The Herald (Harare)

Zimbabwe: Demutualisation Hits Snag

STOCKBROKERS have taken the unprecedented step to seek legal opinion to stop the Government from privatising the Zimbabwe Stock Exchange. The move effectively suspends the demutualisation of the bourse and its subsequent listing on the same privatised ZSE.

Securities Commission of Zimbabwe chief executive Mr Tafadzwa Chinamo said that the process to demutualise the bourse would not go ahead until the latest legal hitch has been resolved.

"Until we sort out this challenge, the process (to privatise the ZSE) will not progress," said Mr Chinamo.

He said that Secz, a statutory body, was acting on instructions from the Government to privatise the ZSE.

But the stockbrokers have once again crossed swords with their regulator, claiming that Secz had no right to demutualise the ZSE.

Stockbrokers once fiercely resisted Secz plans to introduce a number of changes, the most controversial being the investor protection levy.

While the stockbrokers want to prevent Government from privatising the ZSE, the move is now widespread across the world and closer to home is the Johannesburg Stock Exchange.

Considerable progress had already been made towards demutualisation of the ZSE, amid revelations that Imara and Corporate Excellence had been selected as financial advisors.

The two companies had presented and won a joint bid to act as the financial advisors to the privatisation of the ZSE, which was expected to take about six months to consummate.

The ZSE is currently a mutual society made up of members and demutualisation would transform it into a private company that would list on its own by way of an Initial Public Offering.

The ZSE was established as a statutory body in terms of Section 3 of the repealed Zimbabwe Stock Exchange Act and had over the years been run by its members - the stockbrokers.

But Secz said it had become imperative to change the exchange's corporate structure in line with best practice and trends across the world to make it a profit-oriented private firm.

Secz says the privatisation would result in improved governance and operational efficiency, remove barriers to entry for new players, investor participation in the affairs of the exchange, improved access to resources for capital investment and growth and more appeal to foreign investors.

A well-regulated stock exchange serves as the barometer of how well or badly an economy is performing and how the investors see its prospects of performing better or lack thereof.

The slightly over US$4 billion stock exchange has 70 counters, but eight of them are currently suspended from trading.

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