mozambique stock exchange

Mozambique Stock Exchange

MOZAMBIQUE STOCK EXCHANGE 1. ABSTRACT

After more than seven years of effective activity in the Mozambique

Stock Exchange, the effort to attain stability and operational

regularity in the performance of all of the tasks that the stock

exchange had to attend to before the market place, striving not only

for the satisfaction of the of the service levels that we understand

due, but also to gain institutional and operational, credibility and

confidence, of all of those participating in this market.

Having attained the normal level of activity after its start-up, the

Mozambique Stock Exchange has lead its course of action towards

providing more efficient services to those parties and affiliates: The

authorities and other State entities, the business sector, public sector,

institutional and individual investors, and, naturally, the financial

institutions. This report contains information that serves as a

testimony of the results of the input towards innovation, perfection

and response to the constantly emerging needs of the market such as

have been, and will continue to be.

Even though we are dealing with a relatively new reality, the stock

exchange has had an influence in managing and dealing with

securities in the secondary market. This new establishment has made

important contributions that stimulate development and

consolidation of technical and operational set of actions, in


accordance with the Government sector, private sector, and financial

institutions. All of these constitute the fundamentals for the

economic and social development of our country.

The last point refers to the basics of the stock exchange. In fact, it

has deserved and will continue to deserve, our close attention:

Promoting the growth in the practices of business management to

result in a transparent, rational, efficient, and competitive manner,

getting closer to the businesses in the market, and contributing to an

education focused on a market economy. This will continue to be

done, without leaving the professionalism and specialization

demanded by the financial institutions, to diversify the nature of their

negotiable financial products.

The current development stage of the stock exchange would not be

possible to achieve without the confidence that have been placed

upon the Capital Market and the Mozambique Stock Exchange given

by the unconditional support of the Government, the Bank of

Mozambique and the National Treasury Department, the financial

institutions and dealers/brokers, and finally the listed security

issuers.


2. HISTORY

In 1997, the Government of Mozambique, through the Ministry of

Planning and Finance, established the “Stock Exchange Installation

Commission”, whose mission has been to promote better and more

efficient control of the capital market in Mozambique. That is, from

the creation of an institutional structure and is legal framework, as

well as, to create the stock exchange. As from the beginning, this

was the most reliably appointed figure to perform the task for an

efficient functioning of a secondary market involved in securities

trading.

Throughout the course of this important period, the organization of

the Installation Commission’s activities initiated effectively by

having a month long internship at the Lisbon Stock Exchange which

began on the 18th of February in 1997, until march. This could only

happen with the most suitable human resources and the adequate

financial investment provided by the Mozambican Government,

along with the World Bank.

As a matter of fact, it’s important to point out the positive way in

which the internship occurred, and as a result, creating a closer

relationship between the Installation Commission and the Lisbon

Stock Exchange. This relationship was officially formalized in

March of 1996 with a celebration of a cooperation protocol between

the Mozambique Ministry of Planning and Finance and the Lisbon

Stock Exchange. The protocol considered as the main vectors to


undertake, the establishment of a legal framework for the market, the

professional team involved in the project, the aid in Mozambique

privatization programs in aiming as listings arising from this process.

Finally they agreed upon aid on installing technical structures and

operating systems essential for the proper functioning and smooth

running of a stock exchange in Mozambique.

Throughout the years 1997, 1998 and 1999 the Installation

Commission created all the necessary prerequisites for organizing

the capital market in Mozambique.

These were focused on:

• Elaboration of the legal framework needed for on operating market;

• Establishment of the supervision structure directly linked to the

Bank of Mozambique.

• Within the financial institutions, a restructuring process related to

the securities business activities;

• Creation of the necessary conditions for all allocating the Treasury

with an immediate bond issue, “Obrigações do Tesouro 1999”,

aimed to be the first security listed in the Mozambique Stock

Exchange.

