.NG’ANDU

A VIBRANT capital market is an essential driver of economic growth as it assists in mobilising resources and efficiently directing them to their most productive uses.
Capital markets also provide long-term and cheaper financing for Government and further foster more stable growth as an alternative source of financing by ensuring that shocks to the supply of bank credit does not impede growth.
They are essential to the country’s economic development because they promote efficiency and competition in financial systems by providing alternative investment and financing instruments for investors and borrowers.?Capital markets create an avenue for the population to participate in the financial markets and share in its wealth.
It is, therefore, important to note that there is a number of developments that have taken place in the industry since the introduction of market reforms about 20 years ago.
Reflective of the solid economic growth that the country has achieved, the equity market has recorded tremendous performance.
It is for this reason that Securities Exchange Commission (SEC) is considering five big potential bond registrations, two registrations coming from state-owned enterprises, two from statutory bodies and one from the financial services sector which will be approximately K500 million.
These five applications the commission is considering are expected to come up by end of this month.
Companies that started to realise that are raising alternative funds from capital markets to expand or fund new business ventures.
As at February 12, 2015, the Lusaka Stock Exchange (LuSE) All Shall Index rose by over 6,000 points since inception to 6,168 points.?Bank of deputy Governor operations Bwalya N’gandu notes that the market has also seen the opening of two additional exchanges, the Zambia Agricultural and Commodities Exchange (ZAMEC) and the Bond and Derivatives Exchange (BaDEX).
Dr Ng’andu says these developments are positive to the growth of capital markets and promotion of competition amongst players in the industry.
Further, the bond market has equally undergone significant transformation over the years.?From December 2009, the amount of outstanding Treasury bills and Government bonds have increased by 50 per cent, which is the reflection of strong investor confidence in the Zambian economy.
“Positive investor confidence on our economy was also attested by the overwhelming subscription to the first ever Kwacha denominated bond issued by the International Finance Corporation (IFC) in 2014,” Dr Ng’andu said.
Although the industry has undergone significant transformation over the years, the progress has not been without any challenges.
One of the biggest challenges the country is faced with is the supply of investable resources to the small and medium enterprises (SMEs).
Among other challenges hindering the growth of capital markets include low activity and liquidity, narrow investor base, limited public awareness, high transaction costs, limited investment products and scarcity of human capital and financial infrastructure “All these are critical issues that need to be addressed for our capital markets to grow and become the main driver of the long term growth and success of our economy.
This will require continued collaboration, concerted efforts and active participation by regulators, Government and all stakeholders,” Dr Ng’andu said.
For the local exchange market to be more visible, SEC will embark on capital market awareness campaign.
SEC board chairperson Chintu Mulendema says the campaign, which the commission with the assistance from the Financial Sector Development Plan (FSDP) will undertake, aims at increasing awareness and participation in the Zambian capital markets in the second half of this year or early 2016.
Mr Mulendema says he is hopeful that with the help of BoZ, the commission would be able to address the issue of market liquidity.
“We hope that BoZ will help us come up with strategies that we can include in the Capital Market Development, which is expected to be launched this year.
“If as a country we develop and adopt best Capital Market practices, our markets will help the continued growth of the Zambian economy,” he said.
At the same occasion, SEC secretary and acting chief executive officer Philip Chitalu said Zambia’s challenge was to translate the gross domestic product (GDP) into better functioning capital markets.
Despite the many challenges the industry has been facing, it is interesting that a number of companies have continued to show interest in listing on LuSE.
Finance Bank Zambia (FBZ) and Professional Insurance Corporation Zambia (PICZ) Limited are among the latest companies intending to list on LuSE.
The two companies have already quoted on the SEC and are in the process of listing on LuSE.
FBZ chairperson Rajan Mahtani said recently that the bank had commenced the process of listing on capital market and will ensure that all shares are quoted on SEC.
“Our clients, customers, suppliers, business associates, regulators, financial analysts and other shareholders frequently perceive companies which are quoted or listed as being more stable compared to those that are not having a “PLC” after a business name represents performance, stability and credibility,” Dr Mahtani says.
He says the listing of FBZ presents an opportunity to Zambians to own shares in the bank.??“Our quoted status on LuSE is being followed up closely to ensure that the date for the actual listing will not exceed March 31, 2015,” Dr Mahtani.
PICZ also commenced the process and SEC presented the corporation with certificate of confirmation of listing the company on LuSE. The corporation which was converted into a Plc on August 18, 2014 commenced the process of listing by ensuring all its shares were quoted on SEC.
PICZ board chairperson David Frost said being quoted on LuSE entitles the corporation to trade on the “quoted tiers”.
“We have commenced our process of listing by ensuring that all our shares are now quoted on SEC and we have since been presented with confirmations.
“Although the main reason most companies list on the stock exchange is to raise capital, the corporation has been driven by the fact that listing comes with a number of qualitative value addition advantages which, going forward, would take PICZ to another level,” Mr Frost says.
LuSE has 22 listed companies currently trading with nine quoted companies in the process of listing soon.
With the robust economic fundamentals at play and the abundance natural resources, a youthful population and political stability, there is significant potential for further economic growth in?Zambia.
Zambia’s economic vision is intrinsically linked to the success development of capital markets which is bright given the number of companies showing interest to participate in the local capital market,?the prospects for the capital markets are very bright.