How has the DSE

performed in its first

10 years?
Achievements and
Challenges for the
Domestic Bond Market
The Regulation of
Capital Markets in
Tanzania: Is there Room
for Improvement?
Archievements
ISSN No. 0856 8448
Issue No. 35 April, 2008
04
Ministers Statement
CMSA Chairmans Statement
05
08
DSE Chairmans Statement
DSE Chief Executive Offcers Statement
09
The Regulation of Capital Markets in Tanzania; Is there
Room for Improvement?
10
Profles of Listed Companies 30
How has the DSE performed in its frst 10 years?
39
Companies with a Listing Potential
60
Ten Years of Dar es Salaam Stock Exchange (Dse):
Achievements and Challenges for the Domestic Bond
Market
65
Profles of Licensed Dealing Members
71
82
Custody Services
84
The Unit Trust of Tanzania
85
A Note on Challenges of Starting Capital Markets in East
Africa
What the Dar es Salaam Stock Exchange (DSE) can do:-
89
C o n t e n t s
DS E J o u r n a l

It i s wi th great pl easure
that I congratulate the Dar
es Salaam Stock Exchange
on the occasion of its 10
th

Anniversary celebrations. This
is a signifcant milestone in the
history of the fnancial sector in
our country. Capital markets
are a key part of the fnancial
sector in any country. They
facilitate the intermediation
process by systematically
enabling movement of funds
from those with excess to
investment avenues that are
searching for medium and
long-term funds.
The Government deliberately
t ook t he i ni t i at i ves t o
establish the DSE with a view
to facilitating the reform
process in the fnancial sector,
encourage wider ownership
of shares among Tanzanians,
facilitate privatisation process
and assist in mobilisation
of capital for medium and
long-term investments. The
Government is happy that the
DSE has managed to achieve
these objectives despite several
challenges that have been
facing the DSE.
Since it opened its trading
floor, the DSE has on the
and Collective Investment
Schemes) in acquiring shares
of companies that are listed on
the Exchange.
The DSE despite its infancy
was the frst Exchange in East
Africa to automate some of
its operations with a view
to keeping abreast with the
best business practice when it
installed a Central Depository
System and later the Automated
Trading System. It is expected
t hat t hese t echnol ogi cal
infrastructure will help the DSE
reach majority of Tanzanians
and connect them to the rest of
the worlds fnancial markets.
The Government understand
the challenges that are facing
the DSE, and have been on
the forefront in giving a
helping hand in overcoming
them. However, much as
the Government is striving
to improve the policy and
regulatory environment to
enable the capital markets
thrive, the responsibility of
bringing more products and
creating an active market rests
with the DSE, CMSA and other
stakeholders.
STATEMENT BY THE MINISTER FOR
FINANCE AND plANNINg
equity front listed seven local
companies, cross-listed 3
foreign companies. On the
side of corporate bonds 9
bonds worth Tshs. 102.6 billion
have been listed whereas the
Government itself listed bonds
worth Tshs. 813.66 billion. In
terms direct participations
by Tanzanians 116,651 have
participated during the seven
(7) IPOs.
Through i t s operat i ons,
the DSE has facilitated the
Government s pol i cy on
wider allocation of resources
by Tanzani ans as many
Tanzanians have participated
either directly or indirectly
( t hrough pensi on f unds
Hon. Mustafa H. Mkullo
minister for finance
and planning
DS E J o u r n a l

THE ROLE OF CMSA IN

THE DEVELOPMENT OF
SECURITIES MARKET
As we cel ebrate the 10
th

Anniversary of the Dar es
Salaam Stock Exchange, it is
important that we refect on the
role of capital markets sector
in the economic development
process. Equally important is
the role of the Capital Markets
and Securi ti es Authori ty
(CMSA) in development of
the capital markets sector.
Capital markets is an integral
component of the financial
markets that provide avenues
for raising long term fnancial
resources and channel them
to economic ventures thus
availing several economic
benefits and potentials for
economic development. In the
process capital markets provide
liquidity, price discovery,
reduced infation, reduced cost
of fnancial transaction, transfer
of risk and an alternative source
of fnancing investments.
CMSA mission strives to design
and implement purposeful
measures which will enable
the creation and development
of sustainable capital markets
that are effcient, transparent,
orderly, fair and equitable
to all. Our vision is the
creation of sustainable capital
CAPITAL MARKETS AND SECURITIES AUTHORITY
CHAIRMANS STATEMENT ON THE DSE 10
TH
ANNIVERSARY
markets which comply with
international best practices.
Given the current gl obal
economic outlook we cannot
achi eve our goal s i f t he
focus is not directed towards
cooperation and sharing of
information with other players
including international and
regional economic groupings.
The frst decade of existence of
DSE has seen the CMSA directing
attention to the promotion of
capital markets in the effort to
increase domestic resources
mobilization, improving the
supply of long term capital
and encourage the efficient
allocation of existing resources.
This situation has evolved as
result of increased awareness
that capital markets can play
several key roles in mobilizing
resources and allocating the
resources i n i nvestments
thereby stimulating economic
growth.
Developing strong and viable
capital markets requires a
systematic and integrated
approach with particular
emphasis on the need to
devel op, st rengt hen and
improve all aspects of the
financial sector. Capital
markets complement and
compete with other markets
including commercial banks.
Currently bank borrowing
is expensive given the level
of lending interest rates and
the nature of the loans being
mostly short term. Capital
markets are already unfolding
themselves as competitor to
commercial banks by giving
savers a better opportunity for
investment when companies
i s s ue c or por at e bonds .
Companies are also able to
borrow at a rate substantially
less than that obtainable from
commercial banks.
As already stated, the major
function of capital markets
i s t o mobi l i ze resources
from savers and channel
them to i nvestments. A
supportive environment for
the development of capital
markets is therefore that which
on the supply side, promotes
accumulation of savings for
long term investment to build
Dr. Idris Rashidi
chairman - cmsa
DS E J o u r n a l

sustainable liquidity in the

financial markets. On the
demand side, the market
requires productive investment
opportunities which in turn
require a vibrant private
sector.
CMSA wi l l cont i nue t o
support government efforts
geared toward creating and
implementing sound macro-
economic policies, including
both monetary and fiscal
policies. The monetary policy
in Tanzania is targeted at
a sustainable low inflation
thus creating price stability.
Price stability supported by
low infation are conducive
to maintaining predictable
low and sustainable interest
rat es whi ch encourage
savers to invest long term.
On t he demand si de a
similar environment attracts
investors to borrow long
term for the purpose of
investing in the productive
sector. Fiscal policy of a
country also impacts on the
growth and the development
of capital markets. For
example excessive prolonged
government short t erm
borrowi ng resul t s i nt o
excessive supply which can
create havoc in the capital
markets.
The success in financial
sector reforms in Tanzania
is equally important. This
includes the establishment
of fi nanci al i nsti tuti ons
including commercial banks
and insurance companies.
This has led to growth in
financial intermediation
and improved payment and
settlement systems which are
important in building effcient
capital markets. The liquidity
in the pension funds and
other institutional investors
has led such institutions to
participate actively in the
equity and bonds markets.
The envisaged restructuring
of t he pensi on s f unds
and retirement benefits is
expected to be a catalyst in
the development of capital
markets. Its common trend
globally that pension funds
are the key players among
the institutional investors.
Thus institutional investors
pl ay a key rol e i n t he
success of capital markets
and specifically in creating
liquidity in the market.
P r i v a t i z a t i o n a n d
devel opment of capi t al
markets are symbiotic in
nature. Privatization enables
c ompani es t o oper at e
efficiently and profitably
thus making them eligible
f or l i st i ng at t he st ock
exchange. Privatization of
well performing companies
can also be done by listing
the shares of such companies
at the stock exchange. And
through the Stock Exchange
investors get the opportunity
to get in and get out of a listed
company or a listed security
without the involvement of
the concerned company.
The partial liberalization of
the capital account to allow
foreigners to invest at the
DSE could add to the liquidity
of our market. However,
currently strategic investors
who are foreigners own more
than 60% of the shareholding
i n mos t of t he l i s t e d
companies thus inhibiting
foreigners to participate in
the secondary trading due to
the prescribed for
foreign ownership contained
in the current regulations.
CMCA wi l l cont i nue t o
advise the government on
this condition and suggest
possible steps to bring about
positive development.
The establishment of CMCA
as a regulator and developer
of capital markets has created
confdence and was a timely
decision. CMSA came in at a
time when there was no stock
exchange, no stock brokers/
dealers, as well as lack of
readily available products
to issue to the public and
list at DSE. Apart from the
notable achievements that
we can boast of since the
establishment of the DSE,
capital markets in Tanzania
are contributing about 8% of
the GDP and the percentage is
destined to increase given the
envisaged growth momentum
of capital markets in Tanzania.
Its a clear that CMSA has
played role of promoting and
developing an efficient and
transparent capital market in
Tanzania.
Market integrity is of priority
DS E J o u r n a l

t o bot h i nves t or s and

issuers of securities. CMSA
has always put in place a
robust supervisory system
to safeguard the integrity
of the market. On site and
Offsite supervision of the
market place and market
players ranks very high on
the CMSA daily activities. At
this juncture we can proudly
report that since inceptions of
the capital markets in 1998,
there has not occurred an
incident that has shaken our
capital markets.
The future of capital markets
in Tanzania is stipulated in
the current CMSA Strategic
and Business plan 2007/08
to 2011/12. The strategic
plan intends to broaden and
deepen our capital markets
by addressing the challenges
facing the market. The current
status of our fnancial system
is characterized by:-
(a) Smal l fi nanci al sector
which is still dominated
by banks.
(b) Companies have been
fnancing their expansion
program through retained
earnings.
(c) Growing trend of demand
for new initial public
offers (IPOs) products by
investors which are mostly
oversubscribed.
(d) La c k of s uppor t i ve
environment for start ups
but high growth potential
companies.
(e) Insignificant role played
by privatization which has
almost now reached the
end. Through the defunct
PSRC the government
pri vat i zed more t han
300 public enterprises
out of which only 6 were
privatized through DSE.
In addressing the above
c ha l l e nge s CMSA ha s
prioritized certain key areas
as follows:-
(a) Increasing the number of
products in the market in
terms of equity securities,
col l ect i ve i nvest ment
schemes, venture capital
funds, government bonds,
corporate bonds, municipal,
infrastructure and housing
bonds, securitized debt
instruments and in the long
term riskier instruments
including commodities
and derivatives.
(b) Improving the market
conditions and the existing
structure at the DSE by
introduction of a second
market segment which
will cater for the needs of a
section of the economy that
up to now has not been able
to tap into capital markets,
specifcally small, medium
and start up companies
Ent erpri se Growt h
Market (EGM). The EGM
is envisaged as a new
equities market segment
that will exist parallel
to and complement the
existing Main Investments
Market Segment (MIMS).
This segment of market
is targeted to commence
operations by December
2008.
(c) I nt r oduct i on of new
c a t e gor y of ma r ke t
intermediaries such as
Nomi nat ed Advi sor s
wi th strong experti se
i n corporat e f i nance,
l aw and account i ng.
We also expect to see
active involvement and
stronger dealers/brokers,
investment advisers and
investment banking and
underwriters.
(d) Effciency in the functioning
of the CDS and payment
system, brokers trading vide
remote locations, electronic
filing for intermediaries,
and E licensing.
(e) An increased awareness on
individual investors, policy
markers, potential issuers
and professionals through
provision of continuous
public education.
(f) Revi ew of pr i nc i pal
legislation and regulations
on a continuous basis and
amendment of the Capital
Markets and Securities Act
(CMS Act 1994).
Our vision for the future is
seeing companies and others
who wish to raise capital
through capital markets have
a logical route for obtaining
long term fnancing. Investors
also need to perceive that
their investments are secure
and that they are adequately
protected. This can be achieved
through provision of services
t hrough prof essi onal l y
qualified capital markets
players and strong and frm
regulatory regime and fair
law enforcement.
DS E J o u r n a l

Today is a major milestone,

celebrating 10 years since the
Dar es Salaam Stock Exchange
rang its frst bell to signal the
official trading of the first
listed company. Trading
started on 15
th
April, 1998
with only one equity product,
by then TOL Ltd. Ten years
later, the DSE is trading 10
equity products, 5 corporate
bonds and 17 Government
bonds respectively. Over
these ten years, we have
witnessed an increase in
market capitalization from
TZS 161.0 billion in December
1998 to TZS 3,278.9 billion
today.
Those who have followed
closely DSEs evolvement
will recall, perhaps with
amusement, the open-out-
cry trading system that we
began with, where brokers
used to shout their buy and
sale orders to the Exchange
board writer. Today, both
the trading and the clearing
and settlement systems are
automated, moving the DSE
to the club of automated
Exchanges in the world.
All these achievements are
a good testimony that the
Exchange has steadily grown,
and continues to grow, to
achieve the noble objectives
for which it was established
for.
The remarkable successes
registered could not have
been possible had it not been
the support and cooperation
the Exchange received from
the Government of Tanzania,
Issuers, Licensed Dealing
member s, pr of essi onal
advisors investors (both
institutional and retail) as well
as Tanzanias development
partners. On this score, I
would like to extend our
sincere appreciation to all of
them for their contributions
that have made the DSE what
it is today. Going forward
we count for their continued
support, realising as we do,
of the many challenges ahead
that face the Exchange, and
call for concerted efforts of
all stakeholders to address
them.
We at the DSE do recognise
that the Exchange has not
yet been fully utilised in
mobilising medium and
long-term capital required
investments through issuance
of shares as well as bonds.
There are various reasons
for this shortcoming, the
main one being the paucity
of Issuers of these securities,
which is further compounded
by absence of large and
well researched investable
projects.
Our ma j o r c ha l l e ng e
therefore is to transform these
problems and weaknesses
into opportunities. To this
end, as we celebrate, I would
like to conclude by urging
all our stakeholders to join
us and support our efforts
and commitment see to it
that the Exchange plays its
noble role of facilitating
capital mobilisation in our
DSE CHAIRMANS STATEMENT
Mr. peter l. Machunde
chairman - dse
DS E J o u r n a l

As we look 10 years back when

the DSE listed its frst product
on 15
th
April, 1998, we have
every reason to be proud of
the achievements that have
been registered since then.
While we started with only
one product, we are proud
that today we have 10 equities,
6 corporate bonds and 17
Government bonds which are
now all trading on the DSE.
These achievements have put
the DSE on the key position in
the countrys fnancial sector
as a key vehicle for investment
and raising capital.
While participation in Initial
Public Offerings (IPOs) was
low at the inception, today
the level of participation
in IPOs has gone up as the
recent oversubscriptions in
the IPOs have evidenced.
The investment appetite has
increased because of a number
of reasons including the rising
of share prices once shares
are listed, the good dividends
offered by listed companies,
generous fiscal incentives
offered by the Government
on listed securities and the
increase in level of awareness.
It is, therefore, great that we
are celebrating 10 years of
CHIEF EXECUTIVE OFFICERS STATEMENT
Mr. Jonathan A. Njau
ceo - dse
existence amid such buoyancy
in the Stock Exchange. We
have congratulated ourselves
because we have come a
long way in terms of market
devel opment, as wel l as
development of infrastructure.
Br oker age hous es have
increased, while the DSE itself
has expanded its unit functions.
On the infrastructure front we
have moved from the manual
to automated operations, in
terms of trading, delivery,
clearing and settlement.
We would like to thank all
stakeholders, the Government
in particular, for all the support
that has been extended to
the DSE from its inception
todate. Indeed, the growth
of the DSE has been made
possible because of the support
obtained from the Government
t h r o u g h c o n d u c i v e
Go v e r n me n t p o l i c i e s ,
i ssuance of Government
bonds without mentioning
the direct financial support.
We would like to request the
Government to continue down
that road, ensuring that a
better environment is created
which encourages business
people to invest their money
in productive ventures.
The next 10 years are going
to be years of much faster
development for the DSE.
We intend to put in place a
whole range of new things that
will transform the bourse and
align it to the most developed
Exchanges of the world. DSE
intends to be a central player in
our economy by being the most
preferred avenue for capital
mobilisation in the country.
I would like to thank all
Tanzanians and all other
investors for reinvigorating
the bourse. It is now clear
that Tanzanians have the
potential to raise billions of
shillings in capital through
buying shares and bonds as
has been evidenced in huge
oversubscription of IPOs. The
private sector is advised to take
advantage of this huge interest
DS E J o u r n a l
10
INTRODUCTION
About fourteen years have elapsed
since the Capital Markets and Securities
Act was enacted in 1994. In the current
revision, it is Chapter 79 of the Laws of
Tanzania. The revision has consolidated
the Act as well as amendments made in
1997
1
. At the same time that the amendments were
made (i.e. 1997) a set of Regulations were enacted
to cater for a variety of issues including(licensing,
registers of interests insecurities, establishment of
stock exchanges, advertisements, accounting and
fnancial requirements, prospectus requirements,
collective investment schemes and conduct of
business)
2
. A regulation on capitalization and
rights issues was adopted in 2000
3
.
Six brokerage houses are in place
4
, the Dar es
Salaam Stock Exchange (DSE) is operational
5
, nine
companies have been listed at the bourse (of which
seven are local and three are cross-listed from the
Nairobi Stock Exchange)
6
now having a market
capitalization of about US $ 2,650 mln., two unit
trust schemes have been established
7
and a good
number of Tanzanians are now acquainted with
the concept of shares, units and securities dealings
generally
8
. This year, the DSE is celebrating its 10
th

