Archive for the 'Zimbabwe' Category

Runaway gains continue as Zimbabwe Stock Exchange soars

Zimbabwe Stock exchange continues to soar, with gains of 9.3% yesterday (14 September) in its industrial index which closed at 379.95, after climbing 10.3% on 13 September, its biggest one-day gain according to the Herald newspaper. Market capitalization by close of 14 September was US$10.7bn.

The industrial index opened the year at 144.53, so it has more than doubled with 163% gain. The mining index has climbed from 58.51 to close 14 September at 84.65, up 45%. Most of the gain in the industrial index comes in the last 3 months, as shown on African Markets website.

Turnover was $5.2m on 14 September, with foreigners buying $1.5m and selling $4.3m in 162 trades, according to the excellent ZSE website . Meanwhile the Herald newspaper reported turnover on 13 September at $9.0m was one of the highest for the year with foreigners selling $3.5m worth of shares and buying just above $104,000.

Biggest volume on 14 September was in Delta Corporation, which traded $2.0m worth of shares as the price climbed 44 cents (19.9%) to $2.6656 after hitting a year high of $2.6675. On 13 September it had climbed 13% in $2.37m worth of trading, according to the Herald. Barclays Bank traded $1.1m with a price gain of 0.52 cents to close at $0.0852, up 6.5%. Other strong gains were brickmaker Willdale, up 27% in the day to 1 cent ($0.0100) after climbing 58% on 13 September. CBZ Holdings, First Mutual Properties and Nampak Zimbabwe which each scored 20% gain, while Old Mutual was up 19.9%.

Starafricacorproation climbed 14% to close at 2.5 cents ($0.0250) after a reported 67% gain on 13 September, Other top risers on 13 September, according to the Herald, were agribusiness Ariston up 52%, Zimre Property Investment up 37% and hotelier African Sun up 20%.

Seed Co is reportedly seeking to raise $30m and list on a regional exchange. Fast foods retailer Simbisa brands continues to trade under cautionary that it plans to list on the London Stock Exchange AIM board.

A week ago the rally was already in full swing as the ZSE market capitalization reached $8bn and the industrial index hit 286.63. The Herald reported on 11 September “Local investors have been buying into the equity market as a hedge against currency uncertainties and shortages. Most cash-rich Zimbabwean companies and individuals have been failing to access their cash locked in banks due to foreign currency shortages. Business, especially manufacturers and mines, have also been struggling to make foreign payments since the foreign currency shortages intensified at the beginning of 2016. This is the cash that is now being deployed into the stock market, considered a safe haven by many.”

The newspaper reported one investor worried that cash holdings at the banks, even in foreign currency, would not represent fair value “Investors are thus looking at hedging against this loss of value by buying into stocks.”

This web report on Charles Rukuni’s Insider Zim also worries that it is a rerun of 2007: “A stock market running on fumes and not any real fundamentals, a currency crisis and signs of inflation? We have seen this all before. In 2007, just like today, the ZSE became the world’s best performing market. Shares were up close to 600% by mid-year in 2007. Year-on-year, by April 2007, the stock market had risen a massive 12,000%. We now know it was all a deception; it was only going up because investors had nowhere else to put their Zimbabwe dollars, whose worth was evaporating fast. Then, as now, it did not matter that a company was performing badly.”