• Establishment of an operational model on how the markets works;


• Development of the necessary operational systems, such as

electronic trading systems; clearing and settlement systems;

• Lastly, training the market operators from the public administration

level, to the financial intermediaries and the business sector at large.

The activities undertaken by the Installation Commission lead up to

the inauguration of the Mozambique Stock Exchange on October 14,

1999 market by the first normal stock exchange trading session to

take place. During this historical moment the session was opened by,

the Minister of Planning and Finance, His Excellence, Dr. Tomaz

Augusto Salomão. In this session 920 treasury bonds were traded at a

price of 1,005,000 MZM each having established the market buying

price.

A remarkable aspect of this breaking point in history was also the

creation of the Decree number 49198, on September 22. This decree

approves the internal rules and regulations of the Mozambique Stock

Exchange, and it recognized the nature of this entity as a public

institute endowed with administrative, financial as patrimonial

autonomy.

Main Events

From the star-up date of the stock exchange activities, the above-

mentioned operational model was set to operate twice a week, every

Tuesday. Electronic operational functions were carried out for

trading, clearing, and settlement. The stock market operators were


trading via a local network system. Initially, the trading began as call

system which enabled the base quotation for each security to be

determined in each session. The first trade was initiated with one

security listed – “Treasury Bonds 1999” and all of them were

physical scripts.

Ever since then, until the end of the year 2002, which is the period

covered in this report, considering the activities mentioned in the

MSE action plan – running the securities market -, as well as the

contribution for the development of the nation, expansion,

consolidation, and product diversification in the Mozambican capital

markets, we could highlight the following initiatives and

accomplishments:

• In February 2000 we observed the first public bonds subscription

made by a private company (a corporate bond of Madal company).

• Installation of a remote trading network system with a direct access

to the stock market, therefore making it possible for consultation

among the stock market operators without need for a physical

moving from one location to another. This was done by making

information available via wireless internet, for faster, safer and

trustworthy conditions;

• In the last quarter of 2000, a number of steps were put in aimed at

informing a variety of related groups i.e. Professionals from both

financial and business sectors as well as universities ant the general

public


• Creation of legal framework for dematerialized securities through the

Decree number 34/2000, of 27th of October, included in the MSE

operation circulars.

• Establishment of the clearing and settlement control system for the

securities positions that were registered at each financial

intermediary, according to the legal rules regulations that previously

had been agreed upon.

• The launch of the initial public offer, whose results were summarized

at the first special trading session taken place at the MSE on

December 2001 (State sales offer of its minority shares holding in

the private company, Cervejas de Moçambique – CDM).

• The first listing of shares, with the sequential establishment of the

public offer mentioned above (listing of two categories of shares by

CDM, one for the general public and the other can only be traded

amongst managers and workers);

• The increasing of the trading days from having it twice a week

Tuesday and Thursday to five days a week, as of the month of

November 2002.

• Establishment of a new trading system – Registered Trading System

– oriented to institutional investors and to complement the existing

one, the call trade system, whose continuity was not only secured but


improved through new rules established in the Mozambique Stock

Exchange Circular stating the trading disciplinary actions;

• Progressive Increase in the number of the stock exchange operators

to six;

• Finally increase on the number of listed securities to 14, and the

market capitalization over US$400 Millions.

Institutional outlook

The Mozambican Securities market is organized around the

intervention by the following entities:

Firstly, the Mozambican Government, who has the power to define

the general guidelines, which rules the securities. The specific

Government sector responsible for this task is the Minister of

Planning and Finance, whom has the guardianship over the

Mozambique Stock Exchange.

The Bank of Mozambique, in its own right, is the entity responsible

for the supervision and surveillance in both the primary and

secondary securities market, and also to all market operators. It is

also responsible for regulation of everything except to those matters

expressly reserved to the Minister of the Planning and Finances, if it

finds foreseen in the securities legislation.


