Bgoni brings a ‘SPAC’ to the ZSE




ZSE CEO Justin Bgoni

The last year or so, has been particularly eventful within the country’s capital markets with several new products being launched. This has coincided with the appointment of Justin Bgoni as chief executive officer of the Zimbabwe Stock Exchange in March 2019.

By Kudzanai Sharara

The ZSE must indeed be commended for its efforts to increase its product range.

Just last week we saw the Victoria Falls Stock Exchange (VFEX), itself a new creation, announcing plans to establish an international commodities exchange with the help of the Dubai Gold and Commodities Exchange (DGCX).

Additionally, VFEX will seek support from the DGCX in framing a clearing and settlement commodities exchange framework.

The collaboration will also pave the way for possible investments by DGCX into the VFEX Commodities Exchange.

The VFEX will never be the same if it can succeed in not only getting expertise from DGCX but also getting them to invest, given what DGCX has done in Dubai and the nearby region where it is the leading derivatives trading, clearing and settlement exchange.

Parent bourse, the Zimbabwe Stock Exchange (ZSE), also announced plans to introduce instruments that will help tobacco farmers and merchants raise capital to fund their crop. The long term plan is to introduce derivatives.

The current funding model for tobacco is dominated by foreign contractors. All in all, approximately 95 percent of the country’s tobacco is funded by contractors.

This funding model, although it has helped grow the sector to current elevated levels of more than 200 million kgs, on average, in the last 4 years, net export proceeds are significantly less.

A larger chunk of the export proceeds remains outside the country as they go towards repayment of debts borrowed offshore.

While government had sought to intervene, it is encouraging that the private sector via the Zimbabwe Stock Exchange could fund the crop. Government programmes often get abused.

The country’s coffers would be worse off if that is to be allowed. The ZSE’s move is thus welcome and deserves maximum support.

Early this year, the ZSE listed the Old Mutual Zimbabwe Stock Exchange Top Ten Exchange Traded Fund (OMTT – ETF). By simple definition, ETFs are investments that hold a collection of assets and like stocks also trade on a stock exchange.

An ETF is just like any other listed stock and can be bought and sold via any registered stockbroker on the ZSE.  Since its listing on the 4th of January 2021, the ETF has gained 130 percent with approximately $120 million having been invested.

In the last quarter of last year, the ZSE introduced ZSE-direct. ZSE-direct is an online platform for buying and selling financial instruments such as stocks and the ETF.

The online trading platform has played a considerable role in luring retail investors to invest in the stock market.

The number of active investors on the stock exchange, according to the Securities and Exchange Commission of Zimbabwe was 13, 165 in 2020, but had reached 33 000 as at June 31, 2021, thanks in part to platforms such as ZSE — direct.

Also in line to be listed on the ZSE “soon” are Real Estate Investment Trust (Reits). Provisions to legalise the listing of this instrument are already in place through amendments to the Finance Act. Reits are companies that own (and often operate) income-producing real estate, such as apartments, warehouses, self-storage facilities, malls and hotels.

Reits allow investors, individuals and institutional ones, to invest in commercial real estate property without actually buying and managing those properties.

The instrument is expected to present opportunities for pension funds and other institutional investors to issue property derivatives.

The ZSE also has a Joint Venture Agreement with Harare Receivables Exchange (Private) Limited. The JV is aimed at providing working capital solutions to Micro, Small and Medium Enterprises (MSMEs). This type of financing model has been successfully implemented in Asia and Latin America.

The success stories are on the basis that receivables financing through a formalised marketplace reduces the risk for potential financiers.

The ZSE is however not stopping there and is already working on introducing Special Purpose Acquisition Companies (‘SPACs’). SPACs are formed to raise money through an initial public offering to buy another company.

At the time of their IPOs, SPACs have no existing business operations or even stated targets for acquisition.

Investors in SPACs can range from well-known private equity funds to the general public. SPACs have two years to complete an acquisition or they must return their funds to investors.

The bourse this week invited comments from all stakeholders on the First Draft of the SPAC Listings Requirements (Listings Rules) issued on 15 September 2021.

As the ZSE continues to develop and introduce new products and services, the depth and breadth of Zimbabwe’s capital market will be enhanced and hope is that the level of knowledge and participation in the capital market will grow to match. – Business Weekly