Investor 101
New Member
- Aug 5, 2021
- 1
- 5
“TANZANIA’S CAPITAL MARKETS.”
(ANOTHER UNEXPLOITED RESOURCE)
(ANOTHER UNEXPLOITED RESOURCE)
Tanzania being a lower middle-income country, as of July 2020 according to the World Bank; is trying to its level best to keep abreast with the ongoing changes in the various aspects of globalization, be it in the political, cultural, economic, technological or environmental dimension. The main goal is to reach better highs in the struggle for nation development.
In this context, the spotlight will be under the economic dimension for the purpose of trying to create awareness and motivate economic development in Tanzania, particularly through the capital markets. This is because capital markets have in fact proven to be an essential tool in boosting economies of developed countries that were once also developing ones. And yet most Tanzanians are still in the dark on this issue. Henceforth; “Another unexploited resource”, just like all the vast undeveloped resources in Tanzania.
First and foremost, the capital market is a segment of the financial market; whereby the latter is a factor market considered to be the central nervous system of the economy with the sole purpose of trading (i.e., Buying and Selling) securities or financial assets such as stocks/shares, commercial papers, bonds and so on; so as to enable business-oriented firms to acquire funds for various financial activities. And as for the former, it’s a source of intermediate to long term financing for corporate and government entities in the form of equity or debt securities with maturities of more than one (01) year. The acquired long-term funds help these entities to achieve their long-term strategic goals. Some of the securities traded in Tanzania’s capital markets include stocks and bonds such as CRDB, NMB, TBL, JATU shares and BOT Treasury Bills or Bonds respectively. Some of the participants include the “Issuer” of the security (i.e., security seller or entity that has agreed to make future payments) and the “Investor” (i.e., security buyer and owner).
Hypothetically, consider a certain company X with a business plan or an innovation that has a high assurance of prospering in the mere future. Unfortunately, company X doesn’t have sufficient capital to either commence operations or expand. The solution to these hurdles is simply the capital markets. Over the years this is how most of the successful companies in the world have been able to start operations and grow. Hence reaching extraordinary levels of business success; be it locally or globally. From beverage companies like Pepsi and Coca-Cola to tech companies like Apple and Tesla; all these are among the best performing companies in the world as of 2021, with the US capital market being a key factor to their triumph. It would be quite absurd not to follow the footsteps of our pioneers.
Tanzania is slowly building up the pace in the utilization of capital markets whereby various companies (i.e., Issuers) and their respective investors have been able to benefit from it; With much consideration to the equity or stock market. All this is made possible by the Capital Market and Securities Authority (CMSA), Tanzania’s capital market supervisory and regulatory body whose main objective is ensuring safety and soundness in the capital market. Some of the companies include CRDB, NMB & DSE from the banks, finance and investments sector; TPCC and TCCL from the industrial and allied sector and VODA from the telecommunication sector. These listed companies have succeeded in utilizing the Tanzanian equity market via the Main Investment Market Segments (MIMS) to further expand their operations for profit maximization.
In addition; the market has also helped startup companies through the Enterprise Growth Market (EGM) such as JATU PLC to acquire the required knowledge plus assistance on participating in the market as well as funds needed to commence operations. JATU PLC was registered in 2016, involving itself with agriculture, industries and markets. Due to its unique business plan; in just over 4 years JATU has managed to become a prime company alongside a few others in the agriculture sector, through the efficient utilization of funds it had acquired from the capital markets. After upgrading from the EGM to MIMS, it had an Initial Public Offering (IPO).
This helped the company to attain a market cap of over Tzs.2.9 billion and later on an additional Tzs.7.5 billion from the second or follow-on offering; hence making the company to be worth over Tzs.10.4 billion as of August 2021. The initial funds helped the company to get the ball rolling while the latter aims at expanding company’s operations in Tanzania and perhaps across borders. JATU PLC is a prominent example that Tanzania startup companies can prosper through the capital market.
In this context, the spotlight will be under the economic dimension for the purpose of trying to create awareness and motivate economic development in Tanzania, particularly through the capital markets. This is because capital markets have in fact proven to be an essential tool in boosting economies of developed countries that were once also developing ones. And yet most Tanzanians are still in the dark on this issue. Henceforth; “Another unexploited resource”, just like all the vast undeveloped resources in Tanzania.