The Mozambique Stock Exchange is the market management entity,

endowed with the means necessary to ensure continuity in an open

and free market (through authorized intermediaries, the buying and

selling of securities) and also has the competence to regulate matters

related to the operations.

The financial intermediaries are collective entities, either of public or

private nature, legally qualified to professionally perform financial

mediation activities at the stock market.

The stock exchange operators are financial intermediaries,

authorized to execute transactions within the Mozambique Stock

Exchange, on their own, as well as on behalf of the third parties.

The financial intermediation activities can only be exercise by

collective entities whom are recognized as qualified for, in the terms

specified in the Ministerial Diploma 10/99 of February 24th and

Decree 15/99 of November 1st. To exercise the activities undertaken

as a stock market operator (Brokers or Dealers), these entities need

to be registered in the Mozambique Stock Exchange.

In the Mozambique context, and in light of the 14th of June 1999

Ruling of the Minister of Planning and Finance, the banks with

headquarters in domestic territory are authorized to exercise

activities of stock market operators, having undertaken the figure of

a Dealer.


The financial mediation activities taking place in the Mozambique

Stock Exchange are constituted of six entities; all are dealers their

identities go as follows:

• BIM Banco Internacional de Moçambique

• Standard Bank de Moçambique

• BCI Fomento - Banco Comercial e de Investimento

• BPI Dealer ( Moçambique) Sociedade Financeira de Corretagem

• Barclays Bank

• CPC – Cooperativa de Poupança e Crédito

The Investor Protection and Aid

The legislation and regulations that were established were set with

strict and vigorous rules aiming at protecting the investor to the

utmost: In this case, by disclosing all legal information to be given

to issuers, and also the conditions to accomplish the market

operations and, especially, the conditions of exerting the financial

intermediation activities.

On the other hand, the Mozambique Stock Exchange has actively

evolved supplying information and helping investors, especially

individual investors, aiming and providing any clarification on how

to intervene in the market.


Integrity, Transparence and Equality in the Market

The way in which the market is organized and structured, namely the

financial intermediaries’ duties such as executing operations and

provision of services, the principle of professional secrecy, of

information given by issuing the market and the nature of the

functions attributed to the Bank of Mozambique, establish the right

conditions for an effective and efficient market in terms of integrity,

regularity, normality and transparence.

Registered and Follow-Up

In the development of its attributions, the Mozambique Stock

Exchange has been always registering everything relating to its

activities. This includes the following material:

• Registering of the issuers, mainly listing, suspensions, delisting, and

re-listing of securities issued, and all of the relevant facts that

characterize the issuers´ jurisdiction:

• Individual registering of the identity of the stock exchange sponsors;

• Registering the stock exchange operators who are authorized to carry

out operations as well as individual registering of all their mandates;

• Registering of all the effective operations;


• Registering of all the tripled buy or sell notes, relating to effective

operations, issued by the operators;

• Registering of the reports of all the issues that were publicized;

• Registering of all the special trading sessions taken place;

• Registering of any disciplinary sanctions applied.

Information Dissemination and its Quality

The information dissemination related to trading in the stock

exchange, the operations that take place in the market outside the

stock exchange, as well as all the information referring to the market

and any circumstances related to issuers, are published at the Stock

Exchange Bulletin, with the reference to every stock market trading

sessions carried out.

This publication discloses all the information about the stock market

issued securities characteristics, namely:

• In the case of share, the issuer name, the nominal value and quantity

of the listed securities, amount of dividends and other retribution

attributed to each share, and the date of the last divided distribution

occurred;


• In the case of bonds and other debt-related securities, the nominal

value and quantity listed, the nominal interest rate, the daily interest,

the listing year and dates of interest payments, and its maturity date.

With respect to stock exchange’s effective operations, and relatively

to each security traded during the lock session, the object to offers to

buying or selling, without the confirmation of any trade occurring,

the Bolentim de Cotações (Listings Bulletin) refer to:

• Effective quotations or price

• The best proposals for buying and selling of available securities

• The quantities that were involved in each transaction.

