The delisting of Old Mutual Zimbabwe Limited’s Exchange Traded Fund (ETF) from the Zimbabwe Stock Exchange (ZSE) is a sobering moment for stakeholders in the country’s capital markets.

As Zimbabwe’s first ETF, its exit not only marks the end of a pioneering product but also raises critical questions about the sustainability of innovative financial instruments in the local economic environment.

Introduced in December 2020 and listed on the ZSE in January 2021, the Old Mutual Top 10 ETF was a groundbreaking initiative aimed at tracking the ZSE Top 10 Index. It provided a cost-effective and diversified gateway for investors to access Zimbabwe’s blue-chip equities. Over its lifespan, the ETF succeeded in promoting liquidity, enhancing market participation, and broadening the investment horizons of retail and institutional players alike. Its withdrawal, therefore, leaves a palpable void in the investment landscape.

The challenges leading to the ETF’s delisting, as highlighted by Old Mutual Investment Group Managing Director Marjorie Mayida, are emblematic of broader systemic issues.

The evolving composition of the ZSE Top 10 Index and the increasing difficulty in replicating it created a widening tracking error. This misalignment ultimately necessitated the decision to delist the fund to protect shareholder value.

While the Old Mutual ETF’s lifecycle highlights the complexities of managing index-linked financial instruments in an emerging market, it also underscores the pressing need to address structural weaknesses within Zimbabwe’s capital markets.

Chief among these are the limited depth of the market, liquidity constraints, and the volatility of listed securities.

Without interventions to resolve these issues, the sustainability of similar financial products remains in doubt.

The departure of the ETF is a significant setback, particularly for a market striving to diversify and modernize its product offerings. Globally, ETFs are lauded for their ability to enhance market participation, improve transparency, and provide investors with efficient, liquid, and diversified exposure to financial markets.

Zimbabwe’s foray into this space with the Old Mutual ETF was an important step in aligning the local market with global trends.

The delisting, however, sends a concerning signal to both local and international investors.

It suggests that Zimbabwe’s capital markets may lack the resilience and innovation needed to sustain complex financial products. This could deter future investments and erode confidence in the market’s capacity to evolve.

Despite the challenges, the delisting of the Old Mutual ETF presents an opportunity for introspection and strategic recalibration.

Stakeholders—including policymakers, regulators, and financial institutions—must use this moment to identify and address the structural issues that undermined the ETF’s viability.

Efforts should be made to attract more high-quality listings to the ZSE. A broader and deeper pool of securities would not only enhance liquidity but also provide a more stable foundation for index-linked products.

The regulatory environment must support innovation while ensuring investor protection. Clearer guidelines and incentives for the creation and management of ETFs could encourage the development of similar products in the future.

Retail investors, in particular, need greater awareness and understanding of sophisticated financial instruments like ETFs. Comprehensive education initiatives can foster trust and increase participation in such products.

The market’s ability to retain investor confidence hinges on its transparency and operational efficiency. Strengthening governance structures and ensuring accurate, timely disclosures are vital steps in this direction.

While the delisting of the Old Mutual ETF is undeniably a setback, it also highlights the latent potential within Zimbabwe’s capital markets.

The introduction of the ETF demonstrated that there is appetite for innovative investment products, even in challenging economic conditions. The task now is to build on this foundation, addressing the barriers that stymie progress while fostering an environment conducive to innovation and growth.

In the short term, stakeholders must work collaboratively to fill the gap left by the ETF’s exit.

This could involve exploring alternative instruments that provide similar benefits of diversification and liquidity. In the long term, the focus should be on strengthening the market’s structural integrity, ensuring it can support a wider range of financial products.

The delisting of the Old Mutual ETF is a wake-up call for Zimbabwe’s financial ecosystem.

It underscores the urgent need for a coordinated effort to bolster the market’s resilience and adaptability. While the loss of the ETF is disappointing, it also serves as a reminder of the opportunities that lie ahead.

By addressing the root causes of the ETF’s challenges and fostering a culture of innovation, Zimbabwe’s capital markets can emerge stronger, offering a robust platform for both local and international investors. This, in turn, will pave the way for a more dynamic, competitive, and sustainable financial landscape.