RBZ nudges Old Mutual, PPC

STAFF WRITER

Reserve Bank of Zimbabwe (RBZ) governor John Mushayavanhu has urged dual-listed companies Old Mutual and PPC Limited to consider listing their fungible shares on the Victoria Falls Stock Exchange (VFEX), signalling a potential breakthrough in resolving a six-year suspension that once sat at the centre of Zimbabwe’s currency instability.

The proposal comes as monetary authorities argue that the macroeconomic conditions that triggered the dramatic suspension of fungible counters in 2020 have largely dissipated, opening a pathway for the affected companies to re-enter the market through the United States dollar-denominated exchange.

The fungible shares of Old Mutual, PPC Limited, and Seed Co International were suspended from trading on the Zimbabwe Stock Exchange (ZSE) in June 2020 by Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube.

Authorities at the time argued that the shares had become conduits for capital flight and were being used to generate a parallel market exchange rate that undermined the domestic currency.

Now, with the introduction of the Zimbabwe Gold (ZiG) in April 2024 and tighter monetary controls credited with stabilising the exchange rate, the central bank believes the risk environment has shifted significantly.

“The suspended counters should consider listing on the Victoria Falls Stock Exchange because there is no longer that risk of currency volatility and the issues of implied rate which resulted in the suspension,” Dr Mushayavanhu said.

His remarks mark the clearest signal yet from the central bank that authorities are ready to see the long-standing impasse around fungible stocks resolved, potentially unlocking new liquidity for the country’s capital markets.

The suspension of fungible shares in 2020 was one of the most dramatic interventions in Zimbabwe’s capital markets history.

At the centre of the controversy was the Old Mutual Implied Rate (OMIR), a market-derived exchange rate calculated using the price of Old Mutual shares traded across multiple exchanges.

Because Old Mutual is primarily listed on the Johannesburg Stock Exchange but also maintains secondary listings in other markets including Malawi and Namibia, investors could theoretically purchase shares locally and sell them offshore.

Similarly, PPC trades on the Johannesburg Stock Exchange, while Seed Co International has a presence on the Botswana Stock Exchange.

This cross-listing structure made the shares fungible, meaning investors could move them between markets, allowing price differentials to create arbitrage opportunities.

Authorities argued that the OMIR was increasingly being used by market participants as a benchmark for the parallel market exchange rate, often diverging sharply from the official rate and fuelling speculative activity.

In response, Professor Ncube suspended trading in the fungible counters on the ZSE, arguing that the measure was necessary to allow investigations into suspected illicit transactions and to curb currency instability.

The decision effectively froze trading in the affected shares locally and prevented investors from executing cross-border transactions.

Of the three affected companies, Seed Co International has since resolved its position.

The regional seed producer delisted from the ZSE and subsequently listed on the VFEX, where its fungibility was restored.

However, Old Mutual and PPC have remained suspended from trading on the local bourse, despite earlier expectations that they would also delist from the ZSE and migrate to the VFEX.

That transition has yet to materialise.

Dr Mushayavanhu’s remarks are therefore being interpreted by analysts as a renewed policy push aimed at encouraging the remaining fungible counters to consider the offshore-style exchange located in Victoria Falls.

The VFEX, launched in 2020 as a subsidiary of the ZSE, operates as a US-dollar denominated exchange designed to attract international investors and provide a platform insulated from local currency volatility.

Monetary authorities argue that the economic environment that once allowed the OMIR to dominate exchange rate discovery has changed fundamentally.

Since the launch of the Zimbabwe Gold currency in April 2024, the central bank has implemented a tighter monetary policy framework, including stricter control of money supply growth and reforms to the foreign exchange market.

These measures, officials say, have helped curb exchange rate volatility and restore a degree of stability in the financial system.

“Against this backdrop, the risks that prompted the suspension of fungible shares have significantly diminished, creating room for alternative listing options such as the VFEX,” Dr Mushayavanhu said.

The RBZ governor also linked the proposal to broader efforts aimed at strengthening Zimbabwe’s capital markets and restoring investor confidence.

The push for VFEX listings comes at a time when Zimbabwe’s capital markets are showing signs of recovery after years of volatility and policy shocks.

Latest market data indicates that both the ZSE and the VFEX have recorded improved trading activity and rising market capitalisation in recent months.

Trading on the ZSE maintained an upward trajectory in February, with market turnover rising more than 111% month-on-month to ZWG1.93bn, compared to ZWG914.5m in January.

Meanwhile, the VFEX All-Share Index advanced by 6% to 224.06 points in February, up from 211.36 points the previous month, reflecting renewed investor interest in the dollar-denominated exchange.

Analysts attribute part of the rebound to improved currency stability, tighter monetary policy and increased availability of foreign currency in the economy.

For policymakers, bringing large multinational counters such as Old Mutual and PPC onto the VFEX could significantly deepen the exchange’s liquidity and strengthen its position as a regional investment platform.

Market observers say a potential VFEX listing by the suspended counters could represent a turning point for Zimbabwe’s capital markets.

Old Mutual remains one of the most recognisable multinational financial services brands operating in Zimbabwe and across the region, while PPC is a major player in Southern Africa’s cement industry.

Their migration to the VFEX would likely expand the exchange’s market capitalisation and attract additional foreign portfolio flows.

More broadly, the move would signal a shift in policy from punitive restrictions toward market-based solutions designed to balance capital mobility with currency stability.

For authorities eager to rebuild international investor confidence, that signal could prove crucial.

Whether Old Mutual and PPC ultimately heed the central bank’s call remains to be seen.

But Dr Mushayavanhu’s remarks suggest that, six years after one of the most contentious episodes in Zimbabwe’s financial markets, the door may finally be reopening for the country’s suspended fungible stocks.