Our association has been endorsed by the organisation’s Executive Trustee, Fungai Chiposi. “Proudly Zimbabwean Foundation is honored to have Big Law as a member of the organisation. With the firm’s expertise in online communications, we are sure that this partnership can only result in the Foundation’s growth and the development of our country in general.”

Proudly Zimbabwean’s vision is to instill a sense of community ownership and service that enhances progress and prosperity in Zimbabwe with its mission to facilitate community regeneration and growth through implementation of sustainable local initiatives.  I believe that we’re at a stage in Zimbabwe where huge potential in all sectors can be realised and at Big Law we are striving to go the extra mile to achieve our objectives.  One of my goals is to encourage companies to use well informed online communications for the benefit of everyone participating in African capital markets.

We embrace the values presented by Proudly Zimbabwe and its initiative to prioritise programs that will empower communities by delivering the ability of communities to own their own project results.  Big Law’s online communications initiative is, we feel, of benefit to not only Zimbabweans, but our regional counterparts as well and we look forward to working with Proudly Zimbabwean to achieve their objectives.

The first of Proudly Zimbabwean initiatives called BIN-it was launched in December 2012 and, encourages businesses to adopt sections of the Harare central business district (CBD), where each section requires an adequate litter infrastructure with litter monitors trained by a number of organisations, including Harare City Council.  Part of the initiative is to advise members of the public against littering.  The plan includes primary and secondary education initiatives, engagement with local authorities for landfills and collection mechanism, support and awareness and infrastructural support for recycling.  Ultimately, the overriding communication statement is “BIN-it!”

I will update you on progress through our online communications news releases and blogs on our Proudly Zimbabwean association and encourage other organisations to ‘get involved’ and work proactively to develop our businesses and communities.

My survey elicited opinions on 10 questions, ranging from the general standards of corporate governance in listed companies in Africa compared to their peers in more developed markets, as well as African listed companies’ efforts to use the Internet to promote investment in their shares, to whether African listed companies are putting enough information online for potential investors and whether social media can be used effectively to promote investment in African markets by linking companies directly with investors and stakeholders.

Question 01 – What is your view on the general standards of Corporate Governance in listed companies in Africa, versus their peers in more developed markets, for example the London Stock Exchange (LSE) and the New York Stock Exchange?

Over 75 percent of respondents believed that the general standards of corporate governance were inadequate, with 20 percent stating that standards in Africa are generally the same as their international peers. Less than 5 percent believe corporate governance standards are generally higher than their international counterparts.

Some believed that compromised standards of corporate governance in Africa are due in part to regulation still being in its infancy and a ‘new thing’ for Africa. Others put it down to a difference in culture, whereby issues important to international peers may not be the same for African countries. One contributor pointed out that while it was easier to think of standards as being low in Africa, one had to look at the more pronounced cases of investor losses due to poor risk management and malpractices in the west to form a different view.

One respondent, who had worked overseas in finance and banking believed South Africa was way more advanced in terms of financial control measures, and another commentator praised South Africa for its transparent corporate governance.

There was still the belief held of some companies that shareholders should be kept in the dark and not expected to be involved in the day- to -day operations. Directors can arguably take advantage, therefore, of the almost non-existent shareholder activism, which adversely affects the minority shareholder.

According to some respondents, there was still a general reluctance to engage stakeholders by listed companies, which stems from the ‘old way of doing things’ and it was mentioned that the spirit of corporate governance and the spirit of democracy go hand in hand. The more democratic a country is, the more likely its listed companies will have better corporate governance.

There was general consensus that most companies who have written corporate governance do not strictly adhere to it. It was suggested that some companies do not ‘understand’ investor relations, with the exception of Kenya, where it is taken seriously as one of the pillars of Regulation for the Capital Markets. I personally disagree with this but it is recorded here to correctly reflect the diverse range of views received.

Fingers were pointed at a lax regulatory environment and weak commercial laws in Africa, resulting in shareholders not being actively involved in the overall insight and operations of the companies. This is a recurrent theme in my blogs where I contend that it’s the regulators that should spur the a giant leap to the 21^st century information dissemination practices.

