Stock Markets and Sustainable Development

The Dar es Salaam Stock Exchange (DSE) has recently launched its new Rules, among others are Rules related to issuance, listing and reporting of sustainable financial instruments. Meaning going forward entities could issue, and list financial instruments aligned to environmental protection, energy, and water efficiency; social equity and responsibility and human rights; as well as business ethics, compliance, and shareholder’s democracy. These aspects are commonly also known as sustainability/ESG (Environmental, Social and Governance) factors. Given our status, these issues may seem far fetched and not our immediate concern, but they are. – as long as we are in the global capital markets and compete with others for attracting capital inflows for investment activities within our economy. The world is met with investors who are conscious on these issues and could only invest in financial instruments and entities that are compliant with ESG principles.

With this legal/regulatory framework at the DSE entities can issue green bonds, green equity, social and social sustainable bonds, blue economy bonds, or any other sustainable/sustainability-themed/labelled financial instruments. As a stock market, the DSE is better positioned to encourage and motivate the accommodation of diverse financial products and investors within its platform.

Why stock markets? Stock market is a fundamental institution and market infrastructure in the financial system and markets, offering a variety of financial instruments that enable economic agents to pool, price, and exchange risks. It is part of the capital market – which is a highly specialized and organized financial market and an essential agent of economic growth because of its ability to facilitate and mobilize savings and investments. If well understood and utilized, it could be one of the prime tools that drive any economy on its path to growth and development.

This is because it is responsible for long term growth and capital formation by issuing funds for investments, ensuring efficient and effective allocation of scarce financial resources for optimal benefits to the economy, helping to reduce our corporate sector overreliance on short-term financing for long-term projects and business enterprises while encouraging inflows of foreign capital. Meaning, capital market has the potential to occupy an important place in the economic development of a society whose approach to economic development is market-based.  

The growth importance of capital markets in the world, in particular emerging and developed markets, has reinforced the belief that finance is a crucial ingredient for economic growth, stock market being one of the key institutions in the financial sector and markets.

Economic growth, to a large degree, hinges on an efficient and inclusive financial sector – catering for the needs of various and different actors both on the demand and supply side, whether short term on long-term form of capital – pooling domestic savings and mobilizing foreign capital for productive investments. An underdeveloped or poorly functioning capital market, which is illiquid and expensive, deterrers issuance, capital raising activities and investors (domestic or foreign) participation.

The capital market ought to enable the contractual savings industry to mobilize long-term savings from small individual households to larger institutions and channel them into long-term investments and economic productive activities.  That way it fulfills the transfer function of current purchasing power, in monetary forms, from surplus sectors to deficit sectors of the economy, in exchange for reimbursing a greater purchasing power in the future.

Despite the said relevance of capital markets within the economy, but in Tanzania the private sector and public sector actors holds not so much of a positive attitude towards raising capital finance and listing on the stock market, thus limiting the attractiveness of the capital market as a saving and investment platform for investors, due to few listed companies. For the past twenty years of DSE’s existence only about TZS 1.5 trillion has been raised via listing into the DSE by private sector and public sector entities (about TZS 1 trillion via issuance of shares and TZS 500 billion through issuance of corporate bonds). The current DSE domestic equity market capitalization is TZS 10.4 trillion, which is less than 10 percent of the gross domestic product (GDP), indicating that the capital market is not utilized efficiently and effectively as a tool for capital raising and investment.

How can we make the capital market vibrant and play a significant role in the economy by channeling investment into the better use? By sustaining efforts in public awareness and enhancing financial literacy; by encouraging and motivating (via fiscal policies and other tools) private entities to consider offloading part of their ownership via public capital markets; by guiding some of the state-owned-entities, especially those with commercial mandates, to recapitalize via better corporatization and list into the stock market – in the process enhance their governance and performance improvement; establish (by public and private sector) key institutions which are also necessary for a vibrant capital market, the likes of investments banks — for underwriting public capital market transactions, private equity and venture capital funds for financing private capital markets transactions and subsequently feeding into the exchange via exits, fund managers for pension and provident funds as well as collective investment schemes to provide consistent liquidity in secondary market and ensure sustainable/aligned valuations; etc.

Encouraging the Use of Stock Market for Capital and Investment

I recently read a report titled: “PwC Africa Capital Markets Watch”. Of interest was the trend of capital raising in the continent via public capital markets’ Initial Public Offering (IPOs). According to the report for the past five years the average annual IPO transactions in Africa has decline from 30 transactions per annum in 2017 to only eight (8) transactions in 2021. And the value of capital raised via IPOs has also declined from an average of US$ 3 billion per annum in 2017 to only US$ about 0.9 billion in 2021.

The trend is also dire in the post-IPO transactions (also called Further Offerings – FO) where the trend is that of significant decline, from 95 transactions per annum in 2017 to 38 transactions in 2021. The value of FO decreased from US$ 11 billion per annum in 2017 to US$ 2.5 billion in 2021. In the same vein at the largest stock market in the continent – the Johannesburg Stock Exchange (JSE), there was not a single IPO recorded in 2021, while the number of delistings (removal of listed companies from the stock exchange) in JSE reached 24 in 2021 compared to 20 in 2020 and a handful few prior to that.

Similar situation can be said of the largest and oldest stock exchange in East Africa – the Nairobi Securities Exchange (NSE), where there has not been a single meaningful IPO on the exchange in the past nine years.

As for the Dar es Salaam Stock Exchange, during these past five years, there has been five (5) IPOs raising about Tsh. 600 billion of capital. And there has been some further offerings in the form of rights issuances or second offerings, albeit at a lower scale and with minimal uptakes and appetite.