Update 2 – Zimbabwe Stock Exchange automation successful

The Zimbabwe Stock Exchange (ZSE) started successfully trading on its new automated trading system (ATS) on Monday 6 July and volumes were picking up during the week. This is a long-awaited change as the stock exchange moved away from call over and paper-based systems.
ZSE CEO Alban Chirume and a couple of Zimbabwean stockbrokers confirmed to AfricanCapitalMarketsNews that was working well. Monday had started slowly, as expected, but once orders were being matched successfully and there were no problems, volumes seemed to up on Tuesday and today (8 July). Chirume described it as a “major transformation” for the ZSE, founded in 1896. Stockbrokers were upbeat, saying their clients local and international had been waiting for this.
There was a false start on 3 July, originally announced as the launch day, when the “close coupling” linkage between the ATS and the settlement system gave some teething problems. This was resolved by Monday and the settlement system seemed to be working well after that.
The news comes as a relief to brokers and dealers, who can now trade from their own offices and do not need to spend time travelling to the Zimbabwe Stock Exchange building. Earlier this year the ZSE had moved out of its city-centre office and into its own premises.
Chirume said the ZSE staff were cheering as the first trade went through.
The ATS is supplied by InfoTech Middle East LLC and the settlement is run by Chengetedzai Depository Company Ltd, which is using Depo/X system supplied by CMA Small Systems from Sweden to run the central securities depository (CSD). The only securities which can now be traded are those which have been dematerialized, which means that paper share certificates have been replaced by dematerialized entries on the CSD computer. However, all the ZSE shares are now dematerialized apart from Border, which is under judicial management.

UPDATE – Zimbabwe Stock Exchange delays automated trading

According to an announcement today, 3 July, the Zimbabwe Stock Exchange says it did not launch electronic trading today as planned and the launch has been delayed indefinitely. The ZSE says: “Erring on the side of caution, it was decided to resolve a technical issue to ensure a seamless completion of the settlement processes. Further updates on ‘go live’ will be issued by the ZSE in due course.”
The ZSE has been trading securities using “callover” sessions since 1896 and had announced yesterday it was ready to launch online trading today through a new automated trading system (“ATS”) installed by InfoTech. It says it had opted for a close coupling model between the ATS as the front end of the trading cycle and the central securities depository (“CSD”), which has a mandate for settlement of both scrip and cash.

Zimbabwe Stock Exchange launches electronic trading 3 July

Electronic share trading is due to go live today, 3 July, at the Zimbabwe Stock Exchange (ZSE) with new trading hours for the exchange. According to an announcement yesterday all registered stockbrokers meet the requirements and will be able to provide uninterrupted services and the new platform trades only the securities that are dematerialized at the central securities depository (CSD) Chengetedzai Depository Company.

The new automated trading system (ATS) has been supplied by InfoTech, an IT firm headquartered in Singapore with offices in Pakistan, United Arab Emirates and Ghana. It replaces the call-over through which stockbrokers traded shares in Zimbabwe since the bourse was established in 1896 including stockbrokers gathering in a room once or twice a day to discuss trades on a list of securities.

According to the ZSE announcement: “The new electronic platform enables participants to conduct their business from various locations by accessing the ZSE through the Internet. The ATS operates on agreed rules which are in-built in the system and therefore guarantees adherence to price and time priority principles in the interest of market fairness and transparency”.
zimbabwese50502_tradingboard
Newsletter ATS Watch published on 2 July says the ATS hardware was installed in May 2015 including servers and disaster recovery servers. It has “close coupling” links to the CSD: “Given the need to ensure real time exchange of information, the ZSE opted for close coupling and the vendors of both the CSD and the ATS worked for at least six months to ensure that the interface for close coupling was provided.”

Training ran from 8-26 June, led by Ejaz Anwar (Project Leader), Dilshard Ahmad and Muhammad Asghar from InfoTech. Martin Matanda, Operations Executive of the ZSE, is also the project manager leading a team of consultants and IT staff. Training was given to staff of ZSE, the Securities and Exchange Commission of Zimbabwe and the CSD and there was separate training for all other market participants, mainly stockbrokers. Trainees learned how to enter orders and generate reports. Participants also talked to the system vendors and this led to refinements being made to the system to ensure that it is fully customized to the Zimbabwe capital market. Mock trading has also been held.

