Legal Aspects of Securities Exchange Listing—The Case of African Securities Exchanges, and the Alternative Investment Market

Most of Africa’s securities exchanges were established in the late 1980s, and 1990s. Since their establishment, the major source of listings for most of these exchanges has been the privatization of state-owned enterprises (SOEs). The second, albeit unreliable, source of listings for African securities exchanges are the domestic enterprises. However, over the years, the privatized entities have performed so poorly that they could not proceed to list on the domestic securities exchanges. To compound the failure of privatization, domestic enterprises, most of which are family businesses, are reluctant to list on domestic securities exchanges because they think they might lose control of the enterprise if they were subjected to public ownership and disclosure. These two factors have stalled the growth of listings on most African securities exchanges. The central argument of this article is that a competitive and vibrant Alternative Investment Market (AIM) could serve as a steady source of listings for the Main List (the main Securities Market). The corollary argument is that the participation of domestic Micro, Small, and Medium scale Enterprises (MSMEs), which together hold the preponderant portion of domestic capital, in the AIM could be promoted by the development of less stringent listing rules which facilitate the listing of MSMEs, and the enactment of effective regulatory rules which facilitate the active participation of domestic and foreign Venture Capital Funds (VCFs) on domestic securities exchanges. Taking the doctrine approach to examining the effectiveness of regulatory rules and institutions, this article examines the Zambian regulatory and institutional framework which governs the listing of entities on domestic securities exchanges so as to establish whether or not the said framework provides adequate incentives for the participation of MSMEs in the AIM. The main findings of the study were that (a) the law and policy does not allow other entities than companies to list on domestic securities exchanges (b) the Lusaka Securities Exchange rules allow other entities than companies to list on the exchange (c) although the law and policy permits the participation of domestic and venture capital on domestic securities exchanges, foreign VCFs are not so permitted.