1. Critical Analysis of Challenges and Successes of Zimbabwe’s Capital Market Tafadzwa Chinamo CEO Securities Commission of Zimbabwe Lusaka, Zambia May 2013

2. Zimbabwe Capital Market 1 Stock Exchange: est. 1896, market cap $5bn, 74 listed companies, daily turnover ±$1.5m, avg. 90 trades/day, two indices 14 Stockbrokers 5 Securities Custodians 3 Securities Transfer Secretaries 17 Securities Investment Advisors 14 Asset Management Companies: 45 Unit trust funds

3. Notable Challenges Manual and Paper based trading platform System unknown to modern day global players Lack of CSD hindering more efficient clearing, settlement and dividend processing Unable to perform rigorous analysis resulting in limited product offering → no derivatives Keeping away many potential local and foreign players »»» low liquidity

4. Notable Challenges Effects of Z$ to US$ crossover Market caps ‘unjustifiably’ low USD market values too low for most small investors → many now out of the market Few locals with US$ to invest → net sellers, foreigners limited due to perceived political risk & caps on foreign shareholding Contending with odd share prices e.g. US0.01c Financial history lost: 2009 new starting point

5. Notable Challenges Companies Struggling to Recapitalise post hyperinflation Minimal corporate actions and no new listings Many unattractive stocks on the board. These could be seen as Bargains! Worrying number of delistings Small stocks struggling to meet continuing obligations Activity on the market limited to a few stocks

6. Notable Challenges Securities Laws not yet complete SEC’s authority often challenged by players Securities Act not yet complimented by rules Outdated ZSE Listing Rules Regulatory arbitrage between Securities Act, Companies Act and ZSE Listing Rules Weak ties between SEC and prosecuting authorities and law makers

7. Underlying Success Factors Resilient, Tried and Tested Market Still going strong despite: -political and economic vagaries -manual trading platform Market turnover 4 th in Sub-Saharan Africa Exchange been around since 1893 Healthy blend of long established & new players

8. Underlying Success Factors Market sustained by locals 69 of the 74 listed companies are local (BARC, BAT, LAF, OM, PPC) Strong local institutional base (Pen. Funds, Insurance Cos and Asset Managers) Participation at household level significant Able to maintain deep skills base Good base for growth

9. Notable Recent Successes Establishment of SEC as the Regulator SEC re-enforced ‘viable’ SRO structures Several high profile sanctioning of violators Gazetted corporate governance rules Pushing hard for modernisation (CSD, ATS) ZSE now run by independent board Established an Investor Protection Fund Advancing best practice through membership to world bodies (IOSCO, WFE etc)

10. Notable Recent Successes SEC & Public Accountants and Auditors Board Collaboration (PAAB) Huge improvement in preparation and disclosure of financial statements Introduced a Review Panel to scrutinise all published financial statements Set reporting standards to be adhered to by companies and their auditors

11. Outlook Zimbabwe’s capital markets are poised for growth