Victoria Falls Stock Exchange to launch mineral commodities exchange

Enacy Mapakame

ZIMBABWE is set to launch a mineral commodities exchange on the Victoria Falls Stock Exchange (VFEX) before the end of this month.

This initiative is part of a broader effort to bolster capital flow into the country’s capital markets. The minerals exchange is a key component in establishing an offshore financial services centre in Victoria Falls. The centre seeks to boost opportunities for global investment in Zimbabwe.

Broadening capital markets and supporting mining growth

The launch of the commodities exchange aligns with the Government’s ambitious target of reaching US$12 billion in annual revenue from the mining sector.

It will enhance the country’s financial services sector, particularly capital markets, by attracting investment through a free flow of international capital.

“The Victoria Falls Stock Exchange, apart from the already listed counters, is set to launch a minerals commodities exchange in the first quarter of 2024,” Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube told delegates at the Zimbabwe Capital Markets Conference in Shanghai last week.

“This is a welcome development as it will broaden the exchange and the country’s capital markets, as well as expand capital market services for the mining sector, which is projected to grow in excess of the US$12 billion target this year,” he added.

Building on established expertise

The Government announced plans for a minerals commodities exchange in 2021. This initiative stemmed from a memorandum of understanding (MOU) between the VFEX and the Dubai Gold and Commodities Exchange (DGCX).

The MOU provides for the DGCX to extend technical support to the VFEX with the goal of establishing an international commodities exchange in Zimbabwe.

During the 2021 workshop announcing the exchange, Prof Ncube highlighted the importance of leveraging on the expertise of DGCX, a leading derivatives exchange in the Middle East that has played a pioneering role in developing the regional market for derivatives trading, clearing and settlement.

Benefits of the mineral commodities exchange

The commodities market ranks third in terms of value traded, following foreign exchange and bonds. This presents an opportunity for Zimbabwe to diversify its financial market beyond share trading and into commodities and bonds.

The establishment of a minerals commodities exchange at the VFEX is expected to:

• Increase economic activity through job creation and expansion of the mining sector, leading to overall economic growth.
• Address issues of smuggling by providing a transparent market.
• Allow small-scale miners to realise better returns for their products.

The mining sector is a major pillar of the Zimbabwean economy, contributing over 45 000 formal jobs and at least 50 percent of export earnings annually.

VFEX: A safe haven for investment

Prof Ncube addressed the conference delegates, which included executives from Chinese companies, highlighting Zimbabwe’s capital markets as a safe haven for investment. The VFEX, which trades in US dollars, offers investors a hedge against currency volatility.

Zimbabwe Stock Exchange chief executive officer Mr Justin Bgoni also addressed the conference. He explained investment opportunities on the Zimbabwean capital markets to Chinese investors, including debt and equity investments in foreign companies operating in Zimbabwe, joint ventures with private companies, and debt and equity investments in local private companies.

Currently, there is minimal stock market investment by Chinese institutions or companies.

Mr Bgoni pointed out that foreign

investment, primarily equity investment by United States and European investors, once made up 50 percent of the Zimbabwean stock market.

He emphasised the vast opportunities offered by the VFEX, particularly with the introduction of the minerals commodities exchange and the development of Victoria Falls as an offshore financial centre modelled after the Kazakhstan and Qatar international financial centres.

This initiative, along with the VFEX and the commodities exchange, will be part of the centre and will feature enhanced investor protection.

Beyond the repatriation of capital and dividends, Mr Bgoni highlighted the presence of some of Zimbabwe’s largest and most successful companies on the VFEX, such as Innscor, National Foods Holdings and resources group Caledonia.

The VFEX also boasts good corporate governance practices that meet international standards.