The Sunday Mail
ZSE reopened on August 3 after a month of suspension. SI 196 of 2020 has since been published and it provides that securities listed on Victoria Falls Stock Exchange (VFEX) shall be traded solely in United States Dollars (USD) or any other convertible currency.
Local investors with free funds, as defined in Exchange control (Exclusive use of Zimbabwe dollar for domestic transactions) regulations, 2019, published in Statutory Instrument 212 of 2019, will be able to invest on VFEX in addition to foreign investors.
Interestingly, the new bourse will allow for dual listing of companies on both the ZSE and the VFEX.
Resident Zimbabwean companies listed on the ZSE will be permitted to list up to 20 percent of their capital on VFEX, while non-resident and non-ZSE listed entities will be permitted to list 100 percent of their capital on VFEX.
Non-resident ZSE listed companies — or non-resident companies that delisted within the previous five years — will be permitted to list on VFEX provided they commit to invest 20 percent of the capital raised in Zimbabwe within five years, reads part of Statutory Instrument 196 of 2020.
Capital raised on VFEX may be held in an approved local or offshore account with an internationally recognised banking institution.
The clearing and settlement of transactions executed on VFEX shall be done by VFEX either locally or offshore in accordance with clearing and settlement rules as approved by SECZ and in consultation with the Reserve Bank of Zimbabwe (RBZ).
“There is no doubt about it, the closure of the Zimbabwe Stock Exchange makes it difficult,” ZSE chief executive officer Justin Bgoni said in an interview with Bloomberg.
“We are trying to see whether we can get a country-insurance product for the exchange (VFEX) to mitigate the risk.”
The aim of allowing dealing only in foreign currency on the new exchange is to address two of the biggest concerns of investors: the weakening of the local currency and moving money in and out of the cash-starved country, Mr Bgoni said.
“It is to minimise exchange risk, raise capital and to ensure that clearing and settlement will be as easy as possible,” he said.
The exchange is in talks to find insurance that will cater for policy changes that fundamentally alter the valuations of companies, Mr Bgoni said, declining to identify the international providers.
It is still working on the finer details of how the cover could work.
Government is getting behind the plans for the new exchange, which has been in the making for almost a year, the CEO said.
Finance Minister Mthuli Ncube in July offered tax breaks to companies as an incentive for listing on the bourse.
Authorities do not have ambitious targets for new listings.
They are content with one or two by the end of the year amid the fallout from the Covid-19 pandemic, with a more aggressive push in 2021.
Even before the onset of the virus, there was a dearth of listings, with the last initial public offering in 2016.
“We want to attract investors who understand the country risk and understand what they are getting themselves into,” Mr Bgoni said. — Bloomberg/ Business Reporter.