Export of dual-listed shares banned to stop private capital transfers

Zimbabweans were yesterday banned from legally transferring capital out of the country by buying dual-listed shares on the Zimbabwean Stock Exchange for Zimbabwe dollars and selling these for foreign currency on the other exchanges where the shares are bought and sold.

The three shares that are dual-listed on the Zimbabwe Stock Exchange and at least one foreign exchange are: Old Mutual Limited, PPC Limited and Seed Co International Limited.

The technical term for shares that can be bought freely on an exchange in one country for whatever the local currency is and sold on another exchange in another country in that country’s currency is “fungibility”.

A derived economic indicator, the Old Mutual Implied Rate, is now likely to fall. Fungibility was used to calculate this implied rate, which those who do the calculations compare with the price paid for an Old Mutual share in Harare in Zimbabwe dollars for the price of an identical share paid in rand in Johannesburg or in pounds sterling in London to derive what they regard as a market orientated exchange rate.

However, the implied rate is actually an indication of what a Zimbabwean is prepared to pay to legally move capital from Zimbabwe to South Africa or Britain without any fuss or bother, along with an indication of the size of the available pool of such shares.

As such the implied rate has always been higher than what a pure exchange rate, even a black market one, is likely to be.

Thus the OMIR is now likely to fall as the transfers of shares are no longer possible.

In the Exchange Control (Suspension of Fungibility of Certain Shares) Order 2020, gazetted yesterday, Minister of Finance and Economic Development Prof Mthuli Ncube exercised his power as an exchange control authority to suspend the fungibility of the three shares from yesterday to March 12 next year.

Transactions in the three shares on any of exchanges where they are listed made on or before Friday last week but which have yet had their settlement completed are exempt, although settlement must be concluded by Wednesday this week.

The Securities and Exchange Commission and the Reserve Bank of Zimbabwe will be the main enforcers or the order, although it is expressly given to all who are involved in processing a transaction.

The ministerial order follows an order by the Securities and Exchange Commission of Zimbabwe on Thursday last week to all securities market intermediaries for an audit into all transaction inflows on dual-listed shares since June 1 last year.

Fungibility has been used by Zimbabweans wanting to move their money out of the country quite legally and without interference.

It has also been used by those wanting to maximise movement of capital into Zimbabwe, such as someone in the diaspora wanting to buy the maximum number of bricks for their dream house back home.

Even when Zimbabweans were using US dollars for everyday internal transactions, there was a premium needed to buy dual-listed shares, that premium being the cost of being allowed to move wealth out of the country quite legally.

Zimbabwe has had controls on capital movements from colonial times, even to countries using the same currency.–herald.co.zw

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