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Business, Careers & Technology Is the ZSE ownership Terence Zimwara The recent signing of the memorandum of understanding between the government, Securities and Exchange Commission (SECZ) as well as the Zimbabwe Stock Exchange (ZSE) has been aptly called a new dawn. The memorandum of understanding (MOU) sets the pace for the demutualization of the exchange, a process that will see the ZSE being transformed from mutual society to a broadly owned private entity. The government which was represented by the Finance Minister, Patrick Chinamasa, will assume 32 percent of ownership of the exchange while the remainder will be owned by brokers. Presently the ZSE operates as a mutual society where members enjoy rights of ownership, decision making (one member, one vote) and trading. Thus, the essence of demutualization is that of separating ownership of the exchange from management and participation through adherence to internationally accepted code of corporate governance. For years on, brokers had been reluctant to let go of control of the exchange using different tactics to stall the process of turning the exchange into a private entity. The replacement of the ZSE Act with the Securities Act in 2004 culminated in the creation of a capital markets regulator, SECZ. Prior to this, the ZSE had been a ‘self regulating’ entity and the creation of SECZ resulted in repeated clashes between the two, with the former arguing that by virtue of its presence before the latter’s creation it therefore could not be asked to restart a process of registration. In fact, in a sign that hostilities have not totally ended, at the signing of the MOU, Tafadzwa Chinamo chief executive of SECZ repeated his organisation’s long stated position, that the ZSE was not properly registered. Minister Chinamasa who was the last to give a speech, immediately tried to reconcile the two parties by telling SECZ what he felt were the reasons for ZSE’s reluctance to fully register itself with the regulator. He repeated the ZSE line that it was already operating prior to the change in the Act, governing its operations however the minister promised to help solve the long standing issue in the not too distant future. The raising of such an issue at a memorandum signing raises questions about the whole demutualization process. If stakeholders are still publicly slating each other even in front government, then there is every chance that the big egos of brokers and that of regulators may torpedo the latest effort to realign the country’s sole capital market player. Minister Chinamasa in his speech lack of it as the prime cause for past problems at the ZSE. He added that the organisation, this created governance issues and the lack of operational Eve Gadzikwa current chairperson of ZSE applauded the signing of the memorandum because the status quo lacked clarity in terms of, who owns what and who does what? She believed having this clarity will promote growth of the exchange and it will cease to be a club as is the current perception which arises primarily out of the ownership structure. The road map as set out by the memorandum indicates that shareholding structures will change after the demutualization has been completed. When demutualization is done and dusted, government’s shareholding of the exchange will be reduced from 32 to 16 percent. Similarly, brokers are also expected to reduce their shareholding from 68 to 34 percent. The rationale for this according to Minister Chinamasa is to have a the exchange is such an ‘important’ institution whose shareholding cannot be vested in a few stakeholders. The remaining 50 percent will be shared Page 68 The Parade - Zimbabwe’s Most Read Lifestyle Magazine August 2014
Business, Careers & Technology individuals and Chinamasa implored SECZ and ZSE to immediately start the process of identifying potential suitors for the exchange. In the envisaged aftermath of the demutualization, the ZSE will court strategic partners but holders of voting shares in the ZSE will not be allowed to hold more than ten percent of total voting shares in ZSE. Government also said it expects other players to enter the capital markets as competitors to ZSE something that has been impossible to do now due to what the minister called barriers to entry. The ambitious goals that stakeholders have set for themselves will only be achieved if indeed the brokers are now ready to let go of the exchange and if the ZSE management itself is committed to the reforms. In the past former ZSE chief executive Emmanuel Munyukwi and his management were accused of corporate malaise with media reports suggesting unbridled mismanagement of resources. The ZSE ultimately dismissed Mr Munyukwi and Alban Chirume now leads the revamped ZSE management. The MOU now sets the tone for more far reaching reforms and the good behaviour of all stakeholders will be the key in seeing this out. TP Advertise in THE PARADE Online Digital Publication Embrace the new frontier of Advertising The Parade - Zimbabwe’s Most Read Lifestyle Magazine August 2014 Page 69
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