Tanzania Tech Company Goes Public Setting a Model for All of Africa

6 October 2017

Mergers, Acquisitions and Financial Results

Habari, an indigenous internet service provider, is taking advantage of incentives offered in many emerging markets to go public by becoming the first tech company to list on Tanzania’s stock exchange. In 1994 a group of residents in a sleepy town in northern Tanzania came together because they wanted access to email. Early efforts were cumbersome and expensive. To send an email they had to connect to long distance numbers at a cost of $10 an hour.

By 1995 the group had expanded to two dial-up modems. They grew quickly and soon formed a cooperative called Habari Node Marie. Habari set up a local server, realizing that pooling emails would make service cheaper and more efficient. Within two years they had more than 100 members. By 1997 that number had doubled, and what started as a small cooperative morphed into a formidable player and innovator in Tanzania’s nascent information technology scene.

The group hired one of its founding members to manage the company, and more than 20 years later, Erik Rowberg is still the managing director and continues to lead their growth and expansion. Today Habari is preparing for their initial public offering on the Dar es Salaam Stock Exchange. In the mid-1990s no one in Tanzania believed an internet service provider was a viable business. By 1998 Habari had 400 members and steady growth. By 2010, with revenues over $1 million a year, the Tanzania revenue authority insisted that Habari change their registration from a cooperative to a limited company, and Habari Limited was born. A few years later the Tanzanian parliament passed a law requiring all telecommunications companies in the country to list on the stock exchange. Because Habari holds a license to distribute internet, they fell under the umbrella of companies required to list at least 25 percent of their shares on the local market.

“As the managing director and a shareholder I expect that going public will push Habari to the next level, to the level of being a national ISP and carrier,” Rowberg said. “We want Tanzanians, in general, to be proud of a local company. And we want to share the increased profits with a larger group of people while continuing to give back to the community.”

Governments in emerging markets like Tanzania have been struggling to stimulate growth on their local exchanges, and the law was meant to help expand the economy. To date, the Tanzanian exchange only has 26 companies listed. While many smaller ISPs resented the act, Habari was in the perfect position to take advantage of the opportunity. Founded in Arusha, Habari has been expanding into new markets around Tanzania for the past few years and was looking for an opportunity to raise capital. An IPO allows them to grow into a national powerhouse while also continuing to grow their other business streams such as software development and other ICT-related consultancy services. They also register and host domains, including the newly launched .africa top-level domain names.

Habari will offer 5 million shares, which is 25 percent of the company, during the IPO. The plan is to launch the IPO in November and run it for 30 days. This is the first year that foreigners are allowed to purchase shares on the stock market in Tanzania, and Habari hopes to capitalize on the global excitement around technology in Africa. A recent study by PwC has highlighted the role of the internet in the growth of the media and entertainment sectors. Tanzania’s total revenue from media and entertainment was just over $500 million in 2016 and is expected to double to over $1 billion over the next 5 years.

“Habari going public will be a boost for the entire information technology sector in Tanzania, and is also a sign of how the sector in Tanzania and Africa is really starting to mature,” said Zuweina Farah, founder of Bits and Bytes, a leading technology and innovation conference held annually in Dar es Salaam. Between 2000 and mid-2017, internet usage in Tanzania grew more than 6000 percent. As more and more companies recognize the value of doing business in Africa and the potential of the internet as a medium to accelerate development, it is imperative for local companies like Habari to grow in order to remain competitive. Big companies like Google and Facebook are also making inroads in Africa, which brings opportunity and competition to local players.

Tanzania Tech Company

Tanzania. Habari workers laying fiber optic cable underground in northern Tanzania

Julius Nyerere, the first president of Tanzania, once famously said, “We must run while others walk.” Rowberg sees the internet as a great equalizer for emerging markets like Tanzania, which has a huge youth population. It was this vision that the internet could provide new opportunities to the community that motivated Habari to start a community initiative called Elimu On Line (EOL). Elimu means education, and through the program, Habari dedicates free internet service to area schools and community organizations.

Rowberg highlights that Habari is expanding around the country and hopes to become the largest ISP in the country. “Habari also recognizes the potential for economic growth information technology can bring the region and has played a leading role in helping develop the nationwide ICT infrastructure.”

An American by birth, Rowberg has spent the past 40 years in Tanzania and is also the vice-chairman of TISPA (Tanzania Internet Service Providers Association, chairman of the TZNIC Policy Advisory Committee (TZNIC Controls all .tz domains), and is the chairman of the Arusha Internet Exchange.

He states, “We are an ethical organization that believes in integrity and honesty at all levels. We believe that ethical practices are essential for the long-term sustainability of our organization. We promote open-source relationships and transparency.” Habari has long had a strict anti-corruption and anti-bribery policy and is committed to following best practices, “even if that means lost contracts and lower revenue,” explained Rowberg.

Habari employs over 70 people in all the branches in positions from engineers and technicians to sales and support, all the way down to office cleaners and security. Habari has long been adept at hiring the best and brightest in Tanzania and then investing in staff development, and the company credits this with its leading position in the ISP industry. A culture of collaboration, coupled with constant employee development, has lead to an incredibly high staff retention rate; over 80 percent of the staff has been with the company since 2010 or earlier. Habari staff are recognized as industry leaders in Tanzania, and the company is confident they have the knowledge, experience and drive to turn Habari’s goals into reality.

Source: Atlanta Black Star