Category Archives: Business & the Economy

TRANSPORT

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by Ben Taylor

Air travel
A direct flight linking Dar es Salaam with China has been promised by Hainan Airlines of China. This was announced by the company chairman, Chen Feng, during a visit to China by the Tanzanian Prime Minister, Mizengo Pinda. Dar es Salaam should aim to become a hub airport for passengers from across Africa travelling to China. (Daily News)

The recent emergence of FastJet as a low cost airline continues to shake up the domestic scene, offering one-way tickets from Dar to Arusha, Mwanza and Mbeya for as little as TSh 32,000. This price is comparable with bus fares, and brings the cost of flights within range for a much larger number of Tanzanians.

Perhaps as a result, Precision Air is struggling. A report by the airline’s auditors, Ernst and Young, presented to their AGM in November, found the company’s finances in bad shape. The company’s liabilities exceeded its assets by $53m, and it made a $18.7m loss in its last financial year. Previously, the company requested a government bailout of $32m, but this was rebuffed. (East African)

Innovations in Dar es Salaam

Map of Dar-es-Salaam showing the Kigamboni bridge location

Map of Dar-es-Salaam showing the Kigamboni bridge location

Construction of the 6-lane road bridge connecting Kigamboni with Dar es Salaam city centre is well under way. The first of two pylons needed for the 680m long cable-stayed bridge has been completed. It will connect Kurasini and Vijibweni, upstream of Dar es Salaam port, at a reported cost of Tsh 200bn. There are also plans for a new satellite city in Kigamboni [see “Tanzania in the international media” section]. (Daily News)

The sustainability of Dar es Salaam’s experiment in commuter trains has come into question. It has been found that the 12km line between Ubungo and the city centre is running at a daily loss of Tsh 2m. The initiative [see TA 104] was the brainchild of Minister of Transport, Harrison Mwakyembe, and carries an estimated 5,000 passengers per day, each paying TSh 400 (£0.15). (Citizen)

Work continues on preparing Morogoro Road and connected major arteries for the Dar Rapid Transport scheme. Under this scheme, large commuter buses will replace daladalas, and will operate along dedicated lanes [see TA 98]. Phase 1 links Kimara, Ubungo and Morocco with Kariakoo and Kivukoni – a total of 21km – and is scheduled to begin operating in July 2015. Phase 2 (Kilwa Road) and Phase 3 (Nyerere Road) will follow. (Daily News, the Guardian)

Ongoing works on the DART

Ongoing works on the DART

Rail expansion
In what could become the biggest overhaul and expansion of Tanzania’s rail network for a generation, several schemes are in various stages of development. This has been prompted in part by China’s re-emergence as a major player in Tanzania, and in part by political and economic competition within East Africa.

A competitive tender has been launched for a railway line connecting Mtwara with the Chinese-owned Liganga-Mchuchuma mine complex in Ludewa district, Njombe region. It will pass through Songea, and will include a branch line to Mbinga and Mbamba Bay on Lake Nyasa. Newspaper reports of the expected cost range from $1.5 billion to $3.6 billion. (Citizen, Daily News)

Plans are also under discussion to upgrade and/or extend the country’s three major existing lines, though they have been met with scepticism by observers. The Minister of Transport, Harrison Mwakyembe announced a plan to upgrade the Tanga-Arusha line and to extend it as far as Musoma. Japanese support for the central line has been promised, with the eventual goal of upgrading the line to standard gauge; and there has even been talk of an extension from Isaka to the Rwanda capital, Kigali. A Chinese-supported upgrade of the TAZARA line is already in motion, with six new diesel engines delivered in November. (Daily News, Guardian)

ECONOMICS

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by Paul Gooday

Economic update
According to the International Monetary Fund, the Tanzanian economy grew at 6.9% in 2012, and is projected to achieve an over 7% growth rate in 2014.

The National Bureau of Statistics announced that in the second quarter of 2013, Tanzania’s economy grew 6.7% (compared to 6.4% in the same period of 2012). The sectors that grew markedly included agriculture, electricity, construction, transport and communication.

Dr Honest Ngowi, business economics lecturer at Mzumbe University, commented that there were more indicators of growth than setbacks currently in Tanzania, that at 6.1% inflation was decreasing and that oil and gas licensing may stimulate further growth. (Tanzania Invest)

Tanzania and China promote partnership
On a recent visit to China, the Tanzanian Prime Minister signed five Memorandums of Understanding in Beijing with his Chinese equivalent. The agreements include partnerships in science and technology, tourism, textile manufacture, cotton production, and the construction of a new Chinese Embassy in Dar es Salaam.

