Archive for the 'Tanzania' Category

Egypt is Africa’s new #1 investment destination

The challenge for African economies is to adapt to commodity slowdown and sluggish production growth. Many countries have suffered stress in the past three years, and the latest report from a leading investment bank suggests the new winners – and who is lagging. Rand Merchant Bank’s (RMB) Where to Invest in Africa 2018 report shows changes in the top investment destinations in Africa.

South Africa is off the top spot, edged aside by Egypt, and Nigeria and Algeria have crashed out of the top 10. The theme is “money talks” and focuses on major sources of dollar revenues, important income-generators and investment opportunities.

But the report compares 191 global jurisdictions and measures African against country groupings. African countries are still at the lower end of the global-performance spectrum, which is still dominated by the US, UK, Australia and Germany.

In Africa, according to the RMB press release, there is a new pharaoh in town: “Egypt (#1) displaced South Africa (#2) largely because of its superior economic activity score and sluggish growth rates in South Africa, which have deteriorated markedly over the past seven years. South Africa also faces mounting concerns over issues of institutional strength and governance though in South Africa’s favour are its currency, equity and capital markets which are still a cut above the rest, with many other African nations facing liquidity constraints.

“Morocco (#3) retained its third position for a third consecutive year having benefitted from a greatly enhanced operating environment since the Arab Spring which began in 2010. Surprisingly, Ethiopia (#4), a country dogged by socio-political instability, displaced Ghana (#5) to take fourth spot mostly because of its rapid economic growth, having brushed past Kenya as the largest economy in East Africa. Ghana’s slide to fifth position was mostly due to perceptions of worsening corruption and weaker economic freedom.

“Kenya (#6) holds firm in the top 10 at number six. Despite being surpassed by Ethiopia, investors are still attracted by Kenya’s diverse economic structure, pro-market policies and brisk consumer spending growth. A host of business-friendly reforms aimed at rooting out corruption and steady economic growth helped Tanzania (#7) climb by two places to number seven. Rwanda (#8) re-entered the top 10 having spent two years on the periphery, helped by being one of the fastest reforming economies in the world, high real growth rates and its continuing attempt to diversify its economy.

“At number nine, Tunisia (#9) has made great strides in advancing political transition while an improved business climate has been achieved by structural reforms, greater security and social stability. Cote d’Ivoire (#10) slipped two places to take up the tenth position. Although its business environment scoring is still relatively low, its government has made significant strides in inviting investment into the country leading to a strong increase in foreign direct investment over the years resulting in one of the fastest growing economies in Africa.

“For the first time, Nigeria (#13) does not feature in the top 10, with its short-term investment appeal having been eroded by recessionary conditions. Uganda is steadily closing in on the top 10 though market activity is likely to remain subdued after a tumultuous 2016 marred by election-related uncertainty, a debilitating drought and high commercial lending rates.

“Though Botswana, Mauritius and Namibia are widely rated as investment grade economies, they do not feature in the top 10 mostly because of the relatively small sizes of their markets – market size has been a key consideration in the report’s methodology.”

RMB Africa analysts spoke on economic trends:

Neville Mandimika: “The last three years have sounded an alarm, amplifying what is now a dire need for the economies of Africa to shift their focus from traditional sources of income to other viable alternatives.”

Celeste Fauconnier: “Over the past three years, some African governments have had to implement deep and painful budget cuts, announce multiple currency devaluations and adopt hawkish monetary policy stances – all as a result of a significant drop in traditional revenues.”

Nema Ramkhelawan-Bhana: “Some countries have been more nimble and effective than others in managing shortfalls,” says and an author of the report. “But major policy dilemmas have ensued, forcing governments to balance economically prudent solutions with what is politically palatable.”

Where to Invest in Africa 2018 also includes 191 jurisdictions around the world, and measures Africa’s performance relative to other country groupings. The report is available via: www.rmb.co.za/globalmarkets/where-to-invest-in-africa-2018-edition.

Vodacom Tanzania’s $213m IPO results due 7 August

According to the latest timetable on the website of Vodacom Tanzania, the extended $213 million initial public offer (IPO) of shares closed on 28 July. Shares are due to be allotted, the register delivered to the Dar es Salaam Stock Exchange (DSE) and the offer results announced on Monday, 7 August.

Refunds and CSD receipts will be printed on 14 August and the listing and trading of shares will be on 15 August. The offer had been extended previously, see our June story here , most recently from 10 July.

