By Alawi Masare and Eric Ombok
Tanzania is studying proposals by the country’s stock market regulator to scrap limits on foreign share ownership, providing a further spur to Africa’s best-performing equities gauge.
Plans by the Capital Markets and Securities Authority to change rules that cap foreign holdings of listed companies to 60 percent are with Tanzania’s Finance Ministry for approval, Charles Shirima, a spokesman with the Dar es Salaam-based regulator, said in an e-mailed response to questions yesterday. The amendments are expected to be implemented by the end of this year, he said.
The 11-member Tanzania Share Index gained 50 percent in 2014, the most among 17 African gauges tracked by Bloomberg, with Tanzania Breweries Ltd., the country’s largest beer maker, National Microfinance Bank Ltd., the fourth-biggest lender, and Tanzania Cigarette Co., leading the advance. The country’s $33 billion economy, the largest in East Africa after Kenya, will expand 7.2 percent this year, according to World Bank estimates.
“The lifting of the restriction will definitely improve liquidity in the market, which may see the rally continuing,” Andrew Schultz, head of Africa strategy at Imara Africa Securities, which has offices in Angola, Zambia, Zimbabwe, Malawi and Nigeria, said by phone from Cape Town. Tanzania “is the Africa growth story — a young and growing population, rapidly urbanizing.”
Servacius Likwelile, permanent secretary in the Finance Ministry, said he wasn’t immediately able to comment when reached by phone. Foreign ownership of listed companies on the Dar es Salaam Stock Exchange was capped at 60 percent to protect and encourage local participation, the regulator’s Shirima said.
Investors from abroad account for about 23 percent of turnover and are “playing an important role,” he said. Trading this year amounts to 114 billion Tanzanian shillings ($68 million), compared with 252 billion shillings for all of last year, which was a more than fivefold increase in the average turnover in the previous five years, Shirima said.
Proposals put forward by the authority will also allow investors from outside East Africa to buy as much as 40 percent of securities issued by government, he said. “The likely impact is increased foreign participation in our market, which is expected to increase liquidity and make the market more attractive to issuers as well as investors,” Shirima said.
In addition, regulators within the East African region are considering a plan to introduce depository receipts to increase liquidity of cross-listed shares, he said. The Tanzania Share Index fell from a record high, declining 0.2 percent to 4,259.44 by the close.
The Dar es Salaam Stock Exchange, which has a market capitalization of 21 trillion shillings, is targeting a market value equal to 50 percent of Tanzania’s gross domestic product by 2017, Chief Executive Officer Moremi Marwa said in e-mailed response to questions. “We will definitely achieve our target in the next two years” if market conditions persist and it lures more initial public offerings, he said.
The bourse expects three IPOs by the end of its fiscal year through June 2015, two of which will be on the Enterprise Growth Market and the other on the main exchange, he said, declining to name the companies.
Mbeya Community Bank has made an inquiry on “the procedures and requirements for the issuance of shares and a listing but they are yet to make any formal submission,” the authority’s Shirima said. Mwanza Community Bank still needs to comply with some regulatory requirements before approval for a listing is granted, he said.