The Prime Minister expressed his gratitude to the Chinese government for the ‘soft’ loans provided to Tanzania, explaining that in comparison to loans from other countries, the terms have been easier. Tanzania would begin to pay China back a US $24.6 million loan that was used to renovate the Tanzania-China Friendship Mills.

Tanzania and China have also signed seven contracts, totalling US $1.7 billion, for investments in electricity, construction, and research. These include a renewable energy research centre and construction of residen­tial housing and business centres throughout Tanzania. (Tanzania Invest)

Bank of Tanzania treasury bond
The Bank of Tanzania has for the first time floated 15-year treasury bonds with a 13.5 % coupon aimed at further development of the country’s financial markets. This will raise funds for long term development projects and also be a point of comparison with market instruments such as mortgage financing and corporate bonds. (The Guardian / IPP)

Protests against Electronic Fiscal Devices
The government continued to pursue its policy of insisting on the use of Electronic Fiscal Devices (EFDs) by traders although businesses had objected to the tax recording machines. Traders in Kariakoo and elsewhere closed their business for several days in protest. The Ministry of Finance and the Tanzania Revenue Authority (TRA) said they were looking into reducing the cost of the device, but reiterated that businesses could not avoid using the EFD system as it was the best way to get accurate tax calculations and keep records.

Traders are against the EFDs, explaining that the device is too costly at TSh 800,000 per piece. The TRA said the actual price ranges between TSh 600,000 and TSh 778,000, depending on the model and type. The Deputy Minister for Finance noted that these are cheaper in comparison to other countries and were made specifically for Tanzania.

The parliamentary economic and trade committee has proposed a joint committee with traders to address the problem. The House team asked that the taxman raise public awareness, and the option of paying for EFDs in instalments was also proposed. The committee requested the government to remove import duty on the devices so as to lower costs. (Citizen)

Rapid rise on Dar es Salaam Stock Exchange
Data from the Dar es Salaam Stock Exchange in late November shows that the value of all 12 local listed companies – as measured by the domestic market capitalization – more than doubled to TSh 5.96 trillion (US $3.7 billion) at the close of trading from TSh 2.94 trillion (US $1.87 billion) at the close of last year.

The Dar es Salaam bourse said market activity was skewed towards foreign investors, with local investors making a minimal contribution focused on the National Microfinance Bank (NMB) and the CRDB Bank (formerly the Cooperative Rural Development Bank).

BUSINESS & THE ECONOMY

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by Paul Gooday

Overall economic outlook
Tanzania continues to do well in maintaining overall macroeconomic stability. Along with institutional and policy reforms, this has been a fundamental factor behind the strong economic growth rates. The main drivers of growth have been agriculture, manufacturing, wholesale and retail trade, transport and communication activities. Tanzania has also continued to record strong export growth and the country’s medium-term growth prospects are around 7%, significantly boosted by natural gas discoveries. (African Economic Outlook)

Banking on trade with China
Tanzanians doing business with China can now pay for their supplies using the Chinese Yuan Renminbi (CNY), thanks to an initiative by the National Bank of Commerce (NBC). The bank’s initiative enables Tanzanian traders and businesses to pay for goods and services sup­plied by Chinese firms directly by using the Yuan, thereby reducing the costs incurred through exchange rates from purchasing other cur­rencies. A recent survey released by, HSBC (based in Hong Kong) has stated that by 2015, one-third of China’s international business transac­tions will be made in Chinese Yuan. (The Citizen)

Bank of Tanzania (BoT) figures indicate that Tanzania’s exports to China, the world’s second largest economy, increased by nine times between 2005 (Tsh101 billion) and 2010 (Tsh908 billion). The total trade volume between the two countries reached USD 2.15 billion in 2011 and USD 2.5 billion in 2012. Analysts project that trade between China and Tanzania will continue to grow at more than 15 per cent annually. The BoT attributes the increase in trade volumes to receipts from travel and manufactured goods as well as traditional exports.

Chinese investment in Africa generally increased from USD900 million in 2000 to USD68 billion in 2010 aided by its ‘China-Africa’ policy – trading with Africa without any conditions.

