African Investor Relations

Here is an update commentary on the Zimbabwe Government Gazette relating to the tax authorities provisional general ruling on conversion of closing balances for tax purposes published by the Commissioner General of Zimra. It gives an indication as to how Zimra will exercise their discretion in “approving rates of exchange applied in converting the 2008 closing balances that were expressed in Zimbabwean dollars to US$ for taxation purposes”.

1.    Government Gazette 1 October 2010

This Gazette contained, in General Notice 274 of 2010, a “provisional general ruling on conversion of closing balances for tax purposes” published by the Commissioner General of Zimra. It gives an indication as to how Zimra will exercise their discretion in “approving rates of exchange applied in converting the 2008 closing balances that were expressed in Zimbabwean dollars to US$ for taxation purposes”. It states, inter alia:

1.1 that assets which were acquired or constructed using Z$, shall be reflected in an amount that “is approximately equivalent to the replacement value less notional wear and tear claimable to 31^st December 2008”; and

1.2 that trading stock acquired in Z$ shall be reflected at a figure in US$ that is “approximately equivalent to the replacement value”; and

1.3 that an assessed loss shall be converted at a rate which will “closely approximate the loss in foreign currency had the financial statements to which the losses is related … been prepared in foreign currency”.

Those affected by this notice are urged to study it in more detail.

2.    Government Gazette 22 October 2010

Two bills were published in this Gazette, namely:

2.1.       The Deposit Protection Corporation Bill – the Banking Act already provides for the establishment of the Deposit Protection Fund, to which financial institutions must contribute and out of which compensation is paid to people who have deposited money with failed institutions. At present the Fund is administered by a Board of Trustees. The Bill would replace the Board of Trustees with a new institution called the Deposit Protection Corporation, and goes on to deal with a variety of matters including the payment of contributions, the payment and calculation of compensation, and so on; and

2.2          The General Laws Amendment Bill – this Bill, if passed into law, would make a number of minor changes to a variety of statutes. Most of the proposed amendments are insignificant. That said, an amendment is proposed to the Copyright and Neighboring Rights Act which would make “official texts of enactments” [whatever that may mean], “official records of judicial proceedings and decisions”, matters published in the Government Gazette and “entries in, and documents that form part of any register which is kept in terms of an enactment and is open to public inspection”, all “works eligible for copyright” in terms of Section 10 of that Act.

One can only assume that this is some kind of money making venture on the part of Government, seeking to prevent publication of these items without the acquisition of a licence. The trouble is that Government is notoriously lax when it comes to carrying out its own publication duties. It has not, for example, got around to publishing its own index to legislation for many years now.

Thanks to Peter Lloyd of GGG for this post.

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As usual John Legat from Imara provides us with insightful info on Zimbabwe and more specifically taxation in Zimbabwe and the continuing story of a country struggling to recover from economic and political chaos. Good reading. Will Government take note of these recommendations and insights. No probably not.

Herewith John’s latest newsletter:-

Investment Notes                                                                                                                                       September/October 2010

“Budget 2010: Boost Tax Revenues by Cutting Tax Rates!”

The Hon Minster of Finance, Tendai Biti, launched the National Budget Consultative Process on 31^stAugust as preparations for the mid November budget. Back in June he also provided details of the re-drafting of the Income Tax Act which we suspect will take affect at the end of this tax year. With this in mind, in these Investment Notes we will outline our own proposals to boost tax revenues to the benefit of all Zimbabweans.

The current Income Tax Act is based on the “source principle” where tax is levied on income originating in Zimbabwe. Income earned outside of Zimbabwe falls outside of the tax base. This is similar to the UK (although this will likely change) but is contrary to the US, South Africa and Australia where residents are taxed on income earned globally. Zimbabwe’s new Income Tax Act will move to a residence based tax system and away from the source principle implying that all those resident in Zimbabwe will be taxed on their income earned outside of Zimbabwe as well as on that earned here.

That might be a scary prospect to many and may even tempt some to move to a country with a more favourable tax regime. But it need not necessarily be that way. The Zimbabwe authorities have a once-off opportunity to not only encourage residents to stay here but also to encourage income earners from other parts of the World, especially Zimbabweans, to return home. The answer is simple. As the new Income Tax Act is made law, introduce a simplified low flat tax system as a complimentary measure.

