When Zimbabwe adopted the use of the multi-currency system in 2009 as a means to end hyperinflation which had eroded value, ordinary Zimbabweans welcomed the move with open arms.
BY TATIRA ZWINOIRA
But for shareholders, this meant a huge loss in the value of their shares. So hopeless was the situation that a total 21 000 share certificates valued at $19 million have not been claimed.
At the time, the switch from the Zimbabwe dollar to a stronger United States currency meant a huge loss of value for stocks held on the Zimbabwe Stock Exchange (ZSE).
Inflation had risen astronomically to over 200 million percent at the end of 2008.
As such, when shareholders found out that they had lost serious value of their shares, many did not bother to collect their share certificates from stockbrokers, which at the end of 2009 was 34 000 as the stocks were now worth much less than the price they had been acquired.
“I got shares (3 960) with First Mutual, which I bought with real Zimbabwe dollars, but because of United States dollarisation one year they sent me a dividend amount of less than a $1, I could not believe it,” shareholder, Lackson Mvura, said responding on social media.
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He added that he was only keeping shares now in the hope that the market will adjust to their intrinsic value.
Another shareholder, Wizzy Zvoushe, said he had invested all his money in unit trusts which also came to nothing after dollarisation.
“After dollarisation, the bank decided that $10 was equivalent to all the Zimbabwe dollars I had put into the unit trusts. I tried to save with Old Mutual and the bond note was introduced. I can’t afford to save anymore because prices have gone up and there’s so much uncertainty surrounding the bond note. I do not want to lose everything again,” Zvoushe said.
For many shareholders this could be history repeating itself again.
With the adoption of the US unit, share certificates began to accumulate with stockbrokers as many shareholders did not see the need to claim them.
This led to an accumulation of shares, forcing the Securities and Exchange Commission of Zimbabwe (SECZ) to introduce more efficient transfer structures such as the creation of the Central Securities Depository.
“We introduced many other structures. Like the Central Securities Depository (CSD) where really all the share certificates and the registers of shareholders are kept in one place in electronic form. When we introduced that, we saw no need for stockbrokers, who had accumulated those shares over time to still keep them,” SECZ chief executive officer, Tafadzwa Chinamo said.
“So we gave an instruction that look stockbrokers, find your clients and give them your shares because there is a risk that they could be misappropriated, get lost and all sorts of things.”
The CSD was created to hold the unclaimed share certificates from stockbrokers which at that time were 34 000, he said.
As custodians of these share certificates, the CSD was supposed to return certificates to their owners.
Chinamo said that while the owners of the share certificates were reluctant to claim their certificates, they were still attracting dividends.
“Even if those shares are worth, according to you, small amounts of money it is your money and we want to make it easy for you to redeem that money even if it is $19 for example,” he said.
A shareholder makes cash from stocks in mainly two ways, namely, dividend pay-outs and capital gains.
“The reasons why those shares could not find their rightful owners varied with some people having moved, changed their mobile numbers, gone to the diaspora or died. So the stockbroker, the contact details he has on that client could have changed, you know maybe that client has changed their number and so forth, so we moved those shares to one place. Those are the shares I am talking about,” Chinamo said.
To help entice shareholders to come and collect their unclaimed share certificates, SECZ, according to the Stockbrokers Association of Zimbabwe (SAZ), isssued a directive three years ago prohibiting stokebrokers from keeping share certificates.
“You recall, SECZ, three years back gave a directive that all stockbrokers must not keep share certificates on behalf of customers, so all share certificates were given to custodians. So the custodians are the ones who are sitting with the clients’ shares and they are the ones then who do the communication of customers under the supervision of SECZ,” SAZ chairperson, Benson Gasura, said.
Since then, about 13 000 share certificates have been returned, while the custodians were trying to locate the other owners.
To find why shareholders were not collecting their share certificates, NewsDay conducted a survey, which found that 99% of the respondent had completely lost confidence in investing in the stock market.
This, coupled with the sluggish performance of the ZSE, forced SECZ to issue the directive under the Securities and Exchange Commission Capital requirements for Securities Market Intermediaries, last month.
The directive removed a number of requirements which SECZ found put off people.
“The circular was to first make it easier for you to access the market. We removed a lot of requirements that were putting a lot of people off because the requirements of you to provide certain information like a person’s residence and so forth,” Chinamo said.
“That was a problem so that a small amount of money on that share certificate became insignificant because of what it meant you had to do to get that money. So we want to make it easy for you, so that you can do it from your phone while you are waiting for your friends to come for a drink and you sell those shares very easily.”
SECZ has since launched a capital markets awareness campaign to educate the public on stock investments to get them to trade on the bourse and also to get clients to collect the unclaimed share certificates.
In his 2016 budget review and 2017 outlook, Finance minister Patrick Chinamasa said during the first half of 2017, the stock market was characterised by a strong rally as bullish sentiments dominated the equities market.
“The industrial index gained 35,6% to close the month of June 2017 at 195,97 points, whilst the mining index rose by 19,3% to 69,79 points. In addition to the above developments, the ZSE made strides towards introduction of the bond market, with the drafting and approval of debt market rules, already finalised and now awaiting gazetting,” he said.
In 2016, the stock market remained subdued for the earlier part of the year, but recovered from September and closed the year 2016 on a higher note.
Of the counters, the industrial counters gained 25,8% in 2016, on a year to year basis, as the industrial index, which had opened the year at 114,85 points, recovered to an annual high of 144,53 points by end of December.
“Even stronger recovery was witnessed in mining, with the mining share index gaining 145,7% to close the year at 58,51 points,” Chinamasa said.
He said the total market capitalisation of the stock market by end of 2016 increased by 30,4%, from a beginning of year opening of $3,1 billion to $4 billion by December 2016.
