VFEX: Hurry hurry has no blessing

Finance and Economic Development minister Mthuli Ncube this week said Zimbabwe’s foreign currency-only bourse—the Victoria Falls Stock Exchange (VFEX)—will begin trading by the end of the month.

The introduction of the bourse has been accelerated to accommodate three dual listed counters—Old Mutual, PPC, and Seed Co International—who were told to halt trading when trade on the Zimbabwe Stock Exchange (ZSE) resumed on August 3 after a month-long suspension to pave way for investigations into alleged illicit transactions.

VFEX is touted as a game changer and will help raise foreign currency for capital intensive sectors such as mining.

It will help to attract investments and deepen capital markets by tapping into the global capital markets.

VFEX is a wholly-owned subsidiary of ZSE established to kick start the Offshore Financial Services Centre earmarked for the special economic zone in Victoria Falls en-route for government creating a ‘Dubai’ in the resort town.

So eager has been government for the bourse to fly and is pulling out all stops to lure investors. In this push to attract global capital, the government has to ensure that there is certainty and confidence in the bourse.

The days of abrupt policy decisions such as the closure of ZSE in June should be discarded. Investors want policies that inspire confidence.

The exit of foreigners on ZSE should jolt authorities to ensure that VFEX won’t suffer the same fate.

As reported elsewhere in this paper, the success of the foreign currency-only bourse is predicated on the settlement mechanism which facilitates the ring-fencing of free funds to allow those that want to exit the market.

There are talks with an international bank to play that role and it is hoped the move will boost confidence of investors.

Foreign investors on the ZSE have been struggling to remit money outside the country. The situation has in the past improved following the introduction of the foreign currency auction system.

Critics say the settlement mechanism is the one that distinguishes VFEX from ZSE.

Without that difference, there is a risk that VFEX becomes another ZSE thereby losing the confidence the bourse has had from sponsors.

As authorities work round the clock, they should be mindful of the shareholders in Old Mutual, PPC and Seed Co International who have failed to trade their shares for the past three months.

They cannot sell the stocks in other bourses following the suspension of the counters’ fungibility in March this year.

Yet there is also the need to come up with a near perfect platform which will not face glitches at inception as hurry, hurry has no blessings, according to a Swahili proverb.


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