The failure to attract new listing by the Lusaka Securities Exchange – LuSE has been attributed to the country having more Small and Medium Enterprises – SME’s that have not reached the stage required for listing.
Securities and Exchange Commission – SEC Chief Executive Officer – CEO Philip Chitalu to the Zambian Business Times – ZBT that “Originally in our thinking, we concentrated so much as Zambia into listing but then listing requires institutions to be of a certain size and run in a particular way with certain financial reporting requirements”.
Chitalu told ZBT that when one looks at the Companies in our economy, you would noted that over 90% of companies in Zambia are probably SMEs who were unlikely to meet that list requirements but still need capital to grow.
He said, “the question is, how do we facilitate the flow of capital to SMEs [local businesses] when they are not listed? that is why we are looking at Private Equity, Venture Capital funds, green bonds and so on being used to do the exact thing that the market and the regulator where created for.
When asked to give details on why Zambia and LuSE in particular has had low number of companies listing, the SEC CEO said one of the reasons why companies are not listing is because the country has SMEs that are small in size and cannot meet the listing requirements but still need funding.
Chitalu further stated that the other major reason is the lack of awareness among the Zambians about the possibilities of investing through capital markets. “So awareness is another reason and the use and mobilization of savings, what I mean is that we need a lot of savings to be channeled through capital markets to the relevant sectors of the economy.
The other challenge has been the macro economics which have not been very stable. “So we need everyone’s savings including the attraction of foreign savings and investments. What I mean by foreign savings is foreign investors, require a stable macroeconomic environment,” Chitalu said.
“Can you imagine a foreigner brings in US$1 million when the exchange rate is say at K10 per US dollar, so he gets K10 million at that time. But when the Kwacha depreciates and the exchange rate goes to K20 per dollar, his investment will be worth US$500,000 if converted back to US dollars at that exchange rate, so without doing anything, just the movement in the exchange rate would actually discourage a foreign investor from investing in Zambian stocks in long term” the SEC CEO explained.
Chitalu emphasized that there is need for the country to attain a stable macroeconomic environment that entails a stable exchange rate with minimal movements and a manageable inflation rate. He stated that these and other reasons have in a way contributed to LuSE not being able to attract new listings and expand the number of companies listed in Zambia .
