Online Reporter
Nelson Gahadza
ZIMBABWE’S capital market regulator, the Securities and Exchange Commission of Zimbabwe (SecZim), says it has initiated discussions with the Government to have the small and medium enterprise (SME) sector participate in the capital market.
Over the years, the informal sector in Zimbabwe has been expanding and now plays a key role in the economy, making significant contributions to gross domestic product (GDP).
While they continue to play a pivotal role in job creation, innovation and poverty alleviation, many of these businesses face real challenges in accessing capital due to limited collateral, informal operating structures or limited credit histories.
SMEs now dominate various sectors of the economy such as retail and wholesale, mining and agriculture.
Now, SecZim and the Zimbabwe Stock Exchange (ZSE) are initiating steps to lure the sector into participating in capital markets, which will also improve their access to capital.
“The SME sector remains the biggest contributor to GDP and employment and we have initiated discussions with the Ministry of Women Affairs, Community, Small and Medium Enterprises Development to have joint efforts in terms of how we can improve both access and participation by SMEs in the capital market,” SecZim chief executive Mr Anymore Taruvinga said recently.
He noted that going forward, SecZim is also taking advantage of the thrust by the Government to have a financial sector development strategy and the National Development Strategy 2 in place and contributing the required policy interventions for capital market growth.
“We are also anticipating positive developments on virtual assets and hope that we will move to recognising and regulating these soon,” he said.
Analysts believe that in order to improve SMEs’ access to capital markets, there is a need for increased awareness and education on capital market operations among SMEs and financiers.
They say there is also a need to review and reform the regulatory framework to reduce the financial burden on SMEs and promote their participation in the capital markets.
The ZSE, on its part, said it is exploring with its exchanges the inclusion of SMEs to access finance through its platforms.
ZSE Holdings (ZSEH) owns both the ZSE and the Victoria Falls Stock Exchange (VFEX), which trades exclusively in hard currency.
Group chief executive Mr Justin Bgoni, at a self-listing ceremony recently, said ZSEH will ensure that it creates a business-friendly environment that accommodates SMEs, allowing them to tap into and raise capital on its platforms.
“As we look forward to the next chapter, we are excited about the prospects that we are exploring with our exchanges, which include the inclusion of small to medium enterprises to access finance through our platforms,” he said.
Mr Bgoni said the plans to launch an SME exchange had been there for the past decade, but the time is now ripe.
“It is something that we believe the time is right now to do, and we will be coming to the market to talk about that. We will also ensure that we create a business-friendly environment that accommodates this crucial sector, allowing them to tap into and raise capital on our platforms,” he said.
Previously, the ZSE said it was working to establish the Zimbabwe Emerging Enterprise Market (ZEEM), an over-the-counter trading platform for SMEs. This platform would initially focus on providing working capital solutions for formalised businesses, with the goal of eventually facilitating the listing of qualifying SMEs on a secondary bourse through training and other support initiatives.
SMEs believe the setting up of a junior bourse will help companies raise equity funding.
Mr Farai Mutambanengwe, founder and chief executive of the SME Association of Zimbabwe, has previously highlighted that a secondary bourse was good for growing business.
“We feel that there is a need for a secondary bourse because part of the capital-raising function or requirement for any growing enterprise is getting equity funding. A bourse is a very effective way for an emerging business to get that equity capital,” he said.
The Government believes SMEs provide employment for over four million people, and it is committed to enhancing the capabilities of SMEs through training and support.
Online Reporter