First and foremost, the capital market is a segment of the financial market; whereby the latter is a factor market considered to be the central nervous system of the economy with the sole purpose of trading (i.e., Buying and Selling) securities or financial assets such as stocks/shares, commercial papers, bonds and so on; so as to enable business-oriented firms to acquire funds for various financial activities. And as for the former, it’s a source of intermediate to long term financing for corporate and government entities in the form of equity or debt securities with maturities of more than one (01) year. The acquired long-term funds help these entities to achieve their long-term strategic goals. Some of the securities traded in Tanzania’s capital markets include stocks and bonds such as CRDB, NMB, TBL, JATU shares and BOT Treasury Bills or Bonds respectively. Some of the participants include the “Issuer” of the security (i.e., security seller or entity that has agreed to make future payments) and the “Investor” (i.e., security buyer and owner).
Hypothetically, consider a certain company X with a business plan or an innovation that has a high assurance of prospering in the mere future. Unfortunately, company X doesn’t have sufficient capital to either commence operations or expand. The solution to these hurdles is simply the capital markets. Over the years this is how most of the successful companies in the world have been able to start operations and grow. Hence reaching extraordinary levels of business success; be it locally or globally. From beverage companies like Pepsi and Coca-Cola to tech companies like Apple and Tesla; all these are among the best performing companies in the world as of 2021, with the US capital market being a key factor to their triumph. It would be quite absurd not to follow the footsteps of our pioneers.
Tanzania is slowly building up the pace in the utilization of capital markets whereby various companies (i.e., Issuers) and their respective investors have been able to benefit from it; With much consideration to the equity or stock market. All this is made possible by the Capital Market and Securities Authority (CMSA), Tanzania’s capital market supervisory and regulatory body whose main objective is ensuring safety and soundness in the capital market. Some of the companies include CRDB, NMB & DSE from the banks, finance and investments sector; TPCC and TCCL from the industrial and allied sector and VODA from the telecommunication sector. These listed companies have succeeded in utilizing the Tanzanian equity market via the Main Investment Market Segments (MIMS) to further expand their operations for profit maximization.
In addition; the market has also helped startup companies through the Enterprise Growth Market (EGM) such as JATU PLC to acquire the required knowledge plus assistance on participating in the market as well as funds needed to commence operations. JATU PLC was registered in 2016, involving itself with agriculture, industries and markets. Due to its unique business plan; in just over 4 years JATU has managed to become a prime company alongside a few others in the agriculture sector, through the efficient utilization of funds it had acquired from the capital markets. After upgrading from the EGM to MIMS, it had an Initial Public Offering (IPO).
This helped the company to attain a market cap of over Tzs.2.9 billion and later on an additional Tzs.7.5 billion from the second or follow-on offering; hence making the company to be worth over Tzs.10.4 billion as of August 2021. The initial funds helped the company to get the ball rolling while the latter aims at expanding company’s operations in Tanzania and perhaps across borders. JATU PLC is a prominent example that Tanzania startup companies can prosper through the capital market.
This is a wakeup call for Tanzania’s Small and Medium Enterprises (SMEs); they ought to take advantage of the market so as to thrive in their business endeavors. Fortunately, on August 3rd 2021, Tanzania’s secondary market, the Dar es salaam Stock Exchange (DSE) introduced a new program called “DSE SMEs Acceleration Segment” (DSAS or Endeleza Project) which aims at assisting SMEs to readily access long term capital financing from investors. As yet, 08 companies have already fused with the program. These include:
- AKM Glitters Company Limited
- AML Finance Limited
- FINCA Microfinance Bank
- Raha Beverages Company limited
- Reni International Company Limited
- Selcom Paytech Limited
- Techno Image Ltd
- Victoria Finance PLC.
On the other side of the coin; there’s the investor. They buy or invest in securities with the aim of getting a return. This can be anyone regardless of their age provided that he or she has awareness and knowledge of the financial markets (capital markets). When a person buys or invests in a company’s stock or shares, he or she buys portion of that company hence become part owner of the company. This means they are entitled to the business’s declared dividends from profits and gains from the stock’s price appreciation as well as having voting rights regarding issues within the company.
