Mthuli Ncube. Picture: BUSINESS DAY
Mthuli Ncube. Picture: BUSINESS DAY

Harare — Zimbabwe’s finance minister Mthuli Ncube on Sunday issued a decree to stop the fungibility of shares belonging to dual-listed Old Mutual, PPC and Seed Co, which means shares from the three companies can no longer be traded abroad.

Until now investors would buy shares of dual-listed companies and trade them outside the country, but economists say the latest move is likely to result in more investors shunning the southern African country which is battling to attract capital.

Old Mutual and PPC are listed on the JSE while Seed Co, which is one of the largest seed companies in Southern Africa, trades in Botswana.

These dual listings enabled shareholders to buy shares locally and dispose of them on offshore markets.

In a government notice issued on Sunday, Ncube said that in  his capacity as an exchange control authority he had ordered “the suspension for a period of 12 months ... any exchange control authority allowing the fungibility of shares Old Mutual, PPC  Seed Co International.”

Zimbabwe’s government is concerned that the three companies, Old Mutual in particular, were manipulating the country’s exchange rate on the parallel market.

The country is battling shortages of foreign currency to fund its needs.

Though foreign currency is scarce on the formal markets, it is readily available on the parallel market. The  market has lost confidence in the government, which has gained notoriety for its policy somersaults.

Analysts said the latest move is likely to backfire as investors will now shun the Zimbabwe Stock Exchange (ZSE), as they cannot take money out of the country.

“The government says this fungibility of shares is fuelling the parallel market rate. It is certainly an exit route for investors whose money is otherwise trapped in the Zimbabwe financial system. They could buy shares in a dual-listed company then sell them on the foreign market,” said analyst Alex Magaisa.

Magaisa said the ZSE is likely to witness a slide in the next few days.

“Say of fungibility (that it is) a fire escape door in a smouldering building. The decree gives a couple of days to get out. Effect? A stampede for the fire escape. Some will be trapped inside. Fewer people will venture into a building without a fire escape. Most will stay well away,” said Magaisa.

Financial secretary for the opposition MDC David Coltart said the decree would not work.

“It’s a desperate measure to prevent the plunge of the Zimbabwe dollar, rather like a pilot jettisoning fuel after a plane has stalled.”

However, presidential spokesperson George Charamba said on Twitter that the government’s move will clip the wings of Old Mutual, which is also listed on the London Stock Exchange.

Charamba said the company was using its muscle to determine the exchange rate on the parallel market.

 “Old Mutual had become the de facto exchequer in this small economy, causing absolute mayhem in all spheres of the economy, even on sheer speculative grounds.

“Fungibility allows the Old Mutual share to trade across bourses, London and JSE in this case, with those volatile platforms determining the currency value in Zimbabwe, to great detriment in the local unit and, by extension, the whole economy.” he said.