Opportunities for Investment Clubs in Capital Markets in Zambia

We can all agree that saving is a good thing, but earning a return on your investment is very important not only to help you in periods when you have run out of other sources of income but also to enable you to achieve your investment goals. These goals can vary, usually, people save to purchase high ticket items – for example, if someone is trying to buy a house, there are very few people in the country who can mobilize capital of 200m on a whim but saved up over time with the help of return on your investment, you can achieve that goal.

In a webinar discussion organized by Zanaica for its Investment Club members, capital market experts discussed the opportunities available for Clubs to diversify their income in the long run.

To get an understanding of the capital market,  capital markets is a financial system that provides an avenue for raising capital and for saving through investment mostly for longer-term alternatives. Both individuals and institutions can invest in this lucrative industry in form of; shares(Equity), Corporate Bonds (long-term debt by companies, Government Bonds (long-term debt by government more than 1 year) and government treasury bills (less than 1 year).

The industry is regulated by the securities exchange commission and Bank of Zambia while its principal market in Zambia is Zambia Securities Exchange (LuSE), where active trading happens. The industry has different sector players from the; issuers – companies that float shares to the public. Companies that raise funds through corporate bonds . The government of Zambia (Treasury bills and bonds) and Investors – institutional (Napsa is a majority shareholder and other funds) savings groups and individuals are all involved. Other players also include; intermediaries such as brokers, dealers, investment advisors, registrars, rating agencies.

Zanaica highlighted that companies list for different reasons among which include; raising funds to enable companies finance long-term investments. Listing improves efficiency and transparency as companies are mandated to report to shareholders on business performance and corporate governance. In Zambia, some of the listed companies were a result of privatization like Stanbic Bank and New Vision.

Shares can be transferred to close family members and are held in a shares account (Securities Central Depository (SCD)). Shares can be bought for children and held in trust until they are 18 years of age.

Asked why anyone would consider investing in a capital markets venture, Zanaica said; “It’s an investment that can accrue a return in form of dividends and capital gains. If you are looking to save your money, it’s a good investment in that in case you need money, you can sell your shares. You get the chance to become a part-owner in big companies from which you can be part of decision-makers or benefit from incentives that such companies may have for their shareholders.”

You can de-risk through diversification of the portfolio of assets by having shares in more than one company. In case you need collateral security, your shares and bonds can suffice,.

For anyone looking to invest in this sector, there are several opportunities available as it continues to grow every day. According to Zanaica, financial services in banking and insurance are good investments and there is as well a vast potential in the unbanked and low insurance penetration thus making a good case for investment in that area.

There is also an opportunity to invest in utilities such as Zesco, as it operates under specific terms (concession) which safeguards shareholder returns.

Have a shares account now, it’s free of charge and you can trade in the future with no maintenance costs (only 3 colored passport photos, valid National ID/Passport/drivers license through completing paperwork for the investment club).

Always ask your licensed broker/investment advisor before making an investment decision.

Read market reports and financial statements of companies you would like to invest in.

Start small and invest for the long term – a period of at least 3-5years.

Diversify your investments in more companies and markets across the region.