Anniversary.
More than a decade after the adoption of the current
By Dr. Hamisi S. Kibola
*
Chief Executive Offcer
Unit Trust of Tanzania
regulatory framework, no doubt it
has been suffciently tested both as
to its substance and the manner in
which it is implemented. A bad
law implemented well may out-do
a good law which is implemented
badly. However, industry still
needs a good law which should
be implemented well.
This short paper offers some
explanations of; the background
to the capital markets law in Tanzania, problems
related to activation of implementation of the
law, the major characteristics of the law as well as
problems associated with implementation of the
law. The paper suggests that the legal framework
is consistent with international best practices.
However, room for improvement still exists as the
market develops and matures with the prospects
of diverse instruments that may be offered as
well as other participants in the market. Issues
such as foreign participation in Tanzanias capital
market have already led to certain legislative
developments.
One major conclusion of the paper is that changes
need to take place in the regulatory environment.
This involves the art or manner in which the
regulatory framework is practically implemented.
As will be evident later, the Capital Markets and
Securities Act was enacted inter alia to facilitate
the promotion and development of capital markets
in Tanzania. The paper concludes that it is not yet
sunset for these noble objectives.
*
The views expressed in this paper are those of the author and should not in any way be attributed to the Unit Trust of Tanzania
1
Amendments were made by the Capital Markets and Securities Amendment Act, 1997. Act No. 4 of 1997.
2
These are now published in Vol. II of Subsidiary Legislation Revised Edition 2002.
3
Government Notice No. 288/2000.
4
Tanzania Securities Ltd., Solomon & Co. Ltd., Orbit Securities Co. Ltd., Rasilimali Ltd., Core Securities Ltd. and Vertex International Securities Ltd.
5
Established as a company limited by guarantee without a share capital in 1996. Trading operations were launched on 15
th
April, 1998.
6
The local companies are TOL Ltd., Tanzania Breweries Ltd., Tanzania Cigarette Co. Ltd., Tanzania Tea Packers Ltd., Tanga Cement Co. Ltd., Swissport
(T) Ltd. and Twiga Cement Co. Ltd. The companies cross listed from the NSE are Kenya Airways Ltd. East African Breweries Ltd. and Jubilee Insurance
Co (K) Ltd.
7
Umoja Unit Trust Scheme (Umoja Fund) and Wekeza Maisha/Invest Life Unit Trust Scheme have been established by the Unit Trust of Tanzania. Two
other schemes are in the pipeline a Children Career Plan (CCP) and a Regular Income Scheme (RIS).
8
As at 19
th
March, 2008, the Central Depository System of the DSE had 93,578 accounts. Umoja Unit Trust Scheme had 95,188 .investors and Wekeza
Maisha/Invest Life Unit Trust Scheme had 2,210 investors.
THE REgUlATION OF CApITAl MARKETS IN
TANZANIA; IS THERE ROOM FOR IMPROVEMENT?
DS E J o u r n a l
11
There is no better statement on the objectives,
environment and principles of securities regulation
than the one provided by the International
Organisation of Securities Commissions (IOSCO)
9
.
By and large, securities regulation will be primarily
manifested in the law (i.e. the legal framework/the
rule of law). Each jurisdiction has its own legal
framework. What IOSCO has done is to stipulate
certain principles which should be applied in each
of its constituent jurisdictions
10
. We therefore begin
with the Objectives and Principles of Securities
Regulation as stipulated by IOSCO as these are
deemed to be the basis for international best
practices. At a later stage we will match the
legal framework existing in Tanzania with those
principles stipulated by IOSCO. It is pertinent
to observe that Tanzania is associated with
IOSCO
11
.
OBJECTIVES OF SECURITIES REGULATION
IOSCO stipulates that the three core objectives
of securities regulation are: the protection of
investors; ensuring that markets are fair, effcient
and transparent; and the reduction of systemic
risk. IOSCO recognizes that these three objectives
are closely related and, in some respects, overlap.
The Protection of Investors
In as far as protection of investors is concerned,
IOSCO states that investors should be protected
from predatory activities such as; misleading,
manipulative or fraudulent practices, including
insider trading, front running or trading ahead of
customers and the misuse of client assets.
Moreover full disclosure of information material
to investors decisions is the most important
means for ensuring investor protection. This is
due to the fact that investors are, thereby, better
able to assess the potential risks and rewards
of their investments and, thus, to protect their
own interests. As key components of disclosure
requirements, accounting and auditing standards
should be in place and they should be of a high
and internationally acceptable quality.
To underscore the activities of intermediaries in
the context of investor protection, IOSCO states
that only duly licensed or authorized persons
should be permitted to hold themselves out to the
public as providing investment services; as market
intermediaries or the operators of exchanges. Initial
and ongoing capital requirements imposed upon
those license holders and authorized persons should
be designed to achieve an environment in which
a securities frm can meet the current demands of
its counter parties and, if necessary, wind down its
business without loss to its customers.
Supervision of market intermediaries should
achieve investor protection by setting minimum
standards for market participants. Investors should
be treated in a just and equitable manner by market
intermediaries according to standards which
should be set out in rules of business conduct. There
should be a comprehensive system of inspection,
surveillance and compliance programs. Investors
in the securities markets are particularly vulnerable
to misconduct by intermediaries and others, but
the capacity of individual investors to take action
may be limited. Further, the complex character of
securities transactions and of fraudulent schemes
9 IOSCO is recognized as the international standard setter for securities markets. The Organizations wide membership regulates more than 90% of
the worlds securities markets and IOSCO is the worlds most important international cooperative forum for securities regulatory agencies. IOSCO
members regulate more than one hundred jurisdictions and the Organizations membership is steadily growing. See www.IOSCO.org.
10 IOSCO further recognizes that there is often no single correct approach to a regulatory issue. Legislation and regulatory structures vary between
jurisdictions and refect local market conditions and historical development. The particular manner in which a jurisdiction implements the objectives
and principles described in this document must have regard to the entire domestic context, including the relevant legal and commercial framework.
Ibid.
11
IOSCO has three categories of members: ordinary, associate and affliate. The Capital Markets and Securities Authority is an ordinary member of
IOSCO.
PART I
OBJECTIVES, ENVIRONMENT AND PRINCIPLES OF SECURITIES
REGULATION
DS E J o u r n a l
12
requires strong enforcement of securities laws.
Where a breach of law does occur, investors should
be protected through the strong enforcement of
the law.
In the event of an ultimate dispute, investors
should have access to a neutral mechanism
(such as courts or other mechanisms of dispute
resolution) or means of redress and compensation
for improper behavior.
Ensuring that Markets are Fair, Effcient, and
Transparent
The regulators approval of exchange and trading
system operators and of trading rules helps to
ensure fair markets.
On fair markets it is stipulated that market
structures should not unduly favor some market
users over others. Regulation should detect, deter
and penalize market manipulation and other unfair
trading practices.
Regulation should aim to ensure that investors are
given fair access to market facilities and market or
price information. Regulation should also promote
market practices that ensure fair treatment of orders
and a price formation process that is reliable.
In an effcient market, the dissemination of relevant
information is timely and widespread and is
refected in the price formation process.
IOSCO defnes transparency as the degree to which
information about trading (both for pre-trade and
post-trade information) is made publicly available
on a real-time basis. Pre-trade information concerns
the posting of frm bids and offers as a means to
enable investors to know, with some degree of
certainty, whether and at what prices they can deal.
Post-trade information is related to the prices and
the volume of all individual transactions actually
concluded. Regulation should ensure the highest
levels of transparency.
The Reduction of Systemic Risk
IOSCO realizes that regulators cannot be
expected to prevent the fnancial failure of market
intermediaries. Thus regulation should aim at
reducing the risk of failure (including through
capital and internal control requirements).
Where fnancial failure nonetheless does occur,
regulation should seek to reduce the impact of that
failure, and, in particular, attempt to isolate the risk
to the failing institution.
Market intermediaries should, therefore, be
subject to adequate and ongoing capital and
other prudential requirements. If necessary,
an intermediary should be able to wind down
its business without loss to its customers and
counterparties or systemic damage.
Risk taking is essential to an active market
and regulation should not unnecessarily stife
legitimate risk taking. Rather, regulators should
promote and allow for the effective management
of risk and ensure that capital and other prudential
requirements are suffcient to address appropriate
risk taking, allow the absorption of some losses
and check excessive risk taking.
An effcient and accurate clearing and settlement
process that is properly supervised and utilizes
effective risk management tools is essential. There
must be effective and legally secure arrangements
for default handling. This is a matter that extends
beyond securities law to the insolvency provisions
of a jurisdiction. Instability may result from events
in another jurisdiction or occur across several
jurisdictions, so regulators responses to market
disruptions should seek to facilitate stability
domestically and globally through cooperation
and information sharing.
After having surveyed the main components of
the objectives of securities regulation, let us now
highlight the principles of securities regulation.
THE REGULATORY ENVIRONMENT
IOSCO recognises that certain environmental issues
are relevant in the regulation of securities markets.
Implicit throughout the IOSCO document which
spells out the principles of securities regulation is
the belief that;
regulation should facilitate capital formation
and economic growth.
In the context of regulation, there should
DS E J o u r n a l
13
also be a recognition of the benefits of
competition in the market place.
Regulation is necessary to ensure the
achievement of the three core objectives.
Nevertheless,
Inappropriate regulation can impose an
unjustified burden on the market and
inhibit market growth and development.
IOSCO realizes that it is possible to identify general
attributes of effective regulation that are consistent
with sound economic growth and observes that:
There should be no unnecessary barriers to
entry and exit from markets and products;
The markets should be open to the widest
range of participants who meet the specifed
entry criteria;
In the development of policy, regulatory
bodies should consider the impact of the
requirements imposed;
There should be an equal regulatory burden
on all who make a particular financial
commitment or promise.
While observing that there must be an appropriate
is the Capital Markets and Securities Act. This is
supplemented by the Companies Act, the Auditors
and Accountants (Registration) Act as well as
legislation in the area of taxation. Exchange control
legislation is relevant in the context of foreign
participation in Tanzanias capital market.
THE CAPITAL MARKETS AND SECURITIES
ACT
The legal framework for securities regulation in
Tanzania is centered on the Capital Markets and
Securities Act (Cap. 79 of the Laws of Tanzania).
The Act was enacted to establish a Capital
Markets and Securities Authority for the purpose
and effective legal, tax and accounting framework
within which the securities markets can operate
IOSCO is further aware that securities law and
regulation cannot exist in isolation from the
other laws and the accounting requirements of a
jurisdiction.
THE PRI NCI PLES OF SECURI TI ES
REGULATION
Apart from articulating the objectives of securities
regulation, IOSCO has also stipulated thirty
principles of market regulation. These principles are
clustered in the following categories; A. Principles
Relating to the Regulator; B. Principles for Self-
Regulation; C. Principles for the Enforcement of
Securities Regulation; D. Principles for Cooperation
in Regulation E. Principles for Issuers; F. Principles
for Collective Investment Schemes; G. Principles
for Market Intermediaries; and H. Principles for
the Secondary Market.
The principles are elaborated in Part III of the
paper which compares international best practices
with the legal framework of capital markets in
Tanzania.
PART II
THE LEGAL FRAMEWORK OF SECURITIES REGULATION IN TANZANIA
THE REFORM AGENDA
The background has often been given of the
economic liberalization measures which were
adopted in Tanzania during the early 1990s.
Suffces to point out that the development of capital
markets was a part of the package of reforms which
also included; trade liberalization, relaxation of
exchange controls, de-regulation of interest rates
as well as divestiture of public enterprises. In the
place of public fnance of the productive sector,
capital markets had to fll the gap as the necessary
infrastructure in propelling the engine of growth
which has now come to be a synonym for the
private sector.
The apex legislation in regulating securities markets
DS E J o u r n a l
1
of promoting and facilitating the development of
an orderly, fair and effcient capital market and
securities industry in Tanzania, to make provisions
with respect to stock exchanges, stockbrokers
and other persons dealing in securities and for
connected purposes. It may be observed that the
major component of the Act is concerned with
dealing in securities
12
Dealing in securities is
defned as whether as principal or agent making
or offering to make with any person, or inducing
or attempting to induce any person to enter or to
offer to enter into:-
(a) any agreement for or with a view to acquiring
disposing of subscribing for or underwriting
securities; or
(b) any agreement the purpose or the intended
purpose of which is to secure a proft to any
of the parties from the yield of securities or
by reference to fuctuations in the price of
securities.
Technical assistance in the formulation of the Act
was provided by the Commonwealth Secretariat
and later supplemented by the International
Finance Corporation. As earlier mentioned,
the Act was extensively amended in 1997. The
amendments introduced inter alia certain issues
of a fundamental nature in securities business
(relating to public issue of securities and conduct of
business) as well as market development issues (the
need to regulate collective investment schemes).
The enactment of the Act may have been expedited
for the sake of compliance with some reform
benchmarks. The extensive amendments carried
out thereafter set the pace for the subsequent
market development work.
The Act is divided into fourteen parts making
provision for transitional as well as regular/
continuous situations. On transitional provisions,
Part X provided for an Interim Stock Trading
Facility (ISTF) - a stage which was skipped in favor
of a stock exchange
13
. Pending the establishment
of the Capital Markets and Securities Authority,
the Governor of the Central Bank performed the
functions of the Authority
14
.
The other parts of the Act deal with; the Capital
Markets and Securities Authority, Stock Exchanges,
Licenses, Register of Interests in Securities, Conduct
of Securities Business, Accounts and Audit,
Fidelity Funds, Trading in Securities, Collective
Investment Schemes, Public Offers of Securities,
Advertisements Relating to Securities Business
and the last one on miscellaneous provisions.
The provisions of the Act are supplemented by
detailed regulations. We will highlight the main
aspects of these parts before doing a detailed
comparison of its elements with what we have seen
is recommended by IOSCO.
Apart from the Act, there are also certain other
legislations which have a bearing on the conduct
of securities business. The paper will touch on
these legislations at their appropriate points of
reference.
THE CAPITAL MARKETS AND SECURITIES
AUTHORITY
The Act established a Capital Markets and
Securities Authority (CMSA hereinafter the
Authority) as a body corporate with perpetual
succession and a common seal The Authority is
vested with the following functions:-
(a) To advise the Minister on all matters relating
to the securities industry;
(b) to maintain surveillance over securities to
ensure orderly, fair and equitable dealing in
securities;
( c) Register, license, authorize or regulate in
12

Dealing in securities is defned as whether as principal or agent making or offering to make with any person, or inducing or attempting to induce
any person to enter or to offer to enter into:-
(a) any agreement for or with a view to acquiring disposing of subscribing for or underwriting securities; or
(b) any agreement the purpose or the intended purpose of which is to secure a proft to any of the parties from the yield of securities or by reference
to fuctuations in the price of securities.
13
The provisions for an ISTF were based on the premise that appropriate conditions for a stock exchange did not exist. It was however resolved that a
revolutionary step should be taken given the support that was available from both bilateral agencies and multilateral institutions.
DS E J o u r n a l
1
accordance with (the) Act, or anyregulations
made under it stock exchanges, investment
advisers, securities, dealers and their agents
and to control and supervise their activities
with a view to maintain proper standards of
conduct and professionalism in the securities
business;
(d) to formulate principles for the guidance of the
industry;
(e) to determine the minimum capital requirement
for a license holder, depending on the size of
operations and risk;
(f) to monitor the solvency of license holders
and take measures to protect the interest of
customers where the solvency of any such
license holder is in doubt;
(g) to protect the integrity of the securities market
against any abuses arising from the practice
of insider trading;
(h) to adopt measures to minimize and supervise
any conflict of interest that may arise for
dealers;
(i) to review, approve and regulate takeovers,
mergers, acquisitions and all forms of
business combinations in accordance with
any existing rules of practice authorizing or
requiring the security to do so;
(j) to create the necessary environment for the
orderly growth and development of the
capital market;
(k) to perform the function referred to in section
35 of the Companies Act;
(l) to undertake such other activities as are
necessary or expedient for giving full effect
to the provisions of (the) Act; and
(m) to do anything which is calculated to facilitate
the discharge of its functions or is incidental
or conductive to their discharge, under (the)
Act
15
.
In order to discharge these functions, the Authority
has been granted certain statutory powers. These
include: powers to direct production of books;
disclosure of ownership of securities the subject
of acquisition or disposal, disclosure relating to
dealing in securities; advise given by a dealer or
investment adviser, fnancial position of persons
involved in a relevant transaction etc; powers of
investigation etc.
In addition to the powers stated above, the
Authority is empowered to: approve a stock
exchange
16
as well as Collective Investment
Schemes
17
; issue directions to a stock exchange
18

and prohibit trading in particular securities
19
. No
one may carry on business as dealer or investment
adviser (or their representatives) without a license
issued by the Authority
20
. As it were, the Authority
may revoke a license issued by it
21
. In respect of
Collective Investment Schemes, the Authority may
carry out an investigation on the administration of
any scheme and issue directives to a scheme
22
.
In connection with public offers of securities, the
Authority is empowered to approve a prospectus
23
.
Furthermore, all advertisements relating to offers
of services in relation to securities business of offer
of securities has to be approved by the Authority
24
.
It may appear that the powers of the Authority
are limitless. This is however not the case as
Parliament has made action by the Authority
subject to certain conditions. The Authority
is therefore accountable in the implementation of
its mandate. Thus the Authority may take action;
Where it considers that there is suffcient cause
to do so; Where it considers it necessary for the
protection of investors; Where it has reason to
suspect that a person has committed an offence;
15
Section 10 of the Capital Markets and Securities Act.
16
Section 26(3), Ibid.
17
Section 115, Ibid.
18
Section 30(1), Ibid.
19
Section 31(1), Ibid
20
Sections 32(1) and 34(1), Ibid.
21
Section 46(1), Ibid.
22
Section 123(1), Ibid.
23
Section 131, Ibid.
24
Sections 135 and 136, Ibid.
DS E J o u r n a l
1
Where it believes on reasonable grounds;
Where it appears to be in the public interest;
Where the Authority is of the opinion that it
is necessary to prohibit trading; or After it has
given a person to be affected an opportunity to
be heard.
The Authority is an administrative agency whose
decisions/determinations are subject to judicial
review. Where a requirement has been stipulated
for the Authority to act subject to a certain
prescribed condition (such as; having a reason to
suspect, reasonable belief or a particular opinion)
the Authority is obliged to have a verifable basis
for undertaking the respective course of action.
It is also signifcant to observe that the Authority
operates within an executive power structure.
The power to make Regulations under the Act is
vested not on the Authority but on the Minister
of Finance
25
. Moreover, the Minister may give to
the Authority directions of a general or specifc
character as to the exercise of its functions, and it
shall be the duty of the Authority to give effect
to any such directions
26
.
STOCK EXCHANGES
A stock exchange is defned as any body corporate
which has been approved by the Authority
under Section 26. It is therefore clear that the
establishment of a stock exchange is regulated
under the Act.
Certain conditions have been prescribed for the
grant of approval of a Stock Exchange. A proposed
stock exchange must be a body corporate, there
must be a minimum of three members dealing in
securities independent of and in competition with
each other and the body corporate must have rules
which make provision for a variety of matters such
that it is a Self-Regulating Organisation (SRO).
Further approval will be a granted if the interest
of the public will be served.
As an SRO, a stock exchange is obliged to maintain
rules;
(i) for exclusion from membership of persons
who are not of good character and high
business integrity;
(ii) for the exclusion, suspension or disciplining
of members for conduct inconsistent with just
and equitable principles in the transaction of
business or for a contravention of or failure to
comply with the rules of the stock exchange
or the provisions of (the) Act;
(iii) for the making of a report to the Authority
by the body corporate whenever it rejects
any application for membership, where it
suspends or expels a member or where it
suspends trading in particular securities of,
or made available by, a body corporate on the
stock exchange;
(iv) for the terms and conditions of the Chief
Executive Officer of the body corporate,
including a term that such Chief Executive
Officer shall not be liable to dismissal or
removal from his offce without the prior
approval of the Authority;
(v) with respect to the conditions under which
securities may be listed for trading in the stock
market proposed to be conducted by the body
corporate;
(vi) with respect to the obligations of the issuers
of the listed securities;
(vii) with respect to the conditions governing
dealing in securities by members;
(viii) with respect to the class of securities that may
be dealt in by members
(ix) with respect to a fair representation of persons
in the selection of its Council members and
administration of its affairs including the
representation of listed companies, investors,
and the professions relevant to securities
trading; and
(x) generally, for the carrying on of business of
25
Section 148(1), Ibid.
26
Section 147, Ibid.
DS E J o u r n a l
1
the stock exchange with due regard to the
interests of the public
27
.
Amendments of the Rules is subject to approval of
the Authority which in addition has the nuclear
option the power to withdraw approval of a stock
exchange if it is in the public interest.
28
As part of regulatory oversight, the Authority
may issue directions to a stock exchange as well as
prohibit trading in securities
29
. A stock exchange is
obliged to assist the Authority by furnishing such
returns and other information
30
.
The DSE was approved as a stock exchange in
1997
31
. As an SRO, it maintains a Blue Print
32

which contains rules on: membership and business
conduct, listing, trading, clearing, settlement and
depository, foreign investors etc.
LICENSES
Access to securities business is regulated in a
licensing regime. No person shall carry out the
business of dealing in securities or investment
adviser (or their representatives) without a license
from the Authority
33
.
Although the Act provides that any person may
be granted a dealers license, in practice licenses
have been granted to body corporates. Licenses
are granted subject to a ft and proper test which
includes: minimum financial requirements as
may be provided by the Authority; educational
qualifcations and experience; good reputation/
character as well as an opinion by the Authority
that an applicant will perform respective duties
effciently, honestly and fairly.
34
The Authority
may suspend or revoke a license
35
. However,
the Authority shall not revoke or suspend a
licencewithout frst giving an opportunity to
be heard
36
.
Several obligations are attached to a holder of a
license under the Act; A dealers deposit (in the
case of a dealer) must be lodged
37
; Notifcation
of change of any particulars
38
; Compliance with
fnancial requirements and conduct of business
rules
39
.
REGISTERS OF INTERESTS IN SECURITIES
Market i ntermedi ari es (deal ers, deal er s
representative, investment representative) and
fnancial journalists are required to maintain each
a register of securities in which they have an
interest
40
. The register is to be in prescribed form.
The main objective of this requirement is to prepare
a stock of information which may be useful in
the event of unethical activities mainly as a tool
to regulate adverse effects of conficts of interest.
The register is to contain particulars of securities
in which the applicable persons have an interest.
Any changes in the interest are to be recorded in
the register. The Authority may require any person
obliged to maintain such a register to produce it
for inspection
41
.
CONDUCT OF SECURITIES BUSINESS
27
Section 26(3), Ibid.
28
Section 26(6), Ibid.
29
Sections 30 and 31, Ibid.
30
Section 28(1), Ibid .
31
Government Notice published in 1997.
32
DSE Copyright, 2003.
33
Sections 32(1) and 34(1) of the Capital Markets and Securities Act.
34
Section 37(3)(b), Ibid.
35
Sections 46(1)(b) and (3).
36
Section 36(4), Ibid.
37
Section 42(1), Ibid.
38
Section 44, Ibid .
39
These aspects are dealt with elsewhere in the paper.
40
Sections 50 and 51 of the Capital Markets and Securities Act.
41
Section 54, Ibid.
DS E J o u r n a l
1
The key requirements of conduct of business
include: the issue of Contract Notes for transactions,
investor protection where a dealer deals as
principal, provision of priority to client orders
and appropriate use of clients funds. There is a
prohibition of: provision of credit to employees of
dealers and short selling. Moreover obligation is
imposed on an investment adviser to have a basis
for recommendations made to clients.
A Contract Note constitutes evidence of a sale or
buy transaction. A prescription has been made on
the contents of a Contract Note to include apart
from names of the dealer, appropriate name of
the client, date of transaction, the description of
the securities subject matter of the transaction,
price per unit, amount of consideration, rate and
amount of commission, stamp duty and taxes
payable etc
42
.
The rule on priority to clients orders is based on the
premise that a dealer is allowed to deal as principal
and if this rule were not there, clients would
have been exposed to front running by a dealer. It
is therefore provided that when a dealer deals as
principal, the counterparty should be informed of
this fact. Secondly, clients orders shall have priority
over those of the dealer
43
.
The treatment of clients funds is also regulated.
Moneys are to be deposited in a bank account
(not later than the next day), a receipt indicating
the deposit and its terms has to be issued by the
dealer, money is to be retained in the account until
it is used for the appropriate purpose
44
. It will later
be observed that dealers are required to maintain
trust accounts for this purpose.
In addition to the provisions of the Act, other
detailed requirements for protection of investors
are enshrined in the Capital Markets and Securities
(Conduct of Business) Regulations. These include;
regulation of material interest by licensees,
prescription of customer agreements, timely
and best execution, timely and fair allocation,
prohibition of front running, churning and a
requirement for customer confdentiality.
ACCOUNTS AND AUDIT
Specifc requirements relating to accounts and
audit have been prescribed for dealers. Dealers are
required to maintain such accounting records as
will refect correctly and explain the transactions
and fnancial position of the business of dealing
in securities
45
. Clients proprietary documents
are protected
46
.
A dealer is obliged to maintain a trust account in
which clients funds are to be deposited
47
. Moneys
in a trust account can only be withdrawn for
specifed purposes
48
. A dealer must maintain an
audit trail, reconcile customer money at least once
every two months and conform to recognized
fnancial standards.
There is a requirement for appointment of an
auditor by a dealer
49
. A removal or resignation of
the auditor requires consent of the Authority
50
. In
addition, auditors have an obligation to report to
the Authority the occurrence of certain prescribed
matters which include; matters that adversely
affect the ability of a dealer to meet his obligations,
that constitute a breach of conditions stipulated
in a license or failure to maintain accounts as
prescribed, mishandling of clients documents or
failure to maintain a trust account
51
.
Financial statements of a dealer (Balance Sheet and
42
Sections 58(1) and (2), Ibid .
43
Section 63(1), Ibid .
44
Section 64(1), Ibid.
45
Section 67(1)(a), Ibid .
46
Section 68(1), Ibid.
47
Section 69(1), Ibid.
48
Section 70(1), Ibid.
49
Section 71(1), Ibid. This has to be done within one month of commencement of business.
50
Sections 72 (1) and (2), Ibid.
51
Section 75(1), Ibid .
DS E J o u r n a l
1
Proft and Loss Account) have to be lodged with
the Authority within three months of the close of
a fnancial year
52
.
FIDELITY FUNDS
A stock exchange is required to establish and keep a
fdelity fund which is to be applied for the purpose
of compensating persons who suffer pecuniary
loss from any defalcation committed by a member
company or frm or any of its directors or partners
or by any employees of such member company or
frm in relation to moneys or properties entrusted
to or received by them or being trustee(s) received
such property
53
.
Although the assets of a fdelity fund form part
of the property of a stock exchange, they are to be
maintained separately from other property of an
exchange. They are to be held in trust. Separate
fnancial statements have to be prepared for a
fdelity fund
54
.
A fdelity fund is to be funded through; monies
paid by member companies, income accruing
from investment of the fund, moneys contributed
by a stock exchange, any penalties levied by the
exchange etc. The Act prescribes a minimum of
one hundred million shillings or such other sum
as the Minister may direct to be paid to the credit
of the fund. In view of the dire situation in which
Licensed Dealing Members of the DSE found
themselves during the initial life of the exchange,
the Minister prescribed that the fdelity fund of
the DSE shall consist of 0.02% of the commissions
charged in relation to transactions undertaken at
the Exchange. Since then, the Fidelity Fund of the
DSE has been growing gradually.
Claims against a fdelity fund have to be settled
by the Council of an Exchange. Legal proceedings
against a fidelity fund are pre-empted by this
procedure
55
.
TRADING IN SECURITIES
The provisions of the Act dealing with trading
in securities are aimed at preventing predatory
practices such as; false trading and market rigging,
market manipulation, fraudulent inducements
of persons to deal, insider dealing as well as the
use of manipulative devices and dissemination of
information about illegal transactions.
False trading relates to any practice which
is calculated to create a false or misleading
appearance of active trading in any securities on a
stock exchange or a false or misleading appearance
with respect to the market for, or the price of, any
such securities
56
. Market rigging on the other
hand is employment of sales and purchases of
securities that do not involve a change in the
benefcial ownership of those securities or by
any fctitious transactions or devices maintaining,
infating, depressing or causing fuctuations in the
market price of any securities
57
.
Market manipulation involves carrying out
directly or indirectly two or more transactions in
securities of a body corporate which transactions
have, or are likely to have, the effect of raising,
lowering, maintaining or stabilizing the price
of securities of the body corporate in a stock
exchange with intent to induce other persons to
sell, purchase or subscribe for securities of the body
corporate or of a related body corporate
58
.
Insider dealing involve dealings in securities by
persons who by reason of their association with
body corporates are in possession of information
that is not generally available but, if it were might
materially affect the price of those securities. A
direct prohibition is prescribed for any person
who at any time in the preceding six months
52
Sections 74(1) and (4), Ibid .
53
Sections 83(1) and 94(1), Ibid.
54
Section 83(2), Ibid.
55
Section 95 of the Capital Markets and Securities Act.
56
Section 106, Ibid.
57
Section 107, Ibid.
58
Section 112, Ibid .
DS E J o u r n a l
20
prior to a specifc deal has been connected with
a body corporate whose securities are the subject
of dealing. The same applies to a person who is
connected with a body corporate who is prohibited
from dealing in securities of another body
corporate if by reason of his being or having been
connected with the aforementioned body corporate
he in possession of material information. Finally,
connected persons cannot procure third parties to
deal on their behalf
59
.
COLLECTIVE INVESTMENT SCHEMES
Collective Investment Schemes are defned as;
An open-ended investment company
60
; A unit
trust scheme; Such other arrangements being
arrangements with respects to property of any
description, including money, the purpose or
effect of which is to enable persons taking part in
the arrangements (whether by becoming owners
of the property or any part of it or otherwise) to
participate in or receive profts or income arising
from the acquisition, holding, management or
disposal of the property or sums paid out of
such profts or income; and Any other scheme
or arrangement deemed by the Authority to be a
collective investment scheme for the purposes of
(the) Act
61
.
The establishment and operation of Collective
Investment schemes is regulated. Schemes have to
be authorized by the Authority
62
. A scheme must
have a Manager as well as Trustee (or Custodian)
for whom ft and proper tests have been prescribed.
Application for authorization of a scheme must be
accompanied with certain prescribed particulars
(Deed of Trust and Offering Document)
63
.
The regulation of Collective Investment Schemes
extends to several operational areas including:
offering investment plans
64
; pricing, issue and
redemption of units or shares
65
, conduct of meetings
of unit holders
66
, transactions with associated
persons
67
, the obligation for a scheme to maintain
a members register
68
, reporting requirements
69
,
advertising and public announcements by
schemes
70
, investment limits
71
as well as audit and
fnancial reports
72
.
The powers of the Authority in relation to Collective
Investment Schemes are also extensive. Apart from
authorization of schemes, the Authority may
appoint inspectors to investigate and report on
the administration of any scheme
73
, give directions
to a Manager of a scheme to cease the issue or
redemption of units or wind up a scheme
74
. The
Authority may also revoke the authorization of a
scheme
75
.
PUBLIC OFFERS OF SECURITIES
59
Section 112(4)(a), Ibid.
60
The Companies Act defnes an open-ended investment company as a body corporate:-
(a) which has its purpose the investment of its funds with the aim of spreading investment risk and giving its members the beneft of the results
of the management of those funds by or on behalf of that body; and
(b) the members in which have rights represented by shares of securities of that body which;
(i) those members are entitled to have redeemed or purchase from them by, or out of funds provided by that body; or
(ii) the body ensures can be sold by he members on an investment exchange at a price related to the value of the property to which they relate.
61
Section 2, Ibid.
62
Section 117, Ibid.
63
The First Schedule of the Capital Markets and Securities (Collective Investment Schemes) Regulations provides requirements on the contents of an
application for authorization of a Collective Investment Scheme. The Second and Third schedules provide for the contents of Constitutive and Offering
Documents respectively.
64
Regulation 20, Ibid.
65
Regulations 21 31, Ibid .
66
Regulation 36, Ibid.
67
Regulations 32 34, Ibid.
68
Regulation 37, Ibid .
69
Regulations 38 43, Ibid. provides for publication and distribution to holders of Annual and Semi Annual Report. The publication of offer and redemption
prices (or Net Asset Value) is also required. By virtue of section 128(1) of the Act, an Annual Report of a Collective Investment Scheme has to be
submitted to the Authority.
70
Regulations 47 51, Ibid . provides that advertisements are to be submitted to the Authority for approval. There is a prohibition of mention of unapproved
schemes.
71
Regulations 52 58, Ibid. Investments of a Collective Investment Scheme cannot exceed certain prescribed limits. In addition, a unit trust shall not
borrow.
72
Regulations 61 64, Ibid. A Collective Investment Scheme shall appoint an auditor at the out set. The auditor shall be independent of the Manager
and Custodian.
73
Section 123(1) of the Capital Markets and Securities Act.
74
Section 124(1), Ibid.
75
Section 122(1), Ibid.
DS E J o u r n a l
21
Though the part of the Act dealing with public
offers of securities is short, it contains provisions
with most signifcant impact to investors who
hold securities of various issuers. The issuance
of securities including advertisements is made
conditional on the approval of a prospectus. In
other words, no securities may be issued without
a prospectus being fled with the Authority and
the Authority having approved it
76
.
Secondly, the contents of a prospectus are also
prescribed. The Authority shall not approve a
prospectus unless it contains all such information
as investors and their professional advisers would
reasonably require and reasonably expect to fnd
there for the purpose of making an informed
assessment
77
of the securities being offered.
It is pertinent to note that under the Act, every
director of an issuer shall be liable to pay
compensation to any person who has acquired
any of the securities in question and suffered
loss in respect of them as a result of any untrue
or misleading statement in the prospectus or
the omission from the prospectus of any matter
required to be included

