Tanzania opens door to global capital investors

DAR ES SALAAM: WHAT if Tanzania’s next major source of development finance is not sitting within our borders, but waiting in investment portfolios around the world?

What if every global investor looking for an emerging-market opportunity could now look at Tanzania not only as a destination for tourism, manufacturing or natural resources, but also as a market where they can invest directly in the country’s growth story?

This is the significance of the recent decision by the Bank of Tanzania to open participation in Government Treasury bills and bonds to all non-resident investors.

It is more than a regulatory amendment; it is an invitation to the world to invest in Tanzania.

The reform is a commendable step towards deepening Tanzania’s financial markets and strengthening the country’s position as an attractive investment destination.

Previously, participation by non-residents in Government securities was restricted to residents of the East African Community (EAC), the Southern African Development Community (SADC) and Tanzanian citizens in the diaspora.

The new direction removes this geographical limitation and creates an opportunity for investors from across the world to participate in Tanzania’s Government securities market.

This is particularly important because Government securities are not simply instruments for financing government expenditure. They are a critical component of a modern financial system.

A deeper and more diversified Government securities market can improve liquidity, provide reliable investment opportunities, strengthen price discovery and establish benchmarks that can support the development of the broader capital market.

For Tanzania, this is the right timing. Development Vision 2050 requires capital—massive amounts of capital.

Achieving an economy that is competitive, inclusive, resilient and capable of creating quality employment will require investments far beyond what traditional public financing can provide.

Tanzania therefore needs to continuously expand the sources of capital available to finance its development priorities.

Opening the Government securities market to global investors is one way of doing exactly that. It allows Tanzania to tap into a much larger pool of international savings while giving global investors an opportunity to participate in the country’s economic growth.

More importantly, it strengthens the connection between Tanzania’s domestic financial markets and the international investment community.

This reform also sends an important message about Tanzania’s investment environment: The country is ready to welcome capital and is increasingly building the financial infrastructure necessary to receive it.

The benefits, however, should not be measured only by the amount of foreign capital attracted into Treasury securities. The bigger opportunity is the potential spill-over effect across the entire capital market.

As international investors become more familiar with Tanzania’s financial markets, institutions, regulations, market infrastructure and investment opportunities, the country can position itself to attract capital into equities, corporate bonds, infrastructure projects, private investments and other productive sectors.

In this sense, Government securities can become more than an investment destination.

They can serve as the gateway through which international investors enter Tanzania’s wider capital market. The reform also complements the broader regional movement towards deeper and more integrated African financial markets.

The EAC itself has been advancing cross-border trading of Government securities as part of efforts to deepen regional capital markets and financial integration.

Tanzania’s decision to broaden participation beyond the region therefore demonstrates an ambition that goes beyond regional integration: It opens the door to global integration.

As we celebrate this important reform, the next priority should be to ensure that the opportunity translates into actual investment flows.

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Market accessibility, transparency, efficient settlement systems, predictable regulations, investor education, competitive transaction costs and digital investment channels will be critical.

The private sector and capital market intermediaries also have an important role to play in making Tanzania’s investment proposition visible and accessible to international investors.

Vision 2050 will ultimately be judged not only by the ambition of its objectives, but by our ability to mobilise the capital required to achieve them.

Tanzania cannot build a globally competitive, industrialised and prosperous economy by relying solely on domestic resources. We must connect our development ambitions with global pools of capital.

The recent opening of the Government securities market to all non-resident investors is therefore much more than a technical amendment to foreign-exchange regulations. It is a strategic step towards positioning Tanzania within the global capital market.