eBusiness Weekly
Enacy Mapakame
The country’s capital markets will remain a punching bag and an easy scapegoat for policy failure unless sector players prove their relevance not only to policymakers, but to the generality of the Zimbabwe population, industry officials said on Wednesday.
According to the World Bank, capital markets facilitate economic growth by giving producers of goods and services access to long-term financing. In the world’s largest economy, the United States of America, capital markets are the largest source of financing supplying over US$8 trillion in corporate debt and trillions more in mortgage funding.
But in Zimbabwe, they have been “accused” of seemingly taking speculative and arbitrage positions, and the hard-handed reaction by authorities such as market closure has had a negative impact on investor confidence.
In a no-holds-barred panel discussion at the inaugural Capital Markets Awards night hosted by Business Weekly and Financial Markets Indaba in Harare, experts in the capital markets highlighted the sector is currently not receiving enough recognition from the policymakers. Resultantly, policymakers can come up with measures that hurt the sector, which in other countries functions as a barometer for economic performance.
The country is currently pushing for the realisation of the National Development Strategy (NDS1) which should see the economy transform into an upper-middle-income economy by 2030. But discussions from the panel showed there is little or no recognition given to capital markets in this “dream”, despite their crucial role of providing capital raising solutions for businesses.
Regulator- Securities and Exchange Commission of Zimbabwe (SecZim) chief executive officer Tafadzwa Chinamo, highlighted the need for all capital markets players to work together and raise a “voice” that cannot be ignored in the economy and show their relevance to the economic transformation agenda.
“We need a voice that can’t be ignored,” said Chinamo during the panel discussion.
“The fact that a market can be closed for a month and life goes on in the country means we have not made enough information about our importance in this economy known. We need to have a voice that can be influential to policyholders. We have not shown our importance in this economy, which is a problem,” he said.
Chinamo, who was commenting in relation to the suspension of trades on the Zimbabwe Stock Exchange (ZSE) in June last year in compliance with a government directive after the bourse was listed among platforms allegedly being used to sabotage the economy, added that before sector players go and address Parliament, the general populace have to have a feeling that “this market means something.”
He revealed that while approximately 100 000 people are invested in the capital markets against a population estimated at 16 million, they are tagged as elitists and remain “an easy punching bag.”
“If we don’t act and create relevance it’s very easy to be done away with,” Chinamo said.
Last year, the Government singled out mobile money platforms and the ZSE as vehicles that were being used to undermine the economy through tinkering with the exchange rate by promoting illegal exchange rates and currency trades.
Additionally, Government also accused the ZSE of harbouring “fake counters” that were also using the Old Mutual Implied Exchange Rate (OMIR) in the conduct of their business promoting the existence of many exchange rates in the economy.
During the same debacle Old Mutual, PPC Zimbabwe and SeedCo International’s fungibility were also suspended while Seed Co International was later delisted from the bourse and subsequently listed its shares on the USD denominated Victoria Falls Stock Exchange (VFEX). Meanwhile, shares of PPC and Old Mutual remain suspended from trading on the bourse.
This was not the first time trades were suspended on the local bourse. In 2008, at the height of hyperinflation, the central bank – the Reserve Bank of Zimbabwe (RBZ) suspended fungibility of dual-listed stocks, with the same view to stem exchange rate depreciation as this was believed to distort the real value of local currency through speculative purchases.
Market watchers have argued economic uncertainty and policy inconsistencies continue to push away potential investors while others adopt a wait-and-see attitude.
The World Bank also highlights that well-functioning capital markets require incentive structures to “crowd in” commercial investors, an enabling policy and regulatory framework, and synchronisation of robust regulatory framework with institutional capacity.
They also provide investment opportunities for families, both directly and through mutual funds, and pension funds.
Despite these important functions, capital markets are often poorly understood resulting in ordinary people shying away from them on the misconception they are elitist and creating scope for more investor education to lure more retail participation.
ZSE chief executive officer Justin Bgoni, shared the same sentiment with Chinamo and said “it is very important as capital markets (players) to get more and more ordinary people to participate and make them (capital markets) relevant to the people and policyholders.”
Bgoni said as long capital markets are not relevant to policymakers, they can do whatever they want to with “no repercussions for them”.
He said if the sector continues to be regarded as a preserve of the elite, “they know that whatever happens, ordinary people won’t care that much about it.”
“That’s why it’s very important as capital markets to get more and more ordinary people participating and gain relevance”.
