The Zimbabwe Stock Exchange (ZSE) is working with banks on modalities that will guide claims and settlements for foreign investors on the soon to be opened Victoria Falls Exchange (VFEX), a senior official has said.
Early this month, Finance and Economic Development Minister Professor Mthuli Ncube, announced the establishment of another stock exchange in the resort town of Victoria Falls, which will trade in hard currency. When operational, the exchange will have listings mainly from the mining sector as well as other export oriented companies.
The exchange is expected to address one of the major challenges that is deterring foreign investors from the main bourse, (ZSE) which is difficulties in repatriation of funds. This will be a no issue on the VFEX as the exchange will trade in foreign currency.
Responding to questions during a virtual seminar on funding the mining sector post Covid 19 which was hosted by Financial Markets Indaba (FMI) in conjunction with Bakertilly Capital Zimbabwe, ZSE chief executive officer Justin Bgoni, said the bourse was working with the Reserve Bank of Zimbabwe and other banks on a framework on repatriation of funds for foreign investors on that bourse.
“In terms of claims and settlements on the VFEX, we will be talking to banks on this, but will be in line with best international practice. So we are engaging with the RBZ on that. We want it to be easy for investors,” he said.
The participation of foreign investors on the ZSE had been depressed due to challenges on repatriation of funds out of the country, already starved of the much needed foreign currency.
As a result, investors resorted to buying shares in Old Mutual as an easier way of getting money out of the country before Treasury suspended its fungibility earlier this year, together with PPC, and SeedCo International.
In 2019, Old Mutual was the most liquid stock and accounted for 20 percent of total value traded on the bourse as investors sought an earlier way to get their money.
But this year, monthly average by foreign investors was just above US$1 million, a significant decline from monthly average peak of US$26 million in 2013.
Local currency instability has also been cited as a factor in decline in appetite by foreigners to invest on the local bourse.
Last February, stocks were re-denominated in local currency from US dollar at a 1:1 exchange rate which resulted in huge losses for investors.
“One of the biggest challenges cited by foreign investors is that Zimbabwe is risky. If you want to raise money it will be in Zimbabwe dollar. So even if one raises capital, there is no guarantee of getting the USD on the interbank for capital projects.
”That is why we came up with the VFEX where trades will be in hard currency because under the current laws ZSE can only trade in Zimbabwe dollars yet there is a huge appetite for USD,” said Mr Bgoni.