THE Zimbabwe Stock Exchange (ZSE) has effectively completed its demutualisation exercise after it held its first meeting as a private company last Friday. However, it reported a US$1,1 million loss for the full year to December 2015 compared to a profit of US$300 000 in prior comparative period owing to weak trades.
The weakening of share prices across the board resulted in a significant drop in market capitalisation of 28,98% from US$4,327 billion recorded on December 31 2014 to US$3,073 billion recorded on 31 December 2015.
According to minutes of the ZSE annual general meeting (AGM) held last Friday, the ZSE fears a gloomy outlook.
“The decline in market turnover had a significant impact on the profitability which declined from a surplus of US$0,338 million in 2014 to a deficit of US$1,101 million incurred during the financial year ending December 31 2015,” reads minutes of the AGM.
“The board took a decision to fair value the investment in Chengetedzai Depository Company (Private) Limited and this resulted in an impairment charge of US$0,381 million to the profit or loss. Expenditure related to the implementation of the ATS, property development and once-off costs had a further negative impact on the performance of the Exchange.”
The local bourse said during 2016, it will seek partnerships with major data vendors such as Bloomberg and Thompson Reuters to ensure that its market data is easily accessible to investors worldwide.
“The ZSE is mindful of the high market charges that make it less competitive than other regional exchanges. ZSE will continue to lobby the government in order to have the charges reduced or associated taxes removed altogether in order to stimulate trading,” read the minutes.
“In pursuance of the demutualisation process, a new company, the Zimbabwe Stock Exchange Limited was registered under the Companies Act (Chapter 24:03) on December 31 2014. The functions and operations of the new company will remain the same as that of a Stock Exchange regulated under the Securities and Exchange Act (Chapter 24:25). The Companies Act (Chapter 24:03) will provide the governance framework, capital structure and financial reporting requirements and obligations.”
The ZSE, one of the oldest exchanges on the continent, was before the demutualisation exercise, controlled by stockbrokers through a mutual society. The exchange has also changed its name to Zimbabwe Stock Exchange Ltd.
Stockbrokers and government will in the interim own 68% and 32% respectively. The equity stakes will later be halved to 34% and 16% respectively to attract new investors. The remaining 50% equity stake will be shared among private financial institutions and individuals.
“It is anticipated that the operating environment will remain challenging and this calls for innovative business processes and solutions.
At the macro-economic level, the foreign debt arrears clearance strategy being spearheaded by the Ministry of Finance and Economic Development is anticipated to unlock fresh funding and encourage foreign direct investment,” the minutes read.