eBusiness Weekly
Nelson Gahadza
The Securities and Exchange Commission of Zimbabwe (SecZim) has removed the investor protection fund (IPF) levy from Victoria Falls Stock Exchange (VFEX) as part of a strategy to reduce the cost of investing in the market.
The new levies, fees and charges applicable to the VFEX were approved by the Minister of Finance and Economic Development and published in the Government gazette dated August 4, 2023.
The IPF, currently levied on the Zimbabwe Stock Exchange (ZSE) counters, was created by the Securities and Exchange Commission of Zimbabwe (SECZ) in 2010.
Its purpose was to provide compensation to protected investors who have suffered losses, which have occurred when a licensed contributor to the fund is unable to meet their liabilities.
This failure might be due to insolvency or malpractice.
SecZim chief executive, Anymore Taruvinga, told Business Weekly that the removal of the IPF levy is in line with the commission’s strategy to reduce the cost of investing in the market.
VFEX, launched in October 2020, is a subsidiary of the ZSE established to kick-start the Offshore Financial
Services Centre (OFSC) earmarked for the special economic zone in Victoria Falls.
According to the fee schedule, overall fees on VFEX slightly increased to 2,304 percent from 2,124 percent in 2020 after the SecZim levy increased to 0,15 percent from 0,05 percent in
2020.
Overall, the fees are higher because the SecZim levy went up.
As VFEX grows, it requires more oversight, and that is reflected in the new SecZim levy,” he said.
He added that best practice requires that the market bears the cost of regulation rather than the fiscus.
VFEX, on its part, offers a number of incentives and trading advantages compared to the ZSE, which has been the pulling factor for listings.
The USD-denominated exchange provides extended options for capital raising, including debt listing in foreign currency. The USD bourse also offers lower trading costs of 2,12 percent compared to 4,63 percent on the ZSE, which would enable shareholders to retain more value.
VFEX also offers tax incentives for shareholders, which include a 5 percent withholding tax on dividends and no capital gains tax on share disposal, thus providing enhanced earnings for shareholders compared to the ZSE.
Furthermore, the USD provides a hedge against the inflation of the Zimbabwe dollar, providing greater investor protection.
In addition to the role it plays in compensating protected investors, the IPF and SECZ are jointly responsible for the education and protection of investors in securities and capital markets.
In order to fulfill this mandate, the two bodies have been collaborating over the past few years.
The IPF is highly committed to investor education and has partnered with SECZ to craft and implement an investor education strategy.
According to SI 141 of 2023, other VFEX fees remained unchanged from the 2020 level.
Brokers Commission is at 0,6 percent, VAT (14,5 percent) of brokerage is at 0,087 percent, the Central Securities Depository levy is at 0,04 percent, stamp duty is at 0,25 percent, and the VFEX levy is at 0,15 percent.
