Alpha Capital’s 2024/25 economic outlook for Tanzania

As Tanzania enters the new fiscal year 2024/25 in June, economic activity is expected to pick up steam with increased government spending on infrastructure projects. Meanwhile, the Dar es Salaam Stock Exchange (DSEI) has witnessed an impressive 18.71 per cent surge since January 2024. On the interplay between higher liquidity, investor confidence, and potential sector-specific drivers, Imani Muhingo, Head of Research & Financial Analytics at Alpha Capital, sat down with CNBC Africa to shed light on the key economic activities shaping the market landscape and the factors likely to influence market performance in the coming months. In a conversation with CNBC Africa, Imani Muhingo highlighted several key areas driving market activity and influencing investor sentiment in Tanzania. One of the standout sectors is the banking industry, with seven out of the 22 listed companies on the stock exchange belonging to the banking sector. Over the last five years, banking profits have multiplied more than tenfold, signaling robust growth and continued promise for the sector. The demand for credit remains high, further fueling the sector's growth. Additionally, the financial sector's sub-sectors, such as capital markets, have shown promise, with the registration of three collective investment schemes in the last two months and the development of sustainable bonds and other market products. The government's plan to establish a venture capital fund also bodes well for expanding investment opportunities across various industries. Another significant factor driving market performance is the remarkable surge in the DSEI, which has climbed 328 points or 18.71 per cent since the beginning of the year. The rally can be attributed to strong performances from key cross-listed companies like KCB and East African Breweries, which represent approximately 20 percent of the total capitalization at DSEI. The positive corporate earnings of domestic companies, coupled with government initiatives to improve the business environment and attract investments, have further bolstered market prices and investor confidence. Companies across various sectors have witnessed substantial price gains, with some experiencing significant percentage increases since the start of the year. Overall, the market outlook for Tanzanian stocks remains positive, with expectations of continued rallies and growth. Furthermore, the influx of investors into long-term treasury bonds with higher yields has significantly impacted market liquidity. Tanzania's young population, along with pension funds seeking long-term investment opportunities, has driven interest in these bonds, leading to increased liquidity in the secondary market. This trend has made long-term bonds more attractive to investors looking for both returns and liquidity. The government's strategy of issuing more long-term bonds with lucrative yields has resonated well with investors, resulting in a thriving secondary market for these investment instruments. Looking ahead, the establishment of a venture capital fund by the Tanzanian government is poised to have a transformative impact on the market landscape. With a growing entrepreneurial spirit in sectors like agriculture and technology, the fund is expected to address the capital gaps hindering the growth of startups and SMEs in the country. By attracting more investments and fostering innovation, the venture capital fund aims to increase listings at DSE and stimulate further market development. While Tanzania has shown progress in capacity building and regulatory frameworks for capital markets, the venture capital fund is seen as a crucial piece in the puzzle to drive sustainable economic growth and expand investment opportunities in the region. In conclusion, Tanzania's economic outlook for fiscal year 2024/25 appears promising, fueled by robust market activity, increased government spending on infrastructure, and growing investor confidence across key sectors. With a focus on expanding capital markets, fostering innovation, and enhancing market liquidity, Tanzania is poised to capitalize on emerging opportunities and drive sustainable economic growth in the years to come.