WHEN the Victoria Falls Stock Exchange (VFEX) was established in 2020, it generated significant interest due to various benefits that it promised to investors.
These included tax breaks. It offered investors no capital gains tax on the disposal of securities. It offered lower withholding tax of 5%, reduced trading fees, and the ability to raise capital in hard currency. These incentives were particularly attractive to exporters, miners, and manufacturers. Additionally, these benefits were seen as a potential solution to liquidity challenges on the bourse, which stemmed from a scarcity of listed companies.
Companies initially adopted a wait and see attitude. However, many of these benefits have since been removed, exposing the government's lack of policy consistency.
Lack of policy consistency has always been blamed for investor fatigue in Zimbabwe, and government has always been advised to change the way it operates. The changes have meant that some companies are now considering exiting the waterfall bourse, with National Foods Limited (Natfoods), the largest food producer, being the first to do so.
Natfoods was listed on the US dollar-denominated bourse on December 23, 2022, following its delisting from the Zimbabwe Stock Exchange (ZSE), where it had been listed since December 18, 1969.
In a circular to shareholders this week, the company said delisting would enable it to redirect spending on substantial regulatory and compliance expenses to initiatives that are more closely aligned with its needs. During a wave of delistings from the ZSE about a decade ago, these concerns were also raised. History is surely repeating itself.
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Natfoods said its share repurchase offer would provide an opportunity for shareholders to access the full value of their stock and address liquidity constraints associated with the shares' limited trading on VFEX. “The opportunity to sell shares at a price reflecting their true value addresses the challenges of low liquidity and limited trading on the VFEX,” the circular said.
“Exiting National Foods allows for the reallocation of capital to other investment opportunities that may be more appealing. Shareholders will benefit from the exemption of capital gains tax on the disposal of their shares through VFEX.”
Natfoods will now operate as a private firm. The delisting should serve as a wake-up call for the government to maintain policy consistency. Coming up with a policy today and changing it tomorrow is detrimental to investors, who make long-term decisions based on policy. If policymakers keep shifting policies, investors get affected.
Some may even lose huge investments.
It is our plea to authorities to be consistent. If a policy is implemented, it should be stuck to. Consistency is key to attracting and retaining investors. The delisting is a significant move, considering Natfoods had only listed on the exchange for two years. Natfoods’ decision to delist highlights the importance of policy consistency in maintaining investor confidence. The government should take this as an opportunity to review its policies and ensure that they are consistent and favourable to existing and potential investors.