SECURITIES Commission of Zimbabwe (SECZ) chairperson Willia Bonyongwe has criticised some majority shareholders in listed companies for undermining the interests of minority shareholders when firms carry out major transactions or embark on restructuring exercises.
In an interview on the sidelines of the shareholders’ forum, Bonyongwe said the Zimbabwe Stock Exchange (ZSE) had witnessed many special deals over the years, but the participation of minority shareholders was still limited.
Companies that had special deals in recent times include Meikles, Padenga, Hippo Valley and others. She said there was need to strike a balance between major and minority shareholders in line with good corporate governance.
“Special deals are usually related transactions and minority shareholders sometimes do not even know about the deals. There should be a balance between majority and minority shareholders because most of the time it is the majority shareholders that benefit from the special deals,” Bonyongwe said.
Special bargain occurs when buyers on the stock market purchase a big amount of shares at a special price agreed by the seller. The price will be at a premium of the prevailing trading price.
Bonyongwe said most companies disclose information which is not useful to shareholders.
“Sometimes on final accounts you find out that there would be one page and in small font that is even difficult to read,” she said.
Bonyongwe added that institutional investors such as Old Mutual and National Social Security Authority had a role to play to make companies disclose more as they had more weight unlike individual investors.
ZSE chief executive officer Alban Chirume said the local bourse always ensured preventative measures on special deals were taken.
“I agree that issues of related parties on deals are there, but before a deal of that nature comes out we interrogate these issues.
For instance, the African Sun deal at first didn’t look like a related party deal, but after interrogation we realised it was a related party issue, ” he said.
Chirume said the African Sun deal was a related party deal in that one of the key players in the deal had been an adviser to the company in the past 12 months.
Dawn Properties last week sold 12% of its shares to Brainworks which also bought a stake in African Sun. It is believed that one of the advisers to African Sun was linked to Brainworks Capital.
Speaking at the same conference, Theo Botha, an independent expert responsible for investing and shareholder activism in South Africa, said the country required active shareholders to encourage more disclosures from firms so as to protect investors’ interests.
He said companies should be held accountable for the actions that they took that affected shareholders at the end of the day.
“Shareholders should attend annual general meetings. I will come to Zimbabwe to attend some of the annual general meetings to try to impart my knowledge that I have acquired over the 12 years I have been an investor,” he said.
Botha said shareholders should engage in shareholder activism.
Chirume also said activism was important, but in terms of funding the shareholders had to foot their own bills.
He said shareholders should engage in activism to procure a return on capital, ensure change of the board, and increase company efficiency. He said shareholder activism was still inactive in this market.
Botha is a minority shareholder in many companies listed on the Johannesburg Stock Exchange and has been an active shareholder at annual general meetings that has resulted in major decisions being changed.
Botha through activism made Pick ’n’ Pay Holdings raise its strategy on cost management. Botha is a shareholder in Sage Life insurance, Bidvest and others.