A total of 560m shares had been offered at TZS850 each, for an offer value of TZS476bn. It is the biggest IPO so far in 2017 on African capital markets.

The IPO follows the Electronic and Postal Communications Act of 2010 (EPOCA) which requires all telecom companies to list, and the June 2016 Finance Act requiring them to list at least 25% on the DSE to boost domestic ownership. According to news reports the law was changed in June (Finance Act 2017) to allow foreigners to participate.

According to a Business Report article, Vodacom spokesperson Byron Kennedy said in July that opening to international investors: “.. is a positive move for the more than 40,000 Tanzanians that have invested in the IPO as it is expected to improve liquidity of the Vodacom Tanzania shares once they are listed.”

Vivek Mathur, the chief operating officer for Vodacom’s international business, said in a prospectus in February that the capital raising and listing were in line with the government’s intention to strengthen the country’s telecommunications sector to play a key role as the engine of economic growth and socio-economic development: “This process also aims to widen financial inclusion among Tanzanians, and to economically empower the people of Tanzania.”

Reuters reports that two other major telecoms operators, Millicom’s subsidiary Tigo and the local business of India’s Bharti Airtel, have also submitted prospectuses to the regulator the Capital Markets Supervisory Authority CMSA and are awaiting approval for their IPOs.

Vodacom Tanzania wrapping up $213m IPO on Dar es Salaam bourse

Some 40,000 Tanzanians subscribed for the TZS476 billion ($213 million) initial public offer (IPO) of Vodacom Tanzania Ltd, part of South Africa’s Vodacom Group. The figure came from company’s MD, Ian Ferrao, quoted in the Citizen newspaper.

It is the largest IPO in the history of the Dar es Salaam Stock Exchange (DSE) and attracted many first-time buyers.

The company says it has 12.4m customers and 31% market share of a telecoms market it estimated was worth $996m. It says TZS2.6 trillion ($1.17bn) is transacted every month by over 7m customers of its M-pesa mobile money solution. It had offered 560m shares (25% of the company) at TZS850 each. The IPO opened on 9 March and was extended for 3 weeks after the closure date of 19 April and ended 11 May. The announcement of results was due on 26 May, and the listing was expected on 12 June 2017 but has not yet been reported. According to news reports, the Capital Markets and Securities Authority (CMSA) is busy with verification, according to Orbit Securities which is Vodacom’s lead advisor.

Mr Simon Juventus, General Manager of Orbit, said the time extension meant more investors could be reached: “This time around we reached many investors unlike the first six weeks … the progress was good.”

The IPO follows the Electronic and Postal Communications Act of 2010 (EPOCA) which requires all telecom companies to list, and the June 2016 Finance Act requiring them to list at least 25% on the DSE to boost domestic ownership, with foreigners barred.

So far only Vodacom is busy with the process. On 1 June, President John Magufuli said that telecoms licences would be revoked if telecom companies did not list on the Dar es Salaam bourse saying they made enough profit to pay the fines of TZS300m and ordered the Tanzania Communications Regulatory Authority (TCRA) to act tough against telcos that do not list.

According to the President, as reported in Daily News: “Listing at the bourse will enhance transparency and enable the Government to collect its fair share of revenues,” He noted that Ethiopia’s state-owned monopoly telephone company has 30m-35m subscribers and made $1.5bn profit. Tanzania Telecommunications Company Ltd (TTCL) has not paid any dividends since shares were sold to foreign investors in 1990s.

Other companies which list are Airtel (Bharti Airtel Ltd of India and Government each offered to sell 12.5% of the shares), Tigo (local subsidiary of Millicom International Cellular SA of Luxembourg) and Maxcom Maxcom Africa (MaxMalipo), which have presented their prospectus to the CMSA. According to Daily News, the Tanzania Communciations Regulatory Authority (TCRA) says there are 86 tele-firms which that s must list. andOthers include TTCL, Halotel Tanzania, Zantel and Smart. Finance Minister Philip Mpango proposed that smaller companies should be exempted from IPOs as he presenting the Finance Bill 2017 to Parliament.

Opening the IPOs to foreigners
Mpango on 22 June told parliamentarians that Government would bring legislation to allow foreign investors to buy shares in telecommunications companies listing on the DSE. According to Bloomberg , after the IPO stalled.

