In the last 25 years, Zambeef Products Plc has grown from a humble butchery business to one of Zambia’s biggest success stories, with more than 206 shops and 7,500 employees.
A big part of that achievement has been thanks to the company’s ability to raise finance on the stock market to invest and grow its business.
The company listed its shares on the Lusaka Securities Exchange (LuSE) in 2003, enabling any member of the public to own a share in its success. And the National Pension Scheme Authority (NAPSA) is one its largest local shareholders, meaning every working Zambian indirectly owns a stake.
In 2011 the company also listed on the Alternative Investment Market (AIM) of the London Stock Exchange (LSE), which provides opportunities to growing companies to access capital from the global public market owing to its greater regulatory flexibility compared with the larger and more complicated main market.
The stock market listing also enabled a further capital injection from CDC Group Plc, which invested US$65 million in Zambeef in 2016: US$9.5 million in return for 52.6 million ordinary shares and US$55.5 million for 100 million convertible redeemable preference shares resulting in a 17.5 percent stake in Zambeef. Zambeef shares on AIM saw a rise of as much as 50 percent following the announcement.
As a result of capital raised from shareholders, Zambeef has carried out an ambitious retail expansion strategy through its macro outlet roll-out programme, as well as invested in backend facilities such as its Novatek stockfeed plant and state-of-the-art hatchery in Mpongwe, rotary milking parlour at Kalundu Dairy Farm and the Kitwe Processing Plant, in a move to increase operational efficiencies across the group.
It’s a good example of the benefits of stock market listing, enabling companies to raise additional capital and grow their business.
“Listing on the stock exchange was one of the best business decisions we ever made at Zambeef,” said Chief Executive Officer Francis Grogan. “It enabled us to raise the capital we needed to expand, broadened our shareholder base, and ensures that we maintain the discipline of good corporate governance.”
And indeed Zambeef is regularly recognised by LuSE for its excellence in corporate governance.
The company walked away with four awards at the recent LuSE Corporate Governance Awards, scooping first prize for the Corporate Governance Award and the Best Annual Report Award, and being named as first runner up for the Sustainability Award and second runners-up for the Green Award.
It was the third time Zambeef received the Corporate Governance Award, having previously won in 2007 and 2008.
“Zambeef believes in positive corporate governance. We want our employees happy and to operate within the law. As a public company we are regulated by the stock exchange both in London and Lusaka. Our focus is to ensure we are compliant with all the rules and regulations. We want to make sure we don’t just make a profit but also contribute to development, food security and to Zambia’s economic growth,” said Zambeef Group Chairman Dr Jacob Mwanza.
By providing finance for companies such as Zambeef, stock markets also performer a wider function in boosting economic growth for the country.
In a nutshell, stock markets provide a formal platform through which individuals and business entities looking for capital are linked with investors and resources. This is done through the exchange of cash, transfer of shares or a combination of both.
The price of shares will usually depend on the perceived value of a business or venture, and can fluctuate up and down depending on market sentiment. Needless to say there are many factors that can affect stock prices, such as a government regulations, reputation, innovations, competition and climate change.
Enhanced corporate governance in listed institutions is an important benefit that can be derived from the stock exchange. This lends to the credibility of companies, which is often reflected in the value of their share price; the more valuable a company is perceived to be the higher its share prices will be, as more people are interested and willing to put their money into that company.
Investing in shares is usually long term – one cannot expect to reap profits instantly – as company shares tend to gain value overtime, depending on the viability of the business.
The ‘uncertainty’ or ‘volatility’ of stock markets coupled with a general lack of understanding of how they works leads to frustration; disappointment; and sometimes puts off would-be investors – both individuals and companies. For example, understanding that a company only pays dividends when it is making a profit.
Input from a professional goes a long way in helping investors with decision making. Institutions such as the LuSE, the Securities and Exchange Commission, and the Stockbrokers Association of Zambia are a good starting point in finding our more as they are not only there to help regulate markets but also facilitate trade and encourage best practices that demand greater accountability from listed companies and protect the interest and rights of both shareholders, stakeholders and businesses.