DSE Should Pull Up Its Socks

Published on 19th June 2007

At the time of Dar es Salaam Stock Exchange's (DSE) establishment in 1988, it was estimated that the listings would reach 13 companies in three years. That never happened as projected.

So far, only eight firms, six of them Tanzanian are listed with the Exchange. These are Tanzania Breweries Limited, Tanga Cement Company Limited, Tanzania Cigarette Company Limited, Tatepa, SwissPort (formerly Dahaco) and TOL Limited (formerly Tanzania Oxygen Limited).

Unlike the DSE, the Nairobi Stock Exchange (NSE) has been able to list 45 companies since its inception in the 1920’s by the British as an informal market for Europeans. NSE is the fourth leading securities exchange in Africa with the vision of becoming a leading securities exchange in the world.

The first foreign company to list with the DSE bourse was Kenya Airways, in 2004. Another Kenyan company, East African Breweries Limited, is also listed with DSE. Arusha based mining company –Tanzanite One Limited is currently in the process of being listed at the DSE.

The Tanzanian Government has accepted several fiscal incentives intended to attract more listings with the country’s budding bourse. The incentives have been jointly proposed by the Capital Markets and Securities Authority (CMSA) and the Exchange. 

Responding to an inquiry by The African Executive through wire-communication recently, the DSE chief executive officer, Jonathan Njau, said: “In order to attract more listings at the DSE, we need to promote awareness through seminars, media campaigns and presentations for companies with a listing potential in order to impress them to come for listing at the DSE.” To that end, the CEO went on, several fiscal incentives were proposed to the Government by CMSA and DSE, some of which have been accepted. For starters, it has agreed “to lower corporate tax from 30 to 25 per cent for listed companies – provided that the company involved issues at least 35 per cent of its shares to the public.”

Other agreed incentives are the reduction of withholding tax on dividend income from ten to five per cent; the scrapping of capital gains tax (CGT), and abolition of stamp duty on transfers effectuated on listed securities. The DSE aspires to be a place where investors can access medium and long term capital at a relatively cheap cost compared to other financial institutions in the country. 

There has been growth in equity listings from two in December 1998 to ten in December 2006. Moreover, trading sessions have been increased from three in April 1998 to 197 in 2006 – with deals concluded increasing from nine in April 1998 to 3,202 last year. The volume of shares traded increased from 5,390 in April 1998 to 23.3 million in December 2006 while market capitalization grew from Tsh6.9 billion in April 1998 to Tsh31,082.86 billion in December 2006.

Lack of awareness among the private sector in Tanzania which would have otherwise enabled them to take advantage of capital markets in the country is one of the reasons why few firms have so far listed with the DSE. 

“We have depended more on privatization; but it is not happening fast enough. Six out of seven domestic listings are from privatization. Only one private company had used the capital markets to raise capital,” says Njau.

Some financial experts state that numerous local firms have the qualities required for listing, but are not willing to do so – mainly due to ignorance of the benefits associated with listing and lack of confidence in the bourse. In addition, some companies’ management, who are aware of the benefits of listing, are reluctant to permit their companies to go public due to a culture of individualism. 

Economist Andrew Gray of the London-based HSBC Holdings Plc – one of the largest banking and financial organizations in the world – says that the DSE should educate people on investing in stock markets. He adds that the Tanzania Government should ensure that people’s money is safe.


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