. It is equally pertinent
to observe that among the prescribed contents of
a prospectus is a cautionary statement (on frst
page) which among other things states that The
securities offered have not been approved or
disapproved by the Authority
79
. The contents of
a prospectus have been very meticulously spelt out
in the Regulations.
Apart from public issues as such, the law also
regulates capitalization and rights issues of listed
companies. These cannot be carried out unless
approval of the Authority has been granted.
Specifed information is required in an application
for capitalization or rights issue. A deficiency
which may be noted here is that no requirement is
placed for provision of information to shareholders
especially as concerns a rights issue. Admittedly,
this is not essential in a capitalization/bonus
issue.
ADVERTI SEMENTS RELATI NG TO
SECURITIES BUSINESS
An advertisement has been defned as every
form of advertising whether in a publication,
brochure, handout, by letter head, by display of
notice, circular or other documents by exhibition of
photographs or cinematography flms or videos, or
by sound broadcasting or television broadcasting
or distribution of recordings or in any other
manner
80
.
Advertisements for offer of any services in relation
to securities business can only be published by a
licensee who is obliged to register a copy thereof
to the Authority seven days prior to its submission
for publication. The Authority is empowered
to prescribe particulars to be included in an
advertisement. The same situation applies in the
case of advertisements offering securities
81
.
THE COMPANIES ACT
The Companies Act which regulates the affairs of
companies in Tanzania supplements provisions
of the Capital Markets and Securities Act in two
main areas; matters relating to publication of
prospectuses and establishment and effect of the
establishment of a depository by an approved
stock exchange.
PUBLICATION OF PROSPECTUSES
The Companies Act traditionally provides for a
prospectus to be delivered to the Registrar for
registration on or before the date of its publication.

82
To complement the Capital Markets and
76
Section 131, Ibid.
77
Section 132(1), Ibid. In addition, the Capital Markets and Securities (Prospectus Requirements) Regulations prescribe the following information which
should be in a prospectus; rights of holders, information on bankers, statement on legal status and affairs of the issuer, information relating to directors,
capital and debt of the issuer, valuation report, material contracts, risk factors and use of the proceeds of an issue.
78
Section 133, Ibid.
79
Part I of Schedule to the Capital Markets and Securities (Prospectus Requirements) Regulations.
80
Section 2 of the Capital Markets and Securities Act.
81
Part XIII, Ibid.
DS E J o u r n a l
22
Securities Act, the Companies Act now categorically
states that The Registrar shall not register any
prospectus unless.the prospectus has been
approved by the Capital Markets and Securities
Authority
83
.
The effect of the above provision of the Companies
Act is to unequivocally regulate public companies
whether they are listed or not. An additional
requirement has been stipulated for a prospectus
which relates to shares which would be dealt
in an approved stock exchange or (which) states
that the application has been or will be made to an
approved stock exchange for permission to deal in
the shares For such a prospectus, a Certifcate
of the Exchange is required to the effect that the
prospectus has been scrutinized by the stock
exchange and that its requirements relating to the
intents thereof have been satisfed
84
.
ESTABLISHMENT OF A DEPOSITORY BY A
STOCK EXCHANGE
The Companies Act recognises the principle
that shares or other interest of any member in a
company is movable property and transferable in
a manner provided by articles of the Company.
The establishment of a Central Depository System
(CDS) by the DSE called for an adjustment to the
Companies Act so as to provide for transfers within
the environment of immobilization.
A permissive provision in the Companies Act
stipulated that an approved Stock exchange may
establish a depository in which securities may be
maintained. This is subject to a proviso that the
Council or other ruling body of such exchange shall
prescribe rules relating to safe custody, transfers
and reports to be fled with the Registrar. Finally,
the rules prescribed for the depository shall be
satisfactory to the Registrar
85
.
In relation to transfer of shares immobilized in
a depository, it is provided that this shall be
effected in accordance with the transfer procedures
prescribed under the rules of such exchange. The
Council of the DSE has to this effect adopted rules
on Clearance, Settlement and Depository
86
.
AUDI TORS AND ACCOUNTANTS
(REGISTRATION) ACT, 12
The Auditors and Accountants (Registration) Act,
1972
87
was enacted to provide for the establishment
of a National Board of Auditors and Accountants
(NBAA) as well as the conduct of professional
examinations in the accounting industry and
registration of Accountants and Auditors. In 1995,
the Act was amended to empower the NBAA
to stipulate accountancy or auditing standards
and guidelines as appropriate and to ensure the
compliance of the standards and guidelines by the
subjects

. This role of the NBAA is relevant to

preparation of fnancial statements and disclosure
standards which are signifcant in the regulation of
capital markets (in relation to investor protection,
transparency etc.). As commented by IOSCO,
securities law cannot exist in isolation from the
other laws and the accounting requirements of a
jurisdiction.
The NBAA has adopted International Financial
Reporting Standards for application in Tanzania.
Other international standards adopted by the
NBAA include; International Accounting Standards
and International Standards of Auditing. These
standards are binding on accountants and auditors
authorized by the NBAA. The Auditors and
Accountants (Registration) Act vests on the NBAA
the mandate of control over conduct of registered
82
Section 35(2) of the Companies Act.
83
Section 35(2), Ibid.
84
Section 35B(i), Ibid.
85
Section 63A(2), Ibid.
86
DSE Blue Print op. cit. The Clearance, Settlement and Depository Rules make detailed provisions with respects to nature of securities deposited in
the CDS (held in trust for the benefcial holders), criteria for admission of members of the CDS, deposit of securities, confdentiality, maintenance of
a register of existing securities holders and safekeeping of securities.
87
Act No. 33 of 1972.
88
Auditors and Accountants (Registration) (Amendment) Act, 1995 (Act No.2 of 1995).
DS E J o u r n a l
23
auditors and accountants
89
.
REGULATION OF FOREIGN INVESTMENT
Foreign investment is regulated under the Foreign
Exchange Act, the Capital Markets and Securities
Act as well as the DSE Blue Print. Foreign
Exchange (Listed Securities) Regulations, 2003
seek to ensure that capital fows for investment in
the capital markets is remitted through banking
channels.
The Capital Markets and Securities (Foreign
Investors) Regulations, 2003 allow foreign investors
to participate in acquiring listed securities
90
and
places limits on their participation. To begin
by IOSCO. We have also reviewed albeit generally,
the legal framework of securities business in
Tanzania. A point has been reached where we can
now compare Tanzanias legal framework with the
IOSCO principles which in essence encapsulates
best practices. For ease of comparison, this exercise
is simplifed in a matrix.
IOSCO STANDARD TANZANIAS LEGAL
FRAMEWORK
Protection of InvestorsInvestors should be
protected from predatory activities such as;
misleading, manipulative or fraudulent practices,
including insider trading, front running or trading
ahead of customers and the misuse of client
assets. Full disclosure of information material to
investors decisions is the most important means
for ensuring investor protection. Accounting and
auditing standards should be in place and they
with, foreign investors cannot participate in the
Government securities market
91
. A maximum
limit of 60% of issued shares has been fxed as the
maximum permissible for foreign investors. For
individual foreign shareholders, the maximum
limit is 1%. In respect of institutions, the limit is
5%.. The stock exchange as well as depositories are
obliged to fle regular reports with the Authority.
The DSE Blue Print stipulates Dar es salaam
Stock Exchange (Foreign Investors) Rules, 2003.
The Rules provides for deposit of shares held by
foreign investors in the CDS. It also binds Licensed
Dealing Members of the Exchange to respect the
limits imposed on foreign investors.
PART III
A COMPARISON OF INTERNATIONAL BEST sPRACTICES WITH THE LEGAL
FRAMEWORK OF CAPITAL MARKETS IN TANZANIA.
Up to this stage, we have examined the Objectives and Principles of Securities Regulation as stipulated
should be of a high and internationally acceptable
quality. Only duly licensed or authorized persons
should be permitted to hold themselves out to the
public as providing investment services; as market
intermediaries or the operators of exchanges. Initial
and ongoing capital requirements imposed upon
those license holders and authorized persons
should be designed to achieve an environment
in which a securities frm can meet the current
demands of its counter parties and, if necessary,
wind down its business without loss to its
customers.Supervision of market intermediaries
should achieve investor protection by setting
minimum standards for market participants.
Investors should be treated in a just and equitable
manner by market intermediaries according to
standards which should be set out in rules of
business conduct. In the event of an ultimate
dispute, investors should have access to a neutral
mechanism (such as courts or other mechanisms
89
Section 15 of the Act allows the NBAA to suspend registration of accountants or auditors if they are convicted of any offence against (the) Act or
is after due enquiry held by the Board, found to have been guilty of any act or omission amounting to improper, disgraceful or grossly negligent
professional conduct.
90
Regulation 3(1) of the Capital Markets and Securities (Foreign Investors) Regulations.
91
Regulation 3, Ibid.
DS E J o u r n a l
2
of dispute resolution) or means of redress and
compensation for improper behavior.

False trading, market manipulation, insider
trading, Market rigging, timely and best execution,
timely and fair allocation, prohibition of front
running, churning and a requirement for customer
confdentiality are all provided for.Covered below
under Principles for IssuersThe NBAA has adopted
International Financial Reporting Standards
effective 1
st
July, 2004 (IASB). NBAA has also
adopted International Accounting Standards and
International Standards of Auditing (IFAC).Dealers
and investment advisers have to be duly licensed..
No person is allowed to carry out this business or
hold himself out as carrying on such business
unless he is holder of a licence.Minimum capital
requirements have been spelt out for dealers/
brokers. Dealers are allowed to trade on their own
behalf as well as others. Breakers can only deal
on agency basis.A ft and proper test has been
developed for dealers and investment advisers.
Apart from what has been stated above, rules of
business conduct have been spelt out in a specifc
regulation. Confict of interest by licensees is
regulated. There is also a prescription of customer
agreements,The Court may on application by any
person whose interests have been, are or would
be affectedgrant an injunction. The Court is
also empowered to prohibit payment or transfer of
moneys, securities or other properties in protection
of investors
Ensuring that Markets are Fair, Efficient and
TransparentThe regulators approval of exchange
and trading system operators and of trading rules
helps to ensure fair markets.Market structures
should not unduly favor some market users
over others. Regulation should detect, deter
and penalize market manipulation and other
unfair trading practices.Regulation should aim
to ensure that investors are given fair access to
market facilities and market or price information.
Regulation should also promote market practices
that ensure fair treatment of orders and a price
formation process that is reliable.IOSCO defnes
transparency as the degree to which information
about trading (both for pre-trade and post-trade
information) is made publicly available on a
real-time basis. Pre-trade information concerns
the posting of frm bids and offers as a means to
enable investors to know, with some degree of
certainty, whether and at what prices they can deal.
Post-trade information is related to the prices and
the volume of all individual transactions actually
concluded. Regulation should ensure the highest
levels of transparency.

A stock exchange has to be approved by the
Authority. In so doing, trading and other rules
are evaluated. Trading system operators are also
licensed by the Authority.These are covered as
explained earlier under provisions on investor
protection.Regulation provides a basis for fair
access. The major constraint here is market
structures rather than regulatory defciency.Timely
and best execution is provided for as explained
above.At the trading foor of the DSE a single
price order matching system given best price was
implemented. The same has been automated.All
orders are posted in the ATS at the DSE. These are
available to all traders. Post trade information is
provided in a daily Market report
The Regulatory EnvironmentRegulation should
facilitate capital formation and economic growth.
In the context of regulation, there should also be a
recognition of the benefts of competition in the
market place.Regulation is necessary to ensure
the achievement of the three core objectives. Ne
vertheless,Inappropriate regulation can impose
an unjustifed burden on the market and inhibit
market growth and development.There should
be no unnecessary barriers to entry and exit from
markets and products;The markets should be
open to the widest range of participants who meet
the specifed entry criteria;In the development
of policy, regulatory bodies should consider the
impact of the requirements imposed;There should
be an equal regulatory burden on all who make
a particular fnancial commitment or promise.
Comments on this area are made in the last part
DS E J o u r n a l
2
of the paper.
A. Principles Relating to the Regulator1 The
responsibilities of the regulator should be clear
and objectively stated.2 The regulator should be
operationally independent and accountable in the
exercise of its functions and powers3 The regulator
should have adequate powers, proper resources
and the capacity to perform its functions and
exercise its powers.4 The regulator should adopt
clear and consistent regulatory processes.5 The
staff of the regulator should observe the highest
professional standards including appropriate
standards of confdentiality.

The Capital Markets and Securities Authority spells
out the responsibilities of the regulator.Regulator
is operationally independent but subject to general
and specifc directions of the Minister on policy
issues.The Act spells out extensive powers of the
regulator. The regulator is funded by Government.
Capacity building is on-going based on market
developmentThis aspect is covered in the last part
of the paperThe CMSA is compliant but on-going
capacity building is necessary given novelty of the
markets.
B. Principles for Self-Regulation6 The regulatory
regime should make appropriate use of Self-
Regulatory Organizations (SROs) that exercise
some direct oversight responsibility for their
respective areas of competence, to the extent
appropriate to the size and complexity of the
markets.7 SROs should be subject to the oversight
of the regulator and should observe standards
of fairness and confdentiality when exercising
powers and delegated responsibilities.
Self regulation is recognized in the Act. However,
the relationship between oversight and self
regulation has not been clearly defned.The stock
exchange as the only current SRO is subject to
oversight of the regulator.
C. Principles for the Enforcement of Securities
Regulation8 The regul ator shoul d have
comprehensive inspection, investigation and
surveillance powers.9 The regulator should
have comprehensive enforcement powers.10 The
regulatory system should ensure an effective and
credible use of inspection, investigation, surveillance
and enforcement powers and implementation of an
effective compliance program.
The regulator has comprehensive powers of
inspection, investigation and surveillance.The
regulator has comprehensive enforcement powers.
Enforcement procedures have not yet been
developed. The potential for inconsistencies
therefore exist.
D. Principles for Cooperation in Regulation11
The regulator should have authority to share both
public and non-public information with domestic
and foreign counterparts.12 Regulators should
establish information sharing mechanisms that
set out when and how they will share both public
and non-public information with their domestic
and foreign counterparts.13 The regulatory system
should allow for assistance to be provided to
foreign regulators who need to make inquiries
in the discharge of their functions and exercise of
their powers.

The CMSA is a member of IOSCO and shares
the responsibility for implementing international
cooperation spelt out. The Authority is also a
member of the East African Securities Regulatory
Authorities (EASRA) and a Southern African
Development Community Committee on the
same.
E. Principles for Issuers14 There should be full,
timely and accurate disclosure of fnancial results
and other information that is material to investors
decisions.15 Holders of securities in a company
should be treated in a fair and equitable manner.16
Accounting and auditing standards should be of a
high and internationally acceptable quality.
The requirements for disclosure by issuers are
comprehensively stated in the Act and regulations.
The continuous listing requirements of the stock
exchange require disclosure of regular and other
material developments by an issuer.The NBAA has
formally adopted International Financial Reporting
DS E J o u r n a l
2
Standards in Tanzania.
F. Principles for Collective Investment Schemes17
The regulatory system should set standards for
the eligibility and the regulation of those who
wish to market or operate a collective investment
scheme.18 The regulatory system should provide
for rules governing the legal form and structure of
collective investment schemes and the segregation
and protection of client assets.19 Regulation should
require disclosure, as set forth under the principles
for issuers, which is necessary to evaluate the
suitability of a collective investment scheme for a
particular investor and the value of the investors
interest in the scheme.20 Regulation should ensure
that there is a proper and disclosed basis for asset
valuation and the pricing and the redemption of
units in a collective investment scheme.

The Act and regulations make provision for
approval of Collective Investment Schemes as
well as qualifcations of Managers and Trustees/
Custodians of SchemesThe Act provides for open
ended investment companies, unit trusts and
other arrangements which are CISs as well as
their constitutive and operational requirements.
The property of collective investment schemes
belongs to investors in the schemes. It is to be held
by the Trustee/Custodian.Disclosure of the main
aspects of a Collective Investment Scheme is done
in the Offering Document. Other requirements
exist such as; publication of sale and redemption
prices, publication of annual and semi annual
reports. Notifcation to holders has to be made on
changes to the Constitutive and Offer Documents.
The basis for valuation of securities of a scheme has
been spelt out (net asset value of a scheme divided
by number of units or shares outstanding. Rules
for pricing and redemption of units/shares have
been spelt out.
G. Principles for Market Intermediaries21
Regulation should provide for minimum entry
standards for market intermediaries.22 There
should be initial and ongoing capital and other
prudential requirements for market intermediaries
that reflect the risks that the intermediaries
undertake.23 Market intermediaries should be
required to comply with standards for internal
organization and operational conduct that aim
to protect the interests of clients, ensure proper
management of risk, and under which management
of the intermediary accepts primary responsibility
for these matters.24 There should be procedures for
dealing with the failure of a market intermediary
in order to minimize damage and loss to investors
and to contain systemic risk.

