The Herald (Harare)

5 July 2012

Zimbabwe: Stock Exchange Initial Public Offer On Course

THE Securities Commission of Zimbabwe says it will soon be carrying out an Initial Public Offer for the Zimbabwe Stock Exchange as part of the demutualisation process for the bourse.

Demutualisation refers to the transformation of an organisation, normally a club or society, into a commercial entity or a company owned by shareholders.

SECZ chief executive officer Mr Tafadzwa Chinamo said this week that the restructuring process would see the ZSE getting a partner to expedite its capacitation.

He was speaking in Harare on the sidelines of the Chief Finance Officer Summit 2012, organised by the Association of Chartered Certified Accountants.

"SECZ will soon be carrying out an IPO for the ZSE," he said. "What most people do not know is that the ZSE is a statutory body, but it has not been treated as such.

"The IPO is part of the demutualisation of the bourse. In doing so, brokers will obviously get a stake, while at the same time we are seeking a partner to come in and help it modernise quicker."

Mr Chinamo said they were still in discussions with the relevant ministry on the implementation of the IPO.

The introduction of modernised trading systems on the ZSE has been long-drawn-out due to funding challenges.

Experts say the use of the "open cry system" was inefficient and open to abuse.

But it is expected that the introduction of real-time trading would allow for real-time clearing and settlement of trades.

The much-anticipated commencement of the demutualisation process of the ZSE has been long in coming due to funding constraints.

In a recent address during the Annual General Meeting of the ZSE, interim board chairperson Mrs Eve Gadzikwa said the demutualisation process was well underway.

"The Zimbabwe Stock Exchange has worked on the project for some years and the board is doing all it can through its Demutualisation Sub-Committee to bring this process to a close.

"To this end, a number of meetings have already been held with the aim to establish a framework and modalities towards a demutualised exchange," she said.

It is expected that the term of the interim board will end at the conclusion of the demutualisation process when a substantive board will be elected at a general meeting.

The demutualisation plan, which was mooted four years ago, is believed to require more than US$4 million for effective implementation.

Mrs Gadzkiwa said that in line with the new structure to be put in place, the board would soon be recruiting additional staff to bring capacity at the ZSE to desirable levels.

Market watchers believe that the slow pace on demutualisation has impacted negatively on the overall value of shares being traded on the bourse.

Meanwhile, Mr Chinamo has said his organisation, in conjunction with the Public Accountants and Auditors Board and the ZSE, is in the process of reviewing financial reports for the year ended December 31, 2011 of all public listed companies.

"We will also soon publish the names of firms whose financial reporting has discrepancies," he said.

This "name-and-shame" strategy is one of the measures the commission is implementing as part of a broader strategy to improve disclosure by local firms.

"As a commission, we are seeking to rectify the situation where there are little or no consequences for violation of good corporate governance," he said.

"Some of the decisions we will implement may be considered controversial but we cannot just let things go."

It is anticipated that these initiatives will provide a high level of investor protection, promote market integrity and investor confidence, while preventing market manipulation and ensuring transparency in capital markets.

Poor disclosure of information by local companies is believed to be one of the major contributors to the high levels of poor corporate governance that has resulted in the recent collapse of a number of companies.

But Mrs Gadzikwa is of the opinion that inappropriate disclosure is just as dysfunctional.

"It is with much regret that we observe inappropriate disclosures in the Press that are attributed to members or so called sources that refuse to be named," she said.

"We believe there are sufficient platforms for stakeholders to discuss issues that affect us without resorting to leaks in the Press.

"We must all work towards protecting the image of the ZSE at all costs, and not to destroy it through irresponsible actions."

The commission, which has started a programme to reform the capital markets, was established thorough the enactment of the Securities Act (Chapter 24:25).

Section 3 of the Act provides for the establishment of the Securities Commission, the regulatory body for the securities and capital markets in Zimbabwe.

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