The Zimbabwe Stock Exchange (ZSE) now counts Delta Corporation Limited and Econet Wireless Zimbabwe as its only major players, following a wave of delistings by firms opting for the Victoria Falls Stock Exchange (VFEX).
The volatility of the Zimbabwean dollar (ZiG) has prompted companies to migrate to the VFEX, which exclusively operates in foreign currency. This shift has drastically altered the ZSE landscape, with most counters now favouring the stability of US-dollar trading.
Last month, private equity investor BridgeFort Capital Limited and tea producer Tanganda Tea Company Limited became the latest to announce plans to leave the ZSE for a VFEX listing.
Dual Currency Challenges
Stockbrokers Association of Zimbabwe Secretary General Arnold Chibvongodze explained that dual currency trading on the ZSE has created liquidity challenges.
“Liquidity is affected by two currencies, the ZiG and the US dollar. Before the ZiG currency, trading was in one currency, and all the counters were on the ZSE,” Chibvongodze told NewsDay Business.
“With the currency volatility, some counters have moved to the VFEX. For instance, the entire Innscor group transitioned to the VFEX without issuing new shares. This has dried up local currency liquidity as trading shifts to US dollars,” he added.
Dominance of Delta and Econet
Delta and Econet now dominate the ZSE, with market capitalisations of US$987.87 million and US$373.88 million, respectively, as of last Friday. Chibvongodze noted that brokers are increasingly reliant on these two counters to sustain operations.
“If you don’t trade Delta and Econet, you won’t make it as a broker. Without these two counters, there is very little revenue,” he said.
In contrast, the VFEX has attracted heavyweights like Innscor, Simbisa Brands, and WestProp, which trade in US dollars, providing brokers with “real money” and greater stability.
Market Performance
Despite the challenges, the ZSE’s valuation has risen recently, with market capitalisation reaching US$3.27 billion last week, up from US$2.75 billion at the end of December 2023. However, brokers and financial analysts warn that the dual currency environment continues to pose significant hurdles.
Chibvongodze highlighted the difficulties faced by companies reliant on local currency. “When one receives local currency, they have to convert it into dollars to meet obligations. That’s the problem we have at the moment,” he said.
Call for a Single Currency
To address the liquidity challenges, Chibvongodze suggested that Zimbabwe adopt the South African rand as a single currency.
“Adopting the rand would make trading across the region easier. For Zimbabwean companies exporting to South Africa, it becomes more straightforward,” he said, adding that such a move could stabilise the economy and enhance regional integration.
As more firms transition to the VFEX and the dual currency dilemma persists, the ZSE faces mounting pressure to adapt to a rapidly evolving financial landscape.