Look on the brighter side of forex controls

The mixed feelings that have greeted the closure of some bureau de change were expected. But after all is said and done, the general consensus is that positive regulatory reform is a critical component of economic growth – and this applies to all sectors. Nearly 100 outlets have reportedly closed shop after failing to meet the new Bank of Tanzania (BoT) requirements – among which is the Sh300 million and Sh1 billion minimum capital threshold for Class-A and Class-B bureau de change, respectively. There are several other stricter conditions that the central bank set last June in its revised rules for the operation of forex bureaus in the country, including the outlawing of directorship, shareholding, managing and or employment of one person in multiple bureau de change businesses.

These rules are part of efforts by BoT to address some major loopholes in this critical sub-sector. The loss of jobs, reported by some at 600, is regrettable. The loss of business by those who failed to meet the conditions is unfortunate too. But it is our hope that these reforms will open up a sector that has over the years been increasingly under suspicion for laundering money, not only in Tanzania, but in the region as a whole. Granted, the concerns that the central bank is targeting to address are genuine. More so, they are not unique to Tanzania.

In neighbouring Kenya, for example, the central bank has since 2011 barred investors from having beneficial interest in more than one foreign exchange bureaux. And last year, the National Bank of Rwanda also revised regulations governing the operations of bureau de change to allow for streamlining and better supervision. The whole point is to strengthen the corporate governance structure of forex bureaus and guard against market vulnerabilities. In a nutshell, such painful reforms are necessary to re-define the basic tenets of this critical market.