Secondary bourse: answer to viability challenges

Despite earlier indications of growth at the beginning of the year, the bourse failed to live up to expectations that saw both the industrial and mining indices plummeting. While several explanations have been proffered for this slump, it is clear that the liquidity challenges prevailing in the economy have significantly weighed down the overall performance of the ZSE.
Investors who for long have depended on the bourse as a haven for their fortunes are now considering other alternatives in the absence of a lucrative money market at the moment. Foreign investors who at the beginning of the year dominated activity on the bourse accounting for the bulk of the trades, appeared to have been ruffled by the country’s indigenisation laws and adopted a wait and see attitude.
Low production potential, the energy crisis and liquidity challenges did not make the situation any better.
With the economy increasingly being dominated by small and medium enterprises, it is prudent to seriously consider the establishment of a secondary bourse to inject fresh capital into the economy.
Judging from the results released by most companies this year, it is evident that the bulk of them are suffering from the liquidity crunch, poor management. Low production and the illegal economic sanctions.
It is no longer business as usual and the sooner we realise this the better for the affected companies.
A secondary bourse maybe the answer to the viability challenges some of these companies are facing as their operations could be revived if they operated in a less demanding capital market.
Already, five companies have delisted from the ZSE this year alone and more are likely to follow suit as the counters continue operating under pressure.
To expect the financial services sector to continue bailing out these ailing firms maybe asking for too much as they are also smarting from the same economic challenges pervading the economy.
A secondary bourse will no doubt open opportunities for ordinary Zimbabweans to invest their money in the listed companies as doing so at present appears to be non-productive.
The rise of the SMEs aided by the country’s indigenisation policy creates a window for this sector to meaningfully play a role in the economic development of this nation. It is the desire of every Zimbabwean to raise the production levels of yesteryear and this can only be achieved by creating an enabling environment.
A sound primary bourse supported by an equally healthy secondary stock exchange will not only boost production but also attract foreign direct investment due to confidence in the economy by foreign investors.
Shareholders in the SMEs will boost production by not only relishing on the prospect of reaping large profits, but also due to the added incentive to own stocks in larger companies when they eventually buy shares in ZSE-listed companies.
We anxiously await the overdue implementation of reforms on the ZSE at the instigation of the Securities Commission of Zimbabwe, which are seemingly taking forever. Among some of the recommendations is the automation of the local bourse, setting up of a central depository and telling brokers what to do.
The ZSE is currently using a manual system that has long been criticised for lacking transparency, unfair and could easily be manipulated. Naturally investors, locally and abroad, would like to monitor trades and be treated fairly.
Clearly, the writing is on the wall, these are challenging times and the sooner we adapt the better our chances of survival. We have to move with the times and economies around the world have fully embraced the role played by SMEs as the engines of growth and the results are there for all to see. Now is the time to reform and adapt.
A case in point is that of the Republic of Korea where SMEs make machines that manufacture consumer goods not only for the local market but for export as well. Similar examples abound in China, India, Indonesia Japan and Sweden where a deliberate policy to support SMEs has led to an economic boom. Let’s get the SMEs on board and let the good times roll.