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- What is a share?
A share is a capital markets equity instrument. It is a unit of ownership in a company. A
share represents the smallest proportions of ownership on a company. An investor
buying a share is in fact buying ownership rights in a company. As an owner, a shareholder
is entitled to participate in the decision making process of the company and to share
profits generated by the company.
- What is dividend?
Dividend is payment declared by a company's board of directors and given to its
shareholders from the company's profits (current or retained), annually, semi annually or
quarterly. Dividends are usually paid out in cash (usually in the form of cheque or bank
transfer), but they can also take the form of share or other property. In fact, companies
that can use their profits for expansion or growth prefer to re-invest their profits rather
than paying them out as dividend.
- What is a bond?
A bond is a capital markets debt instrument issued for a period of more than one year.
By acquiring a bond, the investor is in fact lending money to the issuer of the bond.
Generally, the bond holder is entitled to regular interest payments (coupon payments)
while his money is being used by the issuer and at the end of the loan period (maturity
of the bond) the issuer (borrower) has to pay back the original amount borrowed (the
principal) to the bond holder (lender).
- What is Capital Markets and Securities Authority?
Capital Markets and Securities Authority (CMSA) is a Government Agency under the
Ministry of Finance charged with the responsibilities of regulating and developing capital
markets in Tanzania. CMSA was established pursuant to the enactment of Capital Markets
and Securities Act (CMS) in 1994. The main functions of CMSA are as follows:
4. I . To develop and promote capital markets in Tanzania;
4.2. To license stock exchanges, market professionals including brokers, dealers
and their agents, investment advisers, authorized dealers' representatives,
investment advisers' representatives as well as authorizing collective
investment schemes; ,
4.3. To supervise capital markets and market professionals: and
4.4. To advise the Government on matters related to the securities industry.
- What is the Oar es Salaam Stock Exchange?
The Oar es Salaam Stock Exchange (DSE), like any other stock exchange, is a market
place where financial securities are traded. The DSE was established in 1996 as a private
company limited by guarantee. Operations commenced in April 1998 with trading in
TOl ltd shares. The governing body of the DSE is its Council. Trade on the Exchange
in conduced by licensed Dealing Members.
- What is the difference between Dar es Salaam Stock Exchange
and Capital Markets and Securities Authority?
DSE is a market place where trading and settlement of securities (shares and bonds are
executed. DSE is a private company. On the other hand Capital Markets and Securities
Authority (CMSA) - is a Government agency, which is charged with the responsibility of
regulating market players including DSE brokers and dealers, investment advisors,
authorized dealers' representatives and authorizes the establishment of (other) stock
exchanges.
- What are the benefits of investing in shares, bonds, units?
a) Generally shares, bonds and units are considered to be liquid assets, meaning that
they can be converted into cash within a reasonably short time. Since these are liquid
assets they can be placed as collateral to secure loans from financial institutions after
meeting other requirements of a lending institution.
b) Investors in shares can benefit through dividend payments as and when is available
depending on the company's earning capacity as well as dividend policy adopted by
its directors. Another benefit is capital appreciation which is the difference between
purchase and selling prices assuming that the selling price is higher the purchase
price. In case the sell price turns out to be below the purchase price an investor
suffers a capital loss. In short, when you invest in shares you cannot tell exactly what
you are likely to earn.
c) Return on bonds is more predictable. Bonds have definitive dates for paying interest.
The rate of interest is often fixed or it is linked to another rate of interest (fioatlng
rate). In case of fixed rate interest, interest income can be easily calculated in
advance. For bonds with fioating rates, investors cannot ascertain in advance the
exact rate, since it depends on another rate or index that will only be known in the
future. Investors who hold bonds up to maturity know with certainty the exact
amount that they will get back on repayment of principal.
d) Benefits of investing in units depend on the nature of the fund. If it is a growth fund
(without income distribution) investors are expected to benefit through capital
appreciation ( increase in the net asset value per unit). Investors should note that the value of units can go up or down. If
funincome to unit holders, cash distribution of income, or additional units in lieu of cash,
will be another benefit to unit holders.
- What are the rights and obligations of shareholders, bondholders
and unit holders?
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- What is an Initial Public Offering?
Initial Public Offering (IPO) is the process by which a company issues securities for the
first time to the public for the purposes of raising capital. The IPO has a limited duration
during which investors are able to purchase the securities on offer. Beyond that time, any
person wishing to invest can only do so through the secondary market (for example
DSE). IPO is a primary market activity.
- If I am not a Tanzanian, can I participate in the Initial Public
Offering (IPO) of Tanzanian companies?
It depends who is selling shares and the terms specified in the prospectus. Privatizations
related IPOs are sometimes meant for Tanzanians only, non Tanzanians may not be
allowed to participate. As per its privatization policy, the Government decided to reserve
shares in some big companies to be offered exclusively to the Tanzanian public at the
appropriate time. Foreigners are allowed to participate in private sector IPOs,
- If I invest my money in a company and it goes bankrupt, what will
happen to my money?
