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Day Trading in Tanzania

Written By

Royston Wild

Written By

Royston Wild

Royston is an experienced investor and writer. His expertise includes stock recommendations through to commodities, forex, and macroeconomic news. Royston's background includes roles as a stocks and commodities reporter, and editor of forex coverage at Shares Magazine.

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Edited By

James Barra

Edited By

James Barra

James is an investment writer with a background in financial services. As a former management consultant, he has worked on major operational transformation programmes at prominent European banks. James authors, edits and fact-checks content for a series of investing websites.

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Fact Checked By

Michael MacKenzie

Fact Checked By

Michael MacKenzie

Michael is a writer and editor with over a decade in journalism and publishing. His niche lies in editing and fact-checking content in the financial services sector, with a focus on online brokers and trading platforms. Michael previously reported on politics and economics in the Middle East and edits books for established publishers.

» Michael MacKenzie Profile Page

Updated

Aug 15, 2024

Tanzania is undergoing a period of robust economic growth, fueled significantly by the expansion of its financial services sector. Combined with steady advancements in technology and market regulations, this has led to a healthy rise in the number of day traders in the country.

This guide will explain how day trading in Tanzania works, providing important information on the country’s tax regime, financial market rules, and the range of securities that can be traded.

Quick Introduction

• Individuals in Tanzania can deal in a wide variety of assets like stocks, forex, bonds, and derivatives, although cryptocurrency trading is illegal. Stock trading takes place on the Dar es Salaam Stock Exchange (DSE) for most of the day on regular weekdays.
• The country’s financial system is regulated by the Capital Markets and Securities Authority (CMSA) and the Bank of Tanzania (BoT). The CMSA is categorized as an ‘orange tier’ regulator in line with DayTrading.com’s Regulation & Trust Rating.
• Active traders will usually pay income tax of 0% to 30% on their earnings, along with capital gains (excluding those made on local shares), to the Tanzania Revenue Authority (TRA).

What Is Day Trading? 

This is a trading strategy where investors buy and sell financial assets within the same day to take advantage of brief price movements. Traders hold positions for anywhere from a few minutes to several hours, targeting market volatility to make a profit.

While day trading can generate large profits, the fast-paced environment also means there’s a greater risk of an investor racking up large losses, and especially if they use leverage (borrowed money). As a consequence, individuals adopting this strategy should exercise caution.

In Tanzania, day traders can deal a broad spectrum of financial instruments including shares, currencies, bonds and derivatives (such as contracts for difference (CFDs)). However, cryptocurrency trading has been banned by the Bank of Tanzania (BoT) since 2019.

Based in the country’s largest city and main financial centre, the Dar es Salaam Stock Exchange (DSE) is where investors can buy and sell company shares. Trading takes place between the hours of 10:30 and 16:00 Eastern Africa Time (EAT), Tanzania’s official time zone.

Is Day Trading Legal In Tanzania?

Yes. Short-term trading is regulated by the Capital Markets and Securities Authority (CMSA), which describes itself as a “professional independent regulator promoting capital and commodity markets development, financial literacy and investor protection.”

The CMSA sets out to ensure market transparency and integrity by creating regulations, supervising financial services providers, and launching enforcement action when necessary.

Under the Capital Markets and Securities Act, all market participants (including brokers, fund managers and stock exchanges) must be licensed by the authority.

The BoT is also tasked with maintaining “the stability, safety and soundness of the financial system” in the East African country. Its tasks include regulating, overseeing and licensing banks, some of whom may also provide brokerage services.

It’s straightforward to check whether a broker you’re considering is licensed by Tanzania’s authorities.

Before parting with any cash or submitting any personal details, head to the CMSA’s and BoT’s websites for lists of approved companies (these can be found here and here).

Royston Wild

Author

How Is Day Trading Taxed In Tanzania?

Traders must declare all profits they make to the Tanzania Revenue Authority (TRA), which administers the tax system and collects taxes.

For earnings over 270,000 Tanzanian shillings (TZS), traders will pay income tax at a progressive rate of between 8% and 30%.