Done as explained in the section on protection
of investorsMinimum capital requirements have
already been observed. Rules on segregation of
investors funds and maintenance of trust accounts
exist.Accounting regulations and conduct of
business regulations provide for this area.
H. Principles for the Secondary Market25 The
establishment of trading systems including
securities exchanges should be subject to regulatory
authorization and oversight.26 There should be
ongoing regulatory supervision of exchanges and
trading systems which should aim to ensure that
the integrity of trading is maintained through
fair and equitable rules that strike an appropriate
balance between the demands of different market
participants.27 Regulation should promote
transparency of trading.28 Regulation should be
designed to detect and deter manipulation and
other unfair trading practices.29 Regulation should
aim to ensure the proper management of large
exposures, default risk and market disruption.30
Systems for clearing and settlement of securities
transactions should be subject to regulatory
oversight, and designed to ensure that they are
fair, effective and effcient and that they reduce
systemic risk.
Establishment of stock exchanges is regulated.
PART IV
DS E J o u r n a l
2
categorical conclusion of this paper is that the
legal framework of securities markets in Tanzania
to a very large extent meets the standards of best
practices. However, the best law has never been
written this even with the precision of the most
careful draftsman. It is suggested that room for
improvement of securities law in Tanzania exists in
two areas; the legislative area; and the environment
of regulation
LEGISLATIVE REFORM
Securities markets are not static but dynamic. New
products, players and methods of doing business
will evolve. Where regulation is left behind (i.e.
no regulation exists) serious conficts could arise.
Needless to mention, the evolution of the markets
in Tanzania is grinding slowly. Areas which
deserve immediate attention for review include;
regulation of takeovers, mergers and acquisitions,
enforcement actions as well as regulation of
advertisements. Furthermore, attention will have
to be focused on the legal implications of de-
mutualisation at an appropriate time.
REGULATION OF TAKEOVERS, MERGERS AND
ACQUISITIONS
As Tanzanias economy continues on the growth
path and the private sector becomes more dynamic
with a combination of both local and foreign
investors, corporate restructuring is likely to be a
tangible feature. It is essential that guidance in the
form of regulations be prepared so that corporate
strategists do not guess what the acceptable
standard of conduct is
92
.
ENFORCEMENT ACTIONS
Enforcement actions are necessary in the event of
a breach of the Act or Regulations. The CMSA has
published Enforcement Guidelines which however
are not binding on the Regulator ( by virtue of a
disclaimer provision) and persons who may be
subject to such action are advised to seek their
own legal advise
93
. The proper approach is for the
Guidelines to be developed into a set of regulations
so that any party involved in an enforcement action
is certain of ongoing activity and is fully aware
of his/her rights and obligations. A clear format
should spelt out in appropriate Regulations on
enforcement which should be equally applicable
as between the Regulator and an enforcement
target is required. This issue would not have
been committed to this paper save for the belief
that as stated by IOSCO, a Regulator is also
accountable.
REGULATION OF ADVERTISEMENTS
We have observed that all advertisements for
offering securities or services in the securities
industry needs to be approved by the Authority. In
practice, this turns out to be a rigid procedure for
sometimes very simple tasks. A more useful model
is to adopt a fexible procedure which allows for
licensees (or other authorized entities) to advertise
while following stipulated guidelines. It becomes
the role of the regulator to publish the guidelines
and that of licensees to comply with them. Those
who are not licensed (or authorized) continue to
be in the regime whose advertisements have to be
approved.
ISSUES RELATING TO THE ENVIRONMENT OF SECURITIES REGULATION
IN TANZANIA
Having reviewed Tanzanias legal framework for securities markets and compared it against IOSCO
principles we now pose the ultimate question whether room for improvement of the former exists. One
92
A search of legislation in this area shows that this is work in progress..
93
See www.cmsa-tz.org
DS E J o u r n a l
2
The implementation of this suggestion requires
adjustments to both the Act as well as advertisements
regulations.
ENVIRONMENT OF REGULATION
Earlier, it was observed that IOSCO believes;
regulation should facilitate capital formation
and economic growth; should recognize the
benefts of competition; should achieve the three
core objectives. Furthermore, IOSCO realizes
that inappropriate regulation can impose an
unjustifed burden on the market. There should
be no unnecessary barriers to entry and exit from
markets and products. Regulatory bodies should
consider the impact of the requirements imposed
and fnally, there should be an equal regulatory
burden on all who make a particular fnancial
commitment on promise.
We review these environmental issues in the
context of; public issue of securities, regulation of
CIS and oversight regulatory procedures.
PUBLIC ISSUES OF SECURITIES
The public issue of securities has important
consequences to securities markets it creates the
underlying products (securities) which are traded
in the markets. It has already been observed that
a prospectus has to be approved by the CMSA.
It is signifcant to know the evaluation approach
adopted by the Authority with the view to approve
or disapprove a prospectus. This forms part of the
environment of regulating public issue. Another
issue here is consistent application of allotment
criteria.
Prospectus Evaluation Approach
Two evaluation approaches are usually mentioned
- Disclosure Based Evaluation (DBE) and Merit
Based Evaluation (MBE). In the DBE, the key
task is to ensure suffcient disclosure to enable
investors make informed decisions. The MBE
approach goes a step further and seeks to establish
the merits of an issue. It is akin to underwriting
the performance of a product.
The legal approach adopted in Tanzania is the
DBE. We have seen that a prospectus cannot
be approved by the Authority unless it contains
information such as to make investors and their
professional advisers capable of making an
informed assessment
94
. We have also observed
that in the cautionary statement presented by the
law, the securities offered have not been approved
or disapproved by the Authority a full disclaimer
of liability on the part of the Authority. In the
meantime, every director of an issuer shall be
liable....
The substantive point raised here is that it has not
been made clear whether the actual evaluation
approach being applied in Tanzania is the DBE or
MBE or a combination of the two. Sometimes even
the pricing of an issue is regulated. It is not argued
here that all and sundry should be admitted into
the market. Rather the cloud of doubt as to which
approach to be adopted has made the market
schyzophrenic. In this context, it is useful to recall
the wisdom of IOSCO:
Regulation should facilitate capital formation
and economic growth;
Risk taking is essential to an active market
and regulation should not unnecessarily stife
legitimate risk taking.
Consistent Application of Allotment Criteria
In so far as closed-ended products are concerned,
it has become the normal practice that allotment
criteria (of IPOs) is approved by the Authority.
For privatization issues (i.e. where shares of
Government are being sold to the public), one
could maintain that even the actual application of
allotment criteria needs to be confrmed.
Allotment criteria is an important tool for fund
managers. It enables them to evaluate the likelihood
that an application to buy securities may be
94
Note 78, above.
DS E J o u r n a l
2
successful (including the magnitude). After
having evaluated an allotment criteria, fnancial
positioning is carried out involving opportunity
costs. It turns out to be a wild goose chase if
allotment criteria is varied post ante and shots
aimed between the goal posts are deemed to be
injurious to the crowd - because the original goal
posts have been shifted.
Suffcient attention needs to be paid to an allotment
criteria before it appears in a prospectus. Changing
its application is not only illegal but contributes
towards a negative environment of securities
regulation
95
.
REGULATION OF COLLECTIVE INVESTMENT
SCHEMES
Two Collective Investment Schemes have already
been established and two others are on the way.
The provisions of the law relating to Collective
Investment Schemes in Tanzania are exemplary.
Questions may be raised on the management
structure of Schemes but this is a relatively easy
matter to handle. Does not call for overhaul of
the law.
A key environmental issue here is the relative
ease with which a Manager of a scheme should be
allowed to manage a scheme at the same time as the
legitimate interests of regulation are protected. In
short, the task of a regulator is to regulate a scheme
and not to manage it.
The law has laid down a sufficient basis for
regulation in as far as treatment of unit holders
and reporting to the Authority is concerned. It
is signifcant that additional requirements of a
management type are required to be included in
Offering Documents of a Collective Investment
Scheme the impact of which is to convert the
regulator into Manager of a Scheme. This is the
result where for instance service providers of a
scheme have to be approved by the regulator.
The Event of a Legal Lacunae
As earlier observed, securities markets are
dynamic. Sometimes, markets may be ahead of
regulation meaning that fnancial commitments
and promises are being made without reference
to an existing law. In such an event where there
is a legal lacunae, the situation can be sticky
especially those who would already have risked
their capital.
This is an area where caution needs to be exercised
and an appropriate approach taking into account
the interests of all parties should be developed. It
is recommended that a useful approach would be
a consensus building approach where the interests
of market players are articulated and concerns of
regulation applied. It is best to realize that exercise
of power in such cases is more political than
enforcement
CONCLUSION
Finally, the paper argues that Tanzanias capital
markets regulatory framework meet the standards
of best practice. By implication, the paper dispels
the notion that Tanzanias market is overregulated.
There are some few areas to be adjusted and newer
areas to be regulated. Legal reform is in this case
an ongoing exercise.
The paper has argued that the environment of
regulation needs to be improved to assist market
operators not to guess on the regulatory approaches
which are applicable. The actions of the regulator
are subject to judicial review. However, there is no
discounting the fact that many in Tanzania would
not prefer to initiate actions for judicial review
because they are expensive and may invite further
wrath of regulators. Market development would
therefore require that regulation be; objective,
impartial, transparent and conducive.
95
The Allotment Formula stipulated in the Prospectus of Twiga Cement Co. Ltd. was not adhered to leading to opportunity loss in some cases.
DS E J o u r n a l
30
I am happy to report that our predictions
for the year 2006, which I presented in last
years Annual Report, have come true, with
the TATEPA Group making a record proft
of Tsh 2.2bn for the year 2006. The world tea
market was buoyant, helping both Wakulima
Tea Company Limited and Kibena Tea Limited
achieve healthy results. In our blending and
packing business a price increase boosted Chai
Bora, despite increased blending costs. All of
this has allowed your Board to propose our
highest ever dividend of Tsh 45 per share, or
a yield of over 10%.
The year 2007 is looking good in terms of
weather and therefore, made tea production.
Kibena is also receiving much better rainfall
and will be able to irrigate for a period this
year, though still not completely. Even though
world tea prices have taken a dip, we do expect
them to remain better than last year, and as a
consequence Chai Bora should enjoy a better
cost of sale base.
In the last AGM, TATEPA shareholders had
approved the formation of a new subsidiary
company, and the transfer of TATEPAs tea
packing business (Chai Bora) to this subsidiary.
I am happy to tell you that during 2006 this
new company, called Chai Bora Limited was
formed and TATEPAs branded tea packing
business was transferred into it at the end
of 2006. The new company commenced
operations as at 1
st
January 2007.
Now for some specifc details:
Wakulima Tea: Over the period Wakulima
achieved a record production of 4,000 tonnes
and realised an average sale price of US$
1.60 per kg. With these impressive results,
Wakulima achieved a net proft before tax of
Tsh 1.9 bn which is a record. The company
paid a dividend of Tsh 551m to its shareholders
(TATEPA, and RSTGA and their 14,000
smallholder tea growers).
Kibena Tea: The Kibena Division also realized
an average sale price of US$ 1.60 per kg. At
2,791 tonnes, its production was lower than
average due to the unfavourable weather
conditions and the lack of water for irrigation,
but the business still made an operating proft of
Tsh 660 million. However, since the Company
is highly geared, causing its fnancial costs to
be rather high, Kibenas operations delivered
a net proft before tax of Tsh 168 m.
Chai Bora: The Chai Bora branded tea packing
business has reported a more proftable year,
although the full positive effect of the increase
in prices will be refected in this next fnancial
year of 2007. I am pleased to report that Chai
Bora has maintained its strong position as the
dominant packer in the market, and held its
share at around 60%.
Dividend: Considering the performance of
the TATEPA group for the year 2006, I am
delighted to announce that your Board of
TANZANIA TEA pACKERS lIMITED
CHAIRMANS STATEMENT
DS E J o u r n a l
31
Directors have recommended payment of a
cash dividend of Tsh 45 per share with an
option to take Scrip. This is subject to approval
by our fnanciers and yourselves.
Financing: During the year 2006, the
management negotiated a new arrangement
with CRDB Bank Limited to replace Kibenas
long-term loan and facilities which were
previously provided by Barclays Bank Tanzania
Limited. Under the new arrangement Kibena
received a grace period of one year before
starting loan repayments, and the repayment
is now to be made over a 7-year period, at a
fxed interest rate. This has had a positive
impact on the cash fow of Kibena and on the
performance of the Group as a whole over the
past year, which meant that there was no need
to process the agreed Shareholders Loan. The
cash fows for the Group are also looking good
for the year 2007.
TATEPA/HIV AIDS Projects: TATEPA
continues to be a vocal and proactive soldier in
the fght to tackle HIV/AIDS in the workplace.
Along with many other respected businesses in
the country, TATEPA is a member of the AIDS
Business Coalition Tanzania (ABCT). ABCT is
an important organisation which is promoting
good governance with regards HIV/AIDS in
the workplace, and gives businesses access
to information and advice to help them deal
with this pandemic. Programmes exist in all
three Group Companies with the Wakulima
programme recently receiving accolades from
GTZ.
Fair Trade Tea: Both Kibena and Wakulima
continue to be proud holders of Fair Trade
accreditation for their socially responsible
philosophy. The premium paid by Fair Trade
consumers in the West feeds directly back to
our farmers. In this last fnancial year Kibena
and Wakulima received a total of Tsh 627m
which has been utilized by the Companies
smallholder trusts for schools and other social
activities.
HACCP Accreditation: In early 2007 (but
due to work done in 2006) both Kibena and
Wakulima gained HACCP accreditation,
becoming the frst factories in Tanzania to do
so. HACCP is a critical quality control check,
and it is another great feather in our cap that
our factories meet these stringent and exacting
standards. The new company Chai Bora
Limited is now also undergoing accreditation
and should achieve this in early 2008.
Expansion Programme: Exciting proposals
were discussed at Board level recently and
these include expanding capacity at Chai Bora,
a potential new factory at Rungwe, and further
development of both our smallholder areas in
Njombe as well as mechanical harvesting.
As I do in every report, I would like to
thank the management and staff for their
hard work, but particularly so this year for
such a successful 12 months after the earlier
challenges. I would also like to thank all our
stakeholders and consumers without whom
we would have no business.
As per the Articles of Association of the
Company, none of the directors are due for
retirement as at the date of this AGM, so it is
only for me to now thank all attendees and
look forward to a prosperous 2007.
DS E J o u r n a l
32
Our History
Tanzania Cigarette Company is a dynamic multi-
national, leading Tobacco company in East Africa,
with strong roots in Tanzania.
The Company was established in 1961 by British
American Tobacco. In 1967, the Government of
Tanzania acquired a 60% shareholding under the
Nationalization Program and in 1975 it bought the
remaining 40% and changed the name to Tanzania
Cigarette Company Limited (TCC).
In 1995, RJ Reynolds of the USA acquired a 51%
stake in TCC for USD 55 million.
In May 1999, Japan Tobacco Inc. (JT) acquired all
non-US tobacco operations of RJ Reynolds, includ-
ing its 51% stake in TCC.
In September 2000, JT increased its shareholding
in TCC to 75%.
In August 2000, TCC became a public limited com-
pany. Its shares were listed on the Dar es Salaam
Stock Exchange on 16th November 2000.
Who We Are
We are majority owned (75 %) by Japan Tobacco
International (JTI), the international arm of Japan
Tobacco Inc. (JT), with headquarters in Geneva,
Switzerland. The remaining 25% is owned by the
Tanzanian public as follows: PSPF 3.9%, PPF 3%,
NSSF 2.9%, Unit Trust 2%, Government of Tanzania
2.5% and the General Public 10.7%.
JTI has offces in more than 40 offces worldwide
and about 23,000 employees around the world, with
products sold in more than 120 countries. JTI is a
wholly owned subsidiary of Japan Tobacco Inc., the
Worlds 3
rd
largest tobacco company.
Our Products
We produce leading cigarette brands for the domes-
tic and regional export markets. Our brands include
Sportsman, Sweet Menthol, Embassy, Safari, Club
and Crescent & Star.
Our Contribution to the Economy
We provide direct employment to over 650 Tanza-
nians. Indirectly, we support over 85,000 tobacco
farmers and 2,500 distributors, retailers and sup-
pliers.
We are one of the leading tax payers in the country.
In 2007, we contributed Tshs 90 billion in various
taxes, and were voted by the TRA the most compli-
ant tax payer for 2007.
In addition, we generate signifcant forex revenues
for the country through our exports to the region.
Our Performance
Tanzania Cigarette Company (TCC)
C O M PA N Y P R O F I L E
DS E J o u r n a l
33
TZS M
2003* 2004 2005 2006 2007
For the year:
GrossTurnover 109,226 120,517 135,643 152,611 191,457
ExciseDutyandVAT 44,406 50,529 59,305 65,146 80,428
Net sales 64,820 69,988 76,338 87,465 111,029
EBITDA
(note1)
27,489 28,833 27,173 29,371 39,714
Depreciationandamortization 2,978 3,279 3,782 5,075 6,230
Operatingincome 24,511 25,554 23,391 24,296 33,484
Taxation 1,127 7,787 6,716 6,719 9,229
Net income 23,560 17,839 17,051 15,641 24,393
* Tax holiday ended Aug 03
At year end:
NetProperty,plantandequip-
ment 20,273 21,937 23,084 38,921 39,090
Totalassets 62,406 58,779 60,823 73,448 82,315
Interestbearingdebts - - - 6,376 255
TotalLiabilities 15,837 16,265 16,836 26,609 23,583
Totalshareholdersequity 46,569 42,514 43,987 46,839 58,732
TANZANIA CIGARETTE COMPANY LIMITED
Consolidated Five-Year Financial summary
notes:1. EBITDA = operating income + depreciation and amortization
DS E J o u r n a l
3
P R O F I L E
SWISSPORT Tanzania Ltd
S
wissport Tanzania Ltd is a member of
Swissport International, a leading global
ground handling company which operates at
more than 43 countries in fve continents and
is active at 180 stations with its head offce in Zurich,
Switzerland. Swissport International is owned by
Ferrovial, a leading European Infrastructure and
Service corporation based in Spain.
Operating at Tanzanias two major airports of
Julius Nyerere (JNIA) and Kilimanjaro (KIA), with
a turnover of over Tshs 16 billion and a workforce
of 650 employees (JNIA 530, KIA 120), Swissport
Tanzania Ltd provides ground handling services for
over 670,000 passengers and 23,000 tonnes of cargo
a year on behalf of about 20 airlines whose total
number of landings is about 16,000 a year.
Background
Swissport Tanzania Ltd, previously known as
Dar Es Salaam Airports Handling Company
Ltd. (DAHACO) was formed in 1984 and started
its operations at JNIA on October 1st, 1985 and
expanded its operations to KIA in 1990. The national
fag carrier, ATC was the majority shareholder with
65% followed by Scandinavian Airlines System with
15% and the rest were held by SWEDFUND AB of
Sweden and IFU of Denmark 10% each. Since, ATC,
the 100% government owned airline held majority
stake, the company was rendered a parastatal
organisation. The company ownership changed
in 2000 when Swissport International acquried the
35% shares owned by the Scandinavian frms and
16% shares owned by the Government. A very
successful IPO was launched in 2003 resulting in
668% oversubscription, whereby the Government
sold its remaining 49% shares to the public at a
price of Tshs. 225.00 per share. Swissport Tanzania
became listed at the Dar Es Salaam Stock Exchange
in May 2003 and the current share price is about
Tshs.770.00.
Until October 1st 1985, ground handling operations
in Tanzania were performed by the then Air
Tanzania Corporation (ATC) which was formed
in 1977 following the collapse of the East African
Airways (EAA). Swissport Tanzania Ltd was formed
following the need for Air Tanzania to concentrate
on its core business of fying, inadequacy of both
expertise and facilities to handle wide bodied
aircraft in addition to other reasons. The expansion
of Julius Nyerere International Airport, then Dar
Es Salaam International Airport (DIA) in 1984 saw
introduction of such types of aircraft.
Services provided
Swissport Tanzania provides ground handling
services which encompass ramp handling, passenger
handling, executive aviation handling and cargo
services as well as other related aviation services.
Swissport Tanzania is a customer focussed company,
operating using the ISO9001 Quality Management
System embedded with IATA and airline specifc
standards.
Corporate Social Responsibility
It is a culture for Swissport Tanzania Ltd to sincerely
take care of its employees and to support various
social initiatives for the beneft of the community.
Swissport has been certifed by the Occupational
Safety and Health Authority of Tanzania (OSHA)
as compliant to providing a safe and health
environment. In May 2007, Swissport CEO was
awarded a certifcate by the Trade Union Congress
of Tanzania for being best CEO in recognition for
his efforts of promoting workers participation in the
company and excellent leadership. Furthermore,
Tanzania Association of Employers ATE
nominated Swissport Tanzania as the overall second
runners up best employer in the country in its second
bi-annual contest following and independent survey
conducted by Ernst & Young in 2007. The company
supports the Tanzania Education Authourity by
donating funds annually, the recent donation
was Tshs 12 million. The company also supports
Kurasini National Childrens Home and currently
a project of erecting two classrooms at the center,
DS E J o u r n a l
3
1. HISTORY OF OWNERSHIP
TOL Limited started operations in the
country in 1950 as a branch of the African
Oxygen and Acetylene Company. In 1965 the
Company became a branch of East African
Oxygen Limited of Kenya. In 1978 the
Company became a subsidiary of BOC who
in 1979 invited the Government of Tanzania
to participate in the ownership of the then
Tanzania Oxygen Limited thus converting
the Company into a Parastatal under the
NDC group of companies.
During 1994 the Government indicated its
intention to privatize the Company through
a public share issue which would result in
a signifcant dilution of the Government
shareholding in TOL Limited. In April
1998 the initial public offer was concluded,
making TOL Limited the frst Company to be
listed at the Dar es Salaam Stock Exchange.
The Government shareholding after the IPO
and Rights Issue therefore changed to 71.14%
while the public and institutional investors
held 28.86% of the total shares.
Towards restructuring the Company, it
was decided that the Government divest
further by bringing in a Strategic Investor.
The process of bringing in the investor
was concluded in January, 2005 when a
Consortium of Tanzanians teaming up as
SAAMI Holdings, in collaboration with
SWEDFUND AB of Sweden acquired majority
C O M P A N Y P R O F I L E
...turning the wheel of progress
share holding of TOL Gases in a competitive
bidding. Current percentage of ownership of
TOL Gases is therefore SAAMI HOLDINGS
(55.31), Government of Tanzania (11.16),
SWEDFUND (4.69), Institutional Investors
and other shareholders (28.84).
In order to explicitly present the Companys
activities, the name TOL Gases Limited was
adopted in September 2006.
2. ACTIVITIES:
The Companys business is classifed under
the following four operating areas:
Industrial gases
Medical gases and healthcare products
Welding and metal fabrication
Transport
Industrial gases have accounted for a major
proportion of the business over the years.
Industrial gases sold by the Company
include:
(i) Industrial Oxygen
(ii) Dissolved Acetylene
(iii) Nitrogen
(iv) Compressed Aid
(v) Argon
(vi) Hydrogen
(vii) White Spot Nitrogen
(viii) Carbon Dioxide
(ix) Medical Oxygen
(x) Nitrous Oxide
TOL Gases Limited
DS E J o u r n a l
3
DS E J o u r n a l
3
Abstract
This paper seeks to determine how
the Dar es Salaam Stock Exchange
has performed in general terms as
well as in formal terms - over the
frst 10 years of its existence. For
the later purpose, the paper uses
two equity stock-market indices
that have been developed by the authors to
track the performance of individual listed
securities as well as the performance of the Dar
es Salaam Stock Exchange as a whole.
Considerable research has been devoted to
measuring the performance of stock markets,
where newspaper and TV headlines are
prefaced and closed by striking news about the
ups and downs of their stock indices. Political
leaders are now judged by the extent to which
their policies affect the performance of their
stock markets. Executives pay is increasingly
being pegged on share performance and
rewarded by stock options.
Ri gorous descri pt i on of t he i ndi ces
methodology is outside the Authors terms of
reference and so only a brief technical insert is
made to introduce the 2 stock market indices
How has the DSE performed in
its frst 10 years?
[Assessing 10-years Performance of the Dar es Salaam Stock Exchange
using the COREDEX Composite Index]
used in this paper. Suffce to
say that the use of stock market
indices is the standard method
of assessing the performance
of a stock exchange. This paper
is devoted to providing such
assessment for the Dar es
Salaam Stock Exchange in its
frst 10 years.
The paper begins by describing the key players
in the industry in hilarious journalistic terms.
With the beneft of hindsight, it gives a birds eye
view of the contradictions that one may expect
when an economy schooled in many years of
centralised socialistic management is suddenly
drawn into the whirlpool of stock markets
pitting unsophisticated investors supported
by nascent Regulators and career civil servants
against shrewd striped-suit attorneys and
hard-nosed frst-world arbitraging investors.
Beginning with a formal technical insert,
the paper then goes on to apply statistical
description of the movements of the shares
prices of individual listed companies, along
with the two market indices: the COREDEX
Composite Index (CCI) and the COREDEX
Average Index (CCI). An appendix presents
By George Fumbuka & CORE Securities Limited
1
1
George Fumbuka is an Authorised Dealers Representative of CORE Securities Limited, Licensed Dealing Member # D.007 of the Dar es Salaam Stock
Exchange. This paper builds on an earlier paper published in Accountancy and Business Review, Journal of the Institute of Accountancy Arusha in
2003 to celebrate 5 years of the DSE.
DS E J o u r n a l
0
tables and graphs that recapitulates the
mission of this paper, which is to provide
answers to the question: How has the Dar
es Salaam Stock Exchange performed in its
frst 10 years?
Not discussed in this paper, please note that
the DSE has also seen 5 corporate bonds and 19
treasuries. It has also seen 3 crosslistings.
A 10 - YEAR CHRONOLOGY OF LISTINGS
OF THE STOCK EXCHANGE
The Dar es Salaam Exchange (DSE) first
opened its doors for trading on 15
th
April
1998. At that time it had only one share
TOL Limited - that had been the subject of
a protracted initial public offering that saw
intense wrangling between the Regulator and
the Issuer. The subscriptions deadline was
eventually extended but the issue was still
under-subscribed, leaving the Government
and its agencies with some 46% of the stock.
This proved an eye-opener to the handling
of privatisation of parastatals via the stock
exchange. Subsequent listings experienced
the normal learning curve as mixed fortunes
fnally moved towards a pattern.
TOL Limited (TOL)
TOL began as Tanzania Oxygen Limited
from the colonial days, a branch of the then
UK company British Oxygen Limited (now
the multinational giant BOC plc). For reasons
that are not quite clear, the company escaped
the massive nationalizations of 1967, but BOC
offered its equity stake in the company to the
Tanzania Government, through NDC.
With a healthy cash fow and a near-monopoly,
albeit in a small market, the company remained
a profitable parastatal during the difficult
period post-1967, paying taxes and dividends
throughout. As required by the listing rules,
TOL did indeed have a good track record of
profts and dividends for at least 3 years it
had no problems with its past.
2
With rudimentary knowledge of and no
experience at all on the workings of capital
markets in nations formerly ruled under
socialism, the Management of TOL now
convinced its equally untutored Board to
embark on a development venture whereby
TOL now borrowed heavily to fnance massive
state-of-the-art facilities from the US.
According to the Prospectus, the new
production lines would more than double
TOLs sales within the year and provide
enough capacity to feed the whole of the SADC
Region. The timing of the IPO launch, no to
mention the expected proceeds, were very
optimistic. With hindsight, one can say they
were too optimistic.
The IPO had the specifc object of refnancing
this debt and providing needed working
capital. However, by the time the less-than-
expected IPO proceeds arrived, the interest
expense and the exchange losses alone had
already made devastating inroads into the
companys net worth.
Whereas the IPO price was Shs 500 (a premium
of Shs 400 on par), the closing price at the DSE
on the 15
th
of April 1998 was Shs 510. Although
2
The Regulator especially in nascent markets like ours faces the dilemma of letting in too many speculative Prospectuses by shrewd operators to an
unsophisticated public (thereby discrediting the whole capital markets concept), or insisting on proven results (in which case the genuine entrepreneur
is hampered by red tape). The 3-year trackrecord requirement is therefore wisely tied to discretionary powers if the product on offer has got particularly
attractive features.
DS E J o u r n a l
1
the price of the TOL share reached a high of
Shs 520 at one time, it never really gained
momentum and was soon trading below the
IPO price. The closing price on the DSE trading
foor on 26
th
June 2003 was Shs 265.
TOL has never declared any dividends, and
the Company was soon struggling even to
serve its local market, of which it had (and still
has) a near monopoly. It quickly became clear
that the TOL prospects had been exaggerated
one can now say grossly exaggerated - in the
prospectus.
This was not helped by subsequent revelations
of sloppy business decisions, before and
during the IPO, on the Issuers part. As
was normal in those times, the Companys
management became the scapegoat and were
fred unceremoniously (leading to continuing
charges and counter-charges in Court).
Responsibility for the fiasco, fortunately,
eventually fell where it rightly belonged
as the Chairman and his Board (inherited
from the parastatal days) resigned n masse
under pressure from the Government and
shareholders at the next AGM.
TOLs performance tottered from bad to
worse, reaching a low of Shs 180 in April
2001 and trading activity virtually came to a
halt. The DSE was reluctant to de-list its frst
baby, justifed by ongoing discussions with the
self-same UK multinational BOC plc, acting
through its Kenyan subsidiary East African
Oxygen Limited.
The hopes of a rescue by BOC buoyed the TOL
share price somewhat, reaching a local high of
Shs 225. These talks however broke down for
what was seen as the Kenyans bad faith they
were eating into TOLs market share in Moshi,
Arusha and the Lake Zone at the same time as
discussions were being held and trade secrets
divulged. The TOL share price blundered
further to below Shs 200 again and prospects
were now quite real that the Company would
be de-listed from the Stock Exchange.
The Government as guarantor of the loans
- intervened once again, paying the past-due
debts that were threatening to send TOL into
receivership. At the same time, the Government
as major shareholder - announced that it
was entering into discussions with another
strategic investor, the South African company
Afrox. Afrox is a subsidiary of the self-same
UK multinational BOC plc.
To bring Afrox into the equity, the TOL Board
came up with a proposal for a 3-for-2 rights
issue at a price of Shs 165 (at a time when
the shares were trading at Shs 200). The idea
was that any shares not taken up in the rights
- along with shares still in Government hands
or its agencies would be sold to Afrox, such as
to leave the latter with 60% of the equity.
The rights issue performed rather better than
expected, given cold facts and TOLs recent
circumstances. As many feared, however, the
Afrox deal never actually materialised, nor
did the Companys fortunes improve.
Later, a consortium was organised by local
investors was put together to take up the 60%,
of which 10% was taken by Swedfund, the
Swedish development institution. Although
another rights issue was foated and fopped
the Government approved the proposal and
agreed to clean TOLs balance sheet by taking
over the onerous debts it had guaranteed.
DS E J o u r n a l
2
As the consortium was never actually
incorporated, being a collection of individuals
acting informally through the name of the
organiser, the 60% block did not really
exercise a controlling vote power. As one
reads these sketches, moves are afoot for
private transfers to the individual names of
the individuals concerned. With the balance
sheet clean-up stated above, TOLs fortunes
have since improved, though TOLs long-
suffering shareholders wish the improvement
was bigger.
Tanzania Breweries Limited (TBL)
On 28
th
September 1998, the DSE made its
second listing Tanzania Breweries Limited,
abbreviated TBL. This used to be another of
the ailing parastatals, one of the frst to be
privatised by selling 70% of the shares to
South African Breweries, a subsidiary of the
multinational SABIA.
The TBL Prospectus described SABIA as the
6
th
largest brewer in the world with operations
ranging from the former Soviet republics in
Central Asia and the pampas lands of Latin
America to the lucrative US markets in the
deep South, not to mention virtually the whole
of Africa.
With massive injections of working capital,
supported by world class standards of
marketing and quality control TBL went
from strength to strength and was soon seen
as attractive for fotation through an offer for
sale. This was assisted by a 3-year tax holiday
and cash proceeds from the sale of prime-site
residential properties in Uzunguni that had
been discounted in the negotiations (being
non-core assets, using a language peculiar
to the privatisation industry).
TBLs performance in the feld was rosier than
its performance in the DSE because, contrary to
market expectations, the share price stagnated
at close to the IPO price for a long time. They
inched up every now and then close to the
dividend pay dates but there was nothing
spectacular.
The dividends being paid were tiny compared
to the proftability of the company
3
. In fact,
for one day in 2000 the shares sold at below
the IPO price and it was only after the stock
broking fraternity decided to lend support
by discouraging sales below Shs 550
4
that the
slide southwards was checked. During most
of this time from 1998 to 2001 TBL shares rose
to about Shs 620 and no more.
The entry of TCC (see below) and some hostile
questioning at the AGMs eventually forced
SABIA to take steps in support its shares on
the DSE.
First, their marketing efforts became more
DSE-friendly, singing praises for TBL as a
good investment, rather than just for the booze.
Steps were also taken to empathize with the
community through sponsorship of societal
activities like football, youth training and the
environment. To meet minority shareholder
concerns, TBL fnally decided to increase its
3
At one time, TBL decided to change its accounting period to end 31
st
March in line with requirements on the London Stock Exchange where SABIA had
just listed. The resulting 6-months gap was never fully compensated in that years dividend. The market speculated that SABIA were not increasing
the dividend since they got more income upfront in the form of management fees and royalties for brands used by TBL.
4
At that time, the Brokers were convinced that the TBL shares were performing below its fundamentals. They compared them to EABL shares on the
Nairobi Stock Exchange and reasoned that TBL should fetch at least T Shs 750.
DS E J o u r n a l
3
dividend payout rates in fact, it even gave a
second special interim dividend.
Slowly but surely, aided by its sheer size, TBL
re-established its premier position on the DSE.
Its shares rallied back, rising from 600 through
700 and 800 to reach the magic number 1,000 in
July 2001. The closing price on the TBL counter
on 26
th
June 2003 was Shs 1,650 and TBL was
at that time one of the 3 largest listings in East
Africa in market-cap terms.
Towards the end of 2002, fresh TBL shares
equal to 20% of the equity were given to
EABL in exchange for SABIA getting 20% of
EABL shares in Nairobi. This appears to be a
justifable commercial transaction although
Regulators and some investors queried the
deal on M & A grounds.
Tanzani a Tea Pac ker s Li mi t ed
(TATEPA)
While the frst 2 products on the DSE were
sourced from the Government sector in the
manner of former parastatals being privatised
whatever their merits, it was in all cases the
Government selling its shares to the public
(and collecting the proceeds net of issue costs)
rather than the Issuer (the company) raising
capital for developmental work.
The frst truly private sector initiative to use
the DSE to raise equity capital was the small
tea growing and manufacturing company
Tanzania Tea Packers Ltd. Backed by venture
capital funds and a track record of expertise
amongst its anchor directors, TATEPA quickly
convinced the Regulator and the market that
it had a viable product though it lacked the 3-
year profts-and dividends stated in the listing
requirements. .
Although TATEPA is relatively small its
market-cap at IPO was all of Shs 3.5 billion
compared to Shs 7 billion for TOL and Shs 130
billion for TBL and (later) T Shs 41 billion for
TCC it proved a welcome addition to the DSE
stable, steady if not spectacular.
From an IPO price of Shs 330, TTP shares
traded at T Shs 400 within 3 weeks, rising to a
high of 480 in early 2000.
In view of its low starting price and the absence
of IPO frills, TATEPAs shares were never able
to rise to the phenomenal heights or lows of its
predecessors. It languished at about Shs 450 for
some time but its steady (if small) dividends
ensured that for a long time its yield was in fact
second only to that of TCC, the DSE fagship.
TATEPA is the unsung hero of the DSE and its
shares have stabilised at about Shs 600, with
the normal highs and lows either side of the
ex-div trading period.
In February of 2000 the company acquired
the assets of a pure tea growing company
to, in the words of the directors, increase
TATEPAs critical mass as well as diversify
into production, both in line with industry
trends. The deal comprised a swapping of
shares at a price whose main effect appears
to have been to increase the underlying price
post-deal from Shs 450 to T Shs 580 as at the
close of business on 26
th
June 2003.
Tanzania Cigarette Company (TCC)
Thanks to the increasing pace of privatisation
and the a massive public awareness campaigns
led by the CMSA, the DSE, the Privatisation
DS E J o u r n a l

