Government restores SeedCo’s fungibility

Author Name
Respect Gwenzi
Author
Stock Market 6 months ago

Harare – Government on Thursday restored full fungibility of Seed Co International Limited’s shares following 8-months long suspension as the authorities argued that fungibility in an inflationary environment like Zimbabwe allows investors to compare prices across different exchanges and exploit arbitrage opportunities.

The suspension took effect on 15 March 2020 as Government through Exchange Control (Suspension of Fungibility of Certain Shares) Order 2020 – suspended the fungibility of Old Mutual Limited, PPC Limited and Seed Co International Limited shares for a period of 12 months.

Fungibility basically implies that two things are identical in specification; accordingly, individual units of the good or asset can be mutually substituted. In view of this concept, the shares of the three counters (which were suspended) can be said to be fungible in so far as all the three companies’ stock are listed on at least more than one stock exchange.

Seed Co International is also listed on the Botswana Stock Exchange.

Subsequently, the three counters were delisted from the ZSE and given an option to re-list on the newly established Victoria Falls Stock Exchange (VFEX).

The suspension was done in a bid to clamp down on alleged illegal activities that involves participation in the parallel forex market by theses companies as the Zimbabwe dollar mercilessly lost value against the US dollar and other foreign currencies.

In an update on Thursday, Finance and Economic Development Minster, Professor Mthuli Ncube said, ““Following full compliance by Seed Co International Limited, and the successful relisting of the company’s VFEX, I hereby announce the lifting of all fungibility restrictions on SeedCo International Limited shares with immediate effect”.

He added that the government remains committed to ensuring the soundness and stability of finance in order to maintain confidence and deliver long term value to stock market investors.

Seed Co became the first counter to be listed on the VFEX on October 21, 2020 and had its listing on the ZSE permanently terminated with effect from October 23, 2020.

VFEX is a USD denominated stock exchange created out of the need to attract foreign capital and hard currency funding for local entities, mainly those involved in the extractive sectors.

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