THE Zimbabwe Stock Exchange (ZSE), rated the best performing bourse on the continent by the African Stock Exchange Association (ASEA), has failed to attra
ct meaningful foreign participation due to a struggling economy, businessdigest established this week.
ASEA said Zimbabwe’s stock market offered investors the highest returns in Africa in 2005 and most of 2006, despite a deep economic recession.
The country’s stock market had been one of the few investment destinations where returns remained above the inflation rate of 1 070%, the world’s highest.
The Zimbabwe Stock Exchange rose 1 545% in 2005 and had shot up by more than 2 000% by the first week of November this year.
However, businessdigest established this week that despite its high performance, the local bourse was struggling to attract foreign participation due to an economic crisis that has disrupted normal economic activities in the country over the past six years, stunting industrial productivity and hurting the performance of a number of listed firms.
Foreign participation on the ZSE is restricted to 10% but figures obtained this week indicated that foreign participation on the stock exchange accounted for a paltry 2,31% during the 10 months to October 31.
Last year, foreign participation accounted for 2,8% of investments on the stock market.
Market watchers said a high tax regime and capital restrictions had partnered to ward off foreign participation on the local stock market.
Investors on the ZSE are required to pay a 2% stamp duty, 15% value added tax, 20% capital gains tax and 5% withholding tax.
Moreover, issues around repatriation of dividends and investments had also triggered a flight from the local market by foreigners unable to hive off their funds from the country due to foreign currency shortages.
Zimbabwe’s economy has contracted by a cumulative 30% over the last five years. The country has struggled to attract foreign direct investment (FDI), said by economic analysts to be key to economic development.
Last year, FDI amounted to less than US$10 million. The country had on average received FDI amounting to US$500 million annually before the six-year economic crisis characterised by acute foreign currency, fuel and food shortages.