RYAN CHIGOCHE
Bridgefort Capital says the ‘burdensome’ capital gains taxation (CGT) rate is undermining trade on Zimbabwe’s capital markets.
CGT is tax imposed on transfer of property, including securities, shares, buildings and land, among many others.
Company secretary for Bridgefort Capital (formerly Medtech Holdings), Sithulisile Ncube, appealed to the government to reverse the CGT rates measures as its implementation will affect company transactions.
Government increased the CGT on Zimbabwe Stock Exchange (ZSE) shares to 20% or 40% depending on whether the shares were held for 270 days or less.
The CGT rates were then legislated in May 2022 through SI 96 of 2022, a move meant to curb speculative behaviour on the markets.
“The 20% and 40% CGT on the sale of ZSE shares was included again in the mid term budget presentation by the Minister of Finance and Economic Development (Mthuli Ncube). The implementation of this would undermine trading on the capital markets and we urge the authorities to reconsider and consult the market on the implications of such a measure,” Ncube said
She said the implementation of such an onerous tax would make the conclusion of any transactions most unlikely until the tax is reversed.
“The announcement alone has already had a negative impact on our ability to conclude transactions.”
For most local companies the local bourse is a critical source for expansion and refinancing capital.
However, as a result of CGT tax and other measures introduced by authorities to thwart inflation, the local bourse in the past few months has depreciated in value as investors lose money.
Bridgefort Capital widened its loss to ZWL$720m in the six months to June 30, 2022 from ZWL$145 000 reported in the prior comparative period, largely due to fair value losses due to the reduction in the real values of the firm’s Class A and B shares which are listed on the local bourse.
On the outlook Ncube said the group is focused on scouting for good opportunities while,” concluding private equity transactions and assisting underlying portfolio companies in achieving their goals”.
