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Zambia currently requires to have two companies listed on capital markets with a total capitalisation of US$700 million to achieve its aspiration of market classification as awarded by Morgan Stanley Capital International (MSCI).
The country currently does not have an MSCI rating, and this does not encourage investor confidence, particularly considering that several African peers do have ‘frontier’ or ‘emerging’ ratings.
This is according to the Capital Markets Master Plan (CMMP) recently launched by President Hakainde Hichilema.
According to the plan, Zambia will need two companies listed on capital markets with a total market capitalisation of US$700 million or more to acquire for its capital market classification as awarded by MSCI.
The two companies would also need to have total free float of US$53 million.
In addition, an annualised trade value ratio (the ratio of annual value of shares traded versus their free float market capitalisation) of 2.5 percent will be required.
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The plan indicated that such a rating would provide a signal to foreign investors on the market’s level of development, which would inspire confidence
“However, the short-term strategic initiatives outlined in the implementation plan, if successfully executed, will address the capital markets’ most pressing issues.
“This could pave the way for the country receiving a ‘frontier’ classification from MSCI in the medium term, which will then be consolidated as the market continues its development towards 2031,” it stated.
According to the plan, Zambia would require a well-functioning clearing and settlement system based on the Bank for International Settlements’ Principles for Financial Market Infrastructures, with no prefunding.
“In addition, the market will require the appointment of custodian banks (currently Zambia has two of these, namely Stanbic Bank Zambia Limited and Standard Chartered Bank Zambia PLC) to provide custody services, as well as a well-functioning registry or central securities depository (CSD), which allows for the possibility of off-exchange transactions,” it stated.
The classification takes a variety of criteria into account and provides a broad signal to global investors on a market’s overall accessibility.
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