There was criticism of the standard of reporting and disclosure in Africa compared to international peers, which was seen as slow and inconsistent. Some respondents commented that most companies with websites do not keep them updated and their news is eclipsed by the media. The practice of executives disclosing non-public information to analysts and portfolio managers over dinner and in private meetings still exists which contradicts the fundamental tenet of treating shareholders equally. In addition, it was mentioned that the lengthy tenure of CEOs, sometimes as much as twenty years, does not comply with corporate governance guidelines and family businesses that have gone public often struggle with the transition. Africa’s highly illiquid markets foment these latter-mentioned issues.

In conclusion there is, I believe a fundamental disconnect between oft-quoted and adopted standards of corporate governance and good shareholder communications practices in African markets. Codes are too general and need to be beefed up to tell listed companies what they should be doing when and how.

My involvement in www.africanfinancials.com, Africa’s largest portal of African listed companies’ annual reports is testimony to my belief that promoting investment into African markets has to start with action and not rhetoric. Africa’s regulators should follow suit. Africanfinancials.com is Africa’s largest portal of free online annual reports. If you would like to contribute annual reports to this initiative give me a call on +263 4 703182.

Sign up to receive releases of African annual reports from www.africanfinancials.com

Here are 3 possible reasons:-

• They see beyond the immediate future of Zimbabwe (which future has dark clouds: called “elections” , “restructuring” and or “recapitalisation”). Zimplow’s podcast on its future refers.
• The timing to start building investors’ confidence is right. The general feeling in Zimbabwe is that whatever the result of the elections this year, the removal of political risk will positively affect the market.
• These executives know that they have solid businesses notwithstanding the current challenges and they want to communicate this long-term value to the market.

Zondi Kumwenda, CEO of the largest manufacturer of agricultural implements in sub-Saharan Africa (pictured below)

Zondi Kumwenda, CEO of Zimplow: Analyst Presentation, Royal Harare Golf Club, 7 March 2013

Source: Africanfinancials.com IR news

outlined how his Group has acquired a number of World class franchises in Zimbabwe in the two main economic sectors of Zimbabwe: mining and agriculture. Zimplow recently purchased 100% of the issued share capital of TPH Holdings Limited, another company listed (and soon to be de-listed) on the Zimbabwe Stock Exchange.

AICO’s transparency in communications is most notable: most company executives would shy away from reporting 30% lower sales volumes, 53% lower sales values and significant impairment losses. But AICO Africa, headed by Pat Devenish did not. In AICO’s case, a “small cap” on the global stage, the extra step to podcast was unnecessary, given the extent of their bad news. But their group is agriculturally based, operates in 15 countries and has significant intellectual capital for long term growth and Seedco forms a large part of this. Short term, the group faces many challenges so why AICO podcast these earnings is testimony to the consistency and integrity of management’s communications policy.

In Zimplow’s case a podcast underlines the solid business case management has built for the future. Both these companies have comprehensive online investor relations sections to their website, they push information to investors and utilise Twitter to disseminate their news widely. Their annual reports are given prominence on www.africanfinancials.com.

Investor presentations can be quite long and comprehensive and I find that a post-presentation interview is an excellent way for a CEO to provide a concluding round up of the key corporate message. Here I interview Zondi after his presentation to round up all that has been said:-

Post Analyst Presentation Podcast with Zondi Kumwenda: Analyst Presentation, Royal Harare Golf Club, 7 March 2013

Source: Africanfinancials.com IR news

In Zimplow’s case the podcast was separated into 5 files for ease of investor access:-

Operating summary podcast | Financial summary podcast | Q & A podcast | Future outlook podcast | Rob’s post presentation podcast

The reader of this blog, if resident in international markets, may not fully appreciate the significance of these events, but in the context of where this country has come from and where it still has to go, these investor relations events are significant as they are driven not by regulators or rules but by what makes sense commercially and from a best practice IR perspective: communicating long term value.

Who gets to see this information (posted at 8am) and do they have time to act on it if need be? Forget that markets are illiquid or that the announcement may not matter – I am providing an illustration of how to try to treat investors equally, so bear with me on this. One fundamental rule is that information that may affect the decision of an investor should not be released during stock exchange trading hours. Only after. Sounds fair and practicable.

