|
FINANCIAL WATCH: UTT and economic empowerment
2005-05-11 08:58:22
By Theo Mushi
Next month the Unit Trust of Tanzania will launch the Umoja fund, which is a collective investment scheme.
It is the first scheme to be operated in Tanzania.
The Privatization process started in 1992 and to date about 350 companies have been privatized. The largest companies have foreigners as strategic investors.
So far six companies have been listed in the Dar es Salaam Stock Exchange (DSE). These are TBL, TCC, TOL, TATEPA, TANGA CEMENT and DAHACO.
So far only a few thousands middle class have managed to buy shares in listed companies.
The government deliberately set aside shares to be sold to the public and this led to the formation of privatization trust as a custodian of the shares.
In 2003 the government formed the Unit Trust of Tanzania to promote collective investment schemes or mutual trust funds as they are called in other countries.
Essentially, the scheme is intended to enable small savers including hawkers and shoe shiners, to become investors in shares of the companies listed in Dar es Salaam Stock Exchange.
UTT will launch Umoja Fund on 16th May 2005 and the public will be able to buy shares countrywide from all branches of CRDB Bank and the Tanzania Postal Corporation.
UTT conducted a public education programme in the past six months to sensitize people in the rural areas about the benefits of investing in shares through the Umoja Fund.
The government has subsidized the prices of shares or units and instead of selling the units at Tsh100/= the public will pay Tsh 70 for the units and the minimum number of units to be sold is 50 and therefore for 3,500/= one can become an investor in the shares of TCC and TBL.
This means ordinary workers and peasants will become investors with 1,000 units for a price of Tsh 70,000.
This is a challenge for workers to inculcate a savings culture to enable them to become investors in collective investment schemes like the Umoja Fund.
UTT will in future establish other collective investment schemes and it has hired experts from India who have wide experience in collective investment schemes or Unit Trusts.
The Umoja Fund will be managed by a fund manager who must be an investment analyst. There will be a custodian (CRDB Bank) to oversee if the manager is managing the investment portfolio according to the prospects approved by the Capital Markets and Securities Authority (CMSA).
The Umoja Fund will invest Tsh 10 billion of shares in TCC and TBL, which have been allocated to UTT by the government.
The fund wills diversity its investment by investing in bank deposits, Treasury bills and bonds and other viable investments to minimize risks.
There will be a lock in a period of one year to avoid speculation and after that the shares will be traded.
This means the Unit shareholders can sell their shares and get back their money or they can opt to use their dividends to buy more units in order to build their capital.
UTT Umoja fund will declare dividends every year and an investor can opt for distribution of dividends or re-investment in more units.
UTT has managed to have a tripartite agreement whereby an investor can borrow money from stipulated banks to buy shares.
The share certificates will be held by the bank until investors pays back the money used to buy the shares.
There is also a special arrangements for small investors to buy shares in weekly instalments of 3500 for the duration of the initial public offer. Plans are also underway for UTT to arrange with employees to deduct money from willing employees in order to buy shares in Umoja Fund on credit.
The minimum number of shares is 50 but there is no upper limit and it must be remembered that Umoja Fund is for Tanzania citizens only.
UTT has other ambitious plans including to set aside funds for SMEs guarantee scheme which is being administered by SIDO.
Plans are also underway for UTT to invest at least Tsh 100 million in all regional and community banks in order to increase their capacity to lend to the rural population and thereby contribute to economic empowerment and poverty alleviation.
|
