POSB listing set to deepen capital markets

Batanai Matsika
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Recent news flow on capital markets indicates that the People’s Own Savings Bank (POSB) has submitted a proposal to Cabinet for the listing of the bank on the local bourse.

Sources reveal that the proposal will be ready for consideration in the second half of 2021.

In line with the listing strategy, POSB has been looking for ideal investors to come onboard. The bank is one of the state entities earmarked by the government for partial privatisation.

In line with the privatisation plan, the bank’s transactional advisors KPMG Advisory Services (Zimbabwe) has already issued the final Inception Report which was subsequently approved and adopted by the Technical Committee.

According to board, the identification of the ideal investors and proposals for the listing of the Bank on the stock exchange will be finalised and ready for consideration by Cabinet in the second half of 2021.

Morgan &Co Research maintains a view that the listing of POSB on the local bourse will deepen capital markets given the inclusion of an interesting theme within the financial services space in Zimbabwe.

POSB is a savings bank in Zimbabwe that was set up with the objective of promoting broad-based financial inclusion. The bank maintains several brick and mortar branches across the country as well as over 200 agency branches through Zimpost.

This a unique theme that is not fully covered by listed financial services players in Zimbabwe.

We envisage that the inclusion of POSB to the financial services sector basket will attract impact investing funds given this unique theme.

It should be highlighted that the Government of Zimbabwe unveiled several parastatal reforms that would see the liquidation, merging, privatisation and recapitalisation of some state-owned utilities (SOEs).

As part of the reforms, parastatals including Cold Storage Company, Grain Marketing

Board and National Railways of Zimbabwe will be recapitalised through several initiatives.

Morgan &Co Research contends that such developments would deepen local capital markets given the possibility of new listings on the Zimbabwe Stock Exchange (ZSE), Financial Securities Exchange (FINSEC) and Victoria Falls Stock Exchange (VFEX).

Privatisation involves selling state-owned assets to the private sector.

This can be done through a normal share — sale transaction to a private investor or via an Initial Public Offering (IPO) on an exchange. It is argued the private sector players tend to run a business more efficiently because of the profit motive. Privatisation has several advantages that include;

λ Improved efficiency- Private companies have a profit incentive to cut costs and be more efficient than parastatals.

It increases the overall efficiency and reduces the bureaucratic culture which is the main culprit in state-owned enterprises;

Lack of political interference — It is argued governments make poor economic managers as they tend to be motivated by political pressures rather than sound economic and business sense;

λ Long term view — A government may think only in terms of the next election. Therefore, they may be unwilling to invest in long term improvements because they are more concerned about projects that give a benefit before the election;

λ Shareholders — Private firms have pressure from shareholders to perform efficiently;

λ Increased competition — The privatisation of SOEs occurs alongside deregulation. These are policies that allow more firms to enter the industry and increase the competitiveness of the market; and

λ Government will raise revenue from the sale — Selling state-owned assets to the private sector can raise a significant sum of funds for the government though it is a one-off benefit.

There are number of case studies of successful privatisation efforts.

For example, the privatisation of companies such as British Telecom, Rolls-Royce and British Airways in the United Kingdom has shown degrees of improved efficiency and higher profitability.

In East Africa, Rwanda has been successful in terms of deepening its markets through several IPOs that include Bralirwa, a beer and soda manufacturer, from which the government divested in 2010, Crystal Telecom Rwanda, I&M Bank Rwanda and the Bank of Kigali, which offloaded the government-owned shares to the public in 2011.

Morgan &Co Research supports the Zimbabwe’s government move to privatise state-owned enterprises and possibly list some on our local exchanges.

Batanai Matsika is the Head of Research at Morgan &Co, and Founder of piggybankadvisor.com. He

can be reached on +263 78 358 4745 or batanai@morganzim.com / batanai@piggybankadvisor.com