Zimbabwe govt caves in to market pressure

THE Zimbabwean government has caved in to market demands for valuation of the two suspended formally dually-traded securities, Old Mutual and PPC, to be valued according to the closing prices of the two stocks on the Johannesburg Stock Exchange (JSE).

The two stocks were suspended in June last year amid allegations of fueling inflation and the status of their fungible stocks, which were trading in both Zimbabwe and South Africa.

While this represents a big score for the market, the valuation shall only be used as a reference price for the purpose of valuation of portfolios by securities markets intermediaries (SMIs).

The JSE values will be converted at the interbank rate, which is currently trading at about ZW$84,5, against the US unit on the official forex auction as compared to parallel market rates that have already breached ZW$120 as foreign currency shortages persist.

"Over-the-counter trading of these securities shall not be allowed," a top government official who has been close to the negotiations around the fate of the two suspended securities said in strict confidence.

A government directive is due for issuance today either by markets regulator, the Securities Exchange Commission of Zimbabwe (SECZ), or directly from Finance minister Mthuli Ncube's office.

"Finally, there is consensus and we hope it will be helpful to the market," a close source, who requested not to be named, said on Wednesday.

Efforts to get a comment from SECZ and the Ministry of Finance were fruitless at the time of going to print.

As previously reported by the Zimbabwe Independent, valuation of the two firms' stocks is material to the fees earned by fund managers as well as the asset base of companies who are holding these stocks in this inflationary environment.

Pension funds and insurance companies, who fund about 70% of investment on the ZSE, are perhaps the most concerned constituency.

Fund managers have been pushing SECZ for the shares to be valued based on the JSE, but the government has been opposed to the move, instead preferring valuation on the basis of the share price at the date of suspension.

Government in March extended suspension of the shares on the ZSE by another year on the grounds that authorities were still considering the impact of whatever decision was passed after a lengthy forensic audit into the matters whose findings have been kept under wraps.

Highly-placed sources in the Ministry of Finance confirmed the government had no choice given the need to have a binding solution and put the matter to rest in order to avoid confusion in the market.

Confusion and lack of certainty have been touted as among the major reasons Zimbabwe is struggling to secure meaningful capital.

This development comes after Ncube on Wednesday told the Independent that he was committed to maintaining the exchange rate stability currently being enjoyed and bringing down inflation as part of measures to attract investment.

Government has since created the Zimbabwe Investment and Development Agency by collapsing the Zimbabwe Investment Authority, the Joint Venture Unit and Zimbabwe Special Economic Zones Authority into a single unit headed by banker and BancABC founder, Doug Munatsi, to spearhead investment promotion. However, the country's business environment is far from being attractive.

Munatsi is working with renowned investment banker, Tino Kambasha, who was an executive director at Imara Capital to change the culture at the organisation and bring results.

Insiders say the unit is working closely with President Emmerson Mnangagwa and enjoys abundant support from the cabinet and presidium to see its vision through.