African Capital Markets News » Zimbabwe

Zimbabwe Stock Exchange fails to attract investors

Tom Minney — Mon, 26 Jul 2010 20:26:11 +0000

“Currently our capitalisation is just above US$3 billion and is falling, but if we attract big companies to list, especially in the mining and banking sectors, we can grow the size of the market up to levels of US$10 billion.” These brave words come from the new chair of the management committee of the Zimbabwe Stock Exchange (www.zse.co.zw), Ndodana Mguquka.
He added, according to a report in the Zimbabwe Independent newspaper (www.theindependent.co.zw): “As the new executive committee, we are looking forward to reviving the ZSE. At the moment there are a lot of issues that need to be sorted out, particularly the quality of our listings. We need to improve the quality of our listings to attract foreign and local investment.”
On 14 July, Finance Minister Tendai Biti had given a good summary of the ZSE’s woes in his 2010 Mid-Term Fiscal Policy Review (www.zimtreasury.org) to Parliament. He said: “Trading on the Zimbabwe Stock Exchange has largely been low, mainly due to market illiquidity in the first half of the year. Foreign participation has remained subdued with investments mainly confined to portfolio restructurings. Corporate results have also failed to uplift the equity market as most corporate are still undercapitalised and also suffering from subdued demand.”
He said that on average takeup of recapitalization rights issues had only been 50%, and underwriters had taken the balance.
“The industrial index which started the year at a high of 156.52 had dropped to 127.46 by June 2010, whilst the mining index fell from an opening of 209.8 to 143.08. Similarly, market capitalisation fell from US$3.97 billion in January 2010 to US$3.19 billion by end of June 2010. The poor performance is as a result of investors pulling out their investments reflecting depressed investors’ sentiment over perceived financial risks, especially following gazetting of the Indigenisation Regulations on March 1.
“In particular, foreign investors’ contribution to market turnover fell from between 40-50% to an average 20% per month.”
Mr Mguquka is the Managing Director of New Africa Securities. The management committee manages and controls the ZSE, settles disputes between members, examines all applications for listing securities for trading on the exchange, and enforces listing requirements with powers to grant, review, suspend or terminate listings so that securities would no longer be tradeable on the bourse. He took over from Bart Mswaka of Renaissance Securities who remains as his deputy.

Imara Holdings on expansion path

Tom Minney — Fri, 05 Mar 2010 05:48:56 +0000

Imara Holdings Ltd (www.imaraholdings.com), an investment banking and asset management group with operations in 10 countries mostly in southern Africa, aims to expand in Zimbabwe, according to Zimbabwe’s Herald newspaper. It is currently listed on the Venture Capital Market board of the Botswana Stock Exchange (www.bse.co.bw) and the Herald reports that it wants to buy the rest of the shares in Zimbabwe’s Imara Capital Zimbabwe (Pvt.) Ltd (www.imaracapital.com), which it owns 32%, and also to dual list on the Zimbabwe Stock Exchange (www.zse.co.zw).
The report says that Imara Holdings has proposed a share deal in which local shareholders and the management will get a shareholding in the parent in return for their shares in the local company. The dual-listing on the bigger exchange could make the shares more liquid and the dollar-based ZSE is attractive to international investors. Imara management reportedly refused to comment, possibly while the transaction is under approval by authorities.
Imara Holdings website does not mention the transaction, although it has been publishing cautionary announcements since 31 July 2009. It describes the group as “medium sized”. It has offices in Botswana, Malawi, South Africa and the UK, and associate offices in Malawi and Zimbabwe as well as working relationships with Stockbrokers Zambia, Namibia Equity Brokers and Mac Capital in Dubai.
According to the Holdings website: “We are independent and privately owned, enabling objective decision-making in the service of our clients. We are active participants in the region’s financial markets and maintain one of the largest research coverage of regional equities. Funds under management exceed US$ 135m and funds under administration exceed US$750m.”
Imara group services fall into three primary operating areas:
• Corporate Finance & Advisory Services
• Institutional and Private Client Asset Management
• Securities Trading
Imara Capital is one of the associates listed in Zimbabwe, others being listed on the website as Imara Edwards Securities (Pvt) Ltd, Imara Asset Management Zimbabwe (Pvt) Ltd and Imara Corporate Finance Zimbabwe (Pvt) Ltd. The Herald report says these are wholly owned by Imara Capital.
On 8 January Imara signed a licence agreement to become the 7th member of Global Alliance Partners (www.globalalliancepartners.com), of which Mac Capital Dubai is already a member. Bernard Pouliot, chairman of GAP and of the Quam Group based in Hong Kong, said Imara joins the alliance at a very opportune time when Chinese interest in Africa is growing: “Imara is good for the alliance and for China. Alongside other members of GAP, we are committed to hit the ground running when an umbrella investment scheme by African countries is developed and eventually implemented.”
The other GAP members are Quam Financial Services Group for Hong Kong and China, Capital Partners Securities for Japan, KT ZMICO for Thailand, Thanh Cong Securities Company for Vietnam, and Westminster of Hudson Securities in USA.
In December, Imara Holdings announced it had recently acquired a majority equity stake in the Botswana stockbroking company Capital Securities (Pty) Ltd., one of 4 licensed stockbrokers on the Botswana Stock Exchange, established in March 1999.
“Shareholders are advised that negotiations relating to a further regional acquisition, which was announced in a Cautionary Announcement published on 31 July 2009 and in subsequent renewal announcements, are still ongoing. Shareholders are therefore urged to continue to exercise caution in their dealings in Imara securities,” says the Botswana announcement published in December.

