caleb m fundanga : developing zambia ’ s stock exchange remarks by dr caleb m fundanga, governor of the bank of zambia, at the official launch of the bancabc central african stock exchange handbook, lusaka, 26 july 2011. * * * the chief executive officer of abc holdings - mr douglas munatsi the managing director of bancabc zambia limited - mr dana botha the managing director of lusaka stock exchange - mrs beatrice nkanza management and staff of bancabc chief executive officers and representatives of various institutions present ; distinguished invited guests ; members of the press ; ladies and gentlemen. let me begin by thanking the management of bancabc for inviting me to this occasion, which marks the official launch of the “ central african stock exchange ( case ) handbook ”. i also wish to thank the managing director of bancabc, mr dana botha, for sending me a copy of the case handbook. the handbook provides a snapshot of various company financial results, share price performance and volumes traded in 2010. the handbook also highlights basic information on investment and borrowing options, which will not only assist investors diversify their portfolios but also assist in reducing transaction costs in our stock market. ladies and gentlemen, the stock market is an important avenue for harnessing resources for the financing of development in our country. stock markets enable firms to acquire the much needed capital at relatively lower cost, hence facilitating capital allocation, investment and growth. the stock market also plays a resource mobilisation role by encouraging savings through the purchase of equities that meet investors risk preferences and liquidity needs. the provision of information on the stock market and its activity such as contained in the case handbook is therefore one way of promoting investor awareness and participation on our local market. this will no doubt enhance the development of the stock exchange and its contribution to our economy. chairperson, as you may be aware, the government of the republic of zambia has been implementing a comprehensive financial sector development plan ( fsdp ) since 2004, whose main objective is to broaden and deepen the financial sector in zambia. under the fsdp, the need for a well - developed capital market as an engine for economic development is emphasised as it among other things would enable investors have access to a wide range of investment options. it is for this reason that the bank of zambia together with stakeholders introduced a number of initiatives aimed at further developing the capital market. this includes the introduction of long term government bonds, which among other

recorded by enterprises during the year. the overall reduction in foreign investment inflows is also consistent with global developments. in fact, at a global level, foreign direct investment inflows drastically declined to us $ 1, 114. 2 billion in 2009 from us $ 1, 770. 9 billion in 2008 and us $ 2, 100. 0 billion in 2007. nonetheless, new equity investment inflows in zambia surged to us $ 419. 2 million in 2009 from us $ 131. 6 million recorded in 2007. the substantial increase in new equity investments, despite the effects of the global financial and economic crisis, demonstrates how favourable the zambian investment climate is in attracting foreign investment. bis central bankers ’ speeches distinguished guests, it is also encouraging to note that the government ’ s diversification efforts are yielding favourable results. the survey findings show that the concentration of foreign direct investment in the mining sector is reducing as evidenced by the substantial fdi inflows to other sectors such as manufacturing, wholesale and retail trade, and the tourism sector in 2009. evidence from south east asia and the recent global financial and economic crises show that high volatility in foreign private capital if not properly monitored and managed, can induce financial and macro - economic instability. in light of this the results of the foreign private investment and investor perception survey are important and intended to assist the government to effectively monitor and manage these flows. in addition, better information on investor perceptions will assist government in designing policies and programmes that will help enhance zambia ’ s favourable investment climate. further, the results of the survey should prove useful to the private sector and other stakeholders as they highlight some concerns which government should address as well as the overall business profitability and performance prospects of various sectors. the importance of timely and reliable information on capital flows in the design of appropriate policy responses by government and thus enhancing macroeconomic stability can hardly be overemphasised. adequate and consistent information on capital flows will also greatly improve balance of payments statistics for zambia and serve as an early warning system for government on potential financial crises and other external shocks. mr. chairman, zambia has adequate technical capacity to collect, analyse and disseminate data and information on foreign private investment. it has, however, lagged behind in terms of the frequency of these surveys compared with some other countries in the region. for instance, while we are now at the third phase of the survey, uganda, tanzania and malawi are in their eighth, fifth and fourth phases, respectively