AFRICA RESOURCESINVESTMENT CONGRESS

IRONMONGERS’ HALL, CITY OF LONDON ● TUESDAY-WEDNESDAY, 14-15 JUN 2011

www.ObjectiveCapitalConferences.com 1

The Zimbabwe investment opportunity Ritesh Anand –Invictus Asset Management

Investment Landscape in Zimbabwe“A Fund Managers Perspective”

25 March 2011 Ritesh Anand

OVERVIEW

3

Strong Fundamentals

The Lost Decade

A New Beginning

• Highly educated and skilled population

• Good Basic Infrastructure

• Diversified economy

• Strong macro economic fundamentals

• GDP fell from $9.5bn in 1997 to $3.5bn in 2008.

• Hyper-inflation - peaked at over 500bn percent

• Political chaos and economic mismangement

• Formation of Government of National Unity in Feb 2009.

• Dollarisation

• 2009: First Real GDP growth since 1997

• Underleveraged (due to the effects of hyper-inflation)

STRONG FUNDAMENTALS

Zimbabwe: Historical and Forecast Nominal GDP

4

7% GDP growth 10% GDP growth 15% GDP growth

0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

GDP forecast to double within a decade to >$9bn

Broadly diversified economy

2009: Real GDP growth for the first time in over 10 years

Good infrastructure

Highly educated population – amongst the highest literacy rates in Africa*

THE LOST DECADE

Zimbabwe YoY GDP growth 1996 to 2008

5

Zimbabwe vs. Zambia GDP 1995-2009E

Source: IMF

-20%

-15%

-10%

-5%

0%

5%

10%

15%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

The Lost Decade

16

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

14

12

10

8

6

4

2

0

Zambia Zimbabwe

Zimbabwe’s GDP was historically 2x that of Zambia. This relationship reversed in 2002 and today Zambia’s GDP is approximately 3x that of Zimbabwe

Significant fall in GDP from US$9.5bn to $3.5bn in 2008

Hyper Inflation – over 500bn%

Political Chaos

Land acquisition program

A NEW BEGINNING

Risks

2008 2009 2010 2011

6

PROGRESS MADE SINCE 2009

7

Bank deposits Government revenues

Beverage consumption Mobile subscribers

7.3x

20x

2.7x

3.3x

KEY DATA AND FORECASTS

8

Real economy 2008 2009 2010E 2011E 2012E

Nominal GDP $bn 4.96 5.62 6.72 8.08 9.32

Real GDP Growth YoY, % -14.8 5.6 8.1 9.3 9.5

GDP per capita $ 423 479 573 689 794

External sector

Trade balance % of GDP -19.6 -28.8 -15.2 -14.7 -12.9

Current account balance % of GDP -15.7 -16.5 -15.5 -10.6 -9.6

Fiscal sector

Government revenue % of GDP 3.3 22 32.1 33.4 33.5

Government expenditure % of GDP 6.4 25 29 31 32.1

Government balance % of GDP -3.1 -2.8 -3.1 -2.4 -1.4

Government gross debt % of GDP 108 110 95 83 76

Monetary policy

Inflation %YoY, YE n/a -7.7 3.5 5.4 6.1

MACRO ECONOMIC INDICATORS

GDP GROWTH

9

GDP Growth by Sector 2008 – 2011E Contribution to GDP, 2010

CAPACITY UTILISATION IN MANUFACTURING SECTOR

10

Significant improvement in capacity utilisation since 2008...

BANKING SECTOR

11

ZIMBABWE INVESTMENT FLOWS

12

Investment flows still low due to political and regulatory uncertainty

THE INVESTMENT CASE FOR ZIMBABWE

ZIMBABWE’S INVESTMENT CASE IS UNDERPINNED BY AN IRREVERSIBLE PROCESS OF POLITICAL REFORM AND MATURITY …

14

…. AND AN UNDERLYING POTENTIALLY DIVERSE ECONOMIC VALUE WITH A STRONG HUMAN CAPITAL BASE…

15

….MAKING THE COUNTRY, A FRONTIER MARKET FOR SIGNIFICANT VALUE UPLIFT ESPECIALLY FOR “FIRST-MOVER INVESTORS”

