ZSE, VFEX must complement each other: ED

PRESIDENT Mnangagwa has urged monetary authorities to apply their minds regarding the growing chasm between Zimbabwe Stock Exchange (ZSE) and the Victoria Falls Stock Exchange (VFEX) noting that firms are “delisting on one to re-list on the other,” and yet the bourses should complement each other for the benefit of the whole economy.

In recent months, there has been a deluge of counters migrating or issuing notices to shift from ZSE to the US dollar-denominated bourse driven by incentives and other value opportunities at the VFEX.

Writing in his weekly column published on Sunday, President Mnangagwa said while he is excited about the unfolding relationship between the bourses, he noted operational concerns.

“I am excited about the unfolding relationship between delisting on one to re-list on the other. The Zimbabwe Stock Exchange (ZSE) and its sibling, the Victoria Falls Stock Exchange (VFEX).

“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,” said President Mnangagwa.

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

“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,” said the President.

ZIMBABWE Stock Exchange (ZSE)

In its Equity Strategy 2023 report, IH Securities observed that 2022 was marked by the listing of new counters on the VFEX with the majority of them migrating from the ZSE saying of significance is the appreciation of share price of companies migrating to the VFEX as prices adjust to fair value.

“We are of the view that the exodus of counters from the ZSE to the VFEX will continue in 2023 as companies take advantage of the benefits on the bourse. The US$-denominated VFEX was launched with the aim to attract global capital and help companies raise capital in foreign currency,” it added.

During the last quarter of 2022, the VFEX had a number of new listings such as Nedbank ZDRs and the Karo Resources Bond.

Simbisa brand

Simbisa and National Foods also migrated from ZSE at a time the main bourse experienced liquidity challenges.

The trend is expected to continue this year, as companies shift to the US dollar-denominated exchange, which allows them to raise capital in foreign currency.

Seed processor Seed Co Limited, Innscor, GetBucks and Axia, and hospitality group- Africa Sun have since announced their intentions to list on the VFEX.

Seed Co International, Bindura Nickel and Padenga were listed on the ZSE before they moved to the VFEX.
The VFEX allows businesses to raise capital in foreign currency and settle offshore allowances that lower exchange control risks.

National Foods

It has lower trading costs of 2,12 percent compared to 4,63 percent on the ZSE, as well as tax incentives for shareholders, including a five percent withholding tax on dividends and no capital gains tax on share disposal.

Most migrations come at a time when market trading is now largely skewed towards US-dollar transactions to hedge against inflationary pressures.

Recently, the Zimbabwe Statistical Agency (ZimStat) said 76,56 percent of spending was now being done in US dollars while the Reserve Bank of Zimbabwe indicated 67 percent of bank deposits were now in foreign currency.

According to a survey of household spending by Zimstat, 76,56 percent of spending is now in US dollars, with just 23,44 percent being in Zimbabwe dollars.

Products that are dominating US dollars sales include clothes and shoes at 97,77 percent, while the US dollar accounts for 65 percent of transactions on food and non-alcoholic drinks.

Transport is 92,51 percent forex transactions, while rentals and utilities are now at 76,45 percent.

Other key products/services being bought and accessed mostly in foreign currency are healthcare at 91 percent and school fees at 95,38 percent.-chronicl.c.zw