Old Mutual, PPC fungible stocks deal inches closer

PHILLIMON MHLANGA

Professor Mthuli Ncube, the minister of finance, economic development, and investment promotion, has disclosed that the Government of Zimbabwe, Old Mutual, and PPC Limited are getting closer to agreeing to reinstate the two businesses’ fungible stocks on the local bourse, Business Times can report.

The development comes four years after Professor Ncube suspended shares of fungible counters – Old Mutual, Seed Co International and PPC Zimbabwe- from trading on the Zimbabwe Stock Exchange (ZSE) claiming that the stocks had become vehicles for repatriating investments out of the country. This, Ncube said fuelled currency distortions and rocketing exchange rate.

Speaking to players in the insurance industry, Professor Ncube said the deal is imminent.

“We are very close (Government, Old Mutual and PPC Zimbabwe) to unlock the value of these assets (fungible stocks). We are getting much closer every day. So, watch the space, it’s quite close,” Professor Ncube said.

The suspension of shares from trading at the ZSE meant that the shares could not be bought on the local bourse or sold on foreign markets.

This triggered an outcry from the country’s insurance sector, which voiced its voice on the issue saying it was critical to have a quick resolution to the matter.

Sector players 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.

The insurance sector has been pleading with the Government of Zimbabwe to allow players holding suspended counters to trade them on external bourses to raise liquidity in line with offshore investment guidelines.

Ncube said the three counters should delist from the ZSE and migrate to Victoria Falls Stock Exchange (VFEX). Seed Co International has since listed on VFEX after delisting from the ZSE. Its fungibility was also restored.

Old Mutual and PPC Limited were also expected to delist from the ZSE and migrate to the VFEX.

But, this has not happened.

Market watchers believed that the reluctance by the two companies to list on VFEX signals a lack of confidence in the new stock market.

The United States 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.

However, there have been several migrations from the ZSE.

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.

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.