Zimbabwe's capital markets underwent significant changes and adaptation and while challenges such as low liquidity and regulatory hurdles remain, efforts to engender durable currency stability and resolve the sovereign debt suggest a bright future.
The introduction of the Zimbabwe Gold (ZiG) currency and efforts to improve relations with international creditors have laid a foundation for future growth.
Market experts believe to stimulate Zimbabwe's capital markets in 2025, a strategic and comprehensive approach is essential.
Business analyst Mr Kudakwashe Mundowozi said key strategies included enhancing liquidity through the introduction of new financial instruments, streamlining regulatory processes, and implementing widespread investor education programs.
"Encouraging institutional investors with tax incentives and leveraging technology to improve market efficiency are also crucial steps," he said.
He added that promoting sustainable investments and developing a green financing framework could attract socially responsible investors and align with global sustainability trends.
"Additionally, fostering public-private partnerships and encouraging foreign direct investment through policy stability and tax incentives will be vital for long-term growth," said Mr Mundowozi.
He noted that by focusing on these strategies and addressing the challenges, Zimbabwe could create a more vibrant and resilient capital market.
The Zimbabwe Stock Exchange (ZSE) and the Victoria Falls Stock Exchange (VFEX) have the potential to become robust platforms for investment, contributing significantly to the overall economic development of the country.
Zimbabwe's capital market has the potential to drive economic growth and attract both domestic and international investors in the coming years.
Investment analyst Mr Enock Rukarwa said the introduction of ZiG, which brought about relative stability, moderated stock market activity from flat to bullish outturn during the later part of the year.
"What has been topical around stock market developments is the issue to do with foreign currency settlement, wherein ZSE trades were being settled with statutory charges only and settlement happening offline in USD.
"This phenomenon ignited improved liquidity on the market, but it was discontinued by regulatory authorities," he said.
Mr Rukarwa added that stock market liquidity, depth, and size were key areas of concern locally, and all these variables were a function of economic dynamics.
He added that an improvement in general macroeconomic conditions would result in improved confidence in the stock market.
Financial analyst Mr Malone Gwadu said the ZSE and Victoria Falls Stock Exchange went through normal stages of runs and stability, which largely mimic the inflation and exchange rate dynamics characterising the economy.
He said ZSE mainly acted as a haven for investors in times of volatility, as was the case during the first quarter (Q1) of 2024 and later in 2024.
"The rush to hedge against exchange rate loss through buying shares also played a large role in leading to share price movements. The VFEX remains hampered from performing well due to liquidity issues," he said.
Mr Gwadu said there is a need to stabilise inflation and exchange rate volatility if the economy is to be able to attract more activity in the capital markets.
"These remain systemic and structural threats to gains and value for investors and impede building confidence in the bourses' trading activities," he said.
According to Mr Mundowozi, offering tax incentives to companies that list on the ZSE can encourage more businesses to go public, increasing market diversity and investment opportunities.
"Rwanda has implemented tax incentives to attract junior mining companies, which focus on exploration and then sell their assets after making discoveries. Similarly, Ireland offers a low corporate tax rate of 12,5 percent to attract multinational companies," he said.
Mr Mundowozi said encouraging companies already listed on other exchanges to list on the ZSE could attract foreign investment and enhance market liquidity.
He said the Johannesburg Stock Exchange (JSE) in South Africa had successfully implemented a fast-track listing process for companies already listed on major stock exchanges, allowing them to place a secondary listing on the JSE's Main Board.
"This approach has diversified the investor base and improved brand recognition for companies," he said.
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Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube recently said the Government would institute additional measures on the VFEX to drive activity after the exchange was largely characterised by limited trading activity and liquidity
In the 2025 national budget, the minister proposed to reduce capital gains withholding tax on marketable securities on the ZSE, effective January 1, 2025.
ZSE chief executive Mr Justin Bgoni, in emailed responses, said the reduction would incentivise investors to trade, resulting in increased liquidity in the market and will also attract more investors, ultimately boosting overall investment activity.
"A reduced capital gains withholding tax rate on marketable securities can make the investment landscape more appealing to foreign investors looking to invest in the market.
"This can lead to increased foreign direct investment, which can benefit the economy as a whole," he said.
Mr Bgoni added that lowering the capital gains withholding tax can lead to improved market efficiency as investors may be more willing to engage in trading activities, leading to enhanced price discovery.
