Dar bourse set to open.

Tanzania's would-be dealers and brokers have been champing at the bit since September but the starting-gun on the Dar es Salaam Stock Exchange is yet to be fired. Latest reports say it will not go off with a bang until early next year.

Officials were appointed and premises acquired, press briefings were held and seminars attended, but for all the preparations which excited potential brokers and dealers plus a number of journalists earlier this year, September 1996 came and went and the Dar es Salaam Stock Exchange (DSE) never did begin business. At the last hour, it was announced that the Stock Market's launch had to be delayed: No specific reason was given and no fresh date was set. The only words of comfort that the Capital Market and Securities Authority (CMSA) could give were that a "firm foundation is being laid" so that trading can start in early 1997.

Let's hope so. Tanzania, a country heavily subjected to a centralised economy where a culture of capital markets was lacking, has begun to feel the need for a Stock Exchange.

Any market it might have had in the past, was the plethora of so-called underground banks where millions of shillings changed hands behind high fences and grilled doors. Then came liberalisation in the mid-1980s which gained momentum in the 1990s as parastatals began to be privatised.

Slowly but surely the economy is now being reoriented towards the private sector and the future should see the bulk of investment coming from non-governmental sources.

It is expected that the DSE will facilitate this process. It is a central institution in capital market operations, providing the requisite liquidity. It stands to benefit the public through greater transparency and the disclosure of information by issuers of securities.

The decision to establish the DSE provoked the implementation of a series of legislative and institutional measures. The Capital Markets and Securities Act, sanctioned in 1994, led to the formation of the CMSA, which will run the market, the same year. Since then the CMSA has been delegated the task of promoting and developing capital market institutions and raising the awareness of market participants and investors towards opportunities in the domestic market.

The next step was to form a registered company, as a corporate vehicle, to run the Exchange. In the Tanzanian context, a suitable DSE company is one with a limited liability by guarantee and without a share capital. The amount of guarantee accepted by members was Shs100,000. The CMSA then prepared a draft Memorandum and Articles of Association (MEMARTS). Subscribers to this include National Insurance Corporation, National Provident Fund, Parastatal Pension Fund, First Adili Bancorp Ltd, Cooperative and Rural Development Bank (1996) Ltd, Tanzania Securities Ltd, Solomon & Co Ltd, Exim Securities and Investments Ltd, Orbit Securities Ltd, Tanzania Oxygen Ltd and, finally Futurnet (T) Ltd.

On 19 September 1996 the DSE limited company was incorporated. Its management was vested in a council and Article 33 of the company provides that: "Members shall convene as soon as possible, and not later than one month after incorporation of the company, to elect members to the council". The role of the council is to provide an organic link between the CMSA and the DSE. The DSE company will be supported by CMSA for three years, after which time it will become the sole conductor of business. The CMSA, which is being supported by the Bank of Tanzania (BoT), has duly set aside funds to run the company.

Firm support for DSE

The DSE has also received firm support from the country's major financial institutions such as the National Bank of Commerce, National Insurance Company and Parastatal Pension Fund, which have all joined the DSE as associate members. A stock exchange that is responsible to the private sector, requires an advisory committee with members drawn mainly from the private sector, thus a committee was made up of representatives from First Adili Bancorp Ltd, Citi Bank Ltd, Stanbic Ltd, an accounting firm Massawe & Co, Parastatal Sector Reform Commission (PSRC), a prominent business Executive, Mr Girish Chande, and CMSA itself.

Meanwhile market participants and the first crop of dealers are getting themselves geared up for business. Publicity and promotional work is in full swing both within and outside of the country, in the belief that the performance of a stock exchange eventually becomes the mirror of a country's economy. The CMSA, with assistance from the World Bank, has commissioned GMA Capital Market Ltd, a London-based consultancy group, to finalise the blueprint for the DSE. In order to carry out its functions, the authority has developed a three-year 'plan of action' which focuses on a number of related issues.

Foremost is the education and promotion programme aimed at planning, developing and conducting the continual education of the public on security markets. The aim is to encourage the broad participation of individuals, institutions, business enterprises and the Government: A recent Zimbabwe survey revealed that despite many years of an operational stock exchange, only 2% of the population know what it is about. With this in mind, a research project - covering everything from fiscal policy to foreign dealers - has been established to investigate existing policies and legislations to see if they facilitate or hinder capital market development.

The CMSA also wants to encourage the issuance of securities to the public and its trading in the secondary market. Thus companies will be encouraged to go public and seek listing on the proposed stock exchange. As the market matures the authority will also examine the possibilities of promoting other products including the issuance of corporate bonds. Already the CMSA has been working with the central bank to prepare for secondary market in government securities.

If the DSE is to be a success, the availability of securities products is crucial. So far, attention has been devoted to shares in parastatals, currently being privatised, as well as some companies in the private sector. The Government is considering a proposal made by CMSA to float some of its shares, about 25%, in the companies being divested, to Tanzanian nationals. However, it has been reported that many state corporations that are being divested do not qualify for listing. In the manufacturing sector, which lacks a good profitable record, this is particularly marked. To qualify for listing, a firm must have a good five-year track record and allow for wide ownership and the ability to transfer shares.

According to the CMSA Director of Operations and Financial Services, Dr Zebedee Mpogolo, Tanzania Cigarettes Co and Tanzania Breweries Co, both recently privatised firms, qualify for a DSE listing. Tanzania Oxygen Ltd looks set to join them once various reforms are in place. Indeed, let's hope that the DSE is fully up and running in the New Year so that those firms which do qualify do not have to play party to further procrastinations.

*In the meanwhile, initial steps leading to the privatisation of the state-owned Tanzania Telecommunications Co have already been taken. A workshop, attended by Government officials and the private sector met last month to discuss the drafting of a new policy document on the reconstruction of the telecommunications sector of the country. Private companies already run card-operated payphone systems and the cellular telephone network.