ZSE Daily Trades Plummet by 92% Due to Restrictive Taxes, Says CEO Justin Bgoni

Justin Bgoni, chief executive officer of the Zimbabwe Stock Exchange, at the Zimbabwe Stock Exchange in Harare, Zimbabwe, on Tuesday, July 11, 2023. Zimbabweans frantically trying to protect their savings from a collapsing currency have driven the country's main stock index up by 760% this year. Photographer: Cynthia R Matonhodze/Bloomberg via Getty Images
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The Zimbabwe Stock Exchange (ZSE) has seen a dramatic 92% decline in daily trades, dropping to just 80 trades, due to restrictive taxes in the capital markets, according to ZSE and Victoria Falls Stock Exchange CEO Justin Bgoni.

Speaking at an inaugural capital markets conference in Nyanga yesterday, Bgoni highlighted the challenges faced by the exchanges and the ongoing efforts to address them.

Bgoni expressed concern over the impact of restrictive taxes, including the vesting period and a 4% withholding tax, on the attractiveness of the markets. “These measures have made the markets very unattractive, leading to significant drops in both volume and value. Currently, we are seeing around 80 trades a day, down from a peak of approximately 1,000 trades,” he stated.

He emphasized the importance of liquidity for market health, noting that low liquidity hampers proper valuation of equities and deters potential investors. “High taxes discourage people from raising capital, resulting in fewer new listings,” Bgoni added.

To combat these issues, Bgoni mentioned that both the ZSE and its regulator are actively lobbying the government to remove these restrictive measures. “We are working hard to increase liquidity and make our markets more appealing,” he said.

Bgoni also pointed out the negative impact of the continued suspension of trading for Old Mutual and PPC, two previously attractive counters. “The suspension has affected pension funds and retirees who invested in these equities, preventing them from realizing their value. This is something we are urgently addressing,” he said.

Additionally, Bgoni highlighted the absence of a debt market as a significant drawback. He urged the government to consider the benefits of raising funds through the capital markets, which could provide a more stable financial environment.

The ZSE CEO concluded by reiterating the need for ongoing efforts to resolve these issues and restore confidence in Zimbabwe’s capital markets. – News Day