Tanzania's CMSA private equity, venture capital & sandbox regulations impact on growth & investment

Tanzania's investment landscape is on the verge of a significant transformation with the recent publication of Private Equity (PE), Venture Capital (VC), and Sandbox regulations by the Capital Markets and Securities Authority (CMSA). These groundbreaking frameworks aim to revolutionize the country's approach to investment, fostering innovation, attracting capital, and promoting financial inclusion. CNBC Africa had the opportunity to speak with Praygod Japhet, Head of Programs and Operations at Tanzania Startup Association, to delve into the key highlights and potential impacts of these regulations. The new regulations fill a vital gap in the country's regulatory structure concerning the registration and operation of VC and PE firms. By collaborating closely with the government, Ministry of Finance, and the CMSA, Tanzania now boasts a comprehensive framework for the establishment and management of VC and PE funds within its borders. One of the primary objectives of these regulations is to address the financing gap faced by mid to end-stage companies and startups in Tanzania. Among the notable highlights of the regulations is the introduction of licensing requirements to ensure that VCs and PEs are registered with the CMSA. Additionally, investor protection measures have been incorporated, limiting investors' liability to the amount they have invested in the fund. The regulations also include guidelines to promote thorough due diligence in investment decisions and mitigate bias, safeguarding the interests of investors. As Japhet projects, these regulations are poised to significantly impact the private equity and venture capital landscape in Tanzania, presenting new growth opportunities and fostering increased investments both locally and internationally. The regulations are expected to create a conducive environment for SMEs and startups in Tanzania, encouraging Tanzanian investors to establish funds within the country, as a clear framework now exists for such initiatives. With Tanzania serving as a gateway to the East African and Southern African markets, local and international investors are anticipated to leverage the population of over 600 million, setting up funds and accelerating deal-making processes, thus boosting job creation and catalyzing the local startup ecosystem. Despite some short-term challenges related to compliance and capacity issues, the regulations are aligned with global standards, enhancing transparency and mitigating risks. Drawing parallels with the robust performance of Tanzania's banking industry and overall economic indicators, Japhet expresses confidence in the regulations' ability to usher in a new era of opportunities in private equity and venture capital investment. While initial hurdles are expected, the long-term outlook remains optimistic, with the regulations poised to streamline the financing landscape, paving the way for increased commercial investments and a flourishing investment ecosystem in Tanzania.