The combined value of expected telco listings would be $1bn, compared to stock exchange capitalization of about $8.4bn. The Daily News reported that the law change would probably be through a 2017/18 Financial Bill to amend EPOCA.
“We want to open up the mandate of companies listing 25% of their shares to allow Tanzanians, Tanzanian companies, Tanzanians in the diaspora, joint ventures between Tanzanians and foreigners, East Africans or companies owned by East Africans, or citizens from other countries.”

The article quotes George Fumbuka, CEO at stockbroker Core Securities: “We are now doing it the way it should’ve been done. I can understand trying to give special treatment for locals, but in the stock market it should be open market.” He said he thought Vodacom was overpriced and an open market would encourage compaies to price IPOs “more competitively”.

George Kalebaila, director for telecoms and Internet of Things in Africa at International Data Corporation, was quoted by The East African newspaper: “Equity markets need time to develop and I think 25 per cent is rather ambitious, as there is limited equity in local hands waiting to be invested. That’s why you see the shareholding structure of a couple of large organisations favour wealthy and politically connected individuals, who have access to capital.” Foreigners will also be able to buy the shares after the IPO

System to track electronic payments

On 1 June President Magufuli launched Electronic Revenue Collection System (e-RCS), which will be operated by Tanzania Revenue Authority (TRA) and Zanzibar Revenue Board (ZRB). The system is designed to track and directly collect Value Added Tax (VAT) and Excise duty on all electronic transactions by communication companies and financial institutions, with the views of enhancing efficiency in the collection of government revenues.

Tanzania Revenue Authority Commissioner General Charles Kichere said only 3 companies – Halotel, Smart and TTCL – have so far joined e-RCS. He said it was an efficient tool for tracking and collecting revenues through electronic payments without human intervention.

Pension funds power Africa’s infrastructure

Here is my article on a critical area for Africa to develop, creating the right atmosphere for productive investments by Africa’s growing pension funds. It is published in African Banker magazine and you can access it on the africanbusinessmagazine.com website here:

The power of pension funds for African infrastructure
By Tom Minney
“Opening the elegant new six-lane toll bridge stretching cross Dar es Salaam’s Kigamboni Creek in April, Tanzania’s President John Magufuli called it “liberation” for citizens.
It represents a $135m investment by Tanzania’s National Social Security Fund, the state-run pension fund, and government. China Railway Construction Engineering Group built the 680-metre bridge with China Railway Major Bridge Group and say it is the longest cable-stayed bridge in East Africa.
It is also Tanzania’s first toll road – which residents say is worth paying for as it makes their lives easier. The development will lead to new residential housing and is hoped to boost tourism in the country.
The World Bank estimates Africa should spend $93bn – 5% of gross domestic product (GDP) – each year on infrastructure and the African Development Bank (AfDB) notes a $50bn financing gap to reach this. Local and international pension funds can help fill the gap.
The Bright Africa report by consultancy firm RisCura says that at the end of 2014 assets under management by pension funds across 16 major African markets amounted to $334bn. Some 90% of assets were concentrated in four countries: South Africa (with $258bn) Nigeria, Namibia and Botswana. Assets had grown more than 20% a year in East Africa and 25%–30% a year in Nigeria over the previous half decade.

Potential to drive growth
Pension funds mostly invest in local fixed-income bonds, with regulation a key driver of asset allocation. But as RisCura argues, pension funds are ideal to drive inclusive growth and social stability, including through investing in longer-term projects such as infrastructure: “Local institutional investors lend credibility and a measure of validation, and often serve as a catalyst for greater external interest. Local investors also allow global peers to leverage local knowledge and networks.
With longer investment horizons, pension funds can serve as anchor investors for infrastructure and social development projects,” says the report. South African pension funds lead the way, partly spurred by rules that allow them to invest 10% of assets through private equity.

