Online Reporter
The Zimbabwe Stock Exchange (ZSE) has, in recent years, witnessed multiple delistings.
Blue-chip counters, including Econet, Innscor and National Foods, have left, citing a range of reasons, among them high costs involved in maintaining a presence on the 130-year-old bourse.
Encouragingly, as we reported yesterday, the Government is moving to explore ways of reducing the costs on a platform that has played a critical role in mobilising capital for businesses and providing investors with an avenue to participate in the economy.
Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube said Government had asked ZSE management to submit proposals on how listing and other operational costs could be reduced. This is a welcome intervention because high costs ultimately undermine the very purpose of a stock exchange.
For listed companies, maintaining a presence on the bourse comes with regulatory, compliance, audit, reporting, advisory and listing expenses. These costs may be justified by the benefits of being publicly listed, but when they become disproportionate to the value and liquidity generated by the market, companies inevitably begin questioning whether the arrangement remains commercially viable.
High costs can therefore discourage new listings while encouraging existing companies to seek alternatives.
But it would be a mistake to conclude that costs alone are responsible for the ZSE’s declining appeal.
Liquidity remains a major concern. A company may be willing to incur the costs associated with listing, but investors must also be sufficiently active for shareholders to buy and sell shares without significant price distortions. Thin trading volumes can make it difficult for companies to attract investors and establish fair market valuations.
Currency issues are another important consideration. The emergence of the United States dollar-denominated Victoria Falls Stock Exchange (VFEX) has provided companies with an alternative platform that offers greater protection against currency-related risks and access to international investors.
The migration of companies to VFEX should therefore not necessarily be viewed as a failure of the ZSE. Rather, it highlights changing market requirements.
The ZSE and VFEX can coexist successfully if their roles are clearly differentiated and the broader capital market is made more attractive. What matters is ensuring that companies have compelling reasons to remain listed on either platform.
Regulatory requirements also need careful examination. Investor protection and corporate governance must not be sacrificed in the pursuit of lower costs, but regulation should be proportionate, predictable and efficient.
Authorities should also examine taxation, settlement systems, disclosure requirements and the time and administrative burden associated with corporate actions.
More importantly, we need to continue working hard to improve the overall investment environment. A vibrant stock exchange depends not only on affordable listings, but also on economic stability, investor confidence, institutional participation and a strong pipeline of quality companies seeking capital.
Pension funds, insurers and other institutional investors should be encouraged to participate more actively, while measures to attract foreign portfolio investment must be strengthened.
The ZSE’s challenges therefore require a comprehensive response. Cutting fees is a good starting point, but it should be accompanied by reforms that deepen liquidity, improve market confidence and make equity financing more attractive.