More activity on Zim SE after trading charges slashed

Tom Minney — Thu, 28 Jan 2010 16:53:58 +0000

There is more trading on the Zimbabwe Stock Exchange after transaction costs were reduced, effective 10 January. Leading stockbroker Securities Africa (www.securitiesafrica.com) quotes Kingdom Financial Holdings (the website is given as www.kingdom.co.zw but wasn’t working when I tried) as saying: “Reflecting the reduction is transaction costs, daily trades shot up to USD 2.8m on 11 January 2010 and USD 2.4m on 12 January 2010 compared to only USD 338,000 recorded on the first trading of 2010 on 4 January 2010 and an average of USD 900,000 during the week ended 10 January 2010.
“The bullish sentiment on the ZSE saw share prices responding positively and this coupled with the increase in turnover explains the rise in the Industrial Index by 4.57% on 12 January 2010 followed by a 4.74% rise on 13 January 2010.”
Trading last week (to 22 January) was more than 435 million shares worth US$6.2 million, according to the Herald newspaper (www.herald.co.zw). The market ended marginally lower with the industrial index down 5% and the mining index 1%. The paper quoted one unnamed stockbroker as saying many investors may start to move into money markets as more stable, and this could see portfolio restructing and lower prices, as well as some potential equity bargains.

Zimbabwe SE seeks to restore IFRS compliance by listed companies

Tom Minney — Sat, 23 Jan 2010 17:49:17 +0000

The Zimbabwe Stock Exchange is seeking to reinforce International Financial Reporting Standards again on its listed companies. Many had stopped using the standards in runaway inflation (which reportedly peaked at over 231 million percent), but the introduction of US dollar-based figures and transactions allows them to reintroduce it.
South Africa’s W. Consulting (www.wconsulting.co.za), in partnership with the Institute of Chartered Accountants of Zimbabwe (www.icaz.org.zw) recently held a workshop with local firms on IFRS. W. Consulting is an independent technical accounting & professional skills training and advisory business based in South Africa, advising many SA listed companies and reportedly accredited to the JSE Ltd.
Currently, a ZSE panel of experts is responsible for checking IFRS compliance. It encourages accurate and correct presentation of companies’ financial accounts including historical data and internationally comparable balance sheets and disclosure. This makes it easier for investors, including external investors.
According to a report in the Herald newspaper, ZSE chief executive Emmanuel Munyukwi said that IFRS compliance is compulsory for all listed companies, but that some did not comply for the last financial period.
According to the newspaper, head of W. Consulting South African operations Tapiwa Njikizana said IFRS compliance was critical for JSE-listed firms to attract and retain foreign investors’ participation: “An investor sitting in China, Japan or somewhere else in Asia requires historical data about a company in order to make decisions. Without adherence to IFRS, he needs a lot of time to understand how and why certain things are done in Zimbabwe, but with IFRS he knows standards are uniform across the globe,” he said.
The Institute of Chartered Accountants of Zimbabwe has fought hard to ensure that the country’s accounting profession remains accredited or recognised by the International Accounting Standards Board.

Zimbabwe Stock Exchange dealing charges from 11 January

Tom Minney — Mon, 18 Jan 2010 17:14:09 +0000

New dealing charges for the Zimbabwe Stock Exchange came into effect on 11 January 2010, a week ago. Contrary to earlier expectations, it appears that Capital Gains Witholding Tax has not been withdrawn on sales proceeds of marketable securities. According a helpful note from stockbroker Securities Africa (www.securitiesafrica.com), the charges are:
BUY SELL
Brokerage 1.00% 1.00%
SEC Levy 0.18% 0.18%
Investor Protection Levy 0.05% 0.05%
ZSE Levy 0.10% 0.10%
Stamp Duty 0.25% -
Capital Gains Withholding Tax - 1.00%
VAT @ 15% of Brokerage 0.15% 0.15%
Total 1.73% 2.48%
Total Both Sides 4.21%

Transaction costs slashed on Zimbabwe Stock Exchange

Tom Minney — Fri, 04 Dec 2009 07:15:54 +0000

Zimbabwe’s 2010 budget was released on 2 December by Finance Minister Tendai Biti and has generally received favourable response from analysts and businesspeople. It includes a cut in corporate tax rate from 30% to 25% and streamlining of the tax structure.

