At the launch of Financial Insight Zambia, the founder of the firm, aptly known as TFHZPC made a bold announcement that his firm would be making an investment of 2000 British pounds (ZMW 23k) through an angel investor who has shown confidence in the work his team is doing.
According to their website Luse.co.zm, Lusaka Securities Exchange Plc. (LuSE) was established in 1993 through the collaborative efforts of the International Finance Corporation (IFC) and the World Bank. These two organizations provided the technical support during establishment of the LuSE. Their website further states that the establishment of the Lusaka Securities Exchange Plc. was part of government’s broader economic reforms aimed at stimulating a dynamic private sector to be the primary engine for economic growth in Zambia.
With the background of LuSE out of the way, we shall be exploring the details of what it currently takes to make an investment on LuSE. LuSE provide a three step approach to making the investment which includes: Opening a Brokerage Account, Buying Shares and Monitoring the Investment.
Over the next couple of weeks TFHZPC will be sharing its journey of what it is like and what it takes when it comes to making an investment. But first, we encourage everyone who makes the decision to look at the long game. By this, we mean that companies are going concerns. Therefore,forget making an investment in the hope that you will get a quick dividend and the story ends. There are management teams at the companies you invest in that are working tireless to continuous create value. Therefore, the long game is the best approach.
To start with, we introduce a prequel to the investment story. We shall call this the TFHZPC investment cycle. In our inaugural blog on the matter we shall cover the first few steps so that we can demystify a couple of issues that are often raised by possible investors. We want you to walk with us during this process.
The prequel involves understanding the industry the company you are targeting is in. Ask the question: has the management team of this company answer the question “What Business are they in?” Once the industry is established, have a feel of what type of margins this industry generates. Now this is the tricky one. Many often base their decisions on gut feel but this is why LuSE has listed companies on its website that offer advisory services and they are all certified by the Securities and Exchange Commission.
For project Ekaris, we chose Stock Brokers Zambia. You may have heard of them on the radio as they often run programs. Their management team assigned us a lovely young lady who has an impressive business acumen indicative of SBZ making investments in its human resources. This inspires confidence for the first time investor. Her job was simple. TFHZPC has a list of companies (we shall not share the portfolio because we do not have an advisory license) and it was her job to give us advice in terms of what PEST (Political, Economic, Social, Technology) analysis was signaling to her. This is important. When they give you cautionary note that shares may rise of fall, they partially base it on this because these factors affect a company’s ability to create value and can either boost or reduce a company’s earnings.
Once the brokers advice is given, there are mundane tasks such as filling in a form (we created the account as a company because we are going concern. We are proud of that)which takes about 5 minutes. Hereafter there is a the matter of ensuring you have all your official documents such as National Registration Card (NRC)certified copy, Proof of residence certified copy and in our case, we needed a commissioner of oaths to certify the documents however, we went with the alternative and that was using a law firm to give us a letter (we are unable to mention the firm because lawyers in Zambia are not allowed to advertise. OMG!). Now at this stage, we were advised by the astute broker that we could actually email her the copies once we had compiled all the forms. This makes the process so much easier as being in the digital age,things can move quickly.
Once our forms were submitted, the broker sent us details of the stock we were keen on and its current availability. We were further advised on what would happen in the event that shares were not available on the market.Afterwards we proceeded to transfer the funds into the brokers account and 48 hours later the account was up and running.
Folks that’s what it took for us to get our account going.We are now official. However the saga continues in our next blog where things become even more interesting. Stay tuned.