By Brian Latham and Janice Kew
Jan. 27 (Bloomberg) -- Zimbabwe’s stock exchange, shut two months after the central bank accused traders of using fraudulent checks, will remain closed until the government agrees on a plan to denominate shares in dollars, the bourse’s chief said.
“We’ve reached agreement in principle to dollarize trading, but there are still some issues,” Emmanuel Munyukwi, chief executive officer of the Zimbabwe Stock Exchange, said in a telephone interview from the capital Harare yesterday. “At this point it’s hard to say how long it will take or when trading will resume.”
Zimbabwe’s dollar, the world’s worst performing currency, has plunged to about 37 million per U.S. dollar at official rates from a 30,000 peg a year ago, and now trades as much as 40 billion on the black market. The U.S. currency is used for daily purchases, when it can be obtained, for ease of transactions. Businesses that trade in Zimbabwean dollars raise prices as many as four times a day.
Zimbabwe has been mired in a decade of economic recession that caused shortages of food, fuel and other basic commodities. At least 2,971 people have died as a result of a cholera outbreak, according to the United Nations. Inflation is about 89.7 sextillion percent, based on estimates by the Cato Institute in November.
The Zimbabwe Stock Exchange has been one place where local assets had been able to make up for some of the currency’s devaluation and inflation. The Zimbabwe Stock Exchange Industrial Index gained 56,436 percent in September, and 3,765 percent in October, according to Bloomberg data.
Trading was stopped from Nov. 21 after Zimbabwe’s central bank accused some traders of using fraudulent checks to buy shares. Eleven companies and nine individuals had their accounts frozen on Nov. 20 after the checks totaling “60 hexillion” Zimbabwe dollars had been used to buy shares, Zimbabwe’s central bank governor Gideon Gono said in a statement.
Lawmakers are discussing whether to use the U.S. dollar, the South African rand or the Zimbabwean dollar in the national budget, due to be presented on Jan. 29, the Herald, based in Harare, reported today. They must also decide whether stockbrokers should be required to lodge dollar deposits with their bankers or the central bank, Munyukwi said. Zimbabwe’s Securities Commission may demand a $500,000 guarantee from stockbrokers before trade on the Zimbabwe Stock Exchange resumes, the Herald reported Jan. 21, citing Willia Bonyongwe, the commission’s chairwoman.
The prices of stocks will also have to be re-evaluated and a review of taxes will have to take place, Munyukwi added. Some 7 percent of the trade on the Zimbabwe Stock Exchange goes to the government in the form of stamp duty, value-added tax and commissions, Lalla said.
Zimbabwe’s main opposition party will decide this weekend whether to bow to southern African leaders’ insistence that it agree to implement a power-sharing agreement and join President Robert Mugabe’s government.
“In the economic carnage of the last 10 years, the Zimbabwe Stock Exchange has almost been this one beacon of light,” Russell Loubser, chief executive officer of South Africa’s stock exchange, said in an interview on Jan. 20.
The closure of the exchange has left investors with “no vehicle in which to maintain the value of their dollars,” Rishay Lalla, a fund manager at Imara Asset Management said by phone from Harare today. “The price of stocks in the last few months have been distorted because of the hyper inflation.”
To contact the reporter on this story: Brian Latham via Johannesburg at firstname.lastname@example.org or Janice Kew in Johannesburg at email@example.com. Last Updated: January 27, 2009 11:45 EST