ZIMBABWE’S United States dollar-indexed Victoria Falls Stock Exchange (VFEX) registered phenomenal 450% growth rate in market capitalisation since its inception 15 months ago as it surged over US$1 billion in March this year, chief executive Justin Bgoni has said.
This makes it one of the fastest growing equity markets on the continent as local firms and new counters opt to migrate to list on the bourse to hedge against market volatilities.
Last year, Finance and Economic Development minister Mthuli Ncube in terms of section 78B(2) of the Banking Act [Chapter 24:20] issued the Banking (Declaration of the Victoria Falls Special Economic Zone as an International Financial Services Centre) Notice, 2022.
The minister declared the Victoria Falls Special Economic Zone as an International Financial Services Centre with effect from the gazetting of the notice on 7 January 2022.
The government wants Victoria Falls to become a regional business and financial hub; a cross-border investment destination of choice for the region and Africa.
With its natural beauty and magnetic attraction of tourists, Victoria Falls has a huge potential to become a business and financial hub, offering a wide range of services within the free economic zone and a stable currency environment.
The VFEX offers currency and certainty stability given that it is US dollar-indexed.
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.
Zimbabwe is facing high inflation levels and weakening domestic currency, rendering stocks on the ZSE undervalued.
The VFEX was established in 2020 as a subsidiary of the ZSE operating in the resort town’s special economic zone.
Bgoni told investors attending the recently held capital markets conference in London that the bourse provides several incentives to 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 partnered by Bard Santner Markets Inc. Many local companies, corporate executives and investors attended.
“VFEX has received support from the government and this has been demonstrated by the official launch by the President of Zimbabwe on 2 December 2021,” Bgoni told the conference.
“VFEX has been attractive as a capital-raising platform due to: ability for companies to raise capital in USD or any other hard currency; trading, clearing and settlement (on or offshore) in USD; reduction in currency risk for listed companies and investors and less onerous listing requirements.”
Mauritius is 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% of total) and US$180 million in tax revenues (8% of total), and provides more than 11 000 jobs (4% 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% of the IFC’s economic value add, an estimated 88% of IFC tax revenues and 70% 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 Q1’23, Innscor 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.
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 was US$57 150.06 from January 2022 to March 2023.
VFEX was founded in October 2020 to cushion investors against currency volatilities.
The bourse offers the following investments: Shares, depository receipts, fixed income instruments, exchange-traded funds, exchange-traded notes 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 5% 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. — STAFF WRITER.