Traders may also typically be liable for capital gains, at 10%, for money they’ve made on the sale of a security (excluding DSE-listed stocks).

Getting Started

There are three steps you’ll need to complete to trade the country’s financial markets:

1. Find a broker. It is important to ensure that the brokerage is licensed by Tanzania’s regulators. This will help you to avoid scam artists. You’ll also want to consider the range of financial assets the company allows you to trade such as DSE-listed stocks or currency pairs containing the Tanzanian Shilling (TZS), the trading fees they charge, and the quality of the charting platform.
2. Open a trading account. With the above ticked off, you’ll be ready to open a dealing account by providing the broker with some personal information, along with proof of address and identification, such as your national ID Card (Kitambulisho cha Taifa in Swahili). The firm may also ask some trading-specific questions, like your financial market experience, your attitude to risk and your investment aims.
3. Deposit some Tanzanian Shilling. Finally, you’ll send some money to your dealing account so you can start buying securities. The method of doing this may differ from broker to broker, though popular ways to send cash over include debit card, wire transfer, and using an online payment provider, such as M-Pesa (one of the most widely used payment solutions in Tanzania).

A Day Trade In Action

You’ll be ready to start dealing in Tanzania’s financial markets after completing these steps. What might a short-term trade look like, though? Here’s a hypothetical example using a popular stock on the DSE.

The Set-Up

My strategy is to turn a profit by going long on East African Breweries Limited stock. More specifically, I plan to buy shares in the business before the release of consumer price inflation (CPI) data in neighbouring Kenya.

The drinks giant sources almost two-thirds of its revenues from Kenyan customers, making it highly sensitive to economic conditions there.

Analysts expect CPI – which is reported by the Kenya National Bureau of Statistics (KNBS) – to have fallen to 3.8% from 4% in the prior month. However, after carrying out some economic research myself, I conclude that inflation is likely to have dropped even more than predicted, to 3.6%.

If I’m correct, shares in East African Breweries could rise. Lower inflation boosts consumer spending power, which might result in greater spending on consumer goods like alcoholic beverages. Weaker price rises may also benefit the company’s cost base.

Before placing my buy instruction, I conduct technical analysis, using the charts to give me a better idea of where East African Breweries’ share price could go.

Studying past price and volume data can reveal chart patterns, trends, and indicators, and is an essential part of short-term trading.

The Trade

The KNBS doesn’t release CPI data at a fixed time of the day. However, it is usually published during the morning or early afternoon EAT, giving financial markets ample time to react.

At the time of Tanzania’s stock market opening at 10.30 EAT, the inflation data is still to be released, so I prepare to key in my trade. This involves two steps:

1. Placing a ‘take profit’ instruction that will automatically close my position if East African Breweries’ share price rises to a pre-selected level.
2. Inputting a ‘stop loss’ order, which works in the opposite way by exiting my position if the stock drops to a level I’ve already chosen.

These tools help me to manage risk, by either locking in a profit for me or minimising my losses. I can choose where I want to place these levels, based on my tolerance of risk and investment objectives.

I bring up East Africa Breweries on my trading platform and find that it’s dealing at 3,050 TZS per share. So I place my ‘take profit’ and ‘stop loss’ orders at 3,075 and 3,060 respectively.

At just after 12:30 EAT, the KNBS releases its inflation data, showing that CPI dropped to 3.6% last month, as I’d predicted. It takes a few hours, but by mid-afternoon, my East African Breweries shares have risen to my ‘take profit’ level of 3,075.

My position is automatically closed and I’ve booked a profit of 25 TZS per share.

Bottom Line

Tanzania’s day trading community is currently smaller than that of many other countries. However, a rapidly growing economy, improving regulatory standards, and evolving technical infrastructure, all mean that financial market interest is steadily increasing.

Despite improving investor protections, scammers are still at work in the East African country, so traders should be vigilant and check that the brokerage they’re thinking of using is approved.

To get started, see DayTrading.com’s pick of the best day trading platforms.

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