VFEX listing affords locals exposure to Nedbank Group

Nedbank group wholly owns Nedbank Zimbabwe through which shareholders on the Zimbabwe register acquired shares in the South African financial services group
South Africa-headquartered Nedbank Group says the listing of Nedbank Zimbabwe Depository receipts (ZDR) on the Victoria Falls Stock Exchange (VFEX) will afford current shareholders and new investors a localised exit mechanism and exposure to Nedbank.

Nedbank is listed on the Johannesburg Stock Exchange (JSE), but its shares do not trade in Zimbabwe.
In addition, while investors on Nedbank Group’s Zimbabwe register can only sell their securities, the shareholders and other interested investors cannot purchase Nedbank shares through Corpserve

Nominees, an intermediary that meets the legal requirements of South African regulations.

Nedbank group wholly owns Nedbank Zimbabwe through which shareholders on the Zimbabwe register acquired shares in the South African financial services group.

“The proposed listing will thus afford current shareholders, as well as new investors, a mechanism to seek exposure to Nedbank through Nedbank ZDRs on the VFEX,” the group said in a pre-listing statement.

The group indicated that the lengthy trading and settlement turnaround time of the current process will be improved by listing Nedbank ZDRs on the VFEX.

A depositary receipt is a negotiable financial instrument issued by a bank to represent a foreign company’s publicly traded securities. The depositary receipt trades on a local stock exchange. Depositary receipts facilitates buying shares in foreign companies, because the shares do not have to leave the home country.

“Currently, shareholders’ sale proceeds are subject to foreign exchange surrender requirements, which will be fully exempt on the VFEX,” the company said.

According to VFEX chief executive, Justin Bgoni, the Nedbank ZDRs will debut on November 18, 2022, and it will be an opportunity for Zimbabweans to buy or increase their shareholding in Nedbank.

“First coming from 18 November 2022 is a platform for holders of Nedbank shares in Zimbabwe to trade their shares on VFEX as Nedbank Zimbabwe Depository receipts.

“There are more than 25,000 people with Nedbank shares in Zimbabwe who until now have been complicated, expensive and taking a long time to sell their shares,” he said.

According to the pre-listing statement, Nedbank Group Limited is a financial services group offering wholesale and retail banking services, as well as insurance, asset management and wealth management services.

Through its principal banking subsidiary, Nedbank Limited, the group is one of South Africa’s four largest banks.

Apart from its predominant exposure to the South African market, the business also has subsidiaries in Lesotho, Mozambique, Namibia, eSwatini and Zimbabwe.

The group said since Nedbank was not listed in Zimbabwe; it had contracted Corpserve Registrars to set up a share dealing service to facilitate trading by their Zimbabwean shareholders on the JSE, which however is currently one way, as locals cannot purchase the JSE shares.

In compliance with tax and exchange control requirements in South Africa, shareholders on the Zimbabwe branch register had to receive their shares through a nominee facility that met the legal requirements of South Africa.

“To this end, Corpserve structured a nominee arrangement, through Corpserve Nominees (Private) Limited (“Corpserve Nominees”), a company that then complied with the required legal requirements on behalf of the thousands of shareholders on the Zimbabwe registers.”

Consequently, Nedbank shareholders that wish to sell their shares are only able to do so through this facility that captures and provides an order management and trade routing facility to the JSE through an intermediary also appointed by Nedbank.

“Having considered the challenges around this model, it is proposed to create a mechanism which routes the trades to VFEX instead of the JSE through a Zimbabwe Depository Receipt (“ZDR”) framework,” said the group.

In the proposed arrangement, the ZDRs will be listed on VFEX in a non-issuer-sponsored depository receipt model.

The group said the proposed solution is centered on the locally available infrastructure and technology.

Depository Receipts (DRs) are equity-like instruments issued by a Depository in this case; Corpserve Nominees and they represent ownership of an underlying asset such as equities publicly listed and trading in a foreign country in this case, Nedbank Group Limited ordinary shares.

The Zimbabwe Depository Receipts will be issued in Zimbabwe through a private placement sponsorship under Corpserve Nominees as a non-issuer-sponsored facility.

This means that Nedbank Group Limited will not be the Issuer of Nedbank ZDRs on the VFEX and will thus not play an active role in the proposed listing.

For Zimbabwean shareholders, Nedbank shares are held by Corpserve Nominees on the South African register. The Corpserve Nominee account is thus acting as a Depository of Nedbank shares in South Africa.

Corpserve Nominees will host the underlying Nedbank shares in trust and will in turn issue depository receipts in Zimbabwe.

The Nedbank ZDRs issued in Zimbabwe shall mirror the Nedbank shares held by Corpserve Nominees on the South African register.

Nedbank noted that shareholders who do not wish to participate in this ZDR initiative will not have their shares transferred out of Corpserve Nominees as ZDRs hence their Nedbank shares will continue to be held under Corpserve Nominees in South Africa.

The group added that the ZDR holders can trade their ZDRs in Zimbabwe through the VFEX platform and proceeds from the sale of securities on the VFEX are not subject to foreign currency surrender requirements, which means that shareholders will retain the entire foreign currency proceeds from the sale of their Nedbank ZDRs in their foreign currency accounts.-ebusinessweekly