Central Bank sets up $5 Fund to facilitate repatriation of dividends for foreign investors

Central Bank sets up $5 Fund to facilitate repatriation of dividends for foreign investors

Insurance24 reporter

HARARE, The Reserve Bank of Zimbabwe (RBZ) says it will establish a $5 mln Portfolio Investment Fund that will facilitate repatriation of dividends as well as sales by foreign investors.

Presenting the Monetary Policy Statement, Governor Dr John Mangudya said the Central Bank has noticed that repatriation of foreign exchange for securities related transactions is taking a long time to be processed by banks despite such transactions being on the first category of the priority list for the allocation of foreign exchange.

“In order to address this challenge, the Bank is establishing a Zimbabwe Portfolio Investment Fund (‘the Fund”) to facilitate the efficient repatriation of portfolio related funds to foreign investors invested specifically on the Zimbabwe Stock Exchange (ZSE).

“The rationale for setting up the Fund stems from the fact that foreign investors have traditionally played a significant role on the ZSE which is one of the most diverse and long established markets on the continent.

“Foreign portfolio flows have provided both liquidity and stability on the market which has been positive for not only listed firms but the country as a whole. The Bank’s view is that a well-functioning capital market provides a strong signal for potential sources of foreign investment and for promoting the integrity and efficiency of the stock market,” he said.

Mangudya said the Fund is therefore essential to re-establish confidence on the ZSE by demonstrating that there is a pathway for foreign investors to realise their gains, stimulate active trading and build a vibrant market with efficient and accurate price discovery and generally to demonstrate that Zimbabwe is open for business.

He said following discussions with the Securities and Exchange Commission and some stockbrokers, the Fund shall be in place with effect from 1 September 2017.

Below are salient features of the framework:

 

  • The Fund shall initially focus on the collection and repatriation of foreign funds related to portfolio equity purchases and sales, with the scope of the Fund to include the repatriation of dividends at a later date. Such dividends would then be serviced on a pro-rata basis.

 

  • Opening of a dedicated Portfolio Investment Fund at two designated commercial banks for the receipt of all portfolio investment proceeds into Zimbabwe and the repatriation of foreign investors’ proceeds from the ZSE. The Bank shall place an initial seed capital of US$5 million in this Fund to kick-start the repatriation mechanism and improve investor confidence.

 

  • The Bank shall have an oversight role for monitoring purposes and to maintain integrity and transparency in the functioning of the Fund.

 

  • All incoming and outgoing portfolio funds, going forward, to be collected and pooled into the Fund, with payments made on a first-in-first-out basis and, if required, on a pro rata basis in line with funds available in the Fund post contribution. Excess funds raised will be allocated to clear the backlog with capital gains prioritised over dividends.

 

The Apex Bank will also introduce, Savings Bonds to encourage individuals, families, households, small and medium enterprises, schools, universities, public and private institutions, corporates, churches and investors in general, to start saving and to nurture a culture of saving and building national wealth.

“The Bank has developed a savings bond which offers simplicity and guaranteed returns with minimum investment from as little as $100 with no commission, agency or service fees.  the Bonds will help to accelerate the empowerment of the banking public by providing an investment instrument with high yielding returns as well as offering safe and secure investment,” he said.

The Savings Bonds will be made available, through banks, 67 selected agencies and electronically on a platform to be established and they will be accepted as collateral on all borrowings and convertible to cash on a simple open and transparent fixed conversion rate on any trading day.

Salient features

 

(i)Fixed Rate Savings Bonds,

 

(ii) Rolling maturities of one year, two years, three years and five years,

 

(iii) Simple interest rate of 7%,

 

(iv) Minimum investment amount of $100,and (v) Tax free on interest earned.