After the Budget Speech of the Minister for Works, on May 20, the newspapers followed up by front-page headlines that hailed the planned introduction of Infrastructure Bonds.
The three English papers had it as follows: “Expanding major roads can be done with bonds”; “Government now turns to bonds to finance key road projects”; and, “Infrastructure Bonds in Offing”.
Newspapers are not supposed to have a short memory, but the way this matter was reported, was like it was the first time Tanzania has had infrastructure bonds.
But, just to remind ourselves: There has been the “Samia Infrastructure Bond” whose issuer is the CRDB PLC.
The public offer for that Bond was opened on November 29, 2024 and closed on Friday, 17th January 2025.
Following the closing date, CRDB Bank PLC announced that it had received applications for the Notes worth Sh323.09 billion, compared to the plan of Sh150 billion, representing a success rate of 215.4 percent.
The proceeds of Samia Infrastructure Bond were meant to be used to finance local contractors working with Tanzania Rural and Urban Roads Agency (TARURA) so as to effectively implement various road projects within urban and rural areas in Tanzania; and was expected to boost infrastructure development and economic growth in Tanzania.
It is a 5-year fixed rate corporate note issued by CRDB, offering investors a 12.00 percent annual interest rate paid quarterly. The bond, which matures in 2030, successfully raised over Sh323 billion, due to overwhelming public demand.
Its accessible retail minimums were starting at Sh500,000. Accessibility was that 94 percent of investments were processed digitally through CRDB's mobile banking platform. Clearly therefore, Tanzania has valuable experience in issuing infrastructure bonds.
There are various efforts being taken in the country to increase financial literacy within the population of Tanzanians and one of the concepts that is being hailed, is that of bonds, as a way of investing, comparing them to stocks and even to real estate.
A bond is a form of loan or IOU. Bonds provide the borrower with external funds to finance long-term investments or, in the case of government bonds, to finance current expenditure.
Thinking in terms of companies, bonds and stocks are both securities, but the major difference between the two is that (capital) stockholders have an equity stake in a company (i.e. they are owners), whereas bondholders have a creditor stake in a company (i.e. they are lenders).
As creditors, bondholders have priority over stockholders.
This means they will be repaid in advance of stockholders, but will rank behind secured creditors, in the event of bankruptcy.
Another difference is that bonds usually have a defined term, or maturity, after which the bond is redeemed, whereas stocks typically remain outstanding indefinitely.
Coming back to government, a student of financial literacy will ask: “We have Treasury Bonds; so why have Infrastructure Bonds as well?”. Good question.
Treasury bonds are broad, government-issued debt used to fund general budget deficits.
On the other hand, infrastructure bonds (such as the Samia Infrastructure Bonds) are specialized debt targeted exclusively at financing public works.
Both offer fixed periodic interest, but infrastructure bonds often provide tax incentives and are tied to specific physical projects.
The purpose of Treasury Bonds is to cover general government spending and fiscal deficits, considering that most government budgets are not balanced. Infrastructure Bonds are used for specific public works like roads, bridges, power, water supply and transport.
The usage of Treasury Bonds funds is unrestricted. It goes into the national consolidated fund. Infrastructure Bonds are strictly allocated to designated infrastructure projects.
There could be differences in the tenure. With Treasury Bond, tenure usually spans 2 to 30 or more years. Infrastructure Bonds can be medium to long-term (5 to 15+ years).
In terms of risk and returns, Treasury bonds are virtually risk-free, with standard market interest. Infrastructure bonds typically carry sovereign or quasi-sovereign backing risk.
Finally, there could be difference in tax treatment. Treasury Bonds are usually subject to standard withholding tax (such as 15 percent). Infrastructure Bonds are frequently tax-exempt or offer special tax advantages.
Those thinking of investing, will find Treasury Bonds ideal for conservative investors seeking predictable, fixed income backed entirely by the national government.
Infrastructure Bonds provide the same high security but often come with an additional tax-free benefit. Many investors prefer them because they see their money directly funding tangible assets like transport systems, especially roads, or utility grids.
Clearly, infrastructure bonds are worthy of investment, and we should grab the opportunity to do so when they get issued.
