Former President Ali Hassan Mwinyi rings a bell to officiate at the
first trading day of Swala Oil & Gas Tanzania on the Dar es Salaam
Stock Exchange (DSE) mid 2014. With him is Swala CEO David Mestres Ridge
(left) and Swala Chairman Ernest Massawe (right). Inset is Uchumi
Supermarket CEO Jonathan Ciano whose firm was cross-listed on the DSE in
August 2014. PHOTOS | FILE
By Alawi Masare,BusinessWeek Reporter
In Summary
- FINANCE: The total market capitalisation grew by 40 per cent to Sh22 trillion in 2014, according to DSE chief executive officer Moremi Marwa
- Capital markets are financial markets for the buying and selling of long-term debt or equity-backed securities. These markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments. Financial regulators oversee the capital markets in their jurisdictions to protect investors against fraud, among other duties. Modern capital markets are almost invariably hosted on computer-based electronic trading systems.
Dar es Salaam. When the capital markets started in Tanzania, the rules capped foreign ownership of the local listed companies at 60 per cent.
It was a deliberate move to protect native investors considering that the concept of capital markets was at its infant stage.
As Raphael Masumbuko, chief executive officer of
Zan Securities, recalls a counter, which reached the limit, remained
untraded for whatever period provided there was no local demand for its
shares.
However, that is a thing of the past, thanks to liberalization of the capital account effected in September 2014.
Opening of the capital account is one of the big issues in 2014 that Mr Masumbuko cannot forget.
“The liberalisation is one of the best
achievements in the local capital markets that improved liquidity and
pushed up prices of some shares on increased demand. There is a big
improvement in the turnover, market capitalisation and even the
indices,” he says.
The total market capitalization, which measures
the total wealth of the stock exchange and how the stock market performs
within the economy, grew by 40 per cent to Sh22 trillion between
January and December, according to DSE chief executive officer Moremi
Marwa.
Market capitalisation also measures how the stock
market contributes into the economic growth and in wealth generation to
those investing in listed companies.
The total market capitalisation accounts for 43
per cent of the country’s GDP (before the October 2014 GDP rebasing)
compared to the levels of 30 per cent in January 2014, says Mr Marwa.
“Our market is now efficient in terms of pricing
and valuations. That is to say, there is now a positive argument for
savvy and sophisticated entrepreneurs to consider DSE as both an exit
mechanism and a capital raising platform,” he says.
The DSE liquidity increased significantly during
the year from the previous average turnover of Sh50 billion per annum to
an average of Sh300 billion this year. Relative to the GDP, the
domestic liquidity ratio was at six per cent (compared to the ratio of
less than two per cent previously).
The regulators – both the Capital Markets and
Securities Authority (CMSA); and the Bank of Tanzania (BoT) amended
their regulations to allow foreigners buy as much shares as they can
while the government securities are reserved for the East African
investors and limited at 40 per cent for non-Tanzanians.
A central bank official was recently quoted by the media as
saying that plans are underway to remove all foreign restrictions in
2015.
Other development
The Dar es Salaam Stock Exchange (DSE) which
launched last year the new alternative listing window for small and
medium-sized firms also saw Swala Oil and Gas Tanzania Ltd joining it in
August this year.
Swala was the second company on the Enterprise Growth Market (EGM) segment after Maendeleo Bank which was listed last year.
Mkombozi Commercial Bank became the third to list
on the EGM on Monday this week after a successful initial public
offering (IPO).
Mwanza Community Bank also launched its IPO toward the end of 2013 but it is yet to list pending approval from CMSA.
“Swala is the first in the oil and gas industry to
go public. I also count it as an achievement in the development of the
local capital markets,” says Mr Masumbuko.
Both the Electronic and Postal Communication Act
and the Mining Act of 2010 have provisions that require the telecoms and
mining companies to list in the local stock exchange. But there seems
to be no political will to implement the legislative pieces that were
passed and signed amid lots of expectations from Tanzanians.
“Despite these achievements, encouraging the
government to implement laws and policies meant to increase the vibrancy
and growth, our local capital market is still a key challenge.
Encouraging the private sector to consider DSE as a potential long term
capital raising platform is also still a challenge – cultural business
practices related to transparency and good governance require some time
to change. However, we believe that with constant awareness creation and
public education, this will change,” says Mr Marwa.
DSE has been able to migrate into a new Automated Trading System (ATS) and Central Securities Depository (CSD) systems.
The new system is far more operational and cost
efficient and is highly scalable to accommodate new capital market
products and services such as close ended collective investment schemes,
Exchange Traded Funds, Real Estate Investment Trusts, Financial
Derivatives, etc.
DSE enhances its efforts for public awareness and
public education to inform the business community, existing and
potential investors, the government (its agents and local governments)
and policy makers on the role of stock market to facilitate financing of
business enterprises and government programmes.
The target is to list at least five companies in 2015.
“We will continue to engage with Municipals and
Local governments in potential of raising public funds and listing
Municipal Bonds in the Exchange,” says Mr Marwa.
DSE also says will make the necessary preparations
for potential listing of closed-ended collective investment funds,
especially REITS and ETFs.
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