Namibia has experienced a surge in companies delisting from its stock exchange as the wider macroeconomic environment remains dire forcing firms to pursue other capital raising options, a research firm has said.
According to PSG Wealth Management Namibia, like many countries around the world, Namibia has experienced delistings from the bourse due to economic challenges, negative business sentiment, and currency volatility.
“Factors such as the impact of Covid-19, economic contraction, share price volatility, and poor growth prospects have compelled companies in Namibia to consider delisting. One of the primary reasons for delistings in Namibia is the insufficient financial visibility and limited research coverage, particularly for smaller companies,” the firm presented at a recent conference hosted by Capricorn.
The report highlighted that these companies struggle to attract investor interest and market liquidity, making it challenging to sustain their presence on the stock exchange.
The firms then consider delisting as a strategic decision to alleviate financial burdens.
The compliance costs and regulatory burden associated with listing and maintaining a presence on the stock exchange are other significant factors, according to PSG.
“Companies face expenses related to regulatory requirements, financial audits, transaction costs, auditing charges, listing fees, and the cost of compliance requirements. These high costs have led many small and medium-cap companies to opt for the private equity market instead.”
Furthermore, undervaluation and share price decline have also played a role in the delistings as previously listed companies in Namibia have experienced significant drops in share prices, raising concerns about undervaluation.
PSG raises that these concerns have prompted companies to delist from the stock exchange to explore alternative avenues.
Amid these challenges, PSG says NSX has taken steps to adapt and address the issues at hand.
“The NSX plans to adopt the global trend of demutualization once legislation provides the necessary framework. In the meantime, the updating of rules and listing requirements has been put on hold.”
However, PSG highlights that the NSX has implemented a best practice approach using the powers granted by the existing listing requirements.
“Corporate governance and reporting have undergone significant changes in Namibia over the past decade. Compliance with corporate governance standards and environmental, social, and governance (ESG) considerations have become important factors for investors.”
This comes as Namibian listed companies are required to adhere to the NamCode or King IV, reflecting the emphasis on sound governance practices and the NSX has also focused on attracting new listings to strengthen its position.
Meanwhile, competition between exchanges has grown, with South Africa witnessing the emergence of new exchanges.
As a result, PSG said the NSX has applied to become a full member of the World Federation of Exchanges, aiming to enhance its international profile.
“The approval processes for dual-listed companies have been streamlined, and the NSX has made efforts to make the application and engagement processes more user-friendly to attract new listings.”
PSG further said as the landscape of the stock exchange evolves, Namibia’s NSX is adapting to the changing dynamics.
“With plans for demutualisation, a focus on corporate governance and reporting, and initiatives to attract new listings, the NSX aims to navigate the challenges and position itself as a resilient and attractive investment destination,” the advisory firm said.
