Transaction costs slashed on Zimbabwe Stock Exchange

Zimbabwe’s 2010 budget was released on 2 December by Finance Minister Tendai Biti and has generally received favourable response from analysts and businesspeople. It includes a cut in corporate tax rate from 30% to 25% and streamlining of the tax structure.

Transaction costs on the Zimbabwe Stock Exchange (ZSE) have been slashed by more than half, to 3.21% (buying 1.73%, selling 1.48%) from 7.5%, according to leading local stockbroker Imara Edwards Securities (www.imaracapital.com). The stockbroker comments: “Generally this should encourage trading resulting in better price discovery”. Prescribed asset ratios have been reintroduced for insurance and pension funds and local institutions may have to realign their portfolios.

Revision of ZSE costs:

Buying (%) Selling (%)
Brokerage 1 1
Stamp duty 0.25 0
Securities Commission Levy 0.18 0.18
Investor Protection Levy 0.05 0.05
ZSE Levy/fee 0.1 0.1
VAT @ 15% on Brokerage 0.15 0.15
Total Costs 1.73 1.48
Total Both Sides 3.21%

Prescribed Asset Ratios for Insurance and Pension Funds:
Pension Funds 10%
Long Term Insurance Companies 7.5%
Short Term Insurance Companies 5%

Source: Imara Edwards Securities

The stockbroker adds in their morning note: “Given the improved economic outlook we recommend investors take a long-term view on their holdings. With the increase in the civil servants’ salaries consumer stocks are likely to benefit, especially those in the defensive food business e.g. Dairibord, Delta, Innscor, OK Zimbabwe, Natfoods and Star Africa. The revival of the retail sector should accelerate exacerbated by the BIPPA agreement with South Africa which should unlock credit facilities for the local retailers.

“Given the demand for infrastructure reconstruction we believe construction companies are well poised to take on opportunities and counters likely to gain include M&R and PGI. In our view, the financial sector provides speculative opportunities. We are wary about the viability of massive growth in lending books as the quality of the book might be greatly compromised. Gradually growth in bank assets would give us great comfort. For those who seek an exposure into the financial we recommend Barclays and CBZ.”

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