Africa-Press – Zimbabwe. THE Zimbabwe Stock Exchange Holdings (ZSEH) is engaging the government to offer tax incentives to small and medium-sized enterprises (SMEs) to participate in the stock exchange as efforts to launch a dedicated SME platform gather momentum.
With market performance subdued on the ZSE due to currency-related risks and restrictions on liquidity, the bourse has now set its sights on SMEs.
SMEs make up the informal sector, which generates an estimated US$14,2 billion annually and has US$2,5 billion in circulation, according to the Reserve Bank of Zimbabwe.
The participation of SMEs on the ZSE is tipped to inject significant capital into the struggling bourse and attract foreign investors who are slowly divesting.
“If you look at other countries like South Africa, they’ve got a platform where companies raise money. It’s popular. What are some of the incentives that you’re looking at? So, we are talking to the government,” ZSEH chief executive officer Justin Bgoni told NewsDay Business.
“We are hoping to get some tax incentives to say if you come to a platform and you raise money, your tax rate can be lower. That’s the example that we’ve seen in Rwanda. In Rwanda, if you come onto the market to raise money, your tax is lower.
Bgoni said there would be two parts to the platform: the SME coming to the bourse to raise money without listing and the business listing.
“It will make the rules more relaxed. We know that small and medium companies tend to be family-owned. They don’t want to lose control. So, we’ll make it easier for them to retain control at the same time until you talk about governance,” Bgoni said.
“So that’s the one that we are working on. I think the best way is to target that sector, small and medium enterprises. That’s where our growth is. As you can tell, there aren’t many large companies.”
According to the Zimbabwe National Chamber of Commerce, 64,1% of the economy is informal, which translates to US$42 billion in current market prices.
“The reason why Zimbabwe is struggling is that there’s been no incentive to formalise, so you need to make incentives to formalise,” Bgoni said.
“That’s our argument. If there’s a platform, where if you’re formal and you can raise money, if you talk to the asset managers and you talk to investors, they are interested in investing in that market.”
For SMEs, this would fast-track growth, he said.
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