According to the Finance Bill, 2016, the electronic and communication companies registered in the country are required to float their shares to the public and subsequently list their shares on the DSE within six months from July 1, this year.
Dar Es Salaam Stock Exchange (DSE) has sufficient liquidity to accommodate through listing telecom firms as stipulated in the amended electronic and postal communications act (Cap. 306) passed by the National Assembly last week.
The DSE Chief Executive Officer Mr Moremi Marwa said in Dar es Salaam the idea that the local market does not have the required liquidity was misguided as the 25 per cent of share offering is not as significant relatively to market liquidity.
“Our current market capitalisation is 22tri/- and annual market turnover is exceeding 750bn/-. Treasury Bonds and Bills issued per annum at DSE normally exceeds 2.5tri/- and they are normally oversubscribed, meaning there is more liquidity to investment less risky assets than instruments available,” he said.
He said the companies are meant to offer 25 per cent of their shareholding to the public and list into the local exchange. So the amount of money to be raised is not 100 per cent of these companies share capital. “The combined 25 per cent of all telecommunications companies’ balance sheets is about 1 billion US dollars. If we factor in the data above and project the potential savings that are not yet in the formal financial system or that may be reallocated across assets classes, one should get a sense that the argument for lack of liquidity is somehow faulted,” he said.
He added that the spirit of Electronic and postal communication act is also in line with country’s policy on economic empowerment, financial inclusion and financial literacy. The law is also meant to encourage transparency and good corporate governance which then encourages business sustainability.
“DSE already has the necessary legal and regulatory framework and the infrastructure particularly the Automated Trading System and Central Depository Systems that are capable to facilitate capital raising and listing of telecoms companies,” Mr Marwa added saying that listing of telecom companies is meant to facilitate the vibrant capital market in the country by increasing its depth and liquidity.
In Kenya for example, when Safaricom off loaded it’s shares and listed in the Nairobi Securities Exchange (NSE) it increased the number of shareholders in the NSE by 100 per cent as well as market liquidity significantly and market capitalisation significantly.
“So listing of Safaricom was a catalyst for market growth and liquidity growth. We need also to have this framework of thinking and not the other way round,” he added.