ZSE overly bullish ahead of polls

HARARE - With the Zimbabwe Stock Exchange (ZSE) capitalisation heading for the $6 billion mark, chairperson Eve Gadzikwa remains overly bullish about the prospects of the country’s capital markets going forward.

Anyway, why wouldn’t she, with the bourse’ main industrial index up 46,7 percent this year and 67,7 percent year-on-year who would blame her.

“We are on the right path looking at where we are now as a market,” she said.

Gadzikwa’s position which can be viewed as overly optimistic, could however be daunted by  a highly anticipated watershed election this year pitting former foes Prime Minister Morgan Tsvangirai’s MDC and President Robert Mugabe’s Zanu PF.

“Investors are sitting on the fence, waiting to see what will happen with the election. It’s an event, it’s something that is going to pass,” she said, admitting the continued uncertainty over the impending polls would have a negative impact on the ZSE board turnaround strategy including its ability to attract much needed foreign investor participation.

“We need to put our house in order as an exchange, so that we can take advantage of the situation after the election,” said the ZSE chairperson.

“The ZSE is performing very well and we are sitting on market capitalisation of over $6 billion. This performance, we expect, is going to improve once the uncertainty passes. We expect to get a lot of interest from outside and this we have seen following the launch of our data portal.”

Gadzikwa said making the ZSE attractive for most listings would also take centre stage of the bourses turn-around strategy.

“We have discussed this as a board and we feel there is a lot that needs to be done to attract more listings and find new business. You are going to see a number of new programmes being implemented to address that issue.

“We are aware of what is happening and we are revising our rules so that they are in tandem with regional best practices, as we need to be competitive as a market.”

Among recent changes made at the ZSE, include the appointment of a substantive chief executive Alban Chirume, who Gadzikwa touts as the game changer for the bourse.

“We are happy we have managed to find a competent person in Alban. He knows the capital markets well and also has regulatory knowledge of what needs to happen on the market.

“Chirume has a vision on how the ZSE should move forward and he has already begun meeting various stakeholders of the ZSE. All this will see more activity coming to the ZSE compared to prior year. I am 100 percent confident we now have the right people in place,” she said confidently.

For a bourse which has been struggling to regain its momentum after having been voted the best performer in Africa once upon a time, the century-old exchange has struggled with internal strife pitting its members against regulator, Securities Commission of Zimbabwe (SecZim) over a raft of reforms which are meant to transform its operations and bring it in line with international best practices.

The fights have largely over shadowed her board’s plan to transform the ZSE in a world class trading platform.

“We are aware of people’s perception about the ZSE and at the moment there is a lot that is being done to address them. We are putting proper structures in place,” said Gadzikwa.

“We are looking at a number of projects such as automation and privatisation of the exchange. This all should bring much needed confidence in the stock exchange,” she said.

The ZSE is still to introduce an automated trading system after its current manual operations have been blamed for negatively impacting on the growth of the exchange, due to the risk perception attached by potential investors.

The automated system is expected to provide more transparency as it is less open to market manipulation, fraudulent dealings, and financial crime.

It is also believed to reduce risk in capital markets, therefore promoting market integrity and boosting investor confidence.

“With the central securities depository, we are moving forward very well and we are in line with the September 26 launch date. We are very keen on modernising our exchange in line with regional standards.”

 Gadzikwa however said the current viability challenges facing stock brokers that has seen more than six closing down, was indicative of the current harsh economic operating environment.

“What is happening to brokers is not an isolated issue as business in general is facing viability challenges. We are however looking at how to accommodate them and keep them in place as they are critical in the operations of the exchange,” she said.

Economist John Robertson however, blamed government for the viability challenges faced by brokerage firms, saying it had overstepped its mandate.

“The current regulations are too much for a small exchange like ours and with the current position we are set to see more challenges for them. The changes to rules and regulations governing the ZSE are inappropriate. These changes will have no impact on the ZSE, I think they should actually be rescinded,” he said.

Robertson noted that anytime a government tries to control markets they tend to become inefficient.

“I think government is getting it all wrong here and should leave the markets alone. I am not saying they should be not regulations, they should be rules but to what level,” he said.

Stockbrokers are required to have at least $150 000 in order to be licensed.

Robertson said liquidity challenges and low investor confidence will continue to hamper the growth of the country’s capital markets.

“To get to reasonable levels of growth we need to grow confidence as a country. Capital markets in this country barely exist at the moment.

“Those investors that are buying our shares are mainly doing so because they are considered cheap but not much is being done by Zimbabweans. The pension funds, which are the major local buyers these days rarely, buy much.”

Robertson said despite elections proving to be a challenge for investors, the tone had been set by the enactment of the country’s indigenisation regulations that require foreign-owned firms to cede a controlling 51 percent equity to locals.

“The election uncertainty does have an impact on the ZSE but the decision of investors not to participate in the ZSE was made long back when the indigenisation laws were enacted.

“Elections are just further complicating an already messy position and capital markets will not get money with the way things are. Elections are adding a layer of further uncertainty,” he said. - Roadwin Chirara

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