Tawanda Musarurwa and Enacy Mapakame
Despite Zimbabwe’s capital market apparently suffering from the absence of a strong retail investor base, Securities and Exchange Commission of Zimbabwe (SECZ) chief executive Tafadzwa Chinamo says the low inclusion rates are “normal”.
Zimbabwe’s fiscal and monetary authorities are driving financial inclusion, which is a key enabler to the achievement of the Sustainable Development Goals (SDGs) which are a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030. Chinamo cautioned delegates attending the inaugural C-trade Investor Day Conference that capital markets are a high risk playground.
He said there is need to distinguish between banking (which is largely viewed as a key driver of financial inclusion) and capital markets.
“There should be a word of caution when it comes to capital markets. Capital markets, especially the shares, are probably the riskiest of investments out there, so there is always a strong word of caution for anyone buying shares.
“For example, when we had a change of Government in 2017, prior to that I think the market had been going up by 20 percent a day, a week later it was falling by the same rate, around 20 percent a day. Now if you are a pensioner and you had put all your money in shares it could have been wiped out,” said Chinamo.
“So as much as we talk about low inclusion rates, it’s designed to be so. It should only attract those who can carry that sort of risk . . . If we go back to fund management principles you never invite or advise someone who is retiring to invest in stocks, so automatically that excludes a lot of people out there.”
Inclusion rates for retail investors on Zimbabwe’s capital markets currently stands at about 1 percent.
In developed economies capital markets investments cover a wide range of products, but locally the capital market is not that well developed and is dominated by shares although retails investors can invest in Collective Investment Schemes or Unit Trusts and other privately sold funds.
There are no barriers to investing on the Zimbabwean capital market. Local investors can trade freely as long as they have the resources.
“If you look at it from the point of view of banks versus capital markets, they are complementary. Banks are the biggest players in capital markets when you talk about raising money from bonds and so forth.
Capital markets are there for capital raising, banks are more transactional and they straddle the entire spectrum of financial services. So while 1 percent might appear low, I would have that 1 percent be people who are there because they know what to do. Banks on the other hand are different because we all need to buy from the shops and we need money to make that transaction.”
Notwithstanding the Chinamo’s assertions, due to a limited retail investor base Zimbabwe’s capital markets has found it difficult to mobilise savings from the public and channel them to the country’s productive sector, hence lack of provision of long-term capital. And this has also led to thin trading and low level of liquidity.
But the SECZ boss made a case for retail investors (including pensioners) who are invested through professional fund managers.
The National Social Security Authority (NSSA) — as a case in point — has around 70 percent of its investments in the local bourse, with interests in 53 of the companies listed on the Zimbabwe Stock Exchange.