“ A flat tax is a tax system with a constant tax rate. Usually the term flat tax would refer to household income and corporate profits being taxed at one marginal rate , in contrast with progressive taxes that may vary according to such parameters as income or usage levels. Flat taxes generally offer simplicity in the tax code, which has been reported to increase compliance and decrease administration costs.” (Wikipedia)

Estonia was the first country to introduce a flat tax regime in 1994 with a rate set at 24% but with the aim of reducing the rate to 18% by 2012. Russia introduced a flat tax of 13% in 2001, Slovakia of 19% in 2004, Romania of 16% in 2005, Ukraine of 15% in 2007 and Macedonia of 12% in 2007. In SADC Mauritius introduced flat taxes of 15% in July 2007.

In developed countries the tax system has become extremely complicated, confusing and expensive to operate. More often than not it creates enormous distortions and is open to tax evasion if not fraud. Tax rebates and allowances are commonplace and means-tested taxes become bureaucratic and expensive to operate. The cost of operating such tax authorities absorbs a substantial amount of tax revenue that could otherwise be spent more efficiently and effectively. In 2005, estimates for the United States, whose tax regime, despite the best efforts of Congress, was by no means the world’s most burdensome, put the costs of compliance, administration and enforcement between 10% and 20% of revenue collected (nearly half of the budget deficit at that time!). In Russia, the tax system was too complicated and tax rates were high. In 2001 President Putin introduced a flat tax of 13%, that rate being applicable to all personal income. He reduced corporation tax from 35% to a single rate of 24%. In just three years, his tax reforms had resulted in a significant increase in government revenues and a reduction in the informal economy.

By removing allowances and rebates, a huge layer of bureaucracy disappears. A flat tax on personal income above a certain tax-exempt level, can be taken at source (PAYE) and will not require complicated or expensive tax returns to be completed. In short, only businesses, those with overseas income and the self-employed would need to liaise directly with the tax authorities. Flat taxes cover ALL taxable income and profits WITHOUT exception or exemption. With tax, simplicity is golden and flat taxes provide the simplicity.

Flat taxes also remove distortions. If income taxes and corporate taxes are at the same level, there is little incentive to hide behind a company or a person to achieve the lowest tax rate. If a country chooses to have a capital gains tax, it makes sense to equate the tax rate to that of income tax, again to avoid distortions and evasion. That said capital gains tax rarely raises sufficient funds to cover the cost of running the bureaucracy to manage it, as capital gains are complicated by inflation and investment additions. For this reason, many countries choose not to implement capital gains taxes as a direct result.

In the SADC region, flat taxes have been introduced successfully in Mauritius, whilst Botswana has a low tax regime. Mauritius introduced a 15% flat tax on incomes and corporate profits on 1^st July 2007. There are no capital gains taxes in Mauritius.

The Government has made it clear in STERP that it wishes to attract skills back to Zimbabwe, especially from those in the diaspora. The net result of low tax rates if successful will be immigration and a rising population which will immediately add to consumer demand, investment in new businesses and a boost for the construction industry as housing investment rises. That in itself will lead to a growing tax base.

As Governments in the developed World are boosting their own spending as a direct result of the global credit crunch, tax rates in these countries are inevitably rising. The UK increased its top rate of Income Tax to 50%! For a country like Zimbabwe, which is starting with a clean slate, rising global taxation provides a great opportunity to attract skills back to the country. In very simple terms, if Zimbabweans living in South Africa are paying 40% in income tax at the top band, 15% provides an attractive incentive to relocate back to Zimbabwe. (It is for this reason that South Africa and SARS may fight such a proposal from Zimbabwe, but Zimbabwe should resist at all costs citing Mauritius and Botswana who have set a precedent within SADC).

In recent years, taxation methods in Zimbabwe have been geared to hyperinflation. Paying taxes in advance of earning revenue is one such tax, as is the ‘presumptive’ withholding tax on capital gains, gains which are far less certain with US dollar deflation! Such taxes should be abolished now that hyperinflation is a thing of the past.

For Zimbabweans today already living in the country, high rates of income tax plus levies can total over 45%. This provides a great incentive to attempt to evade tax wherever possible, perhaps by becoming self employed to enjoy lower corporation tax rates. A low tax rate will, as we have seen in Russia and many other developing economies, encourage people to legalise themselves and to pay the necessary tax. Furthermore the informal sector will slowly be encouraged to join the formal sector, especially where good policing can discourage under hand/illegal dealings.

