VFEX monument to investor rebuff

ELSEWHERE in today’s edition is a story which reveals how Finance minister Mthuli Ncube is battling to save the Victoria Falls Stock Exchange (VFEX), which was launched with much pomp and fanfare in October last year.

Under a plan rolled out by Finance minister Mthuli Ncube 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 immediate effect.

The forex-indexed bourse has only one counter since it started eight months ago. This is a damning indictment of the investors’ confidence deficit. Sadly, this embarrassing development is not surprising given the policy inconsistencies that have dogged President Emmerson Mnangagwa’s government since its coming into office in 2017. The abrupt suspension of the Zimbabwe Stock Exchange for more than a month on allegations of illicit activities last year, as well as halting the fungibility of three counters, namely Old Mutual, SeedCo and PPC, sapped investor confidence.

This is evidenced by the bourse losing a massive ZW$42,5 billion (US$524,691 million) shortly after the suspension was lifted as investors abandoned the Zimbabwe Stock Exchange. This is also evidenced by the failure of the VFEX to attract firms to list on the bourse.

Reports that The Ministry of Mines and Mining Development last week suspended two of its top directors on allegations they tried to solicit bribes from South African potential investors, Lephalele Mining, further shows why the country struggles to attract the much-needed investment and is a far cry of the government’s “Zimbabwe is open for business” mantra.

In its April 2021 Southern Africa Outlook Report, American financial services firm, Fitch Solutions, revealed that Zimbabwe still had the highest short- and long-term risk in southern Africa due to a continued decline of the country’s political and economic situation. That even strife-torn Mozambique had a better score than Zimbabwe shows how far the government has to go to attract significant and meaningful investment.

Since the disputed elections of 2018, FDI has plummeted from US$717,1 million in that year  to US$259 million in 2019. Figures from the Reserve Bank of Zimbabwe show investment further declined during the first half of 2020 to US$71,2 million compared to US$111,6 million in the same period in 2019.

The government has set up the Zimbabwe Investment and Development Agency (Zida) following the signing into law of the Zida Act (2020). The Act deals with the promotion, entry, facilitation and protection of investment in Zimbabwe. Zida has scaled up efforts to woo capital into Zimbabwe, partnering the International Finance Corporation (IFC) to conduct a major Investor Confidence Survey as part of efforts to better appreciate and address challenges prevailing in the country.

However, without significant reforms and solid institutions to back these efforts, the search for meaningful investment will remain a futile exercise.