Dodoma. The government has advanced a proposal that seeks to ensure investors from East Africa and beyond as well as Tanzanians in diaspora are able to take part in the impending initial public offerings (IPOs).
Winding up the debate on the Sh31.7 trillion budget for the Financial Year 2017/18 in Parliament yesterday, the Finance and Planning Minister, Dr Philip Mpango informed the House that the government would amend the Electronic and Postal Communications Act (Epoca) 2010 with a view to allowing investors across the East African Community member states, Tanzanians in diaspora and foreign investors to take part in pending IPOs for telecommunications firms, including those for Airtel Tanzania and Tigo.
Going by Epoca 2010, telecommunication firms are required to offload 25 per cent of their shares for the public through the Dar es Salaam Stock Exchange (DSE).
In this regard, Vodacom Tanzania became the first telecommunications firm to issue an IPO early this year in which it sought to raise Sh476 billion by selling 560 million shares at Sh850 each.
With capital controls, however, the IPO was only open to local investors and so far, the company has been unable to reveal the IPO results, with pundits speculating that it might have underperformed due to a tight liquidity in the economy.
The Vodacom Tanzania PLC’s IPO ended on May 11 and subsequent listing was scheduled for June 12 but it has remained silent—including on revealing the IPO outcomes—since then, causing anxiety among some of its new investors.
The company’s MD, Mr Ian Ferrao, told The Citizen on Monday that Vodacom was only awaiting regulatory approvals from capital markets authorities to go ahead with listing after a total of 40,000 new investors bought shares.
But speaking after eight Cabinet ministers and his deputy, Dr Ashatu Kijaji responded to some other issues as raised by MPs during the six days of the budget debate, Dr Mpango, said the government is amending the Epoca 2010—probably through the Finance Bills 2017—so as to allow more investors to take part in telecommunication firms’ IPOs.
“If a company that will have issued an IPO and fails to raise the required amount, the relevant ministry will come up with a modality that will guide it (the company) on how to raise the entire money as required by the law,” he said.
Dr Mpango’s statement comes at a time when Airtel Tanzania has already successfully completed the process of issuing an IPO after India’s Bharti Airtel and the Tanzanian government successfully agreed to offload 12.5 per cent of their shares each.
Similarly, Maxcom Maxcom Africa—popularly known as MaxMalipo—has already received the approval of capital markets authorities to change its name to a plc while several other telecommunications companies are on several stages of issuing their IPOs in line with Epoca 2010 as amended in the Finance Act 2016.
Responding to some of the issues, Dr Mpango said the government has noted with concern that water remains a serious challenge in various constituencies but hastened to say that at least six major projects—currently in offing—will relegate water blues to history.
“Similarly, we are currently finalising a $500 million (about Sh1.1 trillion) from Exim Bank of India that will specifically be targeted towards alleviating water shortage.
The government is also targeting to get some money through the Green Climate Fund—which assists developing countries in adaptation and mitigation practices to counter climate change—to source money the Simiyu Water Project.
Presenting the Sh31.7 trillion revenue and expenditure plan for the financial year 2017/18 in the House on Thursday, June 8, Dr Mpango announced the abolition of the annual motor vehicle license fees and instead increased excise duty on petroleum products by Sh40.
The proposal did not, however, go down well with some MPs, with the Opposition bench saying it would affect the poor—mostly those who use kerosene—hard.
In response however, Dr Mpango said exempting the Sh40 on kerosene may result in fuel adulteration. “Currently, the difference in excise duty rate between petrol and kerosene is only Sh53. If we exempt kerosene from the proposed Sh40, the difference will rise to Sh93 and that will entice sellers to mix kerosene with petrol and maximize their profits,” he said.
During the budget presentation, Dr Mpango said the government will continue to collect property tax for both valued and non-valued houses in all local government authorities.
He said TRA would continue collecting the tax as determined by the Minister of Finance and Planning, noting that for unvalued houses, a flat rate of Sh10,000 per normal house will be charged and Sh50,000 on every floor of a multiple-storey house.
However, the proposal was opposed by the opposition MPs who said the move meant that even the poor—who live in mud-walled, thatched house would also be required to pay tax.
In response however, Dr Mpango said going by the Urban Authorities (Rating) Act, 1983, the houses for which tax is to be paid are those built in cities, towns townships.
“In the same vain, claims that the retired people will also be subjected to this form of tax make little sense since the law says people above 60 years will not be subjected to tax payment,” said Dr Mpango.
In the endeavour to increase tax revenue, the government is also targeting caterers and those working as Master of Ceremonies (MCs) in various projects.
Presenting the budget, Dr Mpango said small scale business operators including food vendors, small scale second hand clothes sellers, sellers of agricultural products such as vegetables, bananas and fruits among others would be given special identity cards as the government seeks to identify them so they could be given special places where they will conduct their businesses from.
Bank lending rates
The other hot topic was the one on commercial banks’ lending rates, which were described as being too high to nurture the growth of the private sector, with some MPs blaming the situation on the government’s huge appetite to borrow locally.
But according to Dr Mpango, it is impossible for the government—through the Bank of Tanzania—to regulate lending rates in commercial banks, saying that if it does so, it won’t be able to bring the banks to task when they register losses.
“It should also be remembered that our economy has grown by an average of 6.7 per cent for the past ten years due to the policy of leaving interest rates to be controlled by market forces,” he said.
He said as much as he understands, the major challenge facing commercial banks now is an increase in the level of non-performing loans (NPLs).
“BoT has instructed commercial banks to ensure that they bring their rising NPLs back to an average of five per cent of their total gross loans. They have also been instructed to make use of credit reference bureau to know some of the habitual defaulters,” he said.