Trust and the brokers, another products had

to come in the market. This was Tanzania
Cigarette Company (TCC).
5
This time another player entered the market
- the institutional investor in the form of the
state-owned pension funds. Though these had
played some hand in all IPOs including the
dreaded TOL this was more due to Government
prodding or actual directives than to their own
volition. To most of their Trustees schooled in
the old anti-private sector days and thoroughly
averse to risk this was still a new phenomenon
and they could never countenance public
funds being wasted in the stock exchange,
the epitome of capitalism.
The largest of these NSSF, PPF, LAPF, and
PSPF have combined net annual cash infows
in excess of Shs 100 billion. For a long time
they had invested their funds in real estate
(non-performing offce blocks subject to rent
restriction laws or else situated in remote
areas) or were forced to buy Government
bonds (at negative real yields) to fund its
budget defcits.
This time the pension funds were ready. The
TCC offer for sale was heavily touted, at the
back of a generous advertising budget. The
team that managed this IPO took pains to
address the three most important market
expectations, which are:
First, that dividend is king
Next, that dividend is king
Finally, that dividend is king.
Unlike TOL, the IPO price was deliberately set
at Shs 410 well below the intrinsic value and
small enough for small (so called) investors to
be attracted. The Prospectus provided for an
immediate dividend of Shs 47 per share on the
date of listing
6
, and a fnal dividend at the end
of the year that was just 3 months away.
This was the proverbial offer that one
cannot refuse. The IPO was quickly over-
underwritten by the pension funds
7
and
some insurance companies and financial
institutions.
The only interesting question to ask is:
how did TCC do it? This begins from the
disappointment with TOL and, to a lesser
extent, TBL. There was also the generous
advertising budget borne by the Government,
which was quite obviously addressing more
strategic concerns than mere gain, most of all
its policy to widen share ownership among
citizens.
From an investors point of view, however,
the attractive thing in TCC was its balance
sheet. At the time of the IPO it had hefty cash
resources at bank and negligible liabilities
apart from unpaid dividends in the past.
The Prospectus was well written, highlighting
5
Like TOL, TCC had been proftable even during the parastatal days, thanks mainly to frst class management supported by a monopoly position in an
essential commodity. Like TBL, however, it did not come to the market straight: it was frst sold to the US multinational R J Reynolds which, probably
due to the American anti-smoking litigations, sold it again to the Japanese multinational JTI. In an instructive illustration of Tanzanias investment
and tax laws for tax planners, frst RJR then JIT each enjoyed a 3-year tax holiday for investing in the same investment.
6
Strictly speaking, NBAA accounting standards make this dividend a capital receipt deductible from the IPO price rather than a credit to P&L. It is
therefore safe to say that the TCC IPO was pitched at well below its fundamental value a ploy for future IPOs, the Regulator permitting.
7
The pension fund managers have not yet cottoned on to the full tricks of institutional investors, however. One would have expected some feverish
bid activity close to the year-end to boost the balance sheet value of their investments - by NBAA accounting standards, the shares have to be marked
to market. By this evidence alone, one suspects that pension fund managers are not yet being evaluated on their balance sheets.
DS E J o u r n a l

the free cash fows but without the unnecessarily

rosy projections that people saw in TOL. The
Reporting Accountants and the Lawyers
appear to have done their homework this time;
the Sponsoring Broker took pains to address
market expectations as identified by the
(local) brokers - even in the face of a reluctant
(foreign) Lead Advisor.
The rest is history. The IPO was oversubscribed
to the chagrin of the underwriters. The TCC
shares then set the tone for the DSE. They
quickly reached Shs 500, overhauling the
mighty TBL within 5 weeks. The shares never
looked back and peaked at a whooping Shs
1,900 on 25
th
March 2003. To put matters in
perspective, TCC is trading at a higher yield
than TBL, which began at Shs 550 in the IPO
(compared to Shs 410 for TCC) TBL is also
thrice as big in market capitalisation.
What of the future? To the continuing onslaught
from the American anti-smoking lobby should
be added the promptings of the anti-tobacco
lobby and the World Health Organisation
8
.
These are the major threats to TCC. It is diffcult
to decide if the continued support of MPs from
the tobacco-growing areas in Tanzania will
help. There are also the increasing exports
to South-East Asia (China, Korea, Myanmar,
Japan, Iran, etc., where smoking is variously
reported as a delicacy or a symbol of status)
these will also contribute towards balancing
the equation out.
For the average investor in Tanzania, however,
there is a prosaic and much less exciting fnale:
the end of the tax holiday in 2003. The cigarette
is no less taxed today than during the Parastatal
days, when TCC sales taxes were virtually the
only innovative news in the Finance Ministers
Budget speech. Tax planning is certainly going
to be the unenviable lot of the TCC CFO for
many years to come along with the WHO anti-
smoking lobby and group-action American
trial attorneys..
Tanga Cement Limited (SIMBA)
Privatisation of former state-owned enterprises
continued to be the main source for new
listings at DSE.
The next candidate was Tanga Cement
Company l(brand name, Simba) located at
Pongwe, some 20 kilometres from Tanga.
Owned 60% by the Swiss company HOLCIM,
it was described as the second largest in the
world. In the parastatal days, there were 2
other cement companies: in Tanzania: the
oldest was the Tanzania Portland Cement
Company, located in Dar es Salaam (whose
brand was Twiga, now also listed, see below),
and the Mbeya Cement Company (brand,
Tembo)
9
.
Learning from the experience of TCC, the
investing public were ready for another IPO,
convinced that it is possible to get hefty capital
gains within a few weeks of listing. This
turned out to be the case the IPO was heavily
8
All cigarette packets carry a prominent warning: smoking can damage your health. There are also huge danger-warning posters written no smoking
displayed within the factory and in the canteen. Is this what they mean by cutting-your-throat?
9
Although Twiga, Simba and Tembo are popular animals in Tanzania (giraffe, lion and elephant respectively), there does not appear to be any obvious
connection between cement and wildlife. The market now awaits the listing of Tembo shares
DS E J o u r n a l

oversubscribed and a maximum of 5,000 shares

was allotted plus 17% of the balance applied
for.
Since the IPO price was only Shs 300,
institutional investors were left unsatisfed and
became the source of a fat capital gain upon
listing as share price rose to Shs 730 within a
fortnight.
The learning curve thundered on inexorably
and Tanga Cement proved to be another
milestone. From an IPO price of Shs 300, a
forecast earnings-per-share of Shs 47 and a
promised dividend of only Shs 23.50 at least 6
months way, there was no way a hard-nosed
investor would accept a price of Shs 730 - but
this is exactly what happened. When the
euphoria died down and common sense took
over, the price had to fall almost crash to Shs
450 within another week.
This spectacular rise and fall seemed to self-
correct towards the indicated intrinsic value
of the Simba shares, but the last word had not
yet come. The years results were announced 5
months later, showing earnings had exceeded
forecasts and the promised dividend per share
was raised to Shs 55. Hopes were fred anew;
trading hit off towards the roof again and the
shares were soon trading at Shs 750, settling
at Shs 700 ex-div.
All in all, investors got very rich out of Simba
especially the shrewd ones who had submitted
literary - hundreds of applications
10
.
Dar es Salaam Airports Handling
Company (DAHACO)
Oversubscription now proved to be another
avenue towards untold riches and the next
IPO was awaited with interest. This was the
airports ground handling company DAHACO.
It begun as a joint venture between the
parastatal Air Tanzania Corporation and some
other airlines but was soon privatised 51% to
the company Swissport, owned by Swissair.
This was a small IPO, smaller even than Tanga
Cement, and market operators expected a
huge oversubscription. In recognition of this,
the Government decided that shares would be
allotted only to individual applicants unless
there was an under-subscription.
Learning from the Tanga Cement experience, it
was anticipated that the IPO would advantage
the small man in terms of capital gains as soon
as the institutionals entered the secondary
market.
This was not to be: many people applied, so
many, in fact, that the fnal tally was a list in
excess of 40,000 applications.
This must be seen in its proper perspective,
however. Though the Prospectus did say that
multiple applications would be consolidated
in the event of oversubscription, this was
easily short-circuited by the famed African
extended family just apply in the names of
all your cousins since they have no passports
10
The Prospectus stated that allotment would be for a minimum of 5,000 shares per application and mentioned nothing about consolidating multiple
applications in the event of oversubscription.
DS E J o u r n a l

to identify them.
The 40,000 applications were probably no more
than about half that number acting in unison.
Although a frst-come-frst-served allotment
system would solve this problem, nationals in
remote corners of the land would thereby be
disenfranchised.
The inevitable anti-climax arrived - lots and
lots of work processing the applications
and a fnal tally of only about 440 shares per
applicant!
The initial DSE price rose to Shs 750 per share,
stabilised at 630, before settling at between
550 and 600. The TCC ploy (a dividend
immediately upon listing) was also used in
DAHACO but the spectacular riches that
would have arisen had the IPO been larger
were nowhere to be seen.
DAHACO marked another milestone in the
history of privatisation of former parastatals
and their subsequent listing. Typically, when
a strategic investor had been identifed, the
procedure was for the MEMARTS to be
amended to reflect the new realities. The
Company, while still retaining its private
status with all the pre-emption rights thereby
entailed, would normal undergo a series of
contractual undertakings with the Government
in the form of a Shareholders Agreement.
The latter would override any contrary
provisions in the Articles, especially with
respect to the appointment of directors,
voting at the AGM, the rights of the Board
vis--vis those of the AGM, the rights of the
Management vis--vis those of the Board, and
so on.
This was necessary because in many cases
the strategic investor was given management
rights, especially where the new investor
committed itself to specifed investment in
equipment or technology intended to turn
the company around. In such cases, the
shareholders agreement would insist, for
instance, that the business plan and budgets
be free from undue interference by the Board
or the AGM.
In one ridiculous case, the strategic investor
was given majority control of the Board,
including the Chairmanship, even though its
share of the equity was less than 50%. This
proved controversial when the investor was
thereby given control over the preparation
and approval of the fnancial statements that
were to determining how much it should pay
for his shares as if, once again, the investor
could cut its own throat!
To go back to DAHACO, the shareholders
agreement provided for the anchor investor
(with 51%) to nominate the Chairman and 2
other directors while the Government (with
49%) would nominate 2. This had to be
changed in the new set up prior to listing of
the company.
The solution was to do away with the
shareholders agreement altogether because the
Government would no longer be a shareholder
and no names would be necessary because
of the freedom to sell or buy ones shares at
will in the DSE. The Articles were therefore
amended to state that any shareholder with
more than 50% of the shares would nominate
DS E J o u r n a l

3 directors, one of whom would be Chairman.

The remaining shareholders would appoint 2
directors by vote at the AGM.
For the first time since the socialist days,
we saw democracy at work as 5 applicants
campaigned for a seat on the Board at the
AGM. Less than 30 years earlier, there was
no surer way to loss of a public offce since
these companies were all parastatals at that
time. For good measure, technical know-
how counted (s opposed to technical know-
who in the past), public advertisements were
made and a shortlist made by KPMG after
interviewing 16 applicants some 2 weeks prior
to the AGM without any other prior vetting for
political correctness.
DAHACO (later renamed Swissport Tanzania
Limited to capitalise on the parents band
name) had another advantage: the 51%
strategic investment by the (foreign) anchor
shareholder) meant that more foreigners
could buy Swissport T shares in the secondary
market. This provided for fireworks as
entrepreneurial Brokers cultivated foreign
investors and hedge funds to buy into the DSE.
The added liquidity catapulted Swissport T to
blue-chip stature in spite of it being essentially
small-cap.
Swissport had an exclusivity clause for
servicing DIA and KIA until 2005, which was
extended during the IPO preparations to 2007.
That clause has now expired and it is now
possible for competitors to enter the market,
or airlines to do self-handling. In view of the
relatively small throughput at these airports
and the considerable capital investment
required, the cost of entering the industry will
be prohibitive for budding competitors, more
so if safety concerns preclude airlines from
self handling.
Will Swissport succumb to the competition?
Time will tell, but it looks like the onus has
been placed on the Government as the landlord
to revamp the airports infrastructure before
deregulation can safely proceed. One suspects
that Swissport will maintain its DSE niche for
yet a little longer..
Tanzania Portland Cement Company
Limited (TWIGA)
The next IPO was that a second cement
company, which can rightly be given the
accolade that Tanzanias capital markets
had com e of age. All the IPO Advisors
were indigenous frms and the IPO broke all
past records in terms of disclosure, size and
innovation.
The anchor shareholder also answered to world-
class benchmarks it was HeidelbergCement,
the 4
th
largest cement manufacturer in the
world and listed on the Frankfurt Stock
Exchange in Germany. With a previous
shareholders agreement with the outgoing
Government and with the need to abide to
listing German requirements, the Prospectus
and MEMARTS were innovatively structured
to provide a seamless transition to a listed
company.
Valuation was also undertaken by applying
global comparatives, based on the numerous
listed companies both in Tanzania and the
region. TWIGA turned out to have the not only
DS E J o u r n a l

the highest IPO proceeds (T Shs 95 billion) but

also the largest market cap on offer (T Shs 23
billion).
The IPO also continued the trend of employees
share option schemes, this time they got 5% o
the Companys share capital (not 5% of the
IPO, as in earlier situations DAHACO, TCC,
TBL and TOL).
If one is permitted to take advantage of
hindsight, then TWIGA is the classic case.
Not only was there already another cement
company on the DSE SIMBA it so happened
that the newcomer had the competitive edge.
This comes about because TWIGA (the giraffe,
compared to SIMBA, the lion) has a longer
neck (and reach, being closer to the lucrative
Dar es Salaam market). It also sits at the
starting point of the central railway line to the
high-growth market area in the lake zone and
its minerals wealth.
To be sure, the lion is the more aggressive and,
being a relatively new comer, is leaner, and so
the giraffe found itself hard-pressed to match
the formers dividends track record. However,
the debate will probably be won by whoever
invests in capacity faster than the other.
TWIGAs share price began at a relatively high
price of T Shs 720, people having missed the
warning in the prospectus that the company
would not be very generous with dividends
given the need to plough back profts to fund
investment expenditure without diluting the
minority. Notwithstanding spirited push for
dividends prior to and during the frst AGM,
the dividend was small and the price fell and
plateaued there. It was only when TWIGA
published its cash-rich interim accounts
and SIMBA failed to meet its own dividend
target (citing the same problem of capital
investment!) that investors fnally believed
TWIGAs story and the price then short up.
As one reads these sketches, TWIGA is the
clear number 2 in the DSE in terms of market
capitalisation and in its phenomenal rate of
capital gain: it is now trading at 3 times its
IPO price and appears to have won the capital
investment race with plenty of cash to spare.
The only cloud in TWIGAs horizon is the rule
of law (or lack of it since matters have gone all
the way to the Court of Appeal) because its
prime sites for limestone and other inputs has
been occupied by squatters and somewhat
to the frustration of its strategic investor all
efforts to evict them appear to coincide with
elections time. More than any other single
factor, this problem has the potential to stop
TWIGA dead in its tracks. Recapitulation
The performance of individual shares on the
DSE in its frst 10 years data has been taken
from 15 April 1998 to 31
st
March 2008:
Table 1: Summary of IPO Statistics
Table 2: Performance of individual securities
As far as things go, the above tables reveal a lot
of relevant information but, nevertheless, one
really needs to supplement this information
with the big picture how has the DSE
performed as a whole?
DS E J o u r n a l
0
This sort of information is provided by market
indices. The next section tries to address this
aspect.
SECTION 2
TECHNICAL INSERT:
DEVELOPMENT OF DSE MARKET
INDICES
The paper now needs to make formal defnition
of the market indices that it shall use to make
formal assessment of the DSEs performance.
This insert provides technical description of the
indices and the statistics that it derives from it
in reaching its conclusions about how the DSE
has fared in the last 10 years..
For this purpose, the following simplified
working assumptions shall be used in order to
get to grips with the subject matter fairly quickly.
In real life, there are complications that do arise-
these will be stated in the appropriate places in
the text, as well as the methods used to redress
the complications. In most cases these methods
are also non-complex.
There is a point in time, , at which a market
index is to be computed.
Let be a securities market comprising
listed companies.
Let
i,
be the price of the shares of the i
th

company at time .
Let
i
be the total number of ordinary shares
issued in company i.
Let
I
be the number of shares in company i
that are controlled by an investor or a group
of investors acting in unison.
Assume that 0 and 0.2 in the relevant
period and that and are constant.
The following 4 types of common market indices
can be computed:
A price-weighted index
1 such as the COREDEX
Average Index
A value-weighted index
2- like the COREDEX Composite
Index
An equal-weighted index
3 not developed in tis
paper
A geometric mean index
4 not developed in this
paper
In practice, the index would be multiplied by an
arbitrary constant to arrive at a nice round-sum
such as 100, 1 or 1,000 for the opening index at
time = 0. This is computationally unnecessary
but makes for aesthetically pleasing headlines in
the fnancial press.
The Price - Weighted Index
This index is simply the average of the closing
prices, irrespective of the number of shares in
the market.
The price-weighted index of at time

is

. ) , (
0
,
1

i
i
In order to assess the performance of the Dar
es Salaam Stock Exchange, a price-weighted
index has been developed, called the COREDEX
Average index. This index has got the following
traits and procedures for its maintenance:
1. A simple aggregative of actual share prices
2. Base date is 15
th
April 1998 =100
DS E J o u r n a l
1
3. Adjustments are made in the divisor to refect
additional listings of ordinary shares on the
Dar es Salaam Stock Exchange. Only voting
shares are included, all of them, irrespective
of ownership and size of the issuer
4. Adjustments to the divisor are also made
for delistings, fresh issues or rights issues,
bonus shares, share splits and consolidations
(equivalent US terminologies are stock
dividends, stock splits and reverse
splits) and other dilutive corporate actions
5. In calculating the index, closing prices are
used. Where no trading has taken place the
last closing prices available are used.
6. Total-return calculations are not annualised
(for initial and current periods). Dividends
are assumed to be re-invested at the date
trading goes ex-div
7. The COREDEX Average Index (CAI) is
published by CORE Securities Limited,
licensed dealing members of the Dar es
Salaam Stock Exchange.
The following are some of the international
indices using a similar method:
The Dow Jones Industrial Average,
for 30 stocks on the New York Stock
Exchange
The Straits Times Industrial Index for
large, actively traded shares on the
Singapore Stock Exchange
The Nikkei225 Stock Average from
the first section of the Tokyo Stock
Exchange.
The COREDEX Average Index is ideal, due to
its computational simplicity, for tracking the
average performance of the DSE where the
overall trend is more important than precise
short-term assessments.
Performance of the DSE over the period 15
th

