GOVERNMENT’S reluctance to slash fees is stalling the rollout of the Central Securities Depository (CSD) which holds and administers securities, sources have revealed.
Victoria Mtomba
Chengetedzai Depository Company is currently running the CSD, which is a specialised financial organisation holding securities in certificated or uncertificated (dematerialised) form so that ownership can easily be transferred through a book entry rather than a transfer of physical certificates.
Sources close to the deal said government refused to reduce some of its fees such as capital gains which make sellers at the Zimbabwe Stock Exchange pay for losses when they dispose of their shares.
Government introduced the capital gains withholding tax of 1% on sellers during the hyperinflation era.
“We had hoped that government can reduce the stamp duty and capital gains as currently it’s not everyone who is selling for a profit. The argument is that governments should look into that. However, we are informed that government will not reduce its fees, so we must look at ways to reduce the other levies and accommodate the CSD levy,” the source said.
Buyers of shares pay 0,25% stamp duty.
The source said the refusal by government to reduce the fees will have an impact on the market as other players have to reduce the fees to accommodate the CSD levy.
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A local analyst said the move would affect ZSE as investors may shun this market because of the fees as they would increase the total cost.
The total transaction cost on ZSE is 4,21% made up of brokerage fee (1%), Securities Exchange Commission levy (0,18%), investor protection levy (0,05%), ZSE levy (0,10%) and stamp duty (0,25%) on buyers.
There is also a capital gains withholdings tax of 1% on sellers and value added tax of 0,15% (which is 15% of brokerage).
“The appeal of the Zimbabwe market compared to other markets will likely not be competitive,” the analyst said.
Chengetedzai Depository Company chief executive officer Campbell Musiwa said the CSD was technically ready and awaiting approval for the fee structure from government. He said CSD fees were determined by the government.
“We are technically ready, but we are waiting for a fee structure from government,” Musiwa said.
In December 2013, the Securities Commission said they were doing a test run on the system.
Government entities, which include the Infrastructure Development Bank, ZB Holdings and the National Social Security Authority, will hold 51% shareholding in the CSD firm.
