Govt extends suspension of fungibility of Old Mutual and PPC shares

Finance and Economic Development Minister Professor Mthuli Ncube, has extended the suspension of financial services giant Old Mutual and cement maker PPC’s fungibility by another 12 months.

In a notice in the Government Gazette last Friday, Minister Ncube indicated that Government was still considering the implications of an audit report.

The initial suspension was implemented last year on allegations that fingible stocks had become vehicles for repatriating investments out of the country, at a time foreign currency has been scarce and therefore fuelling currency distortions and spike in exchange rate.

“The Government, having received the audit report, is still considering its implications:

“Now, THEREFORE, I, Hon. Professor M. Ncube, in my capacity as an exchange control authority under Part V (“Securities”) of the Exchange Control Regulations, 1996 (Statutory Instrument 109 of 1996), hereby order the suspension, for a period of twelve months from the publication of this general notice ending on the 11th March 2022, of every authority, directive or order granted by any exchange control authority allowing the fungibility of shares of the following companies listed on the Zimbabwe Stock Exchange – (i) Old Mutual Limited; (ii) PPC Limited,” reads part of the notice.

A year ago, the Treasury boss suspended Old Mutual’s fungibility together with Seed Co International and PPC Zimbabwe that are listed on other exchanges, in addition to the Zimbabwe Stock Exchange (ZSE).

Old Mutual is also listed on Johannesburg Stock Exchange (JSE) and London Stock Exchange while Seed Co International and PPC are present on the Botswana Stock Exchange (BSE) and JSE respectively.

Seed Co International is now listed on the Victoria Falls Exchange (VFEX) after delisting from the ZSE.

Shares of Old Mutual and PPC remain suspended from trading on the ZSE. The extension of suspension of their fungibility means their shares cannot be bought on the ZSE and sold on foreign markets, which authorities believed was tantamount to illicit flows of foreign currency, at a time it has been very limited.

In 2008, at the height of hyperinflation RBZ suspended fungibility of dual listed stocks, with the same view to stem exchange rate depreciation as this was believed to distorted the real value of local currency through speculative purchases.

According to the ZSE website, the following are some of the frequently asked questions and answers.

What is Fungibility?
Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type. In trading a financial instrument (stock or bond) is considered fungible if it can be exchanged (bought/sold) on one market/exchange and then sold/bought on another market/exchange. Full fungibility is when a financial instrument (stock/bond) can be sold/bought from one market/exchange into the other and vice versa. Partial fungibility is when shares can only move in one direction.

Which counters are fungible on the ZSE?
Currently there are three counters which are fully fungible on the ZSE which are Old Mutual Limited (OMU.zw) , PPC Limited (PPC.zw) and SeedCo International Limited (SCIL.zw). There is at least a 51 percent limit of the listed shares that shall remain on the Zimbabwean Register.

Of the counters that are fully fungible on the ZSE, which other stock exchanges are they listed on?
●OMU.zw; (JSE, London Stock Exchange, Malawi Stock Exchange and Namibia Stock Exchange)
●PPC.zw; (JSE)●SCIL.zw; (Botswana Stock Exchange)

Of the counters that are fully fungible on the ZSE, which is the most liquid counter?

Old Mutual Limited is the most liquid company because it is listed on many stock exchanges.

What is Old Mutual Implied Rate (OMIR)?

OMIR is an unofficial rate which is used by investors to compare share price movement of Old Mutual shares on ZSE, JSE and London Stock Exchange. This rate has no official connection with Old Mutual and is informally derived.–herald.co.zw