In recent years, substantial unemployment rates in Zimbabwe have seen many migrate to other nations, including the UK, to work and send funds back to relatives in the country. Last year, the result of this was $1.4 billion in diaspora remittances to Zimbabwe and an economy that operates very differently from many around the globe, particularly those in the West.
Nyaradzo Nyimo, Principal at Spear Capital, argues that this creates an attractive opportunity for Western investors, though explains that it needs to be done in the right way.
“Diaspora remittances are a key source of consumer spending in Zimbabwe. This has surged from $1 billion in 2020 to $1.4 billion last year and is on track to surpass this value this year. This presents an attractive opportunity for investors,” says Nyimo.
Nyimo explains that these funds, which come into Zimbabwe from family members living abroad, provide buoyancy to various sectors such as retail, as they support increased consumer spending.
According to World Bank data, the inflow of remittances to sub-Saharan Africa increased by 6.2% to $45 billion in 2021, a surge which Nyimo says has coincided with a decline in foreign investment on the continent. Last year, foreign direct investment to Zimbabwe dropped from $194 million in 2020 to $166 million.
According to the International Organization for Migration, over 3 million nationals currently live outside of Zimbabwe. As such, the financial boost that the diaspora provides is vital to the local economy.
Against this background, Spear Capital has recently completed its investment in the food manufacturing business, Associated Foods Zimbabwe Private Limited (AFZ). The business produces a range of popular food products under the Mama’s and Farmgold brands. The provision of basic foods means that AFZ is supporting the needs of Zimbabwe’s large consumer market.
“While we acknowledge that Zimbabwe is a complex market for outside investment, with some even calling this a VUCA (volatile, uncertain, complex and ambiguous) environment, Spear Capital has an experienced team on the ground which understands the market and its challenges,” explains Nyimo.
“For companies that take the time to understand the market, and to engage with the relevant players on the ground, there are plenty of investment opportunities in Zimbabwe. One can’t ignore the significant contribution of the informal economy, so it is important to be able to tap into this sector as well.”
“We remain bullish about the geographies and sectors where we invest.”