By James Hall
MBABANE, May 8 2002 (IPS)

Only five companies offer shares for sale, and stock trades are so rare that days can go by without a transaction.

But the financial community in the tiny kingdom of Swaziland is determined to have its own stock exchange, even if parliament’s interest in the idea shows less conviction.

“Swaziland has only a 1.4 billion-U.S.-dollar economy, but there should be more investment opportunities, a way for profits to stay in the country,” says Leo Maziya, a financial analyst. “The stock exchange is a start.”

After 12 years, stock trading is also still an experiment. Supporters of the stock exchange say ordinary Swazis now have a way to make their savings work for them locally, instead of adding to the outflow of capital from the country into offshore accounts or the Johannesburg Stock Exchange in neighbouring South Africa.

“The trouble is, our exchange is as conservative as the Swazi people are. Stock holders cling to their shares, and with few new listings, opportunities to invest are rare,” said the late Andrew McGuire, a stock broker who supervised the start of trading in 1990, when the index stood at 117.5 and only one company was listed.

The index high hit in Mar 1997, when it stood at 246.6. When a company delisted a few months later, the market lost 50 percent of its value. Poor performance of any listed company can drag the index down sharply.

When Fridge Master, an appliances manufacturer that struck a deal with General Electric to build Hotpoint refrigerators in Swaziland, suffered losses, the index dropped to a minuscule 72.92 at the end of 1999. The company went out of business, and trading was suspended last year.

But overall 2001 saw an impressive performance for a bourse that had evolved from an informal stock market, with trading conducted over the telephone between the kingdom’s two licensed brokers, to a full Swaziland Stock Exchange (SSX).

“On paper, last year was spectacular, but the market is so small it took only one deal, the merger of two sugar companies, to make it happen,” says Michael Matimela, a broker for Swaziland Stock Brokers.

The Swazi bourse opened 2002 at 205.72, up from 138.04 points at Jan 1, 2001. The All Shares index registered a 49-percent jump.

“The growth was mainly a result of a merger between the Royal Swaziland Sugar Corporation, which is one of the five listed companies, and Mhlume Sugar Company, which was not listed,” says a source with the exchange. “Following the approval of the merger, the share price of Royal Swaziland Sugar Corporation rose 100 percent.”

With no mergers or other big deals in the horizon this year, the market has return to its previous lethargy, closing Tuesday at 178.57, unchanged since last month.

Five companies are listed on the equities market. Total market capitalisation is about E1.4 billion (about 132 million U.S. dollars).

At the beginning of the year, market capitalisation was about E1.6 billion (about 152 million U.S. dollars) up from E453 million (about 45 million U.S. dollars) three months before, prior to the addition of Mhlume Sugar’s assets to the Royal Swaziland Sugar Corporation.

Trading sessions begin daily at 3:30 PM in a conference room in an annex building of the Central Bank of Swaziland in Mbabane, which has oversight over the market. Trade is conducted using the call-over system between the country’s two licensed brokerage houses, Swaziland Stock Brokers and African Alliance Swaziland. No shares were traded Tuesday. When this happens, the day’s trading session can last as briefly as five minutes.

“We are beginning to complain that it is not worth our time to come over from our offices,” says one broker. But advocates of the exchange say proper form must be followed, and the discipline will pay off as the exchange grows.

One government stock and three debentures are currently listed. Only E70,000 (6,500 U.S. dollars) worth of debentures were traded in the first quarter of 2002. Central Bank sources admit the market is hobbled by a lack of liquidity, because of conservative stockholders who hold onto their shares, as McGuire complained.

Mandla Hlatwayo, executive director of Ubombo Sugar Corporation, which has a 40-percent share of Swaziland’s sugar industry that produces the kingdom’s chief export, says, “We would like to list on the exchange, but it is difficult because the rules are in flux.”

The problem lies with parliament. Since 1996, the finance ministry’s Securities Bill that sets up formal institutional rules for the stock exchange has languished with lawmakers without receiving attention. Meanwhile, Ubombo Sugar currently lists on the Johannesburg Stock Exchange.

Frustrated by parliament’s inaction on the Securities Bill, the Central Bank upgraded the informal stock market into The Swaziland Stock Exchange in Sept 2000, while continuing to provide oversight until the enabling legislation is passed.

“Investors will not be comfortable until the trading rules are set,” says stockbroker Matimela.

Ironically, the head of government that should support the stock exchange, Prime Minister Sibusiso Dlamini, instituted the first stock trading when he was finance minister in 1990 as a way to boost investment opportunities in the country.

“The success of any country’s stock exchange is tied to the performance of the country’s economy,” says an official of the Central Bank. “Yes, Swaziland can support its own stock exchange, but our economy must grow. This is not a ‘chicken and egg’ quandary – a healthy economy must come before a healthy stock market. Government is trying to ensure the former, and the exchange will take care of itself.”

Not entirely, investors fret. They still want parliament to take notice of the Securities Bill, and an accompanying Pensions Bill that will mandate 10 percent of all private and public pension funds must be invested in Swaziland. The requirement will bring needed capitalisation to the stock exchange, but only if there are shares to trade.

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