ZSE Market Commentary 07 May 2024
ZSE lower amid struggle for ZiG stability and confidence…as FinMin says ZiG is now the official currency for all transactions
HARARE – Econet Wireless supported Zimbabwe Stock Exchange turnover on Tuesday although the wider market remained in negative territory amid concerns that the authorities are taking slow steps towards establishing currency stability and instilling confidence in the ZiG. The local currency is currently being quoted between 20 and 22 on the alternative market against 13.67 on the official market.
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In a statement, the Confederation of Zimbabwe Retailers said manufacturers and suppliers in Zimbabwe are opting for an 80% USD to 20% ZIG payment structure, creating a competitive disadvantage for formal retail players.
This disparity not only hampers the growth of formal entities but also creates an un-level playing field where regulatory compliance becomes a burden rather than a standard practice. “The reluctance of companies to transact in ZIG due to challenges in procuring USD for raw materials not only drives up costs for manufacturers and suppliers but also contributes to inflationary pressures in the market.”
CZR also said the recent surge in employment costs, with salaries rising by 20 to 30% in USD terms, has further complicated the situation. Employees are seeking USD-denominated salaries to shield themselves from the perceived erosion of purchasing power associated with the Zimbabwean Dollar.
CZR put forward several proposals to address the currency challenge and these include; treating ZIG as equal to other currencies by allowing taxes to be paid in ZIG alongside USD at the taxpayer’s discretion; encouraging acceptance of ZIG by incentivizing manufacturers and suppliers or establishing mandates that ensure a more equitable currency ratio in transactions; reducing IMTT costs in ZIG to 0.5% to make transactions more competitive in the informal market and denominating fees and charges in ZIG to make it the primary currency for local payments.
Finance Minister Mthuli Ncube told Parliament yesterday that ZiG will eventually become the primary currency for local payments once the authorities have completed the recalibration process. But in a statement this afternoon on the transition to ZiG, the Finance Minister said that effective immediately, the country should accept and recognise ZiG as the official currency for all financial transactions and payments for goods and services.
He said that there is no basis for any organisations and economic agencies to use any other exchange rate other than the market-determined interbank rate. To ensure compliance, Ncube said government will soon be introducing the necessary regulations to ensure that business sticks to the official rate for pricing.
He also said unless there is specific legislation allowing charges or fees to be collected in USD only, all collections by government and the private sector shall be made in ZiG or currencies in the multi-currency basket without insisting on a specific type of currency or indexing invoices to the USD.
Meanwhile on the ZSE, turnover was at ZiG5.31 million with Econet contributing 87% of it after 3.55 million shares with a value of ZiG4.62 million traded. The All Share was 1.21% lower to 96.62. Market bias was negative but narrowly mixed after 12 stocks registers losses against nine risers. Trades were at a lowly 165.
The Top Ten Index lost 1.42% to 94.88. Econet was down 6.22% to 130.03c and EcoCash lost 5.70% to 26.40c. However, RTG was the standout heavyweight performer after putting on a marginal 1.59% to 21.03c.
The Medium Cap Index dropped 0.75% to 101.11. Ariston was the day’s worst performer with a 13.31% loss to 4.19c and Zimre Holdings was 12.50% lower to 28c. Zimre recently released its delayed December finals which showed improved profitability although there was non-compliance with IFRS 17 due to varied reasons. It will hold its analysts briefing on Thursday. Dairibord fell 12.40% to 66.22c.
Mash Holdings led the risers with a 14.73% to 16.75c. The company recently saw management changes after its managing director moved to Shelter Afrique in Kenya as chief business officer.
Art Holdings put on 12.75% to 9.02c taking its market cap to US$2.88 million and Star Africa was 4.03% higher to 0.88c. Proplastics added 0.32%.
VFEX turnover remained subdued at US$30 084 after 91 694 shares traded. The All Share was 1.10% lower to 96.60. Edgars was the worst performer losing 19.75% to 1.26 US cents in a low volume trade of 100 shares. Axia was down 5.76% to 9 US cents and Innscor weakness persisted with the company closing with a 4.6% decline to 40.04 US cents.
Caledonia Mining rose 12.5% to US$18 after 60 shares traded. The mining group held its AGM in Jersey today. National Foods was 1.73% higher to US$1.32 while marginal gains were seen in African Sun and Zimplow.-finx