Markets

What will remain of the ZSE?

BATANAI MATSIKA

Is the soon-to-be launched Victoria Falls Stock Exchange (VFEX) already cannibalising the Zimbabwe Stock Exchange (ZSE)?

It is too early to be sure but one thing that should be pondered on is; What will remain of the ZSE?

It is puzzling to imagine that folks in Zimbabwe can buy a litre of petrol, beer pints, pieces of land and even properties in US dollars but still go ahead and acquire shares on the market using “mickey mouse dollars”.

Worse still, is there any strategic logic for an issuer to list on the ZSE only to raise capital in Zim dollars?

More recently, we are witnessing a wave of voluntary de-listings from the ZSE for various reasons as discussed hereunder;

• Falcon Gold has scheduled an Extraordinary General Meeting (EGM) where it will seek shareholder approval to terminate its ZSE listing.

Boundary Investments, a wholly owned subsidiary of New Dawn Mining Corp will make a cash offer of 13c per share to minority shareholders;

• Dawn Properties is also set to de-list from the bourse after African Sun Limited made an offer to acquire 100% issued shares in the company in a deal that will see it assume ownership of the firm’s key assets;

•Zimre Property Investments (ZPI) will also be de-listed given that Zimre Holdings Limited (ZHL) is seeking to acquire the entire shareholding in ZPI and make a simultaneous application for a delisting. According to ZHL, de-listing ZPI will ease the restructuring of the business composition and enable a leaner and more focused business structure; and

• SeedCo Limited and SeedCo International are trading under cautionary and the two businesses are looking to merge in order to make a secondary listing of the combined business on the VFEX.

This will imply the de-listing of SeedCo Limited from the ZSE. In addition to the delistings, Old Mutual Limited, PPC and SeedCo International have been suspended from trading on the ZSE and the plan is to move them to the VFEX.

According to the VFEX listing rules, ZSE-listed local companies will be able to list on VFEX if the company is listing 20% or less of its capital.

In addition, there is an option to entirely de-list from the ZSE and list 100% on the VFEX as illustrated below;

Overall, given the capital needs (in USD) of most ZSElisted businesses, the VFEX appears to be offering a better capital-raising proposition than the ZSE.

The ability to raise international capital (foreign currency) is critical for boosting company productivity. In addition, the de-listings and shift to VFEX by top-tier counters like Old Mutual Limited, PPC and SeedCo International implies limited depth for investors on the ZSE.

In conclusion, the architects of these two exchanges will have to smart and genuinely innovate so as to avoid cannibalisation.

Otherwise the success of the VFEX could trigger the death of the ZSE!

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