Spread business portfolios as cushion in times of economic distress, SEC

0 Views The Securities and Exchange Commission of Zambia is urging Zambian businesses to embrace diversification as a core strategy for managing risk and building more resilient companies. According to the SEC, diversification is about spreading investments across different assets, sectors, or companies, instead of putting all resources into one area. The regulator says this […]

0 Views

The Securities and Exchange Commission of Zambia is urging Zambian businesses to embrace diversification as a core strategy for managing risk and building more resilient companies.

According to the SEC, diversification is about spreading investments across different assets, sectors, or companies, instead of putting all resources into one area.

The regulator says this approach helps reduce the impact that a poor-performing investment can have on an overall portfolio or business.

“Diversification means spreading your investments across different types of assets, sectors, or companies,” the SEC explained. “This can help reduce the impact of a poor-performing investment on your overall portfolio.”

The call comes at a time when many Zambian businesses are navigating a changing economic environment marked by currency movements, inflation pressures, and shifting consumer demand.

The SEC argues that relying on a single product line, one sector, or one company exposes firms to outsized risk if that area underperforms.

The commission gave a straightforward example to illustrate the point. Instead of investing all available capital in shares of one company, a business could spread its money across shares, bonds, and other investment instruments.

By doing so, losses in one asset class can potentially be offset by gains in another, making the overall position more stable.

For businesses, the principle works in much the same way. A company that depends entirely on retail sales of mobile phones, for instance, could be heavily affected if demand drops or supply chains are disrupted.

But a business that also holds interests in agriculture, financial services, or manufacturing may be better positioned to weather shocks in any one area.

The SEC’s message is aimed at both established companies and smaller enterprises that are looking to grow. The regulator notes that diversification is not about chasing every opportunity, but about deliberately allocating resources so that risk is not concentrated in a single place.

Spreading investments across sectors can also open new revenue streams. A firm traditionally focused on trading could explore bonds or other financial instruments. A manufacturer could look at related services. The idea, according to the SEC, is to create balance so that when one part of the business faces challenges, other parts can help sustain operations.

The commission emphasized that the goal is risk reduction. When investments are concentrated, the fortunes of the business rise and fall with that single bet. When they are spread out, the highs and lows tend to smooth out over time.

Zambia’s capital markets have seen renewed activity in 2026, with stronger investor participation and gains across listed equities in banking, agriculture, telecommunications, and manufacturing. In that context, the SEC says diversification gives businesses a practical tool to take part in growth while protecting themselves from volatility.

For many Zambian companies, especially small and medium enterprises, the advice is a reminder to think beyond day-to-day trading and consider how assets are allocated. The SEC suggests reviewing current holdings and asking whether too much exposure sits in one asset, one sector, or one company.

In short, the regulator’s message is simple: do not put all your eggs in one basket. By spreading investments across shares, bonds, and other assets, and across different sectors and companies, businesses can reduce risk and build portfolios that are better able to absorb shocks.

The SEC says diversification will not guarantee returns, but it can help limit losses and create a more stable foundation for long-term growth in an economy that continues to evolve.

On another note, the Securities and Exchange Commission of Zambia is also pushing for small and medium-sized enterprises to look beyond traditional bank loans and tap into the capital markets.

Speaking on the matter, Sitali Mugala, Financial Inclusion and Education Manager at the SEC, says Zambia’s capital markets can provide alternative financing solutions for SMEs.

According to Mugala, expanding access to finance, promoting financial inclusion, and unlocking growth opportunities is key for Zambian businesses.

She explains that for many SMEs, relying only on bank credit has often meant higher costs, stricter requirements, and limited room to scale. The capital markets, she notes, offer another route. Through instruments such as equity and bonds, businesses can raise funds directly from investors while giving more people a chance to participate in ownership and growth.

Mugala adds that financial inclusion sits at the center of this push. When more Zambians and more businesses are able to access and use formal financial products, the wider economy benefits. That includes entrepreneurs who have viable ideas but lack collateral, as well as investors looking for new places to put their money to work.

By opening up capital market options to SMEs, the SEC says the aim is to unlock growth opportunities that have been hard to reach under the current financing model. This could mean more jobs, more investment in productive sectors, and more businesses able to expand without being held back by funding gaps.

The SEC’s position ties into a broader effort to deepen Zambia’s financial system. The commission has been encouraging businesses to consider how they can diversify not just their operations, but also how they raise and manage capital. For SMEs, that means exploring whether issuing shares, raising debt through the market, or other capital market tools could be a fit.

Mugala emphasizes that the goal is not to replace banks, but to add more options. With alternative financing available, businesses have a better chance to manage risk, fund expansion, and build resilience.

The SEC official says that by expanding access and promoting inclusion, Zambia’s capital markets can play a bigger role in supporting the growth of SMEs, which remain a major driver of employment and economic activity across the country.