MANDATORY LISTING: Was DSE chair forced out over letter to JK? By Samuel Kamndaya and Hassan Mghenyi The chairperson of the Dar es Salaam Stock Exchange (DSE) governing council, Mr Peter Machunde, has resigned over what appears to be pressure over his opposition to the recently enacted Electronic and Postal Communications (EPOC) Act, 2010.The DSE governing council yesterday released a statement confirming that Mr Machunde tendered his resignation before the councils 58th extraordinary meeting last Friday. Some DSE governing council insiders told The Citizen later yesterday that the councils vice-chairperson, Mr Yacoub Kidula, was the acting chairperson. Mr Machunde found himself in trouble with stockbrokers and other DSE stakeholders after signing a letter said to be from the DSE governing council, which was addressed to President Jakaya Kikwete, and which urged the Head of State not to sign the EPOC Bill into law on the grounds that it would be detrimental to the countrys investment climate. The Bill had a number of contentious clauses, including the one compelling mobile telephone companies to list at the DSE, and was strongly opposed by the firms. The Tanzania Stockbrokers Association (TSBA) disowned the letter, saying it had not been consulted. TSBA said the letter neither expressed the official position of the body nor the DSE governing council. TSBA chairman Leandri Tairo-Urassa said the association had learnt that Mr Machunde neither consulted the DSE management nor the DSE governing council before writing the letter. He added that TSBA fully supported the law, and said the Mobile Operators Association of Tanzania (Moat) was unhappy because listing would require mobile phone companies to operate transparently by revealing their finances. The DSE governing council also distances itself from the letter in its statement announced Mr Machundes resignation. The DSE governing council disassociates itself from both the statement (as quoted in a section of the media) and the contents of the said letter because those are his (Mr Machundes) personal views, the statement said. It could not be immediately established whether Mr Machunde had been forced out or had resigned of his own volition as his phone was switched off when The Citizen attempted to call him several times yesterday. The two-page letter signed by Mr Machunde said forcing mobile phone companies to list their shares at the bourse would have a negative impact on the firms, the capital market and buyers of the shares. Your Excellency, as much as we want more companies to list on our stock exchange, we are, however, reluctant to support the forced listing of shares by private companies, Mr Machunde said in the letter, which has been disowned by other DSE functionaries. The contents of Mr Machundes letter largely reflected the views of Moat members. Moat said in its letter to President Kikwete in February that forcing mobile phone companies to list at the DSE was contrary to other laws such as the Companies Act, the Capital Markets and Securities Act, and even the Constitution as regards private ownership of property. The mandatory listing requirement will surely discourage potential long-term investors in capital intensive sectors, given that it has already caused existing investors in our sector to seriously re-evaluate their long-term expansion and investment plans, says the letter, whose copy was seen by The Citizen. In the same vein, Mr Machundes letter, a copy of which was also seen by The Citizen, argued that the decision on whether or not to list a company established by private capital or its timing, should be left to shareholders. Mandatory listing thus goes against the grain of free enterprise and could potentially jeopardise rather than support DSEs growth prospects, the letter stated in part. It warned that although the law aimed to increase local ownership and management of the mobile phone companies, this might prove unfeasible because the stock markets capacity was limited. Your Excellency, the reality is that DSEs absorption capacity is, sadly, still very low given the relatively low savings ratio amongst Tanzanians, the letter said. Should the mobile companies be forced to list, there was a danger of the market demand failing to cope with the large companies initial public offer as all existing companies would also have to list their shares at the same time, it further argued. But equally worrisome is the risk of probable difficulty of exit by Tanzanian investors participating in the IPOs, who might find it hard to dispose of their shares after the public share offer due to a shortage of buyers. As a matter of fact, we are already experiencing this problem with CRDB and Dar es Salaam Community Banks listed shares, which clearly demonstrates the existence of this risk. Mr Machunde said investors should be given the freedom to choose when to register with the DSE owing to their capital needs and their own assessment of the market appetite as well as fiscal and other listing attractions. Mr Machunde did not take part at yesterdays official opening of the special training on bonds organised by the DSE with financial support from the World Bank. Instead, it was Mr Kidula who delivered the opening statement at the start of the three-day-course at a Dar es Salaam hotel.