So following on from the 8am release of the announcement… at 8am our time the investor in the USA is still asleep, fast asleep. The investor in the UK is drinking his tea or is in the bus. The investor in the Eastern hemisphere is having his siesta.

Here are some observations on releasing data at 8am:-

• The corporate action that is posted at 8am in the morning does not give time to local investors to digest its meaning or consult with brokers. Trading is at 10am or thereabouts.

• The USA investor is precluded from getting to hear of the information completely. He’s asleep when it arrives (midnight) and trading has closed when he wakes up and has his tea (6am his time – 2pm our time). So that’s a day wasted.

• The UK investor gets the information as trading starts mid-morning in the as-yet-to-be-identified-central African stock market.

The company announced earnings of US$7.9m recently, up from US$5m in the previous year. With shareholders’ funds of US$50m the company’s Price-to-Book Value ratio is 1.9 times. View their earnings release here.

Africansmallcaps.com, the platform upon which National Foods is hosted, is our standardised investor relations template (and portal) for listed companies to satisfy their core communications corporate governance obligations to investors. The standardised layout offers email alerts and all of the company information needed for investors to carry out meaningful investigation into making informed investment decisions. Currently 4 companies are using www.africansmallcaps.com to satisfy their company investor relations obligations.

Their historical annual reports are viewable here. The annual reports of all Africa’s listed food processors appear here. I will have some more exciting news about National Foods shortly. Sign up to alerts here.

Every report of the Chairman had a picture of him or her. In close second was the CEO with 92% occurrence and lastly, 6 out of 10 reports had a picture of the FD. It follows the pecking order doesn’t it.

Our analytics reports of traffic to online annual reports show that the Chairmen, CEO and FD pages in the annual report are typically the highest visited pages. Now traditional investor relations theory dictates that the top 3 qualities to look at in valuing a company are the quality of management, management and management. So this makes sense!

However, there is a more sinister insight into our statistics, one that I fear to raise publicly and that is Chairmen, CEOs and FDs regularly and repeatedly, check their own pictures online – hence the higher page statistics to the management section of the annual report. These senior executives admire themselves in dressed up suits with regal backdrops, expensive over-sized silk scarves and antique furniture. Repeatedly.

Plausible?

You decide.

The Central African Stock Exchange (CASE) 2012 HANDBOOK, is now available for download through their new simple but functional website and includes Botswana in addition to Malawi, Zambia and Zimbabwe. A total 130 companies are profiled, up from 110 last year (2011).

In our illiquid sub-Saharan equity markets, meaningful market statistics and economic insight is sometimes hard to find, but the CASE handbook addresses this dearth of information in a unique way to provide a well-rounded snapshot of the 4 markets it covers.

Aurelius, the Romanesque commentator in the 2012 Handbook, provides his analytical insight to many of economic and financial markets, including:-

• “Think out the box” economic indicators – the fuel consumption of each country in litres (you try and find that anywhere else), the Hard Boiled Egg Index (aka Burger Mac Index internationally), the number of entries into the Kariba International Tiger Fishing Competition etc. Off-the-wall ways of measuring economic (and social) activity should you view official economic statistics with disdain.
• Full broker and registrar contact details: the 544-page handbook lists stockbrokers and custodial services in the four markets and, of course, is intended to inform rather than advise potential investors of company prospects in the year ahead.
• Aggregated historical financial data on the listed companies with little-published liquidity statistics on their share trading.

The publication is well supported by sponsors which is testimony to the quality of its content and distribution.

The pdf version costs $60 through Paypal.

Sign up to receive news of the launch of the 2013 edition here

Marcus Aurelius (Latin: Marcus Aurelius Antoninus Augustus; April 26, 121 CE. – March 17, 180 CE.), was Roman Emperor from CE 161 to 180. He ruled with Lucius Verus as co-emperor from 161 until Verus’ death in 169. He was the last of the “Five Good Emperors“, and is also considered one of the most important Stoic philosophers. During his reign, the Empire defeated a revitalized Parthian Empire; Aurelius’ general Avidius Cassius sacked the capital Ctesiphon in 164. Aurelius fought the Marcomanni, Quadi, and Sarmatians with success during the Marcomannic Wars, but the threat of the Germanic tribes began to represent a troubling reality for the Empire. A revolt in the East led by Avidius Cassius failed to gain momentum and was suppressed immediately.

