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Another rough year for the ZSE

FOR the Zimbabwe Stock Exchange (ZSE), 2020 represented one of the worst years since its dramatic closure in 2008, which saw trading being suspended for three months until February 2009.

SHAME MAKOSHORI

The ZSE’s fungible titans were among the casualties of a terrifying crackdown on business by authorities, which dampened investor confidence and wiped $240 billion in potential revenue.

But the brief closure in June only amplified an already difficult crisis for the bourse.

Many firms had already embarked on plans to de-list and go private, saying it was no longer viable to maintain a listing.

Again, that was bad for a stock market that had been hit by a listing drought stretching over a decade, which triggered questions about the relevance of the ZSE in a rapidly shifting market place.

The latest blow hit the bourse in October, when electrical goods dealer, Powerspeed, marked the start of the fourth quarter with an announcement that it was delisting after 22 years of trading.

Like many of its peers who had pursued the delisting route, Poewerspeed was jolted into taking swift action after realising that its stock was trading at a heavy discount due to Zimbabwe’s prolonged liquidity crunch.

A formal proposal has been put before shareholders by the Powerspeed board seeking a delisting.

But for many analysts, the proposal is as good as approved because the shareholders are well briefed about the vexing economic terrain in Zimbabwe, which has been compounded by the growth inhibiting Covid-19 scourge.

“It is very clear that the current environment discourages firms from listing,” says Tapiwa Sibanda, head of research at Trade Winds.

“Once boards in any of the listed firms come up with plans to leave the bourse, directors are likely to agree because there is very little benefit being gained from maintaining listings. But the costs associated with listing are now considerable,” he says.

Powespeed’s move placed the ZSE on course for a dismal year of delistings as scarce liquidity undermined its efforts to compete with regional rivals like the Johannesburg Securities Exchange, and the Namibia Stock Exchange.

Apart from Powerspeed, five companies have dropped off the ZSE this year, or are in the process of doing so, according to several statements released by the Zimbabwean bourse.

This means 2020 will be one of the toughest years on Harare’s main capital market, which was closed by authorities in June, facing accusations of precipitating an inflationary surge.

That closure, the second since 2008, left three of the ZSE’s heavyweight counters bruised after being asked to delist and seek listings on the newly established Victoria Falls Stock Exchange, which began trading in October.

SeedCo International, Old Mutual and PPC were the centre of attraction following the decision that was pushed by the ruling Zanu Pf party, in an unprecedented move.

Gold miner Falcon Gold has left the bourse citing low trading, while ZimRe Property Investments has followed suit.

Dawn Properties is on its way out.

After many months of hype, SeedCo is the only firm to agree to list in Victoria Falls.

Its peers are still weighing their options.

Analysts say this highlights how appetite has generally been low for listing on Zimbabwean exchanges.

The recent wave of delistings is a continuation of a trend that started in 2011, when big counters like TA Holdings Limited, a conglomerate and CAPS Holdings Limited, Apex Corporation Limited, Tractive Power Holdings, Gulliver Consolidated Limited, Steelnet Limited and Lifestyle Holdings Limited, Cambria, Chemco, Interfin Holdings, ABC Holdings, Cairns Holdings and Trust Holdings Limited went the same way.

Delistings were precipitated by falling production, a shortfall in power supplies, a frail banking system and the ruthless liquidity crunch.

Researchers at Morgan&Co had predicted that the delistings were a sure case of the Victoria Falls Stock Exchange “cannibalising” the ZSE.

But as it has turned out, they were far off the mark.

“Is there any strategic logic for an issuer to list on the ZSE only to raise capital in Zim dollars?”  Morgan&Co queried in a paper titled Economics and Market Intelligent Report, October 7, 2020.

“We are witnessing a wave of voluntary delistings from the ZSE for various reasons. Falgold has scheduled an extraordinary general meeting where it will seek shareholder approval to terminate its ZSE listing. Boundary Investments, a wholly-owned subsidiary of New Dawn Mining Corp. will make a cash offer of 13c per share to minority shareholders. Dawn Properties is also set to delist from the bourse after African Sun Limited made an offer to acquire 100 percent shares in the company in a deal that will see it assume ownership of the firm’s key assets,” said Morgan&Co.

In October, all major indices posted losses, with the All Share, Top 10 and Mining Indices declining by 10%, 14% and 8% respectively.

The All Share index opened the month of October in the red at 1 476,41 points after easing 0,46 points (0,03%).

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