Re-engaging investors key to improving liquidity: SecZim

Nelson Gahadza

THE Securities and Exchange Commission of Zimbabwe (SecZim), which is the country’s capital markets regulator, says there is need to re-engage both domestic and foreign investors to improve liquidity on the main bourse, the Zimbabwe Stock Exchange (ZSE), riding on the back of a stable exchange rate and inflation environment.

SecZim chief executive officer Mr Anymore Taruvinga, speaking during a self-listing ceremony of ZSE Holdings, said the capital market had gone through a tough phase over the past three to four years, marked by declining liquidity, loss of listings and increasing exclusion.

“We are, therefore, grateful that the operating environment has improved since the launch of the Zimbabwe Gold (ZIG) currency in April 2024 through a more stable exchange rate and inflation environment,” he said.

“This is essential for investor confidence and we should all rally to ensure that the current stability continues.”

Among the notable delistings was National Foods from the Victoria Falls Stock Exchange (VFEX) last year after two years of having migrated from the ZSE, while Old Mutual also terminated the listing of its Old Mutual Top Ten Exchange-Traded Fund.

Mr Taruvinga said the commission appreciated interventions in 2024 by the Ministry of Finance, Economic Development and Investment Promotion in lowering capital gains withholding tax and scrapping the vesting period and capital gains tax on marketable securities.

“Our challenge now is to improve liquidity on the main exchange, the ZSE, and for this, we need to re-engage both domestic and foreign investors and we also need to demonstrate that we have a good investment product,” he said.

Mr Taruvinga emphasised that the re-engagement was necessary because there was stiff competition for the limited liquidity at both global and domestic fronts.

“Figures from our first quarter 2025 market assessment indicated that our own asset managers’ exposure to listed equities decreased to 29 percent from slightly above 61 percent in 2020,” he said.

“Exposure to property has, however, grown from 32 percent to 48 percent over the same period. What can we do to claw back this lost market share?

“The participation of retail investors has also gone down to currently about 1 percent from a rough estimate of between 2 to 3 percent pre-dollarisation.

“Perceptions, transaction costs and limited awareness are some of the impediments that we need to deal with.”

Mr Taruvinga highlighted that with the recently revised figures putting the country’s gross domestic product (GDP) at US$44,4 billion, the market’s capitalisation to GDP ratio was now below 10 percent.

He said rapid informalisation and delistings contributed to declining listings and, therefore, the range of opportunities that the market can present to investors.

“Growing listings is, therefore, a must if we are to entice the old and new investors into the market. The ZSE introduced the Prospective Issuers Training Programme last year and this is commendable.

“As the commission, we continue to support the development of new securitised products in the form of exchange-traded funds (ETFs), real estate investment trusts (REITs) and depositary receipts,” said Mr Taruvinga.

“We also need to attract cross-border listings, and the Victoria Falls Stock Exchange platform is specifically meant for that.

“To our Government, we believe support through the listing of Government debt instruments and commercially orientated State enterprises will also help deepen the market.”

Mr Taruvinga said going forward, the commission was taking advantage of the thrust by the Government to have a financial sector development strategy and National Development Strategy 2 (NDS2) in place by contributing the required policy interventions for capital market growth.

“We are also anticipating positive developments on virtual assets and hope that we will move to recognising and regulating these soon,” he said.

He noted that the small and medium enterprise (SME) sector remained the biggest contributor to GDP and employment, and the commission had initiated discussions with the Ministry of Women Affairs, Community, Small and Medium Enterprises Development to have joint efforts in terms of how to improve both access and participation by SMEs in the capital market.

The ZSE is one of the oldest stock exchanges in Sub-Saharan Africa, having been in operation for over 100 years.

Over the years, the bourse has evolved and transformed to remain competitive.

The transformational journey the bourse embarked on in 2020 has seen the exchange introduce new products, which culminated in the self-listing on the ZSE main board.

ZSE chief executive officer Mr Justin Bgoni said the self-listing enables the exchange to remain competitive in the region.

He noted that the process of self-listing was not a new phenomenon and there were peers that had also undergone self-listing in the region.

These include the Johannesburg Stock Exchange, listed in 2006; the Nairobi Securities Exchange, listed in 2014; the Dar es Salaam Stock Exchange, listed in 2017; and the Nigerian Stock Exchange, listed in 2021.

“We have been working tirelessly to grow our capital markets through diversification of new products. This process has enabled us to evolve and as we look back, we have managed to enhance our service offering,” he said.

Mr Bgoni said during the transformational journey, the ZSE built brands that include the ZSE and VFEX Markets, the ZSE and VFEX Depositories, ZSE and VFEX Direct and the ZSE Training Institute.

“We are excited about the new opportunities that lie ahead as a listed entity. As we look forward to the next chapter, we are excited about the prospects that we are exploring with our exchanges, which include the inclusion of small to medium enterprises to access finance through our platforms,” he said.

“We will ensure that we create a business-friendly environment that accommodates this crucial sector, allowing them to tap into and raise capital on our platforms.”

Minister of Finance, Economic Development and Investment Promotion Professor Mthuli Ncube said the Government remained committed to creating an enabling environment where business can thrive, capital can be mobilised efficiently and investor confidence was protected.

“Government will thus continue to play a crucial role in promoting an enabling environment in the sector, including maintaining macroeconomic stability, upholding the rule of law, enforcing sound regulatory frameworks and ensuring that policies remain predictable, consistent and conducive to the growth of the capital market,” he said at the listing ceremony of ZSE Holdings.

He said the Government stood ready to support continuous innovation and reform in the capital market space.

Analyst Mr Enock Rukarwa said the self-listing signalled confidence in the exchange governance and long-term viability and the strategic move was an incentive to potential listings on the ZSE platform.

“The biggest advantage of this self-listing by the ZSE to shareholders and other stakeholders is enhanced liquidity and efficient price discovery. When the counter is unlisted, selling shares at the right price was problematic,” he said.

He noted that the potential downside to the listing was the thin shareholder breath, limiting efficient tradability and counter liquidity.

Mr Rukarwa said post-listing, the exchange should consider a capital restructuring model that broadens shareholder depth, enhancing counter tradability.