As opposed to public capital markets, continental-wise there has been a vibrant private capital markets transactions, especially in places where private equity and venture capital funds are flourishing and where pension funds’ managers have the liberty to invest in private enterprises. This has not been the case for Tanzanian where there are no private equity and venture capital funds activities (except the in-bounds ones), and the private fund management space is relatively in non-existence, note that these are a key feeder into the stock exchange listing in the form of exit in their investment.

On the positive note, there has been significant activities in the debt capital markets, especially on instruments issued by the Government – both in the primary and secondary market. There has also been an increase in financial literacy and awareness. This is an indicator of focus by the country to finance some of the strategic infrastructure projects using domestic financial resources mobilized via issuance of Treasury bonds, and people’s willingness to invest in these financial instruments.

We are somehow challenged to see the same focus replicate especially for some of the state-owned-entities whose need of funds could be met via IPOs, with this we could reignite the interests we saw in late 1990s/early 2000s government’s focus to partly raise funds via IPOs, only that this time the experience could be of an enhanced level given the financial literacy and awareness state, also there is an increased interest in the stock markets activities by the citizens, our liberalized (no restrictions) regulations for foreign investors are better now, our compliance to international capital markets standards is aligned, and the geo-economic posture around the openness in attracting foreign capital into our shores is clear – and the DSE being one of the doors to which foreign capital may land into land.

Citizens interests in the domestic capital market, how? Few years ago, owning shares or investing in government bonds was a preserve of the few rich, and institutional investors the likes of pension funds, banks, and insurance companies. Ordinary citizens defined property in the form of land and other physical goods. Shares, bonds, and intangible assets were not in their vocabulary. But now the situation is different and continue to improve – i.e., Investment (CDS) Accounts at the DSE has more than doubled in these few years, individual investors make up about a quarter of secondary market investment activities in government bonds, and interest in joining in the stock market by citizens is continuously increasing.

Even though the less than expected performance of some of the listed companies, coupled with global issues such as the recent pandemic, or the ongoing geo-political challenges, hindrances in global trade, investment, and logistics – may wane some of the citizens interests in the stock market, nevertheless the importance of the stock market, especially in the context of inclusive economic empowerment and inclusion cannot be gainsaid. With the deepening of the economy and greater focus on technology the place of the capital markets is evermore in focus.

With the consensus that the economy requires innovative thinking on alternative financing of public and private projects and enterprises, it is interesting that the government is keenly focusing in using the capital markets to mobilize domestic financial resources to propel our socio-economic development and growth.

What now? Enhanced campaign and public awareness to promote the capital market as a capital or finance mobilization platform and an investment option, demonstrating its benefits and the processes for engaging with it. This is key, particularly for youth who have embraced technology in their operations – the DSE started engaging the youth few years ago with its DSE Scholar Investment Challenge, and now its SMEs Acceleration Program (ENDELEZA), as well as its Mobile Trading Platform (Hisa Kiganjani).  Providing stock market literacy to the youth will help them debunk the myth that the market is too complicated, and it is for the rich and the sophisticated.

With the above, key stakeholders within the capital markets ecosystem needs to identify companies that could be listed, including state-owned-entities, though IPOs, in the market and encourage/engage such companies to raise capital via IPOs and list into the exchange. It will be then for the regulators and the market to ensure that the corporate governance regulations and guidelines are properly adhered into for the health of these companies and in protecting the investing public.

The DSE is already classified as a frontier market by FTSE Russell and is also a full member to the World Federation of Exchanges (WFE), the next steps could be to internationalize it further by seeking similar classification by other agencies such as MSCI and Standard and Poor. Recently the DSE has implemented Rules and Guidelines for reporting and issuance of sustainability-themed and labelled financial instruments, this is key in improving the investment climate, making the stock market more competitive as compared to other regional markets, but also attract more foreign investors.

The Role of Finance in Sustainable Development

Last week I had an opportunity to speak on a forum whose theme was sustainability of financial markets in Africa, and the role of financial markets in economic development. I chose to share my thoughts around the sustainable finance agenda. Today’s article is an extract from my speech in this forum.

Traditional finance and its reporting mechanism faces a myriad of challenges regarding its relevant, especially if looked form the context of financing for sustainable development. However, despite challenges and drawbacks, there are opportunities for actors within the financial systems and markets to choose to interrogate the future of finance in a different manner. For instance, how sustainable finance can help drive better outcomes than traditional finance, both for the people and the environment. As it were, financial systems and markets underpins strong economies: making easier for people to transact, helping people and businesses to raise capital, help people to save resources for the future; and helps people to reduce or spread-out various forms of risks.

The way matters stand, there is a strong urge for finance to progress and contribute even more, unleashing its potential as an enabler of sustainable development (as enshrined within the UN-Sustainable Development Goals).  Now, this requires that key actors within economies and financial systems to drive their motivation around the idea that investors, financiers, and businesses could still do well while also doing good – this could partly be achieved by encouraging capital to flow into sustainable business models and practices.

Why does this matter? – it matters because getting financing right is critical to meet SDGs. According to a 2021 McKinsey Global Institute named “The Rise and Rise of the Global Balance Sheet”, the total stock of global financial assets is estimated at about $500 trillion (almost 6 times of Global GDP). Unfortunately, the global financial system is not channeling these vast sums of money effectively towards investments for sustainable development.

Furthermore, a recent report by PwC named “Assets and Wealth Management Revolution” estimates that international institutional investors — sovereign wealth funds and pension funds — are holding about US$110 trillion in Assets under Management, but less than 3 percent of it is invested into sustainable conscious enterprises, projects, and assets. This share is further lower in developing countries. However, the act of reorienting even a fraction of these investments would accelerate sustainable development to a different level, making humanity closer to meeting SDG target set by 2030.

The good news is that investors and private sector companies are slowly leading the way and investing in channeling resources towards sustainability under innovative categories like ‘sustainable finance’ or “ethical investments” or “impact investment” – and the trend is growing as market infrastructures and institutions, like stock exchanges and banks, progressively are creating spaces and products that enable intermediation and integration of finance and sustainability.

