Unpacking the VFEX

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The Victoria Falls Stock Exchange (VFEX) is set to go live in a few days but today the much-touted Exchange is launching. The launch comes a few days after the newly branded bourse announced a set of players that had been approved to participate on the bourse as facilitators in clearing, trading, settlement, and advisory. This article gives tit-bits on what the Exchange is all about highlighting the regulatory aspects, possible investors’ opportunities, lists of participants, and possible listings.

The USD denominated bourse was created out of the need to attract foreign capital and hard currency funding for local firms, especially those involved in the extractive sectors, although foreign companies can also list but with restrictions on levels of capital movements.

The Victoria Falls Stock Exchange Limited (VFEX) was granted the approval to launch and commence trading of securities by the Securities and Exchange Commission of Zimbabwe SECZ in September this year.

The development is the fruition of an earlier announcement by Zimbabwe’s Finance Minister Professor Mthuli Ncube in May of 2020 to open a stock exchange in the resort town of Victoria Falls with the aim of attracting “foreign investors and global capital, especially the mining sector,” Mthuli Ncube said.

The VFEX will operate as a  wholly-owned subsidiary of the Zimbabwe Stock Exchange (ZSE). To date, an aggregate of 80 firms in the financial and capital markets have expressed interest to participate in the VFEX.

BSE listed SeedCo International on Wednesday delisted from the ZSE and debuted on the VFEX, with other fungible firms Old Mutual and PPC expected to follow suit soon.

Meanwhile, other companies such as the AIM-listed Caledonia, and ASX listed Prospect Resources have independently pronounced their intentions for a dual listing on the local USD denominated bourse.

In a vital development on Thursday; 5 firms had their custodial service units approved for clearing and settlement of trades on the VFEX. These are CABS, CBZ, FBC, Standard Chartered, and Stanbic.

Zimbabwe is facing acute foreign currency shortages and foreigners have been exiting the ZSE because of a free-falling Zimbabwean Dollar. The local currency has shed more than 90% since its reintroduction in 2019. As a result of currency turbulence, the ZSE has recorded net outflows valued at circa ZWL 520 million since the first trading session of the year to date.

Local counters are encouraged to apply by the regulators but there are pre-conditions indicated in SI 196 of 2020 meant to guard against a mass exodus from the ZSE to the VFEX. As per the instrument; firms that raise funds on the platform must reinvest or use 20% of what they raise in Zimbabwe within a period of five years.

The Central Bank is also guaranteeing settlement logistics on key issues like repatriation of dividends, a sore matter that impinged foreign trade on the ZSE in recent years.

Trading on the VFEX will attract transaction costs including levies, fees and charges pegged at 2.1% per transaction which is nearly 50% of the 4.1% charged on the ZSE. Comparatively, The BSE charges between 1-2 percent for transactions below P50 000 – over P100 000 respectively.

Victoria Falls has been selected as a hub for tourism and financial services under the Special Economic Zones (Sez) initiative aimed at attracting tourists as well as luring investment through tourism. This means the bourse will not be encumbered by rigid regulations- vital to attracting external participation by traders.

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