Tanzania Town Prepares Debut Bond as Bourse Chases IPOs

Tanzania is preparing its first municipal bond issue as the Dar es Salaam Stock Exchange seeks to extend Africa’s best equities rally by luring more investors and new listings.

The Tanga local council on the country’s northeastern coast is seeking to raise 10 billion shillings ($6 million) to extend a bus terminal and market to include hotels and restaurants, said Moremi Marwa, the chief executive officer of the bourse. An investment company is being created to package the securities and overcome laws preventing local governments from directly accessing markets, he said.

“Accessing capital markets gives better financing than bilateral funding through a bank,” he said in an interview on Sept. 10 in Johannesburg. “Tanga will be the first one.”

Investors are looking to buy Tanzanian assets as policymakers in East Africa’s second-biggest economy get ready to scrap limits on foreign-share ownership. The 11-member Tanzania Share Index gained 71 percent in 2014, the most among 17 African gauges tracked by Bloomberg. The $33 billion economy, the largest in East Africa after Kenya, will expand 7.2 percent this year, according to World Bank estimates.

The Tanga sale, the date of which hasn’t been determined, will open the way for other municipalities, Marwa said. The bourse has made progress in talks with officials from Kiondoni, Ilala and Temeke, the three councils which make up the commercial capital of Dar es Salaam, to also issue notes, he said.

Supporting Growth

Plans by the Capital Markets and Securities Authority to change rules that cap foreign holdings of listed companies to 60 percent have been signed by Tanzania’s Finance Ministry and will be gazetted within weeks, Marwa said in a Bloomberg Africa TV interview to be broadcast today.

“Once you allow a broader investor base, that will be key to create liquidity, while also encouraging issuers to use capital markets to raise funding to support growth,” he said.

The bourse is targeting five initial public offerings by June, with one set for October or November and another two during the first quarter of 2015, Marwa said. Three of the companies are in financial services and banking, one in manufacturing and the other in mining, he said, declining to name them because the details aren’t yet public.

“We’re doing whatever we can within our mandate to push the contribution of the stock exchange to the growth of the economy as a source of finance for projects like infrastructure, power, energy, tourism, gas and mining,” he said.

Government Stakes

The DSE’s share index rose a 13th day to a record high, advancing 4.6 percent to 4,980.14 by 1:15 p.m. in Dar es Salaam.

The bourse is engaging the government about selling stakes in at least 10 companies that “will be ready for the exchange,” Marwa said. These include Mbeya Cement Co., which is partly owned by Paris-based Lafarge SA, Bharti Airtel Ltd.’s domestic unit, Mtibwa Sugar Estates Ltd., National Bank of Commerce Ltd., Tanzania Postal Bank Ltd. and Tanzania Telecommunications Co., he said.

“We’re encouraging the government to consider listings on the stock exchange as part of its privatization program rather than private sales, which has been the main approach,” he said.

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