ZSE demutualisation MoU signed

ZSE demutualisation MoU signed
Finance and Economic Development Minister Patrick Chinamasa (left) shakes hands with ZSE chairpeson Ms Eve Gadzikwa after signing the MoU for demutualisation of the exchange
Published: 22 July 2014
Finance and Economic Development Minister Patrick Chinamasa and stockbrokers yesterday signed a Memorandum of Understanding, which will pave way for the demutualisation of the Zimbabwe Stock Exchange.

Under the demutualisation structure, stockbrokers will hold 34 percent of the exchange post demutualisation from the current 68 percent while Government will hold 16 percent from the pre-demutualisation stake of 32 percent.

The stockbrokers' shareholding will be split equally among the holders of proprietary rights.

The remaining 50 percent will be open to private investors where 20 percent will go for a private placement to raise $2 million and 30 percent will be floated through an Initial Public Offer for members of the public to raise $3 million.

This will bring the total capital for the ZSE to $10 million after an initial valuation of $5 million.

Minister Chinamasa said at the signing of the MoU that the current setup of the ZSE creates governance concerns where a club of stockbrokers may not separate their interest as shareholders, managers and participants on the stock exchange.

"As Government we acknowledge that the initiative to establish the exchange was market-driven, mainly through stockbroker contributions in the form of proprietary rights," said Minister Chinamasa.

"The exchange is going to be transformed to a profit-making corporate organisation and it is going to be a public listed entity.

"It will enhance operational efficiency and it will also remove barriers to entry for new market participants and hopefully will boost investor participation through the running of the exchange as well as improving access to resources for capital investments and growth," said Minister Chinamasa.

He said the new development will also increase Government's capacity to attract international investors.

Minister Chinamasa said the primary objective of the MoU is to transform the exchange from being a statutory body to a viable public limited listed company.

He said the transformation would intimately pave way for the listing of the exchange.

The demutualisation process will take three stages starting with corporatisation, which is the registration of ZSE as a company, with the Government and stockbrokers being the first subscribers.

The second stage involves a private placement where 20 percent of aggregate shareholding will be offered to targeted investors, strategic partners and financial sector institutions. An initial public offering to members of the public is the third and final stage of the demutualisation process.

It is envisaged that additional capital of $5 million will be raised through the private placement and the IPO. No holder of voting shares in the ZSE is allowed to hold more than 10 percent of the total voting shares in ZSE.

ZSE chairperson Ms Eve Gadzikwa said "the signing of the MoU signifies clarity in terms of ownership of the ZSE."

Mr Edward Mapokotera, stockbrokers' representative, said Zimbabwe had been lagging behind current global trends where stock exchanges have demutualised.

"Demutualisation will improve governance and help in efforts to raise capital both locally and internationally," said Mr Mapokotera.

The Security Commission of Zimbabwe chief executive Mr Tafadzwa Chinamo said the current situation was ambiguous as it was not clear on who the regulator should deal with.

"We will now know who is accountable," he said. "ZSE is not yet formally registered with SEC and we are hoping that with this agreement, things will move fast towards registration," he said.

Minister Chinamasa said Government envisages that a well established ZSE would create an established bond market and introduce other investment avenues such as a real estate investment trust, which would be used to supply developmental capital that would make Zim-Asset, the country's medium-term economic policy, a reality.
- The Herald
Tags: ZSE,


Latest News

Latest Published Reports

Latest jobs