Tanzania pledges reforms to open capital markets

Tanzania’s capital markets regulator is reviewing foreign investor restrictions that affect allocation and trading of shares for East African investors at the Dar-es-Salaam bourse.

Investors from Kenya, Uganda, Rwanda and Burundi are treated as foreign investors at the Dar- es- Salaam Stock Exchange, which subjects them to stringent rules that have been blamed for the illiquidity of shares at the bourse.

Charles Shirima, the public relations manager at the Capital Markets and Securities Authority of Tanzania, told the Business Daily that rules governing the capital markets in East Africa were being harmonised.

The first priority was to treat all East African investors equally.

“Efforts are under way to harmonise the securities market in the region through activities undertaken by the regional body for East Africa Securities Regulatory Authorities (EASRA),” said Mr Shirima said in an email to the Business Daily.

“The current position is treating East African investors as locals to widen the investor base in the region.”

Current reforms

He said that this is in line with the East Africa’s Community protocol and that the long-term plan would depend on the way the current reforms are taking effect but did not specify a timeline.

It is, however, not the first time that Tanzania is promising to review regulations that restrict East Africans from investing in the Dar bourse.

In November last year, EASRA singled out the different treatment of nationals from the five member states at different stock exchanges as challenge that hinders the flow of funds in the region and noted that equal treatment of East African citizens should be implemented in full.

Foreign investor rules at the Dar es Salaam bourse stipulate that the maximum participation by foreign investors in listed companies be capped at 60 per cent.

In Kenya, foreign investor ownership of listed firms is capped at 75 per cent but in Uganda and Rwanda, foreigners can own up to 100 per cent of a listed company.

The rules in Dar-es-Salaam also require that if foreign investors exceed the specified limit, any shares sold must first be offered to Tanzania nationals for a number of days.

The rules make the trading of shares at the bourse difficult and cumbersome, contributing to the illiquidity of shares at the market, which has 17 listed firms five of which are cross listings from the Nairobi Securities Exchange.

Mr Shirima said that the legal restrictions were meant to encourage locals to participate in the market.