Zimbabwe's first stock exchange was established in Bulawayo in 1896. Later that year, the Mutare Exchange was also established and focused on local mining. The Zimbabwe Stock Exchange ZSE was established after independence in 1980, changing the name from the Rhodesia Stock Exchange.
The establishment of the Victoria Falls Stock Exchange (VFEX) is not necessarily a new concept
The launch of the VFEX comes after the Zimbabwean government suspended trading on the ZSE from 29 June, 2020 to the 3rd of August 2020 in order to impose measures that were meant to address the RTGS dollar.
The giant seed company, SeedCo International's share trading was suspended on the ZSE in June together with other dually listed entities like PPC Limited and Old Mutual following a government directive.
The VFEX therefore aims to harness offshore investments that are critical for economic transformation. Despite being the only stock market in Africa that trades exclusively in foreign currency, the VFEX is a wholly owned subsidiary of the ZSE.
About 80 companies have already shown interest to list on the VFEX, to my surprise, SeedCo International is one of them. SeedCo International was part of the dually listed entities that were fingered among platforms allegedly being used to sabotage the economy. This included mobile money operators which the central bank described as a "ponzi scheme".
The ZSE has been suspended before. In 2008, the Reserve Bank of Zimbabwe (RBZ) shut down the market, using the same reasons being used now, "alleged sabotage". It opened three months later after Zimbabwe moved to the multi currency regime.
Serious investors are not interested in markets that are directly controlled by the government. The suspension of the ZSE gag investors who have used stocks as a hedge against inflation. The series of suspensions of the ZSE scares investors away.
Suspending the stock exchange is inconsistent with the "Zimbabwe is Open for Business" mantra. As for the VFEX, new financial strategies should be adopted to counter "alleged economic saboteurs".
Government declared the resort town of Victoria Falls a Special Economic Zone and has set aside incentives for new traders which will likely encourage business opportunities and growth of the VFEX.
Not only that, the stock exchange is a positive move that will necessitate for the repatriation of funds with respect to foreign capital. Investors were finding it difficult to repatriate investments to their parent country in the traditional ZSE.
The VFEX has the potential to do better than the Mutare and Bulawayo exchange markets. The VFEX excites the tourism players in the resort town. The Victoria Falls economy was hard hit by Covid-19 as it solely depends on tourism which was affected by international travel bans.
The administrative and marketing excellence of VFEX will largely determine the success or failure of the platform. The stock exchange should make it affordable and more efficient for investors to trade. The technology used for transactions must provide for security, speed and transparency in the settling of transactions.