Other key changes in trading include:
1. New trading times (local time): Monday to Friday (except public holidays)
Continuous Session – 10:00 am to 12:30pm; Market closes – 12:30pm
2. Continuous trading during open sessions, which means multiple prices could be established and traders will have more flexibility
3. The ATS can only trade dematerialized securities that are loaded at the CSD via Chnegtedzai’s Depo/X facilities
4. Algorithms will discover the prices, so that an order can be filled at different prices depending on the book
5. Circuit breakers on price with lower and upper price limits (percentage) for each counter on the ATS, based on the previous closing price. These limits can be set for all counters or for each counter
6. Real-time data throughout the “open” phase, accessible to market participants and other stakeholders for a fee

New listing
Manufacturing and construction Masimba Holdings on 8 June separately listed its plastics manufacturing subsidiary, Proplastics, on the ZSE through a dividend-in-specie, according to a news report. It is the second listing on the ZSE in 5 years after Padenga Holdings which also listed through a dividend-in-specie following its unbundling from Innscor Africa in 2010. The last initial public offering (IPO) of shares was Zeco Holdings in 2007.

The latest listing of 60,000 shares at 3c follows a successful restructuring exercise by listed Masimba that resulted in the group unbundling the plastics manufacturing from the construction business. The aim is for both entities to attract capital and strategically position themselves in line with their core business, to unlock shareholder value and Proplastics focus on it business.

Woes of Zimbabwe Stock Exchange

($ refers to USD)

The value of shares traded on the recently demutualized Zimbabwe Stock Exchange fell by 22.2% in the first quarter of 2015, compared to the same quarter last year. A story from The Herald newspaper said that turnover to 31 March was $70 million, down from $90 million in the first quarter of 2014. However, the volume of shares traded was up to 586 million from last year’s 306 million for the period.
Trading in January was $16m (down from $63m in 2014), in February $35m ($26m) and in March $19m ($27m). The share bought by foreigners was down to $41m ($64m) over the quarter.

Zimbabwe Stock Exchange liquidity to 30 April (source ZSE website)

Zimbabwe Stock Exchange liquidity to 30 April (source ZSE website)

Meanwhile the exchange seems to be hit by a series of controversies and several companies have delisted, or removed their shares from trading.
The exchange in March was reported in the Herald newspaper that “go-live” date would be 19 June for its new automated trading system, Capizar ATS trading software from Infotech Middle East FZ, part of Infotech Group of Pakistan. This was in terms of a contract signed in March 2014, as reported here last September. However there has been little news of progress and the project missed previous deadlines, including for February.
There has also been criticism of the ZSE’s relocation to Ballantyne Park, a suburb 8.5km from the central business district effective 1 April before the automated trading system was ready. The new office has a smaller trading area. The Herald newspaper reported that parliamentarians and lobby groups had protested and Chairman of the Parliamentary Portfolio Committee on Budget and Finance David Chapfika said that relocating the exchange to Ballantyne Park will mean that small players will be excluded. ZSE interim chairperson Mrs Eve Gadzikwa said the move was necessary because of high rentals.

SECZ investigates ZSE CEO
In February the Herald newspaper reported that the Securities and Exchanges Commission of Zimbabwe (SECZ) was investigating ZSE CEO Alban Chirume after complaints over the suspension of Meikles (see below). He is said to have acted unprocedurally when he suspended Meikles and then unprofessionally when the decision was reversed. There were also complaints after he placed a notice in a newspaper urging investors to exercise caution when dealing with the shares.
If SECZ finds against him, he could be suspended or fired, according to the Herald report. Past CEO Emmanuel Munyukwi, who had been in post for many years, was suspended after an SECZ investigation and subsequently left the ZSE “on mutual agreement”.
According to the Herald: “Away from the Meikles issue, Mr Chirume has faced criticism over the purchase of a residential building in Ballantyne Park, the overshooting of the budget in the purchase of a vehicle and the numerous instances he has undermined the ZSE board and stockbrokers.”
An amendment in 2013 to Zimbabwe’s Securities Act gives the SECZ the power to dissolve the board of a registered securities exchange or dismiss one or more of its members, but only on certain grounds, and subject to appeal. If it dissolves a whole board it can appoint someone to run the exchange but only until a new board is elected in accordance with the articles of association, which should be within 3 months.

