Victoria Falls Stock Exchange: Zim's plan to lure back fleeing foreign investors

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  • R825m worth of shares sold off the ZSE in two months.
  • Transaction fees on the VFEX cut by 150bps on the selling side.
  • Clearing and settlement of transactions to be done offshore.


Zimbabwe on Friday launched its second stock exchange, which officials believe will shield investors from currency instability and exchange control risks.

The new stock exchange, which will be headquartered in the resort town of Victoria Falls, will trade in United States dollars in terms of clearing and settlement.

It comes at a time foreign investors are selling off Zimbabwe Stock Exchange (ZSE) listed stocks following years of limited access to foreign currency for repatriation of capital and dividends by foreign investors.

Between August and September, foreign investors had sold 80% of the shares that traded on the ZSE.

By value, the shares sold by foreign investors accounted for 75% of the Z$5.6 billion (R1.1 billion) turnover recorded during the period under review.

Foreign investors took advantage of the foreign currency auction trading system that was introduced in June this year, as a window to repatriate investments long trapped in the southern African country.

Since 2016, foreign investors struggled to remit capital, capital gains and dividends from Zimbabwe following a central bank directive for banks to prioritise certain transactions in all foreign payments.

While foreign portfolio investment on the ZSE were said to be a top priority by the central bank, fuel, electricity and food took the biggest chunk of the already limited foreign currency available, leaving foreign investors' funds trapped in banks or back into the equities market.

Some investors took advantage of the fungibility of Old Mutual and used it as a conduit to repatriate funds out of Zimbabwe. But authorities closed that window, too, by suspending fungibility of the stock and eventually kicking Old Mutual from the ZSE.

Before the introduction of the auction system at the end of June, foreign investors were not so keen to dispose their shares as access to foreign currency was very restricted.

In the six months to June 2020, share disposals by foreign investors accounted for only 25% of the ZSE turnover compared to 75% in the last two months.

Authorities now hope, the new bourse, Victoria Falls Stock Exchange (VFEX), will be able to lure back foreign investors.

VFEX targets foreign investors as well as global capital markets, especially the mining industry, according to Finance Minister Mthuli Ncube and chief executive Justin Bgoni.

"The Government of Zimbabwe is aware of the expectations from the International Community in terms of repatriation of investments, and one of the areas we believe will help us to restore investor confidence in our capital markets is the establishment of VFEX to kick start the Offshore Financial Services Centre in Zimbabwe. This will reduce foreign currency and settlement risk for our international investors," Ncube said at the launch. 

Statutory Instrument 196 of 2016 (SI 196 of 2020), which was issued by the Zimbabwe government, stipulates that non-resident companies may list on the VFEX provided that any capital raised by the company are from an offshore source.

Ncube and Bgoni told investors, back in September, that the VFEX is a way of dealing with the country's exchange and capital controls, which are perceived to be a stumbling block to attracting foreign direct investment.

While long-term plans are to have settlement for trading done offshore, through a technical partner in the form of an international bank or another stock exchange, the VFEX has in the meantime signed a Memorandum of Understanding with the Reserve Bank of Zimbabwe on Trade Settlement for Victoria Falls Stock Exchange.  


SI 196 of 2020 stipulates some of the rules and regulations that will govern listing and trading on the VFEX.

To shield investors from exchange control risk, section 8 of SI 196 of 2020 stipulates that all clearing and settlement of transactions on the VFEX shall be done by the VFEX either locally or offshore in terms of clearing and settlement rules to be approved by the Securities and Exchange Commission in consultation with the Reserve Bank of Zimbabwe.

Another section says any capital raised by a company listed on the VFEX can be held in an approved local or offshore account with an internationally recognised banking institution. 

Investors on the VFEX will also be exempted from paying tax on their capital gains, while withholding tax on dividends will be 5%, which is lower than the 10% on the ZSE.  

Transaction fees have also been reduced by 150 basis points on the selling side when compared with the ZSE.

Total transaction fees on the VFEX will be 2.124%, which is lower than the 4.136% charged on the ZSE.

There are high hopes that a platform like VFEX will be a conduit for portfolio investments as well as Foreign Direct Investments (FDI) into Zimbabwe.

"We want it to be a platform for trading securities in Africa in hard currency, we also want it to be a platform for companies that seek to go international and use exchange as a conduit," said Ncube back in September.

"As we know, some companies come into the rest of Africa through destinations such as Dubai, Mauritius and any other jurisdictions and tax havens. So, why not a Zimbabwean jurisdiction or Victoria Falls jurisdiction?" 

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