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Buying stock promotes savings culture: SECZ

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THE Securities and Exchange Commission of Zimbabwe (SECZ) is on a campaign to get individuals to invest on the stock market. SECZ head of corporate finance and market development Kundai Msemburi (KM) spoke to NewsDay (ND) reporter Tatira Zwinoira on the benefits of individuals joining the stock market. Below are the excerpts.

ND: Has there been movement to reclaim the 21 000 unclaimed share certificates since the launch of your campaign?

KM: Yes, there has actually been a bit of movement, but obviously it is not as overwhelming as we would want. A lot of the shares still remain unclaimed because our investor awareness campaign is still ongoing and is part of our mandate, so even with this campaign and our ordinary investor awareness activity we are hoping that people will actually start to come and claim shares. Not only shares, but there are also unclaimed dividends as well, so we are just hoping that people will start looking and see their names.

We have actually got it (names of individuals) on our website, our database, where you can type in your name and national identification (ID) and you can find out whether your share certificates are there, where they are and you can come and claim them.

ND: Why does SECZ feel that the public needs to get in on the stock market considering the current economic environment?

KM: We are saying that people need to be given an alternative. Right now, you have got an issue where people have got their money stuck in banks and they cannot access it in any particular

way and that money is not getting any meaningful return, nothing at all. We are saying why not make that money productive by investing it?

You have an alternative avenue instead of having that money sit in the bank and have nothing, you could go and buy shares, perhaps those shares will go up. Right now, the stock market index is at an unprecedented high level because with the demand for shares people are now actually moving away [from other investments] and trying to earn returns on the stock market which is what has caused the rally.

Now we are actually seeing that our stock market is now valued at over $6 billion so there is a lot of value because when you buy into shares you are buying shares of a company. Companies are the ones who are going to generate the profits that will possibly pay you dividends and capital gains if you sell those shares at the end of the year. But you can actually make money.

It is not guaranteed as is every investment, there is actually an upside and downside risk, but it is a sure bet and its better than letting your money just sit in the bank and not earn anything.
ND: Considering this cash-strapped environment, how can an ordinary person get cash returns from their investment and how would they go about it?

KM: Whatever payment systems are being used remember that these are financial assets. Even in times past no one would actually get dividends as cash. They would go and get it as a cheque or as a payment into your bank, so whatever system is being used it is not an issue about cash.

Shares and investments have got nothing to do with you getting physical cash. Physical cash is an aspect of banking, this [stock market] is investment, this is long-term money so obviously it would move in the form as long-term money such as transfers and as such is not a cash business.

ND: What is your marketing pitch for a person to get onto the stock market?

KM: Like I said, the stock market is a long-term investment vehicle. It is for you to plan for the horizon of three to five years [for example]. When you start speaking of cash you are talking about a very short-term horizon, it is consumptive by nature there are no savings, short-term gains that can be reached. Over the long run, stock markets offer greater returns than someone holding cash.

If you are holding cash, you can put it under your mattress like today, say $100, next year it will not be worth the same so why not put it in the stock market? We are not pitching investments, we are trying to pitch investments and a savings culture because this is a long-term investment and these, over the long term, will get you greater returns.

In terms of cash, you will always have excess and we are saying this is what the campaign is about. If you have got excess cash, instead of keeping it under your mattress why not put it in the system? Go to your broker, asset manager and let that money go and buy a quality share, let that share appreciate over four, five years and get a dividend. It is a long-term asset, a different asset class.

Holding cash is not the most convenient thing to do and by any chance.

Even though we have a physical cash shortage, people are transacting via EcoCash. All our plastic money and wireless platforms are actually helping people to transact, so people need to get away from this concept of holding physical cash because in the first world the actual amount of physical cash circulating is nothing compared to the money that is on payment systems.

So yes, we will evolve to that and people on the lower end prefer to hold cash because most of these people are unbanked, but if you want to have financial inclusion you need to encourage people to be able to transact. Once you open a basic account, you can transact across all asset classes accept perhaps the cash we do not have.

ND: Do you think the requirements that are actually in place are conducive enough to attract ordinary individuals to investing onto the stock exchange?

KM: Yes. In that regard, we have actually had extensive discussions with our fellow regulator the Reserve Bank of Zimbabwe and we are saying if we could, in terms of fulfilling the shared goals of financial inclusion, why not soften some of the ‘know your customer’ requirements in terms of people having to produce proof residence and all these things? But, if a person has got an ID and is listed with a cellphone company surely those are at the bare minimums to be used to identify them?

Yes, we should abide by global anti-money laundering and all these types of laws, but at the end of the day in order to improve financial inclusion we need to soften some of these things that make it hard to open bank accounts.

We are saying for you to now trade, look if you have a bank account we know that you have already been vetted by a bank, so we just need your phone number, ID and bank account and there are no further requirements.

Already, you have got a bank account so once you are like that you can sign up and you can trade on the stock market.

ND: People also do not trust the stock market considering when dollarisation occurred many lost values off their initial investments in stock from the movement of the Zimbabwe dollar to the United States dollar. Why has there been no proper correction in the value of shares which maybe an ordinary individual would have bought well before dollarisation?

KM: What happened in pre-dollarisation was that we were in uncharted territory in terms of hyper-inflation, so because of that the two intrinsic values of any asset were really not known.

So, when we then dollarised we needed to start somewhere, so obviously there are issues that there were bad valuations and people lost a lot of value.

This is not seen in just the stock market, even in the pensions industry you have got those issues which is why President Robert Mugabe actually formed a Commission of Inquiry into what happened in terms of the conversion of peoples’ pensions.

This an issue which every sector is battling with, but obviously when dollarisation happened people had to value assets at some point in time, from some point in time. But gradually now, as we started gathering momentum during the early dollarisation years, in terms of the values we now got closer to what was the issuing reality.

Remember we were in super hyperinflation, one which was unprecedented in Africa. It has never happened, so how do you place a value on anything coming from such an environment? In terms of loss of value which has seen the reduction of the number individual trading accounts because people could not relate the values pre-dollar and post dollar, we are saying let us encourage people.

We have stabilised for a bit now, people know what values are, but at the end of the day people have to come back and renew their interest in knowing capital markets are alternative investments in terms of earning an income, a long-term gain or return.

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