REUTERS SUMMIT-Tanzania bourse presses state for privatisations

Fri Apr 11, 2014 2:55am EDT

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(For other news from Reuters Africa Summit, click here)

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By Edmund Blair and Fumbuka Ng'wanakilala

DAR ES SALAM, April 11 (Reuters) - Tanzania's stock exchange is pressing the government to sell shares in more state firms to help galvanise bigger private businesses to tap the capital market.

Regulations that will push mobile telephone firms and mining companies to list on the main bourse were at an "advanced stage", Moremi Marwa, chief executive officer of the Dar es Salaam Stock Exchange, said in Tanzania's commercial capital as part of the Reuters Africa Investment Summit.

He also said there were moves that could allow foreign investors to buy more than 60 percent of listed firms, raising the current limit that he said was the lowest in east Africa.

Like many other Africa bourses, Tanzania's exchange wants to encourage more firms to list or use the exchange to raise funds via corporate bonds, a potentially cheaper route than more commonly used banks that charge 18 to 30 percent for loans.

The government could help by listing state firms to create a more liquid market for private issuers, many of whom are still reluctant to use a bourse with just 18 listed firms, of which six are also listed in another country and only 12 are Tanzanian firms.

"What we have been trying to say over the last few months is to try to educate policy makers because we think the government can still do much to motivate capital market usage," Marwa said in the 14th-floor offices of one of city's new towers.

The exchange is reviewing three requests from companies to join its Enterprise Growth Market for smaller firms, which launched last year with the initial public offering (IPO) of Maendeleo Bank that raised 4.8 billion Tanzanian shillings ($2.94 million).

Marwa said at least two of those could receive approval and be listed before the end of June.

He said applications had come from two community banks, which serve rural areas, to raise between 2.75 billion and 5 billion shillings, and the Tanzanian subsidiary of Australian explorer Swala Energy Ltd, which wanted to raise 3.2 billion to 4 billion shillings.

REAL PRIZE

Energy firms working in Tanzania, which have made huge gas finds, could be required to list local subsidiaries under a new law for the industry which has yet to be implemented.

Marwa said Swala was moving on its own initiative. "They want to supplement their capital that is coming from their parent company," he said.

The real prize for the exchange, he added, was to secure more listings on the main bourse. He said he hoped state sell- offs could help achieve a target of two major IPOs this year, adding that the exchange had told the government at least 10 state firms that largely met listing requirements.

"We have tried to build the case and communicate it to the government to see the beauty of using the exchange," said Marwa, who took up his post in May, noting just seven of the more than 350 firms privatised since the mid-1990s were sold via an IPO.

He said state-led IPOs would encourage more private firms to follow suit by creating more liquidity on a bourse that now has a market capitalisation of about 17.5 trillion shillings but only 6.2 trillion shillings - about 12 percent of gross domestic product - if cross-listed firms were excluded.

Marwa said another step to encourage more listings would be to implement laws passed in 2010 that required local listings of mining firms working under licence and telecoms operators, of which there are now about six including Vodacom run by Britain's Vodafone and Airtel run by India's Bharti.

However, the laws have not been implemented because related regulations were not in place.

The exchange was also seeking to encourage companies to raise funds through corporate bonds on a market now overwhelmingly dominated by government bonds. There are now just four corporate bonds worth less than 40 billion shillings.

Marwa said one challenge was to convince family owned firms to open up and use the capital market.

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($1 = 1632.0000 Tanzanian Shillings) (Editing by Drazen Jorgic and Erica Billingham)

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