GLOBAL OVERVIEW
Global growth prospects were initially estimated at 2.9% in 2024 according to the IMF. 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, paving way for a soft landing. Global inflation is expected to continue receding in 2024, coming down to 5.9% and 4.5% in 2024 and 2025, respectively. For the Sub-Saharan Africa region, growth is expected to come in weaker at 3.8% on account of the negative effects of weather shocks and supply chain bottlenecks. The outlook for global agricultural production in 2024/25 is cautiously optimistic, with expectations of adequate supplies for most major food commodities. The Food and Agriculture Organisation forecasts a slight increase in production volumes, with global cereal production expected to reach 2.85 billion metric tons, driven by favorable weather conditions in key producing regions and advancements in agricultural technology. However, risks remain due to potential extreme weather events, geopolitical tensions, and sudden policy changes.
ZIM MACRO OVERVIEW
Growth for Zimbabwe is now projected to expand by 2% in 2024, down from the 2024 National Budget projection of 3.5%. The impact of the El-Nino drought has been more severe than initially estimated, resulting in agriculture contracting 21.2% from the initial forecasted contraction of 4.9%. However, national economic growth is expected to be anchored by resilient performance in the mining sector, with increased output of PGMs, particularly chrome and nickel, going into offsetting dampened hard commodity prices.
INVESTMENT THESIS
According to climatologists, the second half of 2024 is expected to bring forth a change in weather conditions into La Nina with regions such as Southern Africa, expected to receive heavy rains from December 2024 to August 2025. The government has begun preparations for the 2024/2025 summer cropping season at a cost of ZWG 22bn, which is expected to be 40% funded by the Presidential Inputs programme. Total cereal production is targeted at 3.2mn tonnes with area under hectarage expected to increase to 2.5mn hectares with small grains expected to increase yields from 180kg/ha to 800kg/ha post the drought period. Authorities have however noted the vulnerabilities linked with rain-dependent farming. With projected improvement in the sector, the expectation is of an improvement in the health of incomes and consumer spend post March 2024. We currently favour SeedCo International at current levels, trading at US$0.20 against a target price of US$0.33. The counter is trading at a PER(+1) of 7.98x compared to peers at 16.4x and EV/EBITDA (+1) of 4.36x versus peers at 10.6x. The group is continually investing in R&D for climate-resistant seed variants and market access across Africa has allowed for diversification of risk.
