By Gilbert Muponda
There is urgent need for a stakeholder conference to start mobilizing resources for Zimbabwe’s economic recovery .The current economic decline will require more resources to get the economy on a productive and growth path again. Whilst politics has taken the spotlight for a better part of the last decade, it’s imperative that a national economic vision blue print be developed beyond any party or political lines. The economic vision blueprint will then act as guideline to mobilize financial, human and other resources necessary to get Zimbabwe’s Economy to work and full capacity to create desperately needed jobs and produce basics that are in short supply.
Over the last few years focus has been on land and sovereignty which are important aspects of nation building but on their own are not enough to build a strong, independent and economically sufficient nation. There is need to involve more stakeholders in developing a national economic vision which will have their support since it will be a result of wider consultation. Whilst land is important there is need to look beyond the land and exploit other advantages that Zimbabwe has including the well developed education sector and function communications infrastructure.
The National Economic Vision will then act as the leading vehicle to mobilize international resources not only in donor form but investment commitments from various sources including Sovereign Wealth Funds which are currently awash with funds seeking suitable investment destinations. There is a definite need to move away from Donor dependency and N.G.O dependency .This can only be done through a comprehensive Economic Plan that’s clear on what is to be achieved and how it will be achieved.
Zimbabwe is rich in various natural resources some of which are currently enjoying record high prices due to the strong demand from China and India’s booming economies. Commodity prices go through cycles and the prices may decline well before Zimbabwe realizes any tangible benefits from current commodity windfalls. Zimbabwe has other advantages such as a relatively well developed financial system and skilled labor force. These factors make it fairly simple how to develop a workable recovery economic recovery blue print It is therefore critical that Zimbabwe starts packaging it self as an attractive investment destination .Whilst the politics is very unstable by any standards ,no situation is permanent , there is now need to look beyond the party and political lines and put Zimbabwe first .
It is clear that Zimbabwe’s current political arch-rivals claim to be fighting to preserve, build and restore national pride. But what seems to escape the whole fight is that probably by the time the fight ends there wont the much in of a nation in terms of economic infrastructure .Industry would be a mere fraction of what it was a few years back. The point here is there is now need to look beyond personal positions or party ideologies and try to focus the nation on re-building the economic foundation after close to a decade of unprecedented recession.
Presently there is a lot of International goodwill towards Zimbabwe such that the Economic recovery may take much less time than what many political and economic commentators have been preaching. The focus has been on Zimbabwe for a considerable time that should the Zimbabweans themselves come up with an all inclusive Economic Vision blueprint many nations and institutions are ready to assist Zimbabwe to get back to its economic feet.
Whilst the goodwill currently exists it must be noted that nothing lasts forever. Especially goodwill can’t be there forever. It only takes another major international emergency or event for all the attention and goodwill to dry up. During the early days the International community used to be seriously concerned about events and situation in Somalia. And when the situation persisted and the nation’s owners failed to resolve their differences international attention and goodwill waned up-to now .Now the international community mostly concerns itself with the safety of luxury cruise liner ships off the Somali international waters for safety from pirates. Otherwise there isn’t much of an effort to fix that country’s economy. This is a useful case study for Zimbabwe in terms of keeping investors and international community interested in the country. Once international and investor interest wanes it’s almost impossible to recover.
Whilst it is important to win a political contest it is even more important to have a comprehensive and realistic plan to mobilize financial, human and other resources to ensure that the Economic production capacity can be enhanced, jobs created and inflation tamed.
Gilbert Muponda is a Zimbabwe-born entrepreneur. He can be contacted at gilbert@gmricapital.com .This article appears courtesy of GMRI Capital. More articles at www.gmricapital.com
Saturday, June 21, 2008
Tuesday, June 17, 2008
Zimbabwe needs a Developmental Exchange
By Gilbert Muponda
The Zimbabwe Stock Exchange (ZSE) needs to actively attract small to medium enterprises to raise capital through listing on the ZSE .This can be done through setting up of a developmental section of the exchange which will allow smaller firms to raise capital to fund their expansion whilst their prepare to list on the main market. The London exchange and the Johannesburg exchanges use a similar model which has served to prepare listing candidates before they graduate to the main market. The London Stock exchange’s developmental section is separately regulated and is called Alternative Investment Market (AIM)
AIM is a sub-market/(developmental stage section) of the London Stock Exchange, allowing smaller companies to list their shares with a more flexible regulatory system than is applicable to the London Stock Exchange’s main market. It attracts firms from all over the world .This allows the companies to raise both capital and their profile on a global scale. A higher public profile makes it easier to access certain markets and to network in critical areas as well as attract talent and other critical resources.
