New stock exchange ill-timed


HARARE – Zimbabwe’s plans to set a secondary bourse that will trade in shares held by the indigenisation fund have been questioned, with analysts saying it was illogical at a time the country faces liquidity challenges.

Indigenisation minister Saviour Kasukuwere recently announced government is planning to set up a second stock market adding to the existing Zimbabwe Stock Exchange (ZSE).

Kasukuwere’s pronouncements followed similar calls by government officials for the country to open a bourse for parastatals and another one for small-to-medium enterprises in order to attract public investment into the companies falling under these categories.

A privately-owned equity fund, Brainworks Capital Management, earlier this month applied for a stock exchange licence with the Securities Commission of Zimbabwe, which if approved will be known as the Harare Stock Exchange, as the company seeks to broaden the capital markets.

Economists advised against setting up of the bourse, arguing the ZSE was struggling to improve liquidity three years after adopting a multiple-currency regime following a decade of economic stagnation and hyperinflation.

Tapiwa Nyandoro, an economic analyst said while the public listing of parastatals would give workers, who are usually owed wages and pensions, stacks in companies, the talk of a second bourse to trade in indigenisation shares is mere politicking and lacks substance.

“That is how Saviour (Kasukuwere) has done a good job for Zanu PF by selling hope and an illusion to the youth. The ZSE is adequate for a serious indigenisation drive,” he said.

“But foreign funding is needed for the exercise, which if genuine, would start by listing state-owned enterprises such as ZMDC, Air Zimbabwe, Hwange Power Company, Cold Storage Company, among others on ZSE, taking the opportunity not only to raise capital for these undercapitalised state-owned companies, as they shift to state-controlled private companies.” he added.

Economist Christopher Mugaga also said a secondary bourse was ill-timed and could prove to be a costly exercise.

“If you look at all the counters on the ZSE more than 80 percent are almost stagnant. In reality a pseudo bourse is already in existence and there is urgent need to revamp and restructure it,” Mugaga said.

Mugaga instead called for the swift implementation of the ZSE demutualisation, saying the process would mean that the ownership, trading rights and management of the exchange becomes divorced from one another in order to circumvent the conflict of interest often associated with mutual exchanges.

He said the country should focus on developing the existing bourse first.

“The subsequent establishment of a central depository system that would usher in an electronic system of trading would lead to paperless settlement of trades (and) that, in itself, would be a clear substantiation of the fact that the local bourse is geared to keep up with international stock market standards and thus expand its capacity to generate revenue,” he said.

In March this year, suspended ZSE chief executive Emmanuel Munyukwi said activity on the local bourse remained stagnant as a result of uncertainty caused by indigenisation.

He said — foreign investors — who at some point accounted for 25 percent of activity on the local bourse had adopted a wait-and-see attitude.

“We don’t really understand it (the Indigenisation Act) so imagine you are a foreigner,” he said, adding market capitalisation had declined to a current $3,4 billion compared to $12 billion in 1999 — before the fast-track land reform programme of 2000,” said Munyukwi.

However, Zimbabwe National Chamber of Commerce (ZNCC) chief economist Kipson Gundani said the industry body was pushing for a secondary bourse with less stringent listing conditions to cater for specific needs of SMEs.

He said SMEs in the country remain underfunded mostly due to the liquidity shortage in the market while exclusionary listing requirements of the ZSE makes it difficult for them to graduate into large-scale corporates “Zimbabwe’s small-to-medium companies will benefit from the support and visibility provided by a listing and trading environment tailored to their needs on the proposed secondary exchange market,” he said.

Upon listing, he added, viable and profitable SMEs can raise capital and expand business and this can impact on economic contribution through higher employment levels and higher output.

Zimbabwe Investment Authority chief executive Richard Mbaiwa said he had no problems with the setting up of a new stock exchange in the country.

“As long as proper studies and research are done, anything that would result in additional investments and increase public participation in the economy is welcome. The current rules of the ZSE are discriminatory and there is need for an alternative market,” he said. – John Kachembere and Taurai Mangudhla

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