Government securities bidding go online

Government securities bidding go online

The new software namely Government Securities System (GSS) allows bidders to place bids online without physically visiting the central bank premises to leave their bidders’ forms. The system also, according to BoT, is user friendly while designed to accept many brokers who will participate in their respected premises wherever they are in the world.

Launching the new system late last week, the BoT’s Governor, Prof Benno Ndulu, said the capital account would be open for the East African residents first before opening to the world in 2015.

“We are committed to the EAC timeframe for opening up the capital accountÉ and currently we are finalizing a system of network that will talk to other system in the bloc.

“This should be ready by the end of this year and go on operation next year (2013),” Prof Ndulu assured journalists during the press conference of launching GSS. The opening, according to him, should have to be taken cautiously to check the speed of in and outflows of portfolio funds to avoid ruining the country’s nascent capital market and the economy overtime.

“A speed bumps system has to be in place to reduce quickly in and outflows of funds, to avoid market volatility which at the end of the day affect the economy,” Prof Ndulu, a one time World Bank Director, said. Tanzania Securities Chief Executive Officer Moremi Marwa said earlier during his votes of thanks after the launch of GSS that it is time for the central bank to look into possibility to allow overseas bidders in debt and stock markets.

During the launching, the Governor said at the moment the main players are stockbrokers, banks and pension funds but more bidders may be included in the future after complying with minor regulations. “The idea to accept more players is to increase efficiency, transparency and competition to rally the debt auctioning,” Prof Ndulu said when answering brokers proposals that bidding should be left exclusively to them.

He said: “The idea is to let many investors to participate in the debt marketsÉ as at the moment only 35 per cent of total money in circulation is in the formal system. The rest are not.” According to BoT Monthly Economic Review of July, up to the end of the first half of this year 2.32tr/- was in circulation.

GSS, has been described as the first of its kind in the East African region. It also puts the country ahead of other economies in the region because it offers a combination of online bidding and Central Depository Services (CDS). “This is a home-made system, it realy works,” said Prof Ndulu, while teasing those who believed the country cannot produce high quality products.

He added: “The bank had to improve the old GSS so that it conforms to international best practices, keeping pace with
technological advancement.” The old GSS system faced several challenges, adding that it was not interactive, did not comply fully with fax and telephones, while traders had to personally present bidding forms.

“In spite of the challenges, the old GSS performed well in the past 13 years, but was defeated by technological advancement,” BoT Director of Financial Market Mrs Judith Ndissi said. BoT’s Director of Management Information System Edward Makwaia said by developing the system, the central bank has managed to save millions of shillings, saying the software would have cost a minimum of 300,000 US dollars (about 480m/-).

“The software can cost up to one million US dollars (about 1.6bn/-), plus servicing fees, which is not less than 100,000 US dollar (about 160m/-) yearly,” he said. The central bank started to sell governments securities in 1993 where bidding and settlement were done manually.

But was later improved a year later when Treasury Bills Information System was introduced. In 1999, the bank introduced the GSS embedded with a book entry system wherein securities were issued in paperless form with connectivity to the Real Time Gross Settlement.

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