It is almost nine years since the last company went public and listed on the Malawi Stock Exchange (MSE). By next year, MSE will have clocked two decades of operation. Packaging Industries Malawi now Nampak Malawi delisted a few years ago. Why has the MSE been such a dormant stock market?
Listing and indeed going public on any stock market comes with tough stringent conditions. It is like a bank taking money from the public, loosely as it, and requires safeguards. More important, the stock market requirements do not only require a decent profit history but a commitment to highest ethical standards of business. It also comes with developing a culture of openness and transparency.
For example, any major decision that may affect the share price must be made public and communicated to shareholders or wannabe investors. But does this explain why MSE is not growing in listings and the subsequent market value in real terms?
Can we start at the Malawi corporate culture? I am not sure there is something uniquely Malawian corporate culture. But I guess all of us have who have had a job in our industry or operate one can share different ideas. I have before drawn some parallels between indigenous-owned businesses and foreign-owned on my partnership obsession. I am tempted to look at the stock market, MSE in particular, as another form of partnership. Partnership is a weakest point of the Malawian corporate despite the small size of our market.
Partnerships are a good avenue to bring different ideas to challenge the global business machine. It brings with it a lot of knowledge and skills to survive. The current corporate mind is awash with quick and profiteering reflected in overcharging of services. But how does it affect the intent to go public on the MSE? Well, another argument is such that if you are a short-term minded business operating in a small comfortable corner, the stock market may not probe worthwhile.
Our distaste of partnerships is intrinsic. It is founded in the notion that this belongs to me and only me. Why should I go public and sell part of my company to some individuals who may even take it once I close my eyes. Examples of businesses that have gone under the hammer because the owner is dead or the environment has become tough abound.
While we try to find answers to MSE that has not generated too much interest, its reason of existence is important. The stock market is a great avenue to raise the much-needed capital, a huge factor that has over the years been a major obstacle to doing business. Borrowing costs from the banks are astronomical high at 37 percent and are some reason banks swim in huge profits while the rest of businesses still struggle. Ironically, the major commercial banks are all listed on the MSE and you would reckon they appreciate the value of the stock trade as an alternative of raising money.
Much as business lobby groups naturally agitate for a business friendly climate, there are aspects that can be done as well. The best way to deal with high cost of finance is to go public. Not only does it allow you to raise capital cheaply but rather raises the profile of the investment, particularly with respect to adherence to regulations that accompany public listing. It also gives some good competition to commercial banks with regard to alternatives of business financing. In fact, public listed companies have a stronger bargaining point than private companies.
Otherwise, attempts by the central bank to pursue financial literacy is some good move to get individual persons to get more involved in a market dominated by a few institutional investors that somehow dictate the flow.
It is up to the Malawian entrepreneur to think outside the circle or box and realise that the stock exchange can easily take banks on as an alternative to raise money to grow a business. It however comes with a commitment to espouse high corporate standards. It is not a dead market but hibernating. n