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Wrangle over ZSE ownership

DISAGREEMENTS over who owns the Zimbabwe Stock Exchange (ZSE) are likely to stall the demutualisation of the bourse amid claims full ownership by the stockbrokers.

The ZSE is currently run as a mutual society by stockbrokers through an Act of Parliament. However, Finance minister Tendai Biti has in the past declared that government owns the exchange.

Well-placed sources say that stockbrokers have sought legal opinion over the issue, arguing they hold proprietary rights to the exchange, which translates to ownership. Furthermore, stockbrokers contend they have been paying quarterly fees to the exchange and therefore own the assets of the exchange. 

However, experts say purchasing the proprietary rights does not translate to ownership but gives the brokers the right to use the exchange and make a profit out of it. The stock market is a tax on investors. Furthermore, listed companies pay an annual subscription fee to the exchange which contributes more than 33% of the exchange’s annual income. This in theory entitles them to anything up to a third of the value of the shares. 

Demutualisation of the exchange is at the centre of the current reform initiatives taken by the government surrounding the capital market. Once demutualised, the ZSE becomes fully exposed to market forces like any other business.

The major concern for the stockbrokers is the protection of their interests amid indications that they would require a structure which will adequately compensate them if they give up ownership of the exchange.

Various options have been mooted on how this can be achieved. Firstly by dilution of the ownership into shares, members can choose to retain their shares – in which case they will own a stake in the exchange or they may choose to sell their shares in the market. Irrespective of this, a member’s right to operate as a trader in the exchange is managed by separate criteria. It would no longer be necessary for a trader to become a member of an exchange to be able to operate as a trader/broker.

Analysts say that it is a question of agreeing at which level they will value the exchange and if government will inject further capital to dilute the current value of the exchange. The net asset value based on December 31, 2011 was at US$2,2 million.

Globally, the first stock exchange to demutualise was the Stockholm stock exchange in 1993. Today, all major stock exchanges around the world such as exchanges in India, Malaysia, Hong Kong, Singapore, Japan, Germany, Australia, USA and UK operate as demutualised exchanges.

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