The Stock Exchange Bulletin supplies information on the monthly

and annual trading sessions gathered in each one of its systems and

presents the market capitalization for each session taken place, and

of the previous one, as well as its respective percentage change.

This publication also contains information on the financial

intermediaries, members of the Mozambique Stock Exchange’s

trading, clearing and settlement system, including their names and

details of their mandates.


3. LEGAL FRAMEWORK

In its own as the markets managing entity, the stock exchange also

carried out task in building up regulation and actions to regulate the

market. That is whether elaborating the proposed legislative and

regulatory initiatives, or participating along with other authorities, in

regulating different subject matters not only directly linked to the

Mozambique Stock Exchange, but also reflect upon the performance

of securities within the market.

In the range of attributions for each market participant with the aim of

endowing the market with better organization, operation, transparency,

and there published the following legal documents:

Decrees number 48/98 and 49/98, both from of September 22nd,

emanated by the Ministers Cabinet. The first one establishes the

general rules about the securities market in Mozambique. The second

one recognizes the creation of the Mozambique Stock Exchange and

approves its Internal Rules.

The Ministerial Diploma number 10/99, of February 24th, of the

Ministry of Planning and Finance, monitors the activity of the

financial intermediaries dealing with securities including their access

to financial intermediation at the Mozambique Stock Exchange;


The approval by the Cabinet of the Decree 34/2000 of October 17th,

states the steps to be taken and the formalities applied in issuing,

registering, circulation, and control of dematerialized securities.

The Decree 61/2003 of December 14th, exempts of taxes (IRPC –

personal annual tax and IRPC – company annual tax) all the incomes

of the listed securities in Mozambique Stock Exchange. Also the legal

acts concerned with the listed securities are exempts of stamp duties.

The Decree 21/2005 of May 31st, establishes a new type of security

named “Commercial Paper”.

Notices number 2/GGBM/99, 3/GGBM/99, and 4/GGBM/99, of

March 14th , from the Bank of Mozambique , determined what the

taxes and commissions should be charged for both transactions carried

out within the stock market – Notice no. 2, and outside of the stock

market- Notice no. 3. It also regulates the conditions for the initial

public offers (Notice no.4).

The Decree 25/2006 of August 23rd, establishes a securities

depository, where the company registration will be mandatory to any

domestic company.

The Mozambique Stock Exchange not only intervenes in the market as

the managing entity, but also as entity with legislative powers.


Because of both of these attributions the stock exchange published the

following legal diplomas:

• Circular no. 1/GPCDBVM/99 stating the stock market operator’s

organizational and registering conditions and their mandates;

• Circular no. 2/GPCDBVM/99 regulates the conditions for listing

securities at the stock exchange;

• Circular nº 5/GPCDBVM/01 is directed towards regulating the

clearing and the settlement of the market operations.

• Circular nº 1/GPCDBVM/02, concerning to the stock exchange

sessions, trading and financial settlement;


4. LATEST ACHIEVEMENTS

a) Legislative Changes

The regulatory framework establishing a new securities code was

submitted for approval by the Government.

b) Market Developments

The Exchange is engaged in a nationwide process of consultation

with the domestic business community as to the mechanisms as to

launch a secondary listing board aiming at capturing the medium

size companies.

It is also a process of defining the strategy on how to introduce

the concept of securities depository among the business, since the

company registration will be mandatory to any domestic

company.


5. FUTURE PLANS

With growing economic and market globalization, the dynamism,

sophistication, and expansion of services rendered by the financial

sector, the continuous need for businesses to grow, develop and

diversify their activities, and the increasing demands from investors,

whether in terms of the quality of the services, or in maximizing their

profits benefits for their servings, all of these require a continuous

developing market, with the ability to fully respond to all their needs.

