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Government to end ZSE monopoly

GOVERNMENT is planning to bring to an end the trading monopoly of the Zimbabwe Stock Exchange (ZSE) following new regulatory proposals currently being analysed by industry players.

The Securities Commission of Zimbabwe, which is responsible for the regulation of the stock market, has drafted a statutory instrument outlining general rules for stakeholders on the stock market. The commission has invited industry players to contribute to the recommendations by August 24.


If approved, this draft would establish the framework for new players to compete with the demutualised stock market.     

“It is hereby notified that the Minister of Finance, in terms of subsection (6) of section 118 of the Securities Act [Chapter 24:25], has approved the following rules made by the Securities Commission.

In terms of subsection (1) of that section an application for the registration of a securities exchange, means the person who is to conduct the business of the securities exchange whose registration is sought, whether the application is being made by that person or by someone else on his or her behalf,” reads part of the proposed statutory instrument.

The Minister of Finance Tendai Biti announced the de-mutualusation of the bourse during the mid-term fiscal policy statement last month.

“Furthermore, there is need to unlock value in the ZSE for it to be a viable and attractive entity that would lure prospective shareholders to come on board,” Biti said.

“This entails de-mutualising the ZSE in terms of the Securities Act. However, prior to demutualisation, there is need to develop the market to ensure growth in revenue streams,” said Biti.

Biti said ZSE had been tasked to develop a business model on de-mutualisation which should have been submitted during the last half of this year.  The new proposal also spells out licensing requirements for individuals and firms seeking to be stockbrokers.

If passed the proposed rules would also see the Zimbabwe Stock Exchange re-apply for a licence with the Securities Commission.

“Where an applicant for registration as a securities exchange has traded in the financial year immediately prior to the year in which the application is made, the application shall be accompanied by a copy of the applicant’s audited balance sheet and profit and loss account for that financial year, together with the auditor’s report thereon,”  the draft says.

The fourth draft of the statutory instrument comes at a time when market capitalisation on the bourse rose to US$4 billion from US$1,7 billion recorded at the resumption of trade in February.  Market watchers said despite the jump, the local bourse was still undervalued compared with regional markets.

Analysts however said listing requirements could give the ZSE an edge over competitors given that local listing requirements do not have the provision for local listed companies to be listed on the stock exchange without approval of the ZSE. Meanwhile the Reserve Bank has clarified exchange control regulations pertaining to dual listing.

The Reserve Bank Foreign exchange guidelines to authorised dealers state that: “In cases of dual listing, the primary listing shall be on the Zimbabwe Stock Exchange with a minimum of at least 60% of listed shares at all times.  Foreign investors shall, however, be permitted to buy up to 40% of the shares in the dual listed company in line with existing Exchange Control policy.”

“Full fungibility shall be permitted up to 40% of the company’s shares held by foreigners. Where secondary listing is on the Zimbabwe Stock Exchange, full fungibility is not permitted,” the bank said.

“I do not see any new players coming on board soon given the early stages of the economic recovery process and the Reserve Bank regulations. We could however have a new exchange for small to medium enterprises or the commodities exchange,” said an investment analyst for a listed company.

With full resuscitation of the economy, analysts said the new law would also result in the formation of the bonds market.   

Bernard Mpofu

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