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BoT bars Tanzanians from buying Safaricom shares
By Mnaku Mbani
THE CITIZEN
The Bank of Tanzania has barred local investors from buying shares in Safaricom, East Africa�s most profitable company, through the Dar es Salaam Stock Exchange, The Citizen has learnt.
Tanzanians hopes of participating in the company's huge Initial Public Offering, which has been widely received in Kenya, Uganda, Rwanda and Burundi, were dashed in one fell swoop, when the central bank sent out a letter, indicating that buying those shares would be contravening the country's financial regulations.
However, reacting to the BoT decision, Orbit Securities CEO Laurean Malauri said in Dar es Salaam: It's extremely unfortunate that Tanzanians will miss this important economic opportunity. This is against the spirit of East African economic integration.
Orbit Securities were the local brokers who had been appointed by Safaricom to sell its IPO shares at the DSE.
The sale of 10 billion Safaricom shares billed as the largest divestiture in post-independence Kenya, as well as the East and Central Africa region was launched on March 28, in Nairobi.
But according to the BoT letter dated April 4, Ref No.IA.53/61/05, addressed to the DSE, the Governor, Prof Benno Ndullu, said Safaricom had not made any commitment to cross-listing at the Dar mart, which denied the country an opportunity for the development of the local market.
Please be advised that the sought dispensation would be difficult to administer given the existing limitation on convertibility of EA currencies, says the letter, which was copied to the minister for Finance and Economic Affairs, licensed brokers, the Attorney-General and the Capital Markets and Securities Regulatory Authority (CMSA).
The letter, a copy of which was made available to The Citizen, added: In any case, piecemeal waivers will not address the fundamental issues on capital account liberalisation, but rather undermine transparency and market development.
According to the two-page letter, the BoT is unable to grant the sought approval but would like to work with stakeholders in revising the policy framework governing such transactions, and thus promote integration of the EA market in a sustainable manner.
The Sh900 billion ($750million) IPO was to be sold at a discounted price of Sh90 (Ksh5) a share to would-be Tanzanian investors.
The Kenya Government jointly owns the company at 60 per cent and Britain's Vodafone, 40 per cent. The IPO, touted as the biggest ever on the Nairobi Stock Exchange, had to be delayed last year because of the General Election. Analysts and brokers in Kenya expect the IPO to be heavily oversubscribed.
The opposition party, ODM, had also urged delay of the IPO until the real owners of a shadowy company known as Mobitelea, which is said to own five per cent of Safaricom, are revealed.
Safaricom made a pre-tax profit of Sh440 billion ($370 million) in 2007, making it the most profitable company in East and Central Africa, followed by East African Breweries Limited.
From the original investment of $50 million and licence fee of $55 million paid by the Government and Vodafone Kenya, together will loans from the financial market, the company's value now exceeds $3 billion.
Following the Tanzania central bank�s ruling, Tanzanians keen on buying a stake in Safaricom must now find their own way to buy the shares.
However, the IPO has continued to draw numerous prospective buyers in Uganda, Rwanda, Burundi and, of course, in Kenya.
On Monday, Uganda's National Social Security Fund bought shares worth $34million (Sh40.8billion).
The minimum one can buy is 2,000 shares.
In Dar es Salaam, Orbit Securities boss Malauri, a former BoT principal economist, said the 14 per cent discount was enough to mitigate any currency exchange risks.
He said the sale of the IPO in the Tanzanian market would have stimulated the Dar es Salaam bourse and enabled more Tanzanians to invest in the mart as the Safaricom price was affordable.
Mr Malauri said Tanzanians could have benefited from the IPO because Safaricom is one of the most profitable companies in the East African region. Most previous IPOs on the local stock market, he said, had been sold at a higher price.
We regard this as a move backwards in the EAC federation effort, Mr Malauri said.
He said most of the cross-listed companies such as Jubilee Holdings, Kenya Airways and East African Breweries had not been beneficial to the locals.
Much as we did get approval from BoT, Tanzanians have not yet participated fully in the EA cross-listed companies, he added.
As Mr Malauri criticised the BoT decision, the Dar es Salaam Stock Exchange said it was the right decision as it was aimed at protecting Tanzanian investors.
DSE chief executive officer Jonathan Njau said though Safaricom IPO was potentially lucrative business, it had no clear exit mechanism for Tanzanian investors.
It would have become difficult for the IPO to be sold due to differences in currency exchange rates in the region, he said.
Mr Njau said the current regulations do not allow a company to raise funds through the DSE and invest the money outside the country.
DSE, he said, had appealed to the East African Stock Exchange Association (EASEA) to enable a company to cross-list its shares in each bourse, but had failed.
