literature around what could have been for the two with the latter being likened to Moses and the promised land of Canaan.

In Search of Political & Economic Alpha

The two men mentioned above have altered the dynamics of Zimbabwe in a seismic way. We have seen a heightened search for political alpha by the current incumbent President of Zimbabwe under the mantra of Zimbabwe is Open For Business.

The traditional key source markets for sustainable capital, except the USA, has expressed support for the “New Dispensation”. China has upped the ante signing deals for $150m upgrade of Airports as well as having the still “non-descript and nameless” Chinese taking over at ZISCO. The chrome sector has been alive for some time.

The President has also gone further to announce key amendments to sticky legislation such as Indigenisation and Land Reform.

He has also gone further to promise free and fair elections and even said the government would invite election observers like the European Union, the United Nations and the Commonwealth. Only a man confident about his political alpha would take such a risk given the politics of Africa.

Whatever our views about the man as RGM’s “enforcer”, no one is in doubt about the J-Curve shape his political capital and alpha has taken. He even had the luxury of describing MRT as an icon of democracy and even hazarded describing the political journey of MRT.

Meanwhile, in the opposition political party there is turmoil. The consensus in various media is that Nelson Chamisa has the highest potential for high political alpha and thus capacity to woe the electorate. The jury is still out whether he will survive the internal politics to be the candidate. Many analysts are beginning to say that in the short term, it will be be difficult to dislodge EDM from presidency so the work is cut out for opposition. A key metric relying on political capital and alpha is the parliamentary seats which are crucial to ensure checks and balances in the way the laws move and hence how the country is governed for everyone else.

The bottom line, positive or negative political alpha aside, like many have been saying is if the elections are to be held in June (some supposedly official June date is floating around) or early July this year ...then we have less than 145 Days to the 2018 Election. Minus holidays and weekends it is about 100 days really. Many politicians in particular the opposition are under pressure to have their houses in order ... for this will be a viciously fast Sprint !

Corporate Lessons from the Two Main Political Parties

The ruling party succession matrix boiled over last year and is literally water under the bridge. The opposition succession matter has been labeled a circus in some circles with accusations of constitutional violations among others. It is not the intention of this article to go into the merits or demerits of what happened at the end for the ruling party neither will there be an attempt to do crystal ball gazing on the opposition outcome.

What Bullish Thoughts wants to draw attention to is the notion that some crucial corporate lessons can be learnt from these political developments. The key lesson for corporate leaders is to have a succession plan that’s executable. Bullish Thoughts would hazard to say perhaps these succession plans are there on paper but haven’t been tested because the people in the C-Suite have been there for as long as the companies has existed and have no intention of leaving anytime soon despite the glaring destruction of shareholder value in some instances. The key question is thus, are those plans still executable. Bullish Thoughts knows that many HR Consultants have attempted and possibly succeeded in having corporates agree to have the plans. But do they even have the names of people in them or there are just gaps with nameless people. Are those people in the succession matrix even allowed to a chance to substantively act in those positions and make useful corporate decisions like they would if the chance to fully lead the organization presents itself. Or that process is left to chance? It’s really food for thought for poor succession planning usually leads to corporates losing crucial talent at the top.

New Dispensation: Corporate Preparedness

Caption: Official opening of American Franchise Pizza Hut on 16 February 2018

Bullish Thoughts has been wondering a lot lately and even discussed with a number of colleagues about the preparedness of local corporates to compete in the New Zimbabwe especially given that the markets are being opened.

It appears the foreign businesses are at the forefront of chasing shareholder alpha while local businesses remain largely incapacitated. Just last week we witnessed the opening of the famous American franchise, Pizza Hut at the Sam Levy Village. Bullish Thoughts is just wondering what’s going on through Zed Koudinaris’ mind right now especially given Zimbos’ affinity for all things foreign. Portuguese Chicken Hut will also soon at Avondale Village. Soon there will be a Burger King, a McDonalds etc. Will Zimbabwe grown businesses make it against well oiled competition?

While competition is good for the consumer, will the affected companies last? Will there be meaningful job creation? Perhaps that’s a conversation for another day but bottom line is foreign competition is heating up. The Pepsi plant is almost about to get online. The Trade Kings plants are on schedule for local manufacturing despite challenges with forex shortages.

In Search of Alpha on the ZSE?

Today, Bullish Thoughts will give the ZSE a cursory glance. There is so much fear and loathing on the bourse. The market is headed for December 2017 reporting season and ZB already has been first off the blocks. 

The new song amongst analysts is that share prices are re-rating to align with future corporate fundamentals and slowly starting to price in actual hard US$s. There are many who are still hung in the ridiculous gains of November 2017and think they can still get those returns in 2018.

The only piece of advice Bullish Thoughts can give to would be investors is that this time around dart throwing onto the price sheet is not going to cut it. There is not much of bad news to go around and push prices up. Proper analysis is required to inform asset allocation and stock picks. This can’t be like a Bitcoin investment where no analysis is useful because there is nothing behind it.

Invest Wisely is your search for alpha!

Invest Wisely!

Bulls n Bears 

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