BusinessSectorsZimbabwe moves to boost equities exchange market


Posted on Monday, 17 September 2012 14:18

Zimbabwe moves to boost equities exchange market

Zimbabwe Stock Exchange (ZSE)/Photo©ReutersZimbabwe's equities exchange market is set for a massive revolution as three more trading platforms are on the cards.

Last week, two major pronouncements were made- the first being plans to create a stock exchange for ailing parastatals with the aim of raising fresh capital.

Brainworks, a local private equity firm also announced plans for another exchange to be called the Harare Stock Exchange.

Early this month, the Youth Development, Indigenisation and Empowerment ministry also revealed plans to create another stock market, the "indigedex", which will trade in shares from the indigenisation fund.

State Enterprises and Parastatals minister, Gorden Moyo, told participants at a mining indaba last Friday that the plan came after the realisation that state-owned enterprises and parastatals were not meeting the stringent requirements to join the Zimbabwe Stock Exchange (ZSE).

One of the requirements for a firm to list on ZSE is to provide a satisfactory profit history for the preceding three financial years.

However, this requirement is not feasible for most parastatals, as they have been recording losses and are behind in terms of producing audited financial results.

"The standards and guidelines are high (on ZSE). Our state-owned enterprises have been going through challenges in terms of capitalisation, there have been human capital flight and we have been exploring the idea of setting up equity exchange for state enterprises," Moyo said.

Zimbabwe has 78 state enterprises with capacity of contributing 40% to the country's GDP, but most of them are operating below capacity and are carrying huge debts.

A recent report by the Comptroller and Auditor General revealed that some parastatals were operating without board of directors.

One of the largest state enterprises, Grain Marketing Board recently held its first annual general meeting.

Moyo said the parastatals are going through a raft of challenges and are in dire need of recapitalisation.

Already a delegation has been dispatched to China to "study and copy the country's model of listing parastatals, as part of efforts to create a bourse for local state enterprises", Moyo said.

Full details on Indigedex are yet to be revealed but Kasukuwere says the move to set up a stock exchange would afford everyone a chance to participate in the empowerment program.

However, economic analysts have questioned the wisdom of creating more exchange markets when ZSE is undercapitalised.

At least US$1 billion is required to capitalise listed companies on ZSE.

The equities market declined 9.7% in the first half of 2012 on relatively thin volumes.

"Several companies on the Zimbabwe Stock Exchange are heavily undercapitalised — a condition that has hampered performance for most listed companies.

"Raising fresh equity remains essential for ZSE-listed companies at the height of the current liquidity constraints.

"We estimate that an amount close to $1 billion might be needed to fully recapitalise companies listed on the ZSE," noted Invictus Securities, a local brokerage and advisory firm, in its latest Mid-Year Equities Market Review.

Currently, the Zimbabwe Stock Exchange (ZSE) has 79 listed firms.

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