1998 SOUTHERN AFRICA ECONOMIC ... - National Treasury

seasonality factors normally associated with an increase in
i m p o rts during the fe s t i ve period.
The Bank of Zambia took a bold decision to strengthen the
financial we l l b e i n g ,and enhance confidence in the banking and
financial system. F i r s t ly,a weak bank with liquidity pro b l e m s ,t h e
Chase Trust Bank, was merged with the Zambia National
C o m m e rcial Bank, a large, s t rong bank. S e c o n d ly, t h re e
c o m m e rcial banks namely, M a n i fold Bank, Prudence Bank and
C redit Africa Bank, which we re insolve n t , we re put under
re c e i ve r s h i p. All the remaining operating commercial banks have
s t rong capital basics and are well managed.
The overall balance of payment position re c o rded a deficit of
USD138.9m in 1997 compared with a deficit of USD124.4m in
1 9 9 6 . The trade deficit fell due to a rapid increase in
m e rchandise exports re l a t i ve to merchandise import s . T h e
i n c rease in exports came mainly from non-traditional export s
(NTEs) which increased by 37.9 perc e n t .
Financial Institutions
Since independence,the Government of the Republic of Zambia
maintained a ve ry active role in the banking sector. At the
beginning of the 1990s the government started the process of
opening up the economy, a l l owing the market fo rces to play an
i m p o rtant ro l e. The financial sector was also liberalised during
the same period.The Banking and Financial Services Act in 1994
was designed to ensure a proper framework for regulating the
conduct of the financial sector and the protection of clients and
i nve s t o r s .
The Bank of Zambia exe rcises overall control over the banking
s y s t e m . The Bank’s main responsibility is the protection of the
value of the country ’s curre n c y. M o n e t a ry control is being
e xe rcised through indirect instruments such as open marke t
o p e r a t i o n s .The Bank of Zambia is also responsible for the
s u p e rvision of the banking industry and re forms aimed at
s t rengthening the Bank’s superv i s o ry and re g u l a t o ry cap a c i t i e s
we re implemented in 1997.
Both local and international banks have a presence in Zambia.
International banks operating in Zambia include Barc l ay s ,
S t a n d a rd Chart e re d ,S t a n b i c, C i t i b a n k ,and the Bank of China.
M a ny of the commercial banks also offer merchant and
i nvestment banking serv i c e s .The introduction of automated and
computerised services has improved the quality of the serv i c e s
p rovided by the banking sector.The number of building societies
is also grow i n g ,catering for small depositors and concentrating
on long term mortgage loans.
Z A M B I A
The Development Bank of Zambia provides medium and long-
Lusaka Stock Exchange - Market Statistics (USDm)
term loan finance and equity.Also providing long-term capital in
the form of loans and equity is the Zambia Ve n t u re Capital Fund,
a private company established in 1995.
Lusaka Stock Exchange
The LuSE began operations in Fe b r u a ry 1994 and although in
the first year no companies we re listed, trading of unlisted
stocks took place. The exchange was officially opened in A p r i l
1 9 9 5 . C u rre n t ly, s even companies are listed, the major ones
being ZCCM, Zambia Sugar and Chilanga Cement.The Zambian
government offers some tax incentives (detailed in the section
on investment incentives) for companies which list on the
e x c h a n g e.
A unique fe a t u re of the Zambian stock market is that it was
designed by the International Finance Corporation, as a unified
m a r ke t .This is achieved through the Securities Act (1993) which
re q u i res companies with 50 or more shareholders to re g i s t e r
with the Securities and Exchange Commission (the agency
responsible for the regulation of the capital market) and trade
their shares on a recognised exchanges. In practice, this means
that the LuSE operates as a central market with a two tier
s t r u c t u re on which both listed and unlisted shares trade. T h e
1998 budget announced that dual listings would be provided fo r
on the LuSE.
The LuSE is designed to meet modern current international
s t a n d a rds in terms of trading, clearing and settlement.The LuSE
operates a central depository system and the trading
mechanism is bro ker to bro ker order matching. Clearing is
automated and completed on T + 1. Settlement is executed on
a T + 3 rolling basis.
The LuSE was one of the fastest growing bourses in Africa in
1 9 9 7 , g rowing an impre s s i ve 208 percent in terms of marke t
c ap i t a l i s a t i o n .The LuSE was also one of the best-perfo r m i n g
m a r kets in 1997.
Among the developmental plans under rev i ew is the fo r m a t i o n
of a Unit Tr u s t , p o s s i b ly in 1998 to engage broad and wide
p a rt i c i p a t i o n ,p a rt i c u l a r ly in the privatisation programme and as
p a rt of effo rts to put in place the institutional structure of the
m a r ket and develop the necessary skills.T h e re are also plans to
facilitate the establishment of an active secondary market in
government securities at the LuSE. This listing of gove r n m e n t
bonds is expected to improve price formation as well as draw
in broader participation by the public in the bond marke t .
The Securities and Exchange Commission, which monitors and
regulates the LuSE, is an independent body, whose board
consists of six commissioners.
Y E A R 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7
Number of companies with shares listed 0 2 3 7
Number of quoted companies 5 6 5 3
M a r ket cap i t a l i s a t i o n n / a 4 3 6 2 2 9 7 0 5
Volume of shares traded (m) 3 . 9 3 7 . 9 2 2 4 1 . 3 8 2 6 9 . 2 6
Value of shares traded 0 . 3 7 0 . 2 3 2 . 6 4 8 . 7 7
A n nual average dividend yield n / a n / a n / a 3 . 9 3
Average price-earnings ratio of all listed companies n / a n / a 4 . 67 9 . 68
S o u rc e : Lusaka Stock Exchange (1998).
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