Report lists factors attracting investors in Tanzania

Dar es Salaam. Tanzania’s investment climate is generally considered fair, a new study says, revealing at least four key investment factors that are attractive to prospective investors.

According to the fifth edition of the Absa Africa Financial Markets Index 2021, the factors are a strong and supportive regulatory environment; good macroeconomic prospects; increasing access to foreign exchange, and a growing market depth.

The country’s actual score in its regulatory frameworks, tax system and market transparency – complemented by the international financial reporting standards and tax incentives – was quoted at 66 out of a maximum possible score of 100.

Speaking during the launch of the report in Dar es Salaam yesterday, the Absa Group’s head of fixed income and currencies, Mr Jeff Gable, said Tanzania’s macroeconomic factors grew in contrast to its regional peers where countries’ economies were severely impacted by the Covid-19 pandemic.

Although there are issues that are still pending – such as balancing fiscal support for the economy, and ensuring debt sustainability – Tanzanian own experience looks better than the global average, said Mr Gable.

“The investment environment is supportive despite the Covid-19 challenges, such as full recovery of the tourism sector through the increase of tourist arrivals,” he said.

Tanzania has also shown strength in the areas of capital control, exchange rate reporting standards and the level of foreign exchange liquidity, scoring a 59 points out of 100 in the index.

According to the Absa Africa Financial Markets Index, the country still holds a satisfactory levels in terms of size and liquidity in the capital markets, scoring 45 percent in the index.

However, According to the chief executive officer of the Capital Markets and Securities Authority (CMSA), Mr Nicodemus Mkama, the authority has already put measures in place that are intended to improve trading. These include approval for the Dar es Salaam Stock Exchange (DSE) to list new products and services.

“Other measures are sustainable equities, sustainable exchange traded funds, sustainable mutual funds, exchange traded notes, green bonds, and other sustainable bonds,” he said.

While the Absa Group report analyses the regional economies in six pillars, Tanzania was found to be lagging in the capacity of local investors, as well as enforceability of standard financial markets master agreements.

Tanzania scored 23 out of 100 in the local investor capacity based on the amount of the pension fund assets in the country relative to the population and market capitalization.

The removal of the indicator on resolving insolvency, based on scores from the World Bank’s Doing Business Report, affected Tanzania’s performance in the enforceability of the standard financial markets master agreements, resulting in the country scoring only ten (10) percent in the Absa Africa Financial Markets Index for 2021.

Gracing the event to launch the Absa Report in the commercial capital yesterday, the Governor of the central Bank of Tanzania (BoT), Prof Florens Luoga, commended Absa for the report, saying that “it provides credible alternative assessment of our country, and may facilitate further development of the financial market through attracting more capital inflows from foreign markets.

“Also, it provides a reference point to stakeholders, regulators and market participants,” he said.

Prof Luoga further said that BoT would continue to facilitate financial inclusion through supporting the banking industry which plays the crucial role of ensuring that the objectives of furthering economic development are achieved.

“You cannot talk about business growth or effective competitiveness of the private sector without having a strong banking sector in place,” said Prof Luoga said.

The fifth edition of the Absa Africa Financial Markets Index 2021 also shows that Tanzania scored 45 out of 100 points, thus dropping to the 13 position, down from the twelfth position last year.