Delistings
Paint and chemical products manufacturer, Astra Industries, was the latest to leave at the close of business on 30 April after majority shareholders Kansai Plascon Africa (listed in Tokyo) and Hermistar investment vehicle for Astra management and staff increased their combined holding to 80.2%, breaching the rule of 30% free float, and applied to the ZSE to leave. Regional manufacturer ART Corporation may follow after buying out minorities.
Other recent delistings include TA Holdings and ABC Holdings in February. According to an article in Financial Gazette, 16 companies have delisted since 2007 when the hard currency (USD) economy was adopted – 8 of these chose to delist, and 8 were insolvent. Such is the turmoil in the Zimbabwe economy that many other companies are probably insolvent but it has not been announced yet as local manufacturers with high hard-currency costs and ancient machines cannot compete with imported goods. Meanwhile, another 4 companies are suspended: PG Industries, Cottco (formerly AICO Holdings), Phoenix and Celsy.
The article warns that more delistings are due this year, including Meikles (see below), Dawn Properties, African Sun. It says that companies do not see the benefit in being listed (see bottom of article). They cannot raise money successfully on the bourse due to the liquidity squeeze and shares being listed at a small fraction of their true value, unless money comes from foreign investors, who usually prefer to buy out minorities and delist. The peak had been over 80 listings.
The only new listing was in 2010 when Innscor Africa’s unbundled Padenga Securities and listed it through dividend in specie. The ZSE did particularly better than most parts of the economy during the years of hyperinflation as desperate investors turned to properties, equities or foreign currencies. It slowed dramatically after allowing trading in foreign currencies.
Creating a second-tier exchange for small companies is unlikely to have an overall positive effect on liquidity or the market.

Meikles row
A leading hotel group, Meikles Limited, is suing the ZSE for $50m in damages and is also warning that it may not remain listed. According to a Reuters report in March, Meikles filed papers on 26 February at the High Court, after its shares were suspended from trading for a week in February and then allowed again from 23 February. Meikles said its share price had fallen and its reputation suffered and it is seeking compensation for “potentially irreparable” consequences of its suspension. The ZSE also issued a warning that people should use caution when trading the shares.
Meikles also operates retail including supermarket chain TM Supermarkets (South Africa’s Pick’n’Pay has 49%), Tanganda Tea, the Victoria Falls Hotel and has a stake in Cape Grace Hotel in Cape Town.

New governance?

Meanwhile ZSE governance could change dramatically after the demutualization was completed recently, as reported last week. Some market participants were said to be surprised when stockbrokers ended up with a 68% majority of the company, after Government took 32%. There had been some suggestions of ownership wrangles.
This could mean that stockbrokers can hold a General Meeting and replace directors or otherwise take action on how the company is managed.

Why the stockmarket does not help business
(quoted from Financial Gazette)
Horticultural concern, Interfresh, which delisted on the last day of trading in 2013, highlighted the problems with being listed.
Chief executive officer, Lishon Chipango, said: “At the moment for us there is not too much (gains from listing). If you look at the contextual framework of the stock market, one of the benefits of being listed is to raise capital, but if you raise capital when the shares are so depressed, you are not going to raise that much. So the issue of benefiting if listed maybe down the road. (I) would not be surprised if others followed (us by delisting).
“The other aspect is there is no money in Zimbabwe. All the capital being raised is external. For us, it is not attractive,” Chipango said.
He then mourned over the discounted rate at which the company’s shares were trading.
“The rights issue to raise the US three million dollars (in 2012) caused a dilution of 75 percent because we used stock market valuations. Now if at that time we had raised money using Net Asset Value instead of stock market valuation, the dilution would have been 15 percent. You see why we are running away from the stock market? We are running away from the stock market valuation,” said Chipango.

