Improving investor confidence to raise capitalMining & Infrastructure IndabaEve Christine GadzikwaZSE Chairman, SAZ Director General
Overview • Background • Brief outline of the ZSE • What are the investor concerns? • Raising capital by dealing in shares, bonds and other long-term investments • Improving investor confidence to raise capital • Stock Exchange Listing Requirements • Way forward
Background • Zimbabwe faces formidable but not insurmountable economic challenges • Inadequate clarity on Indigenisation and Economic Empowerment Act • Economic stakeholders must work together towards rebuilding the economy and attracting fresh capital
Snapshot of ZSE • ZSE has adopted a number of measures since 2013 in the interest of ensuring that ZSE plays an active role in mobilising funds • Risks associated with Lags in the settlement and clearing system are being addressed • Governance improvements to enhance investor confidence is cornerstone
Investor concerns Risks associated with: • Clearing and settlement (T7) • ROI • Regulatory framework • Protection of Property Rights (Title & expropriation) • Corporate governance (Disclosure, Compliance) • Policy Clarity/Consistency • Maturity & sophistication of the markets • Exit strategy for junior mines
continued • suitability of raising funds through listing • Stage of growth cycle of the company • Conditions for listing • Suitability of market conditions • General liquidity challenges • Maximizing value • Overview of international exchanges • London Stock Exchange, Toronto Securities Exchange and Hong Kong Stock Exchange examples of financial centers for financing Africa projects.
Listing requirements • Disclosure and reporting • Annual financial reporting • Half year financial reporting • Major transactions pre approval by shareholders • Special disclosure rules for mining and exploration companies • Competent person’s report • Foreign ownership • Foreign residents not to hold more than forty per centum of the total equity of the company issuing the security.
Current limitations • Lack of variety in instruments traded on the ZSE • Underperformance of Mining index • Reflective of unfavourable economic climate and negative perceptions held by some sectors with regard to indigenization laws. • 4 mining companies currently listed • Difficulties in fund raising under current economic conditions
Improving investor confidence to raise capital: government initiatives and investor experiences • Government is making concerted efforts in re-engaging the international community • A number of projects currently underway to modernise Stock Exchange -Demutualisation -Automation (ATS) -CSD -New listing rules -Data Portal
Demutualisation • The purpose of this Memorandum signed in May 2014 is to provide the broad framework for Demutualisation of the ZSE • Meeting between the principal stakeholders being: • Government; • Stockbrokers; • SECZ; and • ZSE
Impact of electronic trading on securities (ATS) • 1. Reduction in transactional costs – the straight through data processing (STP) offered on fully electronic trading platforms (platforms with both functional ATS and CSD), ensures that overall transactional costs are minimized. • 2. Greater liquidity – in markets where full electronic trading has been achieved liquidity (depth and breadth of the market), as more investors are particularly attracted to the market efficiencies brought about by market depth. • 3. Greater competition – electronic trading promotes international cross border trading thereby increasing global competition and further enhancing liquidity and market efficiencies that promote unbiased price discovery and information symmetry. • 4. Increased transparency – Electronic trading has meant that the markets are less opaque. It is relatively easier to obtain trading statistics (prices and volumes etc) about securities when that information is flowing globally in electronic format.
ZSE Opportunities • Zimbabwe Emerging Enterprise Market (ZEEM) • Current set-up restrictive to companies in early stages of development • Two tier exchange will support companies in all growth stages • Less stringent requirements • ZSE currently finalising framework • Bonds Market • ZSE currently working on development of a market to allow trading of bonds
Outlook • Liquidity on the market is very low. • The ZSE is coming up with a robust framework to facilitate capital raise whilst protecting investors • Improving investor confidence means moving towards better compliance, modernised exchange, timely accurate information, consistency • Investor education is on-going through road shows, conference, workshops • Corporatisation of ZSE • Taping into foreign markets, better governance, good quality listings & access to better sources of finance by 2015
Conclusion • Timing important when considering raising funds for exploration and mining projects through an exchange listing • Mining sector currently underrepresented on the ZSE • PPPs in infrastructure projects will work to harness expertise and efficiencies of private sector, making projects better attractive to investors. • Governance and reporting requirements for listing will provide transparency in infrastructure projects • Depth offered by international markets, as opposed to African exchanges, might be attractive for projects seeking funding
Change is constant • “The responsibility for change is not just on stock exchanges or listing companies; other players such as governments, regulators, investors, standardisers, professional bodies have a part to play in embracing change for socio-economic transformation” ……….ACCA