AT A few minutes before ten on the morning of August 6th, some two dozen smartly attired men and women slowly assemble on the fourth floor of 101 Union Avenue in downtown Harare. They gather in a small room around a chain of wooden tables waiting for the start of the day’s trading on the Zimbabwe Stock Exchange (ZSE). In front of each trader is a numbered green rectangle, which marks his or her spot on the trading floor. At some unseen signal—a bell sits unused on a table midway down the room—the trading begins.
African stockmarkets have been hot this year in part because of growing interest from rich-world investors who want exposure to the continent’s fast-growing economies. Zimbabwe has one of the largest of Africa’s so-called frontier markets, even though only a half-dozen or so of the 70-odd listed companies are big enough to interest foreign investors.
The market’s volumes do not warrant an expensive electronic-trading system or, for that matter, a long trading day. So each weekday morning a small group of brokers gather around the tables for about an hour to trade stocks the old-fashioned way, by calling out “buy” or “sell” orders face to face. Another retro detail is the fixed trading commission, of 1%. A broker who matches one of his buyers with one of his sellers (a so-called “booked-over” trade) can get two lots of fees.
Murray Lynton-Edwards has been trading stocks in Harare for almost two decades and now runs his own firm. When he began his career there were only four or five firms trading on the ZSE, he says. But as the inflation rate in Zimbabwe exploded into the squillions in 2008, locals used equities as a store of wealth in place of banknotes that quickly lost their value. The number of brokers grew to handle the extra trading. The adoption in 2009 of the US dollar as Zimbabwe’s main currency cured inflation and drew in foreign investors for locals to sell to. For a while this helped to support market turnover. But now the pickings are slimmer and have to be shared between 19 registered brokers on the exchange.
On this Tuesday morning there is a notable absence of bull-market fever. The previous day the main index had fallen by 11% as foreign investors sold stocks in response to the weekend’s news that Robert Mugabe (not known for his careful stewardship of the economy) had won Zimbabwe’s presidential election by a thumping margin. Trading is brisk but not frenetic. There is enough interest from buy-the-dip investors to keep today’s fall in the main index to just 1.7%.
Each trader comes to the stock-exchange floor with orders to buy or sell that have been placed by clients either earlier that morning or after the previous trading day’s close. There are no telephones. Traders are entrusted to get the best possible price for their clients, although often they will have been given strict price limits: an instruction, say, to sell Delta (a brewer and one of the largest stocks on the market) for not less than $1.20.
Prices are set by auction. A trader calls out: “I’ll sell Meikles at 32 [cents]”, testing the market for shares in a conglomerate that owns Zimbabwe’s second-largest retailer. Onard Mazorodze, the trader for Lynton-Edwards Stockbrokers, sees his chance. “I’ll buy at 26.” The offers fall, first to 27.75c, and then lower. Mr Mazorodze senses he is the only buyer and sticks to his 26c bid. The banter suggests that other traders realise it, too. “He wants to clean people out at 26 and book over,” says one. No one else bids higher. A deal is struck at 26c, a good price for Mr Mazorodze’s client.
Both buyer and seller scribble the details of the transaction onto their pads. Trading slips are collected every ten minutes or so by a clerk and will be matched when the market closes. At 10.45am the room suddenly falls silent. There is time for one final deal to be struck and then the traders drift quietly from the room. The Economist