AIM is regulated through an array of principles-based rules for publicly held companies. AIM’s regulatory model is based on a comply-or-explain option that lets each company listed on AIM either comply with AIMs relatively few rules, or explain why it has decided not to comply with them. Aside from granting companies some leeway in regards to regulatory compliance, the exchange also mandates continuous oversight and advice by the issuer's underwriter, referred to as a Nominated Adviser. This ensures that firms adhere to some minimal standards to protect the investors and the reputation of the exchange. In Zimbabwe and the rest of Africa an exchange like that is desirable as it can serve to encourage more listings and encourage the general public to be more involved in investment matters which are currently restricted to the elite.
There is a clear need to encourage small firms and businesses since they employ an increased number of people in recent times. In Zimbabwe’s case given that a reported 80% of the population is out side the formal employment system means a significant number is self-employed in operations which have potential to employ more people if given adequate financial and technical support. A developmental exchange can play a leading role in facilitating the growth of that sector.
Self-regulation is pivotal to a developmental exchange’s low regulatory burden: companies seeking a developmental exchange listing are not subject to significant admission requirements; after admission is granted, firms must comply with ongoing obligations which are comparatively lower to the ones that govern the operation of larger exchanges; and certain corporate governance provisions are not mandatory for developmental exchange companies. Developmental exchange-listed companies usually are only required to adhere to the corporate governance requirements of their home jurisdiction, which, as a practical matter, vary widely.
Even though AIM-listed companies are not start-ups, most are small and highly risky. This is viewed in capital markets as hazardous for unsophisticated investors who normally lack both the knowledge and resources to conduct proper inquiries and analysis into a listed firm’s prospects and activities. This limits the involvement of the general public in trading developmental stage listed shares. This presents both a challenge and opportunity to the stock broking community.
In countries such as Kenya, South Africa AND Zimbabwe which have relatively developed stock broking communities the task of developing such markets is not beyond their capacity. What maybe be lacking is the legal framework that would allow the full development of such markets. The benefits to the national economy are significant since this process will allow smaller businesses to expand into solid firms that employ more and can access funding to finance critical activities such as research and development to keep pace with the rest of the world.
Gilbert Muponda is a Zimbabwe-born entrepreneur. He can be contacted at gilbert@gmricapital.com .This article appears courtesy of GMRI Capital. More articles at http://www.gmricapital.com/
The Zimbabwe Stock Exchange (ZSE) needs to actively attract small to medium enterprises to raise capital through listing on the ZSE .This can be done through setting up of a developmental section of the exchange which will allow smaller firms to raise capital to fund their expansion whilst their prepare to list on the main market. The London exchange and the Johannesburg exchanges use a similar model which has served to prepare listing candidates before they graduate to the main market. The London Stock exchange’s developmental section is separately regulated and is called Alternative Investment Market (AIM)
AIM is a sub-market/(developmental stage section) of the London Stock Exchange, allowing smaller companies to list their shares with a more flexible regulatory system than is applicable to the London Stock Exchange’s main market. It attracts firms from all over the world .This allows the companies to raise both capital and their profile on a global scale. A higher public profile makes it easier to access certain markets and to network in critical areas as well as attract talent and other critical resources.
AIM is regulated through an array of principles-based rules for publicly held companies. AIM’s regulatory model is based on a comply-or-explain option that lets each company listed on AIM either comply with AIMs relatively few rules, or explain why it has decided not to comply with them. Aside from granting companies some leeway in regards to regulatory compliance, the exchange also mandates continuous oversight and advice by the issuer's underwriter, referred to as a Nominated Adviser. This ensures that firms adhere to some minimal standards to protect the investors and the reputation of the exchange. In Zimbabwe and the rest of Africa an exchange like that is desirable as it can serve to encourage more listings and encourage the general public to be more involved in investment matters which are currently restricted to the elite.
