The Victoria Falls Stock Exchange (VFEX) continues to evolve on the back of increased interest from both foreign and local companies seeking to raise US dollar capital and take advantage of offshore settlement options, which allow investors to easily repatriate their dividends.
VFEX, was established to kick-start the Offshore Financial Services Centre (OFSC) earmarked for the special economic zone in Victoria Falls.
Currently, the number of listed companies on VFEX is four, namely, SeedCo International, Bindura Nickel Corporation, Padenga Holdings and Caledonia Mining Corporation.
VFEX chief executive Justin Bgoni said in an interview the US dollar-denominated exchange had a strong pipeline of at least 10 new listings in different securities by the first quarter 2023.
“We believe that the stakeholder engagements we have been conducting as VFEX explaining the favourable incentives applicable on VFEX is aiding in the improved interest from companies,” he said.
Nedbank, National Foods and Simbisa Holdings have already made significant progress toward the VFEX listings.
Simbisa is now awaiting shareholder approval from an extraordinary general meeting to be held in November, while Nedbank, according to Bgoni, will debut its Nedbank Zimbabwe Depository receipts (ZDR) next month.
In addition to these, Getbucks Microfinance Bank Limited (Getbucks) as part of capital raising initiatives is also considering migration of the company’s listed securities from the ZSE to VFEX and is currently trading under caution.
The microfinance bank has been negotiating a US$5 million recapitalisation to enable the bank to meet the required minimum threshold set by the Reserve Bank of Zimbabwe (RBZ). According to the central bank thresholds, Tier 3 deposit-taking microfinance banks are required to have US$5 million minimum capital while Tier 1 banks, large indigenous commercial banks and all foreign banks are required to have US$30 million minimum capital.
Caledonia Mining Corporation, which became the third listing on VFEX last year, ended up issuing more shares in respect of its VFEX listing in order to raise more funds than originally anticipated following an extremely positive Zimbabwe investor response.
At an offer price of US$12,64 per depositary receipt, Caledonia raised approximately 630 000 new shares, raising approximately US$7,96 million (before expenses) and the proceeds of the offer were targeted to be invested for general corporate purposes in Zimbabwe.
However, according to Mr Bgoni, VFEX attributes the interest in listing on VFEX listing to mainly three things, a deeper understanding of the platform.
National Foods advised shareholders and the investing public that the firm’s board has approved the delisting of the company from the Zimbabwe Stock Exchange, immediately followed by its listing on the VFEX
The company said further details of the transaction will be provided to shareholders once all regulatory processes have been finalised.
“Organisations now understand what the platform is about, the benefits and more importantly how they can take advantage of it to further their strategic goals,” he said.
In addition to that, growing credibility of the platform as more companies listed and increased trading, has been a huge factor.
Mr Bgoni also said there was a need for companies to raise funding and VFEX has proven to be a credible platform for this.
He said FEX is continuously exploring initiatives that deepen the capital markets and add value to investors.
“First coming, from 18 November 2022, is a platform for holders of Nedbank shares in Zimbabwe to trade their shares on VFEX as Nedbank Zimbabwe Depository receipts.
“There are more than 25 000 people with Nedbank shares in Zimbabwe who until now it has been complicated, expensive and taking a long time to sell their shares.
“In addition this will allow for Zimbabweans to buy or increase their shareholding in Nedbank.,” he said.
Mr Bgoni also noted VFEX was working on a framework for Contract for Differences (CFD) rules as a new product on VFEX.
He said most people know CFDs as foreign currency trading. He added that forex trading in Zimbabwe has been a jungle with people losing money to unscrupulous foreign brokers.
“We will shortly be launching a platform to allow safe and secure CFDs or forex trading in Zimbabwe on VFEX,” he said.
Investment analyst Enock Rukarwa said the Government had created an enabling policy environment for potential Issuers on the Victoria Falls Stock Exchange in the form of 100 percent retention thresholds for incremental export returns.
“Besides an encouraging policy framework VFEX has been less predisposed to systematic risk compared to ZSE taking a cue from the May 2022 government raft of measures,” he said.
He said the scope and value creation presented by VFEX could be an optimal listing Authority, especially for foreign currency-generating companies.
year-to-date according to Mr Rukarwa, on a year-to-date basis the VFEX had rallied by around 28 percent compared to ZSE All Share Index which is only 20 percent higher year to date.
“Liquidity constraints remain a pain point for the VFEX however the introduction of Simbisa should ignite some trading moments as the counter is fairly liquid,” he said.
Batanai Matsika, the head of Research at Morgan and Co echoed Mr Rukarwa’s assertions, indicating that for some companies it makes sense to migrate to VFEX especially coming from a USD operating environment.
“Looking at Simbisa they are predominantly a USD business. Therefore it makes sense for them to list on VFEX and also for prospects of capital raising,” he said.
He added that if more companies decide to migrate from the ZSE that made sense for them to switch because from a capital raising perspective and knowing that companies really need foreign currency for expansion.
Simbisa in its pre-listing statement said the migration to VFEX will enable the group to attract foreign currency capital from investors to match the business’s foreign currency needs.
The company’s board has since approved the transaction hence the group is now moving to seek shareholder approval at an extraordinary general meeting to be held on November 18, 2022.
Addington Chinake, the group’s non-executive chairman said the company was seeking to take advantage of offshore settlement options which allow investors to efficiently repatriate their dividends.
“This would also eliminate the foreign currency risk of holding Simbisa shares as a foreign investor,” he said.
He noted that VFEX had lower trading costs compared to the ZSE and also has tax incentives that enable the investor to retain more of their returns compared to the ZSE.
“Overall, better investment terms would promote liquidity in the trading of Simbisa shares, making them more attractive to investors.
“The VFEX listing will also elevate Simbisa’s local and international profile thereby boosting its public and commercial standing,” said Mr Chinake.
Simbisa has continued to record strong year-on-year growth in customer counts and its restaurants served over 52,3 million customers, up 28,6 percent from the prior year.
Nedbank on its part said the listing of Nedbank Zimbabwe Depository receipts (ZDR) will afford current shareholders and new investors a localized exit mechanism and exposure to Nedbank.
“The proposed listing will thus afford current shareholders, as well as new investors, a mechanism to seek exposure to Nedbank through Nedbank ZDRs on the VFEX,” the group said in a pre-listing statement.
The group indicated that the lengthy trading and settlement turnaround time of the current process will be improved by listing Nedbank ZDRs on the VFEX.
“Currently, shareholders’ sale proceeds are subject to foreign exchange surrender requirements, which will be fully exempt on the VFEX,” the company said.
Meanwhile, for the past two years, the capital markets have seen the introduction of new products such as the ZSE Direct, the Zimbabwe Receivables marketplace, and the Old Mutual ZSE Top 10 exchange-traded fund, which debuted the ETF markets.
In addition to the Old Mutual ETF, there are other four which include the Morgan and Co ETF, the Datvest ETF, Morgan & Co Made in Zimbabwe ETF and the Cass Saddle Agriculture ETF.
ETFs are baskets of different types of investments such as stocks, commodities and bonds that are pooled into a single entity, which then offers shares to investors that are subsequently traded on major stock exchanges. – Herald
