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(HERALD) Indigenisation set to spark surge in ZSE listings

Indigenisation set to spark surge in ZSE listings
Business Reporter

THE Zimbabwe Stock Exchange could witness an upsurge in listings as companies seek to meet the indigenisation obligations. Through public listings, foreign shareholders will reduce their stake by selling part of their equity to local investors while at the same time retaining the controlling shareholding.

The Indigenisation and Economic Empowerment (General) Regulations came into force on March 1 2010 and companies are required to submit their plans to Government on how they intend to fulfil the requirements of law and to have 51 percent ownership in the hands of locals in the next five years.

Analysts believe public listings are the most viable option to comply with the country’s indigenisation thresholds.

"The best option to indigenise is to list on the Zimbabwe Stock Exchange. Companies may come up with a plan to gradually float equity to local shareholders during the next five years.

"Foreigners may also retain a controlling stake," said an investment analyst with a Harare-based research company.

Foreign-owned companies that are already considering listing on the ZSE include Telecel Zimbabwe and Premier Banking Corporation.

Premier majority shareholder African Development Corporation has indicated that it would dispose part of its stake to local investors within five years though listing on the ZSE.

Since stocks began trading in foreign currency last year in February, the market has been largely driven by foreign investor funds but locals have remained in control of the market.

Liquidity constraints have been a major factor while local participation on the equities market has been insignificant.

"During this period when the country is facing liquidity constraints, companies can start by issuing little equity which can be easily absorbed by the market and then increase it as the liquidity improves," said the analyst.

ZSE chief executive Mr Emmanuel Munyukwi concurred that public listings could achieve the indigenisation goals.

"They could be, of course, some challenges since the shares are traded on a free-buyer/free-seller basis, but I believe listing could be the best option to meet the desired goals," he said.

Mr Munyukwi said most companies on the ZSE were already indigenised "and we are conducting a verification exercise".

He added that listings would also help companies to raise working capital.

"Companies used to borrow money from banks but bank finance remains a challenge," said Mr Munyukwi.

Over the past five years, Zimbabwe witnessed only three listings — Redstar in 2006, Zeco Holdings in 2008 and TN Holding in December last year — as a result of inconsistent policies which restricted trade.

Unlike the private arrangements, public listings would be more transparency and ensure greater participation by the public

The indigenisation regulations require that all business with an asset value of US$500 000 comply with requirements of the Act.

In line with the objective of the Act to achieve 51 percent indigenisation shareholding, the regulations stipulate that existing businesses meet the required 51 percent shareholding in a period of five years.

New businesses are also required to achieve the same target within five years from the date of commencement of business.

Labels: INDIGENIZATION AND EMPOWERMENT ACT (ZIMBABWE), ZSE

posted by MrK @ 12:25 PM