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Business Reporter
Zimbabwe’s Victoria Falls Stock Exchange (VFEX) has emerged as one of the fastest-growing equities markets globally after registering a 450 per cent jump in market capitalisation over the past 15 months to US$1,1 billion in March this year, Chief Executive Mr Justin Bgoni has said.
Several companies listed on the Zimbabwe Stock Exchange (ZSE) have migrated from the bourse to the VFEX, now widely seen as a safe haven against economic shocks, especially currency and exchange control risks.
The VFEX was established in 2020 as a subsidiary of the ZSE operating in the resort town’s special economic zone. Victoria Falls is being developed into a regional financial hub offering a range of products and services within the free economic zone and a stable currency environment.
The VFEX offers currency and certainty stability given that it is United States Dollar-indexed. Mauritius is currently the leading treasury and trade finance hub in the region.
The Mauritius International Financial Centre (IFC) is a core part of the Mauritian economy. It contributes almost US$1 billion to GDP (8 percent of total) and US$180 million in tax revenues (8 percent of total), and provides more than 11 000 jobs (4 percent of skilled labour).
The IFC today is built upon three pillars: cross-border investment, cross-border corporate banking and private banking and wealth management. The core area of specialisation is the facilitation of cross-border investments and related fund administration activities, which comprise 60 percent of the IFC’s economic value and,an estimated 88 percent of IFC tax revenues and 70 percent of the IFC employment.
In line with the Mauritian government’s Vision 2030 target to double the size of the financial sector, the IFC aspires to grow its contribution to GDP in real terms, to US$1,9 billion.
This is what Zimbabwe wants to transform Victoria Falls into in the long term.
A few companies such as Karo Mining Holdings have joined the register by way of listing bonds on the VFEX.
The ZSE market has continued to experience a currency-induced exodus in 2023. In the first quarter of 2023, Innscor Africa and Axia migrated to the VFEX, while African Sun and
First Capital Bank are expected to migrate during the second quarter of 2023.
Out of the remaining 45 counters on the ZSE, there has been a high demand for heavy cap and medium cap counters.
Mr Bgoni told investors attending the recently held Zimbabwe Capital Markets Conference in London that the bourse provided several incentives for investors. He said at its launch in 2021, the exchange received enormous support at the highest level.
The two-day conference began last Thursday at the London Stock Exchange and moved to Queen Elizabeth II Conference Centre in the British capital the following day. It was organised by Financial Markets Indaba, Bard Santner Markets Inc and the government of Zimbabwe, backed by various sponsors.
“VFEX has received support from the Government and this has been demonstrated by the official launch by the President of Zimbabwe on December 2 2021,” Mr Bgoni told investors.
“VFEX has been attractive as a capital raising platform due to the ability for companies to raise capital in USD or any other hard currency, trading, clearing and settlement (locally site or offshore) in USD, reduction in currency risk for listed companies and investors and less onerous listing requirements.”
Official figures show that VFEX Total value traded from January 2022 – March 2023 amounted to US$13 373 114.63. VFEX Average daily value traded US$57 150.06 from January 2022 to March 2023.
VFEX was founded in October 2020 to cushion investors against currency volatility. VFEX is a wholly owned subsidiary of the Zimbabwe Stock Exchange (ZSE), a company with profit.
The bourse is registered Exchange and offers the following investments, shares, depository receipts, fixed-income instruments, Exchange-traded funds (ETFs), exchange-traded notes (ETNs) and Real Estate Investments Trust.
Capital raised through a VFEX listing may be held in an approved local or offshore account and there would be an allowance for offshore settlements for executed trades for easier repatriation of dividends and more transactional flexibility to existing shareholders.
This would attract a more diverse shareholder base and enable shareholders to realise the value of their holdings incentivising greater liquidity.
The VFEX offers tax incentives for shareholders which include a 5 percent withholding tax on dividends and no capital gains tax on share disposal. Shareholders would be able to retain more of their earnings compared to the ZSE.
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