There is a clear need to encourage small firms and businesses since they employ an increased number of people in recent times. In Zimbabwe’s case given that a reported 80% of the population is out side the formal employment system means a significant number is self-employed in operations which have potential to employ more people if given adequate financial and technical support. A developmental exchange can play a leading role in facilitating the growth of that sector.
Self-regulation is pivotal to a developmental exchange’s low regulatory burden: companies seeking a developmental exchange listing are not subject to significant admission requirements; after admission is granted, firms must comply with ongoing obligations which are comparatively lower to the ones that govern the operation of larger exchanges; and certain corporate governance provisions are not mandatory for developmental exchange companies. Developmental exchange-listed companies usually are only required to adhere to the corporate governance requirements of their home jurisdiction, which, as a practical matter, vary widely.
Even though AIM-listed companies are not start-ups, most are small and highly risky. This is viewed in capital markets as hazardous for unsophisticated investors who normally lack both the knowledge and resources to conduct proper inquiries and analysis into a listed firm’s prospects and activities. This limits the involvement of the general public in trading developmental stage listed shares. This presents both a challenge and opportunity to the stock broking community.
In countries such as Kenya, South Africa AND Zimbabwe which have relatively developed stock broking communities the task of developing such markets is not beyond their capacity. What maybe be lacking is the legal framework that would allow the full development of such markets. The benefits to the national economy are significant since this process will allow smaller businesses to expand into solid firms that employ more and can access funding to finance critical activities such as research and development to keep pace with the rest of the world.
Gilbert Muponda is a Zimbabwe-born entrepreneur. He can be contacted at gilbert@gmricapital.com .This article appears courtesy of GMRI Capital. More articles at http://www.gmricapital.com/
Sunday, June 1, 2008
ZSE needs to be reformed to assist Entrepreneurs
By Gilbert Muponda
Zimbabwe’s current business operating environment characterized by hyper inflation discourages most lenders to lend capital due to fact that lenders lose value due to inflation .In hyper inflationary environment wealth is transferred from lenders to borrowers who only “repay” the amount that was agreed without adequate compensation the diminished value of currency due to inflation. This in turn results in lack of long term investments as most participants become short-term focused. In addition as a direct result investors would prefer ownership as shareholders and share in the upside of the business rather than just be paid interest which doesn’t fully compensate for inflation. This trend has forced Banks and other financial institutions to become major players on the Zimbabwe stock Exchange .The operating environment demands that various regulations and institutions be reformed and modernized to be better placed to deliver expected services to the nation.
The Zimbabwe stock exchange needs to be reformed and restructured to be more effective in assisting both investors and entrepreneurs reach their respective goals. Initial Public Offering (IPO), also referred to simply as a "public offering," is when a company issues common stock to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded. The Zimbabwe Stock Exchange (ZSE) is the primary institution involved in this and sets the various rules, requirements, terms and conditions of conduct of IPO’s.
The ZSE needs to be reformed to be able to make it more effective and responsive to the needs of entrepreneurs especially small and medium scale businesses who struggle to raise capital even though they may have all the other ingredients for success. The ZSE needs to the reformed from an elitist club into a more inclusive institution that transforms upcoming , promising ideas ,ventures and projects from dreams into reality. If it cant be reformed and restructured to meet those goals then the is an urgent need to set up a rival exchange to do that.
The money paid by investors for the newly-issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). An IPO, therefore, allows a company to tap a wide pool of stock market investors to provide it with large volumes of capital for future growth. The company is never required to repay the capital, but instead the new shareholders have a right to future profits distributed by the company and the right to a capital distribution in case of dissolution.
The existing shareholders will see their shareholdings diluted as a proportion of the company's shares. However, they hope that the capital investment will make their shareholdings more valuable in absolute terms. Among the requirements of conducting an I.P.O in Zimbabwe is the need for the company to be of a particular size and to have a trading record of a specified period (minimum 3 years), and be showing certain level of profitability. These requirements exist mainly to protect investors and also to make the ZSE’s life easy and simple.
