Tanzania capital markets defy global geopolitical turbulence

DAR ES SALAAM: TANZANIA’S capital markets are demonstrating strong resilience despite rising geopolitical tensions that have unsettled global financial systems, signalling sustained confidence in the domestic investment landscape.

The expansion reflects growing confidence among domestic investors, attractive returns from professionally managed funds and regulatory reforms that have broadened the range of investment products in the market.

The country’s Collective Investment Scheme (CIS) industry has grown sharply over the past two years, reaching a record nearly 4.88tri/- in total Net Asset Value (NAV) to date, up from 1.8tri/- recorded in January 2024, if the sector’s latest data are anything to go by, even as global markets grapple with geopolitical tensions.

The milestone highlights the rapid expansion of professionally managed investment funds at a time when many international markets are grappling with volatility triggered by escalating tensions between the US and Iran.

The geopolitical standoff has heightened fears of possible disruptions to global oil supplies, particularly shipping routes through the Strait of Hormuz, sending shockwaves across financial markets and pushing commodity prices upward while weakening equities in several economies.

However, financial analysts say the country’s investment landscape continues to expand steadily, supported by strong domestic investor participation, favourable returns and progressive regulatory.

Zan Securities’ Chief Executive Officer, Mr Raphael Masumbuko said during the first Timiza Fund Annual General Meeting over the weekend that the continued expansion of collective investment schemes reflects the resilience of capital markets even amid global uncertainties.

“Despite the global turbulence we are witnessing in financial markets, country’s capital markets continue to demonstrate strong growth driven by increasing investor participation and attractive returns from professionally managed funds.

“This growth is occurring at a time when many global asset classes have suffered losses due to rising geopolitical risk,” said Mr Masumbuko.

The number of collective investment schemes expanded from seven to 20 during the period, while the number of licensed fund managers increased from two to seven, reflecting rising investor interest and stronger market infrastructure.

The growth as attributed to competitive returns from government securities and high performing banking stocks listed on the Dar es Salaam Stock Exchange (DSE), which have continued to deliver solid gains in recent years.

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Moreover, during the initial fundraising phase of Timiza fund, approximately 10.38bn/- were collected, surpassing its target of 10bn/- and achieving 103.8 per cent of the intended subscription.

Investor participation has also risen sharply, increasing to 8,741in this Q1 from 210 investors recorded in July 2024, an expansion of over 4,000 per cent within less than two years.

In addition, the surge also reflects a gradual shift in savings behaviour as more Tanzanians move away from traditional bank deposits that offer relatively modest interest rates and instead turn to professionally managed funds capable of delivering higher returns.

“Several funds are currently generating annual yields of up to 15 per cent, making them increasingly attractive to retail investors seeking long-term wealth creation and portfolio diversification,” he added Mr Masumbuko.

Though higher fuel costs will definitely filter into production and distribution expenses across the economy, however, such effects would likely emerge gradually rather than as immediate shocks to the stock market.

Alpha Capital Executive Director Gerase Kamugisha told the `Daily News’ that sectors such as manufacturing, logistics and transportation are particularly sensitive to energy price changes.

“For companies listed on the DSE, rising operational costs could gradually affect profit margins, especially if businesses are unable to fully pass increased costs on to consumers,” Mr Kamugisha said.

At the same time, the composition of the Tanzanian capital market provides some stability. Several of the most prominent companies listed on the DSE operate in sectors such as banking, telecommunications and consumer goods.

Demand for these services tends to remain relatively resilient even during periods of economic uncertainty.

“Consequently, the earnings outlook for many listed firms may not change dramatically unless the geopolitical crisis significantly alters global economic conditions,” the veteran stockbroker said.

Another factor moderating potential market reactions is the role of long-term domestic investors. Pension funds, insurance companies and other institutional investors hold substantial positions in listed equities and government securities.

These investors typically adopt long-term portfolio strategies designed to match future liabilities rather than respond to short-term global events.