STOCKS

Zambia 2017 | FINANCE | B2B

Educating companies and the public on the benefits of listing and investing is essential to stimulating activity in the capital markets.

Priscilla Sampa
PRISCILLA SAMPA
Company Secretary & CEO
Lusaka Stock Exchange (LuSE)
Phillip K. Chitalu
PHILLIP K. CHITALU
Secretary & Chief Executive
Securities and Exchange Commission (SEC)

How has the LuSE performed over the last year?

Priscilla Sampa Over the better part of 2016 market activity was characterized by less than favorable trading patterns, induced largely as a result of pre-election political uncertainty and a weakening kwacha. However, the market demonstrated resilience toward the close of the year owing to the strengthening of macro-economic factors. In addition, the Ministry of Finance made significant policy changes that will encourage an influx of FDIs that will boost the market's performance. Furthermore, there is a governmental drive to encourage SME growth through credit reforms that will allow smaller enterprises to forge partnerships or joint ventures with larger, international companies, and this is anticipated to provide additional impetus to the market's performance. The initiative will certainly build capacity and inject capital into the exchange.

What was the motivation behind the establishment of the SEC?

Phillip K. Chitalu The SEC was set up in 1994, prior to the establishment of the LuSE. We were formed by an act of parliament, making us a statutory body. In 1991, after the liberalization of the economy, the government wanted to pull out from several Zambian companies and needed an avenue through which to divest these entities. The stock exchange was the obvious platform for this, but there was the need for the kind of facility that would have regulatory oversight, hence the creation of the SEC. When the government finished selling off most of these entities, the financial landscape in the country changed, becoming much more private-sector oriented. Our current role still involves a great deal of liaising with private entities, engaging them in alternative ways to raise finance.

How can innovation in Zambia be encouraged?

PS Innovation is more easily expressed when the availability of financing to support research and development as well as new technologies is not restricted. While I am confident that we will see increased innovation in Zambia, the lack of access to finance that start-ups encounter must first be overcome. The LuSE offers a clear solution in this regard, and has witnessed increased enquiries from companies about the requirements of listing on the exchange. We, therefore, educate companies on how to draw up business plans and the different products available on the exchange. As a market, we hope to be able to provide the capital new ventures need to expand their businesses.

PKC There is a strong belief that we could be selling the wrong products, products that are not targeted at our market and that have kept levels of participation low. As a securities regulator, we should be wary of the capital environment with which we are dealing: In Kenya, for example, mobile solutions flew off the shelves because the market was extremely receptive to this type of finance model. However, in a credit-type environment, cash-dependent products are likely to flop. Looking back historically, offices such as ours were set up, and set up well, by institutions like the World Bank and its IFC; however, in the process we were issued a standard security product and not one that was accurately tailored to our business environs.

What are your upcoming priorities?

PS First, we plan to broaden the options available to companies that want to trade on the LuSE. We want to grow brokerage and investment bank presence across all of Zambia's provinces, and already engage with banks to increase trading activity and product offering. We also look to introduce several additional instruments to offer on the market, such as deposit receipts, exchange traded funds, and special securities to add to the usual portfolio of equity or bonds. We have entered into discussions with the government about making available certain instruments that could help more SMEs get listed once they are capitalized. We have also run a successful radio program in partnership with certain listed companies, as well as a TV program that explains the basic principles behind investing, and several forums on SME development to better inform people about the differences between money and capital markets.

PKC The SEC is implementing a strategic plan that runs from 2015 to 2018. With this, we have set goals to ensure that people are geared to invest in the market and that their investments are properly protected. Our outreach objectives include radio and other media campaigns to educate people about the safety and benefits of investing. It is possible that without disseminating that type of information, schemes will not take root and people will lose out. This is a key strategic objective to ensure a transparent market that people can trust, which will ultimately lead to growth.