Kenyan investors who participate in the ongoing Tanzania Breweries (TBL) share sale will be restricted to selling their stock to Tanzanian citizens until foreign ownership of the firm falls below 60 per cent.
This is revealed in the information memorandum for the ongoing sale of a 20 per cent stake of TBL that is currently owned by Kenyan beer maker East African Breweries (EABL).
Tanzania considers Kenyan investors as “foreigners” unlike Kenya, Rwanda and Uganda which consider citizens of East African Community member countries as “locals” for purposes of investing in their capital markets.
Foreign ownership of TB will drop to 56.64 per cent after factoring in EABL’s sale, down from 74.64 per cent.
This will leave a margin of only 3.36 percentage points for foreign investor participation, beyond which international buyers will be restricted to offloading their shares only to Tanzanian citizens.
“On the assumption that the 60 per cent limit is exceeded, the practical implication of this restriction is that should any foreign investor in TBL wish to sell their shares after the offer they will only be able to sell to Tanzanians,” said the prospectus.
The limitation is expected to significantly affect liquidity of the TBL shares at the Dar es Salaam Stock Exchange.
If the shares are not taken up by Tanzanians, investors will be allowed a limited window to sell to foreigners subject to the approval of the Capital Markets and Securities Authority of Tanzania.
EABL is selling the 20 per cent block of shares as part of a reversal of a share swap that had seen South African brewer, SABMiller, acquire a similar stake in Kenya Breweries almost a decade ago.
The Tanzanian regulator is giving locals preferential allocation of the block of shares on sale.
There are 58.9 million shares on offer, out of which a sale of 1.98 million units will see the foreign ownership threshold cross to over 60 per cent.
“Of course this policy will affect the liquidity of the share,” said Standard Investment Bank executive director Job Kihumba. “It already takes longer to exit the Dar exchange because of the illiquid nature of the market,” he added.
In 2010 3.2 million TBL shares were traded on the DSE, which is 1.1 per cent of the 294 million free float available for trading.
Over a similar period, 43 million or 5.5 per cent of EABL’s 790 million shares were traded at the Nairobi Securities Exchange (NSE), about five times more.
“It has been very difficult to enter the market,” said Faida Investment Bank chief executive, Bob Karina.
The preferable option, he added, would have been to accord all East Africans the same status.
Joshua Kivuva, an integration lecturer at the University of Nairobi, said that while Tanzania may seem to embrace regionalism slower, the country is doing it the right way.
“Tanzania is taking its time to ensure that the common man is benefiting,” said Dr Kivuva.
He said that the country is trying to avoid a situation where anyone with money can buy any asset, which he said is a recipe for social inequalities.