11 November 2012

Zimbabwe: Companies Team Up to Launch Stock Exchange

PRIVATE equity firm, Brainworks Capital has teamed up with a South African company and the National Indigenisation and Economic Empowerment Fund (NIEEF) to set up a stock exchange, where empowerment shares would be traded.

According to information obtained last week, Brainworks Capital engaged Singular Systems, a South African electronic exchange company that developed a similar system across the Limpopo, where African Bank, Sasol and Multichoice Empowerment shares are being traded.

Initially, Brainworks were promoters of the project, but because regulations require government ownership in capital markets, NIEEF was roped in.

An insider told Standardbusiness that the Securities Commission of Zimbabwe (SECZ) was still processing the application and "at the moment it would be difficult to provide a date on when it would be up and running".

A liquid capital amount of US$1 million is required to set up the institution.

Experts say the expected launch of a secondary bourse in the capital would be a key step towards broadening the capital markets and providing funding for local businesses.

William Bonyongwe, SECZ chairperson, said the setting up and operation of the Harare Stock Exchange would effectively provide competition for the Zimbabwe Stock Exchange (ZSE).

"The exchange would also focus on specialised areas such as the indigenisation drive, providing funding for parastatals and other key sectors of the economy," she said.

"By virtue of the specialised areas, for example mines, this [bourse] would assist in the quest for funding from countries which have the expertise and finance, which in turn would broaden the capital markets and provide funding for local business."

The ZSE is the country's only bourse.

Securities traded on the market include equities and preference shares, among others.

Indices on the market are split into the mining and industrial.

The current liquidity crunch is severely affecting local businesses' growth plans as funding is hard to come by, while interest rates on loans provided by banks are punitive.

The merits of the exchange include companies' ability to access and raise capital, broadening of ownership of companies by shareholders and entrepreneurs' ability to raise money through such a bourse.

Undercapitalised state-owned companies such as the National Railways of Zimbabwe, Civil Aviation Authority of Zimbabwe and Rural Electrification Authority, would also be able to raise capital.

Experts say further detailed research into the determinants of market capitalisation for African and other emerging stock markets is required to identify best ways to develop such markets within the global financial system, while simultaneously promoting domestic economic growth.

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