zimbabwese50502_tradingboard

Zimbabwe central depository brings shares on board

Chengetedzai Depository Company Ltd, Zimbabwe’s central securities depository (CSD), was reported that the last securities had been brought on board in March 2015, according to a report in Zimbabwe Mail. Old Mutual announced that its shares were also dematerialized with effect from 30 March.
CDCL announced last year that it had received due approvals to start operations and it went live in September 2014 with 3 securities onboard, and had extended that to 43 counters by January 2015.
CDCL had been publishing announcements as new shares are brought on board, and latest additions were Mashonaland Holdings, Old Mutual, Dawn Properties and others. There are some delays in the automation of Zimbabwe Stock Exchange trading system which is supposed to link to the CSD.
A CSD keeps a computerized register of securities ownership and also registers transfers after shares have been bought, sold or otherwise transferred. It replaces paper share certificates for most shareholders, in a process known as “dematerialization”. It links to systems for payment and clearance of trades.
The previous system saw clearing and settlement done between the stockbrokers on a T+7 schedule, Chengetedzai says it reduces settlement this to T+5.
Apparently local retail customers initially found it hard to understand that they must address settlement queries to a custodian, not to their stockbrokers as previously. Campbell Musiwa, Chengetedzai Depository Company chief executive said that CBZ Custodial Services had been set up as an “affordable” custodian for retail customers.
NewsDay reported in January that investors and stockbrokers were still breaking regulations by selling shares before dematerialization is complete. It added that only 1,557 accounts had been opened at Chengetedzai, of which 61% are for foreigners who work through global custodians (usually banks) who then relate to local custodians. Chengetedzai has been criticized for not doing enough to educate local shareholders to switch although it has worked with media and produced pamphlets.
Musiwa said there had been some delays in trade settlements if investors had traded before meeting the requirements but also: “There has been a marked improvement which resulted from continuous lobbying with market players to observe the rules,” he said
In April 2014 Chengetedzai Depository Company Ltd was reported by Standard Newspaper saying it was still waiting for licensing and for the award of a CSD levy by SECZ. Chengetedzai Depository Company won the tender to introduce the CSD in 2009 as reported on AfricanCapitalMarketsNews. After a shareholding dispute, it installed core software for operations that were planned for September 2013 but was held up while waiting for the licence.
In 2013, Chengetedzai raised nearly $2.5m through share issues, according to its annual report, including a successful $1.5m rights issue to finance the roll out of the CSD. The ZSE has invested $643,000 including $287,000 in the rights issue, according to its 2013 annual report, and holds a 15% stake after scaling up from 12.93% in January 2014. Chengetedzai’s 2013 annual report says that “quasi-government financial institutions” owned 56% and private investors 44%. Main shareholders were Infrastructure Development Bank of Zimbabwe, First Transfer Secretaries and ZB Financial Holdings with 15% each and the National Social Security Authority with 13% at 31 Dec 2013.
The software is Depo/X system supplied by CMA Small Systems ab of Sweden.

Zimbabwe SE aims to issue 50% shares following demutualization

The Zimbabwe Stock Exchange completed its demutualization last month (March) and is now a fully fledged private company. It plans to issue up to 50% of its shares to new shareholders, according to reports.
Company registration was completed earlier in the month and Finance Minister Patrick Chinamasa issued share certificates at a ceremony on 26 March. According to a report by Xinhua news, the Minister said demutualization transformed the bourse from a statutory body into a viable public company: “The main crux of demutualization is separating ownership of the exchange from management in line with internationally accepted code of corporate governance. The process will see the exchange being transformed from its current not for profit status to a profit making organization.” Demutualization progress is not mentioned on the ZSE website.

