Government’s decision to unilaterally suspend the Zimbabwe Stock Exchange (ZSE) from trading has once again exposed the country’s propensity to violating property rights with the latest move expected to frustrate investor interest in the market, analysts have warned.
On Friday, Government suspended the ZSE from trading together with restricting some elements of mobile money services as authorities moved in to arrest alleged economic sabotage by players in the market.
Market watchers have criticized government for arriving at the decision without having made wider consultations with players in the financial sector on implications of the directive.
“Firstly, there is policy inconsistency in government. Secondly, lack of consultation in coming up with policy then the third, which is very key, is that there are complaints over the issue of property rights. Imagine investors who had bought their stock or securities and they are told the ZSE is suspended. This infringes on property rights and this will have a negative impact on foreign direct investment,” financial markets economist, Victor Bhoroma told 263Chat Business.
Zimbabwe’s tattered property rights record came to the spotlight at the turn of the millennium when government led the land grabs from settler farmers.
The move led to investor flight over the years as property invasions continued unabated.
Lately, the ZSE has failed to attract investor appetite owing to perceived violations of property rights, policy inconsistency and currency devaluation among other reasons.
Last year, the bourse received just around US$ 380 million in foreign direct investment and the suspension on trading is tipped to further deter investor interest.
“This will lead to a gradual disinvestment of the ZSE. Investors are likely to shift their investments into other security exchanges in jurisdictions with better policies like in Botswana and Zambia,” Bhoroma warned.
Analysts have also pointed that the suspension of the ZSE is likely to frustrate investor appetite in the envisioned Victoria Falls Stock Exchange amid fears of property rights violations.
Lately, local investors have been rushing to the ZSE to dispose of their RTGS balances as a way to hedge against inflation which is now hovering around 1000 percent.
Short term securities such as Treasury Bills and Bonds have yielded losses for investors hence the stock exchange has been the best alternative.
“The problem is that ZSE was not consulted with the whole process. It was a command decision to just suspend. There were companies involved in various transactions hence government should have made consultations. Obviously companies will be affected in terms of revenue considering most of them raise revenue from the bourse,” added Bhoroma.