It is a very basic principle that risk always moves with ownership. Equity investors can
expect return in terms of dividend and capital gain in case share price goes up. Equally, in
case the company performance deteriorates, share value will fall to refiect investors'
perception about the company's future. In the extreme case when the company
collapses, the law requires appointment of a liquidator. Creditors are ranked first for
payment out of the proceeds realized by selling company's assets. Shareholders are
ranked last to share any residual amount after all creditors (including bondholders) have
been paid.
- How do I get my dividend?
Dividends are periodic payment made by companies to their shareholders out of profits
attributable to shareholders or out of revenue reserves. The mode of payment and
frequency varies between companies. In Tanzania, most companies have been using
Tanzania Post Corporation and commercial banks to distribute dividends. If payment is
executed through Post GIRO you should expect a warrant in your post office box. If
payment is through a bank, you should expect a cheque in your name or a direct transfer
to your account. It is very important to notify your company secretary or transfer agent
in case of change of address or bank particulars. In Tanzania, listed companies normally
pay dividend twice a year, comprising of an interim and a final dividend.
- Can I transfer my shares to my wife/husband?
Yes, shares are transferable. Taking into account that shares traded at the DSE are held in
a Central Depository System (CDS), transfer is simple and easier compared to physical
share certificates transfer. According to DSE trading rules, private transfer is allowed when
there is no consideration for shares/securities being exchanged, Transfer of shares
between a husband and his wife or vice versa is one of the situations where private
transfer is allowed.
- How do I buy and sell shares?
Buying of shares depends on the market you are buying from. If it is on primary market, \
where issuers normally appoint several receiving agents, including DSE brokers, you ,can ~
approach any of them and subscribe as per the offer prospectus. On the other hand,
buying and selling of securities on secondary markets, where already issued shares are
traded, is done only through licensed dealing members in the case of listed
- How can I contact brokers and dealers?
The DSE has admitted six brokers and dealers. Currently all of them have their offices in
Dar es Salaam. However, technology advancement and agency network provides a
platform for brokers based in Dar es Salaam to service a wide range of investors across
Tanzania. It is a fact that, the current arrangement makes transacting from areas outside
Dar es Salaam more expensive in terms of time, postage and transfer charges. Efforts to
make brokerage services closer to the investors across Tanzania consider level of business
as brokers are not subsidized for their services; therefore it is a business decision. To see the adressess of the Brokers / Dealers go to information / brokers link
- Why do we need brokers to buy/sell shares?
Every market has its ethics and standards. Stock markets are markets of big value
transactions, which have necessitated tight regulations to ensure transparency and fair
play. Stock brokers are specialists in capital markets who will assist you in buying and
selling by advising, being a link between sellers and buyers as well as facilitating transfer of
ownership and money from buyers and sellers. Brokers and dealers are licensed by the
CMSA. In a way, selling and buying shares through them is a form of investor protection.
- Why do we pay commission to brokers?
Brokers/dealers offer services related to buying and selling securities to their clients. In
addition to implementing trade, they also advise on which securities to buy or sell the
right time to deal, the appropriate price as well as helping in the interpretation and
dissemination of stock market information. For these services they charge fees and
commission,
- What is the difference between brokers and dealers?
The difference between dealer and broker is based on their role on the market as well
as their capital. Dealers can buy and sell securities on their own account (principal) as well
as on behalf of their clients. Brokers on the other hand can only buy and sellon behalf of
their clients. Brokers' capital requirement is TZS 10 million while dealers' capital
requirement is TZS 20 million. Both are licensed by CMSA.
- What are the benefits of having a stock exchange in a country?
A stock exchange plays a key rOle in the economy of a country, including: facilitation of
mobilization of capital for companies, it enhances savings culture, is a barometer of the
economy, it facilitates wealth redistribution in the economy and facilitates privatization.
Stock exchange also help investors in listed companies to sell their shares any time they
want and at minimum costs.
- Why is it called Dar es Salaam Stock Exchange and not Tanzania
Stock Exchange?
DSE is the name that was chosen to represent the stock exchange. There is no special
reason why it should not be called Tanzania Stock Exchange (TSE) other than it already
has a name.
- Does Capital Markets and Securities Authority Advise the
Revolutionary Government of Zanzibar?
Yes, CMSA is an adviser to both Union and Zanzibar Governments since the CMS Act
applies to both Mainland and Zanzibar"
- Who Authorizes the Dar es Salaam Stock Exchange?
CMSA authorizes and supervises all stock exchanges in Tanzania.
- What is a difference between a share and a unit?
A share is part ownership in the share capital of the company. A unit is part ownership of
a collective investment scheme.
- Is there any difference between a company and the Umoja Fund?
Yes, there is a significant difference between a company and a unit trust scheme. For one,
a company is an investment vehicle in which once an investor has acquired shares, the
company can not buy the shares back. Investors can only get back their money by selling
shares to another investor. The UmoJa Fund is an open ended investment vehicle in
which the scheme can buy back its units from investors.
