Commentary: Glimmer of hope for VFEX as government incentivises listing on the bourse

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Ahead of what seemed to be a pertinent infancy death for the Victoria Falls Stock Exchange (VFEX), there seems to be a little light of hope that has been shone following the incentives announced by the government for any company in the export business that chooses to list on the bourse.

The VFEX which is a 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 bourse is however now nearing eight months of operation and yet it has only attracted one listing in the form of SeedCo International in what Equity Axis analyst, Respect Gwenzi recently described as “perhaps a world record for any stock market within the same period.”

They have been promises of interest from as many as 80 stakeholder entities including prospective listings such as AIM-listed Caledonia mining and ASX-listed Prospect Resources limited but so far none of those promises have materialised meaning, to date, no additional listing has been recorded and no foreign participation has been registered either.

Analysts are of the view that these are early signs pointing towards a failed exchange but with a bit of luck, the VFEX might just be on a verge of a turnaround.

On Monday (May 10, 2021) the government announced new twitches to the foreign currency retention policy along with incentives for exporters, among these are twitches and incentives that will affect specifically companies that list on the VFEX.

According to the Minister of Finance and Economic Development, Mthuli Ncube “companies that list on the VFEX will be entitled to a 100% retention level of their incremental exports.”

To cast a bit of clarity, since January, the government has been entitled to 40 percent of all foreign currency earned by exporters.

It retains the foreign currency fraction while subsequently settling the equivalent, to exporters, in local currency at the prevailing market exchange rate.

As of Monday however, RBZ will retain 40 percent of foreign currency generated by exporters, but any exports above the rolling monthly average volume will attract lower retention of 20%. In the event that the exporter is also listed on the VFEX, they will get to keep 100 percent of their incremental export earnings, above its monthly average export volumes.  

Simply put, if a company formerly exporting 1 million units or volumes of produce per month increases its volumes above the respective level, will earn incremental retention of the forex earned from the additional volumes at a rate of 80:20.

Counters on the VFEX will also receive a five percent dividend withholding tax, exemption from capital gains withholding tax, minimal currency risk, and the ability to move dividends in and out freely.

Seeing the consistent need for foreign currency by companies in Zimbabwe in order to purchase mainly raw materials for their production processes this can just be the sweetener that was needed to see three or four more counters hopping onto the VFEX ship.

Meanwhile, last month, the Ministry of Finance and Economic Development started rolling out its global business roadshow programme meant to attract increased investment into Zimbabwe.

“In the Global Investor Roadshow, we positioned the Victoria Falls Stock Exchange (VFEX) as an attractive platform for investors aiming to raise capital in hard currency for investment into Zimbabwe and Africa in general,” said Prof Ncube upon returning to Zimbabwe.

Equity Axis News

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