Government plans to make the Victoria Falls Stock Exchange (VFEX), which will provide an avenue for foreign currency listings, one of the best in the region whose rules and regulations are in line with international best practice.
The bourse is one of the key interventions deriving from Government’s deliberate stance to open up the economy.
Zimbabwe Stock Exchange (ZSE) chief executive officer Mr Justin Bgoni last week explained to a global audience including mining executives, Government ministers, capital market experts and other stakeholders on how the stock exchange would operate.
“This is going to be an offshore financial services centre, so it is a very important project for the Government. We have already received great support from them, showing how serious they are about it.
“This will have investor-friendly rules; these should be similar to those at the JSE (Johannesburg Stock Exchange),” he said during the fourth annual Arab and African Mining Conference hosted by Financial Markets Indaba, a private sector-led forum designed to help private and institutional investors.
It is believed that investors could use VFEX as a conduit for investments into the mining sector.
Various incentives have been put in place to increase its allure among African exchanges.
At 5 percent, withholding tax for companies that list on the VFEX will be lesser than other jurisdictions.
ZSE-listed companies are currently taxed 10 percent, while non-listed companies’ withholding tax is pegged at 15 percent.
The planned exchange in the resort town eschews exchange rate risk, as it will trade in foreign currency, making it more attractive among other regional exchanges.
Mining sector executives and market watchers say VFEX has potential to become a game-changer in a country endowed with vast mineral resources.
“Foreign investors want the experience they will have on, say, the London Stock Exchange; they want to freely move their money anytime,” said Mr Roy Pritchford, a mining expert and Contango Holdings PLC director.
“Let us make VFEX a success and a sleeping investment destination,” he said.
Zimbabwe has several mining companies listed in other jurisdictions such as South Africa, Australia and the United Kingdom.
Listing entities like Fidelity Printers and Refiners on VFEX, Mr Pritchford added, would boost investor confidence and attract other regional players to bring their gold to Zimbabwe for refining.
“Fidelity should perhaps be the first to list on VFEX, which will be a clear indication that Zimbabwe is indeed open for business. Fidelity is the sole refiner for gold and being on the exchange will attract producers from outside the country to bring their gold to Fidelity for refining,” he said.
But VFEX is not only angling for foreign investors, but local players and the Diaspora as well.
It is expected to add another dimension to local investors such as pension funds, who, despite being already on the ZSE, can still list 20 percent of their equity on the VFEX. Beyond that, local pension funds can invest in new companies listed on the exchange.
The recently promulgated Statutory Instrument 196 of 2020 and the Finance
Act give the exchange the privilege to raise capital in hard currency, have better control of capital raise and trade, and settlement in USD.
It allows easy repatriation of proceeds after share sales, including repatriation of dividends.
There will be low withholding tax on dividends for foreigners and no capital gains on disposal of shares.
“The funds in the Nostro Investment FCA will not be subject to any restrictions, surrender requirements and will be held for an indefinite time.
“Disinvestments and dividend proceeds due to non-resident investors shall be freely remittable without exchange control approval through their authorised dealers,” said Mr Bgoni.
Among the salient features of listing requirements are the expectation for at least 30 percent of the shares to be held by the public. Other listing requirements include satisfactory profit history for the preceding five years; minimum of 50 shareholders; and minimum subscribed capital of US$3 million (not less than 10 million shares).
An issuer currently on ZSE may list 20 percent of its authorised but unissued shares on the VFEX as a different class of shares from those listed on ZSE.
“Consideration is being done to have a junior mining board on VFEX to facilitate funding for exploration companies,” added Mr Bgoni.