“Risk” is too blunt a word to act on. When capital is exposed to a frontier market like Zimbabwe, the threats come from different places, behave differently, and call for different defences. So before we rate anything, we break the exposure into six dimensions. Each one is assessed on its own, given a qualitative level, and paired with a mitigant that actually targets it. The composite rating is just the weighted roll-up of the six.
Why six, and why separate them
A single risk score hides more than it reveals. An exposure can be perfectly comfortable on counterparty quality and still be wrecked by a currency collapse; it can survive a devaluation and still be stranded by illiquidity. Separating the dimensions means each one gets a mitigant matched to it, rather than a vague reassurance that the deal is “fine”. It also makes the assessment honest: you can see exactly which dimension is carrying the rating.
The six dimensions
- Currency — exposure to ZWG devaluation, Zimbabwe-dollar instability and parallel-market forex spreads. Mitigant: denominate NAV and distributions in USD and keep in-country balances at operational minimums.
- Sovereign — exposure to government default, debt restructuring, sanctions regimes and expropriation. Mitigant: hold capital in South African entities under treaty cover, with no Zimbabwe balance-sheet ownership of fund assets.
- Regulatory — exposure to RBZ exchange-control changes, ZIDA conditions, sector licensing and AML/CFT compliance. Mitigant: continuous OFAC/UN/EU/UK screening plus maintained in-country registration and exchange-control compliance.
- Counterparty — exposure to sponsor default, offtake-buyer failure and contractual non-performance. Mitigant: collateralise offtake before deployment and apply dual-signatory controls to material disbursements.
- Liquidity — exposure to shallow local markets, tenor mismatches and recycling constraints. Mitigant: match investment tenor to the underlying asset and use trade-finance recycling to return capital before completion.
- Political — exposure to regime change, policy reversal, sanctions escalation and interference. Mitigant: South African holding structure and SADC treaty cover, with enhanced diligence on any state-linked counterparty.
How the levels and composite work
Each dimension is rated Low, Medium or High. Those levels are weighted — currency and sovereign carry the most weight in our default model, reflecting where Zimbabwe exposure most often fails — and rolled into a composite score out of 100, which maps to a headline rating of Contained, Elevated or High. The point of the weighting is not precision to the decimal; it is to make sure the dimensions that historically do the damage dominate the headline.
These ratings are qualitative and illustrative. They are not a credit rating, a guarantee of outcome, or a quantitative probability of loss. Use them to direct attention and structure mitigants — not as a substitute for independent legal, financial and tax advice.
Putting it on paper
When the desk is engaged to run an assessment, the scope and limitations are set out in a Risk Advisory Engagement Letter, and the finished assessment is fronted by a Political Risk Memorandum cover and reliance sheet so it travels under the right classification and reliance terms. Both are available as fillable templates.