Govt mulls new measures to stimulate VFEX

Govt mulls new measures to stimulate VFEX Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube said the Government would continue to monitor and, when necessary, institute additional measures to prop up the bourse.
Nelson Gahadza-Business Reporter

Treasury plans to roll out new measures to stimulate the performance of the Victoria Stock Exchange (VFEX), which has largely been characterised by limited trading activity and liquidity.

VFEX is a wholly owned subsidiary of the Zimbabwe Stock Exchange (ZSE) established to kickstart the Offshore Financial Services Centre (OFSC) earmarked for the special economic zone in Victoria Falls.

At its inception in October 2020, the Government extended several incentives on the US dollar-denominated stock exchange, which saw several ZSE counters migrate to the bourse.

Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube said the Government would continue to monitor and, when necessary, institute additional measures to prop up the bourse.

“We will have additional measures to support VFEX; we have learnt more from those that have done it before, and we hope the measures will stimulate the offshore financial services centre,” he said during a 2025 post-budget meeting held on Monday.

Despite this, activity on the Victoria Falls Stock Exchange (VFEX) has remained moderate, with several new listings expected to drive trading activity and liquidity.

The exchange has seen listings from various sectors such as mining, financial services, tourism, hospitality, and clothing, with many stocks having migrated from the Zimbabwe Stock Exchange (ZSE), which trades in local currency.

Minister Ncube said the bourse on its own continued to develop new investment products to deepen the country’s capital markets.

In the 2025 National Budget, the minister proposed to reduce capital gains withholding tax on marketable securities to 1 percent effective January 1, 2025.

ZSE chief executive officer Mr Justin Bgoni, in emailed responses, said the reduction will incentivise investors to trade, which will lead to increased liquidity in the market and will also attract more investors, ultimately boosting overall investment activity.

“A reduced capital gains withholding tax rate on marketable securities can make the investment landscape more appealing to foreign investors looking to invest in the market.

“This can lead to increased foreign direct investment, which can benefit the economy as a whole,” he said.

Mr Bgoni said lowering the capital gains withholding tax could lead to improved market efficiency as investors may engage more in trading activities, leading to enhanced price discovery.

Financial economist Mr Malone Gwadu said that the reduction in capital gains withholding tax enhanced the competitiveness of our financial market, as stringent taxes reduce capital allocation efficiency.

“So the reduction should probably see more activity on the bourse and more trading activity due to the tax reprieve,” he said.

Mr Bgoni said VFEX was working on new products, among them the commodities exchange and the bond market.

The commodities exchange rules were gazetted and published through SI 148 and 149 of 2024.

“We are working with different key stakeholders to operationalise the project. An expression of interest was published inviting interested participants in different categories,” he said.

These include general commodity-dealing companies, commodity-dealing companies, market makers, warehouse operators, clearing companies, warehouse persons, general commodity dealers, and commodity dealers.

Mr Bgoni said VFEX was now conducting training and onboarding of participants as the next steps to enable the commencement of trading.

On the bond market, he said the Bond Market Association (BMAZ) was established to create a smooth and beneficial environment for investors, companies issuing bonds, and all the stakeholders in the bond market.

The association is led by Mr Mehluli Mpofu, and to date, BMAZ has managed to sign a memorandum of understanding (MoU) with the Botswana Bond Market Association (BBMA).

Mr Bgoni said the MoU would provide for ongoing collaboration between BMAZ and the BBMA to enhance the capacity and capability of each organisation and contribute to the development of bond markets in Botswana and Zimbabwe.

“We are also in discussions with the Finance, Economic Development, and Investment Promotion ministry on bringing government debt to the market,” he said.

-herald