OUR front page story in last week’s edition explored the implications of the turmoil roiling Zimbabwe’s stock exchanges on stockbroking firms, which stumbled into firestorms last year. This week, our assistant editor, Mthandazo Nyoni (MN) sat down with Arnold Chibvongodze (AC), general-secretary of the Stockbrokers Association of Zimbabwe (SAZ), to understand the depth of the crisis. Below are excerpts of the interview:
MN: What are the major challenges facing Zimbabwe’s stockbroking community?
AC: Major challenges facing Zimbabwe’s stockbroking industry include economic volatility, low liquidity, competition, and regulatory hurdles. Hyperinflation, currency instability, and erratic monetary policies deter long-term investment. Policy inconsistency and frequent changes to taxes related to trading activity (are affecting stockbroking firms). Limited foreign participation and domestic investor caution reduce trading volumes. The withdrawal of ZiG liquidity from the market is affecting activity. US dollar liquidity is shunning the Victoria Falls Stock Exchange (VFEX), preferring less regulated asset classes such as short-term fixed income assets, property, commodities, and alternative investments such as renewable energy and horticulture activities in forex generating produce. Informal forex traders and offshore platforms lure investors seeking dollarised returns. Also, alternative investments are seeing more support, especially on US dollar liquidity. Frequent policy shifts — for instance tax changes, capital controls, and directives on vesting periods, create uncertainty. The extended suspension of Old Mutual and PPC has been a dark spot on the investment landscape.
MN: How are regulators and firms addressing these problems?
AC: Regulators such as the Securities and Exchange Commission of Zimbabwe (SecZim) are tightening oversight to restore confidence. Firms are dollarising portfolios and adopting hedging strategies to manage inflation risks. Diversification away from equities can be reversed by making equities attractive again through reducing the cost of compliance.
MN: How does the current regulatory framework affect stockbrokers? Are there proposed changes that could reshape the industry?
AC: Proposed reforms include Tier 1 Capital: the higher of 13 weeks’ operational expenditure or prescribed minimum thresholds, for example, 20 000 to 500 000 depending on licence category. Tier 2 Capital: Aggregation of counterparty risk, position risk, and asset safety risk requirements. Adjusted liquid capital: Equity plus subordinated liabilities, minus intangible/fixed assets, must exceed total capital requirements. The proposal aligns broadly with African peers in risk coverage, but diverges in its operational expenditure-linked Tier 1 Capital. It introduces progressive elements (crypto, crowdfunding) but sets lower fixed minima than larger markets such as Nigeria or South Africa. While this is good, it must be done in a phased way to allow participants to comply without excessive pressure. With low trading activity, most players may be forced to look to shareholders for capital injection.
MN: How is technology transforming the industry, and what investments are being made to modernise services?
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AC: Platforms such as C-Trade and the Zimbabwe Stock Exchange Direct are expanding access. There is an opportunity to use artificial intelligence for risk analytics and client profiling.
MN: Are low-cost online platforms or offshore competitors a threat?
AC: Yes, offshore platforms, for example, South Africa’s EasyEquities, and low-cost apps compete for retail investors, especially with regard to the young and tech-savvy investors who are more comfortable using technology.
MN: What role can stockbrokers play in promoting financial inclusion, particularly for underserved communities?
AC: SAZ’s investor literacy programmes target small- and medium-sized enterprises and youth, especially students in high school and universities, through SecZim’s education department. There is an opportunity to introduce fractional shares and deepen the use of mobile-based trading platforms such as C-Trade. On challenges, high inflation erodes trust in long-term instruments.
MN: How do inflation, interest rates, and currency risks impact the stockbroking industry’s performance and client activity?
AC: Investors favour equities as a hedge, but volatility deters sustained participation. Frequent currency changes and the problems around repatriation of investment proceeds have had a negative impact on foreign investor participation. Even VFEX, a market trading in US dollars, has not been spared by foreign investor apathy, as they continue to shun investing in the country. While the tight liquidity control was necessary to stem inflation and reduce the depreciation of the ZiG, the measures have been excessive to the point that they have curtailed trading activity. Worries related to the future of the usage of US dollars in the economy also affect VFEX trading activity. High rates push investors to money markets (than) equities. Lately, for the US dollar, there has been a preference for short-term fixed income investments through microfinance institutions over equities.
MN: What key projects is the association undertaking to grow the industry, and what are its top priorities for 2025?
AC: SAZ’s 2025 priorities include lobbying for a continued listening ear from the Ministry of Finance, Economic Development and Investment Promotion in terms of the capital markets strategic plan. We are also targeting market expansion by promoting real estate investment trusts (REITs) and corporate bonds. We want to support block chain integration for settlements.
MN: What is the total value of assets under management by Zimbabwean stockbrokers, and how does this compare to regional peers such as South Africa or Kenya?
AC: For stockbrokers, we mostly watch total market capitalisation and market turnover. Daily market turnover, which used to average above US$1,5 million, is now nearly a third of that. This obviously means much reduced total trading commission income, which has to be shared among about 23 stockbroking firms. Market turnover in other African markets is much higher than Zimbabwe’s, at around US$2 million for the smaller markets.
MN: What are the main revenue drivers (commissions, advisory fees, proprietary trading), and which segment is growing fastest? How profitable is the average firm, and what are the biggest cost pressures?
AC: Commissions account for 80% of revenue (volume-dependent), advisory (sponsoring broker) fees are growing with institutional demand. However, with low corporate transactions, this line is much lower. Proprietary trading is limited by capital constraints. Only very few players have meaningful and active proprietary books. Cost pressures emanate from compliance, communication, rental, and tech upgrades. Average net margins range from 10% to 15% (highly volatile).
MN: What is SAZ’s growth outlook for 2025, and what factors will influence this trajectory?
AC: We are looking for potential foreign direct investment inflows if currency reforms stabilise. Political instability, further inflation spikes, and geopolitical risks such as tariff wars, as well as wars in Ukraine and the Middle East, may affect the movement of capital across borders, as we continue to see a rise in nationalism. Liquidity shortages are expected to curtail trading volumes, while digital adoption could lower costs and attract retail investors. Forex traders divert liquidity but lack regulatory safeguards. Competition is mostly coming from other less regulated asset classes — cluster developments, short-term fixed incomes, among others. M&As will not necessarily solve the problem of a shrinking capital market. The biggest challenge for brokers is not competition but declining interest in capital market investments, capital flight, and tight liquidity.
MN: Beyond equities, are stockbrokers expanding into bonds, REITs, private equity, or cryptocurrencies to boost liquidity and profitability?
AC: There is a slow uptake due to yield distrust and inflation worries, which tend to affect long-term fixed income instruments more. REITs and exchange traded funds (ETFs) have been growing in number, but the liquidity shortages affecting equities did not spare these innovations. Regulatory risk and changes in the operating environment are having negative effects. For instance, the first-ever ETF, by Old Mutual Zimbabwe Limited, had to be disbanded after facing several challenges. Demand for crypto exists, but regulators are cautious.
MN: Could prolonged low market volumes or economic instability lead to broker collapses? How resilient is the industry?
AC: Small brokers face solvency risks if volumes stay low. However, their resilience comes from having lower overheads and committed proprietors who believe in the industry. SecZim’s capital buffers and investor compensation funds mitigate systemic risks.
Also, the use of custodians has reduced settlement risk to a point where even the failure of a brokerage firm will not have an impact on client funds. Zimbabwe’s stockbroking industry is navigating severe headwinds, but has potential through tech adoption, regulatory modernisation, and regional integration. SAZ and SecZim’s 2025 agenda will be pivotal in stabilising the sector.
