The performance of the Dar es Salaam Stock Exchange has deteriorated in the past nine months amid a government campaign to encourage the public to invest in Treasury bonds.
In March, for example, most companies listed on the DSE lost value on their stock.
Uchumi Supermarkets Ltd share price fell by 10 per cent, London’s cross-listed miner Acacia Gold Mining lost 5.25 per cent while KCB lost 5.56 per cent. But Tanzania Oxygen Ltd and Nation Media Group share prices rose by 1.63 per cent and 1.80 per cent respectively.
An official at the Bank of Tanzania said investors are opting for government bonds which offer more attractive interest rates.
Five-year and 10-year government bonds have been discounted to 81.5753 per cent and 73.5702 per cent respectively.
The coupon rate on the five-year bond is 9.18 per cent (unchanged from last year’s level), while that on the 10- year bond stands at 11.44 per cent. The rate on the 15-year maturity bond stands at 13.5 per cent.
In order to increase uptake, BoT has been conducting a mass awareness campaign in workshops and on the media — radio and television — on the risk-free government bonds in favour of company shares. The government is raising funds to bridge a budget deficit of about 3 per cent of GDP in the 2016/17 financial year.
According to the Minister of Finance and Planning, Dr Philip Mpango, the government plans to spend an estimated Tsh22.99 trillion ($10.7 billion) in the 2016/17 proposed budget. The government has planned to increase its spending by 31 per cent over last year’s budget to finance infrastructure and industrial projects.
Alexander Ngwinamila, director of financial markets at the central bank said that the government was borrowing from the public in order to give them the chance to contribute towards economic development. All citizens of East African countries are free to participate in the Tanzanian government bond market.
Mr Ngwinamila said the starting price for the short term T-bills is Tsh500,000 ($233) and Tsh1,000,000 ($466) for the longer term maturity bonds.
On May 16, the DSE recorded a total turnover of Tsh116.49 million ($54,000) in transactions from 135,880 shares traded in 32 deals, which is lower than the Tsh5,061.66 million ($2,354,630) turnover from 2,067,062 shares traded in 32 deals the week before.
On the government bond market, five-year bonds with 9.18 per cent coupon rates and a face value of Tsh6.40 billion ($2,977,220) were traded at a price of 81.5753 per cent and 76.6701 per cent in two deals.
A seven-year bond with a 10.08 per cent coupon rate and a face value of Tsh2 billion ($930,380) was traded at a price of 82.5316 per cent in deal. A 10-year bond with 11.44 per cent coupon rate and a face value of Tsh5 billion ($2,325,950) was traded at a price of 73.5702 per cent in one deal .