The ZSE

By Golden Sibanda

The Zimbabwe Stock Exchange is working to complete its demutualisation programme in the next 12 months as it also prepares to become a member of the Federation of World Exchanges.

The ZSE intends to demutualise, list, set up a Central Depository System and be a member of the Federation of World Exchanges.

Demutualisation refers to the transformation of an organisation, usually a club or a society, into a privately owned company or entity.

Considerable ground has reportedly been covered and the process, which started a few years back, could be completed soon to transform the ZSE from a society to a privately owned company.

Presently, the ZSE is a mutual society governed by the Securities Commission, which falls under the control of the Ministry of Finance.

Demutualisation of the ZSE into a private company would enable the company to pursue other alternatives of expanding its revenue base rather than relying solely on levies from marketable securities.

A ZSE senior official who requested anonymity said all stakeholders of the ZSE, including Government, the stockbrokers and the Securities Commission, were working flat out to ensure the ZSE is demutualised this year.

“Every stakeholder is eager to have the ZSE demutualised and this process could be completed in the next 12 months and in the next three years it could have listed on the same bourse as well,” said the source.

Efforts to get further comment from the ZSE chief Executive Mr. Emmanuel Munyukwi were fruitless, as he could not be reached on his mobile.

However, Mr. Munyukwi recently confirmed that significant progress had been made towards the demutualisation of the ZSE.

The source added that after demutualisation, the ZSE would quickly introduce an advanced electronic trading system, the Central Depository System (CDS).

Only when the ZSE has implemented the CDS can it become a member of the Federation of World Exchanges.

This body requires member stock exchanges to scrap physical trading and the exchange of shares and share certificates.

It is an international standards organisation based in Paris, France.  It was established to handle business policy issues that affect world stock exchanges.

The committee handles the issues of cross-border investing and is the platform used to settle the majority of the debates that arise from the issues that affect the investment industry.  According to the Federation of World Exchanges, as of April 2007, membership consisted of a total of 55 exchanges from all over the world.

Members altogether account for more than 97 percent of the world stock markets’ capitalisation and the combined size of the markets these exchanges operate is an estimated US$35 trillion.

The CDS, which might cost the ZSE up to US$2.5 million, is a much safer, more efficient and hassle-free way of buying and selling shares electronically, widely known as dematrialisation of certificates.

This would allow stockbrokers to buy and sell shares on behalf of clients in the comfort of their offices through the CDS system connected to the ZSE and most likely managed by the same.

This system is also widely expected to eliminate arbitrary share price determination and influencing of prices by cartels of stockbrokers.

However, before this can happen, the ZSE needs to demutualise first.

If successful, the ZSE would become the second bourse in Africa to demutualise.