The Sunday Mail
Issuer appetite on the Victoria Falls Stock Exchange (VFEX) continues to grow, as companies switch from the Zimbabwe Stock Exchange (ZSE) driven by incentives and other value opportunities at the VFEX.
During the last quarter of 2022, the VFEX had a number of new listings such as Nedbank ZDRs and the Karo Bond.
Simbisa and National Foods also migrated from ZSE at a time the main bourse experienced liquidity challenges.
The trend is expected to continue this year, as companies shift to the US dollar-denominated exchange, which allows them to raise capital in foreign currency.
“The VFEX remains a viable option for investors with US-dollar liquidity, offering attractive returns in a more stable currency than the local Zimbabwe dollar,” said FBC Securities.
Innscor, GetBucks and Axia have since announced their intentions to list on the VFEX. Seed Co International, Bindura and Padenga were listed on the ZSE before they moved to the VFEX.
Last week, seed processor Seed Co Limited also announced similar plans.
ZSE chief executive officer Mr Justin Bgoni told The Sunday Mail Business that migrations as opposed to delistings were a welcome development.
“The conditions on ZSE have been tough for listed companies regarding valuations and liquidity,” he said.
“We are encouraged that instead of delisting, we are getting them moving to VFEX.”
The VFEX allows businesses to raise capital in foreign currency and settle offshore allowances that lower exchange control risks.
It has lower trading costs of 2,12 percent compared to 4,63 percent on the ZSE, as well as tax incentives for shareholders, including a 5 percent withholding tax on dividends and no capital gains tax on share disposal.
Current migrations come at a time trades are now largely skewed towards US-dollar transactions to hedge against inflationary pressures. Listed clothing retailers like Truworths have discontinued credit sales in local currency as the trading environment remained challenging.
“US dollar credit is considered on a selective basis where there is assurance that the US-dollar earnings are guaranteed,” said Truworths CEO Mr Bheki Ndebele.
Mr Bgoni said it was inevitable for the capital markets to avoid the impact caused by the shift towards a more dollarised economy.
“Also, as admitted by the RBZ Governor (Dr John Mangudya), about 60 percent of the Zimbabwean economy is dollarised. We also expect the capital markets to drift that way,” said Mr Bgoni.
Market watchers have also said the switch to the VFEX cannot be avoided.
Therefore, listing on the VFEX will make companies raise capital in foreign currency for expansion projects while offering currency stability.
“The VFEX has been largely stable as it has not been susceptible to policy changes compared to the ZSE. Foreign currency capital raising, export retention, lower fee structure and brand positioning have been instrumental in attracting issuer demand on the VFEX platform.
“Whilst liquidity challenges have been prevalent, with generally depressed activity levels, the bourse is poised for increased activity owing to the growing number of listings on the horizon,” said FBC Securities.
While businesses have migrated and others planning to move from the main bourse, Mr Bgoni said the ZSE still remains a strong platform for raising capital, be it as an ETF (exchange-traded fund) or REIT (real estate investment trust). This has also seen the growth in capital markets as a whole.
“The impact on the capital markets as a whole has been growth. It is important to state that the market, overall, grew by 13 percent last year, with new listings and minimal delistings.
“We believe this is because our current and potential listings have choices,” added Mr Bgoni.