Business Daily (Nairobi)
Washington Gikunju
16 April 2008
Stockbrokers have expressed confidence that the non-participation of Tanzanians in the ongoing Safaricom IPO is unlikely to significantly affect the issue's subscription level.
The brokers say that though the Tanzanians' move is regrettable, they were not expected to form a significant proportion of the total applicants and therefore their non-participation is not likely to upset the IPO process.
The Government is selling 25 per cent of its shares in mobile phone company Safaricom through an initial public offering expected to raise at least Sh50 billion for Treasury.
Last week, the Bank of Tanzania (BoT) Governor Benno Ndulu said that the existing market regulations did not provide for Tanzanians' participation owing to existing capital market and foreign exchange restrictions.
The Nairobi Stock Exchange (NSE) vice chairman, Mr James Wangunyu, says that they were aware of the existing capital market and foreign exchange restrictions, but were hoping that BoT would temporarily lift these to facilitate Tanzanians' participation.
Afrika Investment Bank CEO, Mr Peterson Mwangi, says the robust participation by Ugandan and Rwandese investors was likely to compensate for the Tanzanians' absence.
Prof Ndulu wrote to the Dar-es- Salaam Stock Exchange (DSE) stating that he would not be granting the special waiver on existing forex restrictions to facilitate the Safaricom IPO.
The Governor said that Safaricom had not made any commitment to cross list at the DSE, which denies Tanzania an opportunity for development of its national bourse. "On this account, the BoT was unable to grant the sought approval but would like to work with all stakeholders in revising the policy framework governing such transactions," he added.
The lead Safaricom IPO transaction advisor, Dyer and Blair chairman Jimnah Mbaru, has since written to the BoT governor asking him to reconsider his decision. Apart from the restriction on Tanzanians investing in the IPO, it is emerging that the outcome of applications by international investors through the book building process will take longer to be determined.
Under the schedule contained in the prospectus 3.5 billion of the 10 billion on offer were to be bid for directly through brokers and order filed with the sole book runner Morgan Stanley.
Under the scheme Morgan Stanley was to brief Treasury on a daily basis to help determine the allocation criteria and the pricing of the shares which would have been made public on Wednesday next week.
Industry sources, however, indicate there is a disconnect as brokers withhold orders from the book runner until the last minute for fear that the book might be manipulated, denying them commissions.
At issue is an anomaly in the IPO arrangement whereby the book runner is competing with brokers for placement commissions, which local brokers say should not be allowed to happen again.
They are now proposing that the book runner should have been paid an agreed fee for the service leaving brokers to compete in placing the orders as commission agents.
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