Investing on the ZSE: A first-timer’s experience

Photo by Mathieu Stern on Unsplash

Let’s face it, the average person, especially in Zimbabwe knows nothing about the stock exchange. We don’t know how shares and stocks work and have no idea how to go about buying them. All we know is that rich people are shareholders and that is what we aspire to, to be rich. Unfortunately, things like how to invest on the Zimbabwean Stock Exchange are not common knowledge, probably shedding a light at the bigger problem of financial illiteracy and by extension financial exclusion that is very dominant in this country. Luckily for you, I recently tasked myself with learning a bit more about stocks and in this article will be sharing with you how I started investing on the Zim stock exchange and my experiences so far( 3 and a half months😬).

The Zimbabwean Stock Exchange

So the Zimbabwean Stock Exchange (ZSE) is one of the oldest stock exchanges in Africa, with its predecessor the Rhodesian Stock Echange being established in 1955. It has a rich history of failures, successes and controversies, with the most recent one being its suspension by Minister Mthuli Ncube in June last year in a move to stop the devaluation of the Zimbabwean dollar. Regardless of all this, the ZSE is actually the most performant stock exchange on the continent with yearly of 836% in local currency and 92% in USD last year according to africanmarkets.com(as of 18 December 2020). Even looking at inflation, we still out-perform every other stock exchange at least 3 times over. With this in mind, you literally have no excuse to not invest on the ZSE. In the words on one Kudzai Mubaiwa, “It will end in wealth 😅”.

The process

So to trade on the ZSE you need 3 things:

1. A bank account — This is so that you can deposit and withdraw your money.
2. A stockbroker account — This is necessary cause individual can’t trade directly on the ZSE and you have to do so through a registered stockbroker. These people are licensed to deal in securities and are your interface with the ZSE.
3. A CSD account — This is sort of an electronic ledger ( a bank account of sorts) for your shares. It keeps a record of what shares you currently own and their value.

Now I know what you’re thinking, this seems like a long and troublesome process, brokers seem like their expensive and how do you even get a CSD account, will I have to bribe someone? Don’t worry the process is actually a breeze and you can do it in the comfort of your home. I will work you through it 😉

So firstly, to address the elephant in the room, brokers are quite affordable, their charges are actually prescribed by law and they all charge the same price, the commission is roughly about 1% of your transaction value. And as for opening a CSD account, it’s nothing like getting a passport or vehicle plates in Zim, it’s completely free and your broker can open it on your behalf.

So traditionally you would need to approach a broker, fill in forms to be a client and then regularly call or email them when you want to buy shares🤦‍♂️. Luckily this is now a thing of the past, with ZSE’s digitalisation drive leading to the creation of platforms like C-Trade and ZSE Direct where you can open an account and trade from the comfort of your home with little to no human interaction, just a good internet connection and you’re can start trading.

I have personally used both platforms, but in this article, I will talk about ZSE Direct which is the ZSE’s official trading platform. To register on the platform, you just visit zsedirect.co.zw, and proceed to the registration page and fill in your information, they require a few basic details- name, contact details, etc and additional KYC details like a picture of your ID and a proof of residence(while this is normally a bumper, they have provided plenty options for acceptable proof ranging from utility bills to a letter from employer).

After registering on the platform you’re provided with an account, although you’ll have to wait 3–5 days for your broker to confirm your details and open a CSD account for you, after that we can begin trading and hopefully build a good portfolio. The minimum amount for trading is RTGS 500, which just goes to dispel the myth that trading is for the rich, you can always start small and slowly build your portfolio.

Tips

Now when you start you’re gonna feel tempted to put in all your money and buy as many counters as you can, DON’T. Trading is like learning to drive, you learn and get the handle of it over time, you start at low speeds with a lot of caution and as you get more comfortable, you add more gas but never reduce the amount of caution.

You need to study the companies you buy into, read through their financials and check their historic performance on the stock market before purchasing any stocks. If like me you’re a noob and don’t know how to do most of this, ZSE offers an amazing course on how to get started trading and how to analyze the financial performance of a company, you can access the course here.

Another tip when buying shares is always to gauge the appetite of other investors, the ZSE Direct platform has an interesting feature called Market Depth which shows you other bids made by other investors for buying and selling of a particular counter. You can use this to see what others are willing to pay for that particular share. You can still bid above or below this amount depending on your own goals.

Also, try and stay up to date of any companies you have shares in or are interesting in buying. The ZSE website posts regular update of any new company statements such as trading updates, financials and cautionary statements, it will be wise as an investor to check on this site religiously. Another good website is africanfinancials.com, it provides in-depth profiles of listed companies including documents, historic prices, trading info, dividend declarations and so much more. It has proven to be a great resource for me personally.

Disappointments

While I am really enjoying trading and prospects of becoming the country’s next Mbinga, there are a few shortcomings where I think the ZSE and SEC ( the regulator) can improve.

Firstly I’m still not sure why it takes 3 days to transfer ownership of shares after buying or selling them. In this day and age of technology, this process should be near-instantaneous or at least taking a maximum of a day. Same goes for the process of opening a CSD account, these processes need to be fast and efficient as possible as these bottlenecks frustrate users and can lead turn away potential investors.

Secondly, the ZSE Direct platform still experiences technical difficulties now and then, sometimes pages don’t load and sometimes you get errors when trying to buy shares. While I will also note that they seem to be fixing these errors over time, they should really invest more into their engineering talent to ensure the site functionals at its best always. Luckily enough, they have great customer care, and I am always put to ease when I file a complaint knowing it will be resolved urgently.

Lastly, I have a small complaint with regards to bank deposits 😩. The ZSE Direct platform has 2 primary methods of depositing money into your account, Ecocash and ZIPIT. While Ecocash transfers reflect instantly, bank transfers take up to 48 hours🤦‍♂️. This is rather an inconvenience as most people opt to use ZIPIT as it has fewer charges and unlike EcoCash, doesn’t has less stringent daily and transactional limits. Hopefully, the ZSE team is working to reduce this turnaround time for an improved user experience.

What I’m excited about

The ZSE currently has a very vibrant CEO in Mr Justin Bgoni. The man really seems to know what he is doing, with a background of working on the Australian Stock Exchange, he has managed to make the local bourse more accessible through platforms such as ZSE Direct and C trade, as well as overseeing the launch of the Victoria Falls Stock Exchange in a short amount of time. He is also very open to engagement on social media platforms, which to me is a trait of great leaders. I am really excited to see what more he can do at the helm of the bourse.

On another note, a few weeks back Old Mutual managed to list Zim’s first Exchange Traded Fund (ETF), this is a special type of security which tracks a particular index. This is great cause it shows there’s political will by the ZSE and govt to increase the number of financial products available to people. The more financial products available the more avenues you have to potential access wealth.

Lastly, as a Computer Science graduate, what I really most excited for is the potential of AI automated trading bots, which could potentially automatically trade on a person’s behalf according to set investment criteria. Investors could potentially input their risk appetite, sectors/indices of interest, profit goals, whether they want value or growth investments and then an AI robot could trade on their behalf break a sweat. No reading endless financials, analysing market trends, understanding P/E, P/B, ROI and other fancy financial acronyms. Now wouldn’t that be true financial inclusion 😅

Really hope you enjoyed reading that and it helps you start your journey into investing on the ZSE. Please feel free to tell me what you thought of the article in the comments as well as tell me anything you want me to discuss in future articles :)