Tanzania Securities Limited: Wealth Management, Corporate Finance Advisory and Securities Trading

Interview with Maro Kohi, CEO of Tanzania Securities Limited

How do you distinguish yourself from your competitors? What are your competitive advantages?

We are basically a financial services firm that offers diversified investment services and products. Our focus is financial institutions, corporations, and individuals. We have not started targeting governments or government agencies yet, but that is something that we are looking to tap into in the near future. We offer our services and products through three key business lines. One is the wealth management. Our core service there is portfolio management services where we are helping our customers with investment management and we have separately managed accounts as a product We currently have around 52 billion Tanzania shillings in terms of assets under management. This is a service that started back in 2007 and it has experienced exponential growth. The second division is the corporate finance advisory where we do transaction advisory, in particular, when it comes to capital raising services. We help corporations of different sizes to raise equity in public markets. We have not really tapped into private capital markets but it is something that we are looking to explore in the short to medium term. Over the years, we have really helped aviation companies, financial institutions like banks, manufacturing companies. We were the first company to be issued a securities brokerage license in Tanzania. Our third line of business is the securities trading or what we call global markets. It is something that we like to communicate to our clients. The first company to be listed in the Dar es Salaam Stock Exchange was Tanzania Oxygen Limited which is now TOL Gases. We feel that we have really been pioneers of the capital markets in Tanzania. The big question is always, “why us?”. The competitive advantage has really been from an angle of leadership management as we understand that most companies rely on transactional marketing. And for us, it has really been about how we build relationships with our clients. In terms of how we engage with our clients, we have always gone the extra mile. It was not just about us closing the deal. It was about making sure that there is investor protection and knowledge for what our customers are getting themselves into. We have also been engaging with our clients with the right content. For us, it is really about the relationship and the values that we have stood for over the years. We do not just deal with any client or any partner. For us, it is about integrity, trust, we want to be a place where customers would come and feel that their money and their future are really safe with us. As we are proceeding, we are looking to build our competitive advantages in a number of the customer segments that we are dealing with. Over the years, we have been really more of a retail focused company. We have a customer base of around 40,000. Dar es Salaam Stock Exchange has 550,000 investors. The question for us was how we could include other people as well now. People feel like there is a sense of belonging when they come to us, in a sense that we do not just look at retail investors as a profit or market customer segment. We believe success is built over time and financial success is built over time. That relationship and that trust is what our customers come here for. Over 60% of our customer segment is retail and that is where we are really looking to grow ourselves because we are working on a new mission which we plan to roll out this quarter. It is really about how we can embrace financial inclusion. We are going to launch a very simple mission of having an investor in everyone by 2025. It is a highly ambitious mission, but that is what we want to wake up to in the morning.

What is your assessment of the investment industry in Tanzania?

In Tanzania, we have this financial services sector, where we have banking, payments, insurance; they are doing quite well. But the investment industry is still in the development phase. It grew very fast between 1998 up to around 2007. There was some sort of a slowdown due to trying to pull the right talent into the industry, because without the right talent, you cannot grow the industry. If we compare ourselves in terms of the East Africa landscape, we are quite behind compared to the likes of Kenya or even sub Saharan Africa. But, we have been working very closely with our regulator, who is also responsible for market development, and we have been really trying to push and say we need to see where innovation fits within regulatory framework instead of regulatory framework trying to accommodate innovation. This changes even in terms of certain regulations. For example, in Tanzania, we see ourselves as an investment bank but we cannot go out and call ourselves an investment bank. We must call ourselves an investment firm. I am very positive because I see young people similar to myself coming into the industry, they have all this new thinking, new ideologies on how we can grow the industry. Before, it was really all about securities brokers, but now, we have to think outside of that. How do we grow in terms of assets management and other areas?

Where do the investment opportunities lie in Tanzania?

We are a financial services firm that offers diversified investment services and products. Our focus is financial institutions, corporations, and individuals. We have not started targeting governments or government agencies yet, but that is something that we are looking to tap into in the near future.

