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Hub Publishes EAC Common Market Protocol Tanzania December 2016 Reform Update

Published on January 26, 2017

Tanzania ends 2016 with observable positive impact from partial reforms focusing on easing foreign exchange controls and investment ceilings for foreign investors -- reforms carried out to comply with its commitments to the EAC Common Market Protocol. The reforms included repealing regulations that restricted the flow of capital across borders. Read the update.

This update finds that capital controls restricted several foreign investment opportunities. Tanzanian residents could not optimally participate in EAC IPOs valued at $355m, offered from 2010 when the common market was established. Attempts to offer IPOs in Tanzania had also proved difficult -- case in point being the Precision Air IPO that raised only 43% of its targeted $17.5m, in part because of low uptake from local investors.

The new measures adopted by Tanzania show that new opportunities have been created for foreign investment, both for foreign investors and Tanzanian residents. For example, a decision to allow 100% ownership of listed securities triggered a 307% year-on-year surge on the Dar Stock Exchange and Uganda's NSSF purchased $19.5m of Tanzanian treasury bills, a transaction previously disallowed. In 2017, Tanzania should now fully liberalize its capital account and institute broad investment climate reforms. These include sectoral restrictions to investment that are still in force, limiting foreign investment and capital raising opportunities for the domestic private sector. The USAID East African Trade and Investment Hub is supporting Tanzania’s private sector, particularly Tanzania Private Sector Federation, to identify and accelerate the necessary reforms that will create new private sector opportunities and grow the economy.