The foreign currency backlog for transactions conducted on the Zimbabwe Stock Exchange (ZSE) stood at $164 million, as of February 20, 2018, as the shortage of hard currency in the country keeps constraining repatriation of capital from Zimbabwe.
The bulk of the funds are locked at Stanbic Bank (custodial services) while Standard Chartered Bank (custodial services) has $36,45 million.
This is despite the existence of the portfolio investment fund (PIF) created last year, which Reserve Bank governor Dr John Mangudya said was meant “to facilitate the efficient repatriation of portfolio-related funds to foreign investors” on the ZSE.
The $5 million (PIF) facility is, however, not yet operational as the RBZ is still working on modalities.
Dr Mangudya, when announcing the PIF last year, said the RBZ had noticed that repatriation of foreign exchange for securities related transactions was taking a long time to be processed by banks despite such transactions being on the first category of the priority list for the allocation of foreign exchange.
The Fund is meant to re-establish confidence on the ZSE by demonstrating that there is a pathway for foreign investors to realise their gains, stimulate active trading and build a vibrant market with efficient and accurate price discovery and generally to demonstrate that Zimbabwe is open for business.
Overall, Zimbabwe’s foreign payments backlog reached $600 million in September last year, as the import dependent Southern African country struggled to mobilize hard currency to pay for critical goods such as fuel and equipment.
Challenges with repatriation of portfolio investments could negatively affect the flow of portfolio investments into the country on fears foreign investors would struggle to repatriate dividends and investments.
Given the issues around foreign currency challenges, dual listed Old Mutual has become the conduit for sending money outside the country.
The counter was very active in March this year as investors continued to use the group’s shares as a vehicle to bring in or send money outside the country.
Old Mutual Plc shareholders can buy and sale the shares on any of the three platforms, the Johannesburg Stock Exchange (JSE), ZSE and London Stock Exchange (LSE). On the ZSE the Old Mutual counter is trading at a premium of more than 70 percent to its trading price on both the JSE and LSE
As such, some investors are taking advantage of the arbitrage opportunity of the shares fungibility by bringing in shares bought on the LSE or JSE for selling on the ZSE to earn a premium.
On the other hand local investors are also using Old Mutual to move money out of the country by buying shares on the ZSE and selling them on both the JSE and LSE, though at a discount.
Meanwhile latest statistics show that $158 million worth of investment came to the ZSE last year while $253 million worth of shares were sold by foreigners resulting in foreigners being net sellers of shares on the ZSE.
The trend, however, seem to be reversing in 2018 with foreigners having bought more shares than they sold.
In the first three months of 2018, about $65 million worth of shares have already been bought by foreigners while about $43 million worth of shares were sold.
Recently the RBZ last year secured a $1,5 billion Afreximbank guaranteed loan facility for nostro stabilization as well as provision of security guarantees for foreign investment into Zimbabwe, as a way to boost confidence among foreign investors.