Whither ZSE?

Consumer staples concern Innscor Africa Limited announced this week that its board had approved the delisting of the company from the Zimbabwe Stock Exchange (ZSE) and list on the Victoria Falls Stock Exchange (VFEX).

Innscor is not one of these small counters. Rather it is one of the heavy caps and a constituent of the Top 10 counters, the bellwether stocks which, when they sneeze, the market catches the cold.

It is the second largest listed counter by market capitalisation behind Delta Corporation. Innscor’s market cap was ZWL$199bn yesterday, behind Delta’s ZWL$319.7bn.

The Innscor family has seen quick service restaurant Simbisa Brands Limited listed on the VFEX early this month after delisting from the local currency bourse.

Consumer staples concern National Foods will list on the VFEX next week. Its market cap was ZWL$82bn yesterday

Innscor, Simbisa and National Foods belong to the Top 10 Index. Another Innscor linked entity Axia Corporation also announced last week that it would delist from ZSE in favour of the foreign currency only bourse. Its market cap was ZWL$44bn yesterday.

Last year, Padenga and Bindura Nickel Corporation migrated to the VFEX.

All the companies that are listing on the VFEX are lured by incentives that were rolled out by the government to attract listings.

Companies that are migrating to the US dollar-only bourse say the listing enables existing shareholders to realise the United States dollar value of their holdings as compared to the ZSE where local currency returns were subject to hyperinflation.

They say listing on the VFEX would allow them to take advantage of offshore settlement options which allow investors to efficiently repatriate their dividends.

The VFEX has lower trading costs of 2.12% compared to 4.63% on the ZSE, which will improve the shares’ liquidity.

The VFEX also has tax incentives that enable the investor to retain more of their returns versus the ZSE.

Companies listed on the dollar-denominated bourse also enjoy 100% retention of their export proceeds. They do not beg the central bank to increase the retention threshold.

All these incentives make the bourse attractive. This behoves the capital markets regulator and the ZSE to make the local currency bourse attractive and avoid the canibalisation which is in swing.

The government is to blame for the impending exodus of counters to the VFEX. Every time the local currency takes a rout, the government will blame the stock exchange for fuelling the depreciation.

This year, the government restricted the sale of stocks within 90 days as it moves to stem alleged speculative purposes on the bourse which it blamed for the depreciation of the local currency.

One of the continent’s oldest stock exchanges is under threat as companies trek to the VFEX. Will Innscor play the bellwether role as heavy caps leave the ZSE? Will authorities roll out incentives to stop the impending exodus? The next few months will make or break the ZSE.