Previous trading floor at the Zimbabwe SE (photo from www.4vf.net)

Previous trading floor at the Zimbabwe SE (photo from www.4vf.net)


The shareholding is now 32% Government and 68% stockbrokers, split equally among the holders of proprietary rights. According to an earlier report in The Herald, ZSE has 48 stockbroker members.
A planned future step is to raise new capital so that the exchange would ultimately be owned 16% by Government, 34% by stockbrokers and 50% by new shareholders.
Demutualization is the process through which an exchange converts from a non-profit mutual association, often a company limited by guarantee, into a for-profit company which follows the usual structure of shareholder ownership. It is meant to result in separation of trading rights, ownership and management. The shareholders are expected to convene a meeting to appoint a board of directors. In terms of usual corporate governance, the ZSE CEO would report to the Board of Directors in terms of performance and meeting objectives. The exchange can also list on its own trading boards and become a public company.
According to The Herald, corporatization is also needed for the ZSE to register as a stock exchange with the Securities and Exchange Commission, as required by the Securities and Exchanges Act.
The demutualization process began last year and in July 2014 a Memorandum of Understanding (MoU) was signed by the Ministry of Finance and Economic Development, the Securities and Exchange Commission, the Zimbabwe Stock Exchange and the Stockbrokers, according to a notice issued last year by SECZim.
Market capitalization was $4.07 billion with 59 companies listed and 37 trades during the course of yesterday (28 April).

History since 1896
The first stock exchange in Zimbabwe opened in Bulawayo in 1896 but only lasted 6 years and other exchanges were set up in Gweru and Mutare, according to the ZSE website. Dealing started again in a new exchange in Bulawayo in 1946 and a second floor was opened in Harare (then Salisbury) in 1951. The ZSE was formed as mutual society by a group of stockbrokers who put capital in return for shares of the exchange (proprietary rights). The exchange was funded through the issue of these proprietary rights. SECZim added last year “and over time non-member institutions also funded the exchange, including the Government which also contributed indirectly by way of corporate tax exemptions”.
The present exchange was created in terms of the ZSE Act which was passed in January 1974, although trading was not interrupted and the change was legal only. A Securities Act of 2004 replaced the ZSE Act and became operational in September 2008. The Securities Commission of Zimbabwe became operational in October 2008 and is regulator, governed by commissioners appointed by the Minister of Finance.
According to the SEC: “The major benefit of demutualization is that it leads to the separation of the ownership, trading rights and management of ZSE, which eliminates the conflict of interest between exchange and broker members. If successfully implemented, demutualization should indeed lead to sustainable governance of the exchange premised on transparent, independent and efficient decision making for the benefit of all stakeholders, particularly investors.”

Zimbabwe Stock Exchange new premises

Zimbabwe Stock Exchange (www.zimbabwe-stock-exchange.com) moved to its new premises 44 Ridgeway North Highlands, Harare on 1 April. It owns its new office, which is near Borrowdale Race Course and some 8.5km from its previous rented city-centre office which was at 4th Floor, 101 Union Avenue Building, Kwame Nkrumah Avenue,
It kept a minimum staff at the old office until 30 April. In a notice on 24 March 2015, the exchange said there would be no interruption in terms of the services offered. The exchange has new telephone numbers: +263-4-886830-8.
How did the move affect participants in the market? Please add your observations below.

Zimbabwe stock exchange moving to electronic trading and CSD

Electronic trading is coming to the Zimbabwe Stock Exchange in terms of a contract signed recently with InfoTech Group of Pakistan. Meanwhile the central depository Chengetedzai Depository Company Ltd said that 3 listed companies – CBZ Holdings, Cottco Holdings and FBC Holdings – would be moved onto electronic registers from 8 September, according to local media reports.

The InfoTech Capizar software is also installed at Ghana Stock Exchange since 2008.

