THE Zimbabwe Stock Exchange (ZSE) will next month establish a portfolio investment fund to address delays associated with the repatriation of foreign exchange for security related transactions.
Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya said this Wednesday, indicating that the apex bank would place an initial seed capital of $5 million in the fund to kick-start the repatriation mechanism and improve investor confidence.
He said the setting up of the fund was due to recognition of the critical role played foreign investors.
“The bank has noticed that repatriation of foreign exchange for securities related transactions is 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.
“In order to address this challenge, the bank is establishing a Zimbabwe Portfolio Investment Fund to facilitate the efficient repatriation of portfolio-related funds to foreign investors invested specifically on the ZSE,” said Dr Mangudya while presenting the 2017 mid-term monetary policy statement.
He said foreign portfolio flows have provided both liquidity and stability on the market, which has been positive for not only listed firms but the country at large.
Dr Mangudya said RBZ believes that a well-functioning capital market provides a strong signal for potential sources of foreign investment and for promoting the integrity and efficiency of the stock market.
“The fund is therefore 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,” he said.
“Following discussions with the Securities and Exchange Commission and some stockbrokers, the fund shall be in place with effect from September 1, 2017.”
Dr Mangudya said the fund would focus on the collection and repatriation of foreign funds related to portfolio equity purchases and sales among others.
The scope of the fund will include the repatriation of dividends at a later date.
“Such dividends would then be serviced on a pro-rata basis. Opening of a dedicated portfolio investment fund at two designated commercial banks for the receipt of all portfolio investment proceeds into Zimbabwe and the repatriation of foreign investors’ proceeds from the ZSE,” he said.