The Zimbabwe Stock is growing in 2021, continuing growth that carried over from 2019 and 2020. The growth is largely attributed to the growth experienced in small-cap companies listed on the ZSE. What are small-cap stocks? While I have an answer my research has left me with more questions than answers. None the less the small caps have performed very well for ZSE investors.

Small caps

According to the ZSE Training website, a small-cap company has a market capitalisation below ZW$2 billion. This presents some problems which we shall dive into a little bit later. Small-cap counters are all counters with small market capitalisation figures. As an index (you can read more about indices here) the year to date return on the small-cap index is 288.46% at the time of writing. If you look at the table below you can see that it has far outpaced other indices, more than doubling the return on the closest follower, the medium cap index of 106.70%.

Source: Morgan and Co Price Sheet O7 May 2021

To illustrate the contribution of the small-cap index to the growth the ZSE has experienced particularly in the first quarter of 2021 you can look at the image below.

To drive the case home let’s have a look at the top 10 performing counters on the ZSE in 2021 thus far. As of Friday 7th May, The top 10 counters in terms of returns were as per the image below;

Source: Morgan and Co Market Intelligence Report 07 May 2021

Of the top 10 performing counters, Unifreight, National Tyre Services (NTS), Getbucks, Truworths, General beltings Holdings (GBH) and Fidelity are small-cap counters. Unifrieght being the king of the bunch with what can only be described as astronomical returns and NTS providing good value to investors. There is a case to be made for Willdale being a small-cap counter and we should probably talk about the divisive issue of the composition of the small caps.


The ZSE reclassifies counters and indices quarterly. We will work on the classification as of the first quarter of 2021. This classification names 11 actively traded companies as small-cap counters (Edgars, Fidelity, GBH, Getbucks, Medtech, NTS, Truworths, Turnall, Unifreight, ZECO holdings and Zimpapers) and 4 others (Border Timbers, CFI Holdings, Hwange Colliery Company and  COTTCO) which are not publicly traded. When the ZSE originally announced the new Indices systems in January 2020 the small-cap index contained the bottom 20 of the then 61 listed companies. The trouble comes in that there are 4 companies (African Sun, CAFCA, Willdale and Zimplow) which on the date of reclassification had market capitalisation below the ZW$2billion threshold. So I naturally assumed that the classification anomaly occurred to accommodate the indices as set out in January 2020 where the medium cap companies would constitute companies that ranked numbers 11-40 and the remainder would be the small-cap but all 6 companies identified above have a market capitalisation that is lower than NTS. All this to say there is some confusion in the classification and a bit of clarity would help those interested.

Rise of the retail investor

As you might have surmised by now small-cap counters are small because of a low share price, a small number of outstanding shares or both.  Of the counters currently classified as small-cap shares, only Fidelity had a price above ZW$1 at the beginning of the year. As more people are attracted to the ZSE there is naturally a learning curve involved with ZSE participation. With many people being attracted based on being able to invest from as little as ZW$500 small-cap counters have received a lot of attention. Both direct access platforms in the market. ZSE Direct and Ctrade mandate that transactions must be done in lot sizes of 100 and multiples of so your ZW$500 can buy at least 100 shares of a company valued at ZW$5 per share (excluding fees). The focus of new entrants will undoubtedly be on companies with lower prices. Behavioural finance tells us that once these investors have experienced the growth in their money that comes from the increased interest in these companies (you would likely have to offer a higher price to buy shares someone is holding) they will come back with more money and invest more in the same counters and this is how we find ourselves where we are at. It is not just behavioural finance at play, many companies have grown in value for fundamental business reasons.

The big question here of course is whether the growth trajectory of the small caps will continue as it has so far. The relative economic stability helps but it also signals a probable slow down in share price growth. Time will indeed tell but until then the small-cap index represents a great opportunity for investors.