SADC stockbrokers linking for cross-border investment

Stockbroking firms across Southern Africa are invited for networking on 7 December 2016 to learn more about investment opportunities in neighbouring capital markets. The Committee of SADC Securities Exchanges (CoSSE) aims to implement SADC ideals of close linkages between the region’s capital markets and to support cross-border capital-raising and investments.
First steps are to encourage information flow between the markets and to establish networks so that brokers can route trading to other local exchanges by working with a local broker in the target exchange.


On the agenda for the 1st SADC Brokers’ Network Session will be to facilitate and provide a platform for SADC brokers to meet each other, agree to enter into a SADC database, agree on a standard counter-party agreement which will be used when brokers trade for each other in their respective jurisdictions, and share information about their respective markets.
Every firm is invited to send representatives to meet other broking firms and learn about their activities. After the networking session, brokers will be encouraged to keep each other informed on local opportunities such as initial public offers (IPOs) which brokers in other countries and their clients may be interested in. Brokers will be able to share trading commissions on such deals when two firms are working together.
There are increasing linkages between the financial systems in the region’s capital markets, including the SADC Integrated Regional Electronic Settlement System (SIRESS) which was successfully launched in 2013 and has been growing fast since then.
The networking session will last all day from 8-5 and it will be at the Johannesburg Stock Exchange in Sandton, South Africa. It will be followed by a cocktail. Brokers wishing to attend should contact their national stock exchange.
Other information can be obtained by emailing

New South African stock exchange ZAR X to start 3 October

Trading is to start on South Africa’s new ZAR X securities exchange on 3 October. It gained a licence on 2 September and the first listings will be Senwes and  Senwes Beleggings, with up to 5 listings planned for first week October.

Another exchange is also being readied, 4AX also called 4 Africa Exchange (see story below).

South Africa’s regulator, the Financial Services Board, announced on 2 September that it had granted licences to ZAR X and 4 Africa Exchange Licences. It said: “The Registrar of Securities Services.. received and considered applications for exchange licences from ZARX (Pty) Ltd (“ZAR X”) and 4 Africa Exchange (Pty) Ltd (“4AX”) and has, in terms of section 9(1) of the Act, granted ZAR X and 4AX exchange licences with conditions after careful consideration of objections received as a result of a notice referred to in section 7(4).”

Initially FSB gave ZARX a conditional licence but in August a court ruled in favour of an application by the JSE, which had argued there was no provision for conditional licensing. JSE CEO Nicky Newton-King said at the time there were concerns about the complexity and the potential for systemic risk that multiple exchanges could bring.

ZAR X has a different level of risk as it requires to be pre-funded, which means that participants must lodge scrip and cash before they trade and settlement is then the same day (T+0). In July the JSE and other market participants moved their market from T+5 settlement to T+3 without any problems. Most institutional investors prefer transferring stocks or money after they have traded, when they know the exact amounts to transfer.

Etienne Nel, CEO of ZAR X, said: “We need to create a level of co-operation within the market space to make it as simple as possible for all participants to coexist”.

Speaking to Business Day TV, he said: “..we are very happy, obviously, delighted since it’s been a long time coming. To give you some context around the conditions, it’s obviously what we applied for. We initially said we were not going to be offering derivatives to the market and obviously as a result one of the conditions is we may not offer derivative trades on our market. Similarly, we cannot offer shares already listed on another exchange, but that was never in our application so we are obviously delighted with the licence that we finally got.”

Nel said in September they were busy getting brokers on board and putting investors through necessary screening and checks of the Financial Intelligence Centre Act (38 of 2001 “FICA”)

Nel says ZAR X has less onerous rules on admitting companies for trading (listing requirements): “In our approach to listings.. we will have a conversation with the issuer and we are taking what is called a principles-based approach to listing rather than rules-based. Now what that achieves is if we get the slightest inclination that something is awry within a company we would actually rather walk away rather than doing the listing.. A rules-based environment .. becomes a tick-box exercise and in that environment you would end up with a situation where people end up finding loopholes, which a principles-based approach does not allow for”.

