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Tuesday, December 1, 2020

LuSE, Zesco to meet over raising capital

Economy LuSE, Zesco to meet over raising capital

THE Lusaka Stock Exchange (LuSE) will this week meet Zesco limited to engage the utility company appreciates the process of raising capital on the stock market.

LuSE wants to find out if the electricity utility has immediate capital raising projects that require cheap funding.

Speaking in an interview, LuSE general manager, Beatrice Nkanza said she was surprised to learn that Zesco cannot raise capital from the capital market because they were of the opinion that it was expensive.

She was reacting to Zesco comments last week that raising capital on LuSE was expensive as compared to banks.

“The notion that LuSE fees are expensive is a bit blanket. There is cost of doing business everywhere and to isolate LuSE and say its expensive is incorrect,’’ she said.

Mrs. Nkanza said expenses incurred by companies when rising funding on the exchange were not LuSE expenses per se.

She cited the Securities and Exchange Commission (SEC) as the first entry point when a company wanted to either list or rise capital.

She added that SEC had its own cost structure and once this was done, there was also a brokerage service that was offered to the intending issuer.

The brokerage service is a package of services that ranges from accounting, lawyers and brokers.

She stated that at each stage, parties were free to negotiate before they reached the exchange for assessment of application and approval for listing.

Mrs. Nkanza however pointed out that there was need to sensitize the masses on LuSE as a cheaper source of income.

She stated that if financial institutions like the Development bank of Zambia and Barclays bank of Zambia could raise bonds on the capital market, it simply showed that the exchange was a cheaper source for developmental projects.

“We would like Zesco to come on the market and be part of the change going on in the capital market. In the recent past, we have seen Chilanga cement raise K200 billion on LuSE,’’ she said.

Mrs. Nkanza pointed out that it would be a good start for Zesco to go on the capital market and raise some of the funds it required for its projects in order to meet the looming power shortage in the country.

11 COMMENTS

  1. Mrs Nkanza, Zesco cannot go to the capital markets to raise funds because they would be mandated to “open their books” for all to see !!! Madame, stay away from Zesco it will cost you your job.It is a very complex entity with alot of politics involved….something you do not want to get entangled with.Your idea is not new but the smart ones have stayed away from it!! Free advice madame !!

  2. The Zesco executive is being *****ic by underrating the capital injection from Zed capital markets especially the stock exchange.The only reason they do not want to go that route is nothing more that what our ORIGINAL PUNDIT has indicated.

  3. Luse most likely would be slighty more expensive than other primary lenders. But as you guys point out you cant rule out the fear of tight shareholder control as opposed to banks ‘free’ money which management can allocate as they so wish.

    But ZESCO is in dire financial crisis and nothing short of an increase in tariffs and collection efforts and a prudent borrowing philosophy will save them.

  4. Well, the concerns raised are valid considering how politicans regard ZESCO. However, change such as this that will utimately result in some progress will come at great personal and ‘corporate’ cost. I believe the Madame has her citenge well adjusted. Rock the boat!

  5. #6 Zesco management cant just come out in the open, the cost factor(fees)is nonsense,and the bank route wont be any cheaper,but what needs to be done is just to phase Zesco between generation and transmission and then involve Magandenomics who is the defacto shareholder as the only best way to raise capital.Stock markets are key component in the mobilisation of national and international savings and are used for long term borrowing as opposed to those fake retained profits ZEsco posts.Every where in the world, big companies like BP,Anglo,Vendatta,British gas,Kayata Zambia limited are all listed on SE so who is Zesco to express fears?
    Fear of the unknown is what kills us Zambians,its like they tell you that if you sleep with Elina from Linda compound you will die, just a mere handshake with Elina you start taking ARvs,uyopa chani?Some one must do a cost benefit analysis for them? I will recommend BaJoze to help do that.

  6. Ba Kuku(6), Zesco has very serious corporate governance issues with the major shareholder GRZ being the main culprit.have a look at their “published accounts” !! To be MD or FD of Zesco you have to be very nimble footed, slippery and have a very bad memory to last even one year!! Ba Bulungumune(4), i hope the madame has something under that chitenge becoz any corporate and financial interaction with that monster called Zesco is likely to result in her losing it !!If she has the heart of a lion may she proceed……we will sympathize from the terraces!!

