GOVERNMENT has suspended the 40% capital gains tax (CGT) on stocks sold on the Zimbabwe Stock Exchange (ZSE) to shore up trade on the bourse.
It has also halved the capital gains withholding tax to 2% on all trades that happen on the ZSE for the next six months.
The suspension and reduction in taxes is valid for six months.
The reprieve comes as daily trades on ZSE have been plummeting, dropping by 92% to 80 on restrictive taxes.
The suspension of CGT and reduction in capital gains withholding tax means stocks can now be sold at a much cheaper cost and at a faster rate on the ZSE will run for six months.
In its annual general meeting last Friday, the Securities and Exchange Commission of Zimbabwe (SecZim) chief executive officer Anymore Taruvinga said the Treasury had also approved lifting the vesting period of 180 days which will allow for the faster sale of stocks.
“We are glad that through our interactions with the ministry, we managed to address the issue of the vesting period which was a major issue and has been lifted,” he said.
“Capital gains withholding tax was reduced to 2% coming down from 4% and also the suspension of capital gains tax which had been put at 40% was sort of driving away investors and we are quite happy that it has come through.”
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He noted that the commission would be focusing on Stochastic Momentum Index (SMI) stability, investor protection, market development and recapitalisation plan going forward.
The SMI is a technical indicator that measures the momentum of an asset’s price.
“Going forward, the Commission will continue to focus on SMI stability (currently reviewing capital adequacy framework), investor protection (pushing amendments to the main Act), market development (participating in the Treasury-led financial development strategy and focusing on capital market development plan), and recapitalisation of the institution, that are, offices, systems and motor vehicles,” Taruvinga added.
He said that market remained short on liquidity on both the ZSE and the forex-only Victoria Falls Stock Exchange (VFEX) adding trading would likely remain subdued as a result.
According to the regulator, last year saw nominal growth of 412% in turnover to ZWL726,3 billion across the three trading platforms ZSE, VFEX, and FINSEC.
However, this translated to a 56% decline in United States dollar terms to US$198,32 million.
“2023 was a tough year for the capital market,” Taruvinga said.
“Two counters delisted from the ZSE in 2023 and IPOs [initial public offerings] undersubscribed [REVITUS 18,27% and WestProp 8,23%].”
He added: “Moreover, two advisory firms surrendered their licences during the year. One asset management firm was barred from taking new business and at year-end 2023, 48% and 41% of securities dealers and asset managers, respectively, were undercapitalised respectively.”
The SecZim boss said the commission faced several challenges in implementing the Capital Market Awareness Index and an Investor Education Toolkit introduced to address the decline in trading activity due to financial constraints.
“The commission also faced capacity constraints and was unable to recruit additional staff and limited investment in investor education and awareness programs,” Taruvinga added.
However, on a positive note, new licences were issued including five for security advisories, one to securities asset management, one to securities custody, two to securities trustee, nine collective investment schemes, one security dealing firm and one securities dealer.
During the period under review, funds under management (FUM) recorded a year-on-year growth of 975,6% to ZWL$17,22 trillion from the 2022 comparative.
Collective investment schemes FUM grew by 1 076% to close at ZWL$602,36 billion as last year.
