THE Securities Commission of Zimbabwe (SECZ) has raised concerns over failure by some publicly-owned companies to make full disclosures on looming crises despite facing capital constraints.
Report by Bernard Mpofu Chief Business Editor
A going concern means that a company intends to continue its business and is able to do so.
SECZ chief executive officer Tafadzwa Chinamo yesterday told delegates attending the Confederation of Zimbabwe Industries (CZI) business ethics symposium that most quoted companies trading on the local bourse were withholding critical information relating to the future of the firms thereby prejudicing investors.
“Companies only say they have capital constraints yet they are on the brink of collapse. It may be the case that they may be facing going concern problems for three years, but they don’t make such disclosures,” Chinamo said.
He said there was need to balance ethics, self-policing and regulation to ensure the success of the country’s capital markets.
“We would rather remain a small market than grow from drug money from the mafia. The commission will continue to question trades that are done at large premiums to ensure fairness,” he added.
The country’s capital markets regulator has already engaged the Public Accountants and Auditors Board to review the level of disclosure by listed companies after noting that most companies are failing to carry an auditor’s opinion in the financials.
An auditor’s opinion is a certification that accompanies financial statements and is provided by independent accountants who audit a company’s books and records and help produce financial statements.
Financial statement disclosures are secondary information provided by companies to clarify or interpret certain published financial information.
Disclosures are crucial in assisting outside reviewers of financial information for the purpose of making investments in the business.
According to a recent CZI survey, capacity utilisation for the manufacturing sector this year plunged to 44% from 52,9% mainly due to serious working capital constraints. The ZSE has over 70 listed companies with the bulk of them in the manufacturing and financial services sectors.
Pharmaceutical giant Caps is one of the former public companies in recent times which delisted before going bust due to working capital constraints.