Harare proposes restrictions on equity trading over miner royalties

OVERWHELMED by the bullish run on the Zimbabwe Stock Exchange (ZSE) and concerned by below-expectation royalty payments by miners, Harare has proposed the introduction of restrictions on equity trading.

It wants miners to pay for royalties in mineral ore to avoid lack of “transparency” and enhance verification.

Zimbabwe stocks that have been buoyant over the past few months include Delta Corporation, Econet Wireless, Innscor and Barclays, which have helped the market capitalisation on the bourse reach $10 billion (R135bn) this year.

However, the rally on the ZSE has been described as inflationary, as it is not driven by fundamentals, according to the Zimbabwe Revenue Authority (Zimra). During the third quarter to the end of September, as much as $6bn was added into Zimbabwe’s economy, through heightened trade on the ZSE, added Zimra.

However, this massive rise in trade and capitalisation of the ZSE has “serious implications for growth in money supply” as the “bulls are not driven by fundamentals” in the economy.

“There has been basically no corresponding growth in the underlying assets, making it very inflationary. It may be necessary for the ZSE to introduce circuit breakers in their trading to curb speculative behaviour,” said Willia Bonyongwe, the chairperson of Zimra yesterday.

Fund managers have said Zimbabwean investors are now shifting attention to non-monetary assets in light of foreign currency and liquidity constraints in the economy.

Other analysts say investors moving on to the ZSE have “long-term plans for investing in Zimbabwe as foreign shareholders are unable to get their dividends” from ZSE-listed companies owing to forex shortages.

Further new measures proposed by the Zimbabwean revenue authority will see miners being asked to pay for royalties in mineral ore instead of income generation. This was after royalties as a revenue head missed third quarter guidelines by 24.3 percent.

Two mining executives in Zimbabwe said they were unaware of the proposed measures, declining to comment further.

Mineral royalties raised $16.5 million in government revenue during the third quarter.