Zimbabwe: ZSE Should Foster Confidence


LAST week, we carried an in-depth report on the Zimbabwe Stock Exchange (ZSE) which highlighted the equities market’s sad reaction to complaints from concerned investors. We reported on the lack of action, or slow pace at which the ZSE has investigated a complaint by one investor in CFI Holdings. The complaint relates to the disposal of an asset by the company to another listed company on the ZSE.

An investor in CFI has alleged that the transaction had the hallmarks of conflict on interest in that the shareholders who voted for the transaction at a shareholders’ meeting were also controlling shareholders in the purchasing company.

There have been several shareholder complaints that have been lodged by investors with the ZSE which have taken time to resolve or are still outstanding.

Another case involves shares in CFI. The allegations, in this particular case, are that one investor transacted in CFI shares during the company’s closed period. That investor, apparently, had inside information on CFI since he had significant interest, and board representation in the company.

It has been about a year since the ZSE launched investigations on that case, but up to now the bourse’s authorities have not yet published results of that investigation.

Such an attitude by the ZSE undermines confidence in the bourse and may have the effect of even discouraging foreign investors.

The ZSE requires nurturing confidence more than any other bourse within emerging market economies. It is currently grappling with risks emanating from policy risks related to the expropriation of private property through the indigenisation law compelling foreign-owned businesses to cede at least 51 percent of their shareholding to indigenous Zimbabweans.

This risk has been particularly heightened by the seizure of white-owned farmlands under the country’s land reform programme which started in 2000. That programme, which started as political rhetoric by the political establishment, transmuted into a fully-blown campaign that resulted in the expropriation of over 4 500 farms from their former white owners.

The indigenisation campaign has therefore not been considered as political rhetoric given the experience of the farm seizures. This has tended to militate against confidence on the local bourse.

The actions of the ZSE, therefore, are critical in fostering confidence in a market with a lot of exogenous factors militating against it.

The failure to act in time on complaints creates uncertainties and undermines confidence in the enforcement of minority rights.

Moreover, a perception is created that regulators are corrupted by parties involved in disputes and are, therefore, influenced against acting quickly and decisively on complaints.

Failure to act quickly on complaints may result in prejudice or loss on other parties, and by the time issues are resolved, such loss may be difficult to reverse.

The burden is on the ZSE, and indeed the securities markets regulator, the Securities and Exchange Commission of Zimbabwe, to act on matters that may undermine confidence in our markets.

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