Diaspora Zimbabweans find safe haven in US dollars and real estate

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By Business Report

HARARE – Diaspora Zimbabweans are the target of a new wave of construction and property development investment vehicles, as confidence in the country’s banking sector wanes.

Banks too have been foraying into mortgage-based property developments targeted at Zimbabwean expats settled in countries such as South Africa and the UK.

The Financial Sector Reform Initiative says that “Zimbabwe is at heightened risk of bank runs because of low liquidity and lack of confidence” in the banking sector.

“Despite Zimbabwe’s dollarised system and the presence of a few well-capitalized banks (particularly foreign-owned and large), liquidity risk is still high. Because of these risks, it is necessary for the Zimbabwean government to explore and implement a comprehensive plan for addressing bank vulnerabilities,” it notes in a report.

As Zimbabwe battles currency weakness and a flush of foreign currency from the diaspora, which now outstrips foreign direct investment, investors are “focusing more on the real (estate) sector” which is largely “a store of value alongside equities” and other asset classes, said a real estate consultant from a Harare-based property development company.

Real estate companies and banks as well as pension funds are now being pursued by other firms that are seeking investments to further enhance their property portfolios, especially as foreign capital wilts.

Analysts at Knight Frank say, “there has been ongoing major development of shopping malls in Zimbabwe” in the past few months.

“Fuel station developments within the city continue to be on the increase. The first Real Estate Investment Trust, the Tigere Property Fund with a property portfolio valued at US$22 million (R43m) listed on the Zimbabwe Stock Exchange. More similar listings are expected in 2023,” the analysts said.

Diaspora Zimbabweans, who have been pouring in money into the sector, are now largely shunning the financial services sector for investment, say players in the real estate industry.

“Hyperinflation wiped out our capital to nothing. Real estate is lucrative now in this day and age where the majority are crying over eroded pensions and banked money losing its value,” Ken Sharpe, the CEO of West Property, which has just listed on the Victoria Falls Stock Exchange, told Business Report.

Hyperinflation is ravaging Zimbabwe once again, eroding local currency savings and earnings. Many Zimbabwean investors settled outside the country are opting for residential and commercial real estate development.

The VFEX is a dollar only stock exchange that seeks to give investors foreign currency returns. It has seen a sudden flux of listings, and migrations from the main board Zimbabwe Stock Exchange in Harare, the capital.

“We have decided to list because of the numerous benefits it holds for shareholders. Shares will be traded in US dollars, thus no capital gains,” West Property said in a statement.

Its initial public offering on the VFEX will be targeting diaspora Zimbabweans. The company is touting its offer on VFEX as a better investment alternative.

Other construction sector focused companies such as Khayah Cement (formerly Lafarge Zimbabwe), have already forecast growth in the industry.

“The overall market demand continues to grow driven by the individual home builders segment as well as ongoing major government infrastructure development projects. The company is well positioned to take advantage of this growth and the increase in installed capacity (for cement),“ said Khaya Cement in a recent trading update.