The Securities and Exchanges Commission of Zimbabwe (SecZim) says the Zimbabwe Portfolio Investment Fund (ZPIF), which is earmarked to be operational from next month, would spur investor appetite of stocks traded on the local bourse.
Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya announced during the recent Mid-Term Monetary Policy Review Statement that the fund comes after the realisation that repatriation of foreign exchange for securities related transactions was taking 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.
SecZim chief executive officer Tafadzwa Chinamo told Business Weekly this week that if implemented according to the RBZ plan, the ZPIF would help attract more foreign investors to the ZSE. Chinamo said foreign investors would be keen to loosen purse strings when investing in markets where they would be able to repatriate their dividends.
“I think it (introduction of ZPIF) will make the ZSE more appealing because what any investor wants, when they go to a market that is attractive and make your money, is to be able to realise their profits.
“If you can’t access your profits, it is a problem. If you take an investor from Dubai to come here and invest $500 000 and make a profit of $300 000, and say ‘I don’t live in Zimbabwe and I want to spend it where I stay’. If they can’t get that money out, it is as good as not investing.
“So, really, what this (ZPIF introduction) does is, it makes the appeal for our market much better. If there is no upside in a market, foreigners will not come,” said Chinamo.
Chinamo said currently, foreign investors are having challenges accessing their funds in the form of dividends or sale of shares from Zimbabwe given the foreign currency payments bottlenecks.
Local firms and individuals are struggling to make foreign payments because the RBZ has crafted a priority list regards such payments, and more importantly, the nostro accounts for local banks are depleted.
A nostro account is an account held by a bank in a foreign currency in another bank.
The RBZ has arranged $215 million nostro stabilisation facilities with international financiers, with the African Import and Export Bank (Afreximbank) availing the bulk of the funds. Dr Mangudya said an enhanced nostro stabilisation facility of $600 million is also being negotiated with the Afreximbank, to cushion companies whose operations are choking at the inability of local banks to process outgoing payments.
But Chinamo said if the ZPIF “is done as it is planned to operate”, it will help foreign investors to access their funds from the countries they stay.
“The problem right now is that when they sell their shares, with the current cash shortages, you find that a foreigner; be it in London, be it in South Africa, they can’t get the money in their accounts when they sell shares given that nostro accounts have no money.
“All the foreign shareholders, when they get a dividend, their dividend would be in Zimbabwe, but would want their money in America, Virgin Islands or Australia, in US dollars, (British) pounds or the euro, but the local company’s bank does not have money to give to shareholders.
“So this Fund would make that process much better, it will speed up that process of payments,” said Chinamo.
Stock market analysts, IH Securities, also said the ZPIF was a “a good signal”, adding that it would enable the “collection and repatriation of foreign funds related to portfolio equity purchases and sales in a more transparent manner”.
Dr Mangudya believes the introduction of the Fund is essential 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.
The central bank boss said a properly working capital market provides a strong signal for potential sources of foreign investment and for promoting the integrity and efficiency of the stock market.