FINANCE minister Mthuli Ncube this week pumped up fresh incentives to attract companies to list on the United States-dollar-denominated Victoria Falls Stock Exchange (VFEX), which has entered its eighth straight month with only one counter.
The hype that permeated Zimbabwean markets during the build up to the VFEX’s launch in October last year has slowly dissipated, as targeted firms have kept a distance, as fund managers, jittery about the abrupt closure of the Zimbabwe Stock Exchange (ZSE) in June last year, maintain a cautious approach.
But under a plan rolled out by the Finance minister on Monday to rally companies to scale up export diversification and growth, he specifically singled out VFEX among the most strategic targets of the scheme, promising to give firms listed on the new bourse more incentives on a range of forex retention thresholds that came into effect.
Exporters, including miners, currently keep 60% of their foreign earnings in hard currency, while 40% is sold to the central bank at the official exchange rate.
But under the new policy, companies that export above their monthly average will be allowed to retain 80% of what they earn from that increased portion.
“In order to encourage gold production and deliveries to Fidelity Printers and Refiners (FPR), gold producers who deliver gold quantities above their average monthly deliveries shall be entitled to a retention level of 80% on the incremental portion of the gold delivered to FPR,” Ncube said.
“Those companies listed on Victoria Falls Stock Exchange will be entitled to a 100% retention level of their incremental exports,” he said, noting that his sweeteners were targeted to “encourage listing and participation of firms on the Victoria Falls Stock Exchange and Victorian Falls Offshore Financial Centre”.
“Furthermore, large-scale gold producers that qualify for the 80% retention threshold shall also be entitled to directly export the incremental portion of the gold to enable them to secure funding and gold loans to enhance their gold production. FPR will facilitate the exportation process for the qualifying gold producers under the scheme,” he said.
This week’s reforms were meant to boost productivity among current exporters, while encouraging non-exporting firms to enter the export markets.
Ncube said he wanted to generate sustainable growth in export revenue and to “fine tune the policy on the export receipts retention threshold so that the benefits accrue directly to the exporters of goods and services”.
Government has battled to justify the establishment of the VFEX, which has only attracted SeedCo International since its launch in October last year.
The background to SeedCo’s listing was that after authorities suspended three fungible counters — SeedCo, financial services giant Old Mutual and cement producer PPC from the ZSE — ironically following a protracted bull-run, the blue chips were directed to list on VFEX.
SeedCo took up the offer but its peers have been sitting on the fence.
In addition, VFEX has failed to attract offshore listings that were expected to come through, attracted by trades in United States dollars among a string of incentives announced at its launch.
But in Harare, VFEX chief executive officer, Justin Bgoni, recently told businessdigest that investors must be patient, saying even its 127-year-old sibling, the ZSE went through a lengthy nurturing process before conquering the African markets.
Announcing his new plan this week, Ncube stirred clear of falling into the trap of previous subsidy programmes that ended up stoking inflation and abating a long-drawn economic crisis.
His latest moves came after the Reserve Bank of Zimbabwe dropped a gold support scheme, under which gold miners received 25% of the gold price for each delivery to FPR, which was paid in Zimbabwe dollars at the prevailing official exchange rate.