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The East African : October 26th 2013
MONEY AND EQUITY MARKETS OCTOBER 26 - NOVEMBER 1, 2013 LOCAL OWNERSHIP EAC pushes for listing of oil firms as it harmonises capital markets Local investo≥s a≥e expected to invest in the secto≥ cu≥≥ently dominated by fo≥eign fi≥ms A JOINT REPORT The EastAfrican an effort to increase the size of the regional capital market and offer local investors opportunity to invest in the industry. Tanzania has already drafted a E policy that is before the Cabinet, which requires oil and gas companies operating in the country to list on the local bourse. Kenya’s Capital Markets Author- ity announced last week that two state-owned companies dealing with the oil business — the National Oil Corporation (NOCK) and the Kenya Pipeline Company — are planning to list on the Nairobi Securities Exchange. NOCK has an exploration li- cence for Block 14T. In Tanzania, Swala Oil and Gas (Tanzania) Ltd is preparing for listing to achieve more than 50 per cent local shareholding through listing on the growth and enterprise market segment (Gems). In Uganda, London-listed Tul- low Oil’s plan to cross-list has been on agenda for two years now. The listing of oil and gas com- panies is seen as a short route to achieving local participation in the oil and gas industry whose discoveries have raised the global profile of East Africa, becoming the next oil and gas frontier after the Middle East. Kenya’s CMA chairman Kung’u Gatabaki said privatising NOCK, through listing “will enable Kenyans to participate in the oil sector through ownership in the market and distribution infrastructure.” Oil and gas exploration activities are dominated by foreign owned companies, partly because of the high capital outlay required to finance exploration. As a result, local participation in the oil and gas sector is being threatened, with opportunities being limited to supply of services. When production starts in the next three to five years with Kenya and Uganda producing an estimated 200,000 barrels a day, oil rev- Tullow Oil workers in Buliisa, Uganda. Photo: File enues could contribute to approximately 16 per cent of each country’s gross domestic product, according to Tony Wainaina, managing partner at Fanisi Capital, a private equity company. He said while local businesses can provide accommodation, catering, water and sanitation, drilling tools and fluids, logistics and heavy lifting, pipeline construction and other support services, they have no choice but to comply with the high qualification standards that the upstream companies are demanding from service providers. Listing is also expected to ex- pand the size of capital markets in the region, offering companies a wider and cheaper avenue to fundraise as locals. Part of the plan to achieve this aims has been the introduction of growth enterprise market segments (Gems), which make it easier for small and medium scale enterprises to list. The segments have lower listing fees and less stringent regulations to listing compared with listing on the maim market segment. The Dar es Salaam Stock Exchange, the Nairobi Securities Ex- Listing is also expected to expand the size of capital markets in the region, offering companies a wider and cheaper avenue to fundraise as locals. change and the Uganda Securities Exchange have all introduced Gems with some early listings already completed. The Rwanda Stock Exchange an- nounced in August that small and medium-sized businesses that want to list at Kigali’s bourse will not be subjected to any minimum capital requirement, effectively setting the foundation for introduction of the Gems. Although the growth market seg- ments were developed to facilitate SMEs listing across all sectors, they are coming in handy for oil and gas companies. For instance, Swala Oil and Gas (Tanzania) Ltd is planning to list at the DSE’s Enterprise Growth Market (EGM) in a bid to raise $2 million. According to the company’s chief executive officer, David Ridge, DSE’s EGM has come in handy as most natural resources companies could not list locally because of the main board’s stringent requirements. “This company is 35 per cent owned by Tanzanians and we plan to reach the 50 per cent mark through listing. When we achieve that, Swala Oil will become the first oil local company,” said exploration director Neil Taylor. The East African Capital Mar- kets Association is spearheading harmonisation of capital markets legal and regulation framework in the region. The deadline for stakeholders to submit suggestions closed on October 18. ast African bourses are wooing oil and gas companies to list in Business watch Carbacid maintains $0.03 dividend payout despite increased profits Carbacid Investments Ltd has maintained a Ksh3 ($0.0 3) dividend per share despite a 22.1 per cent rise in net profits in financial year ending July this year. The company, which is listed on Nairobi Securities Exchange, said its net profit grew to Ksh475.5 million ($5.6 million) in the period compared with the previous year’s Ksh389.2 million ($4.6 million), as a result of increased demand for carbon dioxide and dry ice as regional companies engage in battles for new products to grow their market share in the competitive industry. Analysts said the firm’s sales remained static at Ksh952.8 million ($11.2 million), pulled back by the performance in the second half. The growth was weaker than the first half. The company had earlier cautioned the market that its export markets were slowing. African Land Investments eyes Kenyan, Ugandan markets ahead of listing Property investment company African Land Investments (ALI), is eyeing Kenya and Uganda for existing commercial real estate assets ahead of its listing plans on the South African bourse. The interest in the region raises speculation that some listed firms with real estate businesses could be interested in striking deals with ALI. Through its listing on the Johannesburg Stock Exchange, the largest stock exchange in Africa, the investment company will give investors exposure to high growth markets on the rest of the continent. The firm seeks to raise $80 million to pay for an acquisition of assets in Zambia. Robust trading now increases Tanzanian bourse’s market capitalisation The Tanzania bourse’s market capitalisation increased by 18.5 per cent in October from September, thanks to a robust trading activity that saw most companies double their share price. Market cap is the share price times the number of shares outstanding. The capitalisation increased to 15.35 trillion ($9.4 billion) from 12.95 trillion ($7.9 billion) as the average share price of all companies trading at the bourse increased to 172,843,000 points in October this year compared with 145,827,000 points registered over the same period last year. 57 A stockbroker monitors trading activities in the trading room of the Dar es Salaam Stock Exchange. Picture: File Financial reports alone not adequate in current competitive environment Financial reports by companies require more than a mention of profits or losses. According to Japheth Katto, Uganda Capital Markets Authority chief executive officer, reporting the financials of a company, turnover, costs and dividends paid is no longer adequate because the world has become more sophisticated and stakeholders are demanding more than just information about profit or loss. “Stakeholders need to know how the community is benefiting or is being involved and as such, human rights and environmental issues have to be integrated in reporting,” Mr Katto said.
October 21st 2013
November 3rd 2013