Harare - Zimbabwe is offering tax incentives to attract investors to its new United States dollar-denominated bourse, the Victoria Falls Stock Exchange (VFEX).
VFEX was last week licenced by the country’s Securities Commission and is now finalising listing and membership requirements, as well as modalities on the clearing and settlement of transactions.
Mr Justin Bgoni, chief executive of the Zimbabwe Stock Exchange (ZSE) which will operate the VFEX, said: “Foreign investors were not interested (in the ZSE) because it was increasingly getting difficult for them to repatriate their dividends. This is why we came up with a stock exchange that is denominated in US dollars.
“We had to do something different to attract new listings into Zimbabwe. By having this stock exchange with different rules, we minimise the country's risk.
“We are going to be very competitive. Besides the dollarisation, the government has been very generous in terms of incentives. There is no capital gains tax when you sell your shares on VFEX. We think that is a big thing for investors. Very few exchanges have this attraction.”
He went on, “Current withholding tax (on the ZSE) is 10 percent. It is going to be five percent at VFEX. If you raise money on the VFEX you can keep it offshore. There are a lot of things that are attractive about the VFEX.”
Market watchers suggest the Zimbabwe government is targeting mining firms and dually listed stocks such as PPC, Seed-Co and Old Mutual for the forex bourse.
Seed-Co Zimbabwe has already indicated it could consolidate operations with holding company so that it moves its listing to VFEX.
Mr Lloyd Mlotshwa, an investment analyst with IH Securities, said VFEX offered fresh opportunities for firms looking to raise capital.
“I believe that there are companies that already see the attraction of being able to raise hard currency for capex. I think local institutions with time will also appreciate the opportunity to invest in hard currency assets in our hyper-inflationary environment,” he said.
Companies which will list on the VFEX will be compelled to invest at least a fifth of the capital raised on the bourse in the country according to a new Statutory Instrument.
The rules also state that firms listed on the exchange should solely raise capital from offshore sources.
Similar conditions apply for forms placing initial public offers on VFEX.