Rethinking mandatory listing: What’s next for Tanzania’s telecom sector?

Last week, Tanzania’s government announced that it was considering a review of the Electronic and Postal Communications Act (EPOCA), which compels telecommunications companies to list at least 25 per cent of their shares on the Dar es Salaam Stock Exchange (DSE). The Minister for Communications and Information Technology, Jerry Silaa, announced on February 20 during a working session with ministry officials and stakeholders to discuss the country’s 10-year digital economy strategy (2024-2034).

Silaa acknowledged that the Tanzanian telcos have been struggling to comply with the requirement as only Vodacom is listed on DSE. There are currently seven telecommunications companies operating in Tanzania, including Airtel, Halotel, Smile, Tigo, Tanzania Telecommunications Company Limited (TTCL), Vodacom, and Zantel.

“We are receiving many questions about when other companies will join the listing process. But, as your explanations show, the performance of those who have already listed hasn’t been great. I believe the best way to grow any sector in this market economy is to let market forces drive it,” remarked Silaa.

Introduced in 2016, the policy was meant to boost local ownership, increase transparency, and strengthen the country’s capital markets. However, over the years, it has faced resistance from telecom companies, who argue that it imposes unnecessary restrictions and does not serve its intended purpose effectively.

As the government now sits down with industry stakeholders to reassess the policy, key questions emerge: Should mandatory listing remain, be adjusted, or scrapped altogether? And what impact will this decision have on Tanzania’s economy, stock market, and investment climate?

The rationale behind the policy

When the Tanzanian government amended EPOCA to introduce mandatory listing, it aimed to achieve three key objectives:

• Enhance local ownership: The telecom sector is one of the most profitable in Tanzania contributing around 2% to the country’s GDP, and the government wanted Tanzanians to have a stake in these companies rather than leaving ownership largely in foreign hands.
• Increase transparency: Publicly traded companies are subject to stricter financial disclosure requirements, which the government believed would improve corporate governance and accountability.
• Strengthen the stock market: By bringing large telecom firms onto the DSE, policymakers hoped to boost market activity, increase liquidity, and attract more investors, revitalising the exchange.

Initially, telecom companies resisted the directive, arguing that Tanzania’s stock market was too small and illiquid to absorb such large listings. Despite this, Vodacom Tanzania went public in 2017, becoming the first telecom operator to comply. The rest are still facing delays and challenges in meeting the requirements.

Why has the policy been controversial?

One of the main concerns is that the DSE is relatively underdeveloped compared to other African stock exchanges. The low number of active investors and limited trading volumes raise concerns about the ability of local buyers to absorb the shares, potentially leading to undervaluation.

Secondly, telecom operators argue that the 25% threshold is restrictive and does not reflect global best practices, where listing is typically voluntary. They also worry that public listing exposes them to unnecessary regulatory scrutiny and compliance burdens.

Listing on a stock exchange aims to raise capital. However, in a market with low trading volumes, the ability to generate significant capital is limited. This discourages companies from seeing value in the requirement.

Lastly, the policy’s rigidity has led to legal battles and policy uncertainty, which can deter foreign investors. Some analysts believe that a more flexible approach—such as offering incentives rather than mandates—could achieve the same goals without discouraging investment.

What is being reviewed?

The government’s decision to revisit the policy suggests a recognition that the initial approach may not be working as intended. The review will likely consider:

• Policymakers may explore making listing voluntary while still encouraging telecom firms to go public, perhaps through public awareness campaigns and showcasing successful listings.
• Instead of compulsion, the government could provide tax breaks, reduced regulatory fees, or other benefits to encourage participation in the DSE.
• Before enforcing mandatory listing, efforts could focus on expanding the investor base through investor education, streamlining account opening processes, and improving market liquidity through market maker programmes.
• The government will need to consider how to maintain oversight while ensuring a favourable business environment.

Implications of the review

1. The telecom sector

If the listing requirement is scrapped or adjusted, it could encourage more foreign direct investment in Tanzania’s telecom industry. Companies would have greater flexibility in structuring their ownership and capital-raising strategies.

2. The stock market

While removing mandatory listing could reduce the number of telecom firms on the DSE in the short term, it might lead to more sustainable growth in the long term. The review could also prompt broader reforms to attract more investors and deepen the financial markets.

3. The business environment

This review signals that the government is open to reassessing policies that may hinder investment. The outcome could set a precedent for future regulatory adjustments across other sectors.

4. Consumers

Changes to the listing policy could impact investment in infrastructure and services. If companies invest more, consumers could see improved coverage and service quality.

A balancing act for the government

The review of EPOCA’s mandatory listing requirement represents a critical moment for Tanzania’s telecom sector and the stock market. While the original policy was designed to benefit Tanzanians and strengthen market transparency, its implementation has raised challenges that cannot be ignored.

The key question remains: Can the government strike a balance between public interest and business flexibility? Whether the listing requirement is adjusted or scrapped, the focus should be on creating a business-friendly environment that fosters investment, market growth, and economic development.

As the discussions unfold, the government’s decision will shape not only the future of the telecom industry but also Tanzania’s broader approach to private sector regulation.