Spare us from empowerment law, listed companies plead
http://www.theindependent.co.zw/
Thursday, 29 July 2010 18:56
THE Zimbabwe Stock Exchange (ZSE) has asked government to back down on
indigenisation regulations compelling foreign-owned companies that include
listed concerns to dispose of a controlling interest to cash-strapped local
investors.
This comes after the ZSE – an erstwhile vehicle for mobilising national
savings from surplus sectors of the economy and foreign investors to finance
the country’s economic development – shed significant volumes after
empowerment regulations came into force early this year.
Informed sources said equities market players on Tuesday advised Youth
Development, Indigenisation and Economic Empowerment minister Saviour
Kasukuwere to spare publicly-owned companies from the controversial
empowerment regulations. The exchange, however, said government should
review the exemptions periodically to avoid abuse by listed companies.
Kasukuwere declined to comment on the issue.
Tuesday’s meeting came on the back of a prolonged retreat of the exchange
that saw the industrial and mining indices plummeting because of the
regulations that came into force in March.
Kasukuwere on Wednesday declined to comment on the meeting.
“The ZSE approached minister Kasukuwere proposing that the exchange be
spared from the indigenisation law,” said a source. “Market players are also
pushing government to privatise parastatals through listings on the
exchange.”
The move to wean off most loss-making government entities was put on ice
after the state became sceptical that most of these companies would be sold
for a song. The ZSE, according to sources, advised Kasukuwere and Finance
minister Tendai Biti to embark on broad-based empowerment programmes by
privatising financially-beleaguered parastatals that include power utility
Zesa, the Grain Marketing Board, National Railways of Zimbabwe, unreliable
public transporter Zupco, national carrier Air Zimbabwe, Zimbabwe Iron and
Steel Company, Minerals Marketing Corporation of Zimbabwe and
telecommunications companies.
“A properly functioning and active exchange plays a major role in mobilising
national savings and hence capital for the economy and it is of paramount
importance to note that any policies that affect the functioning of the
exchange can only hinder the development of the economy in general,” the
source said.
Biti, during his Mid-Year Fiscal Policy Review blamed the empowerment
regulations for scaring away foreign investors’ contribution to market
turnover which dropped to a monthly average of 20% from 50%.
“The poor performance is as a result of investors pulling out their
investments reflecting depressed investors’ sentiment over perceived
financial risks, especially following gazetting of the Indigenisation
Regulations on March 1,” Biti said.
The proposed measures, according to the source, also seek an upward revision
of the aggregate threshold for foreign investors’ interests in listed
companies. Should the proposals get approval, foreign investors who before
the empowerment regulations were actively involved on the exchange would be
allowed to own 49% shareholding in listed companies, contrary to the
mandatory 40% threshold currently in place.
The ZSE, the source said, is also pushing for a policy that makes it
mandatory for telecommunication and mining companies to list on the
exchange. Currently ZSE blue chip stock Econet is the only listed company
while rival companies Telecel and government owned NetOne remain
tight-lipped on going public.
With liquidity problems still affecting the exchange, the ZSE said promoting
dual listings could be used to improve market activity and money exchanging
hands on the market.
“The Zimbabwe Stock Exchange is yet to fully realise its potential in
moblising and allocating resources for the country’s economic development.
The potential in moblising and allocating resources for the country’s
economic development.
This potential can only be realised through sound and sustainable
macroeconomic policies, enabling legislation that support investment, sound
infrastructure and a business-friendly economic environment.”
Since dollarisation last year, nine companies raised funds on the market
through rights issues and private placements for working capital, while
banks used the funds to comply with prescribed capital levels.
Bernard Mpofu