Playing the market in Zimbabwe. A citizen’s tale

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At 9 am every weekday, Albert Nangara, a chemical engineering student at Midlands State University, Zimbabwe, starts juggling his attention between studies and “the board”. 9 am is when the Zimbabwe Stock Exchange opens and Nangara needs to keep at least half an eye on prices. Nangara is one of a growing cohort of young Zimbabweans who have plunged into the stock market, buying and selling shares using social media platforms. But trading like this requires attention.

“Money never sleeps. I constantly have to monitor my social media feeds for any news that might impact my investment portfolio. So by the time the market opens, I have read and caught up with the news of the day,” Nangara says.

The ZSE, established in 1894, is one of the continent’s oldest bourses, only a little younger than the oldest – the Egyptian Exchange (EGX), founded in 1883 – and the Johannesburg Stock Exchange, established in 1887. For nearly a century it was an enabler of white capital. After independence, it became the domain of key Zimbabwean companies but the wider population was largely excluded from stock ownership. That all changed in 2015, when the exchange migrated to an online trading platform. It soon caught the eye of young digitally savvy would-be investors, like Nangara.

The 25-year-old started his trading journey in 2020, at the height of the Covid-19outbreak. He has since reaped dividends from trading stocks which he has used to pay his college tuition and meet other expenses. He said that he now has a “decent stream of revenue.”

Without any formal training in investment or finance, Nangara credits the film Pursuit of Happyness, starring Will Smith, with the inspiration behind his foray into stock trading. The 2006 blockbuster follows the story of Chris Gardner, a single parent down on his luck who learns the ins and outs of the stock exchange to change his fortunes. 

Before its digitisation, trading on the stock exchange was primarily an exclusive activity reserved for investment professionals. The exchange itself operated manually, with traders on the floor shouting over each other. Since digitisation, it has also featured heavily on social media, where Nangara and others pick up prices and tips.

“Social media gives us access to endless streams of information. It also connects us to like-minded peers who help us make meaning of the day’s news,” says Nangara, who has amassed a considerable following on Twitter, with his tips.

“The only way you can be on top of your game is by researching the company you are considering investing in. Make sure to read the news and look at the company’s financial reports and recent business developments. If everything looks solid, then you can invest,” he adds.

Shares are partitions of a company’s capital, offered for sale at the stock exchange. With as little as one Zimbabwean dollar, one can buy a share that can later sell at a higher or lower price. 

The value of the shares – or what traders refer to as the share price (the price of a single share of a number of saleable equity) is a result of market forces; it can go up or down, depending on micro and macroeconomic developments. 

“From the rising oil prices on the international markets, to local policy pronouncements, it is all connected,” Nangara says.  

The extent to which the Zimbabwean public has been buying into shares became evident when, on May 7, Zimbabwe’s President Emmerson Mnangagwa announced measures to limit trading activity on the Zimbabwe Stock Exchange (ZSE). 

The exchange’s Zimbabwe Industrial Index had climbed from 25,513 on August 31 2021 to 97,112 on April 29, 2022.

The announcement sparked an unpreceded furore on Twitter, with many of the new entrants dominating ZSE-related sites on the platform.

The directive seemed to generate more heat than light. To some, it was an indirect way of restricting new entrants into the stock exchange, to retain the status quo.

New measures included the imposition of higher Capital Gains Tax – a levy on the profits of the sale of property or investment such as shares– of 4 percent, up from the previous 2 percent on the disposal of shares held for less than 270 days.

According to the government, this would help contain the overpricing of stocks which it said was “fuelling inflation and weakening the exchange rate.”

One consequence was instant: when the ZSE resumed business under the new capital gains tax regime, there was an immediate hesitation from investors, who were still trying to make sense of the new rules to take up stocks. A decline which had begun at the beginning of may saw the Industrial Index decline to below 68,000 by May 20.

Michael Nyabande, a 26-year-old “techie” who dabbles in capital market investments, sent out a tweet to his nearly 1,500 followers.

“Morning, fellow ZSE Investors. Are we still buying the dip [when share prices go down], after Saturday’s pronouncements, or is now a good time to hit pause and explore alternative investment?”

“Guys, relax” Godwin Mungwadzi, who describes himself as an entrepreneur, tweeted in response to the mayhem that gripped the youthful community of investors.

