[2008-07-15]  DSE's Special Segment to Cater for Small Firms
Small and medium companies in Tanzania will soon be able to raise money through the sale of shares on a second market segment on the Dar Stock Exchange.

The segment dubbed the Enterprise Growth Market, has been set up in collaboration with the Capital Markets Authority to circumvent barriers that inhibit small companies from listing on the bourse.

These barriers are: an already approved and meticulous prepared prospectus from a regulator; clear dividend policy; compliance to other corporate governance issues; same management at least two years before listing; financial statements; period moratorium; public shareholding spread; issued and paid-up capital; track record of existence and the profitability track record.

Research has also shown that many companies have been unable to list on the bourse due to the stringent rules that include having at least two consecutive years of profitability of the three years that a company has been in existence.

Jonathan Njau, the chief executive officer of the DSE, said that the Enterprise Growth Market will be launched at the end of this year after getting the final green light from the market regulator.

He said apart from offering incentives, the small and medium companies will be exempted from presenting a track record of existence or profitability to list on the DSE.

The DSE chief said the project is expected to help small but established companies grow and expand by getting a second chance on the bourse.

However companies that wish to enlist through the enterprise growth market will have to have been in operation for three years, and will require a capital of $200,000 million as a precondition before being listed as opposed to the $500,000 million that is required for the main market segment on the DSE. But in case a company is operating as a subsidiary in Tanzania but is listed in country of origin, then it will be required to have at least immovable assets worth $500,000 million in Tanzania.

In addition, they will be required to have 50 per cent of their assets in Tanzania and have 20 per cent of its shares held by the public.

At least one third of its of the board members must be non-executive directors not involved in the day to day operations of the company with new companies that wish to list through the special segment having to pay only 0.1 per cent of their capital as opposed to 0.2 per cent usually paid up in the main market segment of the DSE.

A unique component of the Enterprise Growth Market, is that companies are neither obliged to make projections of expected returns nor required to use intermediaries such as stock brokers and banks. This means they will sell their shares directly to the public.

This will cut out costs accrued in preparing projections and estimates for sold shares, commissions for stock brokers, banks, accountants, lawyers and advertising.

Nevertheless the companies will be expected to provide a detailed profile of planned operations that include a five year business plan and an independent technical feasibility report for companies that have been inn existence for less that 12 months.

If a company lists on the DSE for the purposes of selling shares to raise capital, it will be required to disclose the estimated amount of the proceeds from the offer (net of the expenses of the offer) broken down into each principal intended use.

If the anticipated proceeds will not be sufficient to fund all of the intended uses, then the company must disclose the amount and sources of other funds needed.
Source: Copyright © 2008 The East African.