Published: 12 hours ago

The Zimbabwe Stock Exchange Holdings (ZSEH) is in talks with the government to secure tax incentives aimed at encouraging small and medium-sized enterprises (SMEs) to participate on the stock exchange, as plans to launch a dedicated SME platform gain traction.

With overall market performance on the ZSE subdued by currency volatility and liquidity constraints, the bourse is now focusing on the informal sector, which is estimated by the Reserve Bank of Zimbabwe to generate about US$14.2 billion annually and maintain US$2.5 billion in circulation.

ZSEH Chief Executive Officer Justin Bgoni said engaging SMEs could inject fresh capital into the struggling stock market and attract foreign investors who have been steadily divesting.

"Looking at other countries like South Africa, they have platforms where companies can raise money, and it's popular. We are discussing with the government about tax incentives, such as lowering the tax rate for companies that come onto the platform to raise money," Bgoni explained. He cited Rwanda as an example, where businesses raising funds on the market benefit from reduced tax rates.

Bgoni detailed that the proposed platform would have two components: one allowing SMEs to raise capital without formally listing, and the other for businesses that choose to list on the exchange.

"We plan to relax the rules because many SMEs are family-owned and do not want to lose control. The platform will make it easier for them to retain ownership while gradually introducing governance structures," he said.

According to the Zimbabwe National Chamber of Commerce, the informal sector constitutes 64.1% of the economy, equating to approximately US$42 billion at current market prices.

"The challenge Zimbabwe faces is the lack of incentives to formalise businesses. We need to create reasons for SMEs to formalise," Bgoni stated. "If there is a platform where formal businesses can raise capital, asset managers and investors will be more interested in investing."

He added that for SMEs, access to the stock market could fast-track growth and help build a stronger economic foundation for Zimbabwe.

As the ZSEH moves forward with these initiatives, the hope is that a more inclusive market will revive investor confidence and stimulate broader economic activity in the country.
- Newsday