It breaks over 100 years of monopoly Africa by the Johannesburg Stock Exchange, as the JSE was founded in 1887 but there were several stock exchanges around during the first South African gold rush. Speaking after the licence was issued, 4AX CEO Fay Mukaddam said in a press release: “We are delighted to have secured our licence. South Africa is a vibrant, growing market with enormous potential and we are confident that there’s a strong appetite for an additional licensed exchange to further develop and deepen the capital markets in the country.. 4AX can stand as a vehicle for diversity, which in turn, will drive real economic inclusion”. It will be an “empowered exchange” and will aim at retail investors but also attract institutional trading.

Both ZARX and 4AX will use Strate as their central securities depository (CSD).


Etienne Nel, CEO of ZAR X (credit

Etienne Nel, CEO of ZAR X (credit

About 4AX – new South African securities exchange

South Africa’s second new exchange, which also got a licence according to the 2 September announcement by the Financial Services Board (FSB), is 4AX, also known as 4 Africa Exchange. It plans to trade securities that are currently traded over-the-counter (OTC) and to go live early in 2017.

Speaking after the licence was issued, 4AX CEO Fay Mukaddam said in a press release: “We are delighted to have secured our licence. South Africa is a vibrant, growing market with enormous potential and we are confident that there’s a strong appetite for an additional licensed exchange to further develop and deepen the capital markets in the country.. 4AX can stand as a vehicle for diversity, which in turn, will drive real economic inclusion”. It will be an “empowered exchange” and will aim at retail investors but also attract institutional trading.

According to the background on its website: “A unique situation in South Africa has however created the need for 4AX. Previously, a number of South African companies issued shares and facilitated trading in the over-the-counter (OTC) market using unregulated OTC platforms. The current OTC market boasts a combined market capitalisation in excess of R30 billion ($2.2bn).

“As the OTC market expanded, the FSB recognised a need for greater regulation to protect shareholders and ensure a fair, orderly and transparent marketplace for issuers. The FSB determined that all operators of unregulated OTC platforms must cease operating or apply to become licensed exchanges under the Financial Market Act of 2012 (FMA). Board Notice 68 of 2014 reaffirmed the view of the Registrar that operators of exchange infrastructure should be licensed and that a proliferation of exchanges should not be allowed. This has caused significant upheaval in the market, for both issuers as well as shareholders.

“As a result of the regulatory amendments a substantial number of OTC companies are now in breach of the FMA. Faced with significant potential penalties under the FMA these companies have either stopped operating their OTC platforms or applied for extensions from the FSB, whilst searching for an alternative to unregulated OTC platforms. 4AX provide the solution.

Maponya Group has a 15% shareholding, other shareholders listed on its website include Global Environmental Markets Ltd, Capital Market Brokers which is a leading member of the Stock Exchange of Mauritius, independent fiduciary Intercontinental Trust Ltd,  agricultural firm NWK, and investment banking firm Pallidus.

BRVM bourse aims for specialist mining shares platform

The integrated regional stock exchange for West Africa is working with the miners’ favourite global exchange for raising capital in order to build a platform for listing mining shares. Bourse Regionale des Valeurs Mobilieres (BRVM), based in Abidjan, Côte d’Ivoire, aims to have a dedicated section for mining ready for business by 2018.

BRVM General Manager Edoh Kossi Amenounve told Bloomberg in an interview that the new mining exchange will be open for companies exploring or operating mines in the region. He explained that the BRVM is talking with Canada’s Toronto Stock Exchange (TMX Group) to set up a “technical partnership” between the two bourses and will “take inspiration” from the Canadian mining-exchange model. Discussions may be completed by the end of 2016.

