Zimbabwe’s VFEX Commodity Market to Inspire Regional Network of Commodity Exchanges
The soon-to-be-launched Victoria Falls Stock Exchange (VFEX) Minerals Commodities Exchange (MCE) is set to inspire a network of interconnected regional commodity exchanges, fostering trade through a platform for African mineral resources, experts have said. The commodities exchange, slated for launch in the final quarter of this year, is a strategic move by Zimbabwe to leverage its abundant natural resources.
By Ryan Chigoche / Patricia Rwafa
On August 31, the government enacted the Securities and Exchange (Licensing of Minerals Commodities Trading Participants on the Victoria Falls Stock Exchange) Rules, 2024, and the Securities and Exchange (Victoria Falls Stock Exchange Mineral Commodities) Rules, 2024. This marks a pivotal moment for Zimbabwe and the broader Sub-Saharan African region. These regulations lay the groundwork for trading minerals and commodities on the VFEX, which will be conducted in U.S. dollars, opening new opportunities for entrepreneurs, investors, and the economy.
Commercial law expert Steve Chikengezha from Manokore Attorneys stated that these new regulations will promote regional economic integration by enabling countries to join and freely trade their natural resources.
“Zimbabwe’s pioneering initiative to establish a commodity exchange, specifically the VFEX, has the potential to catalyze economic development not only within Zimbabwe but across Sub-Saharan Africa. By demonstrating the viability and benefits of such a market, it can inspire other countries in the region to follow suit, leading to a network of interconnected commodity exchanges. This interconnectedness would foster trade, investment, and regional integration, while also providing a platform for African resources to be traded regionally, promoting economic integration and strengthening regional value chains,” Chikengezha said.
He added that the establishment of commodities trading on the VFEX could have a broader global impact. As the commodity market in Zimbabwe grows and matures, it could attract international investors and traders, contributing to the country’s integration into the global economy.
Impact of the Commodities Exchange on the Broader Economy
The introduction of commodity trading on the VFEX could have a significant impact on the broader economy, including:
- Increased foreign direct investment (FDI): The VFEX can attract foreign investors to the commodity market, bringing in much-needed capital and expertise.
- Job creation: The growth of the commodity market can create new jobs in various sectors, including mining, trading, finance, and logistics.
- Revenue generation: The government can benefit from increased tax revenue generated by the commodity market, which can fund public services and infrastructure development.
- Price stability: A well-functioning commodity market can help stabilize prices for minerals and commodities, reducing volatility and benefiting both producers and consumers.
- Economic diversification: The commodity market can contribute to diversifying Zimbabwe’s economy, reducing its reliance on traditional sectors and making it more resilient to external shocks.
Examples from Other Markets
The success of commodity exchanges in other jurisdictions, such as the London Metal Exchange (LME) and the New York Mercantile Exchange (NYMEX), demonstrates the potential benefits of these markets. These exchanges have significantly boosted economic growth, attracted investment, and promoted innovation in their respective countries. Closer to home, Rwanda’s Ministry of Trade and Industry initiated the Rwanda Commodity Exchange (RCX) in 2011, initially focusing on agricultural commodities. RCX has since expanded to include metals, minerals, and energy resources. Collaborations with the Ethiopian Commodity Exchange and the Nicholas Berggruen Institute led to the development of the East African Exchange (EAX) in 2013, reflecting the growing interest in regional commodity markets.
The introduction of commodity trading on the VFEX marks a significant milestone for Zimbabwe and Sub-Saharan Africa. By providing a platform for efficient trading, attracting investment, and stimulating economic activity, the VFEX has the potential to drive growth, create jobs, and foster regional integration. The broader economic benefits of this initiative, including increased FDI, job creation, revenue generation, and price stability, make it a compelling opportunity for entrepreneurs, investors, and the region as a whole.
The Zimbabwe Stock Exchange (ZSE) originally intended to introduce commodities trading in the first quarter of 2024, but this plan was postponed. With the recent release of government regulations, the ZSE is now preparing to launch a new market segment.
To obtain a license for commodities trading on the VFEX, applicants must fulfil certain requirements. These criteria include being registered with the relevant authorities and ensuring that the principal officer has at least one year of experience in trading such assets, as outlined in the new regulations.
The Zimbabwe Stock Exchange, or ZSE, is the official stock exchange of Zimbabwe. Its history dates back to 1896 but has only been open to foreign investment since 1993. The exchange has about a dozen members and currently lists 63 equities. There are two primary indices, the ZSE All Share and the ZSE Top 10.
The Victoria Falls Stock Exchange was established in 2020 in the resort city bordering Zambia, offering investors a market with fewer risks related to currency fluctuations and inflation issues that have long affected Zimbabwe’s economy.