Govt, ZSE exert pressure on companies

 

Auditor general Mildred Chiri

PHILLIMON MHLANGA

 

The government and the Zimbabwe Stock Exchange (ZSE) are exerting pressure on public companies amid revelations that all State entities have defied the Public Entities Corporate Governance Act on integrated sustainability reporting, it has been established.

Business Times can also report that close to 90% of listed entities are resisting the reporting rules, meaning less than 10% of annual reports for listed companies is non-financial information.

Head of business development at ZSE, Anymore Taruvinga, said most investors were now socially conscious, and make use of environmental, social and governance (ESG) standard criteria to screen potential investments adding that voluntary compliance has been “very low”.

“The increase in socially responsible investment leaves little choice for our companies other than to adopt ESG principles. ESG investing is here to stay in one form or another. It’s already evolving into a dominant force in Europe as Price Waterhouse Consulting claims that 60% of mutual fund assets there will be ESG related by 2025,” Taruvinga said.

He said the bourse will move to implement ESG disclosure requirements through training first and review of financial reports published by listed companies, adding that ZSE may also consider an ESG index like what has been done on the JSE.

Taruvinga said there was a growing trend of investors who now consider sustainability reporting important to incorporate their values and concerns such as environmental concerns into their selection of investments instead of simply considering the potential profitability or risk presented by an investment opportunity.

The ZSE requires public companies to disclose, in the chairman’s statement, the relevance of sustainability to the organisation and the organisation’s strategy for addressing sustainability issues.

Taruvinga said the compliance has to be measured on two fronts, that is, the compliance with the ESG requirements and compliance with the ZSE Listings Requirements on sustainability disclosures.

However, currently, few companies especially in mining and telecommunications are compliant, according to Taruvinga.

Also, less than 20% of board members for listed companies are females. About five boards are chaired by women while there are only two women CEOs in the listed entities.

Less than 10% of listed companies’ annual reports were compliant with sustainability reporting laws, according to Rodney Ndamba, CEO of the Institute of Sustainability Africa (INSAF), an independent think-tank and research institute.

“Corporate sustainability is a business model for long term success, value creation and competitiveness for business and nations. But, research has shown that about 90% of annual reports’ contents of listed companies is financial information and only less than 10% is non-financial information. Complying with IFRS is being misrepresented as corporate reporting,” Ndamba said.

“Zimbabwe has less than 18 recognised company sustainability reports and more than 95% of these have been supported by INSAF in their sustainability reporting. South Africa produces the majority of sustainability reports from Africa with Kenya, Botswana,

Nigeria and Mauritius (following).”

He said many company boards lack sustainability profiles, that is, having a mix of members with economic, environmental, social and governance skills and expertise. Sustainability issues are not being adequately discussed   in board meetings. As such, many investors are not comfortable investing in such companies.”

Institute of Chartered Accountants of Zimbabwe president, Duduzile Shinya, said companies should “take it very seriously” to adopt ESG.

“The idea is to have a 360-degree view of an organisation-both positives and negatives. It has become law in the public sector. It takes the business forward,” Shinya said.

Old Mutual’s enterprise-wide risk management officer, Clive Macheka, said financiers have become more vocal about ESG.

“Financial evolution is taking place across the world with a bias towards ESG linked funds, bonds and assets.  Wealth managers are moving towards ESG informed investing,” Macheka said.

One of the few companies in Zimbabwe to adopt ESG is Econet Wireless Zimbabwe.

Econet’s deputy CEO, Roy Chimanikire said the country’s largest mobile telecommunications provider has moved a gear up on sustainability reporting.

The company has set up a dedicated ESG board Committee and has appointed a general manager, Fidelia Gandiya, to look after the sustainability reporting portfolio, Chimanikire said.

“The board has also set up an ESG Committee. It is chaired by Jacqueline Chimanzi, the CEO of Africa Leadership. I also sit in that committee. Other members are Godfrey Gomwe, Mgqibelo Gasela and Thoko Moyo. The diversity of the people sitting on that committee helped us to see the bigger picture. We have done it for the past six to seven years. We have done it as a matter of compliance and good practice.”

Auditor-general, Mildred Chiri revealed  that  State-entities were breaching the law by not complying with sustainability reporting  rules, a move which would help relate how the vision is going to be achieved together with the SDGs.

“There is no more going back. We cannot turn back the hands of time,” Chiri said.

There are several laws that compel companies to adopt sustainability reporting such as

Statutory Instrument 113 of 2019 (Securities and Exchange (ZSE Listing Requirements) (Section 399-404: Sustainability information and disclosure), Companies and other business Entities Act (24:31) Section 220, and Public Entities Corporate Governance Act which was enacted in 2018.

 

 

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