He told Bloomberg: “Mining companies operating in the region only raise funds in foreign currencies.. Some of them have approached us to see how they could raise the resources they need in local currency. Some have even asked us for a dual listing with the Toronto stock exchange, but the regulating framework isn’t compatible at the moment.”

The BRVM links eight West African countries in an innovative exchange, including gold exporters Mali, Burkina Faso and Côte d’Ivoire (Ivory Coast), and the world’s fourth-largest uranium producer, Niger. Many want to boost their mining industries: Burkina Faso is developing new gold and manganese mines, while Côte d’Ivoire is diversifying from agriculture, including cocoa, and aims to develop its untapped mining deposits, including gold and iron ore, according to Bloomberg. The BRVM attracts investors partly because the countries are part of the West African Economic and Monetary Union (WAEMU) and so use the CFA Franc, which is pegged to the euro.

Amenounve said: “Most of the countries of the region have significant mining deposits… The development of the mining sector has been extremely important in the last few years. We want to support this development..  We need local, African shareholders to invest in the mining sector.”

The bourse currently dominated by banks and telecommunications shares. It is amending its listing regulations to accommodated the new mining platform. Currently listing regulations require two years of certified accounts. The BRVM exchange aims to list mining issuers, including new companies who are raising money for exploration.

Karma heap-leach project in Burkina Faso (photo:True Gold Mining)

Karma heap-leach project in Burkina Faso (photo:True Gold Mining)

Opinion: Steps for regional integration of capital markets


In mature capital markets, regional integration shows significant benefits in unlocking potential and allowing investors to mobilize liquidity across borders by interconnecting diverse markets. Regional integration seems to be the future of world capital markets.

Can it also work for African capital markets, many of which face considerable problems of liquidity?

Many parts of the world have already tackled integration and each has faced its own challenges. In the past, the state of the technology and the feasibility of effective regional integration used to be a major challenge, and often offset the benefits.

This has changed. The technology has become cost-effective and industrial standards have evolved, based upon the widespread experience and solid implementations in different regions. Remaining challenges that still prevent smooth implementation are not in technology but in the business processes and political will.

First it is important to understand the landscape. Africa’s exchanges are usually divided into 4 categories:
• Dominant market: South Africa is the biggest contender
• Medium-size market: Each region tends to have its leading market
• Emerging markets: Several markets are growing fast and showing innovation and determination
• Markets yet to take off: Some are recently established, some are showing slow growth.

As African stock markets have become larger and more prevalent over the last 10 years, there have been preliminary moves towards regional integration. This is the global trend, but more importantly because integration can meet the mutual needs of the exchanges themselves.

Lack of liquidity is a major constraint to attracting influxes of foreign capital (portfolio investment) and to efficient allocation of savings and asset pricing. The different businesses (shares) on offer can be limited and the size of potential deals is often small. Pricing and other cross-comparisons within sectors and across companies can be difficult.

Efficient securities markets in Africa will help exchanges act as efficient channels for the growing pools of domestic savings funds (pensions and insurance) towards national growth and development – both infrastructure and enterprises – as well as providing comfort for foreign and domestic investors. Links and eventual integration between national stock exchanges is the way to ensure this.

Talk of pan-African or other continental structures can be a distraction. It may overlook the necessary work to be done on national and regional limits, including exchange controls, prudential regulations, macro-economic stability and others. It ignores the key roles of local securities exchanges, which are already central in their national economies and have working legal frameworks and institutional set-ups that can be built upon.

Each market has evolved according to the needs of the market participants and the challenges that have been impacting them. Each has its own electronic platforms built for the local practices. Existing micro-level frameworks can prevent change being introduced in a straightforward fashion. For example, in certain markets, turn-around trading is yet not available and settlement procedures are longer than necessary. Regional integration can take this into account if it involves a pragmatic framework that accommodates the composition of the markets.

