By Coreen Madanha
Greetings to our dedicated readers as we enter the height of the holiday period. In the world of investing, trust and structure are paramount, forming the strong roots necessary for the ‘From Acorn to Oak’ growth.
This week, we explain the safety structure of Zimbabwe’s capital markets.
We will explore the vital roles played by the Securities and Exchange Commission of Zimbabwe (SECZ) and the key institutions that execute and safeguard your investments.
The Referee: The Securities and Exchange Commission of Zimbabwe (SECZ)
SECZ is the chief regulator. Think of SECZ as the referee that enforces the rules of the game to protect all players (investors).
- Investor Protection: SECZ stops fraud and financial crime. It also runs the Investor Protection Fund, which can reimburse investors if a licensed participant goes bankrupt.
- Supervision: It licenses and constantly supervises everyone who works in the market, like stockbrokers.
The Marketplace
The Zimbabwe Stock Exchange (ZSE) and the Victoria Falls Stock Exchange (VFEX) are the shopping centres where shares are bought and sold. They set the rules for companies listing their shares and provide the technology for trading.
The Order Executor: The Broker
The Broker (or Stockbroker) is the essential link between you and the Exchange. You cannot trade directly on the ZSE or VFEX; you must go through a licensed Broker.
- Role: The Broker’s primary job is to execute your instruction (to buy or sell) immediately and efficiently on the Automated Trading System (ATS). They are your direct agent in the market.
- The Transaction Team: Recording and Protecting Your Assets
After an order is executed, a highly structured process ensures your ownership is properly recorded and protected.
The Central Record Keeper: The Depository (CSD)
The Central Securities Depository (CSD) is the central, computerised register for electronic share ownership in Zimbabwe, currently run by Chengetedzai Depository Company Limited and Zimbabwe Stock Exchange.
- Role: The CSD replaces paper certificates. When you buy shares, they are credited to your CSD account electronically (a process called dematerialization). This system ensures speedy and secure transaction settlement (T+2, or two days after the trade).
- The Safe Keeper: Custodians
A Custodian is a financial institution that acts as your safe deposit box.
- Role: The Custodian holds your electronic shares on your behalf within the CSD system.
- Practical Example: If you purchase shares in Cake Ltd, the official ownership record is held by the CSD, but the Custodian manages that account for you.
The Professional Guide: The Asset Manager
An Asset Manager (or Investment Manager) is a regulated professional who takes on the responsibility of growing your capital for you.
- Role: They do more than just execute trades; they research, build, and actively manage a diversified portfolio (often using products like Unit Trusts) according to your long-term goals and risk tolerance. This is ideal for institutional investors or individuals seeking expert, hands-off wealth growth.
Having secured the roots of your investment through regulation, the focus shifts to the rewards. Our next step up the alley is discussing the tangible returns that feed your Oak: deciphering dividends and capital gains, a highly pertinent topic as we approach the year-end.
Coreen Madanha is the Managing Director for InvestIQ Oak Wealth (Private) Limited, which is a registered member of the Zimbabwe Stock Exchange (ZSE) and is licensed by the Securities and Exchange Commission of Zimbabwe (SECZ).
