Understated Zambia is quietly putting together one of the world’s most impressive records of economic growth. The Southern Arican nation’s GDP has grown in excess of 5.3% every year since 2003, and the IMF forecasts its economy will expand by 7.7% this year thanks to strong demand for its primary export — copper.
So, how can global investors participate in this intriguing market?
Here’s a quick guide to opening a Zambian trading account and buying your first shares.
I emailed each of the six brokers who are licensed to trade on the Lusaka Stock Exchange. I asked them if they catered to foreign investors, how much they required to open an account, and what documentation was necessary. I found the two brokers listed below to be particularly helpful and responsive.
|Broker||Minimum Initial Deposit||Account Opening Form||Research Sample|
|African Alliance Zambia||No minimum required||Not Available Online||Not Available Online|
|Stockbrokers Zambia||ZMK256,000 (roughly $50.00)||Here||Not Available Online|
Commissions and fees amount to 1.375% of the total transaction value. This rate is standard across all brokers.
Opening a Zambian Brokerage Account
Now let’s walk through the process of opening an account with a Zambian stockbroker and buying your first shares.
Step 1: Complete the Broker’s Account Opening Form
After emailing a broker and requesting information on how to open an account, they will send you a blank account opening form. A sample form from Stockbrokers Zambia may be found in the above table. The form typically requires disclosure of your passport number or other ID number and your address.
If you would like to have dividends deposited directly into your trading account (and I recommend that you do), you should inform your broker of this at this time.
Step 2: Collect a Photocopy of Your Passport.
If you don’t have a valid passport, a copy of your driver’s license may suffice.
Step 3. Mail the Original Account Opening Form and Photocopy of Your Passport to Your Broker
You may email photocopies of all documents to your broker to get a head start on the account opening process, but they must eventually receive the original documentation. I recommend using a courier for this. It’s pricey but could save you a lot of grief in the event that the post office loses track of your documents.
Step 4. Wire Funds to Your Brokerage Account
After opening your trading account, your broker will provide you with its bank details so that you can fund your account. The most efficient way to do this is via wire transfer. If you haven’t sent an international wire before, I suggest that you take your broker’s bank details to your local bank branch and ask them to walk you through the process. They’ll make sure that your funds arrive securely. Note that most US banks charge about $25 for outgoing international wires.
Step 5. Submit a Trade Order
You’ve done your research and found a stock that you’d like to buy. What now?
All that needs be done is to submit a written trade instruction. Some brokers may have a special trade mandate form to complete, but, for others, a simple email may suffice.
Keep in mind that many shares listed on the Lusaka Stock Exchange are rather illiquid, so I advise specifying a limit price for all of your orders. This will help you avoid paying significantly more for your shares than you had intended to pay.
Your broker will then execute your trade and send you a contract note that specifies the buy or sell price, commissions, and fees. Settlement of share trades takes up to three business days after the trade date in Zambia, so if you’ve sold shares, don’t expect to receive the proceeds of a sale before then unless you’re willing to incur a penalty to settle the trade more quickly.
Follow these steps and you’re all set to begin investing in Zambian stocks. That wasn’t too bad, was it?
The process of opening a foreign brokerage account can be confusing. If you found this walk-thru to be clear as mud, please don’t be shy. Post your questions in the comments, and I’ll do my best to get answers for them.