There global trends that ZSE can tap into an enhance both the quality and quantity of investment option available for investors. Specifically the ZSE needs to actively encourage small to medium scale businesses to pursue the possibility of IPOs as a way to raise capital for their operations since the high level of inflation makes it almost impossible to keep borrowing to keep pace with higher requirements of working capital.
Whilst it’s important to adhere to historic standards trends in other markets show the increased popularity of Black cheque IPOs. A blank check IPO exists to raise money, and then seeks to use that money to acquire another company. Blank check companies, also known as special purpose acquisition vehicles, are formed for the sole purpose of acquiring other businesses. They generally tap investors in the public markets prior to making acquisitions, and generally have an agreement to return funds to investors within a specified period if they fail to close deals.
Companies like to raise money first and decide what to do with it later. For investors, however, that can be tricky .Everybody wants a blank check. So-called blank check initial public offerings are in the midst of a renaissance, though they might not provide much of a thrill. In the Zimbabwean environment this can be particularly helpful when many businesses are closing down. A Blank cheque IPO can be very effective to acquire such businesses with a view to turn them around or merge them with other related businesses and create shareholder value in the process.
Unfortunately this very important task has been left only to parastatals and other government entities which have been burdened with acquiring enterprises which at times they can hardly add any value to. This role needs to be opened up to the private sector. And it has to encouraged by enabling legal instruments and a reformed and restructured ZSE which can facilitate such transactions. Blank cheque IPOs can fill in the void in terms of raising capital to acquire such businesses and reduce the burden on the fiscus.
A Special-purpose acquisition company (SPAC) is an investment vehicle that allows public investors to invest in areas sought by a management team or private equity firms. SPACs are shell or blank-check companies that have no operations but that go public with the intention of merging with or acquiring a company with the proceeds of the SPAC's initial public offering (IPO).
The idea of investing in a company where you have no idea what the business will be is hardly new. During England's 18th Century South Sea Bubble, a promoter raised money through a stock offering for "a company for carrying on an undertaking of great advantage, but nobody is to know what it is."
Sometimes companies that go public through this process can be good investments, but there's something investors need to keep in mind: A company that has been acquired by a SPAC has just been put up for sale and is therefore unlikely to be undervalued. If the sellers could have gotten more for it, they would have sold it to someone else.
Blank check companies, which have only come into main stream in recent years, have courted controversy because they have no revenue or operating history -- just a management team promising acquisitions if the right opportunity presents itself. This sounds speculative but if you are an informed investor in Zimbabwe you will be able to assess for your self the chances of such opportunities arising.
Investors who buy into blank checks are in effect betting on the experience, skills and resumes of the managers and their ability to find suitable businesses to acquire. In Zimbabwe opportunities exist for such transactions due to the high company closure or re-location rate. It maybe about time institutions such as the ZSE are reformed and modernized to keep pace with other markets.
Gilbert Muponda is a Zimbabwe-born entrepreneur. He can be contacted at gilbert@gilbertmuponda.com .This article appears courtesy of GMRI Capital. More articles at www.gmricapital.com
Zimbabwe’s current business operating environment characterized by hyper inflation discourages most lenders to lend capital due to fact that lenders lose value due to inflation .In hyper inflationary environment wealth is transferred from lenders to borrowers who only “repay” the amount that was agreed without adequate compensation the diminished value of currency due to inflation. This in turn results in lack of long term investments as most participants become short-term focused. In addition as a direct result investors would prefer ownership as shareholders and share in the upside of the business rather than just be paid interest which doesn’t fully compensate for inflation. This trend has forced Banks and other financial institutions to become major players on the Zimbabwe stock Exchange .The operating environment demands that various regulations and institutions be reformed and modernized to be better placed to deliver expected services to the nation.
The Zimbabwe stock exchange needs to be reformed and restructured to be more effective in assisting both investors and entrepreneurs reach their respective goals. Initial Public Offering (IPO), also referred to simply as a "public offering," is when a company issues common stock to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded. The Zimbabwe Stock Exchange (ZSE) is the primary institution involved in this and sets the various rules, requirements, terms and conditions of conduct of IPO’s.
