13 March 2014

Tanzania: DSE Chief Defends Liberal Stock Market

LACK of uniform regulatory framework for securities markets in the East African Community (EAC) has been limiting free movement of stocks among partner states.

Regionalisation could help EAC capital markets achieve economies of scale, expand the pool of investors, increase the number and diversity of issuers, products and strengthen corporate governance.

The Dar es Salaam Stock Exchange (DSE) Chief Executive Officer, Mr Moremi Marwa, said in an interview in Dar es Salaam on Wednesday that there was still lack of the Central Depository for securities among the EAC partner states where trading can be conducted smoothly.

The EAC securities markets offer a range of products, including company stocks traded in primary and secondary markets, treasury bills, bonds and corporate bonds.

"It is a setback to be addressed by member states to allow free movement of stocks across the region thus making capital markets to play vital role in economic development," he said.

He said the establishment of the central securities depository for free movement of shares in the region was one of the projects in pipeline being implemented by the Association of Stock Exchange of the EAC partner states.

It contradicts the findings by the World Bank Group on the East African Common Market Scorecard 2014 that named Tanzania and Burundi as the only partner states with restrictions making most difficult to conduct securities operations.

According to the report, Tanzania's restrictions affect 10 of the 14 securities operations highlighted while lack of regulation for derivatives affects two others.

The securities operations include quoted and unquoted securities, some collective investment schemes, money market instruments and derivatives.

Some of the restrictions include those based on nationality, place of residence, current payments and where the capital is invested.

Only two operations in Tanzania including foreign purchases and sales of money market instruments by residents and domestic purchases of collective investment schemes by non-residents were free of restrictions.

Also Tanzanians were allowed to participate in the cross listed stocks after the Bank of Tanzania (BoT) had issued dispensation. It opposes the scorecard findings that Tanzanians were not allowed to take part in the cross listed stocks.

The scorecard findings also misreported that the DSE Market Capitalisation was 1.9 billion US dollars instead of 10.94 billion US dollars. However, foreign participation in the market is only 60 per cent in Tanzania compared to 85 per cent in Kenya and 100 per cent in Uganda and Rwanda.

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