SECTOR | Zimbabwe 2024 Consumer Sector Report

    Global Economy

    Despite initial fears of a recession, the IMF estimated a preliminary global GDP growth rate of 2.9% for 2024. The IMF’s April World Economic Outlook further revised global growth for 2024 to 3.2%, with growth expected to remain flat at 3.2% in 2025. Advanced economies have been more resilient to the impact of higher rates and other macro policy tightening than anticipated. As per the World Trade Organisation, the global volume of trade is expected to increase by 2.6% in 2024, recovering from the 1.2% decline in 2023. Considering the tight monetary conditions throughout 2023, global headline inflation notably started converging towards pre-pandemic levels in 4Q23 and has generally sustained its trend into 2024. Forward-looking, global inflation is expected to continue receding in 2024, coming down to 5.9% and 4.5% in 2024 and 2025, respectively.

     

    Global Consumer

    The pandemic saw global unemployment levels hit a 30-year peak at 6% in 2020; however, global unemployment levels have since fallen to below the pre-pandemic averages at the current 3.85%. Whilst there has been a recovery in job growth numbers globally, sustained inflation has outpaced nominal wage growth leading to erosion of real wages. Overall, real wages have remained well below their pre-pandemic levels for most countries. Global household final consumption expenditure growth has generally been resilient to economic headwinds, with q/q growth in key economies remaining positive between 2Q23 and 4Q23. Growth in real consumer spending in South Asian countries is expected to outpace other regions with a tipping point expected in 2024, where the consumer class will outnumber the vulnerable in the region. At a global level, consumers are expected to remain cautious within the year in light of sustained economic uncertainties.

     

    Local Economy

    Projected national GDP growth for 2024 has been weighed down by the anticipated impact of the El-Nino phenomenon on the agricultural sector. Agriculture is anticipated to decline by 4.9%, dragging overall GDP growth down to 3.5%. Falling international commodity prices will also go into dampening growth prospects for the resource- intensive country with a 1% shock in global prices expected to affect exports by between 0.55% and 0.7% as per the MoFED.

    The local population remains largely rural, informalized, and low-income. The country’s working poverty, as defined by the employed populace living below US$2.15 a day, has grown from 20.17% in 2013 to 35.35% in 2023 with wages in the 75th percentile falling in the US$272-US$362 range. However, strong underlying productivity and an increasingly dollarized trading environment powered by the informal sector have supported volumes performances in consumer companies. Whilst the outlook for consumer spend might be weak based on the performance of primary sectors, we believe there might be pockets of liquidity bolstered by the US$2bn remittance line and the gold sub-sector. We are of the view that consumption will likely be geared toward essentials, given limited spend within the year. We are skewed towards consumer-facing stocks that have ability to generate a significant portion of revenue in USD, have good management practices as well as consistent dividend payouts. At current levels, we favour Innscor trading at a P/E (+1) of 6.2x and a dividend yield of 4.8%. On the ZSE, we are inclined towards Delta trading at a P/E (+1) of 8.1x versus peers at 16x, with a dividend yield of 4.9%.

     

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