While the new measures were clearly unsettling on the investor community, one thing was clearly evident: the growing community of largely young Zimbabweans that are showing interest in the stock exchange. The activity brings to mind the keen public interest shown in Kenya’s stock market in 2008 when communications company Safaricom listed in that country and queues of people wanting to buy shares stretched along several city blocks.

Penkline Tugineamatsiko, Stock Dealer at UAP Old Mutual Financial Services Ltd, in Uganda, explained that while some African bourses have made it easy for citizens to get involved in trading, others have not. Also, over-regulation of markets can directly affect their performance, leading to limited liquidity, which makes it difficult for would-be traders to make trades.

“In the East African region, we realize that Nairobi Securities Exchange has several listed companies, of which 70% of the companies listed are liquid. However, in Uganda, we have about 19 listed companies, but about four or five are liquid. So, there is not much for investors to deal with.”

Key to the level of individual interest in trading on the ZSE is the buzz on social media. Investors and investor groups post updates from the exchange, share stock picks, brag about their growing portfolio, and cry about them, too, when the market does not perform as well as expected.

For Nyabande, social media is a huge part of his investment strategy. It has not only opened up what was previously a highly elitist and exclusive environment but also paved the way for a younger and tech-savvy generation that is now mining the empowering potential of the exchange.

Nyabande is part of several groups and communities on WhatsApp, Twitter, and Telegram, which discuss stocks. It helps him keep his ears to the ground.

He is not a fan of technical analysis, but rather, “monitoring sentiments amongst other investors and learning from experts gives me unique insights into the market,” he says.

These online communities and the launch of applications such as “C-trade” and the ZSE’s own “Direct” have made capital markets much more accessible.

“One can trade from the comfort of their home so long they have a mobile phone or a laptop,” Nyabande explains.

Tugineamatsiko agrees. According to her, e-trading has opened the markets to far more investors in Africa, especially young people.

“More and more people are using their mobile phones to pay bills and carry out other transactions. The same can be done with the capital markets industry to increase participation,” she says.

A recent study on why the local bourse had not attracted many locals noted that the best shares are often held by local pension funds, banks, and insurance firms that do not want to sell because they have few alternative assets to buy with the sale proceeds.

But other than this, barriers to entry have mostly been more perceived than real. And these perceptions have been carried on for generations up until now. Tugineamatsiko asserts that a major challenge is that most people lack basic knowledge about capital markets; what is involved, how to participate, and whom to approach.

“There is need for financial literacy for the public for them to appreciate the role of the capital markets industry, and what it does. If you compare it with the banking industry; if you go to the deepest village, one will know what a bank is and what it is does. But if you were to ask someone in the city center about the capital markets, they don’t know,” Tugineamatsiko explains.

“So, there is a need for the capital markets industry to go deeper, do public sensitization so that information can be broken down to the people in a language they understand,” she adds.

Research conducted by the ZSE in 2020 indicated that participation by individual Zimbabweans in the local capital market was marginal. Some of the barriers cited include a lack of appreciation of the investment process and the perception that it is the domain and preservation of the sophisticated in society.

This survey prompted the bourse to launch ZSE Direct, a product that would make access to the market straightforward even for first-time investors.

“ZSE Direct came in to complement the platforms already in the market to provide more choice for investors and increase retail participation as we drive financial inclusion. An investor can register, fund their wallet, buy and sell securities and monitor market performance remotely through the web portal or mobile application,” says Justin Bgoni, the ZSE chief executive.

Another electronic platform, C-trade, allows users to buy and sell financial instruments such as stocks and bonds using mobile phones or laptops and gives brokers access to significant online investment traffic.

According to the Securities and exchange commission of zimbabwe (Seczim), which regulates the capital markets, retail investors trading on the ZSE through C-trade now account for more than half of the trades happening on the local bourse.

Before the launch of C-trade, it was estimated that only around 7 000 individuals were active on the local stock markets, with institutional investors dominating trades on the bourse.

All this contributed to Seczim exceeding its targets for 2021, with daily stock market turnover 98 per cent above the initial target.

“In the ensuing year, we expect more activity in the market, mainly coming from retail investors, due to availability and accessibility of trading platforms and new listings,” said EFE Securities, a local stock brokerage firm.

Given the country’s high mobile penetration rate of 90 per cent, the ecosystem is likely to see more online trading activity, opening up capital markets even further to the (previously) financially excluded. – bird story agency