THE Zimbabwe Stock Exchange (ZSE) recently appointed Justin Bgoni (pictured) as chief executive. He comes in at a time of uncertainty in the market which has had an adverse effect on the local bourse. Zimbabwe Independent business reporter Melody Chikono (MC) spoke to Bgoni (JB) about his vision as well as challenges the ZSE faces, among other issues. Below are excerpts of the interview:
MC: You had a certain image about the ZSE before you got this post. Kindly share with us the prospects you have for the ZSE.
JB: First I would like to thank the board of ZSE led by the chairperson, Caroline Sandura, for giving me this opportunity.
There are three areas that I will focus on:
l The first one is getting our fundamentals right as a company and exchange. This is to make sure that our processes and systems are efficient and effective. I have learnt that it is not enough to put effort in big things only, but also small things such as look, feel and convenience of a service;
l The second one is improve relationships with our stakeholders. This is both internal between staff, management and the board and also external with our listed companies and market participants. Of course, one important relationship is with our regulator SecZim (Securities and Exchange Commission of Zimbabwe) and I have already started dialogue with Tafadzwa Chinamo on this, and he has been most forthcoming. We have to make sure that these relationships are based on integrity, accountability and transparency; and
l The last but most important is to increase growth of the exchange, and propel the role of the exchange in the economy. There are three ways we are going to do this. The first one is diversifying our investor base, especially by encouraging retail investors. Second, increasing the pool of securities and associated financial products such as exchange-traded funds, real estate investment trusts, derivatives and new listings to the market. Third, is to invest in the creation of an enabling market environment, such as improving trading technology, introducing short-selling and securities lending and borrowing.
I am aware that these will take time to get them done and will involve working closely with all stakeholders. I, however, believe that if we get it right, it will create a virtuous cycle of growth.
MC: The bourse has taken an interesting twist following the Monetary Policy Statement (MPS) announcement on February 20. We have been seeing price corrections taking place. What do you think is going to be the long-term effect of the MPS on the bourse?
JB: The long-term effect is that people will invest on the stock exchange on fundamentals. It is always better to think long term in terms of investing on the stock exchange. My understanding is that if you take investment on ZSE over, say, 10 years in US dollar terms, then you got a healthy return after taking the correction into consideration.
MC: Do you think the ZSE will become less attractive to foreign investors outside the bourse due to the MPS announcement?
JB: There is no doubt the MPS brought confusion and uncertainty to foreign investors. We are fielding a lot of questions on this. According to foreign investors, it is difficult to explain or comprehend how you get from US dollar-denominated exchange one day to RTGS-denominated the next day without any translation. We have to explain that this was in line with the MPS and also that the market has already factored this hence no big changes after the MPS announcement.
The important thing, however, to make the ZSE attractive to foreigners, is to resolve the issue of repatriation of capital and dividends to foreign investors. We need to make this process simple and predictable and it has to happen. We are beginning to be seen as a “black hole” at the moment and if this continues, we will be shunned. It is an issue that I intend to raise with the RBZ.
We also need to come up with creative solutions to preserve the value of the locked in funds, while we sort the issue of repatriation. I know that some stockbrokers have done some thinking on this and hope we can work with them to put something in place.
MC: The ZSE has been a haven for investors when there are big shocks on the market. Do you think that will scare away foreign investors from participating on the ZSE following the MPS?
JB: As I said above, in the long term, we want people to invest on fundamentals. As the market corrects, the shares will get more attractive to both foreign and local investors on a fundamental basis. In addition, when the economy improves, the performance of our listed companies will improve, making the stock market even more attractive.
MC: Last year, there was an incident where a Singapore-based company, Infotech, which was supposed to improve on the bourse’s trading system, withdrew its services due to non-payment. How will you ensure this does not happen again?
JB: We are working with Infotech to get better prices from them and maintain a minimum service at all times.
We are also talking to our bankers and RBZ to avail foreign currency and there have been promises in that regard.
We are also improving our ICT processes such as engaging in problem-solving sessions with root cause analysis to make sure that we permanently improve our services.
MC: In October 2017, we heard that the ZSE was awaiting the gazetting of rules on Zimbabwe Enterprising Emerging Markets (ZEEM). Give us an update on the progress, considering that Zimbabwe is a highly formalised economy.
JB: We still are waiting for the gazetting of ZEEM and new listing rules. This is a complex area that needs to be sorted out at the same time as the amendment of the Securities Act.
MC: What is your vision to attracting more listings on the ZSE?
JB: This is an area I am really excited about and our approach is three-pronged:
l The listing of state-owned enterprises is in line with government policy. We really want to engage the government on this so that we are in sync throughout the process;
l We want to educate the market on initial public offerings (IPOs). We are planning to run an IPO masterclass at the end of April 2019 and quarterly on this. In this, we will invite a selected number of companies to a workshop where they can interact with a panel of companies that have successfully listed, advisers, fund managers and brokers so that these company can learn on the benefits, the requirements, processes and practical implications of listing; and
l The last one is to get more debt securities listed. I believe government, both at national and local levels, has a big part to play here to catch up with regional peers such as Botswana and South Africa.
MC: Do you think the ZSE should take an active role in getting de-listed companies back on the bourse?
JB: Yes, we should. First we need to understand why the companies de-listed and what we can do and improve on the reasons why they de-listed. Of course, when a company is now not an attractive investment then there is no reason for them to come back.
MC: Last year saw the launch of C-Trade. How important is this innovation to the expansion of the ZSE?
JB: Innovation is key on the expansion of ZSE. Look, there are many other exchanges that have already taken the path that we are in. We can learn from them and apply their learning to our market. In addition, we need to take advantage of our unique challenges and create solutions such a C-Trade that are a trailblazer for the rest of the continent.
MC: What assistance do you need from the relevant authorities to make the ZSE match international standards?
JB: The most important relationship is with our regulator, SecZim. There is need for co-sharing of a vision to grow this market and maintain its integrity. As I stated before, I have reached out to Tafadzwa on this and he has welcomed with open arms. There is need to co-ordinate amendments to the Securities Act, Companies Act and our listing rules to make sure that they are of international standards and give the market peace of mind. The second is with the RBZ and government on policy. I hate to say this again, but we really need to sort out the issue of repatriation of foreign capital and dividends. If we do not do this we will shut down access to foreign investors at a time when we need it most.
The last is co-ordination between ZSE, SecZim and RBZ on complex transactions. Complex transactions normally involve approval from these three parties, and we need to further streamline our processes so that we come up with a solution that is quick, at low cost and practical to the market.