Swaziland's stock exchange waits for bulls - or bears

The government hopes the exchange, opened Sept. 1, will boost the economy.

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On the edge of town in a small, unimpressive conference room with two dry-erase boards on otherwise bare walls is the great hope of the country's struggling economy. This is the trading floor of Swaziland's new stock exchange.

With two licensed brokers, five listed companies, and just four stock purchases since its opening on Sept. 1, this is Africa's newest and smallest exchange.

In this tiny mountainous kingdom where most of the 1 million residents eke out a living as subsistence farmers, a stock exchange may seem like an unnecessary folly. After all, if only 15,000 households in the entire country can afford a television, who will buy stocks?

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Swazi government officials, however, see things differently. They call the exchange the engine of Swaziland's future. It will not only boost this landlocked country's economy, they say, but also transform it.

Thus far, such an impact is purely wishful thinking. At 3 p.m. each working day, the two brokers and two exchange employees gather around the pine conference table to buy and sell. The sessions last less than five minutes.

"We usually end up talking about the weather," says Sipho Dlamini, one of the two exchange employees.

Historically, Swaziland has been an economic colony of South Africa, which surrounds it on three sides. For decades, Swazi men have labored in coal and gold mines there. Thousands still do, sending their meager earnings home to their wives and children.

Meanwhile, moneyed white South Africans made the reverse trek, buying huge swaths of Swazi land and establishing successful businesses. Of the five largest employers in Swaziland today, four are South African-owned. The other is American.

The new Swazi exchange, says Kokuthula Dlamini (no relation to Sipho), a Swaziland Finance Department official, will help reverse this trend by providing capital to Swazi-based businesses.

"If we can develop Swazi-owned businesses," says Michael Matimela, one of the two brokers, "that will stabilize our local businesses and strengthen our economy."

Because the average per capita income of $1,300 doesn't leave much room for investment, the government is trying to jumpstart the market by offering incentives to Swazi investors. Any income derived from the stock exchange will be tax exempt. In addition, Parliament is considering a bill that would require local pension funds to invest 15 percent of their assets in the new exchange. They now universally send assets over the border to Africa's largest stock market, in Johannesburg, South Africa.

"The government is concerned about retaining Swazi assets in the country," says Kokuthula Dlamini, the finance official.

The funds involved are not insubstantial. The government estimates that Swazis have about 1.7 billion emalangeni ($250 million) invested - through pension funds and other institutional instruments, in foreign stock exchanges - about one-quarter of this nation's annual gross domestic product.

"That money isn't working for Swaziland," says Sipho Dlamini, the stock market employee. "That is Swazi money building the South African economy."

The government plans a public-education campaign to encourage its citizens to invest in the new exchange. For now, Swazis still buy cattle - the traditional sign of wealth in this culture - with their savings.

"People just need a little bit of encouragement," says Mr. Matimela. "We need to sell the exchange."

At the moment, that is difficult. Parliament has yet to pass securities laws to govern the stock market and the behavior of stockbrokers.

"Once the regulations are put in place," adds Matimela, "I think we'll see some growth."

The New York Stock Exchange had equally humble beginnings. It started in 1792 when 24 merchants agreed to trade securities under a buttonwood tree on Wall Street. Now more than 3,000 companies are listed on the exchange, and almost 1 billion shares are traded each day.

The Swazi stockbrokers are still trying to iron out the kinks in their trading system. The first trade they completed, placed by a local journalist testing the system, took three days to complete. Everything is done manually. Stock certificates are hand delivered from seller to buyer. Stock prices are noted in black ink on the trading floor's white boards.

"There is a lot of money to be made in the Swaziland stock exchange," says Sipho Dlamini, "in the long term."

(c) Copyright 2000. The Christian Science Publishing Society

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