After several weeks of suspending stock exchange, trade, and mobile phone-based payments, Zimbabwe will resume trade on its stock market on August 3rd, 2020.
One of the reasons for the initial closure of the market was to address what the government called “criminality and economic sabotage” by leading enterprises in the industry.
The government believes that financial institutions were deliberately manipulating the Zimbabwean Dollar. These suspicions led to an investigation by the state Financial Intelligence Unit.
After FIU drew their conclusions, three stocks that were also listed on other exchanges, including the local unit of Old Mutual, will remain suspended.
Mthuli Ncube stated that the investigation by the FIU discovered that there was a tie between the movement in prices of three dual-listed stocks and the parallel market rate of the Zimbabwe currency.
according to Reuters, it was discovered that investors used Old Mutual shares as proxy exchange rates implied by their prices on foreign bourses such as the London Stock Exchange.
There is no evidence to prove that the companies- Old Mutual, Pretoria Portland Cement, and SeedCo International, were involved, Ncube said. However, President Emmerson Mnangagwa’s ruling ZANU-PF party has suggested that Old Mutual stocks delisted.
The stock market is very pivotal in helping companies generate funds for expansion and also attract investments from sponsors and entrepreneurs.
The need to regulate and filter the market against bad practices is essential to the growth of the southern African country.
It is important to preserve the stock market, against fraudulent schemes as the interest of the whole nation would be at stake, if the investigation wasn’t conducted.
Nevertheless, the government should also consider more proactive approaches that would not disrupt the operations of innocent companies in the stock market.
After several decades of decline in the country’s economy, hyperinflation rendered the Zimbabwean dollar ineffective and the US-Dollar was adopted as the legal tender for trading on the exchange in February 2009.
The Zimbabwe Stock Exchange was established in 1896, slightly after the arrival of the Pioneer Column in Bulawayo. Most stocks trade in the US-cent range, with at least 26 different stocks not trading at all.