In most regions, regulations are a key limitation on integration. The enabling environment for integration requires common policies, institutions and regional frameworks and, above all, the necessary political commitment that ensures macroeconomic stability. Cross-border settlements are difficult as there are no common currencies and the cost of trading is higher due to intermediary costs. Regulatory work to be overcome includes tackling national exchange controls, harmonization of regulations and recognizing each other’s institutions and intermediaries. Prudential limits on cross-border funds’ investments and regulations that stop share offers being marketed across borders could also be rolled back.

Political will is needed to recognize the importance of national structures and to recognize the added value of an integrated regional structure.

Regional integration demands not only that participants agree on a common standard of procedures at the higher level, but that there are platforms to support the regional integration charter. Initially the process may be structured around entities that exchange information with each other but operate on their own.

An ideal is to think towards forming one mega-enterprise with national outposts – Africa’s example is the BRVM which provides an integrated exchange linking 8 markets and is firmly anchored in the considerable monetary and policy integration structures in the francophone region. The evolving future regional exchanges should link all stakeholders through a set of global processes that bridge the gaps between the diverse systems that exist at various levels and connect all to bring value to customers.

There have already been some healthy efforts by Africa’s regional economic communities. The Southern African Development Community (SADC) is supporting linkages between regulators, central bankers and the Committee of SADC Securities Exchanges. Strong advances include the SIRESS cross-border payments systems and cooperation and harmonization between exchanges and regulators, including on listing requirements. The West Africa Capital Markets Integration Council considerable progress has extended to mutual recognition of stockbrokers and regional structures, as highlighted in this blog, and cross-border share deals between national exchanges, in addition to its ground-breaking BRVM regional exchange for 8 countries. The African Development Bank (AfDB) and other multilaterals and finance institutions are supporting important projects.

One of the leaders is the East African Community (EAC), following the signature and ratification of its Common Market Protocol. The EAC Secretariat, working with the World Bank and other development partners, established the EAC Financial Sector Development and Regionalization Project I (EAC-FSDRP I) to support the development of the financial sector through the establishment of a single market in financial services among EAC Partner States. The project objective is to establish the foundation for financial-sector integration among EAC partner States, including the broadening and deepening of the financial sector through the establishment of a single market in financial services, with a view to making a wide range of financial products and services available to all, at competitive prices. InfoTech, a Pakistani IT vendor with expertise in capital markets, particularly in Africa, is delivering the capital markets linkages.

To complement work on the IT and other systems, there is much to be done at policy-making level to harmonize the rules of the game across the region, backed by full commitment of all direct and indirect stakeholders, such as stock exchanges, depository companies, regulatory authorities etc. and their IT vendors to support their existing systems so they can support the regional integration.

Implementing the capital markets regional integration project will be a big milestone and a big step in tackling the core issues that hinder effective integration. The prospects are huge.

Capacity-building at all levels is also critical. Policymakers and regulators need to enhance skills on how to grow efficient markets to ensure they support national and regional development objectives. Exchanges, brokers, banks and key advisors such as lawyers are also central. Knowledge and skills among potential issuers, including small and medium-enterprises, and investors including both institutions and the investing public, all contribute to fast growth of more efficient markets.

Integration has already been proven in advanced markets and the technology works. The biggest challenge and responsibility is with the policymakers who have to formulate a governance framework with effective support to implement the framework at grassroots level.

Working together, African capital markets are moving to the next level of their evolution.