Africa’s $111bn pension fund
The Government Employees’ Pension Fund (GEPF) with R1.6 trillion ($111bn) assets under management in March 2015 reported it had committed R62bn towards “unlisted and developmental assets” in the previous 12 months, including Touwsriver and Bokpoort solar power projects in South Africa; MainOne data and broadband telecommunications in West Africa; pan-African power generation through Aldwych Power; N3TC which operates and maintains 420km of South Africa’s N3 highway; and two hospitals.
Other investments listed include $21.6m into private airport concession TAV Tunisia through the Pan-African Infrastructure Development Fund (PAIDF) managed by Harith General Partners. GEPF invested $2.6bn into the first PAIDF fund by March 2015 and pledged up to R4.2bn for the second by 2020. Five other pension funds also invested in the $630m PAIDF I fund, which will last 15 years and invested into more than 70 African projects. PAIDF 2 recently announced first close after raising $435m, again with pension funds as key investors.
South Africa’s Eskom Pension and Provident Fund (EPPF) in 2014 invested $30m into infrastructure projects through private-equity house Abraaj, based in Dubai, as well as mobile-phone infrastructure through London’s Helios. EPPF chief executive Sbu Luthuli says “We have to diversify” and wants to put more than $100m into infrastructure projects – 1.2% of its total R120bn assets (as of June 2015). GEPF said that it had invested 1% of its assets into African equities outside South Africa at March 2015, compared to a target of 5% (R80bn).

New funds being created
Financial institutions and multilateral lenders are looking to speed up the process. For instance, the AfDB created the Africa50 fund with target capitalisation up to $10bn and says it has secured $500m. For the second round to $1bn it is targeting institutional investors, including African and global pension funds. Kenya’s government and parastatals such as Kengen are leading the way in selling local-currency bonds to finance infrastructure.
The network is growing. Harith works with Asset and Resource Management Company in Nigeria to invest in West African infrastructure and is setting up a $1bn COMESA Infrastructure Fund with PTA Bank for eastern and southern Africa.
In June Harith and its Aldwych arm announced links with Africa Finance Corporation (AFC) to create a $3.3bn power portfolio, supplying 30m people across 10 countries. Andrew Alli, president and chief executive of AFC, says: “By working together we can deliver tangible benefit for Africans, switching their lights on and stimulating positive economic growth on the continent.”

Politics and mistrust
But it’s not always that straight-forward. In February, Nigeria’s minister of power, works and housing, Babatunde Raji Fashola, called on the country’s pension funds, which manage some N5.8 trillion ($18.4bn), to invest more in infrastructure and other development projects. However, later in the year, newspapers reported that no infrastructure projects had been put forward that met the legal requirements of the 2015 regulations on investment of pension fund assets, including a minimum value of N5bn for individual projects and award through competitive bidding to a concessionaire with a good track record.
The Nigerian Labour Congress expressed members’ fears: “The thought of using our pension fund for investment in public-sector infrastructure development is highly frightening given the well-known penchant for mismanagement inherent in public-sector institutions in Nigeria … It is therefore immoral and careless to subject such fund which is the life-blood of workers to the itchy fingers of politicians, no matter how well intentioned.”
Despite the worries, confidence in governance is growing and attention is switching to building the supply of projects. As RisCura’s report notes: “In many countries, assets are growing much faster than products are being brought to market, limiting investment opportunities.”

Projects and stages
Projects typically go through several stages, starting with feasibility studies to create a “bankable” project; then building or developing the project; and finally operating it once it is established, for instance collecting the tolls on a highway and fixing holes. The last stage is usually the least risky and most suited for pension-fund investors.
The Africa50 fund follows other initiatives in funding early-stage projects in order to boost the supply and mobilise more financing for later stages. Kigamboni bridge took more than two decades. Africa’s fast-growing pension funds need a faster pipeline of investible and well-run projects.

Kigamboni Bridge, Dar es Salaam. Photo Daniel Hayduk, from Nairobi Wire

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 rai.co.tz)

Minister of Finance and Planning Philip Mpango (source rai.co.tz)


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

Dar es Salaam Stock Exchange IPO nearly 5x oversubscribed

Total bids for the initial public offer (IPO) of shares in the Dar es Salaam Stock Exchange PLC were TZS35.8 billion ($16.4 million). This is 4.8 times the offered amount of TZS7.5bn ($3.4m) in the IPO which ran from 16 May until 3 June. Next steps include the DSE to refund excess bids after exercising its “green shoe” option, which allows up to 10% extra, and then to self-list on 12 July on its own Main Investment Market Segment under the ticker “DSE”.
According to the DSE announcement: “The planned self-listing is in line with the global trend and practice for exchanges, and is aimed at achieving good corporate governance practices, efficiency and effectiveness of the DSE and further strengthen its strategic and operational practices.” The DSE said in its prospectus it planned to use IPO proceeds to enhance its core-operating system, introduce new products and services and for “strategic and operational purposes”.