16

ZIMBABWE IS WELL ENDOWED WITH RESOURCES

17

Over 40 different minerals have been extracted to date with the country boasting significant quantities of key resources including:• The second largest platinum reserves in the world• Kimberlite diamonds in southern Zimbabwe and alluvial gems in the east believed to be among the largest find in recent times• Sizeable gold deposits scattered around the country, with a total of ~13Mt of estimated resources• ~502 million tonnes of recoverable coal reserves, and 500 million cubic metres of coal-bed methane suitable for electricity generation

At its best, mining has been a strong contributor to the Zimbabwean economy• Contributed ~7% to Zimbabwe’s GDP in 1986• Directly employed up to 60,000 people with numerous others in support industries• Accounted for over 50% of Zimbabwe’s foreign currency earnings

ZIMBABWE STOCK EXCHANGE

The ZSE is a relatively well established, tradable, well regulated exchange by regional standards

18

Market Cap $4.41bln USD (June 2011)

Average Daily Trade

$2.8mln (5 months of 2011)

Settlement Risk

Settlement risk exists because of the use of physical scrip and the lack of a meaningful guarantee fund. The leading custodians, Stanbic, however, is internationally reputable.

Exploration Risk

Despite a perceived lack of ownership rights within Zimbabwe this has primarily been limited to farmland, and mineral rights to a lesser degree. Indigenization legislation will eventually be mitigated through a compromise agreement.

ZSE Market Cap U$ Billion

Top Ten Companies by Market Cap ( Aug 10)

19

CountryTurnover

($mn)Market cap

($mn)GDP ($bn)

Market cap to GDP

Turnover % of market

Botswana-DCI 4,278 11 40% n/aKenya 477 10,503 30 35% 5%

Malawi 20 1,477 5 30% 1%Mauritius 347 5,028 9 55% 7%

Namibia 940 9 10% n/aNigeria 4,091 32,739 165 20% 12%

SA 331,289 799,065 277 288% 41%Tanzania 37 3,830 22 17% 1%

Uganda 9 3,751 15 24% 0%Zambia 44 5,273 14 38% 1%

Zimbabwe* 571 4,186 3.556 118% 14%

ZIMBABWE STOCK EXCHANGE (ZSE)

SSA 2009 data

Zimbabwe: 3rd Largest Market in SSA by market volumes in 2009

KEY CONCERNS

20

Political Uncertainty Early elections – without a clear roadmap for elections External Debt Wage Pressures Supply side constraints – mainly power Insufficient foreign investment Concerns around Indigenisation Skills drain

CONCLUSION

21

Zimbabwe is gradually recovering from more than a decade of economic decline

GDP growth driven by strong recovery in the mining and agricultural sectors

Strong Macro economic fundamentals although external debt remains a concern

Undervalued assets due to lack of liquidity Zimbabwe is well endowed with natural resources Highly educated and skilled population Good basic infrastructure Lack of foreign investment continues to hamper growth

Zimbabwe is on the cusp of a strong and sustained recovery underpinned by mining and agriculture.

BACKGROUND TO INVICTUS INVESTMENT MANAGEMENT

22

Invictus Investment Management Group (IIMG) was established in 2010 by Ritesh Anand, with a goal of building a world class, enduring investment advisory and management business focussed on sub-Saharan Africa. Invictus Capital will initially focus corporate advisory and capital raising in Zimbabwe, primarily in the mining sector. Invictus Investments will focus on both listed and unlisted investment opportunities in Zimbabwe. Ritesh Anand has over 12 years international investment experience including 7 years at the world’s leading medical research endowment, the Wellcome Trust. Invictus Investments’ investment philosophy is to create long-term value through rigorous analysis and thorough due diligence. Our investment process will incorporate risk management into every investment decision, using both qualitative and quantitative approaches. IIM has a successful track record of investing in Zimbabwe and has built a strong team of investment partners who will be based on the ground in Zimbabwe.

THANK YOU

23