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The Victoria Falls Stock Exchange: Redefining Capital Markets in Africa’s Mining Sector

The expansion and modernisation of the VFEX presents significant opportunities for investors and companies alike. VFEX is well-positioned to drive economic growth and become a key player in Southern Africa’s financial markets - redefining Capital Markets in Africa’s mining sector.

Authors: Dominic Varrie and Methembeni Moyo

The Victoria Falls Stock Exchange (VFEX) stands at the forefront of regional financial innovation, offering compelling advantages for investors seeking new opportunities in Southern Africa, redefining capital markets in Africa’s mining sector.

The VFEX opens doors for investors to tap into Southern Africa’s abundant natural resources and rapidly growing economies.

It offers a unique opportunity for portfolio diversification by facilitating investments in emerging markets. Additionally, the VFEX is a catalyst for regional economic growth, mobilising capital and encouraging investment that drives development across key sectors.

Victoria Falls Stock Exchange Background

Launched in 2020, the VFEX is a subsidiary of the Zimbabwe Stock Exchange (ZSE), strategically located in the special economic zone of Victoria Falls. Operating under a distinct and flexible regulatory framework, the VFEX stands apart from the ZSE, positioning itself as a premier offshore exchange.

This strategic differentiation enables the VFEX to attract significant local and foreign investment.

The VFEX is rapidly emerging as a significant player in the financial markets, offering unique incentives for companies to list and raise capital in hard currency. Key benefits include:

  1. Tax incentives: There is no capital gains tax on the VFEX for investors and dividend withholding tax for foreign investors is only 5%.
  2. Repatriation of dividends: The VFEX facilitates greater freedom for foreign shareholders by imposing fewer restrictions on the repatriation of dividends and proceeds from share sales.
  3. 100% Foreign Ownership: Companies listed on the VFEX can have 100% foreign ownership, making it an attractive platform for international investors.
  4. US Dollar-Denominated Listings with No Currency Risk: The VFEX listings are denominated in US dollars, eliminating currency risk for investors.
  5. No Requirements for a Primary Listing: Companies can list on the VFEX without a primary listing on another exchange, providing greater flexibility.
  6. Streamlined listing process: The VFEX has a streamlined listing process to facilitate faster and easier listing for companies.

The VFEX provides a crucial avenue for business to raise capital, and local and international investment in Zimbabwe without the associated currency risk. Historically, the main deterrents to investing in Zimbabwe’s mining sector have been unfavourable and uncertain exchange control, currency, and fiscal policies.

Challenges with Foreign Investment

Investors need assurance that they can invest in the country and repatriate their gains without undue restriction. However, Zimbabwe’s current laws and economic conditions often do not provide this comfort, making it challenging to raise foreign currency for capital-intensive mining projects.

Listing on the VFEX, alongside other funding strategies, could be the solution to financing mining projects in a historically difficult cash environment.

VFEX – Evolving and appreciating serious growth

The VFEX has demonstrated impressive growth, with the number of trades increasing by 35.78% between the second quarter of 2023 and the second quarter of 2024.

This surge is complemented by a substantial 52.8% rise in turnover over the same period. As the VFEX continues to evolve and expand its offerings, it further solidifies its position as a pivotal exchange in the region.

Listing of New Companies

The VFEX has shown notable progress, with six new counters added to its listings and improved trading levels, reflecting growing confidence and interest from market participants. This momentum underscores the VFEX’s viability as a key player in Southern Africa’s the capital markets.

Recent listings on the VFEX highlight its growing appeal as a leading exchange. Kavango Resources PLC, already listed on the London Stock Exchange, has announced plans for a secondary listing on the VFEX.

On 5 April 2024, Edgars Stores Limited, a manufacturer and retailer of clothing was listed on the VFEX, while Invictus Energy, Zimbabwe’s highly regarded oil and gas exploration company, completed its listing on the VFEX on 2 August 2024  joining other prominent companies such as Innscor, Axia Corporation, Padenga Holdings, First Capital Bank, and Zimplow.

Technological Advancements

The VFEX continues to innovate in its efforts to attract investors. The VFEX has partnered with Mauritius-based broker VCG Markets to launch Contracts for Differences (CFDs), a new financial product designed to enhance local capital markets.

CFDs are financial instruments that allow two parties to speculate on the price movements of underlying assets, such as company stocks or commodities, without directly owning them.

This innovative product enables traders to engage in markets like gold, silver, oil, and various global indices, offering a more flexible approach to investing without the need to directly trade the underlying assets.

According to the VFEX CEO Justin Bgoni, the benefits of trading in CFDs include:

  • Maximized Capital Outlay: CFDs provide an efficient way of maximizing one’s capital outlay.
  • Portfolio Diversification: CFDs can help diversify existing investment portfolios or hedge positions.
  • Leverage: CFDs are leveraged products, enabling traders to increase their exposure to an underlying asset with a small initial outlay.
  • Market Access: CFDs allow traders access to a wide range of global markets that would otherwise be difficult to access.

Redefining of Capital Markets in Africa’s mining sector

The expansion and modernisation of the VFEX presents significant opportunities for investors and companies alike.

With its unique incentives, growing listings, strategic partnerships, investor outreach, and technological advancements, the VFEX is well-positioned to drive economic growth and become a key player in Southern Africa’s financial markets.

While raising foreign currency capital is the main driver behind companies in the mining sector listing on the VFEX, a less obvious benefit of listing on the VFEX is gaining the “license to mine.” This doesn’t refer to legal mining rights, but rather the positive reputation miners need with local communities and host governments.

By listing on the VFEX, mining companies demonstrate their commitment to Zimbabwe’s legal framework and economic growth. This in turn helps miners build trust with the government, which is vital for successful mining projects.

NSDV is a specialist Mining, Environmental, Construction and Energy Law firm based in Johannesburg.