ESCROW Systems (Pty) Ltd, developers of the C-Trade application which allows people to trade shares over the mobile phone, designed a similar product for the Eswatini Stock Exchange's (ESE), which went live last month. The company is in the process of setting up more platforms for three bourses in southern, eastern and northern Africa.
Standardbusiness reporter Tatira Zwinoira (TZ) sat down with managing director Simbarashe Machanzi (SM) to find out more about the company's Africa growth plan. Below are excerpts from the interview.
TZ: How do you think working with the Eswatini Stock Exchange in Eswatini (formerly Swaziland) will help you guys provide similar services in other African countries?
SM: Thank you. As you know, the capital market is a vast field with as many as five different players. There are transfer secretaries, custodians, brokers, the exchanges, and the depository. All these need systems and as Escrow Systems, we have deployed in more than nine countries servicing one or the other of these various players.
So, we are saying now this provision in Eswatini is a culmination of the bits and pieces we have been installing in other countries. We are saying Escrow can now give you a one-stop shop that can automate the whole market, so we are thinking that this initiative will open more avenues now to roll out a complete solution to the rest of Africa.
SB: Are you seeking to expand the concept of C-Trade to the rest of Africa, because we do realise there is a high level of financial exclusion?
SM: Yes. Ever since our engagement in the Kenyan market, where they issued the retail mobile bond, retail in the sense they are trying to harness the unbanked low-income earners, we saw the vast opportunity in Africa for us to expand the same concept.
So, we came to Zimbabwe and offered that solution, but on an enhanced platform because in Kenya it is only on Unstructured Supplementary Service Data (USSD) whereas in Zimbabwe we said let us role it out on USSD, mobile application and online. Then, we improved it further in Eswatini, so we are seeing that opportunity and already have prospects in other countries.
Currently, we are talking to three other countries.
TZ: Which are these?
SM: I am not at liberty to disclose yet because we are in the preliminary stages. We have got one in southern Africa, then in eastern Africa we have got another one and in northern Africa there is one.
TZ: Can you give us an update on C-Trade? How many subscribers or people are making use of the platform and which shares are being bought on the C-Trade platform? SM: With C-Trade, we started by saying we need to conscientise people who would otherwise not know about the capital markets and simplify the barriers of entry so that it is easier for someone to enter the capital markets.
So, our target market has been really retail clients. So I would say in terms of the retail clients, before C-Trade there were a few who were participating on the stock market. Afterwards, C-Trade came on board and we have so far been able to register 13 000 retail active accounts from a negligible amount within the six to eight months we have been operating.
This is almost double those that were operating in the capital markets before C-Trade.
TZ: Which counters are attracting the most traffic on the C-Trade platform, if you could give me the top three or five companies?
SM: Thank you. We saw an influx of orders and transactions when Cassava was listed. That was huge activity that we saw. Also, the blue chip companies, people are interested in these companies like Old Mutual, Econet and Delta - people are buying and selling in there.
TZ: In other words, you mean the companies that the large investors go for?
SM: Yes, because of the availability of market data on those companies. Those companies obviously make noise about themselves and naturally that would attract people to invest in them. But, we have also seen an interesting phenomenon on the platform where the low running counters were getting some activity as people speculated. You would see someone buying huge shares in companies such as Medtech. So people were doing that as a speculative measure to say that if we invest more on a low running security, buy and buy, my investment will attract other people to come in and counter the orders and that grows that base for that company. We have seen various behaviours from investors.
TZ: So, how much has been traded or moved in the eight months on C-Trade?
SM: Okay. These are average values we are talking about. In our lowest month, we were able to push around US$300 000 worth of securities per month. In December, it was higher because people had more disposable income, so we were able to do around US$600 000.
In total, C-Trade has done plus or minus US$4 million to US$5 million worth of trades since inception.
TZ: Now that you are expanding into other markets where there are regulatory aspects in those different markets, how are you going to navigate around them?
SM: Our philosophy for C-Trade is simple. We do not introduce new funds or new money into the capital market. We use money that is already in circulation, so we expect the participants in the markets to have already been under know-your-customer (KYC - the process of a business verifying the identity of its clients and assessing potential risks of illegal intentions for the business relationship).
So, we are saying the customer is depositing money into the capital markets from a regulated entity, which is a bank or mobile wallet and who have done their rigorous checks on their clients. As such, what we are just pushing is that they (regulators) change their laws and legislation so that the capital markets can depend on third parties for KYC for customer details.