The Tanzanian government, in cooperation with five-nation trading bloc that includes Tanzania, Kenya, Uganda, Rwanda, and Burundi , is planning the liberalization of foreign ownership restrictions on stocks and bonds by 2015 in order to attract investors and finance new infrastructural projects as stated by the President Kikwete to the Bloomberg news.
Under the current laws, foreign investors are prohibited from buying government bonds and owning more than 60% of the Dar es Salaam Stock Exchange (DSE) listed companies.
According to the DSE Chief Executive Officer, Mr Moremi Marwa, the impact of foreign ownership control liberalization would be greater demand for shares and therefore a more vibrant capital market.
This would translate into higher value of bonds and shares, reduction of lending rates by banks, business growth, and Tanzania economic development.
“This initiative will allow results into more vibrant secondary bonds market at the DSE”, he said, continuing: “The immediate impact will be seen in increased demand for shares which will help them gain more value”.
The current yield on Tanzanian bonds is significantly higher against its East African neighbors, being 12.2 % for a 91-day T-Bill, compared to 8.8% on Kenyan bonds, and 10.9% on Ugandans ones.
Capital controls on foreign ownership is one of the Tanzanian government initiatives to improve Tanzania’s Doing Business ranking published by the World Bank, as well as attract investments in strategic sectors such as infrastructure development.
Other initiatives include offering Eurobonds later in 2014, and enabling Tanzania to have a long-term risk ranking by the Fitch Ratings and Moody’s Investors Service.
To learn more about DSE Stock Exchange read TanzaniaInvest.com exclusive interview with Moremi Marwa, DSE CEO: http://tanzaniainvest.com/banking-finance/interviews/1044-dse-moremi-marwa
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