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Economic trends stifle Malawi Stock Exchange growth

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Thokozani Saulosi

Market experts have indicated that the Malawi Stock Exchange (MSE) has remained small overtime in relation to the size of the economy.

The local bourse has remained small since inception in 1994, having 16 counters.

The platform has also seen the government dominating the bond market and not many players in the private sector using it to raise capital.

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But in an interview, Stockbrokers Malawi Limited Chief Executive Officer Noel Kadzakumanja said the market has been growing at a snail’s pace mainly because of instability and slow pace in the growth of the economy.

“We have seen many players in the private sector shying away from the market because some attempt to avoid costs and the time it takes to raise capital through the market, and the desire of shareholders not to dilute ownership in their companies

“The main problem is not the market itself but the economy in which it is held, any efforts to revamp the economy and keep it stable will surely contribute to making the stock market more vibrant,” Kadzakumanja said.

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Another analyst, Thokozani Saulosi, said little to no knowledge of the MSE as a source of capital has been the major challenge for growth.

He said even after realisation of the MSE as a source of capital-raising either through bonds or equity, participation by the private sector is low due to different factors, ranging from bond or equity listing rules and personal issues inclusive of family businesses.

“The MSE has initiated a programme to help small companies graduate into companies that can list and that is commendable. However, we can go further by initiating venture capital programmes for those with developing ideas which have the potential for tremendous growth and listing in the near future. In developed countries, they have these companies and essentially these companies end up listing within a few years,” Saulosi said.

MSE Chief Executive Officer John Kamanga said they have been engaging potential companies to list on the market through symposiums, one-on one business clinics and visitation to woo would-be market joiners.

“What we have discovered is there is a lack of understanding in terms of the role of the stock market and we have used pioneer projects; for example, we have seen that the stock market has a platform for debt instruments that is the bond, a platform for equity and very soon we will be able to list green bonds.

“We are trying to educate the general public that the stock market is capable of providing the platform for capital raising. We have seen the government raising capital on the market through the Reserve Bank of Malawi and some commercial banks have been raising capital through debt instruments and, very soon, another player in the financial sector will do the same,”Kamanga said.

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