Stock markets: Dar es Salaam loses favor in region (The Africa Report n°38 – March 2012)

Regional investors are holding back, fearing second-class treatment as Tanzania continuously drags its feet on East Africa integration.

In November, Tanzania’s biggest airline, Precision Air, managed to raise only Sh11.84bn ($ 7.32m) of the Sh28bn it was aiming for in an initial public offering (IPO). The underscription was largely attributed to greater investor appetite for East Africa Breweries’ sale of its 20% stake in Tanzania Breweries Limited. But CEO of the Dar es Salaam exchange Gabriel Kitua admitted there was also perception from some Kenyan brokers that they were not welcome on the Tanzania exchange.

“They know our market has always been oversubscribed, so they assume if Precision Air is oversubscribed Tanzanians will get more shares than Kenyans,” he said.

Fearing domination of its domestic market by Kenyan importers, Tanzania has been reluctant to commit itself too quickly to more economic and political integration in East Africa.

“Had we had Kenyans and other East Africans in a big way, the subscription could have been different; we could have seen oversubscription,” Kitua said.

In January, East African Breweries said its Tanzania Breweries IPO was 245% oversubscribed. While local investors were allocated 55% of the shares, regional investors applied for only 0.04% – which they were allocated. The rest went to foreign investors.

The Tanzanian exchange is one of East Africa’s most illiquid, with the bond market dominating trade. In 2010, the turnover of the treasury and corporate bond market was Sh400bn, compared with Sh55bn in equity. But Kitua sees a potential for listings from the banking sector- only three of Tanzania’s 43 banks are listed and from construction, communication and transport sectors.

Last year the Tanzanian Share Index was up 26% to December, versus a 12% rise in the All Share Index – which includes five companies cross-listed in Kenya and African Barrick Gold. The London-listed mining company began trading in Dar es Salaam on 8 December in a move seen as an attempt to smother criticism of the lack of public benefit from natural resources.

Gemma Ware and Erick Kabendera


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