By KENNEDY MUPESENI-
A VIBRANT capital market is a catalyst for enterprise development in any country as it offers opportunities for the local and foreign investors to own shares in companies.
It is now 20 years since the only local stock exchange, the Lusaka Stock Exchange (LuSE) was established.
The formation of LuSE was part of the Government’s broader economic reforms to stimulate a dynamic private sector as the engine for economic growth in Zambia.
The idea was further motivated by the need to deepen financial capital markets in support of the emerging private sector in Zambia.
It is encouraging to note that the LuSE market capitalisation has grown to K59 billion with more than K1 trillion issued corporate bonds in the last 20 years.
LuSE board chairperson Friday Ndhlovu said the LuSE market capitalisation since inception had grown to K59 billion and issued more than K1 trillion worth of corporate bonds, while the share index had risen to 5,300 in the last 20 years.
“This is a clear indication of growth of the local market, although there is need to do more,” Mr Ndhlovu said.
Part of the K1 trillion was used to fund the construction of the exchange building which currently houses the LuSE offices.
He said depository receipts were introduced for the first time in the market and that it was expected that the exchange traded funds would be listed.
The year 2011 also saw an increase in the amount of Government bonds traded in the secondary market recording almost 200 per cent.
Mr Ndhlovu attributed the increase due to the Government’s new policy of conducting primary bond tenders once a quarter rather than every two weeks.
In the last 20 years of its existence the capital market had continued facing a lot of challenges such as limited equity listings, narrow investor base, and lack of diversity of products, low free-float, low liquidity, limited public awareness and higher transaction costs for companies in growth phase.
Mr Ndhlovu says building on the successes, LuSE was developing strategic interventions to improve performance, expand the scope of its operations so that it becomes a more self-sustaining private sector organisation in competitive business environment.
“LuSE will stimulate capital mobilisation to meet the long-term investment desire of Zambians and international investors,” he said.
Learning from the challenges in the last 20 years, LuSE wants to move away from being a mutually owned organisation to an investor owned corporation, engage listed companies to comply with free-float of 25 per cent and making presentations to institutional investors to understand their expectations.
Mr Ndhlovu says this would improve significantly the liquidity levels of the capital market thereby becoming more attractive.
There is, however, need for the players in the market to adhere to the Zambian laws.
Giving his overview of the LuSE 20th anniversary Securities and Exchange Commission (SEC) chief executive officer Wala Chabala urged companies to ensure that they dealt with licensed financial entities as stipulated in the Securities Act.
“Every-end year players and operators in the capital market apply to get their licences renewed and that entities which do not renew remain as unlicensed,” Dr Chabala said.
Licensed entities include stock exchanges, brokers, other dealers and their representatives as well as financial advisors and their representatives.
On the free float, Dr Chabala said several entities on the stock market were falling short of the minimum 25 per cent free-float requirement.
Free-float represents the portion of shares of a public company that are in the hands of public investors and not locked-in by promoters, company officers, controlling interest investors as well as the Government.
The SEC and LuSE would like to see companies to begin regularising the free float to the required levels and most entities have started rising to the occasion.
Dr Chabala said increased free-float would translate into more liquidity on the market which he said would in turn boost efficiency.
Most stakeholders attribute limited liquidity on the stock market as one of the factors leading to low listing and quoting on the local market.
“A more efficient capital market would reflect better value of stock prices of listed companies and attract more capital for long term investment,” he said.
Dr Chabala urged banks failing to raise minimum capital requirement to consider listing on the stock market to meet the minimum capital requirement.
Dr Chabala gave an example of Prima Re-insurance which raised K20 million to restructure the balance sheet of the company to increase the company’s share capital to levels that allow for increased reinsurance business volumes.
Zambia Association of Chambers of Commerce and Industry (ZACCI)  president  Geoffrey Sakulanda said LuSE should intensify marketing of the capital market to attract more players and strengthen its liquidity position.
Commenting on LuSE 20th Anniversary, Mr Sakulanda said LuSE had scored a lot of successes in the past 20 years but that it should make its presence felt by intensifying recruitment campaigns.
“Corporate bodies should be well informed about the benefits of participating on the capital market because it cost less to raise investment capital on LuSE than getting a loan from the commercial markets like banks,” he said.
Mr Sakulanda said a vibrant capital market meant a lot to the development of the economy as it allows Zambians to own stakes in most of the enterprises.
Former Commerce, Trade and Industry minister Emmanuel Chenda says going forward, LuSE should intensify its pursuit to list mining companies on the stock exchange to enable the general public own equity in the firms.
Mr  Chenda feels LuSE should attract mining companies and State-Owned Enterprises (SOEs) to list on the LuSE to enable the general public own stakes in the companies.
“Most mining companies are not listed on LuSE despite some of them registered with the SEC that is why LuSE should intensify efforts so that as many Zambians own stakes in the mining enterprises,” Mr Chenda.
He, however, says LuSE had played a pivotal role in economy in the last 20 years it has been in existence by attracting 21 companies.
Mr Chenda further urged companies in the country to adhere to good corporate governance which he said would bring transparent and attract more investments as they list on LuSE.
“No company or individual can buy equity in the company with any defined corporate structure,” he said.
He hoped that new LuSE corporate governance code would improve the business landscape as well as promote conducive environment and enable companies operate efficiently and operate in an efficient manner.
He said this would attract a lot of businesses entities to trade in bonds and other trading which in turn could result in liquidity enhanced.
Mr Chenda said LuSE and SEC should find a way of incorporating the Small and Medium Enterprises (SMEs) for them to participate on the stock market.
It is hoped that stakeholders have learnt a lesson on what needs to be done to make LuSE more vibrant being in existence for two decades.