- What determines the Net Asset Value of a Unit Trust Scheme?
Net Asset Value (NAV) is determined by the prevailing prices of securities where the
scheme has invested its funds minus the expenses associated with the scheme including
any taxes which the scheme will have to pay.
- Is there any fixed amount that investors should expect as profit
from investments made in shares or units?
Ordinary shares do not guarantee any return. The return depends on two elements
namely capital gain and dividend. These two factors depend on the performance of the
company which cannot be predicted 100% accurately. Neither can income from units be
guaranteed since that depends on the performance of the fund.
- What is the minimum amount that one can invest in shares?
DSE trading rules requires a minimum of 10 shares. The price of shares varies from
•.. company to company.
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- If the investor dies, what will happen to his/her shares/units?
Securities, including shares and units, are assets like any other asset (house, plot, car),
which are transferable and inheritable. Dependants of a deceased person are entitled to
inherit securities owned by the deceased according to the Will or the governing law.
- Why companies do not meet traveling, accommodation and other
costs for shareholders while traveling / attending Annual General
Meetings and Extra Ordinary General Meetings)?
This is the practice internationally. Shareholders' worth is reflected in share value.
Shareholders therefore, when attending an Annual General Meeting (AGM) or an
Extraordinary General Meeting (EGM), exercise their rights to supervise the Board of
Directors by approving or not approving proposals from the Board. Shareholders
therefore do attend such meetings to safeguard their interest in the company. Paying
shareholders who do attend AGMs/ EGMs would mean that the company has to
increase expenses and reduce profits attributable to shareholders. Though, some
companies may have a different arrangement which may appear unique. Foe example,
CRDB Bank Ltd has a unique structure under which each branch of the company appoint
Representatives to attend the AGM and all costs are borne by the company itself
- Can a shareholder exercise direct control on the assets and
liabilities of the company for which he/she is a shareholder?
No, a shareholder has no direct control over the company's assets and liabilities, Her/his
rights of "control" are limited to voting during general meetings to appoint directors
according to the Memorandum and Articles of Association (MEMART) which is the
constitution of the company, appointment of auditors, approving annual report and
approving proposals that require shareholders' approval according to the MEMART
Assets of the company are owned by the company, which is an independent legal entity
from the shareholders, Likewise, liabilities of the company limited by share capital are the
company's liabilities, and are independent from the shareholders,
- Can I use my shares as collateral?
Yes, financial institutions in Tanzania are increasingly accepting shares, particularly of listed
companies, as collateral for loans, The Central Depository System based process to
mortgage shares has proved beneficial to both lenders and borrowers as it is not time
consuming, it is transparent. no valuation costs are incurred and the chances for forgery
are very limited, Treasury bonds, Treasury bills and listed corporate bonds are equally
acceptable to most of lending institutions as collaterals,
- If something wrong happens to my shares, Can I be compensated?
No, risk moves with ownership, Share price can go up (which is good for you) and can
go down (which is not good for you), Such uncertainty (risk) is there from the day you
decide to invest in shares,
In case you loose your share certificate, the advice is to report it to the nearest police
station to obtain a police report to be submitted to the company secretary immediately.
- If I am not certain on what to do about investing in securities, or if
I want to report a suspicious transaction, where can I report?
The most suitable place for you to contact in case you want to know how to invest in
shares is to contact any DSE broker, DSE brokers will advise you and in case you decide
to invest they will execute a transaction on your behalf. Another alternative is to contact
investment advisors who are licensed by the CMSA Investment advisors who are not
brokers can only advise but cannot execute transactions,
The most appropriate place / office for you to report any suspicious transaction is CMSA
CMSA is charged with an overall responsibility of overseeing the market to ensure
transactions are done in an orderly manner, Also such transactions can be reported at
the DSE as the exchange is a self regulated organization that has a set of rules and a
disciplinary mechanism applicable to its members,
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- Can a company in which I have shares lend me against my shares?
No, normally listed companies do not have arrangements to lend to shareholders against
their shares. If you want cash two options are available. One is to approach a lending
institution and apply for a loan, in which case you will generally be able to use your shares
as collateral; or to sell your shares, in which case you should contact a DSE broker /
dealer.
- What does it takes to have my company shares listed at the Oar es
Salaam Stock Exchange?
This process requires professional guidance. CMSA and DSE regulations require any
issuer to appoint a broker to sponsor any new issue or listing. The sponsoring broker will
assist you on the requirements depending on several factors like are company shares
already in public hands like CRDB Bank Ltd, NICO, Dar es Salaam Community Bank,
TCClA Investment Company Ltd or new issue; is listing anticipated on the Main
Investments Market Segment (MIMS) or Entrepreneurship Growth Market (EGM), etc.
The best approach to get detailed information is to contact a Licensed Dealing Member
of the DSE.
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