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Fradreck Gorwe
Some unlisted companies with great potential are willing to join the list of counters on the Zimbabwe Stock Exchange (ZSE), but have remained cautious, chief executive officer Justin Bgoni has said.
Bgoni said this while responding to questions from this publication on the sidelines of the ZSE Training Institute launch on Wednesday.
Questions have been asked on why some companies that apparently have potential to list on the bourse still remain out of the stock market despite them being in need of funds to either recapitalise or retool.
Bgoni claimed most companies express some willingness to raise capital through investing on the stock exchange, but are either dissuaded by inadequate investor education or the unpredictable macro-economic environment.
Companies feel investing on the bourse will not suffice at the moment to raise the amounts they need to enhance their operations.
“First thing is getting people to know how the listing process works. We did some workshops last year on how the listing process works. We have done that but still we have to understand our macro-economic environment.
“The macro-environment is such that people agree they want to list on the stock exchange, but to do that they are going to raise local currency. Most people are looking for hard currency to buy equipment and other things for retooling. Unfortunately for us, most of the equipment is imported so foreign currency is needed,” said Bgoni.
Potential counters have also remained in some kind of indecision about listing citing perceived fluctuations in the value of the local currency, which might make it difficult for them to realise expected capital amounts after a protracted trading period of six to 12 months.
Further, the chief executive officer claims companies give as reasons for delayed listing, the likelihood of some difficulty in converting their ZSE proceeds into forex.
“The main question corporates ask is, given the currency value changes, “How much should we raise?” The raising process takes about six to 12 months and the money needed in the beginning and the end will be completely different.
“The second thing is, after raising the money and it is difficult to get the foreign currency on the market,” said Bgoni.
Improvement of the interbank foreign exchange market will, according to Bgoni, boost the influx of new listings into the bourse.
ZSE, according Bgoni, is striving to find a lasting solution to some kind of stalemate between the macro-economic space and potential counters. The recent signing of a Memorandum of Understanding with the Botswana Stock Exchange was reportedly another strategy to try and lure fresh listings on the bourse through dual listing.
“We are trying to come up with a solution because we know they want to come to the stock market to raise money to recapitalise. Either the interbank has to improve and liquidity in the foreign currency market improves, which might take a long time.
“We have already done one solution which we thought would help when we signed a MOU with the Botswana Stock Exchange where corporates can do dual listing, where as an option they can go to Botswana to raise the money. We still need to come up with other effective solutions,” he said.
Among the companies with great potential to list on ZSE are those in the mining sector.
Only four mining stocks, for example, have at one time or the other been listed on the local stock exchange.
These are RioZim, Bindura Nickel Corporation (BNC), coal extractor Hwange (HCCL) and gold miner, Falcon Gold Zimbabwe.
Besides mining companies, there are companies which at first glance are potential counters like Halsteds and many others.
Proposals were earlier made to adopt legislation to compel mining firms to list the majority of their stocks on the local stock market to ensure some accountability. Some of the companies like Zimplats and Caledonia Mining Corporation are listed in foreign Jurisdictions, the Australia Stock Exchange and Toronto Stock Exchange (TSX) respectively.
Despite the need to lure some large companies onto the ZSE list, the bourse has made strides with regard to promoting financial inclusion, particularly through the introduction of products that cater for the least in society who are willing to raise capital through the ZSE. Examples are Exchange Traded Funds (ETFs) and Invoice Discounting.
The launch of the ZSE Training Institute yesterday is a milestone in the journey to foster enhanced financial literacy among potential investors, the general public and corporates alike.
Actual ETFs are earmarked for launching in March while Invoice Discounting and another product specifically for SMEs shall also be launched before long according to the chief executive officer.
“We started talking about ETFs, but the actual ETF itself has not been launched yet. We are hoping to launch it in March. What we have done is to build up explanations so that when it comes people will know what we are talking about. We have put all these episodes upfront so that at launching investors will be well informed.
“In terms of providing finance for SMEs, it is something we are also about to launch as well. We will launch an Invoice Discounting facility where if you deliver to a large company you can earn some benefit. That is something we are going to launch shortly,” he said.
Online Reporter