80 percent of Zimbabwe stockbrokers facing viability problems

Only a fifth of Zimbabwe’s stockbrokers are currently generating enough commission to survive as the local bourse continues to underperform reflecting a weak underlying economy, ZSE chief executive Chirume has said.

Weak trades and immense competition for scarce investors has seen some brokerage firms such as Kingdom Stockbrokers, ZB Stockbrokers and New Africa folding since dollarisation. A bullish run which followed dollarisation, was not enough to keep the firms afloat.

The country’s 13 securities dealers charge 0.92 percent for either buying and selling shares for every trade.

Turnover on the Zimbabwe Stock Exchange for the five months to May fell 40 percent to $122 million compared to the same period last year, according to official data.

Chirume said while the stockbroking business fluctuates due to market variables, an extended lean period could result in more firms collapsing.

“We agree that the market is very difficult at this point in time and when you look at the sharing of that commission you find out that 80 percent of the market might not be getting what is required for them to survive into the future,” Chirume said.

“There is always a funny trick in broking. They call it bust and boom. It is never quiet – it’s either they are making money or things are very bad. So stockbrokers are very aware of that, so what they normally do, they try and provide for the bad times. So it depends how long the bad times last and that will affect them going forward. But, as the stock exchange, our main thrust is to check how they are placed and the possible impact if anything goes wrong.”

Commenting on the proposed alternative bourse for small to medium sizes enterprises, Chirume said the exchange has engaged stakeholders with a view to setting up a revolving fund to assist potential issuers with pre-listing expenses. He said the ZSE would discourage firms currently listed on the main board to downgrade to the new Zimbabwe Emerging Enterprise Market.

“We are not necessarily encouraging them. These are different boards. The reason why we will have two is not to bring the companies from one board to the other and that will always be a problem,” said Chirume.

“Our thinking is that we want to bring in new capital to new companies to growth companies and that will give us a lively stock exchange and impact the nation. So we want to raise new capital for new companies and that is where the drive is.”-The Source

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