Tanzania is an economy in transition. We have been moving from more of a planned economy to a market economy. There are a lot of reforms that have been taking place since the mid 1980s. Some sectors have been liberalized, like the financial services and other sectors. I see a lot of opportunities within the financial services sector itself, in particular, the insurance, the payments, because for instance, for insurance, penetration is less than 20%. In the payment industry, the bottom of the pyramid is still facing challenges to get the right payment solutions. For us in the investment industry, we still lack a number of players in private equity infrastructure funds. The commodities exchange is just starting up and we hope by this year that it will pick up, but we really have to open up in terms of new products with our Dar es Salaam Stock Exchange. How do we introduce things like green bonds? There is also another area of impact investing, which has not really been formalized and that is a great opportunity for companies or firms to create input. Outside the financial services industry, we have sectors like the mining sector where we see a lot of change that has come into play. Some people are now shying away saying that there are a lot of uncertainties within the mining industry. But if we look at another angle, the government has a responsibility to its people and it also has to get the best out of the natural resources that we have. Those who are more compliant and more engaging with the government will create more value from the mining industry. We also have the oil and gas sector that is coming up. It is very slow and it will take time. Aliko Dangote was right to say, “Africa is for the long term”. If you invest in certain sectors, you have to take a long position. We also have agriculture. We have plenty of arable land in the country but we are still importing cooking oil. There is a lot that needs to be done in particular in the agricultural sector because it is a huge sector with a number of value chains. You can just specialize as a logistics company in agriculture. There is the opportunity for productivity improvement. We have sources of water, federal lands, our demographics are very much along with us because our country has a very young population. There is a lot of government support, policies, incentives, and the current regime is also pushing a lot to encourage investors to go into that space. There is also food processing, if we can categorize it under manufacturing. There is a lot of waste happening in agricultural produce. Since I was young, there has always been talk of agriculture and processing, but it is time that players come into the market and there is a great opportunity in that space. Another area that has been really forgotten is creative industries. Investing should not just be about opening up a factory or setting up a telecom company. We have young people, great talents in the country. It is an area where as a country, we can do real good. We also have transportation coming up. We have a number of projects in terms of the railway projects. Companies can also look into how to undertake PPP projects with the government. There are also opportunities in the energy sector. Energy is still a problem and we cannot achieve our goal of industrialization if we do not have reliable and affordable energy. This is not just about energy, but it is also a matter of clean energy.

What has been the impact of the COVID pandemic on Tanzania?

In terms of COVID, we did see an impact. The government also took the relevant measures in terms of setting the right fiscal policy, setting the non-monetary policy, and lowering the statutory minimum requirement for the banks. They also worked on the discount rates to make sure there is more liquidity in the bank. They allowed banks to have flexibility in restructuring loans with their clients. There was a great impact, in particular, in the aviation and tourism sector. We witnessed some of the employees being floated. We persevered through the pandemic, but this impact is a global issue. No country can stand and say it never really felt an impact. For us, tourism is one of the strategic sectors of the country. In terms of the financial services sector, in particular, the investment industry, whenever there is uncertainty there is always a fear of the unknown. There is a lot of panic. There is no need to panic; rather, it is more an understanding of the situation. And in terms of opportunities that were presented with this pandemic, it is more about first cracking the digital transformation of many corporations. The fact that we have always believed that we must meet in person, our customers must come to our office, we as a team must always be in the office, how do we best serve our customers now? It was a wake-up call for many companies, and that includes us. Now, we have engaged a consultant that is helping us with the digital transformation. We can buy the infrastructure. We can buy the services from vendors. But the biggest element was, do we understand what we are getting ourselves into, do we have the readiness and the right culture that we need to transform as a company? It has also presented the question of how resilient our economy is. The projected GDP growth was 7% and for Q1 2020 we were just under 6% where other countries were around 1% or 2%. It tested the resilience of the economy and made us ask ourselves if we have the right policies and the mentality to get through this pandemic.

Has the pandemic brought new business opportunities in Tanzania for the investment industry or the economy as a whole?

Nothing is solid in terms of the opportunities for our industry. But we have witnessed a mushrooming of tech companies, in particular, the ones that are in the distribution sector. For instance, we have delivery companies that are really trying to embed technology and you do not need to come to the restaurant, you can just order via an application. We are licensed to be a nominated adviser, so we have been talking to these companies saying that we know the future is in technology based companies and we need to see whether we can nurture these companies and eventually take them public. We have also seen a number of fintechs that are really large and people are talking about digital banks right now. It is a long journey, but the fact that we have entrepreneurs that are dreaming about that is very good. There are opportunities that have come with the pandemic. The opportunities are there, but they are more long term.

