It was hyped as the game changer of the Zimbabwe equities market as it was launched back in September 2020, but it is slowly becoming a white elephant in the tourist ‘city’ of Victoria Falls. Dubbed the Victoria Falls Stock Exchange (VFEX), a bourse which trades in foreign currency, has been largely dormant since its launch and only one listing available.
Talks of other companies coming on board have been heard, with initial thoughts of the suspended dual listed counters (Old Mutual and PPC Zimbabwe) listing on the bourse in order to start trading fading by each day, investors have become warry of the new kid on the block.
On the other hand, the country joined the African Continental Free Trade Area (AfCFTA) on 1 January 2021, which makes it easier for companies to export across Africa. The country hopes that its semi-dead industries will be able to export more in order to improve its balance of payments.
The captains of industry say that their companies are able to export but the country is chocking them through policy stopping them from exporting even more.
However, the Minister of Finance Prof Mthuli Ncube issued a flurry of incentives in a bid to spur up appetite to list on the local foreign currency denominated stock market and increase exports for better foreign currency receipts.
In order to spur increased exports, Ncube targeted the gold sector as he adjusted wording on the 60% retention ratio announced in January 2021.
According to terms released on Monday, for anything above the average, the exporter will get to retain 80 percent of the foreign currency, while exporters licensed under Special Economic Zones will retain 100 percent of their incremental export proceeds same as any exporter listed on the VFEX.
“In order to encourage gold production and deliveries to Fidelity Printers and Refiners (FPR), gold producers who deliver gold quantities above their average monthly deliveries shall be entities to a retention level of 80% on the incremental portion of the gold delivered to FPR,” Ncube said.
These incentives are meant to curb smuggling which has hit the country at a large scale and improve gold deliveries. However, this will help increase deliveries in the near future but companies might start to maintain their ‘monthly averages’ lower and release the bulk when it suits them to qualify for the incentives.
In terms of increasing listings on the VFEX, more needs to be done than the current incentives, although they are sort of a starting point. The country needs to sort out the impeding issues raised by industry that is avoiding them from listing on the VFEX. If doable, Ncube needs to speed up the listing of the government-private vehicle Kuvimba Mining on the new stock exchange in order to boost confidence that it is a safe place to look for investment.
Liberalizing the gold buying sector is a long term solution that will increase transparency and competition in the industry leading to efficiency in buying the yellow metal – Harare