THE BACK BONE

Zambia 2015 | FINANCE | INTERVIEW

TBY talks to Brian Tembo, CEO of Lusaka Stock Exchange (LuSE), on demutualization, bullish sectors, and how to support SMEs.

Brian Tembo
BIOGRAPHY
Brian Tembo has over 10 years’ experience in structured market (capital and commodity) development, corporate restructuring/insolvencies, business development and administration. He was responsible for business development at LuSE, which he joined in 2003. In the fourth quarter of 2013 he took up the leadership of the LuSE as Chief Executive Officer and is currently overseeing the demutualisation of the exchange, and operationalization of the LuSE Alternative Market. Brian also worked in the Technical Directorate of the then Zambia Privatisation Agency (ZPA), now the Zambia Development Agency (ZDA) as a Business Analyst and was actively involved in exciting transformation projects such as the “The Livingstone Project,” which saw the establishment of the Sun International Resort at the Victoria Falls in Livingstone, Zambia. He is an Associate of the London Chartered Institute of Arbitrators (CIArb), holds postgraduate qualifications in business management and a Bachelor of Business Administration Degree in money and banking and management information systems.

LuSE is involved in a process of demutualization. What do you hope to achieve?

During my first 12 months as the CEO of LuSE, we focused on accelerating some pending issues. A big part of our strategy is demutualization, a process that was started a year or two ago but the actual work of the Consultant started in October 2013. We completed the first phase with the submission of a report to the Demutualisation Steering Committee in November 2014 and the subsequent presentation by this independent committee to the LuSE Board and its members. The members' unanimous resolutions to demutualize and the associated changes to the Articles of Association were submitted to the SEC and we await their approval. This presents a fantastic opportunity for new investors to invest into the LuSE. The London Stock Exchange and the New York Stock Exchange are demutualized exchanges. On the continent, the Johannesburg Stock Exchange and the Nairobi Stock Exchange already went through the process and are both listed on themselves. The Nairobi Stock Exchange had an order book in the region of $56 million when they were seeking to raise $9 million. This shows the bullish demand for exchange stock. Though our method may be different, part of the reason for this process is to raise funds for our various strategies for growth. We are due for upgrades to our systems for example. Retooling our exchange will require a significant financial investment.

What sectors have you found the most bullish in the last year?

The LuSE has two markets: equities, and bond or debt. In the debt market, the financial services market has been the most active. We have had micro-finance companies raise capital through bonds. Currently, we only have one company listed in the energy sector, Copperbelt Energy Corporation, which raised the equivalent of about $70 million, to finance some of its expansion activities within Zambia and the continent which means the sector is thriving. Manufacturing and construction are interesting sectors as the country seeks to expand its economy. Lafarge opened the year with a share price of ZMK15-17, and now shares have risen to ZMK26. In the investments category, ZCCM-IH, a mining investments company, owns a stake in most mining companies in Zambia. ZCCM-IH conducted the largest rights offer in the history of the exchange, allowing it to expunge about $400 million worth of debt from its balance sheets. We are also excited about telecommunications. There are three operators, and Airtel, the only one currently listed, wants to offer more shares. We expect MTN and Zamtel, which is state-owned, will be listed on the exchange in due course.

LuSE recently created an alternative market for SMEs. How will this market help them?

The Zambian economy is mostly comprised of SMEs. We look at SMEs as an engine for growth. Zambeef is a great example of a company that started off as an SME 20-25 years ago, and is now a real economic contributor. We are establishing an alternative market to separate listings between the main board and the alternative market. This will allow smaller companies to access increased funding. SMEs are underfunded because the financial sector has been structured to favor large companies. Through the alternative market, we have not only made access easier through lower requirements and fees, we have also created a support structure for new companies. The alternative market, from the advisory perspective, is structured to allow for the mentoring of the SMEs. At the same time, we still have strict requirements regarding corporate structuring and practices. Therefore this market is a low requirements market but still maintains the high standards expected of any exchange.