CENTRAL bank governor Gideon Gono yesterday drove a stake through the hearts of speculators on the stock exchange by ending suspected fraudulent trading which drives out buyers from the bourse.
While Gono sees this as a way to instill discipline on the Zimbabwe Stock Exchange (ZSE), the downside is that the state will lose a windfall it was collecting from taxes and stamp duty from trade on the bourse.
The absence of buyers on the ZSE has been worsened by the decision by the central bank to force insurance companies and pension funds to buy government paper with a tenor of 450% at a time when inflation is officially at 231 million %. Insurance companies and pension funds constitute the largest buyers of stock. Their absence will see a major retreat on the industrial index.
Gono said the decision to rein in the ZSE was meant to stem the bourse that had “literally galloped away, in the process creating obscene paper wealth that is causing havoc in the economy”.
But analysts told the Zimbabwe Independent last night that although there was need to regulate activities on the stock market, the heavy-handed decision by the central bank could diminish revenue to the government from transactions on the bourse.
Government levies 2% stamp duty and 5% tax on sales for daily trades on the stock market.
On Monday, for example, blue chip Old Mutual traded 45 941 shares at $520 quadrillion each with government getting at least $2,15 sextillion from stamp duty and tax on sales.
But yesterday OM traded only 1130 shares at $10 quadrillion, which means that government lost a potential $1 sextillion from the stock market bust.
Stock market watchers warned the move was also likely to see a bearish
and apprehensive market owing to changes in carrying out transactions announced by Gono.
“All trade on the Zimbabwe Stock Exchange is to be supported by confirmed bank balances, signed off by each bank’s CEO,” Gono said.
The stock market, which faced a crash on Tuesday, yesterday closed as a sellers’ market characterised by a handful of bids and an all-time fall of the Old Mutual counter, which dropped to $10 quadrillion from $350 quadrillion overnight.
The benchmark industrial index dropped 24,48 percentage points while the mining index traded unchanged from Wednesday.Â Â
Insurance companies, who constitute the bulk of investors on the ZSE, analysts said, were yesterday reluctant to order stocks from their brokers until the market “corrects”.
ZSE chief executive Emmanuel Munyukwi and newly appointed Securities Commission chairperson Willia Bonyongwe described the RBZ’s decision as commendable.
By Bernard Mpofu