ZAMBIA
Using her case study of the 9-year-old Lusaka Stock Exchange (LuSE) in Zambia, she concludes that it, "appears to be making little if any contribution to the Zambian economy." Her research suggests that the LuSE's failure to foster economic development in Zambia is, "mainly a function of the overall weak economic environment and less of the legal and technical constraints on the exchange."

Given such constraints as low savings ratios, the availability of better and safer returns from other investment vehicles and the very limited range of listed companies, Marone says "the creation of national or regional stock markets in eastern and southern Africa may still be a premature project."

Marone's study shows that market capitalization on the LuSE peaked in 1997 at US$ 705 million, falling to only US$ 248 million at the end of 2001. "Almost all" trading activity takes the form of "forced trading" whereby in terms of the Securities and Exchange Commission rules, dealers must trade in public companies via the stock exchange.

In 2001 dealings in just two shares - Zambia Sugar and Chilanga Cement - accounted for over 99 per cent of all the shares traded during the entire year. Only 12 per cent of the market capitalization represents "free float" shares that are available to investors - the balance being tightly held by parent companies in South Africa or the UK.

Clearly this is not what stock market protagonists including the World Bank's private sector investment arm, the International Finance Corp, want to hear. They will take some encouragement from the recent announcement of two new listings on the Lusaka market - one by a local agribusiness company, Zambeef Products and the second by one of South Africa's leading retail chains, Shoprite, which is also listed in Johannesburg and Namibia.

ZIMBABWE

Perhaps the best illustration of the yawning chasm between the real economy and the stock market is the Zimbabwe Stock Exchange. In the year to May 2003,

IMF optimism is based on "continued policy strenghtening the global recovery and highnon-fuel commodity prices."

when real GDP is estimated to have fallen some 12 per cent, the ZSE's industrial index trebled from 60,000 points to 187,000. But even this failed to keep pace with inflation, with consumer prices estimated to have risen 250 per cent in the 12 months to May. In real (Zimbabwe dollar) terms, investors were 5 per cent behind the game. In real money, the situation is far worse. In February, the Zimbabwe authorities finally bit the bullet, devaluing the local dollar by 93 per cent against the US unit, taking the exchange rate to Z$ 800 to the US dollar from Z$ 55 previously. So while the ZSE's market capitalization was up 270 per cent over the year in local currency, when adjusted for devaluation, it is down by three-quarters.

By the end of 2003, GDP will be some 40 per cent below its 1998 peak. Inflation forecasts vary from 350 per cent at the low end to 500 per cent at the top. One bank calculates that should inflation end the year at between 350 and 450 per cent, the Zimbabwe dollar will have to be devalued by a factor of three to around Z$ 2400 to the US unit. None of this is good for equities, but as hyper