By Mnaku Mbani
THE CITIZEN
The Bank of Tanzania has barred local investors from buying shares in Safaricom, East Africa�s most profitable company, through the Dar es Salaam Stock Exchange, The Citizen has learnt.
Tanzanians hopes of participating in the company's huge Initial Public Offering, which has been widely received in Kenya, Uganda, Rwanda and Burundi, were dashed in one fell swoop, when the central bank sent out a letter, indicating that buying those shares would be contravening the country's financial regulations.
However, reacting to the BoT decision, Orbit Securities CEO Laurean Malauri said in Dar es Salaam: It's extremely unfortunate that Tanzanians will miss this important economic opportunity. This is against the spirit of East African economic integration.
Orbit Securities were the local brokers who had been appointed by Safaricom to sell its IPO shares at the DSE.
The sale of 10 billion Safaricom shares billed as the largest divestiture in post-independence Kenya, as well as the East and Central Africa region was launched on March 28, in Nairobi.
But according to the BoT letter dated April 4, Ref No.IA.53/61/05, addressed to the DSE, the Governor, Prof Benno Ndullu, said Safaricom had not made any commitment to cross-listing at the Dar mart, which denied the country an opportunity for the development of the local market.
Please be advised that the sought dispensation would be difficult to administer given the existing limitation on convertibility of EA currencies, says the letter, which was copied to the minister for Finance and Economic Affairs, licensed brokers, the Attorney-General and the Capital Markets and Securities Regulatory Authority (CMSA).
The letter, a copy of which was made available to The Citizen, added: In any case, piecemeal waivers will not address the fundamental issues on capital account liberalisation, but rather undermine transparency and market development.
According to the two-page letter, the BoT is unable to grant the sought approval but would like to work with stakeholders in revising the policy framework governing such transactions, and thus promote integration of the EA market in a sustainable manner.
The Sh900 billion ($750million) IPO was to be sold at a discounted price of Sh90 (Ksh5) a share to would-be Tanzanian investors.
The Kenya Government jointly owns the company at 60 per cent and Britain's Vodafone, 40 per cent. The IPO, touted as the biggest ever on the Nairobi Stock Exchange, had to be delayed last year because of the General Election. Analysts and brokers in Kenya expect the IPO to be heavily oversubscribed.
The opposition party, ODM, had also urged delay of the IPO until the real owners of a shadowy company known as Mobitelea, which is said to own five per cent of Safaricom, are revealed.
Safaricom made a pre-tax profit of Sh440 billion ($370 million) in 2007, making it the most profitable company in East and Central Africa, followed by East African Breweries Limited.
From the original investment of $50 million and licence fee of $55 million paid by the Government and Vodafone Kenya, together will loans from the financial market, the company's value now exceeds $3 billion.
Following the Tanzania central bank�s ruling, Tanzanians keen on buying a stake in Safaricom must now find their own way to buy the shares.
However, the IPO has continued to draw numerous prospective buyers in Uganda, Rwanda, Burundi and, of course, in Kenya.
On Monday, Uganda's National Social Security Fund bought shares worth $34million (Sh40.8billion).
The minimum one can buy is 2,000 shares.
In Dar es Salaam, Orbit Securities boss Malauri, a former BoT principal economist, said the 14 per cent discount was enough to mitigate any currency exchange risks.
He said the sale of the IPO in the Tanzanian market would have stimulated the Dar es Salaam bourse and enabled more Tanzanians to invest in the mart as the Safaricom price was affordable.
Mr Malauri said Tanzanians could have benefited from the IPO because Safaricom is one of the most profitable companies in the East African region. Most previous IPOs on the local stock market, he said, had been sold at a higher price.
We regard this as a move backwards in the EAC federation effort, Mr Malauri said.
He said most of the cross-listed companies such as Jubilee Holdings, Kenya Airways and East African Breweries had not been beneficial to the locals.
Much as we did get approval from BoT, Tanzanians have not yet participated fully in the EA cross-listed companies, he added.
As Mr Malauri criticised the BoT decision, the Dar es Salaam Stock Exchange said it was the right decision as it was aimed at protecting Tanzanian investors.
DSE chief executive officer Jonathan Njau said though Safaricom IPO was potentially lucrative business, it had no clear exit mechanism for Tanzanian investors.
It would have become difficult for the IPO to be sold due to differences in currency exchange rates in the region, he said.
Mr Njau said the current regulations do not allow a company to raise funds through the DSE and invest the money outside the country.
DSE, he said, had appealed to the East African Stock Exchange Association (EASEA) to enable a company to cross-list its shares in each bourse, but had failed.
