THE Zimbabwe Stock Exchange (ZSE) has asked government to back down on indigenisation regulations compelling foreign-owned companies that include listed concerns to dispose of a controlling interest to cash-strapped local investors.
This comes after the ZSE — an erstwhile vehicle for mobilising national savings from surplus sectors of the economy and foreign investors to finance the country’s economic development — shed significant volumes after empowerment regulations came into force early this year.
Informed sources said equities market players on Tuesday advised Youth Development, Indigenisation and Economic Empowerment minister Saviour Kasukuwere to spare publicly-owned companies from the controversial empowerment regulations. The exchange, however, said government should review the exemptions periodically to avoid abuse by listed companies. Kasukuwere declined to comment on the issue.
Tuesday’s meeting came on the back of a prolonged retreat of the exchange that saw the industrial and mining indices plummeting because of the regulations that came into force in March.
Kasukuwere on Wednesday declined to comment on the meeting.
“The ZSE approached minister Kasukuwere proposing that the exchange be spared from the indigenisation law,” said a source. “Market players are also pushing government to privatise parastatals through listings on the exchange.”
The move to wean off most loss-making government entities was put on ice after the state became sceptical that most of these companies would be sold for a song. The ZSE, according to sources, advised Kasukuwere and Finance minister Tendai Biti to embark on broad-based empowerment programmes by privatising financially-beleaguered parastatals that include power utility Zesa, the Grain Marketing Board, National Railways of Zimbabwe, unreliable public transporter Zupco, national carrier Air Zimbabwe, Zimbabwe Iron and Steel Company, Minerals Marketing Corporation of Zimbabwe and telecommunications companies.
“A properly functioning and active exchange plays a major role in mobilising national savings and hence capital for the economy and it is of paramount importance to note that any policies that affect the functioning of the exchange can only hinder the development of the economy in general,” the source said.
Biti, during his Mid-Year Fiscal Policy Review blamed the empowerment regulations for scaring away foreign investors’ contribution to market turnover which dropped to a monthly average of 20% from 50%.
“The poor performance is as a result of investors pulling out their investments reflecting depressed investors’ sentiment over perceived financial risks, especially following gazetting of the Indigenisation Regulations on March 1,” Biti said.
The proposed measures, according to the source, also seek an upward revision of the aggregate threshold for foreign investors’ interests in listed companies. Should the proposals get approval, foreign investors who before the empowerment regulations were actively involved on the exchange would be allowed to own 49% shareholding in listed companies, contrary to the mandatory 40% threshold currently in place.
The ZSE, the source said, is also pushing for a policy that makes it mandatory for telecommunication and mining companies to list on the exchange. Currently ZSE blue chip stock Econet is the only listed company while rival companies Telecel and government owned NetOne remain tight-lipped on going public.
With liquidity problems still affecting the exchange, the ZSE said promoting dual listings could be used to improve market activity and money exchanging hands on the market.
“The Zimbabwe Stock Exchange is yet to fully realise its potential in moblising and allocating resources for the country’s economic development. The potential in moblising and allocating resources for the country’s economic development.
This potential can only be realised through sound and sustainable macroeconomic policies, enabling legislation that support investment, sound infrastructure and a business-friendly economic environment.”
Since dollarisation last year, nine companies raised funds on the market through rights issues and private placements for working capital, while banks used the funds to comply with prescribed capital levels.