Zimbabwe’s retail juggernaut, Innscor Africa, recently moved from the Zimbabwe Stock Exchange (ZSE) to the Victoria Falls Stock Exchange (VFEX). They have now given some of the reasons they made the move and they mirror our own reasons why we believe the VFEX will be the top investment destination in 2023. The ZWL which the government keeps foisting on the business and wider public is on a permanent decline even officially. More and more businesses and individuals are transacting exclusively in US dollars. More businesses and government departments are using the USD as their base currency.
Some of the reasons given by Innscore Africa for moving to the VFEX include:
- Access to USD capital- there are stronger chances of obtaining equity financing in foreign currencies to fund capital expenditures, working capital, and regional expansion on VFEX.
- Innscore has chosen to start producing its reports in US dollars. Reporting in USD rather than Zimbabwe dollars to “reduce Innscor’s perceived risk” and aid prospective financiers and investors in understanding its financial performance.
- Lower trading costs and increased liquidity on VFEX with trading costs of 2.12% compared to the ZSE’s 4.63%.
- Easier movement of money in and out of VFEX for foreign shareholders, including the ability to repatriate dividends freely in foreign currency and settle proceeds from selling shares outside the country.
- More attractive incentives for foreign investors on the VFEX-Tax incentives for foreign investors on VFEX, include a 5% withholding tax on dividends and no capital gains tax.
- Improved regional profile and commercial standing for Innscor, creating pathways to the company’s local and regional prospects.
- Reduced valuation volatility caused by currency translation through USD valuation on VFEX, allowing shareholders to realize the true value of their investments and get a more accurate benchmark of the stock’s performance.
- Presenting accounts in USD, as required by VFEX, is more effective in letting shareholders know the true value of the business.
- The continued decline of confidence in the local currency now accounts for a smaller portion of trade in the economy.
- Need for US money to grow but the inability to raise enough on the ZSE to cover needs.
- VFEX is better protected from changes in governmental policy, such as suspension of trade and hefty tariffs.