Moremi Marwa of DSE and UK Secretary of State for International Development open trading on the London Stock Exchange. Credit: London Stock Exchange

2014: Moremi Marwa of DSE and UK Secretary of State for International Development open trading on the London Stock Exchange. Photo: London Stock Exchange


DSE management are doing an excellent job and there is great potential for the exchange to keep serving the supply of long-term risk capital to one of Africa’s fastest-growing economies. It is sticking closely to its offer timetable and has announced results on time on 16 June. Next is to credit accounts with shares at the central securities depository (CSD) on 24 June and process the refund cheques on 30 June before the self-listing and trading of fully-paid DSE shares on 12 July.
The receiving bank for the DSE offer, as with many Tanzanian IPOs, was local leader CRDB. The lead transaction manager is Orbit Securities Company Limited which said interest was very strong. During the IPO the shares could also be bought using Tanzania’s MAXMALIPO payment gateway or by dialling *150*36# on a Tanzanian mobile phone.
According to an earlier statement by CEO Moremi Marwa: “Over the past few years the DSE has achieved significant milestones, notably:
• Compounded annual growth rate of 110% since 2010 for market capitalization to TZS21trn by 30 March 2016
• Compounded annual growth rate of 56% since 2010 for liquidity to an aggregate average turnover of over TZS800bn per annum
• Introduction of the Enterprise Growth Market (EGM) segment and the increase of listings of both equity and bonds
• Introduction of mobile trading on the DSE trading, depository and settlement platform
• Increased financial independence sustainability and profitability.
As at 30 March 2016 the Exchange had 23 listed equities and 3 outstanding corporate bonds. There are also Government bonds, worth about TZS 4.6trn listed on the exchange, making the DSE the second largest exchange in the East African region.”
According to the prospectus, 3% of shares were reserved for DSE employees and 15% for a capital markets development fund.
Previously DSE was a mutual company limited by guarantee with no shareholders and no capital. The 20 institutions that acted as guarantors – including 8 of the 11 stockbroking firms currently trading – agreed to be issued with 1 share each with nominal value TZS400 by 29 June 2015. It was part of the process as the bourse restructured and changed from Dar es Salaam Stock Exchange Ltd to the Dar es Salaam Stock Exchange Public Ltd Company (Plc).
Among recent changes at the dynamic exchange are
• Migration to the new efficient automated trading system and central depository system (2013), supplied by South Africa’s STT (Securities and Trading Technology system)
• Reduction of settlement cycle from 5 days to 3 days for equities and 3 days to 1 day for bonds in line with international standards (2013)
• The Capital Markets & Securities Authority (CMSA) put in place the enabling regulatory framework and licensed the NOMADs to create a framework for a new Enterprise Growth Market segment of the DSE which was launched in 2013. Since the five companies have listed on the EGM
• Interlinking the exchange’s central depository system to the national payment system (2014)
• Deployment of ATS on the wide area network and start of remote trading by brokers (2014)
• Introduction of the regulatory framework and subsequent use of mobile phone technology in IPOs (equity and debt) and secondary trading (August 2015)
• Limits on foreign investment were recently lifted. There is also increasingly close cooperation in the exciting East African region, including installation of an interconnectivity hub for routing trading order between the exchanges.
New products which the CMSA and DSE are developing include real-estate investment trust (REIT), futures and derivatives, exchange-traded funds (ETFs), closed end collective investment schemes and municipal bonds.
Your author was honoured to be team leader of the CAPMEX/Wiener Börse AG team that wrote the demutualization strategy.