Transaction costs on the Zimbabwe Stock Exchange (ZSE) have been slashed by more than half, to 3.21% (buying 1.73%, selling 1.48%) from 7.5%, according to leading local stockbroker Imara Edwards Securities (www.imaracapital.com). The stockbroker comments: “Generally this should encourage trading resulting in better price discovery”. Prescribed asset ratios have been reintroduced for insurance and pension funds and local institutions may have to realign their portfolios.

Revision of ZSE costs:

Buying (%) Selling (%)
Brokerage 1 1
Stamp duty 0.25 0
Securities Commission Levy 0.18 0.18
Investor Protection Levy 0.05 0.05
ZSE Levy/fee 0.1 0.1
VAT @ 15% on Brokerage 0.15 0.15
Total Costs 1.73 1.48
Total Both Sides 3.21%

Prescribed Asset Ratios for Insurance and Pension Funds:
Pension Funds 10%
Long Term Insurance Companies 7.5%
Short Term Insurance Companies 5%

Source: Imara Edwards Securities

The stockbroker adds in their morning note: “Given the improved economic outlook we recommend investors take a long-term view on their holdings. With the increase in the civil servants’ salaries consumer stocks are likely to benefit, especially those in the defensive food business e.g. Dairibord, Delta, Innscor, OK Zimbabwe, Natfoods and Star Africa. The revival of the retail sector should accelerate exacerbated by the BIPPA agreement with South Africa which should unlock credit facilities for the local retailers.

“Given the demand for infrastructure reconstruction we believe construction companies are well poised to take on opportunities and counters likely to gain include M&R and PGI. In our view, the financial sector provides speculative opportunities. We are wary about the viability of massive growth in lending books as the quality of the book might be greatly compromised. Gradually growth in bank assets would give us great comfort. For those who seek an exposure into the financial we recommend Barclays and CBZ.”

New draft law for Zimbabwe capital markets and listings changes

Tom Minney — Sun, 30 Aug 2009 16:44:43 +0000

The Securities Commission of Zimbabwe, which regulates the stock market, has drafted a statutory instrument outlining general rules for stakeholders in the stock market, reports the Zimbabwe Independent newspaper. The draft could end the monopoly of the Zimbabwe Stock Exchange (ZSE), and open the way for new markets to operate. A bond exchange could also be in the planning.
Minister of Finance Tendai Biti in his July mid-term fiscal policy statement announced that the ZSE would be demutualized. This would follow developing revenue to the ZSE and unlocking value to encourage new shareholders.
The Securities Commission has invited industry players to comment on the draft by 24 August. If approved, the proposed rules would require the ZSE to re-apply for a licence with the Commission. The application will include a copy of the applicant’s audited balance sheet and profit and loss account, and the auditor’s report.
The newspaper reports that market capitalization was US$4 billion in mid-August, up from US$1.7 bln in February when trading restarted.
The ZSE is also considering new listing requirements, according to the Herald newspaper, and the Reserve Bank of Zimbabwe has clarified exchange control regulations on dual listings.
The newspaper reports ZSE Chief Executive Officer Emmanuel Munyukwi saying the revision started in August. “It is a long difficult process. It will certainly take us some time so I cannot give you a definite timeframe.”
The ZSE updated its listing requirements in 1998 to harmonize with SADC stock exchanges, based on the listing requirements of the Johannesburg and the London Stock Exchanges. It last revised them in 2006, but there have been some amendments since then. The paper says some players want the ZSE to relax some requirements to enable more companies to list on the local bourse.

Zimbabwe Stock Exchange to demutualize

Tom Minney — Wed, 29 Jul 2009 10:27:33 +0000

The process of demutualizing the Zimbabwe Stock Exchange has begun, according to Chief Executive Emmanuel Munyukwi, quoted in The Herald local newspaper. By selling shares in the exchange, the ZSE would hope to raise finance for its activities, including a long-delayed US$2.5 million computerization and electronic trading and settlement project.

According to the report, Munyukwi says the first steps include setting up a company to own the exchange, and speaking to the stockbrokers and other potential shareholders. He is quoted as saying: “The ZSE is a society of members or a club made up of stock brokers and we are engaging them as they will be the initial shareholders before other shareholders come on board.”

In his mid-term fiscal policy statement, Finance Minister Tendai Biti said that value should be unlocked in the ZSE by increasing its revenue streams for it to be a viable and attractive entity that would lure prospective shareholders to come on board. It could also eventually list its own shares. The first African stock exchange to demutualize was the Johannesburg Stock Exchange in South Africa.

The ZSE had been suffering the economic turmoil of the rest of the country, and was closed indefinitely in November 2008, after suspicious price movements and trading with unfunded cheques. It restarted trading on 19 February, with share prices and trading in US$ and the main indices reset to 100 each. Since then it has seen strong gains and the Zimbabwe Mining Index has climbed from 100 to 222.91 (28 July 2009) and the Zimbabwe Industrial Index from 100 to 152.54. Some share prices have risen very far.