April 1998 to 31
st
March 2008 according to the
COREDEX Average Index shows that since its
inception, the DSE has recorded a cumulative
return of 156.96%, an average return of just
nearly 16% per annum. This is well above
infation in the period (which was in single digits)
and average interest on bank deposits which has
averaged well below 5% and the average yields
on Treasury Bills (currently below 10% though
it was around 10% one time).
The attached Table 3 shows the results of using
the COREDEX Average Index on the performance
of the DSE since 1998:
The Value-Weighted Index
The Value-Weighted Index is based on weighted
average of the shares in the index, each weighted
by the number of shares in circulation. In other
words, this is an index of changes in the market
values of the company as a whole rather than
the market value of its individual shares as in
the price-weighted index. It is - sort of - like the
difference between the value of the forest and
the values of individual trees. For this reason,
this Index is sometimes called the Prices times
quantities Index
This index is derived by the following formula:
The value-weighted index of at time is

.
.
.
) , (
1
0 ,
1
,
2

i i
i
i i
H

For alternative evaluating the performance of
DS E J o u r n a l
2
the DSE, a modifed form of a value-weighted
index has also been developed the CORDEX
Composite Index. Unlike the conventional value-
weighted index above, it is argued that the shares
listed on the DSE are not freely available to the
average investor. To a large extent, the companies
listed are mostly former parastatals companies.
This means that they are still controlled either
by the Government or by strategic investors
pursuant to a defned shareholders agreement
that constrains the tradability of the shares on
the stock exchange.
In deriving the COREDEX Composite Index, it
has assumed that shares in excess of 20% that
are held by one person or entity, or a group of
persons or entities acting together, would not
be freely available for trading. Such controlled
percentages are therefore excluded from the
weighting.
Consequently, the COREDEX Composite Index
is a value-weighted index that weights the shares
by the free foat. The above formula is modifed
as follows:
The COREDEX Composite Index at time
=

0
0 ,
1
). 1 .(
). 1 .(
i
i i i
i i
i
i
, where
is the controlled stock percentage and the
free foat is (1- ).
The controlled shares in each listed company as
at 18
th
April were:
TOL 45. 8% (increased to 71% on 12
th

December 2001)
TBL 75%
TATEPA 58.3% (Increased to 67.6% on 28
th

February 2002)
TCC 75%
SIMBA 62.5%
DAHACO 51%
TWIGA 69.3%
The COREDEX Composite Index has got the
following characteristics:
1. An aggregate of prices-times-quantities
index formula, where the quantities are
the respective free foats of the constituent
shares. The Paasche weighting method is
applied.
2. Base date is 15
th
April 1998 =100
3. Adjustments are made in the divisor to refect
additional listings of ordinary shares on the
Dar es Salaam Stock Exchange. Only voting
shares are considered.
4. Adjustments are also made for de-listings,
rights and new issues, and other dilutive
corporate actions
5. In calculating the index, closing prices are
used. Where no trading has taken place the
last closing prices available are used.
6. Total-return calculations are not annualised
(for the initial and current periods). Dividends
are assumed to be re-invested at the date
trading goes ex-div
7. The COREDEX Composite Index (CCI) is
published by CORE Securities Limited,
licensed dealing members of the Dar es
Salaam Stock Exchange.
Most international indices are value-weighted,
DS E J o u r n a l
3
among which are the following that use the free
foat in their weightings like the CCI:
The Standard & Poor 500 Index of the top 500
US companies
The Ing Barrings Pan-Asia Index of the top
companies in Asia
TSE 300 Index, the top 300 shares on the
Toronto Stock Exchange
The OBX Index for the top 25 shares on the
Oslo Stock Exchange
The COREDEX Composite Index has been
developed for high net-worth individuals
and institutional investors as well as their
professional advisors. The idea is that the CCI
captures the movement of share prices on the
DSE in a manner that is most responsive to the
specifc needs of this group of users.
Performance of the DSE over the period 15
th

April 1998 to 31
st
March 2008 according to the
COREDEX Composite Index shows that since
its inception, the DSE has recorded a cumulative
return of 170.14%, or an annual average of over
17%.
The attached Table 4 shows the results of
using the COREDEX Composite Index on the
performance of the DSE since 1998:
THE EQUAL - WEIGHTED INDEX
This index assigns equal weights to the price
relatives of its constituent shares. It is given by
the following formula:
The equal-weighted index of at time is

b
i i
t i
1 0 ,
,
3
) , (

The most famous equal weighted index today is
the Value Line Composite Average in the US so
famous, in fact, that another generic name for any
equal weighted index is value line average.
The American Stock Exchange also publishes
similar indices.
The Geometric Mean Index
This index takes the geometric average of the
price relatives of the shares in the market. It is
sometimes called the price-relative index but this
name is not used here to avoid confusion with
the equal-weighted index that is also based on
price relatives.
The geometric mean index is given by the
following formula:
The geometric mean index of at time is
) , (
4

1
1 0 ,
,
(
(
,
\
,
,
(
j

i i
i
This index is most suitable in very active
securities market, where the smaller stock is as an
equal indication of the markets buoyancy as its
bigger brother. It can be shown mathematically
that the geometric mean of their relative changes
tends to downplay the effects of extreme cases.
In comparison with the arithmetic mean used in
the price-weighted index, it tends to lag behind
slightly.
The most famous index calculated in this manner
is the FTSE of the London Stock Exchange (though
some sub-indices are value weighted) and, more
recently, the Warsaw Stock Exchange.
Statistical Application of the DSE Market
Indices
The index numbers that have been developed
to track the performance of the DSE have been
DS E J o u r n a l

applied on the DSE trading results for the period

15
th
September 1998 (when the DSE frst opened)
to 30th June 2003 a period of about 5 years. The
results are tabulated and additional indicators of
performance derived from the primary indices,
as described below.
The total return over the entire period obtained
through compounding by chain linking the
periodic returns:

, where:
R = the cumulative rate of return for the
period
r = the rate of return, day-on-day
n = number of days in the period
(1+r) = Index on day n divided by index on day
n-1.
The rate of return is the compliment of the
geometric mean of [R plus 1], raised to the
power n, computed using ordinary spreadsheet
software packages like Lotus 1-2-3 or MS Excel.
From the periodic return for the index [
1 ) 1 )...( 1 )( 1 (
2 1
+ + +
n
r r r R ), three more
statistics are taken: the compounded periodic
return; average return, and standard deviation.
The average return is simply R annualised by
exponenting it with 365 divided by the number
of days in the period.
The standard deviation

can be calculated
as:
2 / 1
1
2
1
) (
]
]
]
]
]
]
,
,
,
,

n
R R
n
t
a
.
Summary and Conclusions
The DSE opened its doors for trading on 15
th

April 1998 with only one security: TOL. Ten
years later, on 31st March 2008, the Exchange
has seen another 5 listings one of which,
TATEPA is a purely private sector capital-
raising initiative while all the others are former
parastatals which were essentially driven by the
Governments privatisation exercise.
During this time, performance has been variable.
TOL was an obviously bad case to open a stock
exchange with, but this was ameliorated a bit
by TBL, the next much larger issue. TATEPA
came in after TBL but was too small to make
a difference. TCC was a resounding success,
which by general consensus has wiped out
entirely the bad memories and misgivings that
the nascent market had registered after the
TOL fasco.
The latest offerings, SIMBA, DAHACO and
TWIGA, showed that there is appetite for more
IPOs that private entrepreneurs can tap to raise
risk capital. It is now possible to conclude that
the market has come full cycle. If investors are
ready to oversubscribe an IPO by 700% and
more, it means that there is money out there that
only needs to be parcelled out and channelled to
productive use in a win-win situation between
the investor and the issuer.
What of the bigger picture? Measured by the
COREDEX indices, the DSE performance has
been much better than expected in the strange
market that emerged from the former socialist
economy where ownership of shares was
listed as one of the cardinal sins that a self-
11
The DSE has got its own indices. These began only in 2007, though, some 9 years from Day 1.
DS E J o u r n a l

respecting citizen could infict on himself

11
.
The tables overleaf summarise the performance
of the listed companies and the DSE as a whole.
It will quickly become obvious if it had
not been expected that the 2 measures (the
COREDEX Average Index and the COREDEX
Composite Index) give similar but not identical
signals on the DSEs performance. This is not
11
The DSE has got its own indices. These began only in 2007, though, some 9 years from Day 1.
surprising if one bears in mind the philosophy
behind the two indices construction. There is
no mathematical or fnancial justifcation for the
2 indices to give the same answer
12
.

The COREDEX Average Index is computed
to give the general movement of the DSE
market for the average investor; the COREDEX
Composite Index is suitable for high net worth
individuals and institutional investors.
Shilling, Henry
Sharpe, W F,
Alexander, G J and
Bailey, J
Cutler, Mary L
Ross, S A,
Westerfeld, R W
and Jaffe, J
Brealey, R A and
Myers, S C
Copeland, T E and
Weston, J F
Foster, George
Fumbuka, L G
International Guide to
Securities Market Indices
Investments
Market Indices: A Learning
Exercise Using Warsaw
Stock Exchange Prices
Corporate Finance
Principles of Corporate
Finance
Financial Theory and
Corporate Policy
Financial Statement
Analysis
Assessing the Performance
of the DSE using the
COREDEX Composite
\index and the COREDEX
Average Index
International
Publishing, Chicago
Prentice Hall, Upper
Saddle River, NJ
Financial Practice
and Education
Irwin McGraw Hill,
Boston Mass.
McGraw Hill, NY
Addison-Wesley,
Reading Mass.
Prentice Hall,
Englewood Cliffs, NJ
Account ancy and
Busi ness Revi ew,
Journal of the Institute
o f Ac c o u n t a n c y
Arusha, Vol. 1 No.
ISSN 0856-7263
1996
1999
Fall/
Winter
1995
1996
1997
1988
1986
January
June 2004
REFERENCE
DS E J o u r n a l

So long as any particular index is interpreted

correctly and used consistently, there is every
reason to expect users to beneft.
ABOUT THE AUTHORS
CORE Securities Limited is a licensed
Dealing Member of the Dar es Salaam Stock
Exchange. It owns another frm Consultants
for Resources Evaluation Limited a CMSA
licensed Investment Advisor.
George Fumbuka is Fellow of the Association
of Chartered Certifed Accountants (FCCA),
having qualifed in the UK in 1976. He also
took an MBA degree form the University of
Strathclyde Business School (1980), majoring
in security analysis and portfolio management.
He is registered by the National Board of
Accountants and Auditors (NBAA) in the
category of Certifed Public Accountant in
Public Practice.
Mr. Fumbuka taught for 5 years at the Institute
of Finance Management, leaving with rank
of Senior Lecturer and Coordinator of its
Professional Accountancy programme. He
worked for the Board of Internal Trade (as
Management Accountant) the then Coopers &
Lybrand Associates Limited (as Management
Consultant), for TANESCO (as Manager
Finance, then Director of Supplies and
Transport) before going into private consulting
business.
With colleagues affliated with academic and
research institutions, he founded a management
consulting company called Consultants for
Resources Evaluation Limited (CORE) under
whose auspices he has undertaken numerous
assignments for clients in industry, commerce
and the financial sector. He is retained as
visiting trainer, resource person and external
examiner for many professional bodies and
training institutions of higher learning. In
2000, he led a team of consultants to prepare
Tanzanias national accounting and auditing
standards for the NBAA under funding from
the World Bank, which facilitated a seamless
migration to IFRS, fully beginning 2005 .
He has published widely in finance and
accounting, including a defnitive monograph
on consolidated accounts..
George Fumbuka is an active member of
the accountancy profession, sitting on the
Technical Committee of the NBAA. He
also sits on its Governing Board and those
of the Institute of Accountancy Arusha
(IAA), the Tanzania Institute of Accountancy
(DSA) and the Ngorongoro Conservation
Area Authority. From 1997 to 1999, he was
Tanzanias representative to the ACCA
International Assembly in London.
Mr. Fumbuka has been involved in capital
markets matters since the liberalization of the
fnancial sector. He is currently Authorised
Dealers Representative and Chief Executive
Offcer of CORE Securities Limited, Licensed
Dealing Member of the Dar es Salaam Stock
Exchange. He led the Company when it was
the Lead Advisor in the fotation of DAHACO
and TWIGA Cement. He is Secretary of the
Tanzania Stock Exchange Brokers Association
and sits on the Governing Council of the Dar
DS E J o u r n a l

DS E J o u r n a l

DS E J o u r n a l

DS E J o u r n a l
0
1.0 INTRODUCTION
As Dar es Salaam Community
Bank marks fve years of
successful operations it extends
its gratitude to all its esteemed
customers, shareholders,
business associates, Government
and the general public for their
confdence & support, factors
which have enabled the bank to
register success and attain the
status it has now.
The bank is proud to announce that, within fve
years the number of customers has grown from
12,11 in 2002 , to more than ,000 clients by
2007.
Last year the bank introduced foreign exchange
operations, enabling our clients to open, operate
foreign currency Accounts so as to undertake
foreign currency transactions. This year the
we have introduced ATM services under
UmojaSwitch, a consortium of six banks
including, Akiba Commercial Bank, Azania
Bank, Twiga Bancorp, BOA Bank Tanzania
and Tanzania Investment Bank. The aim is to
offer a wide ATM network to our customers
by accessing services 24 hours a day, seven
days a week and 365 days a year at any of the
consortium member banks ATMs.
In response to the need of the banks services
the bank plans to open up its third and
fourth branches at Temeke
and at Tabata Dampo in
Ilala Municipality before
June 2008. Currntly, the bank
operates from two branches at
Arnautoglu Mnazi Mmoja
and MagomeniBranch- at Hotel
Travertine.
It is gratifying to note that the
products and services offered
by DCB have benefted and
transformed the lives of many Dar es Salaam
people and Tanzania at large.

2.0 SHARE CAPITAL
Authorized share capital
0,000,000 shares of TZS 20 each value of
TZS 10,000,000,000
3.0 CAPITAL BUILD-UP PROGRAMME
THROUGH IPO
The frst shareholders subscribed for 1,123,244
shares worth TZS. 1,123,244,000, to kick-start
the bank.
Immediately after registration of the bank, the
capital so contributed was found inadequate to
sustain operations of the bank. It was deemed
prudent to involve stakeholders in Dar es
Salaam Region through offering shares on
Initial Public Offer (IPO). 672,000 shares valued
TZS 1,000/= each were sold through an IPO,
bringing the paid-up shares to 1,795,588.
STATEMENT BY
THE MANAgINg DIRECTOR ON
10TH DSE CELEBRATIONS
DS E J o u r n a l
1
.0 CAPITAL BUILD-UP PROGRAMME
THROUGH RIGHTS ISSUE.
Pursuant to BOT recommendations to strengthen
the banks capital by doubling the paid-up
capital, at the 4th AGM held on 1st July 2006, the
.0 Capital position after Rights Issue
and Share dividend
In their effort; towards continued capital build-
up, the Shareholders at the 5th AGM held on 26th
May 2007, resolved to receive shares in lieu of cash
dividend for the dividend declared out of 2006
profts. The declared dividend of TZS 215 million
1
2
3
4
5
DSM City Council
Ilala Municipal Council
Kinondoni Municipal Council
Temeke Municipal Council
Public (individuals, companies,
etc. 2,643 shareholders)
Total
291,143
277,367
277,367
277,367
-
1,123,2
25.92%
24.69%
24.69%
24.69%
-
100%
341,143
327,367
327,367
327,367
472,344
1,,
19.0%
18.2%
18.2%
18.2%
26.4%
100%
January to June 2002
S/N
Number of
shares
% age
Number
of shares
% age
July 2002 Dec 200
DSM City Council
Temeke Municipal Council
Ilala Municipal Council
Kinondoni Municipal Council
Public
Total
341,143
327,367
327,367
327,367
472,344
1,,
1,050
1,050
1,050
1,050
1,050
295,476
238,095
306,758
295,476
251,279
1,3,0
310,249,800
249,999,750
322,095,900
310,249,800
263,842,950
1,,3,200
Shareholders
No. of shares
Offered
Price per
share
Number
of shares
purchased
Value of share
purchased in TZS
Table 2: Additional share capital through rights issue as at 30th June 200
Table 1 Paid-up Share Capital structure from 2002 to 200
shareholders resolved to raise capital through
Rights Issue. The Rights Issue was issued at one
to one share and aimed at retaining the current
shareholding structure. The result of Rights Issue
programme was achieved by 77.25% as provided
in table 3 herein below;
or 12% per share (1,795,588 original shares) was
therefore paid to the shareholders in the form of
shares at the price of TZS 1050.00 per share.
At the same Meeting the Shareholders deliberated
on the share split from one share of TZS 1,000 each
to four shares of TZS 250 each.
DS E J o u r n a l
2
Table 3: Capital Position after Rights Issue and Share Dividend (Excluding share premium).
2,686,828
2,671,188
2,626,060
2,396,536
3,088,824
13,469,436
1,0,000
,,000
,1,000
,13,000
2,20,000
3,3,3,000
1.%
1.3%
1.0%
1.%
22.3%
100.0%
Shareholders
No. of shares
Value in TZS
% age
DSM City Council
Ilala Municipal Council
Kinondoni Municipal Council
Temekei Municipal Council
Public (2,2 Members)
Total
.0 CAPITAL BUILD-UP
PROGRAMME THOUGH
LISTING AT DAR ES SALAAM
STOCK EXCHANGE DSE
The bank is currently in the listing process to raise
the capital to meet the expansion programmes.
Further to that, during the Rights Issue exercise
the bank was directed by the Capital Market and
Securities Authority to list the shares at DSE for the
beneft of 2,626 shareholders as an exit mechanism
and price discovery facilitation process. It is
expected that this exercise will be undertaken
before 30/06/2008
DS E J o u r n a l
3
T
he CRDB Bank has removed various
fees charged on Internet Banking
service. This is one of other services
and products offered by the bank whose rates
and charges have been reviewed downwards.
The move will enhance the accessibility
of the services to customers, says Tully
Esther Mwambapa, CRDB Banks Director of
Marketing and Research.
Ms Mwambapa said CRDB Internet Banking
customer will now pay only connection fee and
enjoy the service free of charge.
Other changes according to the bank offcial is
on issuance of TemboCard and TemboCardVisa.
The cards will now be issued free of charge.
These cards can be used in ATMs anywhere
in the country for withdrawal and depositing
cash. They can also be used to buy services and
goods at point of sale terminals at supermarkets
and other places. TemboCardVisa can also be
used to services from ATMs of other banks
within and outside the country which have a
Visa sign.
Speaking at a press conference recently, the
Banks Managing Director encouraged business
people to use the cards instead of traveling with
huge sums of money. Elaborating, Dr Kimei said
a businessman from Kariakoo in Dar es Salaam
or Mwanjelwa in Mbeya who is a customer of
CRDB Bank, no longer needed to carry cash
when traveling on a business trip to places
like Dubai or Hong Kong. He advised them to
visit their branch managers, giving Lumumba
or Vijana for Kariakoo and Mbeya branch for
the case of Mwanjelwa as examples. He said the
respective branches would credit the amounts
required by the customers in foreign currency
into their accounts. He said it was not necessary
for a customer to have a forex account in order
to get this service.
In the same occasion Dr Charles Kimei
announced that all money transfers within
CRDB Bank network will now be free regardless
the amount. He said his Bank has also increased
the cash withdrawal limit without notice from
Tshs 1 million to Tshs 5 million.
According to the CEO, the Bank has scrapped
fees for cash withdrawal at non-domicile
(different locality) branch for amounts up to
Tshs 5 million. Previously the limit was Tshs 1
million for savings account and Tshs 2 million
for current account.
The Bank has also reviewed the foreign currency
minimum interest bearing balance. From now
the minimum interest bearing balance for
customers with USD/EURO 1,000 and GBP
2,000 will get an interest. Previously it was
only those with a balance of USD/Euro 5,000
and GBP 3,000 respectively. All the changes are
effective from 1st March 2008.
CRDB Banks Internet
banking, TemboCard for free
DS E J o u r n a l

Abstract
The bond market segment of the
Dar es Salaam Stock Exchange
has expanded significantly
over the past few years. This
development should help
reduce the countrys historical
dependence on local banks
financing. Although much
progress has been made,
vulnerabilities associated with
narrow investor base and a
few investment vehicles remain and secondary
markets still suffer from low liquidity.
1.0 Introduction
An organized exchange is a system through
which fnancial assets (securities) are created
(listed) and exchanged (traded). Although the
existence of a fnancial market is not a necessary
condition for the creation and exchange of a
fnancial asset, in most economies fnancial
assets are created and subsequently traded
in some type of organized fnancial market
structure.
Financial markets provide three additional
economic functions. First, the interactions
of buyers and sellers in a fnancial market
determine the price of the traded asset;
or, equivalently, the required return on a
fnancial asset is determined. This important
function is called the price discovery process.
Second, financial markets
provide a mechanism for an
investor to sell a financial
asset. This feature offers
liquidity in fnancial markets,
an attractive characteristic
when circumstances either
force or motivate an investor
to sell. In the absence of
liquidity, the owner must
hold a debt instrument until
it matures and an equity
instrument until the company
either voluntarily or involuntarily liquidates.
Although all fnancial markets provide some
form of liquidity, the degree of liquidity is
one of the factors that differentiate various
markets. The third economic function of
a financial market reduces the search and
information costs of transacting. Search costs
represent explicit costs, such as the money
spent to advertise the desire to sell or purchase
a fnancial asset, and implicit costs, such as the
value of time spent in locating counterparty.
The presence of some form of organized
fnancial market reduces search costs.

