FINANCIAL MARKETS: Dar Es Salaam Stock Exchange (DSE)

Brief History
The Dar es Salaam Stock Exchange (DSE) was incorporated in September 1996 as a private company limited by guarantee and not having a share capital under the Companies Ordinance (Cap. 212). The DSE is therefore a non-profit making body created to facilitate the Government implementation of the economic reforms and in future to encourage the wider share ownership of privatized and all the companies in Tanzania and facilitate raising of medium and log-term capital.

The formation of the DSE followed the enactment of the Capital Markets and Securities Act, 1994 and the establishment of the Capital Markets and Securities Authority (CMSA), the industry regulatory body charged with the mandate of promoting conditions for the development of capital markets in Tanzania and regulating the industry. The governing organ of the DSE is the Council of the Exchange, which consists of 10 members representing various interest groups in the society.

Trading activities at the DSE commenced on 15th April 1998 after two years of background preparatory work under the stewardship of the Government through the Capital Markets and Securities Authority. The opening of the Trading Floor coincided with the listing of TOL Limited (formerly Tanzania Oxygen Limited), as the first company on the new Exchange.


Organisation Structure
The DSE is a body corporate incorporated in 1996 under the Companies Act, 2002 (Cap.212) as a company limited by guarantee without a share capital. The organogram of the DSE is spelt out under the Articles of Association of the DSE. The DSE governance structure is built on three pillars. The apex pillar is the General Meeting of the members of the company. This is a forum of all subscribers to the Memorandum and Articles of Association of the DSE. This forum is the final organ in the governance ladder within the DSE.

The second pillar (below the General Meeting) is the Governing Council, which is duly appointed in accordance with the Articles of Association of the DSE. All the governing functions of the DSE are vested into the Council. The Council is accountable to the General Meeting (More details are found in the DSE Blue Print and DSE Articles of Association).

The third pillar is Management of the DSE under the leadership of the Chief Executive Officer. Management, which is composed of the CEO and Managers, is vested with powers to run the day-to-day activities of the DSE. Management is answerable to the Governing Council.


Trading Operation
Official Trading Hours
Trading takes place throughout the week from Mondays to Fridays (except public holidays) starting from 10.00 a.m. to 12.00 noon. However due to the low level of activity, trading sessions ends before 12.00 noon.

Trading System

Trading is conducted at the DSE Trading Floor through an Automated Trading System (ATS). This is an electronic system, which matches bids and offers using an electronic matching engine. LDMs converge at the trading room and post their orders in the ATS. Matched orders are displayed on the computer terminal in the trading room and projected in the public gallery. Currently, the ATS operates on a local area network (LAN). Future plans include operation in a wide area network (WAN), which can be accessed by brokers even out of Dar es Salaam. This system will enable the DSE to meet the potential growth expected to take place in the Tanzania securities industry (More details are found in the DSE Blue Print)

Market Surveillance

Both the Capital Markets and Securities Authority (CMSA) and DSE monitor the market trading activities to detect possible market malpractices such as false trading, market manipulation, insider dealing, short-selling, etc. DSE is responsible for on-line/on-site surveillance and the CMSA for on-line/off-site surveillance. The CEO of the DSE has the authority to suspend anytime offers and bids that are deemed to be suspicious.

Investor Protection
Pursuant to the provisions of the Capital Markets and Securities Act, 1994 the DSE has established a Fidelity Fund Account to be used to compensate investors who suffer financial loss arising from fraud and misappropriation of funds by Licensed Dealing Members (LDMs). The Fund is maintained by the DSE. The fund can also be used to compensate investors who suffer losses as a result of Licensed Dealing Members’ (LDMs) negligence. The compensation amount is currently limited to TZS 100,000/=.

Investor Education
Investor education is provided by the DSE through presentations to various seminars organized by itself or by other institutions and through visits to the DSE to observe trading activities. The DSE plans to run the DSE “Bourse Game” to secondary schools and higher learning institutions within the country with a view to educating them about the basic fundamentals of investing and trading in the Stock Exchange. Educational brochures are periodically published about the basics of investments and the financial instruments that are available or traded in the capital markets and whenever a new product is introduced in the market.

Fiscal Incentives
The Government has deliberately provided several incentives in order to encourage active participation in capital markets by Issuers and investors.

Incentives to Issuers

Reduced corporate tax from 30% to 25% for the period of three years where the Issuer has issued at least 35% of the issued shares held by the public. The reduced rate is applicable for five years starting from listing date.


Tax deductibility of all Initial Public Offering (IPO) costs for the purposes of income tax determination. All IPO costs are accepted by the Tanzania Revenue Authority (TRA) as acceptable expenses used in the generation of income and profits, and therefore are taken into consideration when determining profit for tax purposes; and


Withholding tax on investment income made by Collective Investment Schemes (CIS) is final tax. Investors in CIS are not charged with tax on the income distributed by CIS after the scheme’s income taxation.
Incentives to Investors
Zero capital gain tax as opposed to 10% for unlisted companies;


Zero stamp duty on transactions executed at the DSE compared to 6% for unlisted companies;


Withholding tax of 5% on dividend income as opposed to 10% for unlisted companies;


Zero withholding tax on interest income from listed bonds whose maturities are three years and above;


Exemption of withholding tax on income accruing to fidelity fund maintained by DSE for investor protection; and


Income received by the Collective Investment Scheme (CIS) investors is tax-exempt
For more Information visithttp://www.darstockexchange.com/