SECURITIES Commission of Zimbabwe (SECz) is spearheading wholesale reform of the country’s capital markets and encouraging players and key stakeholders to support the process, SECz CEO. Tafadzwa Chinamo has said. Presenting a discussion paper titled Pension Funds and Capital Market Development, at the Zimbabwe Association of Pension Funds’ (ZAPF) annual congress in Victoria Falls last month. Chinamo implored Zimbabwe’s pension funds sector to take the lead in capital market reforms, which he said were inevitable.
Chinamo challenged pension funds and trustees to play an active role as shareholders in investee companies rather than taking the back seat and watching their companies being mismanaged.
He urged them to question some of the decisions and resolutions passed by management and boards of investee companies saying these decisions have not always been in the best interests of shareholders, especially pension’s funds, who are viewed in
most companies as passive shareholders.
“We have trustees sitting in AGMs and EGMs approving resolutions that are not in their own interest. For example we have companies coming forward with share buybacks and share option schemes that dilute or lose value for pension funds (shareholders) but these corporate actions are approved without due consideration. We also have companies coming to shareholders repeatedly for rights issues without accounting for the monies raised in previous rights issues.”
Chinamo said reforms in the Capital Markets were now overdue and after the adoption of the multicurrency system in 2009, investors were disappointed with the US$ share prices. This, he said, had also led to a noticeable reduction in participation on the market by investors — including pension funds
“Whilst liquidity challenges are apparent in the economy, there is clear failure of the price-discovery mechanisms in Zimbabwe stock markets — no-one can be sure what’s going on,” Chinamo said.
He said what was required was modernisation of the trading systems on the ZSE.
“Online continuous automated trading is now necessary as the traditional call-over system is no longer good enough”, Chinamo said, adding the current open cry system was inefficient and open to abuse.
The SECz boss also said the CSD (Central Securities Depository) would deal with the inefficiencies of the current paper-based system that had killed market integrity. Real time trading would also allow real time clearing and settlement of trades.
The initiatives would provide a high level of investor protection, promote market integrity and investor confidence whilst preventing market manipulation and ensuring transparency in capital markets.
Chinamo said it was unfortunate that sometimes stakeholders viewed SECz as heavy-handed but the SECz mandate includes supporting and facilitating any efforts that are targeted at broadening and deepening capital markets.
He said the current ZSE listing rules needed to be upgraded to emphasise better disclosure in reporting, corporate governance and corporate actions. He said the rules would enable authorities to act promptly on transgressors.
A new set of SECz rules to provide for the regulation of financial services and markets and to ensure the organised, safe, public, fair and efficient operation of markets and to protect the rights and interests of investors would be gazetted before the end of the year.
He said SECz would embark on investor education and public awareness campaigns to explain the effects of dollarisation on the investments markets.
SECz would soon formalise qualification criteria for players — introduce a securities institute with qualifications and status similar to IOBZ, Icaz. SECz would also introduce financial literacy programmes in schools to get ordinary people to appreciate money and investments, said Chinamo.