ZIMBABWE Stock Exchange (ZSE) stakeholders lost approximately $204 billion due to the impasse that was caused by the government’s introduction of the capital gains withholding tax.
The stakeholders who lost earnings include sellers, brokers, the investing public and the government itself.
The Minister of Finance, Herbert Murerwa, last month reintroduced the capital gains withholding tax on marketable securities of 10%, a move which sparked the impasse on the bourse.
The government however backed down last Thursday reducing the tax to 5%.
The impact of the standoff on the market has been disastrous.
ZSE chief executive officer Emmanuel Munyukwi said during normal trading before the impasse, the stock exchange made about $12 billion a day.
There was no significant trade on the market for 17 days.
“You should also bear in mind that when the capital gains withholding tax was introduced we were entering a period when companies were announcing their financials and this also had an effect on the share prices,” Munyukwi said.
The new 5% will be with effect from October 1.
ZSE chairman Bart Muswaka said investors also lost on opportunities during the standoff.
“There was a policy shift that distorted the market in terms of clarity and investment horizon,” Muswaka said.
He said almost everyone who dealt with the bourse was seriously affected by the standoff.
He also said that the new requirement by the Finance ministry that pension funds should invest 35% in prescribed assets on the basis of market value, also made it unclear in the market.
Murerwa blamed poor consultation for the impasse at the bourse.
“This was a regrettable problem. There was poor consultation from the beginning,” he said last week at the CZI congress held in Nyanga.
Murerwa said the issue would be adequately addressed in the 2006 budget.
“There will be fuller consultation and a team will be dispatched to South Africa to see how the tax system works (there).”
The Finance ministry also agreed that insurance companies and pension funds apply 40% of their net monthly cashflows to purchase prescribed assets.
This will be with effect from the November 1, but subject to annual reviews.
In his mid-term fiscal policy review, Murerwa also announced that the insurance and pensions industry will have to hold prescribed assets of 25% for the short-term insurance, 30% for the long-term insurance and 35% for pension funds at market value.
Pension funds, the biggest investors on the ZSE, have been calculating the 35% based on book value.