  7. ZESCO. Not proactive. Not innovative. I want to see the new board and how it will work. The old guard has nothing but excuses.

  8. Fund of Funds
    (Multi-Manager Funds or Packaged Funds)

    What are they?
    A type of fund that invests in a number of funds rather than directly in stocks and shares. See diagrams below:

    A normal fund:

    A fund of funds:

    The basic concept behind a Fund of Funds, sometimes referred to as Multi-manager funds, is simple. As the name suggests this type of fund invests predominantly in a number of underlying funds rather than directly in stocks & shares, as traditional funds would do. The fund mainly invests in unit trusts, open ended investment companies (OEICs), exchange traded funds (ETFs) and other collective investment schemes. Instead of making the choice of a fund or selection of funds yourself, you hand matters over to an expert fund manager who will carry out these and other complicated tasks for you

    Benefits of a Fund Of Fund

    Asset Allocation – With over 2,000 funds in the UK and 1,300 offshore funds recognised by the FSA available to UK investors, how do you choose the right one/s?

    Fund Manager Selection – How do you find the time to select the best managers within each sector and monitor them?

    Diversification – How do you ensure that your portfolio has the right mix of assets/geographical sectors?
    Reduced paperwork – you will only have one set of documentation relating to your fund of funds!
    A fund of funds manager ensures that the fund contains the optimum mix of assets, geographical split and underlying fund managers and therefore, generally reduces a portfolio’s risk.

    Any Downsides?
    One criticism regularly made is that fund of funds are expensive due to two sets of management fees. This is not strictly true, as fund of fund managers are able to negotiate large discounts due to the size of them and this helps to reduce costs

  9. Unused Cash is a Drag

    As individuals, we tend to feel it’s better to have low levels of debt – or at least a comfortable cash-to-debt ratio. But corporations aren’t individuals. They exist, among other reasons, to maximize returns for shareholders.

    Do you want to see a CEO and his colleagues pulling down tens of millions of dollars in compensation each year while the company sits on a war chest of unused cash?

    Not me. Yet ExxonMobil and Microsoft, for example, are each sitting on over $30 billion in cash and short-term securities. And Bates’ and Kahle’s study shows that smaller companies showed even larger percentage increases in cash.

    The usual explanations don’t apply. It’s not because of the flood of initial and secondary offerings, which tend to fill corporate coffers. And it’s not just because companies hold cash overseas from international operations to avoid the penalties of repatriation.

    No, it turns out that many companies simply don’t want to cut or eliminate a dividend once they start paying it.

    Top executives know that shareholders expect a dividend to grow – or at least be maintained – once it gets instituted. If it gets cut, the share price is likely to suffer. And if the share price suffers, so will their compensation since much of it is tied to stock options.

    However, most of these companies would be better off using their cash to buy back shares. Why? Because dividing earnings by fewer shares outstanding accelerates growth in earnings per share.

    That’s why a buyback announcement itself is often a catalyst for higher prices. After all, management is ringing a bell, alerting investors large and small that a bargain may have developed.

    My research shows that small- to mid-cap companies with high price-to-book value ratios are generally the best investment candidates when a buyback announcement is made. One study found that the 50 stocks that met these conditions in every year from 1992 to 2002 produced gains 65% greater than the S&P 500 over the next four years.

    Don’t get me wrong. I enjoy receiving a dividend as much as the next shareholder. But what we’re all really after is higher total returns.

    And it’s growth in earnings per share – not dividends – that ultimately drives stock prices higher.

    Good Investing,

    Alex

  10. I strongly feel that going Luse is one good option that zesco should explore. I think you donot need to hold a phd in finance to understand that its cheaper and quicker to raise capital on luse. Zesco must be encouraged to quickly move in that direction. The benefits are twofold; recapitalisation and also empowering the Zambian citizens hold shares in Zesco.

    We are looking forward to a situaion where more companies will list on luse

    Felix

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