adminMK: Can you give us an insight into your 100-day plan?
AC: The Zimbabwe Stock Exchange is running with four major projects at the moment. These are the Automated Trading System, demutualisation/privatisation, review of listings rules and the second-tier exchange. On the ATS, the first stage is consultation and then the appointment of the project manager will follow during this period. I believe the vendor for the ATS will also be chosen within the 100 days. The demutualisation process should be complete or near completion.
Consultations with stakeholders on listings rules have already started. The first draft should be available to the stakeholders in the next few weeks. I am confident that the whole review of the listings rules will be complete within the said period. With regards to the second-tier exchange, I believe we should have conducted a stakeholders’ meeting to galvanise the thinking and agree on all the parameters, including the rules.
MK: When are you likely to see the automation of the exchange?
AC: There is progress on that front. As you are no doubt aware we are currently recruiting a consultant and other specialist resources to assist us in this very complex and delicate change. The progress will be a lot more visible in the second half of this year and for now I can only say we are eyeing Quarter 1 2014 for completion.
MK: The viability of stockbrokers is a challenging issue. Can you highlight what you going to do about it?
AC: This is a matter of great concern. Stockbrokers are equally affected by the economic issues affecting all the other industries. I believe automating trading is going to reduce the cost of doing business.
This will come through reduction of transaction costs and reduction in redundancy systems. From experience from other countries that have automated, volumes of trading more than triple when the stock exchange automates.
Since the correlation of turnover to income of stockbrokers is nearly one, this will see the income of stockbrokers increasing in tandem. The ZSE will work closely with stockbrokers, asset managers and other stakeholders to increase the attractiveness of our capital markets to local and international investors. The desire of the ZSE is to increase the product range it provides should also see the improvement on the quality of earnings for the stockbrokers.
However, in the final analysis stockbroking is a business and every businessman has to have a strategy on managing or expanding or divesting from the business if it is deemed necessary.
MK: We have seen so many companies de-listing while no new firms are coming on board. What would be your strategy to encourage new listings?
AC: The growing number of companies you see being de-listed reflects the tough operating environment for companies as well as the efforts of the Zimbabwe Stock Exchange to regularise the quality of the bourse through making decisions on the those companies that are finding it difficult to uphold the ZSE Listings Rules.
The number of listings on an exchange is affected by other variables in the economy which are beyond the control of the bourse itself. However, the ZSE is currently involved in several projects that will hopefully result in attracting new listings. It is imperative that the ZSE markets itself to those companies which are not listed. This is a major task that my team and I must undertake. Exploratory meetings have already started. You should note that, corporate finance teams in the country are the lead in seeking business opportunities which will result in listings and hence it is a collective responsibility.
MK: How are you going to enforce adequate disclosures and compliance by listed companies? Previously we have seen serious violations while no action has been taken.
AC: The ZSE is committed to promoting compliance by listed companies. This will be achieved through constant reminders of the requirements and where feasible, workshops and other forms of interaction with the affected company representatives.
Behind the scenes we engage listed companies in areas where we believe that they should be improving or taking corrective action. This is an ongoing exercise. We have, however, instruments to take corrective action when the need arises but this only occurs where all efforts to engage the companies have failed. We have a fiduciary duty to protect the investors, to reduce systemic risk, reduce manipulation of the markets and retain the integrity of the market. These regulatory demands are delegated to the ZSE by the Securities Commission. We will not compromise on corporate governance.
MK: Still on disclosures, are you going to force CEOs of companies to disclose their remunerations as is the norm with other established stock exchanges?
AC: This is a matter that is still under consideration. It is, however, important to note that if we want to be rated internationally we need to achieve international standards of disclosure.
MK: Elections are around the corner. Would you like to give us your views on how the market could behave after the harmonised polls?
AC: This is difficult to predict as there are many factors which affect the capital markets. These factors include the socio-economic outlook, the supply and demand of scrip, the sector performance and the individual performance of the companies. The perceptions of various investors have a major impact on how the stock market will react. If the investors believe the outcome of the election process is positive, the market will rally and obviously, the corollary is true. It goes without saying that what is a positive outcome is different for each investor and hence the existence of a market. The ZSE plays the role of providing that market and not speculating. The ZSE data portal www.zimbabwe-stock-exchange.com will provide the historical perspective after the elections and my stockbroking colleagues and other advisors in the market are closer to investors and will be able to offer a more informed forecast in this regard.
MK: And the stock exchange for the small to medium companies, how are you going to work it out?
AC: It will be the junior board of the exchange. We are in consultation with all the stakeholders including the regulator, the Securities Commission, the SMEs, financiers and securities traders.
MK: Tell me your vision for the ZSE?
AC: I see the ZSE as a pivotal institution in the country’s capital markets. The ZSE will play a major role in mobilising savings for deployment in the productive sectors through innovative products that will appeal to all sectors.
I would like to see the ZSE providing an avenue for individual investors to plan their life savings. In some developed countries over 50 percent of the population invests on the stock market to create pensions and savings. In Africa the figure is less than 1 percent. I would like to leverage on our standing as the leading country in Africa with regards to literacy to increase this percentage.
Investor education is therefore of paramount importance. My vision is to see our schools include capital markets-related subjects in their curriculum. As ZSE we will continue with our strategy to reach all levels of learning and the general populace.
I would like to see the ZSE being an employer of choice. This means investing in human capital through training and other means. A highly skilled team can ensure that the objectives of all stakeholders are not only met, but exceeded.
I would like to see good corporate governance being the centre of everything we do. Old-fashioned integrity, honesty, transparency, fairness and consistency are cornerstones of our value system.
MK: Where do you see the stock exchange in the short to medium term?
AC: In the short to medium term the Zimbabwe Stock Exchange will go through a period of rapid modernisation that will see it catch up and eventually overtake all the exchanges in the Sadc region except the JSE. Modernisation will be achieved through the implementation of mission critical automation projects and manpower development initiatives.
In the short term, I would like to see the ZSE being ranked in the top 10 in Africa in terms of market capitalisation.
MK: Given your past acrimonious relationship with stockbrokers when you were the CEO of Securities Exchange Commission, how are things now?
AC: I believe I have been warmly received. I have taken up this job to work with stockbrokers and other stakeholders to improve the market, provide a platform for real profits to be made and enhance corporate governance, and in particular, investor protection. No effort will be spared by my office and team to make sure that these important goals are achieved.
It must be recognised that the issues which were topical at the time I was at the Commission were the following: the existence of and funding for the investor protection fund, the financing of the Commission through a levy and the licensing requirements which were being put in place. All these issues were put in place and still exist. All market players now appreciate the importance of all these structures which the Commission established. The other major area of concern was the interpretation of the Securities Act (Chapter 24:25), the understanding of the savings of the ZSE Act and the ambiguity or omissions of certain issues in the Securities Act. These areas have now been addressed by the amendment to the Securities Act. You will remember that the Commission wanted to see the automation of the exchange and the Central Securities Depository. These projects are now at various levels of completion.
I am honoured to have the opportunity to play a significant role in the automation of the bourse. I believe there is now goal congruence and this should see the capital markets flourish in the short to medium term.
MK: There are companies which have very low market capitalisation. Do you think there is need to have minimum capital threshold for listed companies?
AC: Absolutely, this is one of the minimum listing criteria but due regard should be given to the effects of dollarisation.
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