The country’s capital market has today come-of-age, following the launch of an alternative window at the Dar es Salaam Stock Exchange (DSE) and is scheduled to list its first product.This means DSE is now having two markets, the Main Investments Market Segment (MIMS), which is the older one and Enterprise Growth Market (EGM), the new baby.
Therefore, it gives companies from all walks of life to access relatively cheap capital fairly and conveniently unlike in the past, when only those with good business track record of at least five years could do so through main market.
Raising capital via selling stocks is a relatively cheap means where subscribers become shareholders that are entitled to dividend based on performance of the firm, as compared to a loan from commercial banks that attract yearly interest of up to 25 per cent.
The Zan Securities Chief Executive Officer, Mr Raphael Masumbuko put it that the EGM function was no longer a hearsay or theory revolving around seminars and meetings but it is now a reality.
“The reception would be positive as it’s no longer what they (investors and public) used to hear and read on papers,” Mr Masumbuko said, “but it is a possible practice that a firm can raise capital though stock exchange.”
He said the listing of the Maendeleo Bank is a milestone to the entire financial sector that in the country the firm could now raise required capital through selling stocks.
The second market, EGM, is a brain child of Capital Markets and Securities Authority (CMSA) after a number of studies in a bid to bring onboard existing and starting-up small businesses.
The first company to list on the EGM will be the Maendeleo Bank which recently successfully completed its initial public offer (IPO) where eight million shares were on offer at the price of 500/- each.
The CMSA Principal Public Relations Officer, Mr Charles Shirima, said the EGM segment is designed to enable startup, small and medium enterprises that cannot meet the requirements of the main market to access the capital markets for capital raising, diversification and other corporate reasons.
“The EGM will exist in conjunction with and complement the existing MIMS at DSE,” Mr Shirima said. The establishment of the EGM is a result of recommendations of a study conducted by the CMSA on the appropriate capital markets structure for Tanzania in its efforts to develop and strengthen the capital markets.
Following the conclusion of the study, a number of preparatory steps for launching the EGM market were done including promulgation of the CMSA (Nominated Advisors). Regulations 2010 stipulating the roles Nominated Advisors (Nomads) in advising issuers under the EGM.
Other initiatives that have been taken include training of NOMADS and other professionals and amendment of the Capital Markets and Securities (prospectus) requirements to include requirements for EGM companies. “In addition DSE trading rules were also amended to allow the listing and trading of securities on the EGM platform,” Mr Shirima hinted.
The EGM is expected to create vibrancy of the capital markets and facilitate implementation of national policies aimed at economically empowering Tanzanians. It estimated that SMEs are contributing between 30 and 35 per cent of the country’s GDP and employing between 20 and 30 per cent of the labour force - thus ranked the second employer after agriculture.
According to figures from Tanzania Investment Centre (TIC), the 2.7 million enterprises across the country employ between four and five million out of the country’s labour force of 20 million people.
DSE Chief Executive Officer, Moremi Marwa said the bourse appreciates SMEs as the key vehicle for wealth creation, with huge potential to contribute substantially to real economic growth.
“The cost of raising the required capital through the equity market - during primary offer to listing - is a mere two per cent of the total capital raised,” Mr Marwa said.
Adding: “The minimum amount (that can be raised through the market) is 200m/-.” Listing at the main market required issuers to have a minimum of 1,000 shareholders, with three consecutive years of profitability, among others rules.
After listing at EGM, the issuer - SME - has no interest rate to worry or to pay as buyers of shares become simply shareholders who receive dividends.
Another advantage is that the entrepreneur works hand in hand with nominated advisor (Nomad) on the daily running of the company.
The Nomad is a highly skilled advisor in managing a particular enterprise and is licensed by CMSA to safeguard the interests of entrepreneurs and shareholders.
Source: Daily News, reported by Abduel Elinaza from Dar es Salaam, Tanzania
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