Ethos Capital PE lists after R1.8bn oversubscribed private placement

Private equity company Ethos Capital, based in Mauritius, listed on South Africa’s JSE on 5 August after R1.8 billion ($131 million) oversubscribed private placement for institutional investors. The listing is a unique combination of a liquid listed share which invests into a diversified pool of unlisted private equity investments. It is aimed particularly at institutional investors, including pension funds.
Ethos had placed 180m A ordinary shares at R10.00 each. Rand Merchant Bank was the financial advisor, sole global coordinator, bookrunner and JSE sponsor. The first trade on Friday was at R10.26, pushing market capitalization up to R1.85bn.
The new fund starts as a cash shell and will invest into a portfolio of unlisted investments with Ethos Private Equity, sub-Saharan Africa’s largest private equity firm, acting as the new company’s fund manager and advisor.
Stuart MacKenzie, CEO of Ethos Private Equity, said in a press release: “Growth is a central principle of Ethos Private Equity’s strategy: value is added by actively transforming the strategy, operations and finances of investee businesses, striving to make them best-in-class. Through pioneering thought leadership, creativity and innovation, Ethos Private Equity has developed a long track record of sustainable investor returns.”
Peter Hayward-Butt, CEO at Ethos Capital, said: “We look forward to investing alongside Ethos Private Equity into high-potential businesses, supporting economic growth and job creation in the long term whilst simultaneously delivering value to our shareholders.”
Ethos Private Equity has a 32-year history and has invested in 104 acquisitions of which 91 have been realized, delivering investment returns with a gross realised internal rate of return (IRR) of 37.4%.

Stuart Mackenzie, CEO Ethos Private Equity

Stuart Mackenzie, CEO Ethos Private Equity

Ethos Capital is expected to invest into:
• Primary investments into various funds to be raised and managed by Ethos Private Equity. EPE is reported to be planning to fund raise for Ethos VII fund by early 2017, targeting R8bn-R10bn with 25% for investments in sub-Saharan Africa outside South Africa. Ethos Capital is to commit up to R2.5bn. There is also plans for: a R2.5bn-R3bn Ethos Mid Market Fund I targeting deals of between R100m-R350m which will be majority black-owned and chaired by Sonja de Bruyn Sebotsa, according to Financial Mail, and Ethos Mezzanine Fund I which aims to raise R1.5bn and will be run by a team which formerly operated as Mezzanine Partners.
• Secondary investments by buying interests owned by limited partners (LPs) in existing Ethos funds. This could include up to $600m invested into Ethos VI fund which closed at $800m in 2013 (against a $750m target), according to Private Equity Africa website.
• Direct investments into investee companies alongside Ethos funds
• Temporary investments including a portfolio of low-risk, liquid debt instruments such as South African government bonds and similar instruments, managed by Ashburton Fund Managers.
According to the prospectus, Ethos Capital investors will be charged a management fee of 1.5% of invested net asset value and 0.25% on cash balances. The investors are offered 20% exposure to growth, subject to a 10% hurdle.
Previously Brait, another leading South African private equity company, had listed its portfolio.
Mackenzie says South Africa does not have enough investments in alternative assets such as private equity, according to the Financial Mail, which reports they make up barely 2% of pension fund assets compared with 20% in many developed markets. The listed vehicle will enable funds to share in the outperformance of private equity but will mean they do not have to stay invested for the full fund life, often 10 years.
The report adds that Mackenzie promises investors will not be subjected to a double layer of fees and that Ethos Fund III and IV outperformed listed markets by more than 5% but Fund V, invested in the years before the financial crisis, underperformed listed markets by 2.4%.
A report by RisCura and the SA Venture Capital Association (Savca) shows that private equity in South Africa has generally outperformed the total comparative return of investment of the JSE’s all share and SWIX indices, returning an internal rate of return of 18.5 percent. Over the same period, EPE returned 20.9 percent on realised investments.
Key investors in the private placing reportedly included fund manager giants such as Coronation and Stanlib and emerging managers such as Mergence and Sentio.