A lower tax rate results in higher after-tax income and hence higher disposable incomes. That in itself encourages greater consumption that will imply higher VAT receipts. It will also result in greater demand for goods and services from businesses which will see revenues and profits rising and hence corporation tax receipts rise. The multiplier effect of a lower income tax rate on other taxes in the economy can be significant. Lower corporation tax increases after-tax returns on investment and hence encourages more investment!

ZIMRA needs to be as cost effective and as efficient as possible. By keeping the tax system simple, less civil servants will be required to manage that system, and hence less cost to Government. As we have seen in the developed World, tax authorities have grown exponentially as allowances, tax rebates and means-tested payments have been introduced to offset high tax rates imposed on the hardest hit in the economy. Low flat tax systems do away with such allowances as those for single parents, housing, disability etc, which require a large civil service to administer and are prone to fraud.

Low flat taxes will avoid unnecessary distortions in the economy by doing away with preferences or allowances to specific sectors. A case in point were the tax reductions on capital equipment and vehicles for the tourism sector. It is likely that many smart entrepreneurs entered the tourism sector in order to primarily take advantage of those tax incentives rather than to boost Zimbabwe’s tourism sector! It presumably also required many civil servants to analyse the ‘tourism’ projects and to provide the approval for the tax incentive to be given. Apart from increasing civil service overheads it can also encourage corruption which this Government is keen to stamp out.

Zimbabwe is a land-locked country far from the Coast. This makes importing and exporting goods and minerals that much more expensive than for coastal nations such as South Africa. It is hard to reduce these costs and therefore Zimbabwe will need to ensure that its other costs are that much cheaper. That may mean the cost of utilities such as power, and the cost of raw materials. Whilst import duties have represented a high component of overall tax revenues, this is changing as the economy gains momentum allowing personal and corporation taxes to become the main revenue earners. It should therefore be stated Government policy to reduce import duties to as close to zero as possible on all goods with deadlines given on differing bands eg 20% by end 2010, 10% by end 2011 and zero percent by end 2012. In that way foreign and local investors can plan ahead, confident of the taxation roadmap given by Government.

Reducing import tariffs will also make it unnecessary to introduce sector specific allowances that inevitably will cause distortions as discussed in the preceding paragraph with respect to the tourism sector.

Removing import tariffs will also remove at a stroke, the huge civil service that has to administer these taxes. The border posts would be slimmed down substantially thereby reducing the time spent for people and trucks at our border posts. It would also cut out much corruption which currently reduces the import duties actually collected at the border. Smuggling would become unnecessary.

Zimbabwe should take advantage of its clean slate economic environment. The country can start from scratch using the revised Income Tax Act as the trigger.

Our suggestions would therefore be as follows:

With the introduction of the revised Income Tax Act, initiate the following:

1. Announce Zimbabwe’s intention to introduce a flat tax system taking all taxes to 15% and to provide a roadmap of falling rates to achieve that level with a target date for the final level of 15% to occur eg from Jan 1^st 2013.

2. Provide a roadmap to take import tariffs to zero. Eg from Jan 1^st 2013.

3. Remove capital gains taxes in line with Mauritius.

Tax revenues so far this year have been far above the Ministry of Finance’s November 2009 budget. Cutting taxes boosts growth and hence tax revenues.

In short our proposal should ensure that Zimbabwe’s overall tax base will expand dramatically, tax revenues will soar but the costs of collecting those taxes will plummet. A “Win Win” solution for all honest Zimbabweans.

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African Is Cool is pleased to launch the online stakeholder initiative of Dairibord Holdings on its Africansmallcaps.com platform.

Dairibord Holdings incorporated in 1994 is a leading producer and marketer of dairy, food and beverage products in Zimbabwe. In 1997, Dairibord became the first state-owned company in Zimbabwe to privatise. The company was listed on the Zimbabwe Stock Exchange the same year. Dairiboard currently has a market capitalisation of US$37.5m and is listed under the Food and Food Processors sector.

The group produces an extensive range of products which include milk, foods and beverages which are marketed in the domestic and foreign markets.

Dairibord Holdings has a staff compliment of 1038 permanent employees and is one of the largest manufacturing firms in Zimbabwe with over 50 brands. In Zimbabwe, the Group has factories in Harare, Chitungwiza, Bulawayo, Gweru, Kadoma, Mutare and Chipinge. In Malawi, the group’s factories are located in Blantyre and Mulanje District.

Dairiboard’s africansmallcaps.com portal presence includes a highly professional online charting page where corporate actions are disclosed in share prices.

