The Citizen (Dar es Salaam)
Miki Tasseni
4 September 2008
Mandarins at the Bank of Tanzania (BoT) will start having jitters over the next few months as MPs start pushing for freedom of Tanzanians to buy shares in regional companies being floated on the stock exchange.
The matter came to a head in the Legislature as MPs debated estimates of the ministry of Finance and Economic Affairs, with veteran opposition leader John Cheyo in a bad mood about local investors being prevented from purchasing shares of Safaricom.
He did not dwell on possible lost benefits in share prices or capital strengthening had East Africans been allowed to purchase the floated shares of National Microfinance Bank, despite selling just 21 per cent.
Exchange Control Act
Two types of reactions could be gleaned from the responses by deputy minister Jeremiah Sumari on Mr Cheyo's questions, the first being more or less technical, and the second sort of sentimental.
The technical part was a reiteration of regulations of the Exchange Control Act where the sending of money outside the country for payments has to be okayed, in the context of non-liberalisation of the capital account. What was a bit surprising was that the deputy minister did not see the latter as a basic aspect of policy and aired it merely as regulatory discretion at the BoT.
It may take a while to sort out, say in debate in the alleys of financial sector institutions, as to whether the remark by Mr Sumari was a slip of the tongue on his part, or it reflects growing disarray at higher levels of government as what is policy, and what is just old rules lingering in the books.
Liberal Orientation
But to an extent it reflects a continuing confusion at an executive and legislative level, that the Ômores' of the political alliance that was put to office late 2005 being fundamentally hostile to liberalisation and privatisation, regional integration but not the proper elites so elected. In many cases they have retained their forward looking, liberal orientation.
That could fairly explain a situation where such a fundamental tenet of policy for decades is held up by a deputy minister as a BoT habit which he is not in a position to know when they are going to change it, that is, move towards capital account liberalisation.
Surprisingly, in remarks on plans by minister Mustafa Mkulo to float sovereign bonds as the best way to finance road building (or infrastructure in the usual World Bank speak), a senior IMF official didn't see the issue in BoT rules or as some sort of habit.
Ms Teresa Ter-Minassian, director of fiscal affairs at the IMF, doubted the wisdom of seeking sovereign bonds on the issue, but identified capital account liberalisation as tied to sovereignty itself.
The point that seems to be emerging among economic observers is that rulers are running out of arguments why the capital account should not be liberalised, so people can buy and sell shares as they wish, etc.
That is where the second of Mr Sumari's reflections comes up, which sort of underlines his own affinity with the current institutional set up, while in part appearing to lose the proper policy argument for institutional lack of disposition towards regional share trading or liberalising the capital account.
Buy shares
He queried as to Ôhow many Tanzanians need to buy shares in regional companies like Safaricom, remarks that Mr Cheyo qualified as a denigration of Tanzanians, and the deputy minister didn't add a word...
In fact, the proper basis for institutional fiat against trading in shares from across the border or having shares so purchased is some traditional concern for equity.
Capital account liberalisation rejection is to frown at the behests of a few people putting in peril national security as a whole to trap volatile or unpredictable cross border financial flows instead of backing institutions with proper capital infusion - which may include resorting to sovereign bonds to boost such flows. Aid is now in a serious retreat as sustainable source of development financing, isn't it?
Maintaining that capital account liberalisation is of no purpose because only a few rich people are disposed to buy shares of Safaricom etc now looks tired, a cliche that doesn't make much sense any longer.
Yet it was apparent the deputy minister made the point hastily, almost showing a trace of anger at the query, a reflex which reminds one of Mwalimu's standard reaction to the demand for financial sector liberalisation. He said foreigners don't need to compete with National Bank of Commerce operations here as it doesn't compete with them in their home countries.
To a section of the media - and not the smallest - this is still standard wisdom in explaining the Ôrape' of the country by opening the door to all sort of Ôflies, lice,etc.
That is what private sector representatives have to put up with on a regular basis, as standard wisdom if not in politics as such, but in the standard references that animate people, determining the political agenda. Dutch envoy Dr Karel van Kesteren would see in the position the Ôvulgar economy outlook he lately charged Tanzanians with.
When blocking NMB share sale to Kenyans this is to curb privileges for them, and not to deny the bank the capital it needs - in the central bank and deputy minister's view, which the envoy would find curious. Hence Tanzanians, or rather the BoT seeks to preserve DSE for locals, and it pictures itself as winning both ways; in hindering purchase of Safaricom shares it protects DSE as local investors will remain inward looking, and in halting NMB share sale to foreigners it is denying them the privilege of owning shares in it. That the BoT blunts and stymies DSE is not seen...
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