Rwanda to host 20th African Securities Association conference on 27-29 November

The Rwanda Stock Exchange (RSE) and the African Securities Exchanges Association (ASEA) will host the 20th Annual ASEA Conference in Kigali, Rwanda on 27-29 November. The ASEA annual conference is the flagship event for Africa’s capital markets and all those who work in them. This year’s theme is “The road to 2030: Making the African capital markets relevant to the real economy”.
Celestin Rwabukumba, RSE CEO, explained: “The conference will bring together more than 300 global and regional experts and stakeholders in capital markets, regulators, law firms and issuers, domestic, regional and international investors, rating agencies, portfolio and investment managers, government representatives, and technology providers to ask questions and address the big question of how African securities exchanges should become more effective and play a bigger role in mobilizing capital for African businesses that will drive our economies on the global economic stage.” He added it offers an opportunity for the East Africa Community (EAC) region to demonstrate how much can be achieved through integration of regional securities markets – the EAC is leading the way with an exciting capital markets integration programme as part of stronger regional economic links.
The gathering will also celebrate the RSE’s 5th birthday, it was formed in 2011. “It’s been an exciting 5 years for us. We have grown on all fronts and are increasing our numbers every year in terms of market participation, companies coming on board and technology. This will definitely be a good occasion,” Rwabukumba added.
There will also be scope for tourism and other enjoyment after the conference.

Kigali under Vision 2020 (photo:

Kigali under Vision 2020 (photo:

AfDB and stock exchanges group ASEA sign MoU for capital markets projects

Africa’s leading financial institution, the African Development Bank (AfDB), is pairing with the African Securities Exchanges Association (ASEA) to deepen and connect Africa’s financial markets. The partnership aims to help mobilize more resources to drive growth.
The two will work on projects of mutual interest such as developing financial-markets infrastructure, introducing new products, improving market liquidity and participation, information-sharing and capacity-building. AfDB and ASEA signed a 5-year memorandum of understanding on 11 July. This provides “a collaborative framework for harmonizing and coordinating the efforts”, according to an AfDB press release.
The Bank and ASEA have already started successfully collaborating on the African Exchanges Linkage Project, which they co-initiated to improve liquidity and foster greater investments and trading across markets. This aims to link key regional markets and has proposed Casablanca, Johannesburg, Nairobi and Nigerian stock exchanges as regional hubs, according to project documents.

AfDB and ASEA Executive Committee delegation. (From left to right) Stefan Nalletamby (Vice-President for infrastructure, regional integration and private sector, AfDB), Geoffrey Odundo (CEO of Nairobi Securities Exchange), Oscar Onyema OON (CEO of Nigerian Stock Exchange), Akinwumi A. Adesina (President of AfDB), Karim Hajji (CEO of Casablanca Stock Exchange), Edoh Kossi Amenounve (CEO of BRVM) Photo: AfDB

AfDB and ASEA Executive Committee delegation. (From left to right) Stefan Nalletamby (Vice-President for infrastructure, regional integration and private sector AfDB), Geoffrey Odundo (CEO of Nairobi Securities Exchange), Oscar Onyema OON (CEO of Nigerian Stock Exchange), Akinwumi A. Adesina (President of AfDB), Karim Hajji (CEO of Casablanca Stock Exchange), Edoh Kossi Amenounve (CEO of BRVM) Photo: AfDB

AfDB President, Akinwumi A. Adesina says deepening and integrating Africa’s financial markets to mobilize domestic resources to fund African economies is very important to deliver the Bank’s “High 5s” priorities: Light up and Power Africa, Feed Africa, Industrialize Africa, Integrate Africa and Improve the Quality of Life of Africans (all part of the bank’s 2030 agenda for attaining the global Sustainable Development Goals – SDGs).
He says there are huge pools of capital available in sovereign-wealth, pensions and insurance funds and these can be used for developing Africa through appropriate intermediation and capital-markets products. He called for “increased mobilization of domestic pools of savings and support for small and medium enterprises (SMEs), as they constitute the bulk of Africa’s private sector.”
Adesina pointed to the bank’s progress in financial markets development through issuing and listing local-currency bonds in Uganda, Nigeria and South Africa. The bank has also created African Financial Markets Initiative (AFMI) to support domestic bond markets through the African Financial Markets Database. The bank will soon launch an African Domestic Bond Fund building on the success of the AFDB Bloomberg® African Bond Index, which started in February 2015 to combine the Bloomberg South Africa, Egypt, Nigeria and Kenya local-currency sovereign indices and was expanded in October 2015 by Botswana and Namibia..
ASEA President, Oscar N. Onyema, CEO of the Nigerian Stock Exchange, says the MoU will frame projects focused on the development of exchanges, deepening the stock markets and ultimately fueling African economic growth.

