Maravi

(HERALD) Foreign-owned companies agree to cede shares

Foreign-owned companies agree to cede shares
Saturday, 02 June 2012 19:18
Ambassador Chris Mutsvangwa

Synopsis

The resource nationalism drive reached a milestone with the agreement by Zimplats to cede 51 percent of its shares to various local entities including the National Indigenisation and Economic Empowerment Board — NIEEB.

It is clear that other wholly externally held assets will be complying with the indigenisation law.

The positive game changer was in the acceptance of the principle that national resource ownership needs to be taken into account in mineral resource exploitation.

The next hurdle is the proper evaluation of these assets and their monetisation so Government can generate funds for national investment and improvement of the welfare of the people.

Objective

The challenge is then how to monetise or turn these newly acquired assets into liquid cash for the new shareholder who is mainly the Government of Zimbabwe through NIEEB

Added urgency

There is urgency to this initiative as the neo-liberal school of the International Monetary Fund, World Bank and African Development Bank seek to worm their way back into Zimbabwe’s economic affairs. They have failed in their decade-long drive to sink the national economy and now want back ostensibly to help the same economy they tried so much to destroy.

Modality of Stock Exchange

The modality to do so would be through setting up a new stock exchange or stock exchanges that would be dedicated to the trading of this portfolio of publicly owned assets.

A Special Purpose Vehicle (SPV) should be established as a private limited entity that applies for a stock exchange licence to house and trade these assets.

The SPV would proceed to set up a private limited company under the auspices of the President of the Republic as his office is the custodian of the national wealth.
The private limited company would then apply for a licence or licences from the Security Exchange Commission whose core mission is to develop the natural capital bond, commodity, derivatives and future exchange markets.

The avenue of using the new stock exchange has the advantage of being transparent and accountable to Zimbabwean citizens who are the ultimate owners of the natural resources of the country.

It de-politicises the dispensation of God-given wealth. The stock exchange deepens and widens the access to funds for capital hungry, but resource-rich Zimbabwe.

Evaluation issues

The recourse to the stock exchange would also help address the issues of evaluation of the assets. The accent by the mining companies ceding assets is on their role in prospecting.

It conveniently overlooks ownership rights by the Government prior to the issuing of the mining licences. A reputable consulting company would help address this issue.
The new stock exchange would include:

New Mining Board

Zimbabwe needs a new exchange specialising in mining assets as this corresponds more to the reality of Zimbabwe’s economy as a major mining power. It will, inter alia, cater for a Diamond Exchange, a Platinum Exchange, a Gold Exchange and a Base Metals Exchange.

The mining board will address the existing anomaly where there are a paltry three counters on the existing stock exchange, yet there are nearly 80 industrial counters even when Zimbabwe hardly features as a global class manufacturing centre.

The forte of Zimbabwe is its mineral wealth with being a top and rising diamond producer, sharing 98 percent of known platinum resources with neighbour South Africa, among the top five chrome producers and a very respectable place among leading gold producers.

What oil has done to Opec countries is precisely what Zimbabwe could achieve with its mineral wealth, especially with its more manageable population size.

Zimbabwe as Domicile of Primary

Registration of Home Minerals

A statute or regulation stipulating that the Zimbabwe Mining Board be designated the primary exchange of listing and trading of any minerals whose origin is Zimbabwe would go a long way towards relocation of the trading of Zimbabwe mineral stocks currently being executed in foreign stock exchange administrations like Toronto for gold, Sydney and Johannesburg for platinum, London, Antwerp, Tel Aviv for diamonds.

Of course, dual or multiple listing would be in order so long these are treated as secondary or subsidiary listings that acknowledge the primacy of the Harare Mining Board.

SOE Mining Board

Zimbabwe still has a huge public sector of state-owned enterprises comprising parastatals and other government entities. These would also be taken to the capital markets through a dedicated stock exchange that suits their circumstances as economic enablers and profit-making entities in the new global economy.
With the democratisation of the global capital markets that now includes BRICS centres like Shanghai, Hong Kong, Singapore, Sao Paulo, Johannesburg and other sources like

Ankara and Seoul, there is new competition in investments that can assist in capitalising these SOEs so they are profitable and efficient in delivering service.

Growth of Financial Services Industry

The setting up of the stock exchanges of the two domains of mining and SOEs will beget Zimbabwe a thriving financial services sector while injecting liquidity to the economy.

Sovereign Wealth Fund

The stock exchanges will invest surplus funds generated from their activities into the Sovereign Wealth Fund, completely bypassing the neo-liberal, multi-lateral donor institutions that are the IMF and World Bank and the Paris Club, who all have an appaling record in dealing with Zimbabwe.

This will be Zimbabwe’s ultimate deliverance from the debt bondage of the former imperial powers of the West.


Road show to Capital Markets
The Special Purpose Vehicle should seek the assistance of reputable stock market administrations such as Mumbai, Hong Kong, Shenzhen and Chicago, among others.
A road show to these centres would be in order

Dual or Multiple Licensed
Stock Exchanges

A sequel to the Road Show would be the judicious choice of a partner or partners who can assist in launching the new stock exchange trading the portfolio of mining and SOE assets.

This move would shorten the time to market for the launch of nascent Zimbabwe minerals and SOE exchanges. It will also deepen and widen access to fund managers and other investors so as to enhance liquidity.

A relationship with the likes of India’s Mumbai Exchange, China’s Hong Kong Exchange and America’s Chicago Exchange would be ideal as that will help address geo-political considerations.

It also suits Zimbabwe’s small size.

Official support and consulting services

The two new stock exchanges would enjoy ready support from the targeted partners and their governments. Indications are that India, Hong Kong and Illinois State government would be keen to help launch the portfolio of exchanges.

India, because of its emergent economic power status, a very fresh capital market legislation and a sterling academia steeped in financial services as evidenced by sizable Indian professors in the most advanced USA capital market, a close association with New Delhi in such an initiative is highly recommended.

Labels: INDIGENIZATION AND EMPOWERMENT ACT (ZIMBABWE)

posted by MrK @ 12:18 AM