Published: 2 hours ago

The Zimbabwe Stock Exchange Holdings (ZSEH) is lobbying the government for a further reduction in the capital gains withholding tax (CGWT) to make trading on the bourse more attractive and stimulate market activity.

Currently pegged at 1%, the CGWT is levied on all stock sales, regardless of whether a profit was made. While this marks a significant drop from the previous 4% rate, ZSEH says there is room for further cuts to encourage higher liquidity and investor participation on the Zimbabwe Stock Exchange (ZSE).

ZSEH's push for tax relief follows a tumultuous few years on the bourse. In an effort to defend the collapsing RTGS dollar before its replacement by Zimbabwe Gold (ZiG) in April 2024, the government introduced a punitive 40% capital gains tax (CGT) on equities sold within 270 days of purchase. That CGT, first enforced in 2022, severely dampened investor confidence and led to a sharp fall in trading volumes.

Although the 40% CGT was suspended and CGWT slashed to 1% by December 28, 2024, the market is still recovering. Now, ZSEH is calling for deeper reforms to revive momentum.

"In terms of taxes and everything, the government has been better for us. They have lowered their taxes quite a bit," said ZSEH CEO Justin Bgoni in an interview. "It was 4% a couple of years ago; now it is 1%. We would be happy to have them be lower, but 1% is a fair tax."

Bgoni argues that reducing the CGWT even further would remove a key obstacle to trading, especially for retail and institutional investors looking to rebalance their portfolios more frequently.

"With fewer tax frictions, investors are more willing to sell off holdings when needed, knowing that their returns will not be heavily eroded by taxes," he said. "This encourages active participation, facilitates quicker price discovery, and ultimately leads to healthier, more efficient market activity on the bourse."

The push for tax reductions comes amid signs of lingering investor caution. Market data shows that ZSE market capitalization fell by 3.08% in the second quarter of 2025 to ZiG62.64 billion (US$2.33 billion), reflecting persistent concerns over Zimbabwe's economic policy environment and currency volatility.

Bgoni, however, believes the tide is turning. He pointed to recent reforms such as the willing seller–willing buyer exchange rate system and the ability to purchase stocks using the ZiG, which replaced the RTGS dollar in April.

"The introduction of ZiG and more liberalised forex rules have made it easier for investors to engage the market," he said. "But to maintain that momentum, we need to continuously work on making the market even more investor-friendly - and that includes reviewing taxes on listed securities."

ZSEH has been working closely with the Securities and Exchange Commission of Zimbabwe (SECZim) to push for these changes and ensure regulatory policies align with the goal of making Zimbabwe's capital markets more competitive regionally.

With government policy now appearing more open to capital markets reform, the ZSEH hopes its calls for further CGWT reductions will be taken seriously as the country seeks to rebuild trust and restore activity on the domestic stock exchange.
- The Standard

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