Source Dar es Salaam Stock Exchange

Source Dar es Salaam Stock Exchange

Dar es Salaam Stock Exchange readies for $3.4m IPO and self-listing

DSE launched the modern STT trading system in 2014

DSE launched the modern STT trading system in 2014


The Dar es Salaam Stock Exchange Plc will launch its initial public offer soon, after successfully completing the demutualization that transformed it into a shareholder owned for-profit company. According to a statement from the regulator, the Capital Markets and Securities Authority, the bourse can raise TZS 7.5 billion ($3.4 million) by issuing 15 million ordinary shares at TZS 500 each.
No more details have been released, including a date for the IPO.
A statement from the CMSA, reported in the Citizen news, says: “The IPO and subsequent self-listing of the DSE Plc is the culmination of the demutualisation process approved by the National Demutualisation Committee comprising members from key stakeholders of capital markets in Tanzania including the Ministry of Finance, Bank of Tanzania, Tanzania Stock Brokers Association, DSE Plc and the CMSA.”
There are 23 companies listed on the DSE, which has a Main Board and 4 companies listed on the Enterprise Growth Market, launched in 2013. Total market capitalization of the listed companies is TZS 22.4 trillion ($10.2 bn)
It is the third African exchange to go through the demutualization and self-listing process after the Johannesburg Stock Exchange and the Nairobi Securities Exchange. CMSA said successful completion of the IPO and listing will help boost the issued and paid-up share capital; the active shareholding; improved corporate governance structure of a public company limited by shares. It will also raise funds for the market to grow and expand including introducing new products and services.
daressalaamse_new logoJan2016
DISCLOSURE – your editor worked with CAPMEX agency from Vienna and other team members to create the demutualization strategy for DSE.

Mwalimu Bank shares soar as Dar es Salaam enterprise market gains momentum

The market for small and medium size businesses is picking up momentum on the Dar es
Salaam Stock Exchange. Mwalimu Commercial Bank Plc was the fourth listing on the Enterprise Growth Market segment on 27 November, and Prime Minister Majaliwa Kassim Majaliwa spoke at the listing. The share launched at TZS500 ($0.23) after its initial public offer (IPO) and then soared by 40% to TZS700 on the first day of trading before gradually falling back to TZS665.

The IPO also registered a success for the mobile phone trading platform launched by the DSE in August 2015. DSE Chief Executive Officer Mr Moremi Marwa told Daily News that at the end of September, a month after the launch, some 700 investors used mobile phone trading. The paper says that because of the mobile platform, upcountry buyers outpaced Dar es Salaam residents in buying shares in the Mwalimu Bank IPO. It is good step forward for financial inclusion in Tanzania. The IPO was oversubscribed by 24%.

DSE CEO Moremi Marwa, (photo credit 24Tanzania)

DSE CEO Moremi Marwa, (photo credit 24Tanzania)

Previous EGM listings were Mkombozi Commercial Bank (December 2014), Swala Gas and Oil (August 2014, local exploration subsidiary of Australian Swala Energy), and Maendeleo Bank (November 2013). There are four registered nominated advisers to help companies apply to the EGM for listing and to sponsor their listing and compliance, employing a model based on London Stock Exchange’s Alternative Investment Market (AIM).

The EGM was launched in 2013 as part of a successful project backed by the Financial Sector Deepening Trust (FSDT).

The name of Mwalimu bank means “teacher” in Swahili and was also the affectionate honorific title for Tanzania’s founding President Julius Nyerere. The bank is supported by the Tanzania Teachers Union, which has 200,000 members according to this DSE press release.

It has not yet opened its doors as it needed a banking licence approval and to raise capital, before it can establish systems and procure core banking and other systems. CEO Ronald Manongi was reported in The Citizen newspaper saying it will start offering services in May 2016 with a branch at Samora Avenue in central Dar es Salaam and later at Mlimani City. It has a capital base of TZS31 billion.

IMF cuts African growth forecast

Africa’s growth is slowing dramatically, says the International Monetary Fund, and it could get worse if the global economy does not grow. The IMF says economic growth for 2015 is likely to be 3.75% and 4.25% next year, the lowest level in 6 years and down from last year’s 5% average growth.

In its October 2015 report African Economic Outlook: Dealing with the Gathering Clouds, the IMF writes: “The strong growth momentum evident in the region in recent years has dissipated. With the possibility that the external environment might turn even less favourable, risks to this outlook remain on the downside.”

There are many that are flourishing, including Cote d’Ivoire, forecast to grow at 9% this year because of an investment boom that followed the end of a brief civil war in 2012. It just had a very peaceful election and President Alassane Ouattara, a former IMF official, is widely expected to win.

In real growth terms (page 81) Ethiopia is Africa’s fastest-growing economy this year with 8.7% growth, followed by Democratic Republic of Congo (8.4%) and Cote d’Ivoire (8.2%). Ethiopia is second fastest next year with 8.1% forecast, just after Mozambique (8.2%).