According to reports in the Pakistan Observer and The Nation in June, the contract with ZSE is a turnkey deployment of the automated trading system (ATS). According to a press statement by the ZSE in March, the contract was signed on 19 Mar for for the supply and installation of the Capizar ATS product by Infotech Middle East FZ LLC.

Trading floor at the Zimbabwe SE (photo from www.4vf.net)

Trading floor at the Zimbabwe SE (photo from www.4vf.net)

The agreement was signed between Alban Chirume, CEO of the ZSE, and Naseer A Akhtar, CEO & Chairman of InfoTech Group, assisted by Murad Baig, VP Business Development at IFTL-London. According to the reports, the project was expected to start soon and to be finished within 6 months (by December). The ATS replaces the current manual trading system, which uses MS Excel and other packages to create and publish data, which the new system also does.

The ZSE statement in March adds: “On 31 Jul 2013 we announced the appointment of Central Depository Settlement Company of Mauritius (CDSM Ltd) as our consultant to the automation project. The consultants have since successfully guided us through the tender and vendor selection processes.

“The immediate next steps are the study of the local environment, and the gap analysis to be carried out by the Vendor in order for us to finalise the project plans. These limited activities will be followed by the procurement of computer hardware and construction of the data centre itself. We are expecting that in 3 to 4 months’ time, the project will be in the training and acceptance testing stages with the final live date being our target within a period of 6 months from now.”

CSD going live

Chengetedzai was approved by the Securities and Exchange Commission of Zimbabwe to run a CSD, after winning a competitive tender on 27 Dec 2010. According to a recent news report in The Herald and the Chronicle newspapers, its market update statement said: “Chengetedzai Depository Company Limited would like to advise all capital markets players, issuers of securities and the investing public that the necessary regulatory approvals to commence the Central Securities Depository (CSD) operations has been granted.

“In this regard, CDCL is ready to commence the opening of investor accounts and dematerialisation (migration from paper based title to electronic securities) of approved securities, in preparation for the trading of electronic based securities.” The company urged the investing public to open securities accounts through registered custodians, who include banks, from 25 August and deposit their securities in the accounts.

According to its website, Chengetedzai won the tender in which two bidders were invited to submit proposals after an initial expression of interest round in Apr 2010. This is in terms of the Securities Act 17/2004, which established the legal basis for the Securities Commission, its mandate and the establishment of a central securities depository (CSD) to maintain securities deposits in electronic form. The SECZ was only established in 2008 and the commissioners immediately embarked on setting up a CSD.

The Ministry of Finance put a hold on the project in Feb 2011 and announced in Aug: “The CSD project was deemed by Government to be of national interest and thus Government would take 51% shareholding in Chengetedzai and that only one CSD to be set up in the country. The ZSE would also be included as a shareholder in Chengetedzai. Then followed protracted negotiations between Chengetedzai to value the “sweat equity” and this was settled on 13 June 2012 by Government and SECZ, and the Shareholders’ Agreement was signed on 26 Jun 2012, after which a new board of directors began.

According to the CDCL report: “The first task was to confirm the software to support the CSD operations and a system selection process was kicked off immediately. After visits to South Africa, India and Moscow, the decision was made to select the Depo/X system supplied by CMA Small Systems from Sweden. The purchase and implementation contracts were signed in March 2013 and in April 2013 the implementation of the project started, exactly fourteen months after the tender was awarded.”

Check this amazing profile in Daily News of 23-year-old Samuelle Dimairho who has been dreaming of transforming the ZSE (and trading on it) since he was 15 and is the driving force behind Chengetedzai.

Background on the ATS

The Africa Report magazine wrote in Jan that the contract is expected to cost $2 million and says daily turnover on the exchange was currently $1.5m on average and there were 68 listed companies, down from a peak of 83. According to the report: “Apart from enabling longer trading hours, the ATS would reduce the fraudulent sale of non-existent stocks. The automation of the bourse has been on the agenda since 2000 although plans have stalled due to liquidity constraints. However, as the new system comes on board, more companies are set to delist this year due to the harsh economic environment obtaining in the country.” It cites Chirume saying: “Tentatively, there are companies which have already shown that they might merge and there is a possibility of some de-listings.” He believed that the de-listings would not have any implications on the bourse as some of the affected counters were not trading.

