Editor's Comment

Benefits of listing on LuSE

FOR a long time now local businesses have been crying foul about the high cost of finance from the banking sector and cite this as the reason for failure to expand or improve their business operations.
There is no doubt that interest rates in Zambia have remained adamantly high despite the strides monetary authorities have made to improve the macroeconomic fundamentals such as reducing inflation.
Currently, most interest rates in Zambia are above 20 percent and this is despite the fact that inflation has over the past few years declined and is maintained at single-digit rate of just about 9 percent.
Minister of Finance Alexander Chikwanda has announced that Government may compel commercial banks to list on the Lusaka Stock Exchange (LuSE) to enhance accountability.
However, instead of being compelled to list, banks and other key industries such as mining companies should list on their own upon being encouraged so that they have access to low-cost capital, improve accountability and transparency.
More importantly businesses will also have access to cheaper capital instead of going to banks to borrow for expansion.
Making it mandatory might also create anxieties in the market, thus the need to ensure that LuSE embarks on concerted marketing efforts to enlighten firms on the benefits of listing so that they do it voluntarily.
When companies list, this goes a long way in encouraging citizen participation as they can hold shares in banks, mining companies and other entities.
The private sector reform programme was anchored on the Privatisation Act No 21 of 1992.
The act recognised the importance of citizens’ participation in the economy to attain a wider distribution of shares.
The capital market enables businesses to raise long-term capital at reasonable costs so that they can expand and create more employment.
It also empowers citizens through ownership of shares and attracts foreign direct investment apart from enhancing corporate governance through wider ownership and transparency.
We are encouraging companies to list shares on the LuSE because, since its establishment in 1993, it has proved to be a major alternative for many companies to raise finance, improve governance and empower citizens through share ownership in a diverse number of firms.
Companies such as British American Tobacco, Zambeef, Copperbelt Energy Corporation, Airtel, Larfage, Zambian Breweries and Zambia Sugar, to mention but a few, have all raised millions of US dollars by issuing and listing their shares on the capital market.
We welcome the minister’s encouragement for companies to list shares on their own volition because this will help them raise cheap capital and expand, thus creating more employment.
The minister’s advice is very timely because available information indicates that when companies list their shares on the capital market, they raise finance, expand and increase their shareholders making them better in good corporate governance.
The LuSE itself has continued growing with the market capitalisation or the value of all listed shares increasing over most of the period it has been in existence.
Therefore, for companies that lack capital but want to grow their footprint in the Zambian market and abroad, the LuSE offers a better solution rather than going to the bank and pay exorbitant interest.

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