BAT Zimbabwe Unit Warns Over Policy Risk

Source from:  Reuters 08/30/2011

Cigarette manufacturer British American Tobacco's Zimbabwe unit warned on Monday that an uncertain policy environment threatens future investment, despite signs of economic recovery in the southern African country. The company, in which BAT Plc controls nearly 60 percent of the shares, is one of several foreign-owned companies given a 14-day deadline to submit new plans on how they would achieve local majority control under a 2008 empowerment law. BAT Zimbabwe said while some reforms instituted by President Robert Mugabe and Prime Minister Morgan Tsvangirai, such as the adoption of foreign currencies to replace a local unit destroyed by hyperinflation, were welcome, concerns remain over others. "Implementation of macroeconomic reform measures have registered success, however, uncertainty continues to exist as policy formulation and its subsequent implementation remains a challenge in the economy," BAT said in a statement accompanying financial results. "This has had repercussions on the economy, such as slowed down capital injection and the deteriorating liquidity situation." Mugabe and Tsvangirai set up a coalition government two years ago but the two are sharply divided over the empowerment law, championed by the veteran ruler but which the prime minister says threatens Zimbabwe's fragile economic recovery. The coalition has overseen economic growth since 2009, following a decade of contraction in which gross domestic product shrunk by as much as 50 percent, according to government figures. Zimbabwe, which registered 500 billion percent inflation in December 2008, now has single-digit inflation. BAT said strong demand had seen earnings grow ten-fold in the first half to June. Basic earnings per share rose to 0.11 cents from 0.01 cents in the first half of 2010, while revenues jumped 88 percent to $17.56 million. Enditem