Korea Exchange success story with SMEs

This article summarizes a talk by Honghee Shin, Executive Director of Korea Exchange, at the World Exchanges Congress in March 2016, which highlighted the KRX experience and lessons to be learned.
Building an exchange environment for small and medium-size enterprises and hi-tech companies to raise capital on a securities exchange requires strategic coordination and support by many different government agencies. The Korean Exchange (KRX) has grown to be the world’s third biggest stock exchange for listing and trading SMEs by creating a virtuous cycle in each stage of growth generates cash-flows which in turn fuel other stages.

The original Korea Stock Exchange was set up in 1956 and KRX evolved in 2005 to offer comprehensive front-to-end services. It has KSD (depository) as a 70% owned-subsidiary and also owns 76% of >koscom, a technology subsidiary. It offers a full range of products, trading and market data, as well as the central counterparty (CCP) and it is a self-regulatory organization performing its own market surveillance.

In 2015, KRX had 1,961 listed companies, 8th highest in the world, and traded $1,929 billion of securities, achieving the 10th highest level globally, according to World Federation of Exchanges. The main board is called KOSPI market and it has a futures and options market that was rated 12th in the world.


It has two boards for SMEs:
• KOSDAQ was launched in 1996, and provides funds for well-established SMEs and “technology-savvy” area including information technology (IT), bio technology (BT) and cultural technology (CT).
• KONEX was launched in 2013 exclusively for SMEs and start-up companies to support their early-stage financing and development through the capital market.

The ratio of market capitalization compared to GDP is higher at KOSDAQ in Korea than any other major SME markets in Asia. In global terms it ranks third among world SME markets for market capitalization and daily trading volume and 4th with 1,061 listed companies. Technology has been the main driver of the market – IT, BT and CT companies made up 68% of the market in 2015, up from 63% in 2005. In particular, biotech has grown its share 4 times and forms 17% of the total market.

KONEX had 24 companies in the third quarter of 2013, but increased that 5 times to 128 listed companies by the end of 2015. Market capitalization is up 8x, and daily average trading value is up 4x over the period. It offers a fast-track “ladder system” which 14 companies have scaled to transfer from KONEX to KOSDAQ.

Much of the success of the exchange can be attributed to the coordinated efforts of Government, the exchange and other stakeholders.


Key supports from Government include:
1. Tax incentives
– Corporate tax exemption for investing in newly-listed shares(within 2 years)
2. De-regulation for M&A
– Between KONEX and unlisted stocks
– Relieving corporate governance structure
– Waiver of obligation on appointment of external director and full-time auditor
3. Eased accounting standard application
– Exemption of K-IFRS accounting standard.

Concessions offered by KRX are:
1. Relaxation of Listing Requirements
– Lightened listing requirements for corporations with 20% of total investment from angel investors and venture capital
2. Modified disclosure obligation
– Reduction of timely-disclosure
– Exemption of quarter and semi-annual reports
– Mitigation of obligation to submit registration of securities
3. Minimum deposit requirement for investors adjusted from $300,000 to $100,000.

The exchange brings together companies from diversified industries, with a convergence of the high-tech companies that are the driving force of the economy. There is a solid investor base, including active retail investors with ample liquidity, and the exchange offers them a new way to find investment opportunities. The KRX itself offers relaxed listing requirements and less disclosure and maintenance costs. Government offers supportive policies towards gradual de-regulation as well as tax incentives and benefits.

