Transcript Critical Analysis of Challenges and Successes of Zimbabwe

Critical Analysis of Challenges
and Successes of Zimbabwe’s
Capital Market
Tafadzwa Chinamo
CEO
Securities Commission of Zimbabwe
Lusaka, Zambia
May 2013
Zimbabwe Capital Market
1 Stock Exchange: est. 1896, market cap $5bn,
74 listed companies, daily turnover ±$1.5m,
avg. 90 trades/day, two indices
14 Stockbrokers
5 Securities Custodians
3 Securities Transfer Secretaries
17 Securities Investment Advisors
14 Asset Management Companies: 45 Unit trust
funds
Notable Challenges
Manual and Paper based trading platform
• System unknown to modern day global players
• Lack of CSD hindering more efficient clearing,
settlement and dividend processing
• Unable to perform rigorous analysis resulting in
limited product offering → no derivatives
• Keeping away many potential local and foreign
players »»» low liquidity
Notable Challenges
Effects of Z$ to US$ crossover
• Market caps ‘unjustifiably’ low
• USD market values too low for most small
investors → many now out of the market
• Few locals with US$ to invest → net sellers,
foreigners limited due to perceived political
risk & caps on foreign shareholding
• Contending with odd share prices e.g. US0.01c
• Financial history lost: 2009 new starting point
Notable Challenges
Companies Struggling to Recapitalise post
hyperinflation
• Minimal corporate actions and no new listings
• Many unattractive stocks on the board. These
could be seen as Bargains!
• Worrying number of delistings
• Small stocks struggling to meet continuing
obligations
• Activity on the market limited to a few stocks
Notable Challenges
Securities Laws not yet complete
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SEC’s authority often challenged by players
Securities Act not yet complimented by rules
Outdated ZSE Listing Rules
Regulatory arbitrage between Securities Act,
Companies Act and ZSE Listing Rules
• Weak ties between SEC and prosecuting
authorities and law makers
Underlying Success Factors
Resilient, Tried and Tested Market
• Still going strong despite:
- political and economic vagaries
- manual trading platform
• Market turnover 4th in Sub-Saharan Africa
• Exchange been around since 1893
• Healthy blend of long established & new
players
Underlying Success Factors
Market sustained by locals
• 69 of the 74 listed companies are local (BARC,
BAT, LAF, OM, PPC)
• Strong local institutional base (Pen. Funds,
Insurance Cos and Asset Managers)
• Participation at household level significant
• Able to maintain deep skills base
• Good base for growth
Notable Recent Successes
Establishment of SEC as the Regulator
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SEC re-enforced ‘viable’ SRO structures
Several high profile sanctioning of violators
Gazetted corporate governance rules
Pushing hard for modernisation (CSD, ATS)
ZSE now run by independent board
Established an Investor Protection Fund
Advancing best practice through membership to
world bodies (IOSCO, WFE etc)
Notable Recent Successes
SEC & Public Accountants and Auditors Board
Collaboration (PAAB)
• Huge improvement in preparation and
disclosure of financial statements
• Introduced a Review Panel to scrutinise all
published financial statements
• Set reporting standards to be adhered to by
companies and their auditors
Outlook
Zimbabwe’s capital markets are poised for
growth