The State of Tanzania’s Capital Markets in 2024

21st January 2025, Tanzania’s capital markets closed 2024 on a high note, with the Dar es Salaam Stock Exchange (DSE) reporting a significant surge in trading volumes, particularly in December. The total trading volume for the year reached an impressive 45.4 billion Tanzanian shillings (Tshs), with December marking the highest monthly volume of the year. Despite the robust trading activity, market trends show a nuanced picture, revealing a blend of seasonal trading patterns and ongoing global economic uncertainties that continue to shape investor behavior.

The spike in trading volume during December is largely attributed to the annual year-end sell-offs. As the festive season approached, many investors sought to free up liquidity to cover seasonal expenses, particularly for travel and family reunions. In Tanzania, the festive season is culturally significant, especially for those from regions like Kilimanjaro, where homecoming trips for the holidays are common. This surge in demand for cash during the holidays led to a rise in market activity, but at a cost—despite the high volume of trades, the market value declined by 0.79% during this period.

Zan Securities’ Chief Executive Officer, Raphael Masumbuko, commented that the year-end sell-offs presented a unique opportunity for investors to acquire high-quality stocks at attractive valuations. The market, which has shown resilience, experienced consistent trading activity during the fourth quarter in both 2023 and 2024, with December standing out as the peak of the trading season.

A significant shift in market dynamics was observed with the continued decline in foreign investor participation. Net foreign outflows increased by 143%, reaching 26 million USD, as global investors took a more cautious stance amid ongoing global economic volatility. Foreign purchases dropped, while foreign disposals nearly doubled. The declining trend in foreign interest, a pattern seen over the past three years, underscores the cautious approach to emerging and frontier markets, especially in light of concerns such as trade wars, inflationary policies, and geopolitical tensions.

Despite this, Tanzania’s local investors stepped up, absorbing much of the foreign disposals. Domestic investors played a key role in driving the market’s turnover in 2024, with domestic market capitalization increasing by nearly 8%. The country’s growing financial literacy, alongside heightened awareness of the capital markets, has fueled increased participation, highlighting the resilience of Tanzania’s market amidst global uncertainties.

While the equity market saw impressive growth, particularly in the Bank, Finance & Investment sectors, the bond market faced challenges. The secondary bond market experienced a decline in transaction values by 15% to 3.38 trillion Tshs. However, the number of deals almost doubled, reflecting growing retail interest in fixed-income securities. Despite the decline in transaction volume, the primary bond market fared better, with the government collecting 3.8 trillion Tshs from Treasury bond auctions, an 8% increase compared to the previous year.

Innovation within Tanzania’s capital markets continued in 2024, with new bond listings and collective investment schemes contributing to market growth. For example, CRDB Bank issued Tanzania’s first infrastructure bond aimed at raising 150 billion Tshs for road development projects. Additionally, the creation of new collective investment schemes, which mobilized 81 billion Tshs, signals the country’s growing financial ecosystem.

However, Treasury bond re-openings have somewhat affected the DSE’s revenue from bond listing fees. These re-openings pay significantly lower listing fees compared to new bonds, thus impacting the exchange’s overall revenue from bond-related transactions.

Looking ahead to 2025, the outlook for Tanzania’s capital markets remains positive. The country’s capital markets are expected to continue growing, with domestic investors playing an increasingly important role. Government policies that foster a favorable business environment and the introduction of new investment products, such as the proposed Food Security Bond and a Venture Capital Fund of Funds, will continue to support market growth.

Moreover, fixed-income securities are expected to remain a vital part of the market, especially with the continued demand for financing among financial institutions and commercial banks. However, risks remain, especially from external factors. Protectionist policies from major economies, including the US, and geopolitical tensions, particularly in the Middle East, could disrupt global markets and, by extension, Tanzania’s capital markets.

Despite these uncertainties, the Tanzanian market has demonstrated resilience, bolstered by increased local participation and innovation. As the country continues to deepen its financial markets and improve financial literacy, the future looks bright for Tanzania’s capital markets, with plenty of opportunities for both investors and issuers alike.

In 2024, Tanzania’s capital markets showed a remarkable capacity to adapt to shifting investor behavior, seasonal trends, and global uncertainties. Domestic participation has grown significantly, counterbalancing the decline in foreign interest, while new products and strategic investments have provided fresh avenues for market growth. With optimism for 2025, Tanzania’s capital markets are on a promising trajectory, supported by resilient investors, government policies, and ongoing innovations. Global risks remain, and stakeholders will need to remain vigilant to navigate these challenges.