ZIMBABWE is planning to launch a mineral commodity exchange by the end of 2024 as the southern African nation pins its hope on the capital-intensive mining sector to spur economic growth, The NewsHawks has established.
BERNARD MPOFU
Mining is the country’s major foreign currency earner, accounting for over 50% of export shipments. Despite this, only a few major mining companies are listed locally, with experts saying the country has limited capital and incentives for them to be on the registers of local bourses.
The proposed commodities exchange which will be run by the Victoria Falls Stock Exchange is expected to be established in a special economic zone and will operate using the United States dollar.
In addition, investors will benefit from reduced tax rates and easy repatriation of dividends and profits. Foreign investors will also look to unlock easy access to diversified commodity portfolios currently traded on the VFEX such as stocks and bonds.
The move by VFEX comes at a time when the trading of African mineral commodities has predominantly taken place on foreign exchanges, such as the London Stock Exchange (LSE) and the Dubai Gold and Commodities Exchange (DGCX). The few existing commodity exchanges in Africa trade primarily in soft commodities.
Arthur Gwarimbo, the Minerals Marketing Corporation of Zimbabwe internal audit manager, told The NewsHawks on the sidelines of a training workshop held in Headlands this week that the Finance ministry is currently reviewing the draft regulations of the proposed exchange.
“With the regards with the progress we have made so far of launching the commodities market exchange, as MMCZ, we are working in conjunction with the Zimbabwe Stock Exchange to set up the exchange,” Gwarimbo said.
“To date we have compiled the ground rules and regulations which will govern the operation of the commodities exchange and these have been submitted to treasury. They are looking into them and after they’re satisfied with the whole process, they will then submit them for approval with other relevant structures so that we start implementing the commodities exchange. Hopefully by end of this year we should have launched the commodities exchange.”
Commodities exchanges are where trading takes place for physical goods, also known as commodities.
Agricultural products fall under the scope of soft commodities while minerals are deemed hard commodities. In a typical mineral commodities exchange, investors can trade in minerals and enter into spot transactions for immediate delivery of the mineral commodity, or derivatives transactions with forward, futures, and options instruments.
The commodity market allows a wide range of market participants to gain access to a centralised and liquid location. Participants include outright suppliers and producers, focusing on obtaining or simply selling the commodity while others may be looking at it as a way to hedge against a certain exposure in the same product or another.
Speculators and investors are also present in the commodities market, betting on a rise or fall in prices while others may hold commodities to protect their portfolio against adverse market conditions.
Market watchers say this comes in handy given the current price shocks being experienced in the mining industry.
