Minister of Finance and Economic Development Professor Mthuli Ncube has extended the fungibility suspension of financial services giant Old Mutual and cement maker PPC for another 12 months.
In a statement in the state gazette last Friday, Minister Ncube pointed out that the government was still examining the effects of an audit report.
The initial suspension was implemented last year on allegations that fungible stocks had become vehicles for repatriating investment from the country. At one time, foreign currency was scarce, causing currency distortions and an increase in the exchange rate.
The government that received the audit report is still examining its implications:
“Therefore, I, the Hon. Professor M. Ncube, in my capacity as the Exchange Control Authority under Part V (” Securities “) of the Exchange Control Ordinance of 1996 (Instrument 109 of 1996), order the suspension for a period of twelve months from the date of publication on this general announcement, which ends on March 11, 2022, of any government agency, policy or order issued by any exchange control agency that enables the fungibility of shares of the following companies listed on the Zimbabwe Stock Exchange – (i) Old Mutual Limited; (ii) PPC Limited ”, it says in part of the announcement.
A year ago, the CFO suspended the fungibility of Old Mutual together with Seed Co International and PPC Zimbabwe, which are listed on other stock exchanges besides the Zimbabwe Stock Exchange (ZSE).
Old Mutual is also listed on the Johannesburg Stock Exchange (JSE) and the London Stock Exchange, while Seed Co International and PPC are listed on the Botswana Stock Exchange (BSE) and JSE, respectively.
Seed Co International is now listed on the Victoria Falls Exchange (VFEX) after delisting from the ZSE.
Old Mutual and PPC shares will not be traded on the ZSE. The extension of the suspension of their fungibility means that their shares cannot be bought in the ZSE and sold in foreign markets, which the authorities believe was very limited at a time tied to illegal foreign exchange flows.
In 2008, at the height of hyperinflation, RBZ suspended the fungibility of listed stocks, with the same view of containing the depreciation of the exchange rate, believed to be distorting the real value of the local currency through speculative buying.
According to the ZSE website, the following are some of the frequently asked questions and answers.
What is fungibility?
Fungibility is the ability of a good or asset to be exchanged for other individual goods or assets of the same type. In trading, a financial instrument (stock or bond) is considered fungible if it can be exchanged (bought / sold) on one market / exchange and then sold / bought on another market / exchange. Full fungibility exists when a financial instrument (share / bond) can be sold / bought from one market / exchange to the other and vice versa. Partially fungible is when stocks can only move in one direction.
Which meters are fungible on the ZSE?
There are currently three meters that are fully fungible on the ZSE: Old Mutual Limited (OMU.zw), PPC Limited (PPC.zw) and SeedCo International Limited (SCIL.zw). There is a limit of at least 51 percent of the listed shares that should remain on the Zimbabwean registry.
On which other exchanges that are fully fungible on the ZSE, are they listed on which other exchanges?
- OMU.zw; (JSE, London Stock Exchange, Malawi Stock Exchange and Namibia Stock Exchange)
- PPC.zw; (JSE) ● SCIL.zw; (Botswana Stock Exchange)
Which of the meters that are fully fungible on the ZSE is the most liquid meter?
Old Mutual Limited is the most liquid company as it is listed on many stock exchanges.
What is the Old Mutual Implied Rate (OMIR)?
OMIR is an unofficial rate used by investors to compare the performance of Old Mutual stocks on the ZSE, JSE and the London Stock Exchange. This rate has no official connection with Old Mutual and is informally derived.