An Introduction To The Zimbabwe Capital Market

An Introduction To The Zimbabwe Capital Market

A stock market is a place where securities/equities trading is conducted on an organised system. An organised system entails an association of stock brokers who meet and transact in company equities according to recognized forms and regulations.

In Zimbabwe these transactions are conducted on the Zimbabwe Stock Exchange (ZSE). This is a securities exchanged governed by the country`s Securities Exchange Act (24:25). As an institution, the ZSE regulates stock brokers, market makers and companies. Its mandate is to facilitate the process of raising long term capital through the issuance and purchase of shares.

The history of the ZSE dates as far back as 1946, after WWII. During this period, one businessman Alfred M. Bentley presided over the opening of a stock market and the first office in Bulawayo, today the ZSE head office is located in Harare. Trading is conducted on an automated trading system offering direct access to Equity, Debt, Depository Receipts, Unit Trusts, Exchange Traded Funds and Real Estate investment trusts.

Through these investment vehicles, ZSE has managed to achieve the following:
a.) Allow listed companies to raise additional capital,
b.) Enable company owners to liquidate a portion of their investments,
c.) Enable the general public to invest and trade in the subsequent shares.

The stock market has also acted as a reliable means to preserve cash value during hyper inflation. This can be said for Zimbabwe during the period spanning from 1998-2008.

Components Of Zimbabwe Capital Markets

As you get to learn more about Zimbabwes capital markets try to understand the three regulated players. Equity markets involve the circulation of money and value. To this effect, there is a need to ensure for secure, reliable and well regulated transactions. Resultantly, capital markets in Zimbabwe are regulated by three players, that is, the Zimbabwe Stock Exchange (ZSE), the Securities and Exchange Commission of Zimbabwe (SECZ) and the Central Securities Depository (CSD). These work hand in hand to facilitate secure long and short term capital accumulation through equity markets.

1. The Zimbabwe Stock Exchange (ZSE)

The ZSE is a licensed securities exchange which has a long history dating as far back as 1896. In the sub Sahara region, the ZSE is one of the long established equity markets operating in terms of the Zimbabwe Securities and Exchange Act (24:25). It facilitates the raising of long tem capital for companies, government and semi-government institutions. Through the ZSE platform, investors get the most reliable information relating to listed securities, their prices, market reports and historical financial statements. The ZSE compiles market information and presents it as indices such as the All Share Index, Industrial Index, Mining Index and the Top Ten Index. Through the ZSE, investors are also exposed to other securities such as Exchange Traded Funds (ETFs), Depository receipts as well as preference shares. For secure transactions, each listed security is assigned a unique International Security Identification Number (ISN). This ensures that the company is also identifiable internationally for the sake of international investors.

2. The Securities and Exchange Commission of Zimbabwe (SECZ)

The SECZ is a pivotal wing of Zimbabwes capital markets. It oversees the monitoring and regulation of participants in the capital markets. In essence the commission controls the trading and dealing in securities encompassing the registration, supervision, licensing and regulation of securities exchanges. The overarching aim of the commission is to promote free, fair and orderly trading in the securities and capital markets.

3. The Central Securities Depository (CSD)

The CSD is a company that operates an electronic book entry system which records securities and transactions. The CSD of Zimbabwe is operated by Chengetedzai Depository Company Limited an entity incorporated with the mandate to establish and operate a central depository for Zimbabwe’s capital market. In the CSD system, investors have accounts in which their securities are maintained electronically. This is somewhat similar to how banks store money in electronic credits.

The above described form the core of Zimbabwe`s capital markets. We encourage new investors to learn more about these players so they may better appreciate capital markets.

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