By Moremi Marwa, DSE
Some years ago, the Capital Markets and Securities
Authority conducted a study to determine the most appropriate stock market structure for Tanzania. The study aimed at, to among others, answer the question — why the number of listed entities at the DSE was not increasing as anticipated in year 1998 when DSE started its operations.
Among others, the study found that: (i) there was low level of awareness about capital market institutions and transactions; (ii) existing listing conditions were too stringent for small, but growing enterprises; and (iii) majority of companies were willing to list on the DSE if conditions for listing were relaxed.
The study also indicated that firms would be interested to list if there will be an alternative market segment of the DSE to complement the existing Main Investment Market, whose target is for relatively well-established corporate entities.
Of the 300 entities that were surveyed: 21 percent stated that they would immediately consider listing on an alternative market segment; and 48 percent would consider the option if they met the listing requirements.
Based on the above, in year 2013, the Dar es Salaam Stock Exchange introduced the Enterprise Growth Market (EGM) segment to complement its Main Investment Market Segment in order to address the SMEs challenges of access to capital.
The introduction of the EGM on the DSE for the listing of SMEs – both at the start-up stage and growth potential – aimed at enabling SMEs country-wide to have access to the capital markets in order to raise sustainable capital and to increase expertise among market stakeholders in financing SMEs.
For the past six (6) years of its operationalization, the EGM market segment has not performed as expected i.e. (i) there are only five (5) companies that have listed in the EGM so far; (ii) investor base of about 270,000; (iii) EGM listed companies total market capitalization is only about TZS 110 billion (i.e. less than 1 percent of DSE market capitalization); and (iv) total volume of shares traded on EGM is less than 0.5 percent of the total annual turnover at the DSE.
These metrics depicts how low are activities on this market segment, which was designed to support SMEs within the Economy, which indicates that we have further challenges than just the lack of existence of institutions, structures and schemes that could enable SMEs to access financing.
From this backdrop, there is a clear need for various stakeholders to consider implementation of solutions that will facilitate addressing some of the existing challenges within our business community – part of it are cultural and behavioral related. In any way there is apparent capacity gap for SMEs owners/managers in the context of managing businesses sustainable, the necessity of good corporate governance, the desire for achieving greater results, etc.
As one of the interventions to bridge the gap, the DSE this week has launched the DSE Enterprises Acceleration Program. This program has the objective of: (i) providing capacity building to identified SMEs to enhance their capacities in key areas of their business growth ecosystem; (ii) create practical linkages and networking solutions between suppliers of funds and those in demand of funds hence bridging the knowledge and financing gaps; and (iii) ease their access to various sustainable funding options, short-medium-to long term, both local and globally.
This is a necessary intervention. It will assist businesses and companies take advantage of the structures and institutions that the country has put in place to enable businesses access to diverse sources of finance.
The Program is for 12-months where 6-months will be for classroom training, the next 3-months for mentorships and couching and the remaining 3-months for Networking and accessing capital from financiers, investors and capital markets platforms. And then, each year there will be a new class for new SMEs participants.
The idea of Acceleration Programs in the financial sector is being championed across many countries i.e. London Stock Exchange Group (which includes Bourse Italia have been running an ELITE Program (which is an acceleration program covering over 300 companies). South Korea has over 200 Acceleration Programs covering many start-up and SMEs – these programs are run by various financial institutions (Industrial and Development banks, Venture Capitalists, Government Agencies, etc), and in Africa– Morocco works with ELITE of LSEG for a similar program covering over 40 companies, BRVM in West Africa also works with ELITE covering over 20 companies, in Kenya, the Nairobi Securities Exchange launched their IBUKA Program in 2019 now covering over 20 companies. And so are other markets.
The DSE Program is run in partnership with UDSM Business School, KPMG Advisory, Institute of Directors Tanzania, Banks, SSC Capital (a Venture capital fund) and the Financial Sector Deepening Trust (FSDT).