The DSE is an organized exchange that was
incorporated in September 1996 as a private
company limited by guarantee and not having
a share capital under the Companies Ordinance
(Cap. 212). The DSE is therefore a non-proft
making body created to facilitate, among other
things, the Government implementation of
the economic reforms and facilitation of the
TEN YEARS OF DAR ES SALAAM STOCK EXCHANGE (DSE):
ACHIEVEMENTS AND CHAllENgES FOR THE
DOMESTIC BOND MARKET
By Dr. S. R. Mohamed, Senior Lecturer, the Institute of Finance Management, Dar es Salaam, Tanzania
DS E J o u r n a l

wider share ownership of privatized and all

the companies in Tanzania. Currently, the
exchange is open for 5 days in a week from
Monday to Friday except on public holidays.
Trading takes place between 10a.m and 12 a.m
due to thinness of trading.
1.2.1 Functions of DSE
The DSE like many other emerging capital
markets was created to perform seven major
functions. The frst function is to provide a
market for listed securities. Specifcally, it was
created to enable those who wish to join or exit
the market to do so effciently. This role ensures
liquidity in the secondary market. The second
function of DSE is to facilitate price discovery.
Demand and supply forces together with an
effcient information processing mechanism
will ensure that buyers and sellers of securities
transact at fair prices. The third role of DSE
is to facilitate transparency. Disclosure
requirements put in place by the DSE require
listed companies to promptly disclose all price
sensitive information so that investors may
make informed decisions. The fourth role of
the market is to facilitate privatization and
wider ownership of resources. The market
has facilitated and continues to facilitate
privatizations of parastatal organizations
which were previously under the control of
the Government.
The other function of DSE is to facilitate raising
of capital by frms. These companies are able
to sell new securities at prices which lower
the cost of capital and improve their chances
of increasing operating profts. Creation of
wealth through investing in listed securities is
also a function of DSE. In real terms, all listed
securities at DSE have generally performed
well compared to bank deposits. The last
function of DSE is to contribute to the cultural
transformation of Tanzanians. This is mainly
a knowledge revolution geared towards
educating Tanzanians on issues related to
stock market operations. This exercise has
contributed substantially towards public
enlightenment which has caused some
Tanzanians to invest in listed companies as a
result of the said transformation.
1.2.2 The DSE Trading System
When the frst trading commenced on 15th
April 1998, trading used to be conducted at the
DSE trading foor under open outcry continuous
auction trading system. Specifically, the
representatives of the licensed dealing members
(LDMs) converged at the trading foor during
trading hours to trade securities received in
their respective offces. Trading used to be
conducted by LDMs shouting their orders
to the board writer who records the order on
the board. The board writer used to write the
orders as received from LDMs. When bid and
offer matches, then the securities in question
was considered to have been sold or bought.
With effect from 15th December 2006, trading
has been conducted at the DSE trading foor
through an Automated Trading System (ATS).
This is an electronic system which matches
bids and offers using an electronic matching
engine. LDMs usually converge at the trading
room and post their orders in the ATS. Matched
orders are displayed on the computer terminal
in the trading room and projected in the public
gallery. Currently, the ATS operates on a local
area network (LAN) but the exchange plans
to extend operations to a wide area network
(WAN) which can be accessed by brokers even
out of Dar es Salaam.
1.2.3 Clearing and Settlement System
Clearing and settlement of transactions at DSE
is facilitated through an electronic Central
Depository System (CDS) which has been
operational since1999. The system facilitates
DS E J o u r n a l

registration of changes of ownership of

securities electronically. The CDS facilitates
the delivery of securities in time for the
settlement of trades to be implemented within
fve working days (T+5). The exchange is in
the process of upgrading its system so as to
move into a clearing and settlement regime
of (T+3) days.
1.2.4 Listed Debt Securities at DSE
In addition to seven domestic and three
cross-listed equity companies, the DSE
has four corporate bonds and a series of
Table 1: Outstanding Corporate Bonds as of 30th June, 2007
Key: EADB= East African Development Bank
PTA= Eastern, Central and Southern African Trade Development Bank
BB= BARCLAYS BANK (T) LTD
SCB=STANDARD CHARTERED BANK LTD
Source: DSE handbook, June 2007
Table 2: Outstanding Government Bonds as of 30th June, 2007
7.82
6.20
6.10
9.18
7.75
6.60
10.08
8.50
7.50
11.44
2
5
5
5
7
7
7
10
10
10
7 July 07 25 Jan 09
26 Sept 07
16 Jan 08
10 Sept 08 12 April 12
22 Aug 09
23 Jan 10
16 Oct 10 11 Jan 14
31 Oct 12
30 Oct 13
23 Oct 13 01 Feb 17
247.7098
19.5000
22.0260
116.2038
25.2000
18.9867
98.1581
12.1290
14.4800
80.1668
0.3
Source: DSE handbook, June 2007
Issuer Remarks Issue Date
23rd May,
2005
23rd January,
2004
4th July, 2005
6th July, 2005
Principal
Amount (TZS
billions)
15.0
10.0
26.4
8.0
Coupon Rate
Floating rate
Fixed & Floating
rates
Fixed Rate &
Floating Rate with
a cap of 15% p.a
Floating
Redemption Date
15th August, 2010
4 equal installments
commencing on 19th
July, 2007
19th July, 2010
Final maturity 25th
August, 2015 with
callable option after
25th August, 2010
EADB
PTA
BB
SCB
Unsecured
Unsecured
Unsecured &
subordinated
Unsecured &
subordinated
Coupon Rate (%)
Tenor (Years)
Maturity Date
Cumulative Face Value of
Bonds (TZS billions)
Grand Total
DS E J o u r n a l

Government bonds of different maturities.

These bonds together with the other important
characteristics are shown in Table 1 and 2
below.
2. Achievements of the Bond Market
Ten years have elapsed since the DSE started
its operations on the 15
th
April 2008. The frst
bond was listed in 1999 while the second bond
made its way to the exchange in 2002. The frst
Treasury bond was listed in March 2002 with
the market value of TZS 8.4 billion and tenor of
fve years. There after, a series of Government
and corporate bonds with different maturities
and embedded options were issued.
The maturity of Government bonds has
typically been 2, 5, 7 and 10 years with a large
chunk of the issue skewed toward the short
and the medium-term segment of the market.
Table 1& 2 show that the market value of
the outstanding corporate and government
bonds as of 30
th
June 2007 is about TZS 60
billion and TZS 661billions respectively.
This shows that domestic bond market has
constituted a growing source of fnancing for
the Government and of portfolio allocation
for parastatals and other private investors.
The very introduction of the bonds and the
growth of their outstanding value is clearly
an achievement for DSE.
On the other hand, the corporate bond market
has witnessed a signifcant growth not only in
the number of issuers but also in the degree
of innovations. For instance, foating rates
bonds are very common in the corporate bond
market
1
. Optional features like callable option
for a Standard Chartered issue that is expected
to mature on 15
th
August 2015 and cap feature
that is attached to a Barclays Bank (T) Ltd is
also a signifcant step in the right direction.
Introduction of an Automated Trading
System (ATS) at DSE is also an achievement
worth noting. It has made matching of bids
and offers much effciently. The educational
programmes that have been conducted by
DSE management have also greatly helped to
educate the general public about the dynamics
of the bond market. Of course, more needs to
be done in this area.
3. Challenges of the Bond Market
The bond market has constituted a growing
source of financing for our economy. The
expansion of this market has reflected
a conscious effort by investors and the
government authorities to reduce their
vulnerability to adverse external shocks. In this
context, a key issue is to strengthen demand
and supply conditions for domestic debt. This
shall be accomplished, inter alia, by continuing
to pursue stable macroeconomic policies.
In spite of the successes we documented, the
bond market has remained underdeveloped
owing to a number of policy and structural
impediments. These included an illiquid
secondary market, the absence of a deep and
diversifed investor base; regulatory restrictions
that hampers the development of other primary
and secondary market activities; and the lack
of an adequate infrastructure for facilitation of
innovations in debt instruments.
The secondary bond market, has for instance,
been very inactive. For example, by the end
of 2002, only six secondary bond market
transactions were registered at the DSE. Out
of these six, there was only one Treasury bond
transaction. The pattern of illiquidity in the
secondary market has prevailed over time. It
is argued that the investor base for the bond
1
See for example, BIDCO, Barclays and Standard Chartered bond issues
DS E J o u r n a l

market is not broad enough to allow for active

secondary market. Most of bond investors
are financial institutions, mainly pension
funds and insurance companies, who seem to
have preference for a buy-and-hold strategy.
This behaviour could partly be explained by
existence of very limited (bond) investment
avenues and perhaps due to their high degrees
of risk aversion or may be due to the regulatory
restrictions on choosing the right investment
vehicles. There is also a possibility that the
current bond holders pursue a deliberate
passive investment strategy so as to reduce the
risk caused by maturity and value mismatch
between their assets and liabilities mix. As a
result, these investors tend to buy and hold
their bond portfolios until maturity and their
actions obviously contribute to the illiquidity
of the secondary bond market.
The low level of secondary market trading is
a concern since active markets are an essential
prerequisite for the cost-effective taking
or unwinding of positions. Poor liquidity
can induce large changes in market prices
and volatility. Liquid fnancial markets are
necessary for the functioning of modern
risk management systems, which rely on
the derivation of accurate benchmark rates
for the pricing of portfolios and the smooth
functioning of markets for the frequent
rebalancing of positions. On the other hand, in
addition to macroeconomic factors, the pricing
of longer-term bonds can be infuenced by
liquidity. It is also true that the size of a market
has a bearing on liquidity [see for example,
McCauley and Remolona (2000), Amante et al.
(2007) and Gyntelberg et al. (2005)]
Equally important is the breadth of the
investor base and the type of securities traded
in the market. The investor base at the DSE
has been very narrow for the last ten years.
Non-institutional and perhaps small investors
have played a limited role in the bond market.
The market seems to have been dominated
by institutional investors mainly the pension
funds. The narrow investor base is obviously
hampering the development of secondary
market liquidity. The number of available
investment opportunities has been limited too.
As a result, a deliberate effort has to be made so
as to increase investor base by reducing barriers
that prohibit small investors from participating
in the bond market and by also increasing the
number of investment opportunities through
innovations in the market.
The lack of signifcant innovations and the
seemingly high degree of risk aversion
among prospective investors and issuers may
jeopardize the growth of the bond market in
Tanzania. Innovations, for example, can create
a lot of opportunities and mitigate some of
the problems that surround our market at
the moment. Issuers may wish to introduce
inflation-linked bonds that will be very
attractive to the would be investors because
they would preserve the purchasing power
of their investments in bonds. Some investors
are currently reluctant to commit their funds
at fxed rates for long periods of time for fear
that borrowers in the region could be exposed
to a significant degree of refinancing risk
should domestic or global fnancial conditions
deteriorate.
Another aspect of innovation is for as many
issuers as possible to introduce derivative
features such as callable, convertible and
putable options. Some of these options
will be attractive to both investors and the
issuers. Introduction of zero coupon bonds
could also add value to our market. These
bonds are particularly attractive to portfolio
managers who wish to offset particular liability
streams and preserve the real values of their
investments.
Further, there should be a gradual extension
of the maturity structure of Government
and corporate bonds. The progress made by
DS E J o u r n a l
0
the government in lengthening the maturity
of their fxed rate debt is commendable but
more needs to be done. This can be achieved
in stages, for instance 15years may initially
be introduced followed by 20 year bonds and
so forth. The wider availability of longer-
dated bonds shall not only provide a useful
representation of the term structure of interest
rates but the lengthening of maturity profles
of domestic debt shall help in reducing the risk
resulting from maturity mismatches.
The economy in Tanzania is growing at a rate
of about 7 percent. The main drivers of this
growth are mining, manufacturing, transport
and communication, hotels and tourism,
building and construction and agriculture. To
sustain growth, part of the funding will have
to be drawn from the domestic bond market.
Firms will have to borrow from the exchange to
fnance their investment opportunities. On the
other hand, following the reduced frequency
of government bonds auctions and reduced
tender sizes, the Treasury bond market has
experienced over subscription phenomenon.
For instance, in January 2008, the demand
for Treasury bond amounted to TZS 23.0
billion, against TZS 15.0 billion offered by the
Government [See, Bank of Tanzania, Monthly
Economic Review, February 2008]. This pattern
of events will undoubtedly put tremendous
pressure to the domestic bond market and
the exchange to increase the number of debt
instruments in the market.
As mentioned earlier, trading at DSE is being
conducted through an Automated Trading
System (ATS) and the exchange is planning
to extend its operations to a wide area
network (WAN) which can be accessed by
brokers even out of Dar es Salaam. While this
is a commendable effort, electronic trading
technologies should also provide low-cost and
real-time information about the performance of
the bond market and issuers of debt securities.
According to Wooldridge et al (2003), these
developments should also greatly reduce
transaction costs and processing times so as to
further broaden market participation.
4. Conclusion
The DSE has made significant progress in
developing domestic bond market for a
decade. However, there are still a number of
challenges. The most pressing are the need
to increase secondary market liquidity and
increase the depth and breath of the market.
Moreover, the extent to which the bond market
constitute a dependable source of funding for
our economy remains to be tested. Although
the bond market appears at this time to
be less vulnerable to fnancial shocks, less
auspicious market conditions could expose
incipient domestic bond market to unforeseen
pressures. In this respect, policymakers should
encourage further developments of our bond
market.
References
Amante, A, M. Araujo and S. Jeanneau (2007):
The search for liquidity in the Brazilian domestic
government bond market, BIS Quarterly Review,
June, pp 6982.
Bank of Tanzania, Monthly Economic Review,
February 2008
Gyntelberg, J, G. Ma and E. Remolona (2005):
Corporate bond markets in Asia, BIS Quarterly
Review, December, pp 8393.
McCauley, R and E Remolona (2000): Size and
liquidity of government bond markets, BIS
Quarterly Review, November, pp 5260.
Wooldridge, P, D Domanski and A Cobau (2003):
Changing links between mature and emerging
fnancial markets, BIS Quarterly Review, September,
pp 4554.
DS E J o u r n a l
1
C O R P O R A T E P R O F I L E
Vertex International Securities
V
ertex is a Licensed Dealing
Member of the Dar Es Salaam Stock
Exchange (DSE) and Licensed
Primary Dealer in Government
Securities. The Company was incorporated
under the Companies Ordinance and issued
with Certifcate of Incorporation number
35381 dated 11th December 1998.
As a Licenced Dealing Member of the DSE,
Vertex offers a comprehensive range of
securities dealing services which include:
Securities Dealing;
Advice in Initial Public Issues of Equities
and Bonds;
Arrange underwriting of public issues;
Syndication and private placements;
Structuring Collective Investment
schemes
Investment Advice
Research Information on both listed
and unlisted investment instruments
Specialized Financial Products and
Services
Vertexs sister company, Vertex Financial
Services Ltd, provides corporate fnance
advisory services with focus on structured
project fnance, business valuations, as well
as mergers & acquisitions transactions.
Vertexs approach to the creation and
preservation of value and the forging of
personal relationship with its clients is
founded on a total commitment to excellence
and professionalism, which forms the bedrock
of its business philosophy. Our business
philosophy is founded on innovation,
integrity, best practice and performance
driven. Our teams are structured to provide
the specialist practical skills needed to meet
the specifc needs of our clients.
Today, Vertex has:
Unrivalled knowledge of all aspects of
Tanzanias domestic market
Access to international experience and
best practice in capital markets
Structruring expertise in innovative
fnancial products which are bankable
in one of the regions fastest growing
economy.
DS E J o u r n a l
2
Vertex International Securities limited
Dealing Member of the DSE Linced
VERTEX WISHES TO EXTEND ITS WARMEST CONGRATULATIONS TO THE
DAR ES SALAAM STOCK EXCHANGE ON ITS 10TH ANNIVERSARY
As a leading player in the market, our track record speaks for itself
Barclays Bank Tanzania Limited
Co-arrange and Sponsoring broker for the frst
Corporate Bond in Tanzania.
Sponsoring broker for the largest private Sector
Corporate Bond to-date, issued in tranches.
Lead Adviser and Sponsoring broker for the frst
Rights Issue of a DSE listed company in Tanzania
Co- sponsoring broker for the shares listing of
Tanzanite-One on the London Stock Exchange AIMS
market
CONTACT US AT:
Zambia High Commission Building, Cnr Ohio St. / Sokoine Drive
P. O. Box 13412 Dar es Salaam, Tanzania, Tel: +255 22 2116382 / 2110387
Fax: +255 2110387, E-mail: vertex@smartcardtz.com
VIS
DS E J o u r n a l
3
CORE Securities Limited
W
ith introduction of
capital markets in
Tanzania towards the
end of the millennium,
CORE Securities Limited was founded in
1997 to specialise in dealing and investment
advisory matters, which required a CMSA
and DSE license.
Prior to that, the shareholders had founded
a management consulting company called
Consultants for Resources Evaluation
Limited, incorporated in 1988 as an
indigenous enterprise wholly under the
control of Tanzanian nationals comprising 6
shareholders and several principals affliated
with academic or research institutions.
Its main objectives were and still are
to render consulting services in capital
markets operations; funds arrangement and
management; corporate fnance; economic
and market studies; taxation, public
fnance and policy analysis; information
technology; collective investment scheme;
and professional training in all these areas.
Subsequent reorganisation saw CORE
Securities Limited reconstituted as the parent
company (specialising in dealing matters) and
CORE specialising in investment advisory
matters (which also required CMSA license).
The parent company is licensed by the CMSA
in the category of Dealer in Dual Capacity
(License: D.007). Two of its Directors and 2
of its senior staff are licensed by CMSA as
Authorised Dealers Representative. The
Company itself is additionally licensed by the
Bank of Tanzania as a Authorised Dealer in
Government Securities.
The subsidiary company is licensed by the
Capital markets and Securities Authority
(CMSA) in the category of Investment
Advisor.
The Group has used these authorisations,
and those of its directors and key staff, to
play a key role in the development of capital
markets in Tanzania and their evolution from
their early days in 1998 to date. Between
them, the 2 companies have handled many
capital market and corporate fnance advisory
assignments.
CORE Securities Limited
(Licensed Dealing Member of the Dar es Salaam Stock Exchange)
Ground Floor, Twiga House
P.O. Box 76800 Dar es Salaam, Tanzania
Tel: +255 22 2123103 Fax: 2122562 E-mail: core@cats-net.com
http://www.coresecurities.co.tz
Business Registration No. 33144
DS E J o u r n a l

DS E J o u r n a l

S
OLOMON has been involved in a number of sponsoring projects.
Our project undertaking experience includes:
1. Tanzania Oxygen Limited (1998): SOLOMON carried the frst
role sponsoring in the market. This included;
forward an application and Prospectus (acceptable to the Client) to
CMSA and DSE for consideration and approval for going public and
listing on the DSE respectively,
submit to DSE and CMSA, and other regulatory bodies all necessary
documents to support the application,
ensure that regulators are made aware of all information that should be
brought to their attention,
scrutinize the accuracy and adequacy of information provided to the
regulators,
advise the Issuer on all requirements in relation to pricing, marketing,
distribution process and continued requirements on the issue,
counter check all stated facts and certify that the issuer is suitable for
listing; and,
take reasonable steps to ensure that the issuer has complied with all
relevant conditions and requirements for going public and listing at
the DSE
2. Tanzania Breweries Limited (1998): Co-sponsoring, advised on timing,
structuring, marketing and pricing of the issue in relation to the equity
transaction involved. SOLOMON was also involved in the subsequent
merger and acquisition transaction.
SOLOMON
STOCKBROKERS
DS E J o u r n a l

WHO ARE WE?

SOLOMON STOCK BROKER CO. LTD are
stock brokers in the business of buying and
selling of equities or shares registered by THE
DAR ES SALAAM STOCK EXCHANGE (DSE)
ALSO
Buy and sell Government securities TREASURY
BILLS/BONDS both in primary and secondary
market issued by Bank of Tanzania.
WHERE TO FIND US
SOLOMON STOCKBROKER CO. LTD are
located at
PPF House, Ground Floor
Morogoro Road/Samora Avenue
P.O. Box 77049
DAR ES SALAAM
CONTACTS
SOLOMON STOCKBROKERS CO. LTD
Tel: +255 22 2124495
+255 22 2112874
Fax: +255 22 2131969
Email: solomon@simbanet.net
SOLOMON
STOCK BROKERS
NI NANI?
SOLOMON STOCKBROKER CO. LTD ni
wakala inayekuwezesha kununua na kuuza
HISA za kampuni zote zilizoandikishwa katika
soko la MITAJI la DAR ES SALAAM STOCK
EXCHANGE (DSE)ALSO PIA
Na ununuzi na uuzaji wa HATIFUNGANI na
DHAMANA za muda mfupi zinazotolewa na
Benki Kuu ya Tanzania.
TUKO WAPI?
SOLOMON STOCK BROKER CO. LTD are
located at
PPF House, Ground Floor
Morogoro Road/Samora Avenue
P.O. Box 77049
DAR ES SALAAM
SIMU ZETU
SOLOMONSTOCK BROKERS CO. LTD
Tel: +255 22 2124495
+255 22 2112874
Fax: +255 22 2131969
Email: solomon@simbanet.net
SOLOMON
STOCKBROKERS
Reach / Access / Invest
Reach / Access / Invest
DS E J o u r n a l

A B R I E F C O M PA N Y P R O F I L E
1. COMPANY BACKGROUND
Rasilimali Limited was incorporated on 4 February,
1980 vide certifcate of incorporation No.7586 as
a wholly owned subsidiary company of Tanzania
Investment Bank (TIB). Its mandate then was to
purchase, take or lease or in exchange or otherwise
acquire any land and buildings in Tanzania. It was
a property developer and was assigned to oversee
the construction of the Banks offce Block to be
called RASILIMALI HOUSE. This project was
later postponed and therefore Rasilimali Limited did
not start operations as expected. In the early 1990s
the bank embarked on restructuralisation program
under which it was decided to start some new
activities including merchant banking, in addition
to its traditional role of lending. The enactment
of the Capital Markets and Securities Authority
(CMSA) Act of 1994, prohibited banks to undertake
the activities capital market operations unless under
a separate independent company which is to be
regulated by the CMSA.
Pursuant to the rules and regulations of CMSA,
TIB decided to reactivate Rasilimali Limited
and transform it from Real estate developer into
providing Financial Services and Securities Dealing
Company. Rasilimali Limited was granted licences
as per CMSAs requirements on 10th October
2. SHARE HOLDING:
Rasilimali Limited is wholly owned by Tanzania
Investment Bank, with an authorized capital is Tshs
150 million and fully paid up capital is Tshs 62.5
million.
TIB as the owner of the company has appointed the
following as Board Members of the company, Mr.
Thomas F. M. Samkyi (Chairman), Mr. Charles M.
Chenza (Director),
Mr. Elsie Kanza (Director), Mr. Bernard P. Mono
(Director) and Mr. Aidan Eyakuze (Director).
3. COMPANY ORGANIZATION STRUCTURE:
The company is headed by the General Manager;
currently it is Mr G.E. Maganga. It has two main
departments, namely the Operations and Investment
Advisory Services Department which is headed by
Mr Arphaxad G. A. Masambu. The two above, both
are holders of the ADRs Licence. The Department of
Finance and Administration is headed by Mr Fabian
M Mauna.
4. PROFILE OF PROFESSIONAL STAFF:
The above three staff are the professional and key
resource persons to the company in relation to
the daily Operations of the company, Investment
activities and Capital markets advisory services.
The company can however access other professional
resource persons (as and when needed) from the
parent company, Tanzania Investment Bank. These
include professional resource persons in the areas
Consultancy, Advisory Services, Research Studies,
Financial Analysis, Auditing and Accounting,
Engeneering, Economics and Agriculture.
(1) Bryson E. Mwanga - Head of Finance; B.Com, CPA
(T), Master of Finance
(2) Mr G. Matembele - Relationship Manager
Investment and credit analysis; BA Economics and
Statistics, Master of Project Management
(3) Ms M.J.J. Maeda- Legal Counsel & Secretary to the
TIB Board, LLB, LLM,Advocate
(4) Mr L.O. Mlewa- Head of Portfolio Management
B.Com. Finance, M.Sc. Banking and Finance.
(5) Mr T.M.F. Samkyi- Head of Business Development
and Appraisal; BSc Agriculture; MSc Agr.Economics
(6) Mrs M. Mcharo- Head of Credit Administration;
B.Com. Finance, MSc Banking and Finance
(7) Mrs M. Rwegarulira- Relationship Manager;
RASILIMALI LIMITED
DS E J o u r n a l

BA-Economics, MSc Finance (Credit & Finance

Analyst)
(8) Mr I. Tairo- Legal Counsel and Secretary to the
Company (Rasilimali Ltd) LLB, Advocate.
. CO - ACTIVITIES
The company has entered into an agreement with
KPMG Tanzania to jointly undertake assignments
that are always put to tender. This means only for
commercial activities which need the professional
capacity of both companies.

