Corporate exodus rocks Zimbabwe’s stock markets

LIVINGSTONE MARUFU

Zimbabwe’s capital markets are bleeding, and the exits are getting louder.

This has sent shockwaves through the financial sector, as a growing number of companies are abandoning both the Zimbabwe Stock Exchange (ZSE) and the Victoria Falls Stock Exchange (VFEX), raising red flags about liquidity, valuation distortions and the broader health of the economy.

At the heart of the storm is that the stock market is failing at its core mandate, raising capital and delivering fair value to listed firms.

And now, some of the country’s biggest corporates are voting with their feet.

The impending departure of Econet Wireless Zimbabwe, the country’s largest telecommunications firm, from the Zimbabwe Stock Exchange marks a watershed moment.

For years, Econet has been one of the ZSE’s anchor counters, a heavyweight that drove trading volumes and investor interest.

Its exit, attributed to liquidity constraints and persistent undervaluation, signals deep structural weaknesses within the market.

Market watchers say the implications are profound.

“When large caps begin to leave, it strips the market of liquidity and confidence,” said Kelvin Muchiraweho, an investment analyst with EFE Securities.

“With Econet leaving, it is likely to further drain liquidity from the stock market.”

Liquidity is the lifeblood of any exchange. It enables constant trading, supports price discovery and ensures that shares are fairly valued. Without it, markets stagnate.

And stagnation is precisely what analysts say has gripped the ZSE and to a lesser extent, the VFEX.

The stock market traditionally serves as a barometer of macroeconomic health. When companies list, it signals expansion, capital formation and long-term confidence. When they delist en masse, it suggests stress.

Recent exits from the Victoria Falls Stock Exchange have only deepened the concern. National Foods Holdings has already exited the VFEX, while African Sun Limited is finalising its departure.

These moves raise uncomfortable questions about the attractiveness of the foreign-currency denominated bourse, once touted as a safe haven for investors wary of currency volatility.

Morgan & Co investment analyst Tafara Mtutu believes the exodus will continue unless authorities act decisively.

“There are various reasons why companies delist, but lately an emerging theme has been low liquidity, high scrutiny, and the need to cut costs in a rigorously taxed environment,” Mtutu said.

Analysts argue that Zimbabwe’s capital markets are battling a perfect storm.

In developed markets, institutional investors including pension funds, insurance firms and asset managers, provide deep pools of long-term capital. Locally, however, those institutions have been repeatedly weakened by policy shifts and currency reforms.

“Locally, these sources have been decimated one too many times by shortsighted policies,” Mtutu said.

Worse still, available capital has been rotating out of equities and into real estate, viewed as a defensive hedge against policy uncertainty and potential risks tied to the proposed mono-currency transition.

Real estate offers predictable US dollar-denominated returns, something equities are increasingly struggling to guarantee.

The result has been thin trading, erratic price discovery and counters that remain chronically undervalued.

“The delistings hint at the fragility of the economy, regardless of the gold and tobacco windfall,” Mtutu added.

“Capital markets need supportive policies which move money from the informal into the formal economy.”

For many corporates, the decision to delist is becoming a cold financial calculation.

Listing on the ZSE or VFEX comes with compliance costs, regulatory scrutiny, legal fees and ongoing disclosure obligations. In an environment where raising capital is increasingly difficult, these costs are harder to justify.

Enoch Rukarwa, another investment analyst, says limited capital-raising capacity is the primary driver behind the exits.

“The core reason why companies list on stock exchanges is to raise capital,” Rukarwa said.

“Given the obtaining economic circumstances, that has not been an easy ask.”

He points to the country’s contractionary monetary policy stance, aimed at curbing inflation and exchange rate volatility. While stabilisation efforts are necessary, they have squeezed excess liquidity from the system — reducing the probability of successful capital raises.

“This challenge has been there even before the introduction of ZiG,” he said.

In addition, Zimbabwe’s thriving informal sector, dominated by micro and small enterprises, operates with significantly lower compliance costs.

This has created an uneven playing field, where listed firms shoulder heavy regulatory burdens while informal players operate more flexibly.

For some issuers, moving into the unlisted space is becoming an attractive alternative.

Beyond liquidity and costs lies another critical issue, the valuation.

Rukarwa argues that price discovery has long been problematic due to shallow market depth, limited shareholder spread and structural inefficiencies.

“Our capital markets, because of depth, popularity and structure, have struggled with price discovery for a long time,” he said.

In such an environment, shares often trade below intrinsic value, frustrating both investors and issuers.

As the economy transitions into what analysts describe as a more stable, albeit fragile, US dollar-denominated cost structure, speculative pricing and exchange rate arbitrage opportunities are disappearing.

“Now that things are stable and costs are hardening in US dollars, companies will consider cutting down on costs that don’t serve them,” Mtutu said.

“Listing costs could be an avenue to save.”

Policy inconsistency has further eroded both local and foreign investor confidence.

Muchiraweho notes that several firms have also undergone corporate restructuring, prompting voluntary delistings and a shift toward private ownership structures.

But the broader concern is systemic.

If capital markets cannot provide liquidity, fair valuation and efficient capital raising, their strategic relevance diminishes.

Analysts warn that continued exits risk triggering a negative feedback loop: fewer listed companies reduce liquidity, which in turn discourages new listings and investor participation.

Compared to regional peers such as the Johannesburg Stock Exchange, the Botswana Stock Exchange, the Malawi Stock Exchange and the Nairobi Securities Exchange, Zimbabwe’s exchanges face structural competitiveness challenges.

Rukarwa warns that simply lowering standards to attract listings is not the answer.

“We wouldn’t want a capital market full of relatively low-value counters when compared to other regional markets,” he said.

Instead, he proposes creating alternative boards tailored to the realities of an economy dominated by informal enterprises, potentially lowering compliance thresholds while preserving governance standards.

The exits from the ZSE and VFEX are not isolated corporate decisions, they are signals.

Signals about liquidity stress.

Signals about policy strain.

Signals about the struggle to rebuild trust in Zimbabwe’s financial architecture.

Unless policymakers address listing costs, improve liquidity flows, restore institutional investor strength and ensure consistent, predictable policy frameworks, analysts warn the trickle of delistings could turn into a sustained corporate migration away from public markets.

Zimbabwe’s stock markets were designed to be engines of capital raising.

But right now, they are fighting for survival.