The fund blames a slump in commodity prices and cheap dollars returning to the US and out of African credit markets for the lower overall growth. Hardest hit are the 8 countries that export oil from sub-Saharan Africa, where the prices are far lower. Top producers Nigeria and Angola will see revenues falling fast, while . weak minerals prices, power shortages and difficult financing conditions are slowing growth in countries such as Ghana, Zambia and South Africa. It said commodities revenues are forecast to remain depressed for several years.

According to a report by Reuters, Antoinette Sayeh, head of the IMF’s Africa department, said governments should work quickly to diversify revenue sources by improving domestic tax collection: “Mobilizing more revenues is an urgent matter – as is being more exacting in choosing expenditure. It’s a difficult patch, but we definitely think that countries can move out of the very difficult terrain and grow more robustly.”

The fund urges governments to increase productivity: “To sustain rapid growth the region will need to diversify away from commodities, increase export sophistication, and integrate into global value chains.”

Low interest rates, especially by issuing Eurobonds on international fixed income markets since 2007, has meant African governments have borrowed and public debt levels have risen. Sayeh warned governments to be “very careful” in how they managed dollar financing to ensure it is invested wisely. Some governments, such as Ghana, have been accused of frittering away Eurobond revenues on state salaries. Sayeh said Accra was doing “reasonably well” in its efforts to curb public spending under a $918 million IMF programme agreed in April.

She says that Zambia has not yet asked IMF for financial help. It is also struggling with the rising cost of servicing USD debt after the value of its currency fell 50% this year.

The Fund also notes that Sub-Saharan Africa has among the highest levels of inequality—both income and gender—in the world, even after accounting for the lower levels of per capita income in the region. There is growing international evidence that such inequality can impede macroeconomic stability and growth

Highlights from the report
In most low-income countries, growth is holding up, as ongoing infrastructure investment efforts continue and private consumption remains strong. The likes of Côte d’Ivoire, the Democratic Republic of the Congo, Ethiopia, Mozambique, and Tanzania are projected to register growth of 7% or more this year and next. But even within this group, some countries are feeling the pinch from lower prices for their main export commodities, even as lower oil prices ease their energy import bill. On average, activity for this group is now projected to expand by 6% in 2015, some three-quarters of a percentage point lower than foreseen a year ago.

• The region’s 8 oil-exporting countries, conversely, are being hit hard by the continued weakness in oil prices. Falling export incomes and resulting sharp fiscal adjustments are taking their toll on activity, now expected to expand by 3½% this year, down from the 7% expected before oil prices started falling. Headwinds are particularly strong in Angola and Nigeria, but also among oil exporters in the Central African Economic and Monetary Community (CEMAC).

• Several middle-income countries are also facing unfavourable conditions. A combination of supply shocks (for example, curtailed electricity production in Ghana, South Africa, and Zambia), more difficult financing conditions in a context of large domestic imbalances (Ghana and Zambia), and weaker commodity prices (Botswana, South Africa, Zambia) are set to lower growth.

Moreover, there is a risk of still lower growth if the external environment continues to weaken. Existing vulnerabilities, especially on the fiscal front, could also come to a head if the external environment were to turn even less favorable, via further declines in commodity prices, stronger growth deceleration in China, or a disorderly global asset reallocation.

Debt crunch
With gross external financing needs in excess of 10% of GDP in many of the larger economies (Ethiopia, Ghana, Kenya, Senegal, South Africa, Tanzania), it might at best become increasingly difficult and expensive to cover these needs, and at worst, impossible to do so, forcing an abrupt adjustment.

Where fiscal deficits are particularly large and external costs have already risen substantially, recourse to domestic markets is also becoming increasingly difficult, as in Ghana and Zambia. This has pushed domestic borrowing costs up— crowding out the private sector in the process and restraining the emergence of new, more diverse, domestic sources of growth.

inflation is now inching up in some of the largest sub-Saharan African economies, in contrast with the trend of recent years. Average inflation in the region is expected to reach 7% this year and 7¼% next year. In some countries, specific factors such as electricity tariff hikes (South Africa), the elimination of fuel subsidies (Angola), and rising food prices (Ethiopia, Tanzania) have also pushed inflation up. However, inflation in most other countries remains contained, particularly in the CFA franc zones, where it ranges from 1 to 3%.
some central banks have intervened in the market to contain exchange rate volatility, and others, most notably oil exporters, have drawn on their external buffers to smooth the adjustment to lower commodity prices (Figure 1.12). Some countries, including Angola and Nigeria, have also introduced administrative measures to stem the demand for foreign currency, significantly hampering the conduct of private sector activities in the process.

