Finance and Economic Development minister Mthuli Ncube last week designated Victoria Falls as an international financial services centre (IFSC) in the last leg of reforms to make the Special Economic Zone attractive to investors.
An international financial services centre caters for customers outside the jurisdiction of the domestic economy, dealing with flows of finance, financial products and services across borders.
Plans to list Victoria Falls as an IFCS have been on the cards for a number of years since it was designated as a Special Economic Zone in 2017 with two areas of specialty: finance and tourism.
Victoria Falls was accorded city status in 2020.
A foreign currency only bourse, the Victoria Falls Stock Exchange (VFEX) was established in 2020 to kick start the Offshore Financial Services Centre earmarked for the special economic zone in Victoria Falls.
The bourse has already attracted four counters since 2020 and more are expected to join it to enjoy the benefits as funds held in a Nostro Investment FCA are not subject to any restrictions or surrender requirements and can be held for an indefinite period.
Foreign currency received by resident investors on the VFEX as disinvestment proceeds and dividends into their Nostro FCA accounts are deemed to be free funds and can be held for an indefinite period.
Disinvestment and dividend proceeds due to non-resident investors are freely remittable through their authorised dealers, without the need for exchange control approval.
Companies on ZSE have been struggling to remit dividends to foreign investors due to the foreign currency squeeze.
They have to go via the foreign currency auction system.
Trades on the VFEX do not attract Capital Gains Tax on the disposal of listed securities.
In addition, withholding tax on dividends for foreign investors has been halved to 5% from 10%. These measures are critical to lure foreign investors into a destination.
Zimbabwe has roped in its all-weather bank, the African Export-Import Bank (Afreximbank) to turn Victoria Falls into a financial hub as part of measures to lure investments.
Afreximbank is working with the finance ministry and the Zimbabwe Investment and Development Agency to execute the project.
The Cairo-headquartered bank is providing guarantees to investors under the US$1.5bn US$1.5bn ZimOpen initiative, aimed at de-risking eligible inward investment into Zimbabwe, catalysing trade finance inflows and increasing the availability of US$ liquidity in order to assure investors of more predictability in exit possibilities and terms.
Zimbabwe, which has lagged behind in attracting investors due to unfavourable policies, needs to sprint where other destinations are running.
Foreign investors need certainty and we do hope the President Emmerson Mnangagwa administration provides that lest the “Zimbabwe is open for business” mantra is reduced to mere propaganda.
Work is cut out for the government to ensure the incentives promised to investors are adhered to.
Policy flip- flops do not bode well for investors who have a wider option to choose from.
The designation of Victoria Falls as an IFSC is projected to lure foreign direct investments. Miners that require capital in hard currency see VFEX as an avenue to raise resources.