Justin Bgoni (JB) took over the reins as Zimbabwe Stock Exchange (ZSE) chief executive officer 18 months ago with a promise to grow the exchange and improve relations with stakeholders.
In this question and answer with Business Times News Editor Ndamu Sandu (NS) Bgoni said he had ticked the right boxes.
Find excerpts below:
NS: How have you fared so far if you were to juxtapose your vision and the results?
JB: As I joined the ZSE, I highlighted that there would be three key areas that I would work on which include; -Getting our fundamentals right as a company and exchange -To improve relationships with our stakeholders (both internal and external) and -Growing the exchange.
As I look back on the journey I am happy to report that we have made significant progress.
The fundamentals can be seen in our new listing rules, the website, and our compliance regime among others.
In terms of relationships we are in better terms with our regulator SecZim, our parent Ministry of Finance and Economic Development, the Reserve Bank of Zimbabwe and market participants and listed companies.
We are on course to achieve the growth of the ZSE and we have launched several initiatives including the following: a) Training Institute, b) A joint venture, Zimbabwe Receivables Marketplace, which focuses on receivables trading; and c) Currently in the process of launching the Victoria Falls Stock Exchange.
NS: How could you have done it differently?
JB: In terms of stakeholder relationships, this was wider than I envisaged. I should have also included social players in my initial outreach.
NS: How has Covid-19 affected operations ZSE and how did you navigate the operational challenges?
JB: The effects of Covid-19 were felt across the whole world, and did force us to work from home from March until August. With the exchange having been automated from 2015, the flexi working did not pose much of a challenge save for the issues to do with intermittent internet and power challenges.
We however ensured critical staff got tested for Covid-19 and could still have access to the offices as well as resources to meet the data and power requirements.
NS: What is the impact of the one-month suspension on trades to facilitate investigations into illicit deals?
JB: There was a notable decline in the share prices post the suspension with the All share Index having declined by 22% in August.
NS: There are concerns that the market is illiquid after less than half of the listed companies traded about 5% of their issued shares in 2019.
How is that going to be addressed to make the market liquid? JB: It is important to point out that a turnover ratio of 5% is considered fair in terms of liquidity indicators and in 2019, 18 counters had a liquidity ratio of at least 5% out of the 61 listed companies.
Many factors affect liquidity, including company specific fundamentals, macro-economic conditions, perceived country risk and level of market efficiency. As the ZSE, we can only influence the level of market efficiency – and to that extent the ZSE has been working to improve the level of regulatory and operational efficiency.
New listings requirements were published in 2019 to improve information disclosure and strengthen investor protection whilst access to the market has been widened through online trading technology.
NS: Daily trades are below 300 which are very low considering the population. As ZSE, what plans do you have to increase more trades on ZSE?
JB: The need for ordinary Zimbabweans to participate on the ZSE remains a big concern to us.
The overall objective is for investors to consider us in their wealth creation plans and we will achieve this through investor education, tools to facilitate trading and new products and listings.
The launch of ZSE Direct is expected to increase participation by retail investors and ultimately the number of daily trades.
NS: What digitised solutions are you thinking of which simplify and increase trades?
JB: Online trading through ZSE Direct which connects investors to stockbrokers, the trading system and the central securities depository.
NS: ZSE is going to lose Falgold, Zimre Property Investments, and Fidelity Life Assurance which will delist for one reason or the other.
The delistings come at a time there have been calls for more companies to list on ZSE. What are the challenges ZSE is facing in luring companies to list?
JB: ZPI and Fidelity are going to be part of an entity that is already listed and such are not effectively being lost from the market – it is just consolidation into a bigger entity. This may actually be better for the ZSE as a bigger entity may realise more economies of scale and deliver better returns to shareholders.
The challenges in bringing new listings arise from the challenging economic environment that has seen more of informal entities being set up compared to formal businesses.
In addition, the instability of the currency has made companies reluctant to fundraise, hence the need for USD based platform, namely VFEX .
NS: What incentives does ZSE require to attract more companies to list?
JB: Education about the benefits, requirements, and process of listing, tax incentives for listed corporates, tax incentives for the real estate sector and continued currency stability.
NS: VFEX is the game-changer in terms of attracting foreign investors. What mechanisms are in place to ensure that foreign investors are able to repatriate capital gains and dividends?
JB: VFEX has already obtained exchange control approval to trade in USD, a hard currency.
This ensures that there is no need for conversions before the remittances can be done. The settlement model is also being worked in consultation with the RBZ to ensure that funds due to investors can be repatriated easily.
NS: How effective has been a fund set by the central to help companies repatriate dividends to foreign investors?
JB: Investors have been able to utilise the current auction to access foreign currency and it has been much better than the previous arrangements.
The Reserve Bank has been setting aside money for this purpose NS: On September 24 there were examinations for sponsors on ZSE and those for VFEX sponsor approved executives will be on October 1.
Is this standard practice in the industry and what is it intended to achieve?
JB: Being accorded a sponsor on an exchange implies that one has intimate knowledge of the listings requirements for that exchange and can be trusted to give advice to issuers and new applicants seeking admission to that exchange.
The only way to determine if a sponsor is knowledgeable with regards to the rules of an exchange is to examine them, hence the sponsor examinations.
This is standard practice and current sponsors on the ZSE went through a similar exercise, the only difference being that examinations on ZSE were orally conducted and for VFEX they are going to be written.
NS: What has been the response by financiers, corporates and suppliers to the Zimbabwe Receivables Marketplace?
JB: There has been positive response from market participants.
