PHILLIMON MHLANGA
Finance and Economic Development Minister, Mthuli Ncube, has revealed that the government is ready to restore the fungibility on Old Mutual Zimbabwe and PPC stocks a move which paves way for the securities to be traded on other exchanges.
The Government, through Exchange Control directive, in March 2020 initially ordered the suspension of dual listed Old Mutual, PPC and Seed Co International shares from trading at the Zimbabwe Stock Exchange (ZSE) for a period of 12 months after accusing dual-listed stocks as vehicles for repatriating investment out of the country, fuelling currency distortions and a spike in exchange rate.
The ban on Old Mutual and PPC was further extended by another year up to this month.
Ncube said discussions are going well, although he could not provide timelines.
“Discussions are very warm and largely cordial. As a government, we are ready to re-admit Old Mutual and PPC [on the stock exchange]. But on their side, there are some issues they are still dealing with (before they return to the stock exchange). The conversation is ongoing. I have no timelines, but we are ready to re-admit them (Old Mutual and PPC),” Ncube said.
Seed Co International is now listed on the Victoria Falls Stock Exchange (VFEX), a subsidiary of ZSE and there are expectations that Old Mutual and PPC would follow suit.
Seed Co’s fungibility was also restored. Seed Co has a primary listing on the Botswana Stock Exchange. Old Mutual is also listed on the London and Johannesburg stock exchanges while PPC is also trading its shares on the JSE.
Ncube’s remarks came after players in the insurance sector and the industry regulator, the Insurance and Pensions Commission (IPEC) raised their voices saying it was critical to have a quick resolution to the matter.
IPEC highlighted that the continued suspension of Old Mutual and PPC needed to be resolved quickly as several local pension funds have their money tied up in the two counters.
Market watchers believed that the reluctance by Old Mutual and PPC to list on VFEX signals a lack of confidence in the stock market.
The dollar-denominated stock exchange, created out of the need to attract international capital and hard currency funding for local entities, has been struggling to attract new listings since its launch in October 2020.
This has been attributed to the policy inconsistency and a trust deficit and dividend remittance bottlenecks, among other problems.
Moreso, Zimbabwe has been red flagged as a high risk and unsafe to invest in due to its unpredicted legal system and policy inconsistencies.
However, the government has rolled out a number of incentives to encourage listings on VFEX.
According to Exchange Control directive RV177/2020 issued by the Reserve Bank of Zimbabwe, all foreign currency inflows invested into a resident company listed on the VFEX shall be from free funds or offshore funds and these investment funds shall be credited to the listed corporate’s investments foreign currency account.
The central bank also said that the funds held in the investments FCA shall not be subject to any surrender requirements and shall be held for an indefinite period for use by the listed company.
The directive also states that exchange control approval will be required from resident companies listed on the VFEX, for opening an offshore account for the purposes of receiving investment proceeds.
Non-resident companies listed on the VFEX will receive investment funds in local or offshore investment accounts.
The non-resident company can keep funds raised from the listing or the balance after investing the required amounts in Zimbabwe.
Foreign currency received by resident investors on the VFEX as disinvestment proceeds and dividends into their local FCA accounts, shall be eligible for meeting offshore payments as well as settling local obligations.
Dividend or disinvestment proceeds due to non-resident investors shall be freely remittable through the authorised dealer without seeking prior exchange control approval.
