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Capital market disclosure in spotlight

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Publicly quoted companies will be obliged to make more disclosures, besides traditional financial cautions and social responsibility programmes, under a new national code on corporate governance being developed for the entire economy.

Securities Exchange Commission (SEC) chairperson Willia Bonyongwe on Tuesday said the proposed regulatory reforms were part of a broad national corporate governance movement driven by the Institute of Directors, the Standards Association of Zimbabwe and the Zimbabwe Leadership Forum.

The review may ultimately see the Companies Act going under surgery, as it is currently thin on corporate governance and non-financial operational disclosures.

Bonyongwe, who is heading the movement’s thematic committee on integrated reporting and disclosures,one of the 10 appointed to steer the development of the code, said the draft should be put before the market by March next year.

She said corporate governance in the country “has been dealt with in piecemeal manner” by disjointed jurisdictions such as the Reserve Bank of Zimbabwe, SEC and government. She said the current effort was aimed to harmonise the truncated frameworks into a national code that would cover and guide every player in the economy.

Government, a fortnight ago, launched a corporate governance framework for parastatals, public institutions and local authorities with a view to increase transparency and accountability.

“At the moment the level of disclosure in capital markets is minimal,” Bonyongwe said.

“We feel companies should not just report on money, balance sheets and other financial issues. There should be more disclosures.

“We want them to say more about the environmental impact of their operations, about developments in their industries that may impact on others and about whether their companies are a going concern or not.

“At the moment, this is not being done because it’s not a requirement under the current legal and regulatory framework. But going forward there should be more disclosures.”

She said the envisaged framework would make it a requirement for companies listed on the Zimbabwe Stock Exchange (ZSE) to make disclosures on directors’ remuneration, production systems, technology employed and transactions with third parties.

She said this was critical in curbing insider trading in equities. Corporate governance has recently been elevated to a status as important as financial performance as it has a bearing on how a firm is run, and ultimately its ethical conduct and financial performance.

International stock exchanges, including South Africa’s JSE, have adopted the King I, II or III reports on corporate governance into their regulations to move with the trend.

King III report recommends that activities such as environmental, health and safety assessments should be conducted by an independent, credible and professional consultant.

Bonyongwe noted that ZSE-listed companies have voluntarily adopted the King Report on corporate governance, but lamented that the culture of disclosure was still facing repulsion in Zimbabwe.

The level of financial market deepening and companies’ access to credit and markets has been found to correlate with the degree of disclosure.

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