THE paramount objective of every business is to make profit, survive and prosper.
It is also the desire of almost every business to grow in scale and operations with the passage of time.
To pursue the objective of growth, companies need additional financing. The immediate source of financing available to companies is their retained earnings.
Usually the level of retained earnings is insufficient to grow the business and this calls for additional sources of financing in form of debt, equity and other securities which are usually not available from the major shareholders of the companies.
Empirical evidence reveals that, about 90 per cent of the businesses globally, are family owned and therefore, raising additional capital through debt and shares from family members would be impractical.
The stock exchange inevitably becomes an alternative place to raise huge capital for business expansion.
Today, we look at the role that the stock market plays in helping companies to grow.
To discuss this topic, I would like to feature the outcome of an interview I had with Lusaka Stock Exchange (LuSE) Business Development Assistant, Ms Kapembwa Mulenga.
The discussion culminated into the role of the LuSE in fostering business growth especially with the introduction of Alternative Investment Market (AIM).
In my earlier contact with LuSE more than fifteen years ago, it had taken an initiative to find a strategic partner and shareholder for my consultancy client then.
The strategic partner offered to inject huge capital equipment amounting to over US$6 million to revamp the fortunes of my former client.
Unfortunately, the company declined the offer and in no time, it ceased to operate.
From the onset, it is important that we define what a stock exchange is: It is a place either virtual or physical, where individuals, companies and institutional investors can buy and sell shares, bonds and other securities through stock brokers.
Stock exchanges may also provide facilities for issuance and redemption of securities and other financial instruments including payment of income and dividends.
Stock brokers are an intermediary between buyers and sellers of stock and match the offers between the parties.
In the recent past, we have seen calls by Private Limited Companies to raise capital by issuing debt to the general public. This act is forbidden by the law.
We have also seen big private companies thriving and expanding their operations but eventually becoming bankrupt.
The above scenarios may be indicative of the need for some companies in our economy to embrace the growing trend towards corporate governance and the growing significance of the role of the stock market to raise additional capital for expansion.
Businesses can grow through internal expansion using retained profits but up to some extent, the funds required to start and operate a factory or manufacturing plant is so enormous that the company cannot generate it internally.
Up to this point, empirical evidence reveals businesses that rely solely on retained profits for expansion, have wound up.
The LuSE was established in 1993 as part of governments economic reforms aimed at stimulating a private sector driven economic growth from the historic parastatal-dominated economy.
Up to April this year, LuSE comprised the main exchange where large companies would trade for shares and other securities.
This is essentially a more stringent category for large Public Limited Companies with requirements such as having at least 300 shareholders and a minimum of 10 million shares in issue and a subscribed capital of K250, 000.
There is also a requirement to show a three-year history of profitability.
On April 22, 2015,  LuSE launched the AIM which is aimed at small to medium companies that are in the growth phase.
Some of the main requirements of the AIM are: a minimum number of five shareholders being family members and the majority being non-family members.
This is essentially meant to promote corporate governance.
Applicants must demonstrate an operation record of a minimum of five years and with a record of increased revenues and market share for three consecutive years.
The issuer must have not less than 500,000 shares in issue.
Additionally, the stock exchange provides an excellent means of raising equity and debt capital through the growing participation of institutional investors such as pension funds, banks and insurance companies who are always seeking suitable investment opportunities.
In conclusion, it is clear that raising additional capital is increasingly becoming a topical issue in global and local businesses.
The LuSE could provide the best alternative to raising additional capital and fostering the four phase transition of businesses from micro, small and medium, to large companies especially with the advent of the AIM.
(The author is the managing consultant at GN Grant Business Consultant, a fellow of the Association of Chartered Certified Accountants (ACCA), a Master of Business Administration (MBA) holder and a candidate for the Herriot Watt University (Scotland) Doctor of Business Administration)