Our experience is that there are some global investors who can’t invest in some of our listed companies because of sensitivities around ESG issues. But, at the same time, there are investors who are looking for opportunities to invest into our market, even at lower investment returns, if there were companies issuing green finance/bonds, social bonds, social-sustainability themed bonds, etc. This is the opportunity for both banks and non-banking entities.

Looking ahead….

Primary actors within the current financial system – those in real economy (i.e., Individuals, Companies and Governments); Assets Owners (i.e., pension funds, insurance companies, commercial banks); Assets Managers (i.e., Investment Consultants, Financial Advisers, Investment banks and Stockbrokers); Financial Markets Regulators, Ratings Agents and Standard Setters, are encouraged to integrate ESG (Environmental, Social and Governance) issues and factors into their operations.

Why? Because it is being recognized that ESG and sustainability is becoming not only a reputational issue, but a financial risk issue and a survival issue – especially from the climate and social equity perspective. So, by integrating ESG across means helping address climate crisis, poverty and inequality, conflict, pandemic, and insecurity, as well as ensuring long term success of businesses. If not timely addressed, partly by finance and allocation of capital, these trends could be detrimental to communities, environment, businesses, and long-term economic prosperity.

Within East Africa, there have been some forms of development around this agenda, especially from the legal regulatory framework. Let us take a stock of the latest regulatory developments related to ESG:

In Tanzania, the DSE has incorporates ESG/Sustainability factors into its just recently approved Rules – so, going forward these will guide the conduct for companies intending to issue green or social or social-sustainability bonds. But also, it is being mandated that listed companies will be required to report the status of ESG and Sustainability in their Annual Reports.  These rules will be effective from 1st March 2022.

But prior to this — the DSE has been promoting voluntary disclosure on ESG by listed companies. This has been the case since 2016 when DSE became a partner Exchange to the UN-SSE Initiative.

On the same note –the Regulator (CMSA) and the DSE have recently approved issuance and subsequently listing of a social-impact Bond targeting financing of women empowerment. The approval by CMSA was based on ICMA (the International Capital Markets Association) standards.

Furthermore, the CEO Roundtable (CEOrt) of Tanzania — a forum for industry leaders within Tanzanian to constructively engage with the Government, development partners and others — have recently adopted sustainability and impact to socio-economic development to be their key agenda in the execution of their Strategic Plan of 2022-2025.

In Kenya: There is a Guidance on Climate Related Risks that was issued by the Central Bank of Kenya in October 2021 – mainly requiring commercial banks to embed the considerations of financial risks from climate change in their governance arrangements. This guidance also requires banks to include the financial risk mitigation strategy and to design a clear way of reporting on such perils. In the same vein – the Nairobi Securities Exchange in November 2021 released the ESG Disclosures Guidance Manual that guides listed companies on how to collect, analyze and report ESG information.

In Rwanda, the National Bank of Rwanda, through Regulation No. 28/2019 requires banks to prepare an overall report that explains the link between their financial performance and their social, environmental, and economic impact.

In Uganda, there are ongoing discussions, led by the Bank of Uganda, for possible regulations on ESG/Sustainability in the near future.

SMEs and Capital Raising during Challenging Times

Over the past two decades and a half, globally, public equity markets have faced increasing challenges. This is not applicable only to developing economies, no – the number of companies listed in developed countries has also roughly halved and the value of new issues has fallen, according to the recent report by the World Federation of Exchanges (WFE). This has been driven by: (i) the rise in alternative sources of capital, especially private equity, and venture capital; (ii) an increase in disclosure requirements for listed companies; and (iii) a structural shift in the banking and finance industry towards scale and technology. This has encouraged larger companies to list into exchanges, however, to the detriment of smaller issuers and the ecosystems that support them.

The number of listed SMEs decreasing even further since the COVID-19 pandemic hit. Businesses, particularly Small-to-Medium Enterprises (SMEs), have further struggled to navigate the impact of COVID-19 on their operations.

SMEs, which are typically seen as the backbone of many economies — they drive growth, lead innovation, and provide a critical source of jobs and economic welfare. The World Bank states that SMEs contribute up to 60 percent of total employment and up to 40 percent of national income (GDP) in emerging economies. During the pandemic, SMEs reported declining revenues but also a number of related issues including: (i) concerns about defaulting on loans; (ii) concerns about their ability to retain employees and sustain their supply chain; and (iii) expectations of reducing their headcount in the aftermath of the pandemic and postponing growth projects.

In response to these concerns, governments across different jurisdictions announced a number of support measures for SMEs including grants, loans, furlough payments, and other fiscal relief measures.

Public capital markets

Public markets, like the DSE, continue to support listed companies at all growth stages as they raise capital to strengthen their balance sheets and fund their growth and development. That’s why we introduced the Enterprise Growth Market (EGM) to enable start-ups and SMEs access capital via public capital market. DSE, as it is for other stock exchange help to finance ecosystems through markets but have had variable levels of success in developing a viable segment for SME funding. Globally, access to capital for high-growth companies is improving, with a variety of capital available to companies across all stages of their development from traditional debt and equity to newer platforms such as crowdfunding and peer-to-peer lending.

As for us – access to capital outside the bank-based is still a challenge, partly due to lack of some of key institutions and infrastructure to support the capital market eco-system. So, despite our introduction of EGM in 2013, as the capital raising and listing platform for start-ups and SMEs which in a way enhanced a “toolbox” of options needed to build a successful SME market that could potentially tap in capital sustainable and patient capital from the capital markets, but further efforts are needed.

