The Zimbabwe Stock Exchange (ZSE) is on the verge of reaching the $10 billion mark as the rally continues unrestricted.
As of yesterday, total market capitalisation was sitting at $9,8 billion and should be past the $10 billion mark by close of trading today. The market’s main Industrials Index was up 140,2 percent year-to-date to close at 347,63, while the Mining Index had put on 40,49 percent to close at 82,20.
While market players understand that current prices are no longer justifying the intrinsic value of the underlying companies, they have justified the surge on the ever increasing currency risk.
In other words, the rally is fear driven. The value of bank balances has been falling as economic players exchange them for the elusive US dollars. We are hearing that parallel market exchange rates being pushed by unscrupulous dealers are upwards of 30 percent for an electronic transfer in exchange for hard cash.
This effectively means bank balances no longer carry the same value as real notes, which is worrisome. What is more worrying is that it’s not only unscrupulous parallel market players who are seeing the erosion and increased risk of keeping cash piles in banks.
Formal players, including listed entities, are also seeing the risk. This week saw Econet paying a quarterly dividend for the first time, as far as we can remember, by a listed company.
Normally, ZSE listed companies pay either an interim dividend or an annual one, but given the possibility of bank balances losing value, the company saw it prudent to declare and pay out a quarterly dividend.
This we understand is in the spirit of time value for money. The same company also set another precedent after it increased its share buyback threshold to 20 percent from the usual 10 percent.
Again, this move speaks to the lack of confidence by economic players to keep money in the bank where it’s not even earning interest. Now that there has been loss of confidence in the currency sitting in our banks, there is need to encourage debate on what should be done.
The RBZ needs to consult widely and take sound economic advice. The thrust to encourage productivity and exports through incentives, though sound, subsidising the private sector is wrong as it introduces inefficiencies that would otherwise not exist with private capital solutions.
The Fifth Session of the Eighth Parliament which was opened this week by President Mugabe should also engage in robust debate and find solutions to the challenges affecting the economy.
As lawmakers debate the Mines and Minerals Amendment Bill, among other Bills, they must make sure they come out with a law that encourages investment in the mining sector, our cash cow for export earnings.
Even as they debate the Shop Licences Amendment Bill, they must make sure that those who will fall under this particular law will engage in activities that do not undermine the country’s monetary systems as is the case now.
One of the reasons why Government ended up issuing Treasury Bills was to capacitate mismanaged parastatals that have been a drain to the fiscus.
It is thus imperative that as parliamentarians debate the Public Entities Corporate Governance Bill, they must make sure that there will be no sacred cows in its application and implementation.
There is need to resolve the structural issues and source balance of payments support, instead of resorting to printing Treasury Bills.