Marcus Aurelius’ Stoic tome Meditations, written in Greek while on campaign between 170 and 180, is still revered as a literary monument to a philosophy of service and duty, describing how to find and preserve equanimity in the midst of conflict by following nature as a source of guidance and inspiration. Wikipedia

• Time on site – 03:23
• Average number of visitors per site per month – +720 unique visitors
• Average number of visits – +1,000 per month
• Average number of countries visiting corporate websites – 54 per month
• Top visiting countries: USA, UK, South Africa, Nigeria, Kenya

As banks are not part of the statistics above we suspect traffic to be a lot higher. How can a bank be assured of meeting its website visitors’ needs within 3 clicks and 3 minutes though? Brand and reputation and confidence in a bank are everything and so is the way that a bank’s website is structured.

The fact is few banks get their websites right. With the new NMB Bank Limited (“NMB”) website (www.nmbz.co.zw) we think we have managed to overcome these challenges and have go one step further by merging an online investor relations function seamlessly, without detracting from the commercial value and functionality that a bank website should give.

“Designed with functionality in mind, our website provides an easy way for customers, stakeholders or investors to contact us and receive a quick response on any of your banking or investing queries or needs”

said Tsungai Guzuzu who invites you to register to receive corporate events, company, other announcements email alerts on the new website on www.nmbz.co.zw. Tsungai’s details are Head of Marketing and she is contactable on +263 772 262 611, +263 4 759 651-9. NMB provides premium financial services to corporates, institutions and high net worth individuals and has a market capitalization of US$22m as at 23 August 2012. The company has 4 362 shareholders.

View NMB’s investor relations section | Sign up for alerts | View NMB’s latest annual reports | Visit the website in case you have missed the links above.

Our clients now comprise 21 listed companies (whose market capitalization in aggregate exceeds US$1.02bn) listed on the Zimbabwe Stock Exchange who are engaging investors directly through a comprehensive and timely online investor relations function.

• Time on site – 03:23
• Average number of visitors per site per month – +720 unique visitors
• Average number of visits – +1,000 per month
• Average number of countries visiting corporate websites – 54 per month
• Top visiting countries: USA, UK, South Africa, Nigeria, Kenya

As banks are not part of the statistics above we suspect traffic to be a lot higher. How can a bank be assured of meeting its website visitors’ needs within 3 clicks and 3 minutes though? Brand and reputation and confidence in a bank are everything and so is the way that a bank’s website is structured.

The fact is few banks get their websites right. With the new NMB Bank Limited (“NMB”) website (www.nmbz.co.zw) we think we have managed to overcome these challenges and have go one step further by merging an online investor relations function seamlessly, without detracting from the commercial value and functionality that a bank website should give.

“Designed with functionality in mind, our website provides an easy way for customers, stakeholders or investors to contact us and receive a quick response on any of your banking or investing queries or needs”

said Tsungai Guzuzu who invites you to register to receive corporate events, company, other announcements email alerts on the new website on www.nmbz.co.zw. Tsungai’s details are Head of Marketing and she is contactable on +263 772 262 611, +263 4 759 651-9. NMB provides premium financial services to corporates, institutions and high net worth individuals and has a market capitalization of US$22m as at 23 August 2012. The company has 4 362 shareholders.

View NMB’s investor relations section | Sign up for alerts | View NMB’s latest annual reports | Visit the website in case you have missed the links above.

Our clients now comprise 21 listed companies (whose market capitalization in aggregate exceeds US$1.02bn) listed on the Zimbabwe Stock Exchange who are engaging investors directly through a comprehensive and timely online investor relations function.

What were the results?

The SEC did not mince words when Mr Tafadzwa Chinhamo, CEO, described as “not good enough” the results of a review of 40 listed companies’ published financial reports for the February March reporting season this year. The review was carried out by a technical team and presented by Graham Cheater CA (Z) an IFRS expert with Chartered Accountants Academy in Harare. His presentation is displayed below.

