Tanzania has liberalized its Capital Account for all East African
Community (EAC) residents which allows them to participate in Dar es Salaam
Stock Exchange (DSE) securities and to a limited extent in government
securities.
The move will also allow Tanzanians to invest in the EAC region without
requiring prior permission from the country’s Central Bank, Bank of
Tanzania (BOT).
This is a significant stride towards fulfilling the requirements of the EAC
Common Market as annexed in its Schedule on the Removal of Restrictions on
the Free Movement of Capital by 2015.
Commenting on this development the Deputy Minister for East African
Cooperation Hon. Dr. Abdulla Juma Saadalla said the move was one of
Government’s deliberate efforts to open up opportunities for Foreign Direct
Investments (FDIs) and wealth creation through Tanzanians’ investment
abroad.
“This is yet another milestone for Tanzania in its quest to attract more
FDIs and allowing its people to invest abroad,†said Dr Saadalla adding
that the country was already moving on the right direction in attracting
investors.
Liberalization of capital account has been necessitated by BOT’s recent
amendments of two key Regulations namely; the Foreign Exchange (Listed
Securities) (Amendment) Regulations 2014, and the Foreign Exchange
(Amendment) Regulations 2014.
The two Regulations were availed through Government Notice No. 132 and were
published in the Government Gazette on 2 May 2014.
Before this amendment, foreigners were not allowed to participate in
Government securities at all, and were limited to only 60% in listed
securities at DSE.
Now East Africans can participate in Government securities up to 40% of the
amounts issued but investors from one country cannot exceed two-thirds of
that 40% threshold.
As it was the original Foreign Exchange (Listed Securities) Regulations
2003 that set the 60% limit for foreigners, its amendment effectively means
that the foreigners’ limit in the DSE does not now apply.
Dealing in Government securities was also closed for all non-residents but
this amendment effectively means that Government securities are now open
for EA residents up to 40%, but still closed for non-EA investors.
Under the amendment, Residents can now deal in any other securities freely
but only within the EA Region. The difference with the first Regulations is
that whilst the first Regulations apply to listed securities, the second
one allows outward investments in any securities.
“This is partial opening of the capital account should be a welcome
development for Tanzania’s Licensed Dealing Members (LDMs), banks, pension
funds and High-net-worth individuals (HNI),†says George Fumbuka of CORE
Securities Limited a Licensed Dealing Member of the DSE.
Remaining restrictions include; acquisition of Collective Investment
Schemes (CIS) is not allowed unless the Issuer is authorized by Capital
Markets and Security Authority (CMSA), foreign securities must meet the
requirements of the CMSA and Payment must be through a bank accompanied by
supporting documentations.
In addition to the above amendment that restricts foreign investment in
securities to the EA Region investors only, there is a specific amendment
with respect to FDI and the acquiring of real estate and other real assets
anywhere in the world.
The amendment allows residents to engage in FDI and acquiring of real
estate and other real assets beyond the EA Region but only if: (1) the bank
shall notify the BOT of the intended remittance prior to its remittance
approval; (2) Funds for the acquisition come from external sources; (3) the
bank(s) make (s) periodic returns of such transactions in a manner and
frequency to be determined by BOT.
Note: A resident is a person who resides consecutively, or whose centre of
predominant economic interest is in the United Republic of Tanzania for
twelve months or more.