Govt should solve share price puzzle urgently

ELSEWHERE in this edition we carry a story which reveals the turmoil in the market over the valuation of the Old Mutual and PPC shares that were suspended on the Zimbabwe Stock Exchange (ZSE) in June last year, with auditors having to ponder various possible calculations of their value in the accounts of clients. Information at hand shows fund managers have been strongly pushing markets regulator the Securities Exchange Commission of Zimbabwe (SEC) to issue a directive for them to use prevailing share prices for the two stocks on the Johannesburg Stock Exchange (JSE).

They want the directive to enable them to calculate the local value of the two stocks at the prevailing interbank rates and to come into effect in line with legal and operational procedure.

However the government is opposed to the move, instead preferring valuation be on the basis of the share price at the date of suspension.

That the confusion over the issue persists more than six months later is a source of major embarrassment. More importantly it sends the wrong signals to investors, some of whom have incurred huge losses as a result of the uncertainty.

The dithering over the valuation of the shares of two major stocks is in stark contrast to President Emmerson Mnangagwa’s thrust that the country is open for business. It is also at variance with the government’s recent launch of the Zimbabwe Investment Development Agency with the aim of attracting investment in the country.

The confusion is the fallout from the government's damaging decision to abruptly suspend trading on the ZSE last year under the guise of investigating illicit activities. This cost the local bourse a staggering ZW$42,5billion (US$518 million).

The greater cost however has been in the massive loss of confidence among investors. This is evidenced by how foreign investors have ditched the local bourse since then.

The cavalier attitude by Finance minister Mthuli Ncube when asked about investors’ concerns about the value of their shares during the suspension of trading on the bourse probably best reflects the lack of seriousness by the government and probably has helped trigger the mass sell-off of shares on the ZSE.

At a post-Cabinet briefing during the suspension of the bourse, Ncube likened the suspension to a harmless “long holiday”. This coming from not only the Treasury boss but also a professor of economics who has vast experience on the international arena was shocking.

It was also an indicator of why the country’s foreign direct investment has plummeted from US$717 million in 2018 to US$259 million in 2019 according to figures made available by the Reserve Bank of Zimbabwe.

Government cannot wax lyrical about boosting investment when its actions repel the same. Unless the government gets its act together, it calls for investment in the country will most likely fall on deaf ears.