In frank responses to questions about his tenure at the helm of Zimbabwe’s capital markets, Chinamo said there were serious weaknesses in legislation governing the capital markets.
He suggested wide-ranging amendments to the SEC Act to give the regulator more powers to police the markets.
Chinamo said for now, SecZim was enforcing regulations through capital markets like the Zimbabwe Stock Exchange (ZSE), because current legislation bars it from directly policing listed companies.
“Financial reporting quality is at the centre of a well-functioning capital market,” Chinamo said. “Low financial reporting quality impedes assessment of earnings quality and impedes valuations. The standards we set in 2014 have largely been ignored due to our limited regulatory authority over listed companies.
“When the SEC Act was crafted, the commission was given power over all market intermediaries except the most crucial, issuers of securities or listed companies, on the understanding that the ZSE would perform the function. We were therefore forced to implement this via the ZSE and expecting a private company to enforce unpopular regulations on other private companies just doesn’t work.
“The solution is amendments to the SEC Act, which will give the commission regulatory authority over issuers. This is best practice which all concerned now accept should be the norm here as well.”
From this perspective, the SecZim CEO said he was leaving the capital markets regulator a sad man, although generally, he had learnt so much to use in his future endeavours. He said Zimbabwe could still correct the shortcomings and move in line with global trends.
Chinamo said sceptics looking at Victoria Falls Stock Exchange as a complete failure were judging the new bourse harshly.
He said it would be unfair to compare the hyperactivity taking place at the ZSE, which has operated for about 100 years, with a stock exchange that is only entering its second year.
“I think it’s too early to pass judgement on the VFEX after less than a year of operation,” Chinamo said. “It’s natural to compare it to the hive of activity that is the ZSE. But remember the ZSE is over 100 years old, and I am sure it wasn’t always smooth sailing.
“As VFEX finds its feet it must overcome the dilemma of what investors who hold shares listed there would do with the proceeds should they sell. Ideally, they would want to invest in other preferably liquid US dollar assets for which there are currently limited options.
“As more counters list and as we establish a US dollar money market, trading will improve. As for why companies are not listing, it’s a chicken and egg situation. Companies prefer to list on a liquid exchange that has depth and liquidity, and depth is a result of many listings.”