VFEX, RBZ sign trade settlement MoU

Prosper Ndlovu, Business Editor
THE Reserve Bank of Zimbabwe (RBZ) has signed a Memorandum of Understanding on trade settlement with the Victoria Falls Stock Exchange (VFEX), paving way for the operationalisation of the forex-denominated platform this month.

The signing of the MoU buttresses the ease of doing business in the country and is one of the final pieces of the plan, laying a good foundation for the success of VFEX.

Economist and communication executive within the Treasury, Mr Clive Mphambela, says settlement rules are critical for the efficient conduct of securities trading business and, as such, having a clear and transparent settlement mechanism “is a critical step”.

VFEX, a subsidiary of the Zimbabwe Stock Exchange ZSE), was recently issued with a licence and would be denominated in foreign currency.

It targets foreign investors as well as global capital markets especially the mining industry. Government is already engaged in ongoing discussions with several international investment financiers to support VFEX that will trade exclusively in foreign currency.

“The Victoria Falls Stock Exchange is pleased to advise stakeholders on the signing of the 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,” ZSE chief executive officer, Mr Justin Bgoni, said.

“The completion of the modalities on the clearing and settlement of transactions with RBZ is one of the final steps towards the launch of VFEX.

“VFEX is looking forward to a successful partnership with RBZ as it forges ahead with plans to officially launch before the end of October 2020.”

Mr Bgoni said details of the administration of Foreign Currency Accounts (FCA) accounts eligible to participate on VFEX will soon be published by the RBZ, ahead of the official launch.
He paid tribute to the RBZ and the Ministry of Finance and Economic Development for the “tremendous” assistance rendered through the process of establishing the platform.

Treasury has been seized with the matter of trade settlement in response to investor concerns over the country’s exchange and capital controls, which were perceived to be a stumbling block to attracting foreign direct investment.

The challenge of repatriating funds was being raised in all investment platforms as business leaders sought clarity and guarantees from authorities. Given that VFEX will be denominated in the United States dollar, investors have been keen to get guarantees on the ease to repatriate their funds.

In the case of VFEX, Finance and Economic Development Minister, Professor Mthuli, is on record saying that it makes more sense for the RBZ to be involved initially at VFEX but clarified that over time other banks with strong balance sheets and skills would come on board.