Say one had bought CRDB shares back in 2019 when they were trading at Tzs.95 per share. On June 2021, a single CRDB share was worth Tzs.295; which gives an outstanding 210.5% return in just over 02 years, if the investor were to sell them. Besides that, the investor receives dividends that had been declared by CRDB PLC from the profits made in a particular financial year. One receives all these benefits without even setting foot in a CRDB office to work! Other advantages of these securities are that they can be converted back into cash (i.e., Liquidity) and can also be used as collateral for securing a loan in some banks.
In November 2020, DSE reported that 60% of its investors were foreigners and locals occupied the rest. In other words, foreigners exploit this resource far better than we natives; whom by a large percentage aren’t even aware of its existence. “Why are foreign investors interested in our capital market?” Or “Why do they include Tanzanian securities in their portfolios?”. It’s quite obvious they see potential opportunities in these markets. One doesn’t necessarily have to be a millionaire or a billionaire to engage with these markets. Surplus or ideal cash is all that’s needed.
Instead of depositing all your money in the bank of which is subjected to a monthly maintenance fee and receiving an interest that’s barely noticeable; you could invest some of it in the capital market so that you could have that money working for you instead! Or in lieu of blowing your money over an opulent lifestyle for the sake of social media like most youths do in their 20’s; one should rather invest it to avoid certain consequences in the future. For instance; back in 2014 one TBL share was much cheaper than a bottle of beer that the company produces. Today 2021, one TBL share is 5 times more the price of beer and the company pays dividends as well.
In brief; these markets channel funds from surplus (investor) to deficit (issuer) entities who professionally utilize the funds and create a return in the form of interest, dividends or capital gains depending on the security type. For the Tanzanian market, the demand or deficit side is well off established alongside the regulator (CMSA). Much can’t be said for the supply or surplus side where Tanzanians are lagging behind in participating in it hence missing out on the opportunity of being beneficiaries like our fellow foreign investors.
It’s important to bear in mind that capital markets are risky due to the constant change in security prices henceforth diversification is the key. But also, with high risk comes high returns. Lastly; people have to realize its best to invest idle cash than to save it, since a shilling today is worth more than a shilling tomorrow. So let that idle cash work for you instead.
Say one had bought CRDB shares back in 2019 when they were trading at Tzs.95 per share. On June 2021, a single CRDB share was worth Tzs.295; which gives an outstanding 210.5% return in just over 02 years, if the investor were to sell them. Besides that, the investor receives dividends that had been declared by CRDB PLC from the profits made in a particular financial year. One receives all these benefits without even setting foot in a CRDB office to work! Other advantages of these securities are that they can be converted back into cash (i.e., Liquidity) and can also be used as collateral for securing a loan in some banks.
In November 2020, DSE reported that 60% of its investors were foreigners and locals occupied the rest. In other words, foreigners exploit this resource far better than we natives; whom by a large percentage aren’t even aware of its existence. “Why are foreign investors interested in our capital market?” Or “Why do they include Tanzanian securities in their portfolios?”. It’s quite obvious they see potential opportunities in these markets. One doesn’t necessarily have to be a millionaire or a billionaire to engage with these markets. Surplus or ideal cash is all that’s needed.
Instead of depositing all your money in the bank of which is subjected to a monthly maintenance fee and receiving an interest that’s barely noticeable; you could invest some of it in the capital market so that you could have that money working for you instead! Or in lieu of blowing your money over an opulent lifestyle for the sake of social media like most youths do in their 20’s; one should rather invest it to avoid certain consequences in the future. For instance; back in 2014 one TBL share was much cheaper than a bottle of beer that the company produces. Today 2021, one TBL share is 5 times more the price of beer and the company pays dividends as well.
In brief; these markets channel funds from surplus (investor) to deficit (issuer) entities who professionally utilize the funds and create a return in the form of interest, dividends or capital gains depending on the security type. For the Tanzanian market, the demand or deficit side is well off established alongside the regulator (CMSA). Much can’t be said for the supply or surplus side where Tanzanians are lagging behind in participating in it hence missing out on the opportunity of being beneficiaries like our fellow foreign investors.
It’s important to bear in mind that capital markets are risky due to the constant change in security prices henceforth diversification is the key. But also, with high risk comes high returns. Lastly; people have to realize its best to invest idle cash than to save it, since a shilling today is worth more than a shilling tomorrow. So let that idle cash work for you instead.
