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DSE plans to transfer ownership to the public

Saturday August 29 2015

The Dar es Salaam Stock Exchange plans to sell its shares to the public, and eventually self-list on the Tanzanian bourse, in the next seven months.

The decision to change the exchange from a mutual entity (a company without share capital and not-for-profit) to a company limited by shares was passed during the bourse’s annual general meeting in May.

The exchange has demutualised by separating its ownership from the trading rights of the members, and changed its name to Dar es Salaam Stock Exchange plc on June 29.

“What remains is the process of raising capital from shareholders. This will be done through the planned initial public offering and self-listing,” said Ibrahim Mshindo, manager in charge of finance and research at  the DSE.

Mr Mshindo said the IPO and self-listing is expected to be complete by March 2016.

“We are in the process of recruiting different advisers as required by law and practice,” he said.

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READ: Plans to take DSE public in two years

With demutualisation, it will no longer be necessary for a trader to become a member of the exchange in order to operate as a broker.

The trading services of the exchange will also come under a separate licencing mechanism as prescribed by the regulator, and will not have any relation with ownership or management.

Demutualisation is being driven by the need to improve corporate governance in the management of regional stock exchanges, where external shareholders are represented on the board, and to boost investor confidence.

A study on demutualisation of the Uganda Securities Exchange was completed in April 2014.

“They have just completed the automation of   the exchange, and they have began discussions on demutualisation of the bourse. It is within the USE’s five-year strategic plan.

“They wanted to, first, deal with issues that improve liquidity, such as automation and introduction of a mobile trading platform,” a source at the Capital Markets Authority of Uganda told The EastAfrican.

The Nairobi Securities Exchange self-listed on the bourse in September 2014, after a successful IPO in which 63 million shares were offered to the public, raising Ksh627 million ($5.94 million). The funds were used to develop new products such as derivatives and exchange-traded funds.

READ: East African investors buy least stake in sale of bourse shares

This year, the NSE reported a 40 per cent growth in net profit for the six months to June 30, largely buoyed by its data vending business. Turnover in equity trading remained flat impacted by the introduction of capital gains tax.

The NSE’s profit after tax rose to Ksh178.6 million ($1.69 million) from Ksh127.9 million ($1.21 million) in the same period last year.

In the bond market, turnover declined by 17 per cent year-on-year, due to rising interest rates that continue to erode the valuation of these securities.

“We are working closely with our stakeholders to review the tax regime, which continues to impact negatively on our market,” said Geoffrey Odundo, the chief executive of the NSE.

The NSE is set to launch the derivatives market, Real Estate Investment Trusts (REITS) and Exchange Traded Funds (ETF), to broaden its product offering and deepen the capital market.

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