6 June 2017

Tanzania: Govt Should Consider Buying Mining, Telecoms Shares At IPO

Photo: Micheal Jamson/The Citizen
The Dar es Salaam Stock Exchange Chief Executive Officer, Moremi Marwa (middle).

The National Microfinance Bank (NMB) has issued a dividend of 16.5bn/- to the government for 2016 since the government owns 31.8 per cent of the bank.

The bank was separated in 2000 from National Bank of Commerce (NBC).

Actually the government picked the best branches of NBC and sold them to ABSA Group of South Africa. Finance stakeholders had it then, that the bank, NMB, was left for dead. However, the government proved them wrong and turned the bank around.

Today NMB is the largest bank in the country in term of profitability. NMB has been providing dividend immediately after the government sold it's share to a consortium led by Rabobank of the Netherlands with 34.9 per cent, the public 25 per cent, NICOL 6.6 per cent and TCCIA Investment 1.7 per cent.

The NMB story teaches us one lesson that the government reaps not only its investment in NMB through dividends but also from taxes--corporate tax and Pay As You Earn (PAYE).

Also the government privatisation in the financial sector was wisely since it retains some shares in NMB, NBC and some banks still retain a hundred per cent ownership-- TPB Bank, Twiga, TIB to mention a few. However, in mining sector the government was not wise. It gave up all its natural resources to investors and in return gets merely tax returns.

Currently, a topic of town is gold sand concentrates. And the debate is the country is robbed nakedly. The actual fact is the country is not robbed rather gave away the natural resources to investors at will, thanks to our laws and regulations.

However, the government acted smart recently and introduced a law that forced miners and telecoms to offload some of their share to the public--telecoms 25 per cent and miners 30 per cent. The laws are Electronic and Postal Communications Act of 2010 and Mining Regulations 2017, which states that all mining companies with special mining licenses (SML) must go public by 23rd August 2017.

At least the government now wants those firms to be owned by wananchi. This is a good move but the best way is the government to have a seat on the board of directors. This is a best chance to have a member at the boards of these mining firms and telecoms.

This way it will enable the government to have a first-hand information regarding companies. In late 2000s, Barrick Mine established a company to look for its interest in Africa. They named it Acacia Mining. Lately the firm, Acacia, was listed in London Stock Exchange (LSE) and cross listed to Dar es Salaam Stock Exchange (DSE). The priority was given to Tanzanians.

But the subscription was poorly subscribed. Stockbrokers, then, advised the government to buy those shares enough to be in the board of directors or warehousing them and sell to locals later.

The government simply said it has withdrawn out of businesses and let private sector and individuals do the buying. Good but the country lost a chance of sitting at Acacia board. Nevertheless, again these companies are supposed to offload their share to public through listing on DSE.

Yes, private sector and individuals will buy those share but not enough to be on board of directors. The best point is for the government to at least make sure buy up to 20 per cent and have a chance to seat on the directors' board. There are two advantages on this.

One is to increase government revenues through its share and, second knowing the company strategies, plans, and financials at the board level. The government could raise fund through bonds and buy those shares.

Paying back the bond could be through dividends. For instance, Stamico-- State Mining Company-- could be given the task of controlling the government stakes in the mining sector.

Currently, Stamico is doing the same controlling government share of Tanzanite One--actually some of its mine engineers are working at the mine in Mirerani. Also on telecoms Tanzania Communications Regulatory Authority (TCRA) could handle government shares form telecoms.

TCRA could use some of its revenues to buy those shares. Another way is to ask pension funds to invest in that area instead of letting them venture into manufacturing sector which history told us the country failed during ujamaa--socialism, era.

Government buying mining and telecom firm shares would also assists the current initial public offers form being undersubscribed. The firms which are supposed to be listed are many.

And the public does not have the financial muscles to handle all those IPO.

The recently ended Vodacom IPO failed to raise the required amount in the first six weeks. Vodacom had to apply for extension. Vodacom is the beginning of listing biggest four out of 50 plus tele-firms.

The government should look at these opportunity and grab it with both hands in order to increase its watchdog in the mining and telecoms sectors.

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