ZSE welcomes capital gains withholding tax cut
The Zimbabwe Stock Exchange (ZSE) says the proposed reduction of capital gains withholding tax on marketable securities will greatly enhance the market and boost overall investment activity.
Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube, in the 2025 National Budget, proposed to reduce capital gains withholding tax on marketable securities from 2 percent to 1 percent effective January 1, 2025.
ZSE chief executive officer 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.
Bgoni said lowering the capital gains withholding tax can lead to improved market efficiency as investors may be more willing to engage in trading activities, leading to enhanced price discovery.
Financial economist Malone Gwadu said that the reduction in capital gains withholding tax enhances 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.
On the Victoria Falls Stock Exchange (VFEX), Bgoni said the bourse is working on new products such as the commodities exchange and the bond market.
Already, the commodity 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.
Bgoni said VFEX is 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 Mehluli Mpofu, and to date, BMAZ has managed to sign an MOU with the Botswana Bond Market Association (BBMA).
Bgoni said the MoU will provide for ongoing collaboration between BMAZ and the BBMA with a view to enhancing 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.-ebsinessweekl
