The domestic excitement about the Victoria Falls Stock Exchange suffered another painful blow as more information comes to light with the clear message that domestic investors will not be encouraged and perhaps even welcome on the Exchange. The idea of the exchange was initially attractive to locals because Finance Minister Professor Mthuli Ncube made it clear the exchange would trade in US dollar-denominated shares and maintain the value of shares in US dollars. Something locals would gladly welcome with eth Zimbabwe Stock exchange heavily affected by inflation and currency depreciation.

As more details have emerged the hopes of local investors have been dashed with Mthuli Ncube himself and now Zimbabwe Stock Exchange Chief Executive Justin Bgoni making it clear that the exchange is meant for foreign capital only.  The logic is sound, due to foreign currency shortages and exchange control regulations foreign investors have had great difficulty repatriating investment proceeds to their countries of origin. It wasn’t always like this.

After the economic turmoil that culminated in dollarisation in 2009 Zimbabwe opened up capital flow and the period 2009 to 2013 represents some of the best years for Zimbabwe in terms of foreign activity on the Zimbabwe Stock exchange. Monthly average foreign activity on the ZSE peaked at US$26 million in 2013 but it currently sits at US$1 million. The period 2009 to 2013 was marked by huge capital outflows as well but that is the nature of opening up and it was well worth it. However when exchange control was tightened foreigners resorted to using Old Mutual, PPC and SeedCo shares as they were tradeable on other exchanges. Fungibility was

“One of the biggest challenges cited by foreign investors is that Zimbabwe is risky. If you want to raise the money it will be in Zimbabwe dollar. So even if one raises capital, there is no guarantee of getting the USD on the interbank for capital projects. That is why we came up with the VFEX where trades will be in the hard currency because under the current laws ZSE can only trade in Zimbabwe dollars yet there is a huge appetite for USD,” said Mr Bgoni.

The Exchange is set to register mining and other exporting concerns in Zimbabwe, this to match the US dollar valuations with US dollar revenues. Mr Bgoni rightly notes the appetite for US dollars but ignores the source of the appetite singing from the same tune as finance minister Mthuli Ncube. Reserve Bank Governor Dr John Mangudya has for years now said Zimbabwe does not have a foreign currency problem but rather an allocation problem. The very policies that are being put in place to protect foreign investors US dollar investments and returns would be appreciated by domestic investors. Surely Zimbabweans would find it in their hearts to allocate the US dollars they have to local investment if they were afforded the same treatment.

The deficit of trust that Mthuli Ncube referenced when asked about the economic problems the nation currently faces is not just a domestic one. We continue to see deals that range from questionable to outright absurd being entered into on behalf of the people because there is a dire lack of good suitors. The VFEX may attract similar investors if the causes are not addressed.