ZIMBABWE’S stockbroking community has warned that a tight liquidity regime, high borrowing costs and policy distortions are choking activity on the country’s capital markets, undermining both trading and capital-raising.
Market experts say urgent reforms to ease monetary conditions and restore investor confidence are critical if the Zimbabwe Stock Exchange (ZSE) is to regain traction.
Zimbabwe operates two bourses — the ZSE and the United States dollar-denominated Victoria Falls Stock Exchange (VFEX).
But the two have evolved under sharply different conditions, creating a fragmented market.
Arnold Chibvongodze, president of the Stockbrokers Association of Zimbabwe, said the ZSE continues to grapple with persistent liquidity shortages, elevated borrowing costs and currency distortions linked to the country’s monetary framework.
“These factors have collectively suppressed trading activity on the bourse,” he said in an interview with businessdigest.
He said policy intervention is needed to unlock liquidity and reduce the cost of capital, with one immediate lever being the reduction of statutory reserve requirements imposed on banks.
“Lowering these ratios would release liquidity into the banking system, reduce the cost of credit and create a more conducive environment for equity investment and capital raising,” Chibvongodze said.
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Zimbabwe introduced the Zimbabwe Gold (ZiG) currency in 2024 as part of efforts to stabilise the monetary system. However, market participants say currency dynamics continue to deter participation on the ZSE.
Chibvongodze noted that investors remain reluctant to convert hard currency into ZiG to buy equities, largely due to uncertainty around exit mechanisms.
“Critically, investors are reluctant to convert hard currency into ZiG to purchase ZSE-listed shares, as the reconversion pathway exposes them to parallel market transactions — an activity prohibited under current regulations,” he said.
“This dynamic effectively locks foreign and diaspora capital out of the ZSE.”
In contrast, the VFEX has gained steady momentum, buoyed by its US dollar trading framework.
“Trading activity on the VFEX has gained positive momentum, underpinned by the fact that transactions are predominantly denominated in United States dollars,” Chibvongodze said.
“Investors who deploy hard currency on the VFEX can exit their positions and repatriate funds in the same currency, eliminating the conversion risk inherent to the ZSE.”
The divergence between the two exchanges has widened in recent years, with several firms migrating from the ZSE to VFEX, while others have opted to delist altogether.
Companies remaining on the ZSE are increasingly facing structural challenges that erode the benefits of a public listing.
“Depressed valuations reduce the utility of listed status as collateral for debt financing, making it difficult for companies to leverage their market capitalisation for borrowing,” Chibvongodze said.
At the same time, tight money supply conditions have significantly weakened the primary function of the exchange, which is raising capital.
“Raising fresh ZiG-denominated capital is near-impossible given the constrained money supply, rendering the primary capital raising function of a listing largely redundant,” he said.
Chibvongodze cautioned that macroeconomic stabilisation alone would not be enough to revive the market.
“Macroeconomic stabilisation, on its own, is a necessary but insufficient condition for revitalising capital market activity,” he said.
“For stability to translate into measurable increases in investor participation and new listings, it must be accompanied by a concurrent reduction in borrowing interest rates and a meaningful improvement in the money supply environment.”
Despite these headwinds, he said the dual-exchange structure has provided some resilience by offering companies flexibility in choosing listing platforms aligned to their currency preferences.
Beyond structural reforms, expanding the investor base remains a key priority.
In collaboration with the Securities and Exchange Commission of Zimbabwe, stockbrokers are intensifying financial literacy programmes to boost retail and youth participation.
Looking ahead, market participants are calling for a coherent and predictable policy framework to unlock growth.
Proposals include tax incentives for new listings, dividend tax relief, concessional funding for companies seeking to list, and the development of a formal national capital markets strategy anchored in government policy.
“Policy certainty is a must in the capital markets,” Chibvongodze said.
At a regional level, analysts note that Zimbabwe’s capital market constraints contrast with broader trends across the Southern African Development Community, where several markets are deepening liquidity and strengthening regulatory frameworks to attract both domestic and international capital.
Countries such as South Africa, Mauritius and Botswana have implemented reforms to enhance market depth, improve investor protection and align with global best practice — factors that continue to draw capital flows into their exchanges.
For Zimbabwe, aligning with these regional benchmarks could be key to restoring confidence and repositioning its capital markets for growth.