Throughout the time that the Mozambique Stock Exchange

concentrated the efforts to fully reaching the necessary stability and

operational regularity, bringing security and, proportionally, a level

of services that are efficient enough for the various agents within the

market, there is all need for a strategic thinking to consolidate,

expand and develop the Mozambican securities market, and the stock

exchange itself.

The stock market dynamism and its continuing and sustained growth,

will be possible through an already, clear and objective well defined

plan for a strategic orientation. This plan has to be rigorous in

reaching its goals, and also, in its pre-determined actions and

towards progress.

Under its attributions and competences as the securities´ managing

entity, from the 3rd quarter of 2002, the Mozambique Stock

Exchange, did establish a master action plan with the view of a time


limit no less than three years. The objective of such a plan is to

endow the market with renewed dynamism of consistency and

amplitude in the Mozambican stock market, and equally in the

Mozambique Stock Exchange.

The context of the referred orientation plan, the nature of outlined

measures cover material starting from the market’s institutional

organization to the details of operational efficiency. This covers the

structural limitations of the functional operations of the market,

similarly, the actions that interact with all others market participants

– the authorities, the financial intermediaries, businesses and the

investors.

After the guidelines have been established, there was all need to look

for ways to create the right environment to launch fundamental

strategic goals for another way of functioning and expression of the

securities market, such as:

• Promoting joint actions that stimulate effective expansion and

growth in the structure of the primary and secondary market;

• Develop actions that allow for greater visibility of the market,

contributing to an adequate acknowledgement of its role and

credibility;

• Create the conditions so that the Mozambique Stock Exchange can

reinforce its position in the midst of the financial market;


• Installing the necessary means of diverse nature to function and

maintain at a high technical standards;

• Incite broad general knowledge of the market, so that there is high

level of professionalism from all participants.

• Establish favourable structural and operational conditions for

interaction with the global market.

• Agree upon the joint measures to be taken for the internal

organization of the institution the vision of internal efficiency and

the level of services rendered.


The Stock Exchange Dealers

BPI Dealer - Soc. Fin. de Corretagem Av. Julius Nyerere , nº 210 CP 1016 Maputo Telefone: +258 21 494009 / +258 21 491170 Fax: +258 21 493412 E-mail: [email protected] Contacto: Dra Isabel Mansour Andrade Augusto Mulenza Rui Jorge Cardoso

Standard Bank Praça 25 de Junho, nº 1 CP 2086 / 1119 Maputo Telefone: +258 21 352500 / +258 21 352566 Fax: +258 21 352563 Contacto: Dra. Cláudia Conceição Dr. Fernando de Oliveira

Barclays Bank Moçambique Av. 25 de Setembro, nº 1184 Maputo Telefone: +258 21 313453 / +258 21 303037 / +258 21 314647 Fax: +258 21 313454 E-mail: [email protected] joaquinal@barclays .co.mz Contacto: Werner Pauw Joaquina Litsure

Banco Comercial de Investimento Av. 25 de Setembro, prédio John Orr’s, 1645 CP 4765 Maputo Telefone: +258 21 353722 / +258 21 353723 / +258 21 309832 Fax: +258 21 311613 / +258 21 307152 E-mail: [email protected] [email protected] Contacto: Manuel Soares Acácio Mondlane

Millennium bim Av. 25 de Setembro, 1800, 16º Piso CP 2657 Maputo Telefone: +258 21 351551 Fax: +258 21 354393/4 E-mail: [email protected] Contacto: António Silva Pinheiro

Cooperativa de Poupança e Crédito Av. 25 de Setembro nº 1695 – 3º andar Maputo Telefone: +258 21 307753 Fax: +258 21 307754 E-mail: [email protected] Contactos: José Vaz Pele Fernandes Rosa Mertina Telma Augusto Guambe Sandra Cristina Mendes Lopes Amina Jamal

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