During the pandemic, there was a clear message from governments, regulators and participants within the financial services ecosystem that highlighted the role that equity and debt markets play in providing finance to business to aid recovery. During all this time our capital markets remained open and orderly. Both users and preparers of accounts faced unprecedented challenges during this period including (but not limited to): uncertainty in a company’s financial position, potential delays in the provision of financial information, and the need for auditors to undertake additional work to support their audit opinions, delayed Annual General Meeting (AGM) and introduction of Board and AGM virtual meetings.

Whilst exchanges have a role in encouraging SME listings, they are only part of an ecosystem that offers solutions to SME funding challenges. Other participants such as banks, private equity and venture capital firms must also play their part.


For us, given that the eco-system is not fully supported i.e., due to the lack of private equity and venture capital funds, the lack of Initial Public Offering (IPO) transactions underwriters, the lack of liquidity providers and market makers, etc –somehow makes it even difficult. However, to partly address the challenges the DSE has undertaken some of the key initiatives involving the exchange, regulator, business leaders, and other participants, and considers some interventions could be utilized to encourage SMEs to list in future. That’s why DSE Enterprises Acceleration Program (commonly known as DEAP) was introduced with the fundamental objective of imparting knowledge and skills of running businesses in a sustainable manner for businesses to be able to raise capital finance from both private and public capital markets. The DSE extended this program by introducing the pre-IPO listing platform (known as “ENDELEZA”) for the purpose of enhancing visibility and profiling of the pre-IPO listed companies to potential financiers and investors. It has been two-years and DEAP has already trained over 50 business executives on matters such as financial management, strategic planning, capital raising, value creation and value protection, controls, and good corporate governance, etc. On the other hand, ENDELEZA has listed 10 companies. We encourage more entities to leverage on these platforms for their sustainability, expansions, and growth.

Capital-raising measures

It is a fact that COVID-19 created cashflow issues for many listed companies in the short- to medium term, particularly for those that required funding to meet debt or other contractual commitments. There was a clear risk that liquidity problems could turn into solvency problems. During the pandemic, governments and central banks intervened to introduce helpful measures such as furlough schemes and, in some instances, forbearance from banks. A wide range of listed companies also called on existing shareholders through a variety of follow-on equity offerings including rights offers, open offers and placings. Globally, the number of follow-on offerings increased by about 20 percent between 2019 and 2020 – according to WFE. As we continue to emerge from the pandemic, these alternative transactions in the capital markets can present opportunities for both investors and issuers to benefit from capital-raising and investment opportunities alike, and not only to developed economies but also to developing ones. Public markets like the DSE provides such platforms.

The Necessity of Plans prior to Investment

It is true that many successful business enterprises to which some of us are working with take time to develop, manage and review their strategy, plans and budgets on regular basis in a bid to monitor their progress, financial situation, and performance.

Most of us will agree that financial planning and budgeting for companies is a critical undertaking as it identifies currently available capital resources, provide an estimate of expenditure, and anticipate incoming revenues. Through the process, companies can measure performance against plans – either on the income or expenditure – and ensure that the resources are available for initiatives that support business growth and development, reduce costs, improve efficiencies and profits, as well as enhance returns on investment.

It is however astonishing that many individuals who directly or indirectly actively participate in these entities’ planning and budgeting processes do not engage in similar activities and processes for their own income, expenditure, and investments. You wonder why?

Research shows that over 80 percent of all people do not plan or budget and live a life trusting that everything will fall into place as long as life goes on. Only a few people plan and budget for their basic needs such as food, clothing, rent, school fees, medical costs, etc. After that, everything else is left to nature together – i.e., despite nature’s erratic and inconsistencies as we know it.

Some people decided, uninformed – or otherwise – to take a position that planning, and budgeting is a complicated affair and that the process is equated to numbers, figures, formulars and spread sheets. There are also cases of irrational arguments that goes like — in order to budget, one must have a lot of money. This isn’t necessarily true either. Everyone should be able to come up with the basic financial plans and budget which shows your income (from all sources i.e., employment, business, investment, gift, etc), your expenditure (normal and development), debt repayments as well as disposable income – which is available for investment. This will guide you to understand how much you need to allocate towards your savings and investment and whether the investment should target short, medium, or long-term assets.

As a rule, even though it real also depends on the sources of income — you may want to allocate at least 50 percent of your income towards basic needs such as house rent, food, school fees, and medical expenses/insurance. Thirty (30) percent towards savings and investments (i.e., investment in shares, bonds, units, fixed/term deposits) and the rest twenty (20) precent may be allocated into emergence, debt repayments, entertainments, gifts, and relatives’ support. But if you are heavy in debts you may need to allocate a further ten (10) precent towards that direction – reducing what could be available into savings and investments.

However, another way of managing your debt obligations is to increase your income – it can be via performance-based promotion, salary increment, and bonus, etc; or it could be via allocating more funds into investment portfolio hence enhancing returns on investment that will then be used to serve the debt; but then this requires achieving a good balance of cost of debt versus return on investment. Another option is to pursue debt renegotiation and debt consolidation with your financiers to enable you to reduce or stagger the amount of debt that is repayable periodically.

For senior citizens, or individuals who are about to retire – either from business or employment – it is advisable for them to start focusing on their needs by cutting down on their wants so as to free up some funds towards investment in the retirement plan via pension. It is advisable not to borrow, rather clear off debts once retired.

As you may appreciate all these actions requires some form of planning and budgeting. As it comes to investment, there are several opportunities in that market that will be determined by your risk appetite and investment goals. These include units trusts like liquid funds, or fixed income funds, etc which are managed by professional fund managers. You may also consider pursuing a good selection of dividend-distributing equities/shares/stocks with potential for price increase which are listed in the DSE.