Go to the Dairibord website : Go to Dairibord’s IR website : Go to Dairibord’s annual reports

Sign up for Dairibord alerts

Dairibord’s launch now takes African Is Cool’s total client base to 27 listed companies in four countries. 18 of these clients are listed companies based in Zimbabwe and are serviced by reseller Big Law Management Consultants Pvt Limited. Big Law also manages the online stakeholder relations of St John’s College and Preparatory School. The remainder of 9 AIC clients are based in Malawi (3), Zambia (3) and Botswana (3).

AIC also recently announced its move into the provision of managed corporate websites.

The Africansmallcaps.com platform is an incredibly low cost but highly effective online investor relations platform for companies that do not have the time nor resources to worry about bad website service providers or whether their investor relations information is out of date. The platform can be used as the “investor relations section” of the company’s website.

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Imara Holdings, a pan African investment banking organisation with an asset management division managing funds across Africa, and with offices in Harare, provide some really insightful research into African markets. Especially for Zimbabwe. This is some of their best stuff.

Investment Notes – July/August 2010 – “Lies, Damned Lies and Statistics!”

In recent weeks we have read reports from the IMF and heard the Mid-term review from Finance Minister Biti. In recent months we have also heard from companies operating on the ground in terms of their current sales and future intentions. We therefore find it hard to understand why both the IMF and Government are being as cautious as they are. That said we are pleased that they are not being overly optimistic as past Governments have tended to do. Nonetheless their views give a rather sobering view of the economy rather than an upbeat and exciting outlook for a country barely in its second year of reform that we would rather take.




The IMF believes that the Zim economy is just over $5 billion. We are not sure as to where they got their figures from but we assume it is based on CSO data and their own estimates. They do however point out that “Data have serious shortcomings that significantly hamper surveillance due to capacity constraints”. In past Investment Notes we have been skeptical about such a number. Zimbabwe’s $5 billion economy compares with $14 billion for Zambia, a country with a similar sized population. In the past, and before the “lost decade”, Zimbabwe’s economy was always around 50% larger than Zambia’s as our agriculture, tourism and manufacturing sectors were always much larger whilst Zambia’s copper mining industry was still recovering from years of neglect. Indeed, had Zimbabwe continued on its growth path that it began from the mid 1990s, its economy today could well be a $25 to $30 billion economy. But it didn’t and it’s not!




In this month’s Notes we will be looking at what is happening on the ground to assess whether the $5billion is reasonable or not. We start by looking at Zambia. Taking both major breweries in Zambia (owned also by SAB), in the year ending March 2010, they sold a combined $230 million worth of beverages (at higher prices than in Zim). This compares with Delta that sold $324 million in a year when they could not meet demand. That could imply that the Zambian breweries may not have such a tight control of their distribution thereby allowing in competition from imported product. Or it could mean that Zimbabweans simply drink more…or importantly can afford to drink more! At the same time, Zimbabweans are due to spend around $500 million using Econet’s mobile phone network in 2010. Zambians are spending only around $280m on their major network provider Zain (who no doubt charge less than Econet!). Innscor will soon be reporting their June 2010 numbers. We would not be surprised if  the amount of spend that Innscor is receiving domestically from fast foods, Colcom, National Foods and Spar will take the combined spend for just these three companies alone to well over $1.1 billion in 2010. Whilst the latter company is also selling imported product, it does give an indication of the current spending power in Zimbabwe just one year after dollarization. According to the IMF and Government Zimbabwe’s GNP per capita (ie economy per head) is US$450 which compares with Zambia at US$1,200 per head. The spending patterns in both countries alluded to above would suggest the opposite!

If we look at Zimbabwe’s major exports being generated by the mining, tobacco and cotton sectors in 2010, we also see an upbeat picture. Gold production is estimated by the Chamber of Mines to be around 7.5 tonnes in 2010 compared with 5 tonnes in 2009 and 3.5 tonnes in 2008. That’s a 50% increase over the year when gold prices have reached new highs. The value of those exports should be roughly US$250m. Zimplats this year will produce around 180 million ounces of platinum plus 160 million ounces of rhodium and palladium. The value of those combined is roughly $500million. Then Anglo’s Unki mine starts to sell its concentrate in the last quarter of 2010 adding to these numbers whilst Mimosa should add around $200million. In addition Zimbabwe is exporting chrome and coal and may even see ‘official’ sales of diamonds from Marange in the second half of 2010, adding to the diamond exports from Rio’s Murowa mine and River Ranch. Murowa is due to sell $30m in 2010. In the first half of 2010, the Mid-term review suggests, the value of shipments from platinum, ferrochrome and gold alone was $550 million. For 2010 as a whole a number nearer $1.2billion could be achievable for these minerals although we would expect more.

