In our recent article, entitled “A look at Cassava Smartech ahead of the Results Release”, dated 21 May 2019, we recommended investors to take positions in Cassava Smartech Zimbabwe Limited (CSZL) on the basis that there were compelling prospects particularly given the cash-less society that the country has evolved into and the penetration of the Eco-cash payment platform in rural and urban Zimbabwe. The market has responded to our call and we have witnessed the share price increasing to $1.70 from around $1.10 in five trading days. We expect this upward momentum to continue!
From a broader Sub Saharan Africa (SSA) perspective, mobile money has been a clear winner as transactions have expanded rapidly. According to GSMA Intelligence, the total value and number of mobile money transactions in 2017 within the SSA region grew by 14.4% and 17.9% to reach USD19.9bn and 1.2 billion, respectively. Financial services groups in Zimbabwe such as CBZ Holdings, FBC Holdings and NMBZ Holdings have also moved to take advantage of the “non-interest income opportunity” and have racked in millions from electronic transactions. Mobile money platforms such as Eco-cash have played a key role in extending financial services to people with limited access to traditional financial institutions, particularly women and rural populations. A key driver of growth for Cassava (Eco-cash) has also been smartphone adoption and low-cost handsets. GSMA Intelligence estimates that smartphone adoption will continue to see rapid growth in the SSA region despite affordability challenges. In the case of Zimbabwe, low-cost handsets have come in handy. Chinese players have traditionally dominated the feature phone market in Africa but are now increasingly active in the smartphone market, though Samsung remains a leading player in this market segment.
Over and above the mobile money story, Cassava’s Eco-Cash has led the pack in terms of tapping into the informal sector in Zimbabwe. According to the International Monetary Fund (IMF), Zimbabwe has the second largest informal economy as a percentage of its total economy in the world, after Bolivia.
Out of 158 economies studied by the IMF in a recent research, Zimbabwe had a score of 60.6%, second to Bolivia which topped at 62.3%. The shadow economy (known by different names such as the hidden or informal economy), includes all economic activities which are hidden from official authorities for monetary, regulatory and institutional reasons. By offering a payment platform that cuts across the informal and formal sectors implies that Cassava (Eco-cash) taps into a much broader economy as opposed to pure “formal sector operators”. We are maintaining our BUY call on Cassava!
Author – Batanai Matsika
Head of Research – Morgan & Co
+263 78 358 4745