‘Nedbank financial instrument listing on VFEX a game-changer’

Justin Bgoni

ZIMBABWE Stock Exchange (ZSE) chief executive officer, Justin Bgoni says interest in the listing of Nedbank depository receipts on the Victoria Falls Stock Exchange (VFEX) worth US$25 million, will bolster earnings for its local shareholders.

According to local financial services firm MMC Capital a depositary receipt is a locally-listed negotiable certificate, a financial instrument issued by a bank, representing shares of a foreign entity.

Without the hassle and red tape of opening a foreign trading account, the negotiable certificate or financial instrument enables local investors to acquire shares in foreign companies such as Nedbank Zimbabwe, which is part of the South African banking group, Nedbank.

When the South African financial services firm, Old Mutual Plc (OMP), concluded its controlled separation from Nedbank in October 2018 and unbundled its majority stake in the bank, OMP shareholders received shares in the bank. As a result, many investors from Zimbabwe ended up owning Nedbank shares that were unavailable for local trading.

In response, Corpserve (a local financial securities services administration firm) set up a share dealing facility through Corpserve Nominees (Private) Limited that allowed shareholders of Nedbank Zimbabwe to sell their shares on the Johannesburg Stock Exchange (JSE). However, this alternative arrangement ultimately didn’t work.

“This is about perception and Nedbank is a good share. It should perform like the Nedbank share in South Africa. One of the things that people have been struggling with on VFEX was that, because there are places where they can leave their money, they don’t leave a count,” Bgoni told NewsDay Business in an interview.

“When you buy you leave a count you just need to be able to buy another one. It just helps in terms of people creating their portfolio. Also, for an exchange to be relevant there should be as many listings as possible so it’s a quality asset that is in our portfolio.”

Bgoni told NewsDay Business  last week that the shareholding will be an asset on its portfolio given the performance of the Nedbank share price on the JSE.

By the close of business on Friday one Nedbank share was trading at ZAR223 per share with 2,61 million shares traded.

MMC Capital reported that the previous facility of allowing Nedbank Zimbabwe shareholders to sell their shares on the JSE was not feasible, hence, the latest move to unlock shareholder value on the VFEX.

It was not feasible owing to risks such as local investors being unable to buy Nedbank shares on the JSE, settlement for receipt of sales being long, shareholders’ sales proceeds being subject to forex surrender requirements, and no localised exit mechanism. Further, investors could only sell on the JSE through Corpserve Nominees, forcing the VFEX listing for Nedbank Zimbabwe shareholders.

“Consequently, a decision to list Nedbank ZDRs on the VFEX was made in order to deal with the abovementioned weaknesses of the pre-existing structure. To this end, it was announced that Nedbank Zimbabwe Depositary Receipts (ZDRs) will be listed on the VFEX next month, with the listing date confirmed for the 18th of November,” MMC Capital said, in an analysis of the proposed move.

“Zimbabwean Nedbank shareholders will, therefore, have the option to convert their Nedbank shares under Corpserve Nominees into ZDRs listed on the VFEX. We as MMC Capital encourage existing Nedbank shareholders to convert their shares into DRs so that they can enjoy the full benefits of having an easily tradable foreign investment, thus enabling efficient hard-currency generation.”

Bgoni said the value of shares that would be moved to VFEX would depend on how many people would move their shares across, adding  that the Nedbank shareholders portfolio was worth around US$25 million.

“What we want is for people to move their shares across, that is to say, if you want to do it, this is how you will do it. It is a process and we have laid down the procedure. When Old Mutual listed last time they gave shareholders Nedbank and quilter shares. Those shares have been sitting with Zimbabwean shareholders and if you wanted to sell them you had to go through the JSE,” he said.

“If you wanted to buy them there was no forum for you to buy. What this meant was that those shares had been introduced in number as people sell them, but it was an expensive process to do so because they pooled their shares together and then sell them. It was worse for people with less than 100 shares.”

He added that about 24 000 Zimbabweans had less than 100 Nedbank shares and that now was not the right economic moment for them to sell.

“So, this is the forum that helps to sell these shares.” Bgoni continued.

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