Tanzania: Stock Exchange Proves It Has Potential to Boost Industrialisation
Posted on :Wednesday , 22nd June 2016
Tanzania has enough liquidity to facilitate industrialisation as manifested by recently Dar es Salaam Stock Exchange initial public offer which was oversubscribed by astonishing proportions.
The oversubscription was expected since day one, but not at the said magnitude of almost five times or 377 per cent to rake in 35.77bn/- while the exchange earmarked to raise 8.25bn/-.
The oversubscription has shown that the DSE can be used as catalysts for industrialization through mobilisation of resources for capital needs. It has proven that the stock market has matured and is now capable of promoting efficiency in capital formation and allocation.
It is also a testimony that it has the potential to raise long term fund for financing projects and expanding and modernising industrial and commercial demands.
"This tells us that there is enough liquidity in the market to facilitate companies growth," Orbit Securities Chief Executive Officer (CEO), Laurean Malauri said. The IPO was opened to both domestic and foreign investors. However, going by the numbers local investors put 10bn/- for DSE.
"This means that the IPO was oversubscribed by a relative good margin by locals only," Mr Malauri said. Domestic investors put 1.75bn/- extra for the IPO.
The bourse nearly 20 years old, is still at nascent stage compared to Nairobi Securities Exchange, which has 60 years, but in recent years' people started to realise its importance in the economy and creating people's wealth.
DSE, though much younger to NSE, its senior to Uganda Securities Exchange and Rwanda over the Counter. Mr Malauri, whose firm was sponsoring broker of DSE primary offer, said the oversubscription shows "good signs" to capital seekers as liquidity is available. The monies are available because during the IPO wholesale buyers did not participate.
They preferred to stay out of the DSE saying it was very small. The Zan Securities Chief Executive Officer (CEO), Mr Raphael Masumbuko, said earlier that a single pension fund or some mutual funds could buy the IPO at a go.
"So in reality the heavy weights (wholesale investors) can buy the DSE at a go ... ," he said. Therefore even without heavy weights participation individual buyers put 10bn/-, what could have happened if pension funds subscribed as well?" he queried. DSE Chief Executive Officer (CEO) Mr Moremi Marwa said out of 35.77bn/- collected, 30 per cent or 10bn/- came from domestic investors while foreign investors subscription was 25.77bn/-.
"Due to data, domestic investors oversubscribed the IPO," Mr Marwa said. What helped the oversubscription? DSE brokers had marketed the IPO well. They said at the launch of the primary offer most investors failed to distinguish the bourse businesses and self-listing but after educating them, things took an abrupt U-turn.
The Managing Director of Orbit Securities, Juventus Simon, said many investors failed to understand income source of DSE thinking it may raise conflict of interest with other listed firms.
"But we have educated them that the bourse income is much separate from the listed firms... that the exchange generates its revenue by collecting various fees," Mr Simon said.
The problem is that DSE cannot take all those cash least they said would ask Capital Markets and Securities Authority to increase green shoe option slightly.
"The reason for raising this capital tied us to not taking all amount rose, but we are thinking of slightly increasing our green shoe option percentage," Mr Marwa said.
He said the redistribution of share would base on DSE promise made on prospectus on allotment pro-rata against the number of applicants. "For allotment pro-rata, we are considering to give full amount for individuals who bought less than 5.0m/-, but this is subject to approval from the regulator (CMSA)," Mr Marwa said.
CRDB Bank's Security Services Manager Hemed Masumai said they received more than 3,200 applications but even after the deadline would-be-investor wanted to buy.
"If we accepted all the application, even after deadline, we would have collected some 50bn/-. After the deadline we received about 1,600 or 50 per cent of on time applications," Mr Masumai said.
The bourse put on offer of 15 million shares at 500 each to raise 7.5bn/- with a green shoe of 10 per cent. DSE wants to use the IPO proceeds for enhancement of its core-operating system, introduction of new products and services and strategic and operational purposes.
The bourse self-listing is expected to take place on July 12 and refunds at the end of this month.
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