In agriculture, the tobacco crop has been revised up on a number of occasions whilst the global price for our Virginia tobacco has been high due to global demand, especially Chinese. The export value of semi and processed tobacco could reach $500million in 2010, twice the amount of 2009. The cotton crop is up 18% whilst the cotton price is also higher than in 2009. The value of lint should be $200million in 2010, an increase of 60% on 2009. Thanks to the investment by Tongaat Hullet in Hippo Valley and Triangle over the past year, sugar output should jump by 24% in 2010 to 350,000 tonnes. Maize production in Zimbabwe has also increased in 2010 whilst the price has fallen sharply on World markets. The cost of importing maize should therefore be less than $100 million although the donors often fund a part of this and the cost to Zimbabwe could be lower still. Overall agricultural exports in 2010 could surpass $1 billion.

So excluding manufacturing and tourism, exports from agriculture and mining might top $2.3 billion or higher in 2010. That’s a bigger number than the IMF forecast that includes manufacturing exports. We have not analysed Zimbabwe’s manufacturing exports for these Notes but believe that longer term, Zimbabwe’s export growth will come from mining and agriculture rather than manufacturing production. That said there will always be a place for Zimbabwean manufacturers who produce niche products that can compete regionally and globally. Sadly, long gone have the days when we can or should try to compete with large scale production from China and India in mass market products.




In the construction sector, PPC Cement has capacity to produce 700,000 tonnes of cement, a level that can be increased with clinker imports from SA. Lafarge Zim produces 450,000 tonnes, plus 350,000 tonnes of clinker. Meanwhile Lafarge Zambia’s new plant produces 1.23 million tonnes a level that easily meets Zambian demand. Zimbabwe’s cement demand is set to rise strongly as demand for housing and infrastructure increases. Investment projects announced so far by the mining companies include those for Zimplats ($445m) and Rio Tinto for Murowa ($300m). AngloPlats are also investing heavily in Unki. Recent tenders published in the newspapers highlight the amount of works about to go into housing and infrastructure for such projects.




Meanwhile the financial sector has seen deposits rise from $700 million a year ago to $1.9 billion today, a growth of 167%. Year to date the growth is 40%. As a result liquidity and lending is slowly picking up. Just as we are seeing globally post the credit crunch, credit and bank loans are hard to come by. The banks themselves will admit that the cash in circulation and held by individuals could be substantial relative to the deposits in the banking system such is the mistrust in the banking system on the one hand and the size of the informal economy on the other. In some African countries the informal economy can be the same size as the recorded formal economy. Looking at Zambia again, bank deposits at the end of March totaled $1.6 billion in kwacha deposits plus another $1 billion of forex deposits, little higher than Zimbabwe today!




The Mid-term review also gave some upbeat data. Tax revenues in the first six months of the year were 12% above target with Vat receipts 9% above budget. PAYE was 22% above budget and 290% above that raised twelve months before. This also explains in part why consumption is strong year on year. Corporation tax is also 54% above target. Overall revenue earned was $931million whilst expenditure was $813million thereby following the Government’s cash targeting. Overall budgeted expenditure for 2010 is being held at around $2.25 billion which we believe might be nearly 50% above 2009. (the year of transition makes this comparison difficult). It would appear though that most of this revenue will be generated from local sources rather than by the “vote of credit” assumed in December’s budget.




Our sources are primarily those on the ground ie the operating companies, rather than the Government or the individual Ministries. We share both the Finance Minister’s views and that of the IMF that the data is poor hence the revamp for the Central Statistical Office that is soon to be implemented. We wonder for example whether the mobile phone industry that barely existed ten years ago is even recorded in the statistics, or for that matter platinum! An economist who relies on Government statistics will find analysis tough. The Mid-term review reduced Government’s economic growth forecast from 7% to 5.4%. The IMF revised it’s down to 2.2% as they are concerned about Zimbabwe’s exports falling far short of imports. Surely not! We remain totally unconvinced and further don’t believe that the underlying number used for the economy, being $5 billion, is correct. As we saw in last year’s December budget, the Government revised up the size of the economy from $3.5 billion to $5.1 billion but with barely a corresponding uplift in the growth rate! We would not be at all surprised to see a similar ‘re-rating’ occur in the future. Last year we suggested that the economy is more likely an $8billion to $10 billion one. We stand by this and suggest that it might in fact be much bigger once the informal economy is included. That makes the current stock market capitalization of $3.5 billion look very cheap especially given the broad sector coverage of the economy that the Zimbabwe Stock Exchange provides investors. The Zim economy is pumping !