According to the ZSE press release in Jan, 11 vendors expressed interest, and 4 submitted full responses. They were:
1. A consortium of local vendors led by Chartered Systems Integration in partnership with CMA Small Systems of Sweden.
2. A consortium of Infotech Middle East FZ-LLC and local suppliers.
1. National Stock Exchange of India in partnership with Valentine software of Zimbabwe.
2. New York Stock Exchange Euronext Technologies.

“The initial valuation of all bids submitted narrowed down the competing vendors to a short list of 2 – CIS/ CMA Small systems and Infotech Middle East. During the last week of November the shortlisted 2 vendors were given the opportunity to give oral presentations and demos to support their bids. The CSI /CMA Small Systems consortium was however unable to participate in the demo exercises due to other circumstances beyond their control. Additional due diligence measures were taken during the month of December and as a result of the report outcome of these efforts the Board of the Zimbabwe Stock Exchange has approved the engagement of Infotech Middle East FZ-LLC subject to a successful contract negotiations.”

Top performances for USD investors at Africa’s stock exchanges

Malawi came out as Africa’s top-performing securities exchange for USD-based investors over 2013, with a strong 62.4% return over the year to 31 December. According to data published by the excellent website, www.investinginafrica.net, 8 out of 13 African exchanges surveyed beat the 29.6% return achieved by the key US S&P 500 equity index.
Other top performers for USD investors included West Africa’s regional securities exchange Bourse Régionale des Valeurs Mobilières (BRVM) which covers 8 countries. Ghana Stock Exchange gave 44.8% return, the Nigerian Stock Exchange was close behind with 44.6% and Kenya’s Nairobi Securities Exchange scored 43.7%.
Worst performers were the Namibian Stock Exchange (-2.6%) and the South Africa’s Johannesburg Stock Exchange (JSE) with a return of -9.3%, both strongly affected by the decline in the exchange rate of ZAR currency against USD.
Prospects for African exchanges continue to look good with many African economies expected to continue strong growth in coming years and increasing deal interest. However, changes in quantitative easing in the US could lead to cash withdrawals from emerging and frontier markets including Africa.
Liquidity is a major challenge for many exchanges, according to the data by Ryan Hoover of InvestinginAfrica. Zambia’s Lusaka stock exchange only traded $0.7million of African equities a week, while Malawi and Uganda only achieved $0.8m each and Namibia $1m. Ghana was at $3.5m a week, just behind Abidjan-based BRVM which traded $4.6m, while Mauritius managed $5.7m a week, Botswana $6.2m and the Zimbabwe Stock Exchange $8.5m. Most liquid exchanges in the list (which does not include the Egyptian Exchange) include Nairobi averaging $37.1m a week, Nigeria at $106.8m and the JSE at $3.5 billion of equity trading a week.
Although Hoover lists the Dar es Salaam SE as trading a creditable $10.7m a week, a news report in the Tanzania Daily News say turnover jumped 5 fold to TZS252.3bn ($155.9m) in 2013, up from TZS50.9bn in 2012, which is equivalent to $3m a week. The paper quotes DSE’s CEO Moremi Marwa saying: “The DSE outstanding performance demonstrates the increased activities coupled with education campaigns geared at enhancing awareness that gradually made the market more vibrant”. However, the article notes there was a single transaction for TZS78.5bn ($48.5m) in Tanzania Breweries (TBL) in the third week of December 2013 as 48 deals between the International Finance Corporation and local investors which boosted local ownership and may have influenced the figures.

For the full table, check www.investinginafrica.net here: