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The East African : Aug 18th 2014
MONEY AND EQUITY MARKETS AUGUST 16-22,2014 IPO OVERSUBSCRIBED Local oil firm Swala lists on DSE The≥e is hope that mo≥e oil fi≥ms will open thei≥ owne≥ship to East Af≥icans A JOINT REPORT The East African Exchange has raised hopes that more upstream petroleum companies will open their ownership to East African investors. Tanzania and Mozambique have T made significant gas discoveries while Kenya and Uganda now boast commercially exploitable oil reserves that are attracting broad interest from investors, including locals, as the oversubscription of Swala Energy’s IPO showed. “Oil discoveries in Uganda and Kenya have also added to the excitement in the sector as new players look to enter these markets, including the super majors who are now also witnessing the potential in this region,” said DHL energy sector president Steve Harley. Unlike in other parts of Africa afflicted by the oil curse, partly blamed on local grievances over exploitation by foreigners, players in East Africa are hoping to get the buy-in of local communities through ownership of the companies, besides other corporate citizenship programmes. Tullow Oil Uganda Operations, a unit of the UK-based Tullow Oil PLC that has investments in Kenya and Ethiopia, plans to crosslist on the Uganda Securities Exchange ahead of its planned oil and gas production in the Lake Albert basin. Tullow started talks with Ugan- dan authorities in January 2010 for the cross-listing of its shares on the local stock exchange but negotiations are still ongoing. It appointed investment bank African Alliance to advise on the potential listing. The USE is planning a new, separate index for Tullow Oil once it cross-lists. Analysts said the oil and gas counter will attract regional and foreign investors, making it more competitive while raising more capital for the companies. Foreign oil and gas companies have previously been faulted for not sharing gains equitably with governments and communities. The Ugandan government is considering making it mandatory for oil companies intending to oper- he listing of Swala Tanzania on the Dar es Salaam Stock 49 Investo≥s push fo≥ favou≥able te≥ms as pe≥ taxation t≥eaty By BERNARD BUSUULWA The EastAfrican UGANDA IS facing growing pressure from offshore investors seeking preferential rates on withholding tax charged on interest earned from Treasury bills and bonds. Dealers in commercial banks say offshore investors originating from countries that have signed double taxation agreements with Uganda have been seeking preferential tax rates outlined in these treaties for almost two years, but their demands have not yet been met. Withholding tax levied on interest earned from government securities was raised from 15 per cent to 20 per cent in 2013/14 for both local and foreign investors. Officials from the Treasury claim that A FIRST Swala Energy listed on the Dar es Salaam stockmarket last week, becoming the first public owned upstream oil and gas company in East Africa. Swala is the 20th to list on the DSE and the second to list under the Enterprise Growth Market (EGM) an equity market specifically intended for Small and Medium Enterprises and start-ups. The other listed firm on the EGM is Maendeleo Bank. Swala Tanzania is a subsidiary of Australia’s Swala Energy. 58.25pc concerned offshore investors initially approached BoU, the official administrator of the government securities market, and a withholding tax agent, but were referred to the tax agency for legal clarification over the matter. However, URA reportedly threw the matter back to BoU on the grounds that it fell under the withholding agent’s discretion, a claim that URA has denied. Henry Saka, URA’s Commissioner for Domestic Taxes said: “ But we are ready to engage these investors in order to come up with an effective solution to this problem.” Amid pressure from offshore investors, Visitors on a tour of Ngamia 1 oil rig in Turkana county, Northern Kenya in April 2012. Picture: File fering had debunked the myth that there was no money in the local market to support companies looking for operation and expansion cash. Swala chief executive Mestres The stake held by local investors on the DSE prior to the listing of Swala Tanzania ate in the country to cross-list their shares on the local stockmarket, in order to give Ugandan citizens more opportunities to invest in the country’s oil sector. Before the listing of Swala Tanzania, a subsidiary of Australia’s Swala Energy, local investors held 58.25 per cent of shares on the bourse. Swala Energy listed on the stockmarket last week, becoming the first publicly owned upstream oil and gas company in East Africa. DSE chief executive Moremi Marwa said the oversubscription of Swala’s initial public of- Ridge said the listing provided a means for nationals of Tanzania and East Africa to participate in the development of local oil and gas resources. “The listing is a significant milestone for the company and the people of Tanzania. Swala Tanzania is looking forward to the imminent start of its onshore 2D 2014 seismic data acquisition programme, about which further announcements will be made in the near future,” he said. The company listed 99 mil- lion shares, raising Tsh4.8 billion ($2.8 million) through the IPO, which was oversubscribed by nearly four million shares. Swala Energy still retains a 58 per cent equity in Swala Tanzania. Former president Ali Hassan Mwinyi said that Swala’s over- subscription showed a great appetite among Tanzanians for investing in their country’s economy. Mr Ridge said the company was evaluating data acquired on the Kilosa-Kilombero licence area. Swala chairman Ernest Mas- sawe said that listing on the EGM marks a new chapter for the company and another step forward in realising the company’s ambition to achieve a successful venture based on private and public partnership. “The company is now ready to start its 2014 seismic programme, and we look forward to fruitful results,” said Mr Massawe. The Australian independent oil and gas exploration company is exploring the East African Rift System for hydrocarbons and has substantial equity in Tanzanian, Kenyan and Zambian oil blocks. By Hellen Nachilongo and Scola Kamau A Bank of Uganda information stand at the 2012 Comesa Summit in Kampala. Pic: Morgan Mbabazi BoU eventually issued a circular to chief executives of commercial banks last month. “Each offshore investor is treated under the terms of the treaty depending on individual circumstances and the respective investors are advised to seek confirmation from URA’s Commissioner of Domestic Taxes on an annual basis for the determination of the tax treatment of their incomes sourced in Uganda,” reads the circular dated July 17, and signed by Phillip Andrew Wabulya, BoU’s executive director for operations. Efforts by The EastAfrican to reach the af- fected offshore investors proved futile. Countries that Uganda has signed double taxation agreements with include the UK, Mauritius, South Africa, Norway, Netherlands, India and Denmark. With regard to Kenya, Uganda is awaiting ratification of the East African Community double taxation agreements that provide for a withholding tax rate on interest income of 10 per cent.
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