The Sunday Mail
Enacy Mapakame
The case for a secondary bourse is becoming stronger by the day, with the recent decision by construction industry concern Radar Holdings to delist from the Zimbabwe Stock Exchange on April 30 signalling the need to comprehensively cater for smaller companies.
Radar shareholders sanctioned the move at an EGM in Harare on February 25.
According to a circular to shareholders in January, Radar said listing had become expensive to maintain.
“The reason for the proposed delisting is that the group continues to underperform,” the company said then.
Market watchers believe that a secondary bourse for relatively smaller companies might help accommodate firms that could no longer sustain ZSE listing requirements.
In 2015, just 79 483 shares valued at US$2 302 of Radar were traded.
The counter has not traded this year and remains stuck at USc2,48.
Shares of counters such as Zeco Holdings and Unifreight Africa Limited have also not traded this year.
It is feared that the revised listing rules, which set the minimum listing capital requirement at US$10 million, will make it increasingly difficult for companies to remain on the ZSE.
More than a dozen entities have exited the bourse in the last six years due to tougher monitoring and general depreciation of company values.
Analysts are now pushing the ZSE to fast-track a secondary stock exchange with a proposed minimum capital requirement of US$250 000.
A secondary board will be ideal for companies that have shrunk over the years, as well as for emerging small businesses wishing to trade publicly.
Economist Dr Gift Mugano said, “Most companies are now like SMEs, while other smaller companies are emerging. The economy is now driven by the SME sector and having a bourse that caters for this growing sector is noble, this is where the economy is. It is like coming closer to where the money is.
“The once-big companies can move to that bourse as well and raise money in a more relaxed exchange. It is believed US$4 billion circulates on the informal market and this will also be a way of bringing it back into formal channels.”
Equity Axis financial analyst Mr Respect Gwenzi said while a secondary bourse maybe a noble idea, the timing also had to be right.
“So, really, the listing fee becomes less a dampener of propensity to list than economic environment. Therefore, for the long run it remains a wise proposition, but given the current environment it may not achieve the intended outcome of pulling capital as most of these unlisted entities lack in corporate governance and this may lead investors into a deep pit as they fail to disclose certain vital information that may impact the share price or even the going concern status of the company.
“In the instance of Radar, it may be relevant to contextualise their exit and as far as they mentioned listing fees was their concern,” he said.
In October 2015, capital markets regulator the Securities and Exchange Commission of Zimbabwe announced it would issue licences for setting up a new platform – the Alternative Trading Platform to allow private companies to raise capital by selling their securities to the public.
SecZim chief executive Mr Tafadzwa Chinamo said setting up of the SMEs bourse was still work in progress while the regulator was also awaiting approval from the Finance and Economic Development Ministry on the rules to be used for the ATP.
“It is still work in progress within the ZSE. The ATP rules are with the Ministry of Finance. Once they are happy with it then we publish a statutory instrument to that effect,” he said.
In an earlier interview, the regulator said it had received expressions of interest from “one or two” applicants, but these would not be processed until April when the ATP is expected to be operational and issuance of licenses would commence.