John R Legat | Chief Executive

Imara Asset Management Zimbabwe (Pvt) Limited

Block 2, Tendeseka Office Park, Eastlea

Tel : +263 4 790090, 790280, 790304

Fax: +263 4 791875

Website : www.imaraholdings.com

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This was obtained from www.newsday.co.zw and the original article was posted on July 22, 2010. We are obtaining the SI 100/2010 and will provide some news in due course. The charges and levies of capital markets players are payable during the absence of an economic  upturn and improvement in Zimbabwe’s capital markets, which markets, in return, rely on political and economic certainty from the people that set these rules and regulations in the first place.

“The Securities Commission of Zimbabwe (SEC) says it will be introducing 11 more rules and regulations to tighten its regulation and surveillance of local capital markets with emphasis on compliance and transparency.

The initiative is part of Zimbabwe’s preparation for Sadc’s securities convergence in two years, a process in which Zimbabwe Stock Exchange (ZSE) and SEC chief executive officers are taking part.

The new measures aim to expand the current set of rules covered by Statutory Instruments (SI) 100/2010, which put into force the Securities Act of 2004 repealing the ZSE Act.

The Act became operational in 2008, the year the commission was apointed.

Willia Bonyongwe, SEC chairperson, says the envisaged rules seek to develop a code of conduct for corporate governance, set the criteria for accessing the investor protection fund set up last year and develop a clear complaints procedure.

The general regulations will also widen the current framework for integrated reporting and disclosures, set the qualification criteria for traders and broaden the requirements for listing, licensing, business conduct, safety of custody, corporate governance and rules of the stock exchange, among other goals.

SEC proposes regulating the number of minimum shares that go to the public for firm that intends to float an initial public offering. The regulatory body is still consulting key players comprising securities dealers, brokers, the Zimbabwe Stock Exchange (ZSE) and pension funds to develop a draft, which would be gazetted into law with the approval of the Ministry of finance.

The initiative also aims to bring additional players under SEC, including asset management companies and securities custodial services, both of which are currently under the jurisdiction of the Reserve Bank of Zimbabwe. This should happen “within the next 12 months or so”, according to Bonyongwe.

“We want to take a look at what is happening in Sadc and look at look at ourselves in the light of that,” Bonyongwe said. “The Securities Act charges us to regulate each area and come up with rules.”

“Brokers did not participate much in the development of the current set of rules. I hope it will be different this time.”

“We want to regulate the market based on where we think the market should be going.

The buzz word everywhere is compliance and transparency. Everything is our business.”

SI 100/2010 laid out specific rules that put the Securities Act of 2004 into force. The statutory instrument sets out provides for criminal and civil penalties for offenses such as insider trading, market manipulation, fraud and financial crime and the fees and levies for securities dealers and authorised brokers, making a clear distinction between a dealing firm and a licensed broker.

It also provides for the establishment of a Centralised Securities Depository.

The Securities Act deals with licensing requirements for market participants, the registration requirements for securities exchanges and the corporate governance framework for licensed players. Under the new structure, the ZSE will no longer be self-governing, but would be registered and licensed by SEC.

Its role would be limited to the supervision and monitoring of the trading process to ensure transparency, including forestalling manipulations of the market at the first level.

Every broker registered under the repealed ZSE Act is deemed a licensed under SEC, but all prospective player would have to apply.\

The deadline for registration and licensing is December 31.

