LIVINGSTONE MARUFU
Most local miners will not rush to list on the foreign currency denominated Victoria Falls Stock Exchange (VFEX) as the resources firms are waiting to see the impact of the promised incentives, the Chamber of Mines of Zimbabwe (CoMZ) said this week.
Government introduced several incentives to lure investors on the VFEX, including slashing withdrawal tax on dividends for foreign investors by half to 5% from 10% and tax breaks. Also, trades on the VFEX do not attract capital gains tax on the disposal of listed securities.
CoMZ chief executive officer, Isaac Kwesu told Business Times this week that the majority of miners were taking a wait and see approach.
“Our stance about VFEX at the moment is that we will wait and see how it goes. We will watch all positive developments and this may influence them to list,” Kwesu, told Business Times.
He added: “Listing is another thing and achieving the overall objective is another. We regard the listing on the VFEX as a medium to long term solution.”
Kwesu said the internal processes do not allow the listing to be as quick as expected as there is due diligence needed and a number of issues including the shareholders, corporate structures and approvals. He said mining companies are listed elsewhere hence the processes does not happen overnight.
Companies listed on the VFEX also have the opportunity to move their capital and dividends freely and there are low transaction costs.
To date, two mining companies, Bindura Nickel Corporation and Caledonia, have their shares listed on the VFEX, a subsidiary of the Zimbabwe Stock Exchange.
Government said it will offer incentives to companies that list on the VFEX.
Analysts said VFEX is likely to attract more foreign investors as it takes away the major risk in the form of exchange rate.
VFEX was established in October 2020 as a means of attracting foreign investment and capital, especially in the mining sector.
The incremental export incentive scheme that the government, through the Reserve Bank of Zimbabwe put in place seeks to boost productivity and generate sustainable growth in export revenue and ultimately encourage listing and participation of firms on VFEX.
But miners are not convinced as yet.
The bourse offers incentives such as tax breaks and assures the unfettered repatriation of funds from the country, where foreign-exchange is in short supply, no tourism company has shown interest despite the strategic location.
Government 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 designate Victoria Falls as an IFSC 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 speciality: finance and tourism.
Victoria Falls was accorded city status in 2020.
Companies listed on the 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.
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.
The Cairo-headquartered bank is providing guarantees to investors under the 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.
The bank is working with the Treasury and the Zimbabwe Investment and Development Agency to execute the project.
