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proposal to establish a Central Securities Depository has now been presented to Cabinet.
Finance Minister Tendai Biti told a Securities Commission of Zimbabwe and ZSE breakfast meeting – to improve stakeholder relations and explore possibility for more capital markets – that the CSD could be in place by year-end.
“The main issue being dealt with is the shareholding structure of this systematically important institution (CSD), which should reflect national ownership by both the public and private sector players,” said Minister Biti.
He said the National Social Security Authority, the Reserve Bank of Zimbabwe or the ZSE would own at least 51 percent of the CSD company.
Chengetedzai, the local private firm tasked with overseeing the establishment of the electronic trading system, will also have significant shareholding in the CSD.
Minister Biti said the CSD was a critical institution for modern capital markets as it reduced the payment cycle, enhanced transparency and monitoring of shareholding thresholds of foreign investors participating on ZSE.
He said the current situation on the ZSE, where only about 20 investors accounted for most of the trading, was unhealthy.
The minister also cited financial shenanigans unearthed at Renaissance Financial Holdings as examples of the irregularities the CSD would help prevent.
“When you go to the Zimbabwe Stock Exchange and see the way they trade it gives the impression that we are still stuck in 1950.
“It is as if someone pressed a pause button on the TV and everything stopped. We have to modernise and part of it is coming up with a CSD,” he said.
To enhance accountability in the manner in which Zimbabwe’s most active capital market (ZSE) is run, Government seeks to demutualise the bourse.
Demutualisation is process of transforming a member-based society or club into a company that has shareholders and has a strong profit orientation.
Minister Biti said demutualisation was critical to prevent cartels of members from dictating the affairs of the bourse, which created credibility crises. Once the bourse lacks confidence it would struggle to attract investors.
As such, the CSD will improve liquidity, promote market integrity and transparency while minimising market manipulation, fraud and financial crime.
Speaking at the same occasion. SECZ chairperson Mrs Willia Bonyongwe challenged innovative Zimbabweans to come forward with proposals on how the country could go about establishing more capital and securities trading markets.
She cited the equity market, bond markets, quasi or hybrid financial instruments, asset securitisation and unitisation, hedging or risk commodity markets and private equity instrument as cases of possible initiatives.
Zimbabwe only has the ZSE as the active capital market, but has potential for other exchange markets for trade in agriculture and mining products.
Online Reporter