However, you may need a good financial adviser to guide you through the selection process as it requires some level of financial literacy to achieve what you want. The other area – which is also gaining significant traction at the moment is investment in bonds. Bonds are long-term securities offered by the Government or private organizations towards specific goals. By investing in the Government’s issued bonds, for instance, you are lending money to the Government with a promise and agreement that your will be repaid your invested amount after a certain agreed period, but meanwhile you will get paid your interest income (coupon) on the loan to the Government every six-months until the end of tenor for the bond. Incomes from investment in bonds are guaranteed and fixed – appropriate for a pension plan.

You may by now have developed some interest based on what you have read so far, and you may be asking yourself, how do I start? Well – you may start by attending financial literacy classes, which are common these days. With social media, you may also want to get into YouTube and access financial literacy materials – these will help you understand how to plan, budget, spend, save, invest, insure, etc. These trainings will help you to understand various asset classes or investment opportunities available in the marketplace. This will enable you to acquire the requisite knowledge needed to make the right investment decisions.

But all these can be achieved through continuous and consistent discipline which sticking to your plans, budget, and investment goals.

On Investing in the Stock Market – What to Expect

This article provides some essential tips that could be useful for those interested in investing (i.e., not betting or speculating) in financial instruments which are listed in the stock market. It is good to know factors that determines prices of listed securities i.e., demand and supply; economic variables such as economic (GDP) growth, inflation, interest rates, exchange rate, current account balance, etc and how they relate, and impact the performance of the listed share prices. It is better to know company news (good or bad) have impact on the increase or decrease in share prices. There is a need to appreciate how market psychology and market cycles factors affects market prices. Some of these aspects have been covered in previous articles. By the way – terms stocks and shares are being used interchangeably, they mean the same in this context.

So, when you buy a stock, you are not buying a lottery ticket, rather, you are actually becoming a part owner of a real operating business. The value of your shares will rise, or fall based on the company’s performance and the perceived fortunes. Many stocks also pay dividends, which are periodical distributions of profits back to shareholders of the company. By investing in a stock, you are making the shift from being a customer to being an owner. For example, if you buy a beer or cigarette, you are a consumer of TBL or TCC products, but if you buy a TBL or TCC stock/share, you are buying your ownership of the company — and are entitled to a percentage of its future earnings, as well as its assets.

What and how much can you expect to earn as an investor of a stock? Much as this is impossible to predict, but we can use the past as a (very) rough guide on the potential earnings and gains. Historically, picking from stock markets with long-time existence and experience, are relatively bigger and mature, stock markets have returned an average of 10 per cent per annum over a century. But of course, if such data and analysis are looked separately, they may seem deceptive because stocks have the tendency of being wildly volatile along the way — in the process of averaging into the 10 per cent per annum there are cases of ups and downs such that it is not unusual for the market to fall by more than 20 or even 50 per cent in a period of time in every few years. Analysts and observers tell us that on average the market is down once in every four (4) years. You need to recognize and appreciate this reality so you won’t be shocked when stock prices tumble — and so you should set your expectations right and or learn to avoid excessive risks. However, as you do that remember and usefully recognize that the market has made money three out of every four years and continues this trend, even today.

In the short term, the stock market is entirely unpredictable, despite the claims of some “experts” who here and there would pretend to know what is going on about the market! There are recent examples in which prices and indices sank by some significant percentages — but then made a U-turn almost during that same period and rose nearly as rapidly. This is true to our market as well, as a keen observe would have noticed this, albeit for us the context may be a bit different given our market size, its nascent and the lack of sophistication.

Despite that, in the long run, nothing reflects economic expansion or the shrink thereof more than the stock market — that’s why it is perceived and viewed as the barometer of the economy. As it is, overtime the economy and population grow, and workers become more productive. The rising economic tide makes businesses more profitable and predicted to trend the same in the future, which then drives up the stock prices. That explains why markets soared in the twentieth century, despite wars, crashes, and crisis. So, generally it pays to invest in the stock market if you are one of those who would take a long-term view in your investment philosophy and approach. This seemingly fact of matter makes me, almost, suggest — over the long-term stock markets news will be good. If you can buy into this “seemingly” factual statement, it will help you to be patient, unshakable and ultimately relatively better-off by investing in stocks of companies listed in the stock market — and of course choices of stocks to invest into matters as well.

So, what exactly does this mean — it means that if you believe that the economy and businesses will be doing better 10-years from now it then makes a lot of sense to allocate a portion of your investment in the stock market. Of course, it is undesirable that it may be a bit of a challenge to stay in the market long enough to enjoy these gains, given that needs for money for individuals may be abrupt as emergencies may dictate. In all these, the last thing you want is to be a forced seller during a prolonged bear market. But then how can you avoid such fate? For a start — either don’t live beyond your means or saddle yourself with too much debt/loans — both are reliable ways to putting yourself in a vulnerable position. As much as possible try to put a financial cushion, you will reduce the chances of raising cash by selling stocks when the market is crashing. Of course, one way of achieving such an objective is to invest in fixed income instruments such as bonds — given their contractual nature of paying fixed amounts in pre-agreed periods. We covered about bonds in the last week’s article.

On the Diversification of Financial Resources

For one thing, liquidity on the bonds segment of the market, 2021 was a historical year for the exchange (note, liquidity is one of the key parameters that measures stock exchange’s performance). In 2022, the total trading activities reached Shs. 2.72 trillion, a historic high – albeit contributed largely by transactions emanating from the fixed income Government treasuries segment of the market. On the other hand, the exchange had a tough and challenging year in the equity’s liquidity

The perspective: liquidity determines interest and appetite to use the market for capital and fund raising, it determines volatility and price movements, it determines market depth, encourages investors participation in the market, it determines growth and potential for diversification of financial assets and resources. They say liquidity determines liquidity.

