DSE foreign account curbs yet to be lifted

Dar es Salaam. Non-Tanzanian investors may take longer than expected to start buying government securities as the capital markets regulator has yet to give the go-ahead for foreign participation.

The Bank of Tanzania published two amended regulations in the government gazette on May 2 which removed restrictions for investors from the East African Community from participating in local capital markets, including buying the risk-free treasury bills and bonds.

The amendment allowed, among other things, citizens of EAC member countries to buy up to 40 per cent of government securities, while the provision setting the maximum foreign ownership of local listed companies at 60 per cent was removed.

This means that foreigners can now own up to 100 per cent of the companies listed on the Dar es Salaam Stock Exchange.

However, The Citizen has established that the opening up of the capital account had not come into effect although it was supposed to start on July 1.

The Capital Markets and Securities Authority (CMSA) has not amended its regulations, which cite  the restrictions lifted by BoT.

The amendment proposals had already been submitted to the Ministry of Finance for approval, CMSA principal public relations officer Charles Shirima said.

“I don’t know exactly when it will start, but I presume until the foreign investor regulation is amended. It has already been submitted to the Ministry of Finance,” he said in a text message.

The proposals include removal of the 60 per cent cap for foreign ownership in the local listed firms, he said.

Finance deputy permanent secretary Adolph Mkenda, could not be reached for comment as he neither picked up calls nor responded to text messages.

Dr Joseph Massawe, BoT’s Director of Economic Research, says amendments made by the central bank were within its jurisdiction.

“We amended restrictions that were in the jurisdiction of the BoT, but these will come into effect once the CMSA has done the same on its side,” he said.

The central bank borrows through auctioning of the treasury bills or bonds in a weekly basis to finance the government expenditure but it has never allowed any foreign investor to take part in the lending process.

The market is dominated by local financial institutions like pension funds, commercial banks and insurance companies.

Last year, the BoT introduced the new Treasury bond with maturity of 15 years.

Last week, the BoT offered the first-in-July Treasury bills worth Sh80 billion which attracted Sh111.42 billion from 97 bids.

However, the central bank accepted only Sh60.3 billion during the Wednesday auction, according to the auction summary on the website.

Brokers who did not want to be named said they were receiving many calls from investors in the EAC who placed orders for equities after the BoT notice.

For his part, the chairman of the Tanzania Stock Brokers Association, Mr George Fumbuka, said they were waiting for the regulators to settle the issues to start the trading.

“There are communications going on and we hope it will be settled soon,” he said.