ZSE’s Bgoni under pressure

Zimbabwe Stock Exchange (ZSE) chief executive officer Justin Bgoni is under pressure to meet competing demands of various stakeholders of the equities market.

The past few years have seen the local bourse receive brickbats from some stakeholders for alleged role in hurting the local currency.

Allegations, in particular those levelled against the ZSE last year, are that the local bourse was being used for speculative purposes.

The allegations reached peak level last year when Finance and Economic Development Minister Mthuli Ncube, who ironically is the principal authority, described the stock market performance as a bubble that needed to be pricked.

“We have information and we know some of perpetrators that were using banks to borrow cheap liquidity; cheap in the sense of negative real interest rates, to speculate and take positions on the parallel market, but also root some of the proceeds on to the equities market and then just keep playing around the equities and parallel markets,” he said then.

To prick the bubble, Mthuli announced several measures that sent the market tumbling from a market capitalisation of $3,6 trillion in May 2022 to less than $2 trillion at some point.

The market is yet to recover to those highs.

With currency depreciation and inflation wreaking havoc, company valuations tanked making the ZSE unattractive to listed entities.

The Victoria Falls Stock Exchange, however, came as a relief giving listed entities a viable alternative.

A total five firms have since migrated to the VFEX while three more plan to.

Migrating companies have been motivated by the potential of the US dollar-denominated bourse to unlock value for both local and foreign shareholders.

Experts say since the VFEX trades in a stable US dollar, some of the valuation challenges faced by listed entities will be a thing of the past.

For Bgoni the migration is a better option than seeing firms delist as Getbucks has decided to.

Other stakeholders have, however, expressed concerns.

The highest office in the land, President Mnangagwa, on Sunday called for the harmonisation of the two stock exchanges.

He said the discrepancies in incentives attached to either of the bourses, might be the main reason why firms are now migrating from the ZSE to the VFEX.

“I am exercised about the unfolding relationship between 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.

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

“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,” reads part of President Mnangagwa’s column in the Sunday Mail of this week.

Contacted to comment on the concerns raised, Bgoni said: “ We are currently in discussions with authorities on the way of harmonisation. An announcement will be done in due course.”

However, on his Twitter handle Bgoni seems to have felt obliged to express the predicament of pleasing various stakeholders.

Through his, Twitter handle @BgoniJustin, on Sunday he explained the role of the ZSE to balance the interests of mainly four players.

“These players are listed entities, investors, brokers, and other market participants and Government.

“These players often have conflicting interests and therefore fairness and equity are required.”

He explained on their part, listed companies do not want the Exchange rules to be too onerous and expensive while on their part investors want the rules of the Exchange to protect them, especially minority investors.

“They also want the cost of trading to be as low as possible,” Bgoni wrote.

With regards to stockbrokers, Bgoni wrote they require the fee to be as high as possible to make their businesses economic.

“The Government and other authorities have bigger economic goals. They would like the Exchange activities to support these greater economic goals.

‘Needless to say, the goals and aspirations of various players can easily be conflicted and the Exchange has to balance these with its own goals and aspirations,’ Bgoni tweeted.

An expert in the equities market who spoke off record said it’s highly unlikely that any further action will be taken on the two stock exchanges.

“I think the harmonisation has already been implemented as we saw with the removal of the incentive for VFEX-listed firms to keep 100 percent of their incremental exports.”

According to the RBZ’s latest Monetary Policy Statement, export retentions have been increased and standardised at 75 percent across all sectors, including firms listed on the Victoria Falls Stock Exchange (VFEX).

“That should harmonise the two markets, so I don’t expect any further action,” he said.-ebusinessweekly