Governance of Valuations: Consolidating Market Confidence

MIKE ERIC JURU

 

As mentioned in one of my previous articles, valuations are undeniably the invisible scaffolding of modern economies. They determine the worth of companies, properties, and financial instruments, shaping decisions from boardrooms to trading floors.

 

Yet, the credibility of valuations rests not only on technical skill but on governance, the systems, checks, and responsibilities that ensure valuations are reliable, trustworthy, transparent, and aligned with the public interest.

 

In Zimbabwe, where capital markets are evolving and like the world over, investor confidence is paramount, governance of valuations is a shared responsibility meant to prevent manipulation, bias and errors to deliver market stability.

 

It largely involves the valuation firms, the entities commissioning valuations, capital and financial regulators such as the Zimbabwe Stock Exchange (ZSE), Victoria Falls Stock Exchange (VFEX), Insurance and Pensions Commission (IPEC), Reserve Bank of Zimbabwe (RBZ), and Securities and Exchange Commission of Zimbabwe (SECZ).

 

Each plays a distinct but interconnected role in safeguarding integrity.

 

 

 

The Valuation Firm: Custodians of Integrity

 

Valuation firms are the first line of defence in governance. Their role extends beyond producing numbers; they must embed independence, objectivity, and professional rigor into every assignment. Strong internal governance means:

 

Independence: resisting client pressure and conflicts of interest.

 

Standards compliance: applying International Valuation Standards (IVS) and local regulatory frameworks consistently.

 

Quality assurance: instituting peer reviews, audit trails, and transparent documentation of assumptions.

 

Capacity building: investing in continuous professional development to keep pace with ESG integration, digital tools, and global benchmarks.

 

A cautionary case is the 2008 global financial crisis, where weak governance in mortgage-backed securities valuations contributed to systemic collapse. Valuation firms that failed to challenge unrealistic assumptions became complicit in inflating asset bubbles. The lesson is clear: governance is not optional; it is the profession’s license to operate. The Valuers Council of Zimbabwe is therefore called to action.

 

 

 

The Entity Requiring the Valuation: Responsible Commissioning

 

Entities commissioning valuations which are the listed companies, insurers, banks, or corporates—also carry governance obligations. They must:

 

Define clear mandates: specifying scope, purpose, and intended use of valuations.

 

Respect independence: avoiding attempts to influence outcomes for short-term gain.

 

Disclose transparently: ensuring valuation reports are fairly presented in financial statements, prospectuses, or regulatory filings.

 

Procure responsibly: recognizing that procurement of valuation services is a strategic decision requiring senior employees, not a routine administrative task.

 

Globally, governance lapses have shown the risks of poor commissioning. In South Africa, the Steinhoff scandal revealed how weak oversight of valuations and accounting practices eroded billions in shareholder value. The scandal highlighted the importance of valuation governance which included independent oversight, competent and ethical valuations. Entities must therefore treat valuations as governance instruments, not mere compliance exercises.

 

 

 

Regulators’ Expectations: Oversight and Market Integrity

 

Zimbabwe’s regulators demand valuations that uphold market confidence:

 

• ZSE and VFEX: require valuations underpinning listings, mergers, and acquisitions to be transparent, independent, and aligned with disclosure standards.

 

• IPEC: relies on valuations for solvency assessments and fair treatment of policyholders, demanding actuarial and valuation rigor.

 

• RBZ: uses valuations in banking supervision and collateral assessments, expecting consistency and risk-sensitive methodologies.

 

• SECZ: oversees valuations in capital raising and securities transactions, requiring governance structures that protect investors.

 

Internationally, regulators have acted decisively when governance fails. The UK’s Financial Conduct Authority (FCA), for example, tightened rules after misvaluations in investment funds led to liquidity crises. Zimbabwe’s regulators are similarly positioned to enforce discipline, ensuring valuations are not only technically sound but institutionally credible.

 

 

 

Towards a Governance Framework

 

The governance of valuations can be visualized as a triangular alignment:

 

• Valuation Firms: uphold professional standards and independence with clear guidelines.

 

• Entities: commission valuations responsibly and disclose transparently, setup valuation committees overseeing valuation processes and approving valuations.

 

• Regulators: provide oversight, enforce compliance, and set clear expectations.

 

When this triangle is strong, valuations become instruments of trust. When it is weak, valuations risk becoming tools of manipulation. The need for regular monitoring and reporting valuation risks cannot be overemphasized.

 

A positive case study is Kenya’s capital markets, where strong governance of valuations in real estate investment trusts (REITs) has attracted international investors. Clear standards, independent valuers, and regulatory oversight created confidence in asset-backed securities. Zimbabwe can emulate such frameworks to position its markets as transparent and investable.

 

 

 

Conclusion

 

Valuations are not just numbers; they are governance signals. They tell investors whether markets are credible, whether companies are accountable, and whether regulators are vigilant. For Zimbabwe, strengthening governance of valuations is essential to attract capital, protect stakeholders, and build a reputation for transparency.

 

Valuation firms are custodians of integrity and must act accordingly. Entities must commission and procure valuations responsibly, recognizing the strategic importance of independence, competence and capabilities. Regulators must enforce standards that safeguard market confidence.

 

Together, these actors can ensure valuations serve as reliable instruments of trust, driving sustainable growth and investor confidence.

 

The governance of valuations is, ultimately, the governance of the economy itself.

 

Juru is a recognised and accomplished business leader who is the current Chairman of the Green Building Council Zimbabwe, Valuers Council of Zimbabwe and CEO of Integrated Properties. His previous National leadership roles include Chairman of Institute of Directors Zimbabwe, President of Real Estate Institute of Zimbabwe, inaugural Chairman of REITs Association, Vice President ZNCC. He has sat on several Boards in private and public sector. He leads passionately the transformation of Zimbabwe’s built environment to sustainability.