By Edward Mukaro
THE ruling party, ZANU PF has recommended the Government of Zimbabwe (GoZ) to set-up a stock exchange which will trade in the United States of the American dollar, to protect the interests of the 30 168 shareholders of Old Mutual Limited.
ZANU PF’s position comes at a time where trade at the Zimbabwe Stock Exchange bourse has been halted by government, amid the skyrocketing exchange rate, which ZANU PF blames on the fungibility of OML’s shares.
The Reserve Bank of Zimbabwe introduced a raft of measures intended to curb the skyrocketing exchange of the local currency versus the USD, which had spiralled out of control, especially in the parallel market by shutting down the ZSE, as well as limiting mobile money transactions.
In a statement, acting secretary for information and publicity and party spokesperson Patrick A. Chinamasa expressed grave concern as fungibility of shares on the ZSE has created an opportunity for the determination of foreign exchange rate in Zimbabwe to be determined from activities emanating from actions of speculators operating on the stock exchange.
“…ZSE is now being used for speculative purposes, which is harmful to the economy.
“Distortions have risen emanating from the Old Mutual share being traded on multiple stock exchange counters. The distortions emanate fundamentally from differences from the relative strengths of the underlying economies in which the OML shares are listed.
“This fact has created an opportunity for fungibility to generate arbitrage gains. Fungibility creates an opportunity for speculation, as there are arbitrage opportunities to trade the share between Zimbabwe and other stock exchanges. This speculation may distort the foreign currency market.
“ZANU PF is recommending to its government that it sets up a stock exchange, which will trade only in US$,” said Chinamasa.
The ZANU PF spokesperson added that opening of a stock exchange that trades in the US$ will enable firms like OML to trade, while also recommending the reopening of the bourse.
Such an action, according to Chinamasa would then attract foreign direct investment into the country.
“Old Mutual Limited can then be allowed to migrate, find home and trade on such a foreign currency-denominated counter, in Zimbabwe. Trading on other counters has been normal and the Party is recommending that trading be resumed.
“Setting up a foreign exchange denominated stock exchange is an appropriate institution for raising and attracting Foreign Direct Investment into Zimbabwe. Companies that want to invest in Zimbabwe and requiring foreign currency would then list on such a stock exchange to attract foreign direct investment in foreign currency for investment.
“It is the desire of ZANU PF that implementation be in shortest possible time to avoid undue disruption to inflows of investment capital,” he added.
The government suspended the stock exchange, citing economic sabotage, leading to the collapse of the Zimbabwe dollar.
The suspension of ZSE, according to analysts, has rattled invested, who have used stocks as a hedge against, while other commentators have opined that the suspension has had a major knock-on Zimbabwe’s already threadbare image as an investment market.
By Edward Mukaro