6. SERVICES PROVIDED:
(i) Brokerage Services: Share trading,
Underwriting and Brokerage Sponsoring
(ii) Securities Primary Dealership (i.e. Dealer
in Government Treasury Bills and Treasury
Bonds)
(iii) Share valuation i.e. both quoted and unquoted
shares
(iv) Investment Advisory Services
(v) Consultancy Services and Feasibility Studies
(a) Portfolio Management
(b) Raising money in the Capital Markets
(vi) Fund Management.
. OFFICE LOCATION
Rasilimali Limited is located on the Ground Floor
of the Government Flight Agency Building, Dar es
Salaam, at the junction between Sokoine Drive and
Zanaki Street,
. RASILIMALI AGENTS
The agents of Rasilimali Limited who are registered
by The Dar es Salaam Stock Exchange are;
a) Equities Consult Limited: Is located along
Liberty Street, within Ibadhi Mosque Buliding.
They deal mostly with Investment and Stock
Brokerage activities. Their Telephone No. is
0754-469778; Fax No.028-2540179; and E-mail
No.equtiesmza@yahoo.co.uk
b) C. V. Okhai: This is an agent who is based in
Dar es Salaam. He deals mainly with brokerage
activities and Portfolio Management. His
contacts are: Mobile Phone No. 0713-334499;
Fax No.022-278249 and Email No. cvokhai@
yahoo.com
c) ALI KONDO MNYANI: This agent is based in
Tanga. He also deals mainly with brokerage
activities. His contacts are: P. O. Box 123 Tanga;
Tel no. 0754-313199. His offce is in Katani
Limited offces in Tanga
. COMPANY BASIC INFORMATION
(i) BANKER:
(a) NBC (1997) LTD
SAMORA BRANCH
P.O. BOX 9002
DAR ES SALAAM
(b) CRDB BANK LIMITED
HOLLAND HOUSE
DAR ES SALAAM
(ii) AUDITORS:
TAC Associates
P.O. BOX 580
DAR ES SALAAM
iii) LEGAL ADVISORS:
TANZANIA INVESTMENT BANK
LEGAL COUNSEL DEPARTMENT
P.O. BOX 9373
DAR ES SALAAM
OUR ADDRESS:
C/OTANZANIA INVESTMENT BANK GOVERNMENT FLIGHT AGENCY BUILDING, GROUND FLOOR,
Zanaki Street/ Sokoine Drive, P. O. Box 9373, Dar es Salaam
Telephone: 022-2111711, 0713-777818, 0754-787600) Fax: 022-2122883
E-mail : rasimali@africaonline.co.tz
DS E J o u r n a l

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DS E J o u r n a l
0
O
rbit Securities Company
Ltd. (ORBIT) is a private
Company incorporated in
Tanzania in 1996 and one of
founder members of the Dar es Salaam Stock
Exchange (DSE). ORBIT is dully licensed
Stockbroker/Dealer and Investment
Advisor. The Company is also licensed
by the Bank of Tanzania as Primary Dealer
trading in Government Securities. Orbit is
one of the leading Stockbroker/Dealers at
the Exchange.
OUR SERVICES
ORBIT team, which brings together experts
in Finance, Economics and Accounting, is an
ideal place where you can get the following
specifc fnancial services: -
As Broker-dealers, we execute
transactions (buying and selling shares)
at the Stock Exchange on behalf of our
client, and on our own behalf to provide
the liquidity in the market.
As Primary Dealers in Government
Securities we submit bids on behalf of
investors and facilitate the settlement
process.
As Investment Advisers, we provide
advise on clients overall investment
planning as well as on specifcs
such as security selection, portfolio
diversifcation, risk management, and
timing of transactions. ORBIT will offer
advice taking into account the investment
objectives of the clients.
As Corporate Finance Consultants, we
advice clients on how to raise money from
the public including Private Placement
and the preparation of Prospectus/
Information Memorandum.
We provide custody services for
foreigners investing in the domestic
equity market, by facilitating funds
transfers, dividend payment remittance
and re-investments.
EXPERIENCE & ACHIEVEMENTS
Experience in Sponsoring Initial Public
Offerings (IPOs) and Cross-listing of
shares from Nairobi Stock Exchange.
As at April 2008, ORBIT sponsored fve
C O M P A N Y O V E R V I E W
Orbit Securities Company
Ltd. (ORBIT)
DS E J o u r n a l
1
of the ten Companies listed on the DSE
including three cross-listings namely
Kenya Airways, East African Breweries
and Jubilee Holdings Ltd. The local
listings that were sponsored by ORBIT
and highly over-subscribed are Tanzania
Cigarettes Co. Ltd. and Tanzania
Portland Cement Company Ltd.
Experience with Placement of Bonds.
Among others, ORBIT was Co-Arranger
(along with Barclays Bank Tanzania
Limited) for fve years three tranches
Tshs. 30.0 billion and the third tranche
of Shs. 10.0 billion was placed in October
2006. The Issuer was Barclays Bank
Tanzania Ltd.
Experience in conducting relevant
Capital Market courses to cater for the
needs of the fast growing Financial
Markets.
ORBIT is the frst Stock-brokerage
frm on the DSE to have Back Offce
Operations and Database Management
fully computerized.
ORBIT has invested heavily on
developing human capital and we have
a dedicated team to provide professional
services to our clients.
INTERNATION PROFILE
ORBIT has business relationship with
New York based Registered Stockbroker
Auerbach Grayson & Company as ORBIT
representative in the U.S.A. market.
Through Auerbach Grayson, ORBIT has
several U.S.A based clients trading shares
on the DSE.
In the recent past ORBIT scooped two
International Quality Awards by Business
Initiatives Directions (B.I.D) one was in
International Quality Summit Award for
Excellence and Business Prestige in Gold
Category for 2002 presented in New
York and World Quality Commitment in
Platinum Category for 2003 presented to
ORBIT in Paris.
The two awards served to increase
international public awareness and
recognition of ORBITs commitment
to quality services to our clients and
acknowledgement of our corporate
achievement and readership.
At Regional level, ORBIT is also well
connected with stock market players based
in Nairobi, Kampala and Johannesburg.
For further information ORBIT Securities Co. Ltd. can be contacted at:
Twiga House, 3rd Floor, Samora Avenue
P. O. Box 70254, Dar es Salaam
Tel: 255-22-2111758/2120863
Email: orbit@orbit.co.tz
DS E J o u r n a l
2
Capital markets have a proven re-
cord of being the most effective way
of mobilizing capital for investment
and the growth of the wealth of com-
munities. This has proven to be the
case in most successful and fast grow-
ing economies. Despite the frequent
booms and bursts that keep recurring
in capital markets, no other systems
of mobilizing resources has proved
more effective than the markets as it
touches on the individual households and investing
units in communities where they exist. To a large
extent the ease of access and exit by domestic and
the international portfolio investors contribute to
the pace of growth in the capital market.
It is for this reason that the emergence of the priva-
tization concept in the mid 1980s led by the then
British Prime minister, Margaret Thatchers govern-
ment, was closely associated with the emergence of
development of capital markets across the emerg-
ing market economies. At the time, the presence of
a capital market in any country in the developing
world, that considered attracting FDI and some
funding from Bretton Woods institutions, became
an important requirement.
Governments were instructed to reform their fnan-
cial sectors to facilitate smooth entry and of course
of international capital. New securities laws were
enacted in jurisdictions where they did not existed
and reforms were undertaken where the laws were
not considered suffcient. Besides, the disclosure
demands for companies going public provided the
frst step to injecting governance into businesses in
the emerging economies. Pensions reforms were
also recommended as a way of boosting the growth
A NOTE ON CHALLENGES OF STARTING
CAPITAL MARKETS IN EAST AFRICA
By Robert mathu
Executive Director
Capital Market Advisory Council, Rwanda
of the capital markets and true to the
fact, those economies that reformed
their retirement benefit sectors
realized immediate returns as the
levels of savings in their economies
increased substantially.
Among the frst emerging markets
to present capital markets that at-
tracted portfolio investors were the
likes of Mexico, Argentina, Brazil,
Hong Kong, Singapore, Malaysia and later South
Africa.
In East Africa, only Kenya had an organized secu-
rities market, the Nairobi Stock Exchange (NSE).
Until the last year of the 1980s decade, the NSE
was a remnant of an old East African capital mar-
ket that was started in the early 1950s. At the time,
Kenya Uganda and Tanzania were all protector-
ates or colonies of the Britain Empire. Companies
that were listed and traded on the Nairobi Stock
Exchange were mainly, agricultural and mining
companies that traded across the East African re-
gion. All investors in the NSE were white settlers
and neither Asians nor Africans were allowed, not
only to invest but to borrow any money from any
fnancial institutions.
All companies listed on the NSE were also listed
on the London Stock Exchange (LSE). Some of the
most active stocks on the NSE like Kakuzi Limited,
a famous coffee and tea plantation, had Market
Makers on the LSE. The NSE had access to the LSE,
the leading international fnancial centre. The East
African region had a common currency, the EA
Shilling. There were no capital fow restrictions and
I believe some of the restrictive Taxes never existed.
DS E J o u r n a l
3
At least, I am sure of the CGT (Capital Gains Tax).
Then there were double taxation treaties which
protected investors against multiple taxes.
In the recent years, the development of the capital
market in East Africa as a region has been an uphill
task. EASRA (East Africa Securities and Regula-
tory Authorities) was formed in 1993 as a regional
capital market forum for the capital market regula-
tors. This body has done a lot of remarkable work
towards harmonizing the capital market policies in
the original three EA countries of Kenya, Uganda
and Tanzania. Consultants after consultants have
undertaken studies and always come up with the
same recommendations on what the region requires
to integrate into one regional East African capital
market. EASRA, which is recognized by EAC
Charter, presents these recommendations to the
respective governments.
But why did it take a long time to implement the
recommendations across the board in all the EAC
countries? Except for the trading, clearing and
settlement technologies, the recommendations
were simply a return of the markets to the early
1950s, when there was free movement of people
and capital within defned jurisdictions. One won-
ders why Kenya, Uganda and Tanzania, have been
unable to resolve that a capital market in the bigger
EA is a panacea for the development of wealth of
its people. Really, it is no wonder the economies
of Singapore and Malaysia were likened to East
African countries in the early 1960s just when we
took over the running of our economies politi-
cally and economically.
The purpose of the capital market is well summed
up in, Economics Private and Public Choice by G.
Gwartney, et al, that when a nations capital market is
integrated with the world capital market, it will be able
to atract savings (fnancial capital) from throughout
the world at the cheapest possible price (interest rate).
Similarly, its citizens will have access to the most atrac-
tive investment opportunities regardless of where those
opportunities are located.
The fundamental challenge in developing the capi-
tal markets in East Africa seem to emanate from
some inertia in resolving to move fast enough.
There is a market capable of funding most the
infrastructure projects. These investment projects
have a direct impact on the livelihood of the citi-
zens and yet we have taken almost two decades to
start thinking very hard by almost reluctantly
accepting the reality that capital markets can thrive
to support the growth and development of the East
African region.
The other major challenges in the development
of the capital market in East Africa will include
modernization of the Companies Act, which is the
mother legislation for business incorporations and
administration; boldness in accepting the fscal and
non fscal recommendations for harmonizing and
development the capital markets; realizing that the
EA capital market and economies, for that matter,
are in constant competition for the worlds FDI;
wait and see attitude among the member states;
restrictions in the capital fows and different cur-
rencies among the East African countries.
On the Companies Act modernization, the laws
used in all the countries have lacked a continuous
update in tandem with the original British common
laws. This has forced the capital markets regulators
in the region to keep creating new pieces of legisla-
tion to provide for the areas where the mother Act
has lagged behind.
A comprehensive set of set of incentives have been
recommended for the harmonization of the capital
markets in the region. Different partner states have
implemented different policies at different times
and some time in different ways. The absence of
harmony will keep the securities markets in regu-
latory arbitrage. The East African partner states
could now consider opening all the licensing of
intermediaries into the rest of the East African
region. This will fasten the transfer of technology,
skills and capital among member states.
The fnal challenge now is to let business to thrive
by encouraging an entrepreneurial environment
where the regulators focus more on policy matters
while the business community is left to maintain
their zeal on creating value and wealth. Business
decisions should be left to the business people.
DS E J o u r n a l

DS E J o u r n a l

The Unit Trust of Tanzania [UTT] has been

incorporated on 19th June 2003 under the
Trustees Incorporation Act [Cap. 318],
primarily with the objectives of achieving
wider participation by citizens in the ownership
of privatized enterprises and launch unit
trust schemes in the country. Accordingly, it
launched the Umoja Unit Trust Scheme more
popularly known as the Umoja Fund in May
2005 followed thereafter in May 2007 by Wekeza
Maisha/Invest Life Unit Trust Scheme. A brief
description will help for better appreciation of
both these funds.
The UTT is a fnancial institution and therefore
its programmes are to hinge on the development
of financial products empowering Tanzanians
to undertake various economic activities. These
fnancial activities may range from establishment
of collective investment schemes to the formulation
of various fnancial support products. In kick-
starting the activities of the UTT however,
attention was focused on the establishment of a
collective investment scheme the now famous
- Umoja Fund.
Umoja Fund:
Accordingly, UTT launched - Umoja Fund, which
is the first Collective Investment Scheme that
has been able to provide an avenue to facilitate
Tanzanians to invest their hard earned savings.
During the initial sale of Umoja Fund units, the
scheme received an overwhelming response from
the investing public.
THE UNIT TRUST OF TANZANIA (UTT)
C O M PA N Y P R O F I L E
Umoja Fund is a unit trust scheme established
under the Capital Markets and Securities act of 1994
as amended in 1997. The scheme is sponsored by
the government through the Unit Trust of Tanzania.
It has been established as an empowerment
scheme.
What are the advantages of investing in Umoja
Fund?
Investing in Umoja Fund enables you to
benefit from economies of scale and low
transaction costs,
Umoja Fund is professionally managed by
skilled portfolio managers which help in
getting maximum return at a given level of
risk,
Being an on going open end scheme, Umoja
Fund units can be liquidated as per your cash
requirements,
The Income payable to unit holders under
Umoja Fund is TAX EXEMPT in the hands
of investors,
Collateral - In case of need Umoja Fund units
can be used as collateral for getting bank
loans,
Umoja Fund units are transferable and can
also be inherited,
Transparency - you get to know the value of
your investments (Net Asset Value) on a daily
basis on every working day,
Umoja Fund is a balanced Fund with 70 %
in debt and 30 % in equity, which ensures
a steady return as well as growth through
Capital Market exposure.
DS E J o u r n a l

Umoja Fund Performance:

Initial Sale Period : 16th May until 29th
July2005
The then largest IPO of East Africa, wherein a
subscription amount of Tzs. 90.5 Billion was
collected from more than 102,000 investors;
During its short journey of about 3 years,
the scheme has consistently generated
returns of more than 15% per annum which
are higher compared to returns from other
fnancial products of similar risk profle in the
country;
The Scheme has been able to pass all the
three litmus tests of Safety, Liquidity &
Returns;
The current fund size [i.e. Assets Under
Management] stands at about Tzs. 63 Billion,
which can be termed as a good indicator of
investors confdence in the fund;
The fund is contributing a lot towards the
creation of domestic capital formation in the
country;
A graphical presentation as indicated below depicts
the annualized return for the current year starting
from 2
nd
July 2007 up to 31
st
Mar 2008:
Scheme Return* (%) as on March , 200
Since
Launch
16.74%
1st NAV
(1th Nov 0)
16.47%
Trailing
month
21.17%
Trail-
ing1
year
Current
year
18.45%
The NAV per unit has consistently grown from
Tzs119.5424 as on 2
nd
July, 2007 to Tzs 135.5412 as on
10
th
April, 2008. When the same growth is plotted in
the form of an annualized return the return shows
growth from 7.79 % as on 3
rd
July, 2007 to 18.45% as
on 5
th
March, 2008.
The returns of the scheme at various points since
launch have been as follows:
DS E J o u r n a l

Thus, the chart indicates that Umoja Fund has

been able to give a consistent return of more than
15% per annum since its launch. While the 30%
Government discount provided in the frst year
gave an impetus to save, a steady and consistent
Wekeza Maisha/Invest Life Fund:
The unprecedented success of Umoja Fund
paved the way for the second unit trust scheme:
Wekeza Maisha /Invest Life unit trust scheme
which is a combination of Insurance and Unit
Trust (Investment) benefts (i.e. a marriage of
Insurance and Unit Trust). The Initial Sale was
subscribed by 2209 applicants with chosen
contribution amount of Tzs9.76 billion
This is an open end balanced fund which seeks
to generate long term capital appreciation, while
also offering additional insurance benefts in the
form of Life Insurance, Personal Accident / Total
Disability and Funeral Expenses cover.
The scheme achieved the following initial sale
results:
No of Applicants
2,20
Commitment Amount (Chosen
Contribution Amt)
(TZS)
, billion
return year after year, augers well for confdence
building and effcacy of the fund.
Below is the comparative analysis between Umoja
Fund returns and Treasury Bills returns from
October 2006 up to January 2008:
The scheme has become open ended for
subsequent sale of units with effect from 1
st

February, 2008 onwards and its current NAV per
unit is Tzs. 108.7088 (as on 10
th
April, 2008).
Two more products are being readied for
launch:
Regular Income Unit Trust Scheme:
While Wekeza Maisha / Invest Life Unit Trust
Scheme was being marketed, the UTT received
market feed back at various forums and in
response to it, it has been decided to launch a
product to suit those individuals/institutions
who have a lump sum corpus and need a steady
return to meet their regular needs. Our in house
assessment of the market has reinforced that there
is a need to address this need gap.
Investors who receive a lump sum amount by way
DS E J o u r n a l

of superannuation or due to any other reason need

to plan their investments so that they continue to
get a regular income and at the same time there is
a possibility of capital appreciation on a long term
basis. It is better to plan and remain independent
than be a hapless victim of circumstances once the
lump sum is spent.
It is for all such investors that the Regular Income
Unit Trust Scheme offers a solution.
Regular Income Unit Trust Scheme aims at
providing regular income distribution/reinvesting
of income and capital appreciation (if any) over a
long term from a prudent portfolio mix of equity
and fxed income securities.
Childrens Career Plan:
The Childrens Career Plan (CCP) is the frst
scheme of its nature to be established by the Unit
Trust of Tanzania, which shall work towards the
overall development of children in the country. It
is our duty in Tanzania to provide an environment
conducive for children to grow up healthy,
educated and in dignity. Some of the scheme
features are as follows:-
Objectives: A child benefit open end
balanced fund, which seeks to generate
long term capital appreciation through a
judicious mix of investment in debt and
listed equity instruments.
Eligible Investor(s): Open for investment
to Resident as well as Non Resident
Tanzanians i.e. Individuals, Corporate
Bodies, Banks, Eligible Trusts (NGO) etc.
Investments are to be made for the beneft
of a benefciary child.
Options: The scheme offers investment
under two options (a) Scholarship Option
and (b) Growth Option.
Benefciary Child & Entry Age: Investment
in the name of a child up to the age of 18
years.
Minimum Investment: (a) Initial Investment
Amount = Tzs 10,000/- and (b) Additional
Investment Amount=Tzs. 5,000/-. However
there is no limit on the maximum investment
amount made by an investor.
Transparency: The NAV shall be computed
& disclosed on weekly basis during cool off
period of 6 months and thereafter on daily
basis.
Liquidity: Partial / full repurchase is
allowed after the benefciary child would
have attained 12 years of age (which is
an average age for joining secondary school
education in the country). However partial /
full repurchase may be allowed in case of
exigencies e.g. where money is needed for
medical treatment of the benefciary child
or for any other genuine reason.
It is being planned to launch both these products
by mid of May 2008. Thus the UTT is a futuristic
organization , constantly engaged and committed
to offer to the investors good scheme that serve
as excellent avenues for investment which in turn
lead to empowerment.
One can seek more details through our website:
www.utt-tz.org or contact us through our
e-mail: uwekezaji@utt-tz.org
Wekeza Uwezeshwe!
DS E J o u r n a l

A. TO THE I SSUI NG ENTI TI ES:

The DSE provides a facility for listed companies to
raise long-term capital from the investing public
by issuing shares or bonds. Through the DSE, a
company can go to the public at large and invite
the public to lend it cash (by buying bonds) or own
a part of the company (by buying shares). In this
way, the company can tap the savings of every
person in the country or outside the country, in
order to obtain the long-term capital that may not
be easily available from its own resources or from
its bankers.
Companies which raise long-term capital by issuing
shares or bonds are able to expand their services,
replace equipments and develop new products etc.
Above all, listing on the DSE will raise the profle
of your company and its products or services.
INCENTIVES AVAILABLE TO THE
ISSUING ENTITIES:
(i) Reduced corporate tax from 30% to 25% for
the period of three years where the Issuer has
issued at least 35% of the issued shares held
by the public. The reduced rate is applicable
for fve years starting from listing date.
(ii) Tax deductibility of all Initial Public Offering
(IPO) costs for the purposes of income tax
determination. All IPO costs are accepted
by the Tanzania Revenue Authority (TRA) as
acceptable expenses used in the generation of
income and profts, and therefore are taken
into consideration when determining proft
for tax purposes; and
(iii) Withholding tax on investment income made
by Collective Investment Schemes (CIS) is
fnal tax. Investors in CIS are not charged with
tax on the income distributed by CIS after the
schemes income taxation.
B. TO INVESTORS:
The DSE provides a market place where investors
can buy and sell shares or bonds. It gives investors
opportunities to invest in listed companies and
participate in their possible fortunes. The DSE also
provides better liquidity for the shares or bonds due
to the large established market base.
INCENTIVES AVAILABLE TO INVESTORS
(i) Zero capital gain tax as opposed to 10% for
unlisted companies;
(ii) Zero stamp duty on transactions executed
at the DSE compared to 6% for unlisted
companies;
(iii) Withholding tax of 5% on dividend income as
opposed to 10% for unlisted companies;
(iv) Zero withholding tax on interest income from
listed bonds whose maturities are three years
and above;
(v) Exemption of withholding tax on income
accruing to fdelity fund maintained by DSE
for investor protection; and
(vi) Income received by the Collective Investment
Scheme (CIS) investors is tax-exempt.
OTHER BENEFITS OF BUYING SHARES
OR BONDS INCLUDE:-
(i) A possible hedge against infation
(ii) Share or bond certifcates which is accepted
by banks as collateral.
WHAT THE DAR ES SALAAM STOCK
EXCHANGE (DSE) CAN DO:-
DS E J o u r n a l
0
(iii) Dividend income which is the companys
distribution of profits to share holders or
income (Coupon) paid to bond holders.
(iv) Possi bl e prof i t ari si ng f rom capi t al
appreciation
(v) Diversification by investing in different
companies listed on the DSE.
(vi) Liquidity quick possibility of selling your
shares when you need cash (applicable only
to listed companies).
(vii) Safe custody of your share certifcate in the
DSE Central Depository System.
PRODUCTS AVAILABLE AT THE DSE
INCLUDE:
(i) LISTED EQUITIES
1. TOL Gases Limited (TOL)
2. Tanzania Breweries Limited (TBL)
3. Tanzania Tea Packers Limited (TATEPA)
4. Tanzania Cigarette Company Limited
(TCC)
5. Tanga Cement Company Limited (SIMBA)
6. Swissport Tanzania Limited (DAHACO)
7. Tanzania Portland Cement Company
Limited (TWIGA)
8. Kenya Airways Limited (KA)
9. East African Breweries Limited (EABL)
10. Jubilee Holding Limited (JHL)
(ii) LISTED CORPORATE BONDS
7 Corporate bonds worth TZS. 57.1 billion
(iii) LISTED GOVERNMENT BONDS
2 years tenor of TZS. 216 billion
5 years tenor of TZS. 203 billion
7 years tenor of TZS. 233 billion
10 years tenor of TZS. 162 billion
PRODUCTS IN THE PIPELINE INCLUDE:-
National Investment Co. Limited (NICOL)
Dar es Salaam Community Bank (DCB)
National Microfnance Bank (NMB)
Tanzanite One Limited
CRDB Bank Limited (CRDB)
YOU CAN PARTICIPATE THROUGH
THE FOLLOWING LICENCED DEALING
MEMBERS OF THE DSE:
CORE securities Limited
Ground Floor, Twiga House
Samora Avenue, DAR ES SALAAM
Tel: +255 22 212 3103, Fax: +255 22 218 2521
Info@coresecurities.co.tz
Rasilimali Limited
Former TACOSHILI Offces
Sokoine Drive, DAR ES SALAAM
Tel: +255 22 211 1708, Fax: +255 22 212 2883
rasilimali@africaonline.co.tz
Tanzania Securities Limited
7
th
Floor, IPS Building
Samora Avenue/Azikiwe Str, DAR ES SALAAM
Tel: +255 22 211 2807, Fax: +255 22 211 2809
tsl@muchs.ac.tz
Orbit Securities Co. Limited
3
rd
Floor, Twiga House
Samora Avenue, DAR ES SALAAM
Tel: +255 22 211 1758, Fax: +255 22 211 3067
Orbit@orbit.co.tz
Solomon Securities Co. Limited
Ground Floor, PPF House
Samora Avenue/Morogoro Road,
DAR ES SALAAM
Tel: +255 22 211 2874, Fax: +255 22 213 1969
Solomon@simba.net
Vertex International Securities Limited
Annex Building Zambian High Commission
Sokoine Drive/Ohio Street, DAR ES SALAAM
Tel: +255 22 211 0392, Fax: +255 22 211 0387
vertex@intafrica.com
CONTACT ADDRESS:
The Chief Executive Offcer
Dar es Salaam Stock Exchange
Samora Avenue, Twiga House 4th Floor, P.O. Box 70081, DAR ES SALAAM
Tel: +255 22 2128522, 2135779; Fax: +255 22 2133849, Website: http//www.darstockexchange.com
e-mail: info@darstockexchange.com