The 2 Korean boards, KOSDAQ and KONEX play a critical role in a virtuous circle of growth and investment. Typically venture capital (VC), angel investors and government (through policies as well as funds) invests into start-up companies. These grow to list on KONEX, where professional investors tend to invest in what re now start-up SME companies, and VC investors can take some funds out to re-invest into fresh start-ups. As the company grows further, it can more to KOSDAQ where often non-professional investors may be interested in what have evolved into established SMEs, and the VCs can take more funds to reinvest into the earlier growth stages. The virtuous circle means that each stage adds momentum to the other stages, fuelling further growth – for the diagram see above.

Dar Stock Exchange shares double on first day of listing in hectic trading

Trading has been fast and furious in the shares of Dar es Salaam Stock Exchange PLC, which self-listed at 9am on 12 July. The first day of trading saw the shares listed at TZS 500 each and soaring as high as TZS 1,000 after hitting TZS 800 in the first 20 minutes. They closed at TZS 935. Turnover was 201 deals out of all the 248 deals for the day, according to the DSE daily report and TZS 794.8 million ($363,750) worth of shares were traded (out of TZS 817.9m traded for all counters).
DSE continued scorching up its own trading boards today (13 July), climbing further to TZS 1,100 and then ending at TZS 1,000 in 289 deals (out of 356 total) for a total value traded of TZS 1.1 billion (out of daily traded value of TZS 1.25bn).
Huge interest had already been seen in the initial public offer (IPO) of shares which ran from 16 May and closed on 3 June. Total bids were TZS 35.8 billion ($16.4 million), or 4.8 times the offered amount of TZS 7.5bn ($3.4m). This follows its demutualization in 2015. The Capital Markets and Securities Authority (CMSA) approved that DSE could augment its “green shoe” option from 10% (i.e. TZS 750m) to 35% or TZS 2.6m). That means the DSE raised TZS 10.1m in total.
IPO applications for up to 10,000 shares (TZS 5m) got their application in full, the full 3% allocation was given to staff, and those who applied for more than 10,000 shares received shares pro rata and a refund.
Government is planning pressure to encourage more listings. Speaking at yesterday’s launch, Finance and Planning Minister Philip Mpango said Government would start with encouragement for privatized companies to list, but it could consider a new law and regulations: “If the mutual talks fail, then the Government will push them to offload some of their shares at the DSE” (as reported in Daily News).
Listed companies that were previous privatizations such as Tanzania Breweries, Tanzania Cigarette Company, National Microfinance Bank, CRDB Bank, Simba Cement, Twiga Cement and TOL Gases are among Tanzania’s 15 largest taxpayers and rated as top-quality employers. Mpango said listing would encourage transparency and good corporate governance, making tax administration easier while enabling citizens to participate in economic activities.

Minister of Finance and Planning Philip Mpango (source

Minister of Finance and Planning Philip Mpango (source

DSE CEO Moremi Marwa said more than 400 state-owned enterprises (SOEs) had been privatised in the last 20 years, but only 7 listed on the bourse: “It is advisable that future privatizations are conducted through the capital market.”
Nasama Massinda, CEO of CMSA, said they were very pleased by Government’s move to force telecom companies to list 25% of shares at the DSE. “We believe this is the right thing as we want Tanzanians to own shares of these companies… the trend is that some of the firms are allocating shares to one or two ‘mwananchi’. We want them to sell their shares to the public. And the good thing is that these shares are not given for free since local investors would buy them.” She added that the Mining Act also requires that mining firms with special mining licences should sell part of their shares to citizens through DSE.

Investors who want to buy or sell shares can contact the DSE stockbrokers (licensed dealing members) or trade on the DSE’s mobile phone trading platform by dialling *150*36# and selecting “DSE Shares” from the list.

daressalaamse_new logoJan2016