Kampala — Potential investors who have predicted a possibility of refunds in the event that the Safaricom initial public offer (IPO) is oversubscribed have been boosted by the decision by Tanzanian authorities to block their citizen's participation in the IPO sale.

Tanzania's central bank instructed the Dar es Salaam Stock Exchange (DSE) not to participate in the IPO in an April 4, 2008 communication.

In turn, the citizens of Tanzania were blocked from participating in the issue on the grounds that it would amount to capital flight since Safaricom will not be cross-listed on the DSE.

Dealers in Kampala now believe there have been additional deposits from speculators especially because of Tanzania's position on the IPO, which should raise the targeted US$750 million.

"That was indeed a positive turn in the thinking of the speculative investor and indeed many people had additional deposits because they felt more people had been left out and hence they would get more share allocations," Ms. Vivian Sekadde, a broker at African Alliance in Kampala said. "All in all, more deposits were made and more applications were received."

No specific volumes and size of additional deposits could however be ascertained.

As the IPO came to a close last Wednesday, experts in the financial sector in Uganda concede that this has been the biggest IPO in comparison to those of six locally listed companies at the Uganda Securities Exchange (USE).

The Safaricom IPO swept the region, bringing on board even new markets like Rwanda and with it dampening activity at some counters at the Uganda bourse.

Interest from various investor categories, according to sector experts has seen local brokers and agents experience high levels of walk in clients looking to get a piece of the "sweet pie."

Even with the various agents' pre-conditions (like the nature of identification documents), the investment spirit was not dampened "as many Ugandans looked for various sources of funding to participate."

Counters like that of Stanbic Bank Uganda, experienced a fall as investors exited because they planned to invest their returns in Safaricom.

"The interest is phenomenal. I believe Stanbic (2006 IPO) was an eye opener for the first time investor in 2007. However KenGen in Kenya is the benchmark at which ongoing investors in the Kenyan market are looking at Safaricom," said Sekadde.

Sekadde noted that the last three or so IPOs in Kenya really threw back many investors who had taken on interest to try at the speculative tide on the Nairobi Stock Exchange (NSE) and in turn a few of the investors opted to take another route.

"The laid out strategy was to allocate minimal funds to the Safaricom IPO and target promising stocks on NSE over the last few weeks and true to that, KCB and Mumias Sugar amongst other stock have had great returns for instance, if you purchased KCB as at March 23, 2008, the average price you would have paid was about Ksh28. As of close of trade on Thursday (April 24, 2008), KCB was at Ksh31.50," said Sekadde speaking from Nairobi.

Going forward, East Africa is beaming with financial investment potential. What remains is listed companies now taking the initiative of cross listing, an issue that was partly responsible for Tanzania barring citizen participation.

"I believe this may be the beginning of a new era of investing across the East African region with hopes of additional cross listings and the opening of the virgin market in Rwanda that should have a promising IPO coming up," said Sekadde.

Technocrats have to act swiftly so the region can truly benefit. For instance, Ugandans still painfully continue to have manual transactions at the local exchange because of an over due piece of legislation that the Uganda Parliament has not passed.

Passing the central depository systems bill would open the way for automated transactions, a matter that would end paper transactions, save time and put Uganda at par with Kenya that beams her business to the rest of the world. "Obviously there are a lot of economic and political factors to consider as East Africans assess the risk in investing in the East Africa markets.

However, all in all, this IPO has shed a lot of light on the interest in this market especially with increased awareness of capital markets," said Sekadde.

Locally, the talk of National Insurance Corporation and Crane Bank listing before the end of 2008 continue to whet the appetite of potential investors but with both institutions having no concrete dates set.

But experts say should the telecom giants go public, it will be time for another bumper harvest.