The Citizen (Dar es Salaam)
Damas Kanyabwoya and Bethuel Kinyori
18 August 2008
The first day of the NMB Bank initial public offer (IPO) was marked by a low turnout from lower income earners, the group that the bank says is its primary target.
This was noted in a survey done by The Citizen yesterday in Dar es Salaam, coming even as the Government defended its position to ban banks from giving loans for NMB shares, saying it took the decision to defend the interests of the poor.
The Government's defence was voiced by the chief executive officer of the Capital Markets and Securities Authority, Dr Fratern Mboya, and the deputy minister for Finance and Economic Affairs, Mr Jeremiah Sumari.
They both said that the central bank's decision and position on the matter was proper, when speaking at the official launch of the IPO last week.
Locked out
They said experience shows that it is the high income earners who easily access loans and so the poor might be locked out of the IPO process if loans are allowed.
"Furthermore, regulations of the Bank of Tanzania (BoT) restrict issuing loans for buying shares in an IPO," said Dr Mboya, when responding to a question by Dr Raphael Chegeni (Busiga-CCM) who wanted clarification on the order.
Profitable bank
A survey by this paper showed that there were no long queues at most IPO selling points, as initially anticipated when the most profitable bank in the country announced going public about a month ago.
A 21 per cent stake in NMB that is equivalent to 105 million shares is on sale to the general public and NMB workers. The sold shares are part of 51 per cent shares owned by the government after partial privatization of NMB in 2005.
Share buyers who spoke to this paper yesterday said the decision by BoT last to restrict banks and financial institutions from giving loans to people for purchasing the shares hit the poor.
There is also the issue of the high price of the shares, and could also have sidelined low income earners with mild savings who depend on bank loans when such opportunities arise.
Between 20 and 50 people had visited at least five share selling points observed by The Citizen yesterday to take IPO forms, which must be filled before buying the shares or promptly paying for the shares after filling the forms.
Most of the buyers were from middle classes and bought shares worth millions of shillings.
"So far we have received about 20 people since morning with most of them paying for their shares outright, something that is unusual in the first day of an IPO," said Mary Kessi, a dealer at Core Securities Limited.
Few of the buyers bought shares that were worth less than Sh1 million, with each share costing Sh600 while individuals are allowed to buy a minimum of 100 shares per person or multiples of 100 shares. Other dealers said it was too early to conclude on the turnout as people have more than three weeks to buy the shares.
Making decisions
"Often the first days are not hectic but the momentum can increase as days go by. People need time to study offer terms and conditions and consult their brokers before making decisions," said Ms Gloria Ntuke, a dealer at Orbit Securities.
A buyer who identified himself as Jason Mkundai said the Sh600 price was too high for most ordinary people.
Ms Hawa Moshi seemed disappointed by terms and conditions of the NMB shares' IPO. She said the decision by BoT to restrict loans for buying the shares, the high price of shares, and selling only a minimum of 100 shares will see the target group of low income earners being left behind.
Speaking at the official launch of the IPO, Edwina Lupembe, the executive director of the Consolidated Holdings Corporation, the custodian of the NMB shares said shares would be sold to Tanzanian nationals only or companies that are owned by Tanzanians 100 per cent.
Mr Sumari said 80 per cent of all at shares at the IPO will be sold to individuals and the remaining 20 per cent will be sold to local firms.
Meanwhile, various experts voiced mixed feelings regarding the BoT directive, some saying it is positive in terms of containing excessive liquidity in the economy.
Inflationary pressures
Lawrence Mafuru, the head of treasury at the National Bank of Commerce, said the directive needs to be seen as part of efforts by the central bank to grapple with inflationary pressures.
To allow banks to loan out money would be counterproductive to the central bank's long term monetary management measures, he stated.
"If all the commercial banks issued out loans to the public to buy shares worth Sh63 billion it would lead to a lot of money chasing few goods which will directly trigger over-subscription of the shares.
On the other hand it takes away the opportunity for the ordinary citizen to access shares," he pointed out.
Be the first to Write a Comment!
Copyright © 2008 The Citizen. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