The context: projections from various sources indicates that 2022 will still be another challenging year, economies are expected to grow at a slower pace – which might affect markets performances. Is there a possibility to predict bullishness for 2022? The response to such a question would be, it is mixed – i.e., yes and no. Yes – to the extent that there is an appreciation that sources to finance sustainable development needs to have a combination of traditional and new alternative initiatives and there are efforts by all key stakeholders to move towards that kind of direction. No, in the sense that unless there is a different way of responding to questions such as: how can we efficiently and diligently finance our long-term development projects and enterprises from a good balance of local and external financial resources? how can we grow the capacity of our domestic markets so they can be more vibrant as channels of finance intermediation for long-term projects and enterprises investments?

A combination of the ongoing efforts by our government to address the fiscus which has resulted into the continuously increase in tax revenue, this is something significantly positive. Not in rhetoric, but in practical terms this increases the possibility of seeing the potential of increasingly financing our growth and development using local money. However, as is, for sustainable inclusive growth, the fiscal aspect needs to be combined with similar measures on the monetary side to potentially unlock local financial resources for better and efficiency use for financing development projects and enterprises – to which the central bank has been at the front, and positive results are progressively being seen.

Currently, we have about Shs. 35 trillion of savings within our banking system, however, it is also known that financial resources outside the system could be relatively larger than — the question is, how can these untapped sources be unlocked and intermediated for productive investments? A vibrant bonds market could be one of the tools to unlock this potential, and there has been good progress on this in these past three years, except for, the lack of micro-savings bonds targeting retail investors, issuance of municipal bonds and just a handful corporate bonds. Furthermore, in relative terms, especially if we compare with similar economies – despite the progress we are seeing on the treasuries, we are still on the lower end. As an example, in 2021 Kenyan fixed income (treasury bonds) transactions were worth equivalent to Shs. 20 trillion compared to our Shs. 2.5 trillion, they had new issuances equivalent to our Shs. 15 trillion, while our new issuance was only about Shs. 4 trillion – and so it applies to other similar parameters for measuring this kind of performance, whether ratios relative to the GDP, or transactions versus outstanding listing, etc.

The other challenge, or rather an opportune is that while treasuries attract funds at the yields we are observing, depends on maturity, it is tough to motivate the growth of a vibrant bonds market in the private sector. It is practically challenging for corporate entities to mobilize long-term investment financing via issuance of term notes or corporate bonds.

If we can imagine a situation where interest rates will be commercially and economically viable — two things might happen: (i) there will be increased business enterprises activities, as funding for them could be affordably accessed from the local market; and (ii) entities will have an option to either borrow from commercial banks or borrow directly from the public via issuance of commercial papers (i.e., corporates term notes and corporate bonds). The action of corporates accessing public money by issuance of notes and bonds will: (i) enhance pricing competition among lenders; and (ii) will further unlock idle savings which are not yet tapped into the banking system — these will be used for productive investment activities within the economy.

In a normal market environment, whenever certain asset classes, such as equity (shares) slows down, investors normally switch to other asset classes, such as treasuries or other fixed income instruments or gold, etc – like what we have been observing since the start of COVID-19 pandemic there has been a surge in the fixed income and a drop in the equities. And this is what is being observed across markets, Investors selling-off on the equity, switching their investments into treasuries and gold. One might argue, this presents an opportune for a diverse vibrant bonds market, given the increased appetite — and therefore private sector entities and local government authorities should seriously consider this as an opportunity to strategies and pursue. The good thing is that a combination of monetary policies and naturality has brought interest rates relatively down for issuers and hence lower cost of funding to them. This will be a re-start of a diverse sources of tools and mechanisms to finance our economic enterprises and projects using domestic resources.

Financial Literacy for a Shared Economic Prosperity

Financial Literacy for a Shared Economic Prosperity

Lack of skills, knowledge, competence and understanding about how financial markets works is one of the deterrents to participation in the financial markets and hence failure to benefit in the economic opportune and prosperity, in as far as capital being one of the factors of production, is concern. Research indicate that the lack of financial literacy prevents households from participating in the inclusive economic benefits due to non-participation in financial markets. The role of financial literacy should not be under-estimated. As more people live into a system where would have to decide how much to save for retirement and how to invest their savings for the better future, it is important to consider ways to enhance financial management skills or guide them in their financial planning, execution, and decisions.

Increasingly, individuals are being put to oversee their financial security post retirements. Moreover, the supply of complex and on-line/digital financial products has increased considerably over the years. However, many individuals who participate still lacks the necessary financial knowledge and skills to navigate this new financial environment. Youth – employed and otherwise, are becoming increasingly active in financial markets especially where the promise of quick returns is availed, their participation being accompanied/promoted by the advent of ever new financial products and services. However, some of these products are complex and difficult to grasp, especially for financially unsophisticated and illiteracy investors. At the same time, in many economies market liberalization and structural reforms in social security and pension sectors have caused an ongoing shift in decision power away from the government and employers toward private individuals. Thus, individuals have to assume more responsibility for their own financial well-being. 

The questions is: are individuals well-equipped to make financial decisions? do they possess adequate financial literacy and knowledge? Research on this topic indicate that financial illiteracy is widespread, many people lack the knowledge of the most basic finance and economic principles.

Some of the aspects for consideration as our society evolves includes answering questions such as: what is the importance of financial literacy and what is its relation to financial markets and economic development? Are financially knowledgeable individuals more likely to hold to participate in the ownership of economic prosperity via ownership of financial assets? Is there a causality relationship between financial knowledge and investing in financial markets? In all of these, the truth remains in that the lesser the understanding of basic finance and economic concepts related to economic growth (i.e., inflation, interest rate, compounding effect, diversification, etc) the limited is the knowledge of investing in financial assets – be it stocks, units and bonds, fixed deposits, etc.

