According to an article published in Newsday today, the Zimbabwe Stock Exchange (ZSE) is working on a junior bourse to be named Zimbabwe Emerging Enterprises Market (ZEEM). Whilst this is a welcome move, in line with many first world financial markets; in African there has been only one success story of a junior bourse: the Alternative Exchange (AltX) a subsidiary of the Johannesburg Stock Exchange (JSE). It seems the primary reason for success is a somewhat buoyant economy with government and large corporates which support the SMEs through expansions and integrations. In Europe; however, SME exchanges are thriving with the FTSE AIM trading more than 800 counters with total capitalisation of £80bn.
Will SME Exchange work for Zim?
The timing couldn’t have been worse; the economic fundamentals in Zimbabwe are just not right for another stock exchange. Given that 19 companies have delisted from the ZSE since 2009 and there hasn’t been any significant new listings in that same time frame; chances are the junior exchange will be doomed. There will just be no appetite for trading in pink stocks which will most likely be dogged with corporate governance issues. The lack of a legal corporate governance document such as the King Code, liquidity squeeze, low disposable earnings and depressed economy will see very little activity on such a market.
Whilst it is good to have the legislation and the necessary structures in place; plans to actually launch the ZEEM should be shelved until a time when the macro-economic factors are right.