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Dumisani Nsingo, Senior Business Reporter
PLANS to launch a stock market exchange, which caters for Small to Medium Enterprises (SMEs), the Zimbabwe Emerging Enterprise Market (ZEEM) within the Zimbabwe Stock Exchange (ZSE) are at regulatory approval stage, as calls to materialise the platform grows.
ZSE chief executive officer Mr Alban Chirume confirmed that the country’s primary bourse’s board and executive members were working on launching a listing and trading platform for SMEs within the existing exchange.
An SME Exchange is a stock exchange dedicated for trading the shares or securities of SMEs who otherwise find it difficult to get listed on the main board. The concept originated from the difficulties faced by SMEs in gaining visibility and attracting sufficient trading volumes when listed along with other stocks on the main board of stock exchanges.
World over, dedicated SME trading platforms or exchanges are prevalent, and are known by different names such as
“Alternate Investment markets” or “growth enterprises market”, “SME Board”. Some of the known markets for SMEs are AIM (Alternate Investment Market) in UK, TSX Ventures in Canada, GEM (Growth Enterprise Market) in Hong Kong, MOTHERS (Market of the high-growth and emerging stocks) in Japan, Catalist in Singapore and the latest initiative in China — Chinext. As a matter of fact, NASDAQ also started as an SME exchange.
“ZSE is working on launching a listing and trading platform for SMEs within the existing exchange which is ZEEM.
There are thus no plans to establish a separate alternative exchange. ZEEM is now at regulatory approval stages. In this case what needs to be approved are the listings requirements, which have gone through a thorough public and legal review,” Mr Chirume said.
He said the platform was meant to provide access to long term equity capital for SMEs which will meet the listings criteria.
“Equity capital helps companies, including SMEs to reduce gearing and hence insolvency risk. Equity capital is also permanent capital, which enables companies, including SMEs to undertake long term projects without worrying about the need to repay the capital.
“By listing, SMEs will attain a better corporate image and hence access to cheaper debt capital, better business prospects and enhanced ability to attract skilled human capital,” Mr Chirume said.
A company applying for listing on ZEEM is expected to have been incorporated and registered in terms of the Companies Act (Cap24.03) or under any other law of the country of incorporation. It should have a minimum share capital (including reserves but excluding minority interests, and revaluations of assets and intangible assets that are not supported by a valuation by an independent professional expert acceptable to the ZSE prepared within the last six months) of $250 000 at the time of listing.
According to the regulations, the public shall hold a minimum of 26 percent of each class of equity securities listed and the number of public shareholders shall be at least 50.
The regulations state that for a company currently listed on the ZSE, the float is 30 percent and the number of shareholders must be at least 300.
The company should also have historical financial information in respect of a period of at least one year up to the year of issuing the pre-listing statement of the applicant, prepared in accordance with International Financial Reporting Standards. Small and Medium Enterprises Association of Zimbabwe executive officer Mr Farai Clement Mutambanengwe said there was need to expedite the setting up of ZEEM as it would play a pivotal role in capacitating small enterprises.
“Primarily the coming up of ZEEM will be of importance to SMEs as it will ensure those that list in it to raise capital.
The companies also stand an opportunity to raise the profile of their business among other ancillary benefits such as adhering to good corporate governance,” Mr Mutambanengwe said.
derick.khumalo