Given what we little know — the limited knowledge about finance among us, says that financial literacy should not be taken for granted as we pursue financial mobilization for our economic development. The truth is that majority of households possess very limited financial literacy. Furthermore, given that financial literacy differs substantially depending on education, age, and gender — this suggests that financial education programs are likely to be more effective when targeted to specific groups. As such, financial and economic programs or policies and legislature actions should take into account the fact that when put in charge of investing for their retirement, financially unsophisticated individuals may not invest in financial markets, not because they lack funds for investing but largely due to lack of the specific financial knowledge. Thus, to work effectively, financial and economic programs need to be accompanied by well-designed financial education programs.

It is also fair to note that the challenge of limited financial literacy is not only for us, but financial literacy surveys conducted worldwide indicate that majority of the population in most economies do not have sufficient skills and knowledge to understand the basic financial products and risks associated with these products. Thus, many individuals may not adequately plan for their future and are likely to make ineffective decisions in managing their finances. The same is true for us where a significant proportion of the population have very limited understanding of financial products and services offered in the market. This is particularly the case among the rural poor but also across the relatively more affluent peri-urban and urban mass market.

As a result, efforts on improving financial literacy and educating consumers around financial products and services has become an essential means toward greater economic, social, and financial inclusion as well as an important complement to market conduct and prudential regulation. For capital markets in particular, investor education is important to promote greater retail participation in the market on a sound basis – in other words the best protection for investors is education. The same applies in other sub-sectors of the financial sectors i.e., banking, insurance, social security and pension, collective investments, and investment management, etc.

It is important to appreciate and recognize recent efforts by the Ministry of Finance and Planning, the Bank of Tanzania, and other stakeholders within the financial markets in embarking on various efforts putting strategies applied to educate and protect different groups of the population who are current and potential users and consumers of financial markets products and services. Sustained efforts are desired for mutual and commonly shared greater good.

DSE: Analysis of the 2021 Performance

During year 2021, the Dar es Salaam Stock Exchange (DSE) market performance depicted mixed results, however largely on the positive and depicting a bullish market outlook. There was an increase in market size and liquidity in the fixed income (bonds) segment of the market, as well as the growth in market capitalization for both domestic companies and in total. On the other hand there was decline in liquidity on the equity segment of the market.

Equity (Shares) Segment

Market Size                    

Total market capitalization — which covers all 28 listed equity securities –- recorded a five (5) percent increase compared to the market size/investors wealth during year 2020. The total market capitalization increased by TZS 715 billion i.e., from TZS 15.09 trillion in December 2020 to TZS 15.81 trillion as of 31st December 2021. This follows the increases in prices for some companies as well the listing of new shares in the market.

On the same note, domestic market capitalization covering the 22-domestic listed companies also increased by three (3) percent (or TZS 265 billion) during the year 2021. The total domestic market capitalization increased from TZS 9.16 trillion to TZS 9.43 trillion as of 31st December 2021.

The significant increase in prices in the following counters contributed largely to this increase: TANGA/SIMBA (increase by 120 percent), NICOL (up 62 percent), DSE (up 48 percent), CRDB (44 percent), and TWIGA (36 percent). Cross-listed companies whose share prices also increased during the year were: NMG (16 percent), KCB (14 percent), JHL (12 percent) and EABL (2 percent).

Even though there were declines on: DCB (whose price declined by 28 percent), JATU (18 percent), NMB (15 percent), SWISSPORT (11 percent) and YETU Microfinance (7 percent) – however the increase in prices of the above-mentioned companies outweighed the decline in prices in these companies and hence the over recorded increase of TZS 715 billion (equivalent to 5 percent). The remaining companies’ share prices remained unchanged during the year.


The value of transactions in the equity segment of the market declined during the year 2021. Equity trading turnover decreased from TZS 591 in 2020 (even though this was largely contributed by a one-off transaction on VODACOM) to TZS 104 billion in 2021. The declining is largely a result of reduced in foreign investors activities in the market following the impact of COVID-19 pandemic to many global fund managers with portfolio investments in our market.

The industrial and allied sector led in liquidity creation and investment activities, contributing about 47 percent of total liquidity during the year. This was followed by the financial services sector that contributed 45 percent, while the services and allied sectors contributed about 8 percent of total market turnover. Companies that led into liquidity creation were: TBL (TZS 27 billion), NMB (TZS 25 billion), CRDB (TZS 21 billion), TCC (TZS 15 billion), VODACOM TZS 6 billion and TWIGA Cement (TZS 4.8 billion). Other key counters were DSE (TZS 2 billion) and TANGA Cement (TZS 1.6 billion). Other counters with minimal investment and trading activities were: Swissport (TZS 0.9 billion), JATU (TZS 0.8 billion), NICOL (TZS 0.4 billion) and TOL Gases (TZS 0.3 billion).

Fixed Income (Bonds) Segment

Market Size

Total outstanding listed Government (Treasury) bonds increased by 19 percent (equivalent to TZS 2.5 trillion) — from TZS 12.79 trillion as of December 2020 to TZS 15.26 trillion as of 31st December 2021. Out of which outstanding corporate bonds stood at TZS 128.89 billion.


Trading activities in the secondary market fixed income/bonds increased by 21 percent during the year. Trading turnover increased from TZS 2.12 trillion that transacted during 2020 to TZS 2.57 trillion in year 2021. The increase emanated from both the increase in listing as well as the increase in the domestic investors (retail, financial institutions, and companies) to invest in the less risky financial instruments, given the economic uncertainty due to the impact of COVID-19 on businesses, trading, investment, and the economy. The increase in financial literacy is also a contributing factor.