The ZSE needs to be reformed to be able to make it more effective and responsive to the needs of entrepreneurs especially small and medium scale businesses who struggle to raise capital even though they may have all the other ingredients for success. The ZSE needs to the reformed from an elitist club into a more inclusive institution that transforms upcoming , promising ideas ,ventures and projects from dreams into reality. If it cant be reformed and restructured to meet those goals then the is an urgent need to set up a rival exchange to do that.
The money paid by investors for the newly-issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). An IPO, therefore, allows a company to tap a wide pool of stock market investors to provide it with large volumes of capital for future growth. The company is never required to repay the capital, but instead the new shareholders have a right to future profits distributed by the company and the right to a capital distribution in case of dissolution.
The existing shareholders will see their shareholdings diluted as a proportion of the company's shares. However, they hope that the capital investment will make their shareholdings more valuable in absolute terms. Among the requirements of conducting an I.P.O in Zimbabwe is the need for the company to be of a particular size and to have a trading record of a specified period (minimum 3 years), and be showing certain level of profitability. These requirements exist mainly to protect investors and also to make the ZSE’s life easy and simple.
There global trends that ZSE can tap into an enhance both the quality and quantity of investment option available for investors. Specifically the ZSE needs to actively encourage small to medium scale businesses to pursue the possibility of IPOs as a way to raise capital for their operations since the high level of inflation makes it almost impossible to keep borrowing to keep pace with higher requirements of working capital.
Whilst it’s important to adhere to historic standards trends in other markets show the increased popularity of Black cheque IPOs. A blank check IPO exists to raise money, and then seeks to use that money to acquire another company. Blank check companies, also known as special purpose acquisition vehicles, are formed for the sole purpose of acquiring other businesses. They generally tap investors in the public markets prior to making acquisitions, and generally have an agreement to return funds to investors within a specified period if they fail to close deals.
Companies like to raise money first and decide what to do with it later. For investors, however, that can be tricky .Everybody wants a blank check. So-called blank check initial public offerings are in the midst of a renaissance, though they might not provide much of a thrill. In the Zimbabwean environment this can be particularly helpful when many businesses are closing down. A Blank cheque IPO can be very effective to acquire such businesses with a view to turn them around or merge them with other related businesses and create shareholder value in the process.
Unfortunately this very important task has been left only to parastatals and other government entities which have been burdened with acquiring enterprises which at times they can hardly add any value to. This role needs to be opened up to the private sector. And it has to encouraged by enabling legal instruments and a reformed and restructured ZSE which can facilitate such transactions. Blank cheque IPOs can fill in the void in terms of raising capital to acquire such businesses and reduce the burden on the fiscus.
A Special-purpose acquisition company (SPAC) is an investment vehicle that allows public investors to invest in areas sought by a management team or private equity firms. SPACs are shell or blank-check companies that have no operations but that go public with the intention of merging with or acquiring a company with the proceeds of the SPAC's initial public offering (IPO).
The idea of investing in a company where you have no idea what the business will be is hardly new. During England's 18th Century South Sea Bubble, a promoter raised money through a stock offering for "a company for carrying on an undertaking of great advantage, but nobody is to know what it is."
Sometimes companies that go public through this process can be good investments, but there's something investors need to keep in mind: A company that has been acquired by a SPAC has just been put up for sale and is therefore unlikely to be undervalued. If the sellers could have gotten more for it, they would have sold it to someone else.
Blank check companies, which have only come into main stream in recent years, have courted controversy because they have no revenue or operating history -- just a management team promising acquisitions if the right opportunity presents itself. This sounds speculative but if you are an informed investor in Zimbabwe you will be able to assess for your self the chances of such opportunities arising.
Investors who buy into blank checks are in effect betting on the experience, skills and resumes of the managers and their ability to find suitable businesses to acquire. In Zimbabwe opportunities exist for such transactions due to the high company closure or re-location rate. It maybe about time institutions such as the ZSE are reformed and modernized to keep pace with other markets.
Gilbert Muponda is a Zimbabwe-born entrepreneur. He can be contacted at gilbert@gilbertmuponda.com .This article appears courtesy of GMRI Capital. More articles at www.gmricapital.com
Subscribe to:
Posts (Atom)
