The Lusaka Stock Exchange, LuSE, which was organized with the assistance of the World Bank’s International Finance Corporation, opened in February 1994. The IFC structured the exchange to meet G-30 recommendations for clearing and settlement system design and operations.
The exchange operates an electronic clearing and settlement process, with trade-for-trade netting and rolling settlement 3 days after the trade (T+3). The LuSE also has electronic depository facilities, operated by the LuSE Central Share Depository (CSD). Barclays Bank of Zambia and Stanbic Bank, Zambia are members of the CSD. Barclays Bank of Zambia is a subsidiary of Barclays Bank in the UK, and through Barclays Global Securities, based in London, provides custody services for foreign investors. Similarly, Stanbic Bank, Zambia, a subsidiary of South Africa’s Standard Bank, also provides global custody services, via its operation in South Africa.
Since inception, the LuSE has offered trading in equity securities. In March 1998, the LuSE became the official market for trading in Government Bonds. Investors intending to transact in a listed security or government bond are now mandated to trade via the LuSE. There are a number of firms acting as brokers at the LuSE; by October 1999 Pangaea/EMI Securities had handled the largest proportion of the total volume trades completed since the creation of the LuSE.
The market is regulated by the 1993 Securities Act, which created the Securities and Exchange Commission (SEC) to enforce the Act. By Q4 1999, the market had seen five public offerings. All five have been offerings on the back of Zambia’s privatisation program, in which shares have been offered to the Zambian public only. The Zambia Sugar Plc public offer, in late 1996, was the only exception in which shares were also offered to international investors, because the shares on offer were a combination of those warehoused by the Zambian Privatisation Trust Fund (ZPTF) and those owned by the Commonwealth Development Corporation (CDC). Two foreign emerging market funds participated in the Offer, taking up the bulk of the 165 million shares available to foreign investors. In August 1999, Zambia’s first ever Rights Issue, concluded by Pangaea/EMI, took place: Zambian Breweries Plc successfully raised over US$ 8.5 million to refinance a loan that had been secured to finance the acquisition of Northern Breweries Plc in December 1998. The Issue was a success with 100% of the rights being exercised. .
Although most of the listings on the LuSE have been triggered by Zambia’s privatisation process, several private sector companies are now looking at the exchange as a means of raising new capital. Many of these companies, especially the privatised mining operations, have expansion plans ahead of them and will strongly consider financing these plans through the capital market. The exchange currently (October 1999) transacts in 9 listed and 4 “quoted” (unlisted) securities.
By yearend 1999, TZI will spin-off its Zambian ranching operations and delist. Thereafter, companies designated for future floatation of their government owned shares and listing on the LuSE include: ZAFFICO (Timber Planting and Processing); ZESCO (Power Generation); ZAMTEL (Telecommunications); ZAMEFA (Manufacturing); ZNCB (Banking); ZSIC (Insurance); BP (Petroleum); AGIP (Petroleum); National Milling (Agricultural Processing); Mpongwe Development (Agriculture); Lever Brothers (Consumer Products) and ZAMOX (Industrial Gases ).
There are no restrictions on foreign investment and foreigners may invest on the stock exchange on similar terms as Zambians.
Trading days and hours are Mondays to Fridays, 10:00 to 12:00. There are 6 stockbroking firms active on the exchange. Brokerage rates are negotiated; the indicated scale is 1.25%. There is a 10% withholding tax which is treated as income, but no capital gains tax.
The exchange was a star performer in Africa in 1997.
Its market capitalisation fell to $301m during 1998 against $705M in 1997, largely because of weaker institutional investment, the depreciation of the kwacha, the poor performance of the economy and the disappointment of investors’ expectations regarding the pace of privatisation of the mining industry (ZCCM). The small individual domestic investors kept the market going, with about 20,000 Zambians invested in the stock market, compared with less than 1000 at the opening of the exchange in 1994. Analysts are hoping that the privatisation of Zambia Consolidated Copper Mines will spark renewed investor interest in the exchange.
