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Tanzania 2015 | FINANCE | INTERVIEW

TBY talks to Moremi Marwa, CEO of Dar es Salaam Stock Exchange, on growth in the markets, encouraging financial inclusion, and integrating in East Africa.

Moremi Marwa
BIOGRAPHY
Moremi Marwa joined the Exchange in May of 2013, prior to which he had held the position of CEO at the Tanzania Securities Limited brokerage firm since 2010. Moremi holds a Bachelor’s Degree in Commerce and Accounting and an MBA in Finance, both from the University of Dar es Salaam. He has been a Certified Public Accountant since 2003, and is certified by the Financial Markets Association.

How has the Dar Es Salaam Stock Exchange (DSE) grown over the last year?

It has grown significantly. In 2013, the local index, which we call the Tanzania Stock Index (TSI), grew by almost 100%. We doubled in terms of domestic market capitalization for the 12 locally listed companies. For total market capitalization, we experienced more than 25% growth. We have two indexes, a local index for domestic companies and an all share index for the whole market, including cross-listed companies. Some of the cross-listed companies did not do so well in 2013 in their primary markets. We have five that are cross-listed from Nairobi and one from the London Stock Exchange.

The Tanzanian government recently released its plans to ease restrictions for foreign investors, especially for government bonds. How will these changes affect the DSE?

The President has indicated that the government is in the final phases of enhancing capital account liberalization, and this will increase the level of foreign investors in our listed equities and also in the fixed-income instruments space. We believe that this might happen in the next 12 to 24 months. This, for us, is a great move because it will increase the investor base. Once you have that, then market forces tend to play a role and hence a better price mechanism and proper valuation for listed securities will emerge. And we will also be able to manage the pricing of these financial products.

How would you assess the current level of foreign interest in investing in the DSE in light of these new reforms?

The interest and appetite of foreign portfolio investors to participate in our market is high, both in the equity segment and on the fixed-income side. We receive a lot of queries as to when we will increase or remove the limits or restrictions that hinder foreign participation in our equity and fixed-income markets. Foreigners are allowed to participate up to a limit, and currently the ceiling is 60%. In the East African region, our limit in the lowest, followed by Kenya, which is at 85%. Uganda and Rwanda do not have the threshold, while Burundi does not have a stock exchange yet. It is important we note that most of the companies listed on the DSE have already reached or, in some cases, exceeded that limit. What this means is that, generally, foreigners are not allowed to participate in our market because, in most of the companies, the ownership limit has already been reached. Many foreign investors are keen to participate if we increase the minimum threshold. On the fixed-income side, we also receive many portfolio investors from abroad. As a country, we may decide to remove this restriction in a phased approach. We may begin by allowing East African investors to participate in our market, which is how other countries in the East African Community (EAC) are doing it. Many investors from other countries normally run their operations in the region through Nairobi. Once we allow investors from the region, such as portfolio investors and other similar types of investor, i.e. portfolio or fund managers, then we will tap some foreign investors beyond the region who are interested in our market.

Could you please elaborate on your integration plans with Kenya and Uganda?

We are part of the East African Securities Exchange Association (EASEA). With that association and the support of the EAC, we have been making significant progress. We are in different phases of implementing some activities, including initiatives toward regional securities issuances, regional stockbrokers, common securities trading, and depository and settlement infrastructure. We are now at an advanced stage toward introducing the regional infrastructure platform that will integrate our automated trading systems and our central securities depositories. The EAC Secretariat is spearheading the project, which will bring these exchanges together through ICT infrastructure, meaning that securities and investments will be easily moved across the region.