You talk about by 2025 having an investor in every home, which is quite interesting. But in the medium term, two to three years’ time, what is your vision for the company?

My focus right now is really how we can become the number one investment bank in Tanzania. We see ourselves as an investment bank from a global lens and we are very positive that our regulator will come to recognize that what we need is an investment banking industry in Tanzania. So, we would like to reposition ourselves as early as possible to become the number one leading medium size investment bank in Tanzania by 2025. And beyond 2025, what we are pursuing is the vision of being in the landscape of sub Saharan Africa.

What are some of the short term, immediate projects that you have?

Our strategic direction in terms of the short term was really to focus on strengthening the core businesses and the core products. On wealth management, we even tried to work on resegmenting the market. With the individual investors, we have the retail, we have the emerging affluent, we have the affluent, we have the high net worth individuals. And we asked ourselves where is the growth going to come from? And we also looked at corporate finance advisory and asked ourselves where do we really focus? Where we are going to focus has to resonate with the operating environment. In terms of corporate finance advisory, we are going to really focus on agricultural companies, mining companies, and oil and gas because we also wanted to support the vision of the company which is in line with the country’s Vision 2025 focusing on Tanzania’s development.

What are some of your recent success stories?

My success is the success of the team. I have always said, for me, the biggest challenge is people. If you can change people’s mindset, bring about a new heart and a new vision, that for me is the first success. My first point was to get a buy in from my team. I came in as a young CEO, and people wondered if I really knew what I was doing. They wanted to have a captain who was really sailing our ship in the right direction. Within three months, I had the idea that we needed to change our logo. Our logo did not really resonate with where the world is going, where the industry is going. So, we changed our logo and I got a lot of support from that. I said we needed to relocate. Everybody was a bit reluctant and then came onboard for the move. Getting a buy in from the Board was my greatest challenge to begin with, to actually show them that I was the right guy to drive our company forward. I am also a member of the Tanzania Stock Exchange Brokers Association. For me, it has always been about pushing the new agendas. The country has recently launched a master plan for the financial sector development in Tanzania. It is not something that I have influenced but it is something that we have been pushing even before I joined the company. As someone who is really passionate about investments, I have been in touch with the regulator for a number of years saying that we have to work on these changes. I am really happy to see that accommodated in the master plan. My people are going to win me my customers and eventually our shareholders. My winnings are more in the leading indicators rather than the lagging indicators in terms of the financials and soon, we will start seeing those outcomes.

What is your process? What you want to achieve in the long term personally?

My background is in accountancy. I studied accountancy in undergrad and then I did my Masters of Science and Finance. I have worked in a number of companies, including banks, and I am also an associate member of the Chartered Institute for Securities and Investments of the UK. As a person, it is really about the fact that I hate poverty. It is something that I wake up every morning and say other countries and other societies have done it, why can’t we do it? I joined Clean Technologies which is an environmental technology startup still in the very early stage in terms of the conceptualization, trying to engage with customers, and see whether there is a valuable problem that deserves the right solution at the time. I say to my fellow Tanzanians that I believe entrepreneurship can really change our lives. So, I wanted to learn how to support startups. I did a lot of reading and engagement in innovation, read all the books about business model generation. We can do something about poverty. I remember saying that we need to stop talking about poverty alleviation and we need to start talking about wealth generation. This is also a matter of mindset. When we talk about poverty, it also resonates in your mind and sticks in your mind. But I say, let’s generate wealth. So, I started engaging with the Board – the opportunity was there, I am the youngest on the Board, and it is really an area where we can create input and we can change other people’s lives. Yes, there is an element of every one of us wanting to make money. There is no crime in financial success. But the fulfillment comes to how you have lived your life. What impact have you created? For me, when I also started Equity Partners, the whole idea was that we have a new regime, a new president who said we are going to revive industries. So, my whole idea was that I would start a fund that would really work on reviving the formerly state owned enterprises because I believe we can do it and there is no reason why we cannot do it. I hope to come back to Equity Partners and say now I know how it needs to be done, I have a track record with Tanzania Securities Limited, let’s work on these impact funds. Just last year, before I joined Tanzania Securities, I had the opportunity to work with a philanthropic organization that I was actually advising. There was a problem with the German government which was trying to see how they could channel philanthropic funds to East Africa, Kenya, and Tanzania. I am more into the impact world rather than just making money and going home. I see myself more as an impact investor in the near and long term future.

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