African bourses urged to demutualise

March 31, 2009
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, LUSAKA, Zambia, Mar 31 – Stock exchanges across Africa should embark on the separation of the bourses\’ private ownership from their management in order to improve efficiency, analysts have recommended.

Lusaka Stock Exchange (LuSE) Company Secretary Priscilla Sampa told reporters that the process, which is commonly referred to as demutualisation, can help open up the markets to the participation of more investors.

"Demutualisation is the way to go. We have realised that we should not have a handful of people controlling the markets but a lot of investors who will also bring in more resources," she said.

She said committees in several stock exchanges across Africa had been formed to look at how to implement this process.

The Nairobi Stock Exchange (NSE) is one of those bourses in the Continent that has formed a joint committee with the Capital Markets Authority and the Central Depository and Settlement Corporation to chart the forward on implementing the process.

The NSE board has expressed confidence that this should be completed before the end of this year.

Ms Sampa said when executed, this would be particularly useful as many countries across the Continent were looking at integrating with their neighbours.

This is particularly true for the East African Community and COMESA that are looking at integrating their stock markets so as to increase investments and which is eventually expected to have the multiplier effect of accelerating the regional economic integration.

Speaking during a workshop on corporate governance in Zambia, Ms Sampa emphasised that for the stock markets to be fully developed, listed companies need to observe and adhere to the rules and obligations set out by their market regulators.

This she stressed would be achieved through the timely and accurate disclosure of information to all investors which in turn promote their confidence in the markets and by having sound corporate governance principles.

This in effect means that the management is accountable in its running of the firm\’s affairs and that it strives to protect shareholders’ wealth.

Ms Sampa explained that the escalation of corporate scandals result partly from the failure (by a company) to disclose vital information, a situation which often creates a window through which the management can misappropriate their shareholders\’ wealth.

"Disclosure is the life blood of the capital markets. Information about what a company is doing needs to keep flowing so that the public and other stakeholders can know what is going on in any given firm," she insisted.

She therefore called upon journalists play an active role in uncovering corporate and market misconduct which could in turn trigger action such as legal reforms and reduction of malpractices and fraud cases in their respective countries.

Speaking during the same forum, Senior Consultant at the Global Reporting Initiative Michael Rae urged companies to put in strategies that can ensure they manage their reputations effectively.

Mr Rea said that this would involve following the principles of sustainability reporting that requires a company to inform its stakeholders on both its financial and non-financial performance.

The ongoing global financial meltdown, he argued, provided the perfect opportunity for firms to come up with policies that would enable them to pay attention to which areas their investments in corporate social responsibilities was being spent on.

"They need to monitor and evaluate their projects as a way to measure returns on their CSR investments. They need to ask themselves whether they are making a difference in the society," Mr Rea stressed.

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