Zimbabwe’s hyper-inflationary environment rendered financial reporting meaningless as accounting technicians discovered the real challenges associated with implementing IAS 1, 21 and 29 in an environment where hyper-inflation could NOT actually be measured. Zimbabwe’s experience resulted in the accounting standards being amended.Zimbabwe will shortly announce a new corporate governance code after the previous code failed to garner broad-based support or traction.

The SEC attributes the fall in discipline in published reporting/press releases to the absence of capacity at the ZSE from 2007 and clarified that the SEC with the PAAB is acting to fill the gap in ZSE capacity until such time as the ZSE could resume its full role fully resourced. Kundai Msemburi, Head of Corporate Finance at the SEC described the ZSE capacity issue as “improving”.

Briefly, the results of the IFRS review for published extracts of financial reporting are as follows:-

• Only 6% of reports acknowledged that the responsibilities for the preparation of the accounting records were that of the directors – this fact is to be stated in the report

• ZERO% of listed companies reported Headline Earnings Per Share, as required

• 50% of reporting companies said that the interim results were audited but gave no information on the audit report or the auditor

• Not all companies reported a statement of cash flows and statement of changes in equity (12%)

• 62% had no notes or minimal notes by the Chairman / director’s highlights

• 63% did not report segment information

The overall conclusions are

• “Reporting entities do not display consistency”

• “Reporting entities appear to report what they want the reader to read, not what might be of use to the reader”

• “IFRS is NOT complied with”

The Zimbabwe reporting and investor relations environment is fascinating from the perspective of what can go wrong when a reporting framework is negated, corporate governance codes are not adhered to and the regulatory environment is weak. Remember however that in the hyper-inflationary period CEOs of listed companies were actually jailed for “illegally” increasing prices. This activity (being jailed), borne by management on behalf of shareholders, was not originally envisioned in any common law or regulatory principles in other countries (obviously). Directors and management had the role of protecting shareholder value, which in a hyper-inflationary environment, meant counting inventory in the morning and then “going for lunch” i.e. NOT selling any goods or services. It’s obviously taking time for the reporting and accounting sectors to get out the mindset that investor relations is just not that important.

Zimbabwe now finds itself 3 years post hyper-inflation, in a precarious state politically and desperately in need of recapitalisation and there’s no local capital available. The need to improve reporting and get back onto the investment horizon is palpable and the frustration of the SEC clear to see. The SEC appears to be using the whip to bring listed companies and their auditors into line with threats, “henceforth”, to suspend or de-list companies that do not present fully IFRS compliant reports – either press releases or full annual financial statements – to the ZSE.

The “brain drain” of accounting skills from Zimbabwe is the starting point for the accounting and auditing profession in addressing these concerns but so are the attitudes of listed company directors. The accounting profession may be the start of addressing some issues, but it is only when the practice of investor relations is fully appreciated, that Zimbabwe’s interface with the global investing public can be world class.

CBZ, a prominent listed Zimbabwean bank, “adopting electronic shareholder communications” by ceasing to post annual reports to shareholders, has taken a great leap forward in a regulatory environment where online standards to replace hardcopy reporting to investors have yet to be defined. Their motivation: to save money. So it’s not only the quality of reporting that is the issue on the table in Zimbabwe at the moment, it’s also the nature of the reporting link to investors, the owners of the business.

Dominic Jones , a world leader in online investor relations, has this opinion about the trends in African markets regarding de-linking the direct communications channel with shareholders:

“Scrapping requirements for companies to mail printed disclosure documents to investors is a global trend, but it has exacerbated shareholder apathy in every jurisdiction where it has been implemented. This is largely because regulators have failed to replace printed disclosures with suitable standards of online disclosures. Apathy and an uniformed investing public is, to my mind, the single worst thing that can happen in any market. It ultimately will lead to market abuses.”

The SEC using the whip on listed companies and the accounting and auditing profession may not seem to be palatable to some, but it is likely to have a very significant impact in a very short time – and forms just one step in many to get Zimbabwean companies back on the world investment stage, as they were in 1997. This is good news.

Interestingly there is a group of companies in Zimbabwe and surrounding stock exchanges that are using the online environment to comply with the core aspects of the responsible dissemination of information and these companies will lead the way in getting their reporting up to international standards all round.

A comprehensive array of Zimbabwean annual reports can be found online on www.africanfinancials.com