adminTHE introduction of a framework regulating Alternative Trading Platforms or Systems (ATPS) by the Securities Exchange Commission of Zimbabwe (SecZim) will provide private and public companies with an alternative avenue to get liquidity.
However, analysts fear the platform might be blighted by the same market conditions negatively affecting the Zimbabwe Stock Exchange.
The ATPS is a system that is not necessarily electronic but provides an interface between buyers and sellers.
Experts call it an alternative to the traditional bourse and does not provide stringent rules for the participants.
This allows private companies to raise capital by selling their securities to the public.
SecZim, on October 10, 2015, published the capital adequacy framework for ATPS.
It will soon be issuing licences.
Mr Bhekithemba Ndlovu, chair of Chengetedzai Depository Company (CDC) – the firm that helped establish the Central Securities Depository company for the ZSE – said the new platform could help funnel capital from investors who are reluctant to participate on volatile stock markets.
“There are people with money but do not know where to invest it; take, for instance, people in smaller businesses like transport operators handling cash everyday may take advantage of this as a safe investment haven,” said Mr Ndlovu.
“It’s a noble idea, especially when companies are struggling to raise capital. Its feasible.
“This is one way for small businesses to raise capital in an illiquid market,” he said, adding this would shake off the misconception that capital markets are for elites and big corporate bodies.
Whereas the proposed minimum capital requirement for companies listing on the ZSE is US$10 million, the ATPS sets no such barriers.
Deepening local capital markets will help companies diversify their portfolios and spread risk.
The ZSE’s performance has been particularly unspectacular with the mainstream industrial index plunging 23 percent year-to-date.
In 2014, the index slumped more than 33 percent.
Zimbabwe National Chamber of Commerce CEO Mr Takunda Mugaga noted last week that if economic fundamentals remained the same, the new platforms might be similarly affected.
Companies are struggling to raise capital on the mainstream bourse due and the ZSE has been experiencing thin trade volumes, with daily average turnover dropping to as low as US$13 000 on September 30 this year – the lowest since automation.
Big institutional investors such as pension funds have been shifting their portfolios to the property market, which is largely considered a hedge against economic turmoil.
“It is a challenge to have the ATPS because the investors are the same in the same illiquid economy.
It is a cosmetic move and I do not think it will change much since the economic fundamentals are the same . .
“What makes the trading platforms differ from one another are the factors affecting share price,” contended Mr Mugaga.
Framework for ATPS
Shareholder funds and working capital must always be positive
Liquid assets equivalent to three months operating costs
The ATPS shall be required to have total asset cover of 250 percent of total liabilities
Minimum indemnity cover of US$100 000 issued a registered insurer
Minimum fidelity guarantee policy cover of US$200 000
Online Reporter