Fresh headway in stock market plan

ZIMBABWE inched closer to establishing the Victoria Falls Stock Exchange (VFEX) on Friday, after the central bank and the Zimbabwe Stock Exchange (ZSE) inked a deal spelling out terms of a settlement system for the planned bourse.

Regulators had already approved a cluster of incentives for the forex-denominated VFEX "that very few countries have" to drive foreign capital into Zimbabwe and prop up hundreds of firms pushed to the brink by a long-drawn economic crisis.

There has been a marked rush to bring the VFEX online after authorities realised that the Zimbabwe dollar-denominated ZSE had been thrown into irrelevance by a relentless foreign currency crisis and a five-year listing drought.

Without initial public offerings (IPOs), the ZSE was "dying a natural death", according to CEO Justin Bgoni.

He has also said securing a settlement services agreement with the Reserve Bank of Zimbabwe would be the final step before trading on the VEFX kicks off at the end of this month.

VFEX is a wholly-owned subsidiary of the ZSE.

The VFEX, which was licensed last month, targets foreign investors.

"The Victoria Falls Stock Exchange Limited ('VFEX') is pleased to advise stakeholders on the signing of a Memorandum of Understanding ('MoU') with the Reserve Bank of Zimbabwe ('RBZ'). The MoU provides the terms and conditions under which the RBZ will provide assistance to the settlement services for trades conducted on VFEX in foreign
currency," Bgoni said in a statement.

Details of the administration of the FCAs (foreign currency accounts) eligible to participate on VFEX will soon be published by the RBZ, the statement said. Government recently gazetted exchange control regulations to allow investment and trading on the new VFEX. Under the regulations, securities listed on the Victoria Falls bourse shall be tradable and settled in United States dollars or a convertible currency.

Local companies already listed on the ZSE may list on the VFEX a maximum of 20% of their stock already quoted on the ZSE, but these foreign currency shares have to be funded from an offshore source or from free funds.

Foreign companies may list on the bourse, but any capital raised by such companies on the VFEX must be from an offshore source or from free funds.

A foreign company that had de-listed from the ZSE in the five years preceding its listing on the VFEX must, however, reinvest or employ in Zimbabwe 20% of the capital raised on the VFEX no later than five years from the date that it was raised.

Commenting on the development earlier, Bgoni had said: "We realised that there has been very few IPOs in the last five years. There has been very little capital raising on the market. If a stock exchange is not bringing new counters and people are not raising money on it, it kind of dies a natural death. It loses relevance to the economy. We had to do something different to (attract) new IPOs or new listings into Zimbabwe. We tried to find out why prospective companies were not listing and there were three reasons. Our currency has not been stable of late. Companies would tell us that they want to come and raise money. Most of the time they want to use that money to buy equipment in US dollars. But if the currency is unstable you don't know how much you need. Most of these projects tend to be long-term in nature. We were losing the battle to get foreign investors interested."