Dar es Salaam — Two Tanzanian financial advisory firms are setting up mutual funds that will enable foreign investors to take part in Vodacom Tanzania’s initial public offering, which is currently only open to domestic buyers.

The pair, Vervet Global and Orbit Securities, are following the lead taken by Core Securities. The offer for 476-billion shillings ($213m) of shares in the mobile operator, a unit of Johannesburg-based Vodacom Group, ends in nine days.

"We already have one under way," Alpha Marwa, a partner at Vervet Global, a Dar es Salaam-based investment advisory firm, said by phone. "What this instrument means is brokers will establish funds like Core Capital’s, bring in foreign investors who can then buy stocks."

Foreigners are barred from participating in the Vodacom offering because of domestic ownership rules. The IPO is Tanzania’s biggest so far, and while the Capital Markets and Securities Authority is optimistic that domestic investors will absorb all of the shares, it may consider opening up the offer to foreigners if it’s undersubscribed, spokesman Charles Shirima said March 9.

Tanzania had eight mutual funds, including a real estate investment trust, at the end of March, according to Shirima. They include the Umande Unit Trust set up by Core Securities subsidiary Core Capital Ltd. in 2015. That instrument has become an avenue through which foreign investors are buying into Vodacom with a minimum 13,500-shilling investment, according to Core’s Chief Executive Officer George Fumbuka.

Collective investment schemes, which don’t restrict investors who buy the units, can be used to buy Vodacom’s shares within the established regulations, according to Shirima.

"What Core are saying is legal as the foreigners are buying the units," Shirima said by phone. "The same can be done by the other authorized collective investment schemes as well."

Regulatory nod

The funds will have to receive the CMSA’s green-light prior to being made available to investors including Tanzanians living outside the country, Vervet’s Marwa said. "This product is not a subversion of the established regulations," he said by email. "Instead it is simply an alternative means of market participation for a wider range of investors."

Demand for Vodacom shares is expected to accelerate in the final two weeks of the sale period, according to Godfrey Gabriel, head of corporate and market research at Orbit Securities, the lead adviser on the Vodacom IPO. The company has commitments from pension funds such as the state-owned National Social Security Fund and the Parastatals Pension Fund to buy shares, he said.

Core’s fund, which has the regulator’s green light to invite foreign investors, will play a vital role in plugging any gap in demand for an IPO the size of Vodacom’s, Fumbuka said. The stock exchange has a market cap of about $8.9bn, about half the size of neighbouring Kenya’s bourse.

"The purchasing power of Tanzanian investors is very small in general," he said.

For those that miss the Vodacom boat, there could be several more sales in the offing this year. Tanzania has asked all telecommunications companies to list at least a 25% stake on the bourse to boost domestic ownership. The local units of India’s Bharti Airtel Ltd and Luxembourg-based Millicom International Cellular SA have submitted their listing proposals to the regulator.

The industry has more than quadrupled its subscriber base over the past decade to more than 40-million users, according to the Tanzania Communications Regulatory Authority.

Vodacom is the country’s largest operator with a 31% market share, followed by Millicom’s Tigo, Airtel and Halotel, a unit of Vietnam’s Viettel Group. Companies registered in Tanzania after July 2016 are exempt from the listing requirement for at least two years.


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