Seed Co suspends migration to VFEX over policy path

Uncertainty over the long-term policy path of the Victoria Falls Stock Exchange, has forced Seed Co Limited to suspend indefinitely its decision to migrate to the US dollar-denominated bourse, a source close to the developments has revealed.

In January, the seed producer’s board approved the migration of the company’s listing from the Zimbabwe Stock Exchange (ZSE) to the Victoria Falls Stock Exchange (VFEX).

The decision saw the seed producer’s ZSE share price skyrocket to a year-to-date gain of more than 200 percent at some point.

As of Wednesday, the seed producer’s share price was up 154,96 percent.

Firms moving from the ZSE to the VFEX found the latter attractive given the incentives that are on offer.

The VFEX, among other things, allows for easier repatriation of dividends and more transactional flexibility for existing shareholders.

In addition, the VFEX offers tax incentives for shareholders, which include a 5 percent withholding tax on dividends and no capital gains tax on share disposal.

Further, the VFEX is seen as providing better prospects for firms to raise capital from foreign investors.

Another major attraction of the VFEX was the incentive to allow listed firms to retain 100 percent of their incremental export receipts.

This incentive was, however, shortlived as in his 2023 Monetary Policy Statement (MPS) RBZ governor Dr John Mangudya removed the incentive.

The 2023 MPS standardised all export retentions at 75 percent across all sectors, including for firms listed on the Victoria Falls Stock Exchange (VFEX).

This has forced SeedCo to reconsider its decision to migrate to the VFEX.

In a cautionary statement released on Thursday, the company said:

“Shareholders of SeedCo Limited (“the Company”) and the investing public are advised that the Board has resolved to suspend indefinitely the proposal to migrate the Company’s listing from the Zimbabwe Stock Exchange to the Victoria Falls Stock Exchange (“the Transaction”).

“Accordingly, the Cautionary Announcement made on 18 January 2023 is hereby withdrawn.”

A well-placed source who spoke off record said the decision to withdraw the previous cautionary announcement was motivated by recent policy changes and announcements with regard to the VFEX.

The recent removal of the 100 percent incentive in the 2023 MPS was seen as a key policy change to a major attraction to the VFEX.

“There have been quite a few noises around the VFEX in the last few weeks, so we just thought maybe while all this is unclear as to where exactly this exchange is going, maybe let’s wait a bit rather than rushing then you find you are locked into something that you didn’t expect to work that way.

“So it has more to do with changes in policy, so we just thought let’s wait,” said the source.

Recently President Mnangagwa expressed concern over the “unfolding relationship between the Zimbabwe Stock Exchange and its sibling, the Victoria Falls Stock Exchange”.

“Instead of a relationship of complementarity, I am beginning to sense that businesses are delisting on one to re-list on the other.

“This may very well relate to discrepancies in incentives we have attached to either of the bourses.

“In an economy that is fighting off negative speculative behaviours, this might not be very helpful.

“Again, I urge the authorities to apply their minds on this growing chasm between these two bourses so they complement each other, for the benefit of our whole economy,” reads part of President Mnangagwa’s column in the Sunday Mail a few weeks ago.-ebusinessweekly