How to Invest – Bank of Tanzania Treasury Bonds and Treasury Bills
Tanzanian treasury bonds are publicly traded instruments. The Tanzanian government borrows funds from the public and promises to return the money to the investors with interest after a set time. Tanzania has two forms of government securities: T-bonds (treasury bonds) and T-bills (treasury bills). T-bonds refer to long-term securities that mature after more than a year. T-bills refer to short-term instruments that mature in under one year.
The securities are issued by the Bank of Tanzania (BOT) on the government’s behalf. T-bonds come in five different maturities: two years, five years, seven years, ten years, and fifteen years. T-bills have maturities ranging from 35 to 91 days, 182 days to 364 days.
Tanzanian Government Securities Requirements
To begin trading in government securities, you must fulfill these requirements:
- Bring three passport-sized pictures.
- 3 copies of your valid ID
- 3 copies of the TIN
- Open a CDS account (Central Depository System) with the Bank of Tanzania through a brokerage that deals in government securities.
Tanzanian government securities can be traded in two markets: the primary market and the secondary market. Before being listed for secondary trading on the Dar Es Salaam Stock Exchange, the securities are initially exchanged at BoT via the Central Depository System. The Government Securities System manages and handles bonds and Treasury bills transactions. Treasury bills are issued every two weeks, and Treasury bonds are issued every month.
The Advantages of Trading Government Securities
If you are interested in dealing in Tanzanian government securities, you will enjoy the followings perks:
- Less risk is involved because they are government-issued.
- They have very competitive rates.
- They are transferrable and negotiable.
- You can use them as loan collateral.
- They draw a high profit on investment by offering discounted pricing.
Tanzanian Government Securities Trading Procedures
To begin trading in Tanzanian government securities, you must first deposit funds with your preferred broker. T-bonds need a minimum investment of Tsh 1,000,000, while T-Bills require a minimum investment of Tsh 500,000. The broker works on your behalf by participating in the BoT auction. You can purchase primary market bonds via a BoT auction. An investor can also purchase bonds on the secondary market via the DSE.
Eligibility Criteria to Trade Treasury Bonds in Tanzania
The Foreign Exchange Listed Securities Regulations (Amendment) 2014 define who can trade securities as follows:
- If you are an East African Community resident, you can purchase government securities in Tanzania.
- If you have lived in Tanzania for a period of 12 months or longer and you have an economic stake in the nation.
A resident of the nation may deal in securities under the Amendment Regulations if:
- The total number of securities bought from the defined territory does not exceed 40% of the total number of securities issued.
- Government securities will not be transferred to a resident within 12 months of purchase.
Public Notice and Announcement of the Auction
Five days prior to an auction, the public is alerted through the BoT website or newspaper. CDS clients and participants can apply after a notification is published. They must complete tender Annex I (CDS/FORM/03), which may be obtained from the BoT website or headquarters. BoT has the authority to accept and reject tender forms filed in the auction. To identify winning bids, BoT employs an automated selection process.
Following each auction, the results are published on the bank’s website. They are also displayed in the CDP offices. The CDPs can provide bid codes to winning bidders, who can utilize the bid code as the reference for T-Bill payment. Tanzania Interbank Settlement System is used to make the payment.
Bond and Treasury Bill Payments in Tanzania
The successful bidders are required to make payments the following day. They should settle through their banks. Similarly, upon maturity, they will receive the whole amount invested as well as the interest amount.
Tanzanian Government Securities Taxation
In Tanzania, income received from trading in government securities is taxed. As a result, revenue from T-Bonds and T-Bills with a maturity date of two years will be subject to a 15 percent withholding tax. However, investments with terms of five, seven, ten, and fifteen years are not taxed.
Final Remarks on Purchasing Government Securities in Tanzania
Tanzanian government securities are a safe and trustworthy investment. Being government-backed, you are not only guaranteed not to lose your money but also to receive interest. Before you begin investing, it is advisable to consult with your broker regarding the current interest rates.
Treasury bond calculator Tanzania – https://www.bot.go.tz/TBonds/TbondsCalculator
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