Companies shun the stock exchange

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Bereng Mpaki

REPRESENTATIVES of the Maseru Securities Market (MSM) have bemoaned the fact that there is still no registered company on the bourse despite road shows and bilateral meetings with prospective clients since the launch of the bourse in January 2016.

They said there were several benefits that the companies could access by joining the MSM which is yet to list a single company despite extensive sensitisation and financial literacy programmes.

Currently incubated within the Central Bank of Lesotho (CBL), the securities market was created to facilitate a centralised trading of financial securities to encourage the wider share ownership of previously privatised companies in Lesotho as well as facilitate raising of medium to long-term capital.

Speaking to Lesotho Times this week, Section Head of Domestic Markets Development at CBL, Motebang Mphi, said prior to MSM establishment, there were indications of the need of such a facility.

This was evidenced by the fact that some of the local companies had started to offer part of their shares for subscription by the public to raise capital and fund their operations.

Mr Mphi said buyers of shares and financial securities often do not have the means to exit such companies even when they wish to do so. He said they also cannot go back to the companies that issued them as that would entail drawing down of their capital.

“But through a stock exchange it is very possible and easy to find buyers willing to invest in such companies,” Mr Mphi said.

“For a company to list it should have a vision to grow or expand into new markets or products and believe in benefits of listing, like the ability and ease of raising capital, and in that case they will come to MSM to list their securities and find investors.”

When a company lists on a stock exchange, it also enhances its reputation and grows its footprint within the country, regionally and across the globe.

Mr Mphi said however, the main reason companies list on the stock exchange was to raise funds and spread the risk of ownership among a group of shareholders.

“Spreading the risk of ownership is especially important when a company grows, with the founding shareholders willing to cash in some of their profits while still retaining a percentage of the company,” he said.

He said MSM stands ready to assist any company on the procedure necessary to be followed in order to eventually register, as the process can be cumbrous and, sometimes lengthy.

“As MSM, we want companies to come and register, and we are ready to guide any company on what steps to follow until it is listed.”

He said some companies had shown interest and discussions to list with MSM were at an advanced stage.

‘Mabakoena Moonyane, also from the MSM, added that the idea of shedding part of their share ownership remained a challenge for some companies as owners seem to fear losing control of their businesses.

She further indicated that with continued dialogue with the private sector, that mindset was gradually changing.

“This is a new initiative and some companies appear reluctant to give up part of their share ownership because they believe they will lose control of their companies. But this does not have to be the case as founding shareholders can still hold on to a majority stake and offer the rest to aspiring shareholders to enable the business to grow.”

Mr Mphi further indicated that one of the ways to promote the uptake of the bourse was through divesting the government shareholding in some of the privatised enterprises indicted by Finance Minister, Moeketsi Majoro, in the 2018/19 financial year budget speech last month.

“The MSM can be a powerful vehicle to raise capital and dilute the government’s holding of shares in privatised companies.

“During 2018, Government will finalise a plan to recapitalise the Lesotho PostBank directly through the Maseru Securities Market by allowing Basotho to buy shares that were initially held by government. A broad assessment of an equity dilution strategy will be undertaken with a view to opening up direct shareholding to our people,” Dr Majoro said at the time.

Former Trade and Development Planning ministry Principal Secretary, Majakathata Mokoena Thakhisi, said that, “Stock exchanges in other countries are driven by the private sector”.

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