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ZSE insider trading set to worsen

Ngoni Chanakira

ALLEGED insider trading on the Zimbabwe Stock Exchange (ZSE) will worsen as long as the country experiences hyperinflation says American anti-corruption activist and political science profess

or Gary Sykes.

Zimbabwe’s inflation has soared from about 200% in January this year to stand at 455,6% for September. Predictions are that it will surpass the 600% mark soon and 1 000% by year-end.

Sykes is vice president of the Centre for American and International Law in Dallas, Texas, and is a professor in political science and justice administration.

He was in Zimbabwe last week at the invitation of the United States Information Service to address various sectors including bankers, business, labour and government officials on corruption, insider trading and good governance – especially at a time of globalisation.

Insider trading is the abuse of privileged information gained from officials either working at the ZSE or the listed company.

Individuals who can receive such information include company executives, including chief executive officers, their secretaries and board members.

Journalists can also be accused of insider trading because they get information relating to listed companies, sometimes even before the general public is made aware of any pending changes.

Insider trading on the ZSE currently cannot be proven because the country does not have laws stipulating what it is and how it can be stopped.

The bourse, led by Emmanuel Munyukwi, is still using the Prevention of Corruption Act to deal with cases of alleged insider trading.

Loopholes in this Act have however, resulted in individuals successfully challenging the law and being allowed to go scot-free pending “summons being issued”.

Cases of alleged insider trading have included those dealing with the floating of shares for Econet Wireless Holdings Ltd and dividends for First Mutual Life Society Assurance of Zimbabwe Ltd, where businessmen were hauled before the courts.

They were accused of having abused privileged information and misrepresented facts to reap handsome rewards.

“As long as you have hyperinflation and the majority of the population starving, you will find it extremely difficult to control insider trading,” Sykes said in an interview.

“Hyperinflation worsens already precarious situations and those in the know will obviously abuse their positions inorder to reap huge amounts of money which they give to their buddies. Personal gain drives corruption and high pay of officials employed by the stock exchange does not necessarily make them honest.”

He said in the United States, each year, the Securities and Exchange Commission brought between 400 and 500 civil enforcement actions against individuals and companies who broke securities laws.

“The infractions include insider trading, accounting fraud, and providing false or misleading information about securities and companies that issue them,” he said

He said Anti-Corruption Commissions had been set up in several countries.

“Success stories have been noted in Hong Kong and Botswana, while failures have been in Kenya, Zambia and Nigeria,” he said.

Zimbabwe set up an Anti-Corruption Committee using its National Economic Consultative Forum (Necf), a 150-member grouping appointed by President Robert Mugabe.

The Necf’s Anti-Corruption Com-mittee is led by flamboyant businessman and Zanu PF MP and Chinhoyi provincial chairman, Phillip Chiyangwa.

While the committee has investigated some cases of alleged insider trading on the ZSE, it has failed to pin down the culprits because there is currently no legislation on the illegal dealing in the country’s statutes.

One such case was that dealing with First Mutual Assurance Company of Zimbabwe Ltd dividends. Although individuals were hauled before the courts, to-date no one has been convicted. Some of the alleged culprits have even fled the country.

The Necf’s Anti-Corruption Committee has also largely been viewed as a body whose major role is to scuttle deals undertaken by individuals, especially indigenous entrepreneurs, not sympathetic to the ruling Zanu PF party and government.

Last week, the Minister of Finance and Economic Development Herbert Murerwa, pointed out that the Insider Trading Bill would come up for debate in the 150-member parliament during the current session.

Transparency International, which publishes an annual corruption perception index, last week called on wealthy nations to increase their support for developing countries fighting to end corrupt practices.

“Rich countries must provide practical support to developing country governments that demonstrate the political will to curb corruption,” Peter Eigen, chairman of the Berlin-based Transparency International said upon release of its annual survey on perceived levels of corruption in 133 countries.

“Those countries with a high degree of corruption should not be penalised, since they are in the most urgent need of support.”

Bangladesh, Nigeria and Haiti were perceived to have the worst records of corruption by public officials and politicians and received the lowest rankings.

At the other end of the spectrum, Finland, Iceland, Denmark, New Zealand and Singapore were the top five countries in terms of perceived low levels of corruption.

The United States was 18th on the list, while Zimbabwe stood at 106.

Sykes meanwhile said it was disturbing to see Zimbabwe’s economy go down the drain the way it has yet at one stage it was viewed as Africa’s best example of economic and political growth.

“There are serious problems in Zimbabwe which are not being addressed,” Sykes said.

“Hyperinflation is destroying the economy. Investment is leaving rather than coming to Zimbabwe and what has surprised me most during my stay here is the generalised fear I found among groups because of government suppression.”

He said government suppression, while being “subtle” could be seen in the way it was dealing with the media, economic affairs, as well as its treatment of the country’s deteriorating health situation.

“What is tragic here is that Zimbabwe could be a shining example of a country living in peace and prosperity and yet it is headed in the wrong direction,” he said.

“People need to talk about problems because they are of common concern. Groups also need to talk about these issues because from discussions emerge proposals.”

Sykes said while he would be the wrong person to talk about the shutting down of the Daily News and the Daily News on Sunday, newspapers from the Associated Newspapers of Zimbabwe (ANZ) stable, he thought the move further tarnished the country’s image and came at the wrong time.

The ANZ had its newspaper empire shut down on September 12 after being charged of operating illegally.

“It is only dictators who shut down newspapers,” the professor said. “Dictators shut down newspapers because they are enemies of the truth. The incident will further isolate Zimbabwe.”

He said, however, there would be light at the end of the tunnel soon for Zimbabwe.

“This cannot continue indefinitely and change will come much sooner than later,” he told businessdigest.

“There are so many burning issues such as the HIV/Aids scourge, and basic food needs that need to be addressed immediately. These cannot go on forever without being addressed.”

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