Finance

Investing in Itself

DSE IPO

The Dar es Salaam Stock Exchange (DSE) followed the example of Nairobi and Johannesburg when it self-listed itself in May, reflecting a welcomed move toward increasing transparency and efficiency at the bourse.

Self-listing is a relatively accepted practice in developed markets, with self-listed stock exchanges including Australia, Hong Kong, Singapore, London, and NASDAQ. It is generally seen as a sign that the chance of conflicts of interest has been quashed by strong and robust regulation.

Tanzania’s capital market became the third in Africa to demutualize when its initial public offering (IPO) was conducted from May 16, 2016 to June 3 and was targeting TZS7.5 billion through the offer of 15 million shares. The move got a resounding show of support, and did not disappoint expectations that it would be oversubscribed, with the 500/- priced shares being oversubscribed by more than 4.7 times. The DSE managed to receive just under TZS35.8 billion, equivalent to 377% more than the targeted capital.

The success of this IPO is undoubtedly the result of DSE’s latest performances as well as its initiatives aimed at enhancing public awareness. The capital market organizes training programs for market intermediaries and local journalists in a bid to enable them to report on financial market related news more accurately and in turn educates the public about investment opportunities in the capital market.

The DSE is a young capital market at only 18 years old. Its total market turnover hardly reached TZS500 billion in 2014 but in 2015 it stood at TZS1.1 trillion, and passed the TZS1 trillion mark in October 2016, showing a continuous upward trend. One reason is its offering of sophisticated technological solutions to investors. One such example was the launch of a mobile trading platform. This was a first for the continent, allowing investors to buy and sell shares using mobile wallet apps on smartphones. This service was launched in August 2015 and today has more than 4,000 investors registered. Through this platform, the DSE is trying to expand its investor base, which currently stands at 1% of the local population. The DSE aims to reach 5% in the next five years, which is quite an ambitious target considering a local population of more than 50 million people of which 40 million are economically active.

Another significant help towards greater financial inclusion is the enforcement of a clause in a finance bill, which will require all telecoms companies operating in Tanzania to float a 25% stake in their companies on the local stock exchange. This is expected to be fully enforced by January 2017. The newsworthiness of this legislation has increased awareness of the DSE among the wider population.

The DSE was originally established to serve the government’s privatization agenda and today it is again a crucial tool for the government, which is considering listing state-owned enterprises (SOE) as part of President John Magufuli’s industrialization program. Industrialization comes with capital raising needs and the DSE is seen as the opportunity for SOEs to raise capital.

DSE’s focus on profitability has increased significantly after the IPO. The institution was previously receiving a small government subvention on an annual basis to continue with its internal activities, whereas now the DSE is completely self-reliant and looks at more diverse revenue streams to achieve the projected profits that it has on its books.

The DSE is today a self-regulating organization (SRO), and given the fact that it is the custodian of the rules, the institution is well aware of how to comply with them. The demutualization process brings the DSE at the same level with other capital markets that have already gone public and makes the institution more competitive when seeking to grow and more aggressive in providing capital raising needs and in increasing financial inclusion.

The DSE initial public offering has been the most significant step within its process of demutualization, which will ultimately transform the institution from a non-profit member-owned company into an investor-owned corporation with real capacity to raise capital for its wider economy.

You may also be interested in...

Aerial,View,Of,Dar,Es,Salaam,,Tanzania

Economy

Nuts & Bolts

Doing Business

View More
Wild,Giraffes,In,African,Savannah.,Tanzania.,National,Park,Serengeti.

Tourism

Hidden Gems

Southern Circuit Tourism

View More
Kids,Running,On,Beach,Sand.,Children,Running,To,Play,In

Health & Education

Eliminating English, Eliminating the Economy?

Language of Education

View More
Happy,Students,At,A,School,In,Uganda,,Africa.,Students,Raising

Health & Education

Outcomes for All

Education

View More
Community,Health,Workers,(chw),During,A,Door,To,Door,Covid-19

Health & Education

Best Practices

eHealth

View More
Getting Healthy

Health & Education

Getting Healthy

Health

View More
Reap What You Sow

Agriculture

Reap What You Sow

2020 Irrigation Target

View More
East Africa’s “Geneva“

Real Estate & Construction

East Africa’s “Geneva“

Tanzania Strategic Cities Project (TSCP)

View More
View All Articles