Zambia: Lusaka Stock Exchange tightens dividend law

By Nawa Mutumweno – The Lusaka Stock Exchange (LuSE) is to start penalising companies that will not be declaring dividends to their respective investors to encourage compliance with the law.

According to LuSE chairman Friday Ndhlovu, it is disappointing that there are some firms that hardly pay dividends to their investors.

‘’I would like to take this opportunity to advise the players and investors that with the revised listing rules, any breach will now attract a fine or penalty,’’ he said at a media briefing in Lusaka on February 21, 2014 ahead of the bourse’s 20th anniversary.

Since inception, the capital market has grown, recording a market capitalisation of K59 billion and corporate bonds issues amounting to over K1 trillion.

‘’Collective investment schemes were introduced in the market over the years, seven companies issued corporate bonds with one supranational, namely International Finance Corporation (IFC) which was issued last year as part of its pan-African domestic currency in a sum of K150 million,’’ he explained.

The capital market remains a critical platform to raise funds as demonstrated by listed companies that have raised funds for various expansion projects.

Copperbelt Energy Corporation Plc (CEC) has issued a rights offer, expected to close on February 28, with the firm anticipating to raise $70 million to finance projects in Zambia and West Africa.

ZCCM-Investments Holdings has also indicated plans to conduct another rights issue to restructure its balance sheet.

However, Mr Ndhlovu said limited equity listings, narrow investor base, low free float and lack of diversity of products have remained a challenge for the local bourse.

LuSE has since embarked on the demutualisation process that will entail a change from a mutually-owned organisation to an investor-owned corporation to bring more players on the capital market to increase market capitalisation.

The bourse is also encouraging listed companies to comply with the public free-float of 25 percent. The free-float allows shares of the company to be freely traded on the capital market.

‘’LuSE is lobbying key Government stakeholders to utilise LuSE as an empowerment vehicle and mechanism for diverstiture and capital raising for the remaining state-owned enterprises as we lobby for the removal of withholding tax on bonds,’’ he added.

At the same event, LuSE board member Charles Mate said Zambia has continued to attract foreign investments due to its consistent gross domestic product (GDP) and other economic fundamentals, a development that has contributed to the upward trend of the capital market.