Following an exodus from its tightly-controlled capital account which has limited capital inflows, Tanzania lifted control on foreign-share ownership.
According to Yvonne Mhango, sub-Saharan Africa economist from RenCap, this is good news for investors and an immediate boost in Tanzania’s share pricing on the stock exchange is anticipated.
“Tanzania’s stock exchange has been the best performing this year, up to 30 per cent year to date, compared to 17 per cent in Kenya and flat in Nigeria. It is a market that foreigners would really like greater access to, so that is very promising. It implies that we will see greater inflows, particularly into other stocks. There are very liquid stocks like Tanzanian Breweries as well as Tanzanian Cigarette Company which I think we can see great exposure towards other stocks,” Mhango said.
The DSE which became operational in 1998 and has a domestic market capitalisation of 22 trillion Tanzanian shillings, could only allow foreign investors to invest up to 60 per cent in aggregate of the share capital of any listed company.
The Tanzanian bourse which has 13 domestic listed companies and seven cross-listed companies will also see East African investors buy up to 40 per cent of government treasury bonds. Easing of these restrictions is part of the country’s commitment with its East Africa Community (EAC) peers and permits.
Moreover, Mhango believes that this move will see more companies enter into Initial Public Offering (IPO) market that the bourse is keen on seeing expand.
“I think it was fear of the stock exchange since we would like to see more of the medium term, the market capitalisation of the stock exchange increase to about 60 per cent of the GDP which implies more than a fourfold increase and for that to happen it implies IPOs,” Mhango said.
Meanwhile, the East African country recorded the highest foreign direct investments last year within the East African Community. The country’s inflows were recorded at 1.8 billion US dollars.