Banks could well see a worsening of the quality of their assets. Recent analysis suggests that financial stability indicators in natural-resource-rich countries, such as bank profitability or nonperforming loans, tend to deteriorate and the probability of systemic banking crises tends to increase in the wake of negative commodity price shocks

Power block
Infrastructure bottlenecks have long been an impediment to attracting new activities and fostering trade integration.8 These bottlenecks have come to the forefront even more acutely recently for a wide range of countries. Load shedding and electricity shortages, triggered by delays in upgrading aging power plants and filling the power generation gaps, have become a regular occurrence in Ghana and South Africa, with particularly acute effects in the manufacturing sector. Worsening conditions in electricity supply have also been severely hampering activity in a few other countries (Comoros, Madagascar, Nigeria, and Zambia).

These difficulties are in stark contrast with encouraging progress made elsewhere in the region, as past investment is now bearing fruit. In Kenya, the doubling of geothermal generation capacity in the second half of 2014 led to a 20% increase in overall capacity and a 25% decline of electricity cost (IMF 2015b). The coming onstream of new hydropower plants in Ethiopia is contributing to a further increase in electricity availability for the entire east African region, and will do so even more in the next few years—supporting the emergence of new activities. In west Africa, a new dam put in service in Guinea in the summer of 2015 will also allow electricity exports to neighbouring countries.

Dar es Salaam Stock Exchange aims for IPO and self listing Q1 2016

Dar es Salaam harbour (Credit: Tom Minney)

Dar es Salaam harbour (Credit: Tom Minney)

Tanzania’s Dar es Salaam Stock Exchange (DSE) aims for an initial public offer (IPO) of its shares within 6 months followed by listing itself on the exchange. It has published a call for lead transaction advisor, sponsoring stockbroker and other experts to express interest by 21 July.

CEO Moremi Marwa told Reuters on 1 July that the aim is to improve governance and raise funds for expansion: “We expect to pick a lead transaction adviser probably within a month and the whole process of launching the IPO should take around six months to be completed.” The quantity of shares to be sold will be decided later. Funds would be used for upgrading trading infrastructure, among others.

The African bourse has 21 listed companies and total market capitalization of TZS 23.9 trillion ($10.9 billion) at 30th June. This includes 14 domestic listed companies with market cap of TZS 9.9trn. It also has listed bonds (corporate and government) worth TZS 4trn. There is potential for more listings for companies to raise capital through equity or bonds, according to Reuters which notes that lending rates at banks can be 18%-30%. In 2014 Tanzania scrapped controls on foreign ownership of shares in an effort to stoke demand on the bourse. Bloomberg notes that in 2014 the index gained 64%, making the exchange Africa’s best performer.

According to Marwa’s quarterly statement liquidity in the second quarter was up to TZS 285bn from TZS 278bn in the first quarter, representing 9% liquidity ratio on an annualized basis: “During Q3, 2015, we expect at least three listings: Mwalimu Commercial Bank, PTA Bank (for corporate bonds) and YETU Microfinance.” He added that priorities include introducing mobile and Internet trading on the platform; encouraging more listings; public education and awareness; integrating and synchronizing the DSE’s central securities depository (CSD) with that of Bank of Tanzania for government bonds trading.

Dar es Salaam Stock Exchange Ltd was incorporated in 1996 as a mutual company limited by guarantee. According to the website it has recently changed into a public company limited by shares and is renamed Dar es Salaam Stock Exchange Public Limited Company.

According to the DSE website: “The objective of these changes is to enhance DSE’s operational, financial and governance structures and capabilities so as it can efficiently execute its mandates in line with DSE strategic objective: i.e. to be the focal point for long-term capital raising by private enterprises and public sector within the economy via provision of efficiency infrastructure, systems and listing platform for multi-financial products.

“The invitation is for Expression of Interest (EOI) by eligible firms to provide the following consultancy services:
1. Lead transaction advisor
2. Co-sponsoring stockbrokers
3. Legal advisor
4. Reporting accountant
5. Public relations firm
6. Lead receiving/collecting bank.

The Nairobi Securities Exchange has successfully sold 38% shares in a $7.1m IPO which was oversubscribed many times in August 2014, and it self-listed soon afterwards. South Africa’s JSE Ltd did the same in 2006.