78
CAPITAL MARKET
INTERVIEW
for SMEs before going onto second-tier board. From the regulatory point of view, the New Securities Act was enacted in December 2016 and addresses the regulatory framework around private equity which was previously nonexistent. Before the regulation, institutional funds could not invest in the existing unregulated private equity structures and there was a need to protect the interests of the institutional funds. The next stage is the reform of the institutional funds and set guidelines as to what the institutional funds can be invested in. With such prerequisites, we could begin to see an increased flow of capital into this asset class. To a large extent, the lack of education and understanding of the role of capital markets is an issue of concern. Historically, Zambians have been groomed to be employees with entrepreneurship being a last resort and only considered once the route of formal employment is unattainable. It is envisaged that with the multi-faceted efforts currently been made to address this knowledge gap, we shall see more entrepreneurs emerging in the medium term and it is hoped that developments in private equity structures could provide an answer for such entrepreneurs. Brian Chintu: The business culture is a major point to consider. Due to the knowledge gap, it would take another five to ten years for Zambia to have a solid entrepreneurial base. This is a constantly evolving process. Most of the young Zambians are investing, applying for mortgages, etc. There is a lack of knowledge about the policy and regulatory framework. The SMEs segment would certainly play a more active role if it realised the access to funding opportunities. Most entrepreneurs that are knowledgeable about these funding lines are
uncomfortable with a shared ownership. The regulator has initiated an education programme for school children on how the capital markets operate to bridge the knowledge gap through regular competitions that focus around the investor operations of the Lusaka Stock Exchange. Once this segment of the population evolves into the working class they will be more knowledgeable on how to access the funding for their own business ventures. Over the years, we have also noticed an improvement in the general savings culture and this has been manifested by the increasing diversity of clients particularly on the mutual funds and stock broking portfolios.
BRIG: How can the Government and the private sector make Zambia more competitive globally? Muchindu Kasongola: From the policy perspective, the government needs to look at how attractive and competitive its policies are. We are competing for the same capital available globally and the potential investor is searching for a market with less surprises in terms of market, political and economic risks. The current administration is trying to monitor the situation against the benchmarked criteria and Zambia has done well to create an open market. They have recognized the importance of consistency and stability of policy, and the need to incorporate the various stakeholder views. There have been many reforms that have taken place to ensure Zambia is a conducive business environment. It is easy to expatriate funds and bring investment inflows into Zambia. We have also established a full-stream commercial court a High Court, with judges specialized in commercial litigation, and the government is continuing to reinforce the independence of the judiciary.