19 February 2013

Zimbabwe Stock Exchange Eyes More Recapitalisation

ZIMBABWE Stock Exchange-listed companies need to gather significantly more finance this year despite raising a staggering US$126,4 million to recapitalise operations last year to replace obselete plant and machinery, the ZSE has said.

According to the ZSE's country report, presented to the Committee of Sadc Stock Exchanges meeting in Victoria Falls last week, the companies used a combination of private placements and rights offers to raise the funds for recapitalisation.

The report said of the US$126 408 175 recapitalisation funds raised last year US$7,7 million was mobilised in February, US$11,6 million in March, US$98,4 million in June and US$8,6 million in October.

Although the report does not give an estimate of how much could be raised this year, the ZSE's country report contends that more capital would be raised this year as firms retool to enhance their efficiencies and competitiveness.

"The increase (in required capital) is due to the challenging environment in which listed companies are operating. Demand for capital is expected to continue well into 2013 as companies retool and retire expensive debt," the ZSE report says.

Officially opening the Sadc meeting last week, Finance Minister Tendai Biti said Zimbabwe's manufacturing industry required about US$4 billion to rebuild its industrial base.

It is against this background that Minister Biti said Zimbabwe required huge inflows of foreign investment to raise capital to companies and infrastructure.

The companies unable to secure or inject fresh capital over the decade to 2008 due to macro-economic instability, characterised by rampant inflation, which peaked at 231 million percent in August 2008, according to official statistics.

The ZSE report says most listed companies were currently operating well below capacity and relied more than anything else on the use of mostly expensive short-term debt. Borrowing from banks has been prohibitive due to punitive lending rates of up to 30 percent per year. Affordable long-term capital remains elusive in Zimbabwe.

The report also says trading in the shares of companies listed on ZSE was affected by the liquidity crisis pervading the entire economy. Low levels of disposable income have also affected the contribution of retail stocks to trading on the bourse.

Manual trading on the ZSE is also impeding levels of trading activity.

But things could change soon, as plans are already underway to introduce automated trading. Its success will depend on the successful implementation of the paperless share settlement system.

The mandate to establish a CDS was given to local private firm Chengetedzai Depository Company in December 2010 by the Securities Commission of Zimbabwe.

Government will control a 51 percent stake in the firm, with ZSE holding 15 percent. Other private investors will hold the balance of the shareholding.

The ZSE report says the industrial index fell 1,34 percent during the year which saw market capitalisation falling from US$4 billion at the end of October to US$3,96 billion by December 31 2012, due to a decline in the prices of mining stocks.

The ZSE closed last year with 79 active counters. Nine companies are suspended. The year saw only one debt instrument listing and no new company listing.

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