The fees set by SI 100/2010 are as follows:

• Securities (dealing firm) licence $8000

• Securities (dealer) licence$2000

• Securities (authorised dealer) licence  $2000

• Securities (client liaison) dealer $1000

• Securities (transfer) licence $2000

• Securities (trustee) licence $1000

• Securities (custody) licence $1000

• Securities (investment advisor) including journalist $ 2000

• Securities (investment management) licence$10 000

• Securities (multiple) licence $10 000

• Securities (dealing firm )licence $3000

• Securities (dealer) licence$1500

• Securities (authorised dealer) licence $500

• Securities (client liaison) licence$500

• Securities (transfer) licence $1500

• Securities (trustee) licence $1000

• Securities (custody) licence $1000

• Securities (investment management ) licence $3000

• Securities (multiple) licence $4000

• Securities levy of 0.18% of total transaction consideration

• Investor protection levy charged at 0.05% of total transaction consideration

• Securities levy charged at 0.5% of monthly gross income

• Securities (investment management ) company levy charged at 0.5% of monthly gross income

• Securities (investment advisors) company levy charged at 0.35% of gross income for the month

• Corporate Action levy charged at 0.1% of gross amount raised through sale, charged monthly.”

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This notice appeared from Pioneer Africa in the Zimbabwean press today – see below. Here are a few observations:-

- THE ANNUAL REPORT IS NOT ONLINE AS AT THE DATE OF THIS ANNOUNCEMENT – IT IS ONLY THE ABRIDGED ANNUAL REPORT THAT IS – NO PROXY VOTING MATERIAL EITHER – a few more days and shareholders will be able to claim that proper notice was not given

- This notice obviously has the sanction of the ZSE but no mention is made of this

- The notice in the hardcopy press advert does not appear on the website

- There is no mention of why the annual report was not sent – presumably because the company can’t afford it?

- There is no explanation of the threshold of shareholder votes required to approve the waiver of the receipt of the hardcopy annual report – is it 75% of the votes (in which case a majority shareholder could unilaterally deny minority shareholders) or 75% of the shareholders by number? Or 75% of the number or votes in attendance at the meeting – usually the quorum at an AGM is just a few shareholders

- is putting the annual report on the website enough? Do Directors have an obligation in terms of good corporate governance to make available to shareholders the annual report?

- proxy forms are available at the Head office but not on the website – shareholders have to collect these forms and then forward them to the Company Secretary – if the annual report can be put online why not the shareholder proxy forms? The shareholders that are asked to waive their right to receive hardcopy annual reports

- are the directors reasonably sure that all of their shareholders have a reasonable chance of receiving their shareholder voting material? How can a shareholder vote on something if the voting material is not sent to them. Surely the logical thing to do, assuming that this initiative is legal, is to send all of the hardcopy announcements of the company’s intention to be carried out in the following year.

- How many contact email addresses does Pioneer Africa have of its shareholders? What initiatives has it taken to ensure that the voting material – the stuff that all shareholders are entitled to – is sent to shareholders?

- There is no corporate governance section on the Pioneer Africa website. The 2008 annual report (since the 2009 one is not online) says that the Board endorses the King II Code of corporate governance……mmmmmm…..

- S149 of the Companies Act requires that the balance sheet etc. “be sent to all persons entitled to receive notices” – the penalty if this is not done? s149 (3) of the act says ” If default is made in complying with subsection 1 the company and every officer of the company who is in default shall be guilty of an offence and liable to a fine not exceeding one hundred dollars……….gasp.

- so why havent other companies done this previously?

- which is more or less excusable? Denying the shareholders a reasonable right to receive their voting material or denying them the right to receive the annual report?

- forgetting the bigger picture issue here – if the annual report does not get published in the next day or so the clear 21 day notice period will have been breached – so what? You may ask.

This is a good example of the ignorance of directors when it comes to their obligations associated with shareholder communications. The IOD Zimbabwe and other institutions have high-flying-fluffy-puffy corporate events and training sessions where the oft-stated cliches of progressive corporate governance etc are stated over and over again to a sleeping audience. There should be hands on practical training sessions showing how executives can use the web effectively to communicate with shareholders, interactive sessions with legislators to come up with ways of solving the issues facing Zimbabwe

I hope this does not set a dangerous trend. Pioneer Africa is not a Safaricom and does not have the ability to significantly influence the regulators in turning a blind eye to corporate governance principles that have evolved from the South Sea Bubble days.

Dominic Jones , a world leader in online investor relations, has this opinion about the trends in African markets regarding de-linking the direct communications channel with shareholders:

“Scrapping requirements for companies to mail printed disclosure documents to investors is a global trend, but it has exacerbated shareholder apathy in every jurisdiction where it has been implemented. This is largely because regulators have failed to replace printed disclosures with suitable standards of online disclosures. Apathy and an uniformed investing public is, to my mind, the single worst thing that can happen in any market. It ultimately will lead to market abuses.”