Comparison with Other Markets

Compared to other selected stock markets in Africa, the index performance (in US$ terms) as reported by for the period ended 31st December 2021 are as follows:

ZSE All Share (Zimbabwe)10,997.06310.51%310.51%4603.74%
LuSE All Share (Zambia)6,059.6854.89%54.89%42.10%
GSE-Composite (Ghana)2,789.3443.66%43.66%23.58%
MSE All Share (Morocco)45,367.6840.05%40.05%49.96%
BRVM-Composite (West Africa)202.0839.15%39.15%27.03%
NSX Overall (Namibia)1,576.1427.54%27.54%20.31%
JSE All Share (South Africa)73,722.6324.07%24.07%29.12%
MASI (Malawi)13,296.2918.35%18.35%9.75%
SEM All Share (Mauritius)1,935.5117.75%17.75%-3.46%
EGX 30 (Egypt)11,897.4010.18%9.95%-14.26%
NSE All Share (Kenya)167.109.43%9.43%0.03%
USE All Share (Uganda)1,420.698.46%8.46%-21.10%
NGX All Share (Nigeria)42,716.446.07%6.07%59.14%
DSE All Share (Tanzania)1,897.504.39%4.39%-7.89%
TUNINDEX (Tunisia)6,976.872.34%2.34%-1.07%
BSE Domestic Companies (Botswana)7,009.611.89%1.89%-6.47%
RSE All Share (Rwanda)154.34-1.90%-1.90%7.20%

[Other] Tips for Investing in Stock Markets

Some of the key factors that influence returns on investment in shares, measured by dividends and capital gains, also impact share price performance. It is also true that factors such as demand and supply, fundamentally impacts price movements for listed shares, as it is for economic variables such GDP growth, inflation, interest rates, exchange rate, current account balance, etc which also affects the performance of the listed share prices. Today, let us look into other factors, i.e., how psychology and market cycles factors affect market prices.

Market Psychology

Market psychology is the overall sentiment or feeling that the market experiences at any time. Greed, fear, expectations, circumstances, etc are all factors that contribute to the market’s overall investing mentality or sentiment.

While financial theory describes situations in which all the players in the market behave rationally, such theory, however, do not account for the emotional aspect of the market that can sometimes lead to unexpected outcomes that can’t be predicted by simply looking at the fundamentals of the economy, or the underlying performance of the company, etc.

However, analysts normally use trends, patterns and other indicators to assess the market’s current psychological state in order to predict whether the market is heading in an upward or downward direction.

Market sentiment

Market sentiment refers to the psychology of market participants, individually and collectively. It represents the general prevailing attitude of investors as to the anticipated price development in a market. This attitude is the accumulation of a variety of fundamental and technical factors, including price history, economic reports, financial performance reports, seasonal factors, as well as national and world events.

Market sentiment is perhaps the most challenging category because as it is, it matters critically, but we are only beginning to understand it. Market sentiment is often subjective, biased, and obstinate. For example, you can make a solid judgment about a share’s future growth prospects, and the future may even confirm your projections, but in the meantime the market may simply decide to dwell on a single piece of news that keeps the share artificially high or low — albeit this can especially be prevalent in emerging and developed markets. And you can sometimes wait a long time in the hope that other investors will notice the fundamentals.

Market sentiment is monitored with a variety of technical and statistical methods such as the number of advancing versus declining stocks and new highs versus new lows comparisons. A large share of overall movement of an individual stock has been attributed to market sentiment. In the last decade, investors are also known to measure market sentiment through the use of news analytics, which include sentiment analysis on textual stories about companies and sectors.

Emotions and perceptions

Share prices can change because of perceptions, greed, hype, momentum, fear, etc. Sometimes the stock market can be seen as the sum of the emotions of its human entrepreneurs, subject to the arbitrary human whims and flights of fancy.

According to a Wall Street saying, only two influences are at work on the stock market – “fear and greed. Most of the time they are in equilibrium, with greed only staying dominant long enough to produce the long-term trend depicted on a share market graph. The early 2000s technology boom was a good example of greed taking over. The Internet, and anything connected with it, became the spice of the moment and the technology shares skyrocketed in price. But when it all got too much later— some of us may recall what happened.

Bullish & Bearish

This is the other side of hype and momentum of the market. If investors expect upward price movement in the stock market, the sentiment is said to be bullish. On the contrary, if the market sentiment is bearish, most investors expect downward price movement. When a bear market sets in, fear takes share prices downward, to a long, bitter winter of discontent. During a recession nobody wants to buy shares. Only in hindsight do people realise that it was the best time to buy shares. This is what “value investors” the likes of Warren Buffet recommend.


“To everything there is a season, and a time to everything, and a season for every activity under heaven”, says the author of the Bible’s Book of Ecclesiastes — could have been talking about the stock market as well!

Most stock markets show a distinct seasonal pattern. It has a regular seasonal correction at the end of the financial year. This is normally followed by a major seasonal rally i.e., beginning of the tax year, periodical financial reporting seasons, etc. The stock market is more likely to rise and fall in certain months than in others, i.e., portfolio or fund managers tend to withdraw from the markets at the end of each tax year to balance their holdings. They start spending again at the beginning of the subsequent tax year.

Market cycles

Besides psychological factors that determine market prices and rates of return on share investments, there is a totally different concept to consider and that is the market cycle.

Stock market cycles are the long-term price patterns of the stock market. It is very important for investors to know where the market is in its cycle at the time when they will be investing, particularly if they are entering the market for the first time.

Two key types of models that have been developed to help you to understand at what stage of the cycle the market is in are: macroeconomic models and intuitive market models. For either type of model, the two most important factors in determining the market cycle will be the interest rates and monetary policy. To determine whether interest rates are favourable for share market investment, it is necessary to calculate their ‘real’ level.

Along with macro-economic models, the other way to identify and predict market cycles is intuitive market models. Intuitive market models are imprecise and rely on subjective inputs from the investor – for example, where you think you are in the market cycle. Although they are partially based on economic conditions, they are mainly based on an intuitive understanding of how markets work.