THE Zimbabwe Stock Exchange (ZSE), once the second largest exchange in Africa in terms of market capitalisation, is in dire need of foreign investment. In the absence of foreign investment, privatisation of government entities could be used to excite the market.
The Zimbabwe Independent senior business reporter Bernard Mpofu (BM) spoke to newly appointed ZSE committee chairman Ndodana Mguquka (NM) on Wednesday in the capital on issues affecting the equities market.
Mguquka — who took over from Tedious Kasaira — is the New Africa Securities MD. Below are excerpts of the interview.
BM: What is the main priority of the ZSE committee?
NM: The main priority for this year’s committee is to turn the stock exchange into business. By that I mean we are trying to attract a lot of quality listings on our stock exchange because this country is a resource-based country.
We understand that Zimplats went to raise money in Australia because we were trading in Zimbabwe dollars. But now that we are dollarised, there is no reason why they can’t list on our exchange especially when their resource is in Zimbabwe.
BM: How do you intend to engage with such companies that are currently not listed?
NM: We have created a business development committee within the ZSE committee which will make a presentation to the Chamber of Mines of Zimbabwe sometime in August. This presentation will focus on the advantages of listing and why they are being unfair to us. We will probably talk to the Bankers Association of Zimbabwe to try and persuade some of the banks that are not listed here, but are listed elsewhere, to consider listing in Zimbabwe.
BM: Do you think such companies will be interested in listing here given that government is expected to review the multi-currency system in 2012?
NM: The whole issue about listings is raising money. From now on I think local pension funds have got the capacity to take up some of these IPO shares. They are recovering slowly and they are the major players on the exchange.
BM: What impact will the anticipated stockpiled diamonds sale in Zimbabwe have on the exchange?
NM: There is a liquidity crunch on the market. All we need is some money in the bank. So if the sales improve liquidity, that will definitely help us on the market. The reason why our market is falling is that there is no money. We are really suffering — the viability of stockbroking firms is at its worst right now. Stockbroking firms are struggling to pay salaries and so on.
BM: So what is keeping them going?
NM: Innovation has become the only key (kiya kiya), but it is really getting difficult.
BM:: How come we haven’t seen any stockbroking firm going under since February, apart from NDH and ISB Securities which were disposed of earlier this year?
NM: It is us the independent firms that are going to suffer because the shareholder must put more money, but firms that are owned by big banks and parent companies will always survive. They can pay rentals and salaries until the rainy day comes because stockbroking business is called fist and famine — it’s a cyclical business and it is very sensitive to all sorts of things.
BM: Apart from liquidity problems, what else is hampering stockbroking business in Zimbabwe?
NM:: There is so much happening. We are in dialogue with the new regulator (Securities Commission of Zimbabwe) because we are the ones who promoted the establishment of this commission. We have a feeling that they are coming up with a lot of rules that people do not understand. For example, them (SEC) trying to licence financial journalists is something that is unheard of. That should apply to CEOs of listed companies.
BM: Disclosure is a thorny issue in your sector. Has there been any resolve on this issue since last year’s dollarisation of the economy?
NM:: We are resolving our listing requirements although they are widely at par with the region. We should have new listing requirements by the end of the year and they will mainly focus on disclosure. At present we are copying and pasting listing requirements in South Africa, not entirely though because we only apply what is suitable here and leave out what is not.
BM: What is your view on indigenisation?
NM: Government owns about 40% of this economy. It should promote the exchange through privatisation. The only way this privatisation can be transparently done is through listings and IPO. Once you have got a viable stock exchange, you have got a viable economy and studies have proved that.
BM: Did foreign participation on the bourse improve after indigenisation regulations were amended?
NM: No, I did not see any improvement. Foreign investors normally have a keen interest in blue chips and there are no volumes in these counters.
BM: Is privatisation sustainable under prevailing conditions?
NM: That is where your diamonds come in. You must understand that when you list quality assets, foreigners are allowed to own 40% of listed companies. At present, foreigners have pulled back because of indigenisation regulations yet in countries like South Africa, foreign portfolio investment makes up about 25% of the gross domestic product. We can market these IPOs and listings in the region and worldwide for as long as they are attractive. No one will refuse to buy Zimasco or Zimplats for example.
BM: So, should we anticipate any new listings soon?
NM: We may have a few this year.
BM: How is your relationship with the SEC? And when is the commission going to be fully in charge of the exchange?
NM: We are in dialogue with them and we will continue to do so. Turning to your next question, they are in charge and they are licensing as we speak. They are licensing in terms of issuing out new licences because under the Securities Act, you are deemed licensed if you are an existing firm. We are, however, still negotiating with them because their licensing fees are too high.
BM: Is the ZSE ready for demutualisation because this matter has been on the cards for quite some time now?
NM: We think the stock exchange as it stands is too thin. So we can only demutualise once there is proof that it makes good sense to do so. Demutualisation is a business case, we will definitely get there but the issue right now is survival and making sure that the exchange is solid enough. We will definitely demutualise, in what form, I don’t know. But we have consultants working on that.
BM: Can you briefly take us through the day of the ZSE chairman?
NM: It is not a paid job, but it is almost full time. I have to run New Africa and address stock broking issues which pop up daily. I spend most of the time walking up and down to the ZSE or on the phone with ZSE CEO Emmanuel Munyukwi.