Globally intellectual debate about the end of “shareholder value maximisation” has come to the fore. A recent article in the Economist highlights that “stakeholder values” are emerging as the core objectives of management.

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Prior to dollarization Zimbabwe could not be IFRS compliant because IAS 21 (exchange rates) and IAS 29 (inflation) could not be implemented. The Institute of Chartered Accountant’s Zimbabwe ( ICAZ) issued guidelines on IFRS last year however in order to achieve IFRS compliance guidance has been sought from the International Financial Reporting Interpretation Committee (“ IFRIC”). IFRIC is due to issue interpretive releases in July 2010 to enable companies to re-adopt IFRS compliance in Zimbabwe.

Therefore by the end of 2010 it is likely that full IFRS compliance will be possible in Zimbabwe. In addition to this initiative, 32 important or significant changes are due to be adopted within IFRS standards during 2010. Should listed companies in Zimbabwe adopt a progressive approach to IFRS adoption investor credibility will be enhanced.

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Econet Wireless Zimbabwe Limited released its updated investor factsheet as at 10 May 2010 recently. The next issue will be in November after the release of their interim financial results to 31 August 2010. The factsheet is also available on their investor relations website under ‘Downloads‘ or by following the link below:

• Econet investor factsheet: May 2010

Investor fact sheets are an ideal quick info tool for new investors to get an overall view of a company’s investment profile. We usually update them after the release of interim results which typically are once every 6 months.

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Here is a presentation that provides a rare detailed insight into the state of the Zimbabwe economy:-

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We believe that listed companies have now been required by the ZSE to prepare hard copy annual reports for all shareholders. The question of cost now comes to the fore given that there are thousands of shareholders whose shareholdings are of insignificant value (penny stocks). The practical focus should be how listed companies can reduce their shareholder bases significantly to avoid the costs of preparing annual reports. There has to be some form of share buy back solution specifically to make shareholders meaningful again.

Is it all really about cost? Isn’t the annual report a marketing document too? Isn’t business tough in Zimbabwe at the moment? The fact is that no-one has information on how much it costs to prepare annual reports in  hardcopy. If you want to share this information with us we will aggregate all the data we have, without disclosing names and let you know whether this is the issue that everyone thinks it is. Tell us how many shareholders you have and the total cost of your annual report per annum here .

Zimbabwe is at a crossroads in its securities legislation and corporate governance – a new code will be released by the end of the year. Now is the time to start looking at using electronic shareholder communications within a framework of corporate governance and the law. The solution is to provide investor choice and there is ample evidence elsewhere on how to slowly wean ourselves off hardcopy communications.

Click here to track internet use in Zimbabwe and other countries (you will need an internet connection). Or just read the document attached herein see below.

Remember all shareholders have to be treated equally. Companies can’t only have 10 institutional shareholders and still be listed.  If companies view them as an asset then the question is how to use the relationship to better advantage. This advantage may be in corporate reputation, commercial return, brand enhancement. Each listed company will have its own story. Every company has a story. You may not think it does, but it does.

When the obligation to send hard copy communications is dropped, an alternative communications governance model has to be adopted. The Internet can be an important cog in this wheel. The fact is no one channel of communications is perfect. Directors should use whatever tools they have available to them. Hardcopy, electronic and the Internet. You can’t ask shareholders to vote on a proxy card without giving him the information to make a decision on which he is voting. The issues are complex.

In Zimbabwe, the regulatory environment has been unclear and its up to companies to adopt a new communications governance model in consultation with legislators and regulators. Fat chance. There needs to be a culture of co-operation and like minded concern. This does not exist because everyone is so apathetic.

The attached paper outlines what an alternative communications governance model might look like. Read it here online here or download it here and send me your feedback. Zimbabwe is formulating a new corporate governance code and its precisely these issues that need to be addressed.

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OK Zimbabwe, one of Zimbabwe’s largest retail store groups, has taken its investor relations initiative online following a rights offer capital raising from which it raised US$15m from shareholders and the Investec Group.

Why should investors consider investing in OK?

OK is one of Zimbabwe’s largest, well known retail store chains operating through 49 branches countrywide from in excess of 74,000 square metres of retail trading floor space.

A growing number of Zimbabwe based companies are progressively using the Internet to communicate with the local and global investment community. Each company has a message for shareholders and investors. A sign of a turnaround for Zimbabwe?

Access the interactive investor relations website here.

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