LIVINGSTONE MARUFU
More firms are expected to list on the foreign currency denominated bourse, Victoria Falls Stock Exchange (VFEX) this year on the back of incentives offered for listed companies, market analysts have said.
Four firms—Seed Co International, Padenga, Bindura Nickel Corporation and Caledonia—are listed on the VFEX, a subsidiary of the Zimbabwe Stock Exchange (ZSE).
Trading exclusively in foreign currency, investment analyst Batanai Matsika said is strategic to attract foreign direct investments and strengthen Zimbabwe’s desire to become an upper middle income economy by 2030.
He said there is likely to be a considerable migration to VFEX with various companies being listed in other international stock exchanges which may be a low hanging fruit for the Victoria Falls Exchange.
“We see that there are a lot of mining companies that are listed in Australia with the country improving the mining environment, a considerable movement to Victoria Falls will be expected. A number of mining companies are expected to move to VFEX and various exporters may see the platform attractive,” Matsika said.
He said the VFEX is likely to attract more foreign investors as it takes away the major risk in the form of exchange rate.
Companies listed on the VFEX have the opportunity to move their capital and dividends freely and there are low transaction costs.
However, Matsika said there was a need for a lot of marketing to be done.
VFEX was established in October 2020 as a means of attracting foreign investment and capital, especially in the mining sector.
An analyst who preferred anonymity said the development is one of many initiatives being implemented by the government to stabilise and grow the economy and to make it attractive to foreign direct as well as domestic investors.
“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,” he said.
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 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 speciality: finance and tourism.
Victoria Falls was accorded city status in 2020.
Companies 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.
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 slashed by half 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 Ministry of Finance and the Zimbabwe Investment and Development Agency to execute the project.
The Cairo-headquartered bank is providing guarantees to investors under the US$1.5bn ZimOpen initiative, aimed at de-risking eligible inward investment into Zimbabwe, catalysing trade finance inflows and increasing the availability of US$ liquidity in order to assure investors of more predictability in exit possibilities and terms.
