How to Invest in Government Securities in Tanzania

Tanzanian government securities are instruments that are traded to the public. The government borrows money from the public with a promise to repay the investor after a particular period with an interest. There are two types of government securities in Tanzania; treasury bonds (T-bonds) and treasury bills (T-bills). T-bonds are long-term securities and take over a year to mature. T-bills are short-term securities and less than a year to mature.

The Bank of Tanzania (BOT) issues the securities on behalf of the government. There are five types of T-bonds with varying maturity duration of 2 years, 5 years, 7 years, 10 years and 15 years. Likewise, T-bills also have varying maturity dates of 35 days, 91 days, 182 days and 364 days.

Requirements for Government Securities in Tanzania

Soma makala hii kwa Kiswahili: Jinsi ya Kuwekeza Kwenye Dhamana za Serikali

If you want to start trading in government securities in Tanzania, you need to meet the following requirements:

  • Have three passport size photographs
  • Three copies of a valid ID
  • Three copies of TIN number
  • Open a Central Depository System (CDS) account with the BoT from any brokerage that deals with government securities

You can trade government securities in Tanzania in two markets, the primary market or the secondary market. At first, the securities are traded at the Bank of Tanzania through the Central Depository System before they can be listed for secondary trading at the Dar Es Salaam Stock Exchange. Treasury bills and bonds transactions are maintained and processes through the Government Securities System. T-bills are issued after 2 weeks while T-bonds are issued after every month.

Benefits of Trading in Government Securities in Tanzania

If you are an investor and you are looking forward to trading in Government securities in Tanzania, you will reap the following benefits.

  • They are less risky since they are issued by the government
  • They have highly competitive rates
  • They can be transferred from one person to another and can be negotiated
  • They can be used as collateral for a loan
  • They attract high return on investment through discounted prices

How to Trade in Government Securities in Tanzania

To start trading in government securities, an investor needs to deposit funds with the broker of their choice. The minimum amount you can invest in T-bond is TZS 1,000,000 and TZS 500,000 for T-Bills. The broker will be working on behalf of the investor by taking part in BoT auction. An investor can buy bonds in the primary market through BoT auction. Alternatively, an investor can buy bonds in the secondary market through Dar Es Salaam Stock Exchange.

Eligibility to Trade in Government Securities in Tanzania

The Foreign Exchange Listed Securities (Amendment) Regulations 2014 defines those people who can trade in securities as:

  • You can buy government securities in Tanzania if you are a resident of the East African Community.
  • Also, those who have resided in Tanzania for twelve months or more consecutively and have an economic interest in the country can buy securities.

Pursuant o the Amendment Regulations, a resident in the country can trade in securities provided that:

  • Total securities acquired from the prescribed territory do not go above 40% of the securities issued
  • Government securities won’t be transferred to a resident within 12 months since the acquisition

Public Notification and Announcement about Auction

The public is notified about an auction through a newspaper or Bank of Tanzania website five days before. Once a notice has been issued, CDS participants and clients can apply. They need to fill tender forms CDS/FORM/03 (Annex I) which can be downloaded on BoT website or BoT head office. The Bank of Tanzania has the right to accept or reject tenders forms submitted in an auction. The Bank of Tanzania uses a computerized selection to select successful bidders.

Auction results are then available on BoT website after every auction. The results are also displayed on Central Depository Participant (CDP) offices. The successful bidders can get bid codes from the CDPs. They can use the bid code as a reference for the payment of T-Bills. The payment is made through Tanzania Inter-bank Settlement System.

Payments of Bonds and Treasury Bills in Tanzania

Successful bidders are expected to make payments a day after the auction. They should use their banks for settlement. Likewise, after the maturity, you will receive the full amount they invested and the interest amount.

Taxation of Government Securities in Tanzania

Income earned by trading in government securities is subject to taxation in Tanzania. Therefore, the income you will earn from T-Bills and T-Bonds with a maturity day of 2 years will attract a 15% withholding tax. However, those investments with 5, 7, 10 and 15 years do not attract interest.

Final Word on How to Buy Government Securities in Tanzania

Government securities in Tanzania are a reliable and secure investment. You are sure not to lose your money since they are government-backed while you are also sure of earning interest. It is best that you ask your broker about the current interest rates before you start investing.

Vincent is a writer with an interest in finance, business, technology and health niche. He holds a Bachelors degree in Applied Statistics with computing. Read more about Vincent and see our complete editorial team at FiFi.