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”.
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.