Transport/Infrastructure
The African Development Bank (AfDB) has approved two loans totaling USD232.5 million for the 157.5-kilometre road project from Arusha to Taveta and Voi in Kenya, crossing the border at Holili (Tanzania), This aims to reduce the cost of transport and enhance access to agricul­tural inputs, larger markets and social services within the East Africa Community. Tanzania will be awarded USD120 million. The project, which is expected to be completed by December 2018, is also jointly financed by the Governments of Kenya and Tanzania. The Africa Trade Fund has extended a grant for a small component for trade facilitation at the Namanga border, bringing the total cost of the project to USD 262.2 million.

AfDB’s Regional Director for the East Africa Resource Centre confirmed that the road had been identified in the East African Regional Integration Strategy Paper (RISP 2011-2015) and the East African Transport Strategy and Regional Road Sector Development Programme of November 2011 as a priority. The East African Community (EAC) seeks to improve regional transport infrastructure to encourage economic and social development in the region, promote tourism and foster regional inte­gration, while reducing the cost of doing business by supporting cross-border and international trade.

The Arusha-Holili/Taveta-Voi Road is one of the transport corridors of the EAC region meant to increase competitiveness of the region on the global market and at the same time promote regional integration. The project road links the Northern Corridor to the Central Corridor across the common border of Tanzania and Kenya through Arusha, Minjingu (Lake Manyara) and Babati to Singida and Dodoma. The corridor at completion will link the port of Mombasa to northern and northwestern Tanzania and the landlocked countries of Uganda, Rwanda, Burundi and the Democratic Republic of Congo. (African Development Bank)

Tanzania becomes Japanese investment hub
The Japanese Minister for Economy, Trade and industries, Toshimitsu Motegi, announced that Japan had nominated Tanzania to be a major economic hub for business and investment in the African continent. The business community in the country have welcomed this development as a real opportunity to transform Tanzania into an industrial economy.

Among the projects lined up for implementation include the replace­ment of the central line railway network with the international gauge, and expansion of the port at Dar es Salaam to increase efficiency in service delivery. With the implementation of the plan, Minister Motegi said the industrial sector contribution to GDP, now below 20%, would more than double.

The Confederation of Tanzania Industries (CTI) chairman, Felix Mosha, stated that the governments’ efforts to improve the energy and infra­structure sectors were commendable but not enough. He reiterated that the budget increments in the energy and infrastructure sectors are welcome but remain small compared to the mounting demand for the services to reduce the cost of doing business. The sudden increases in certain charges and duties by regulatory authorities could discourage some potential investors.

If Tanzania is to achieve the Development Vision 2025, there would have to be improvements in the rules and regulations. Vision 2025 is aimed at developing the nation from an LDC (Lesser Developed Country) to a Middle Income Country. The Vision matches well with the Japanese plan to make the country a major economic hub for business and invest­ment throughout the continent. The CTI believes the Japanese plan will enhance the growth of local businesses and encourage economic development. (Daily News)

MINING & ENERGY

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by Roger Nellist

Tanzania in the wider African context
Recent Tanzanian mining developments were included at the Africa Mining Summit convened by the Commonwealth Business Council in London on 25-26 June 2013, although the country was not represented at Ministerial level. Ministers from other leading African mining countries – notably Cameroon, Ghana, Kenya, Rwanda, South Sudan and Zambia – shared their experiences and highlighted recent policy approaches to mineral development in their countries.

Recurring themes at the summit were (a) increased acceptance of greater transparency in mining sector operations, driven in part by the Extractives Industry Transparency Initiative (of which Tanzania is a member); and (b) the emergence across the continent of various forms of “resource nationalism” – of which the most common are the need to maximise national value-add from the minerals produced and also to ensure that local communities where the mining operations take place derive specific, identifiable benefits. These themes for mining also ring true for oil and gas operations (see TA 105 on Tanzania’s offshore gas developments).

In a presentation at the summit by IntierraRMG, Tanzania was bench-marked against other African mineral-producing countries, confirming that the country is a significant minerals player, especially in gold. In recent years Tanzania has ranked 3rd in the African annual gold production league, producing significantly less than South Africa and Ghana but a little more than Mali, Burkina Faso, Guinea, Zimbabwe and others. Tanzania also ranked 3rd in 2011 and 2012 in the number of new gold prospects drilled across the continent – which will help sustain the country’s gold production levels in future years. Tanzania’s Geita mine ranks 4th in the list of Africa’s top 10 gold mines.

Tanzania produces useful quantities of other minerals too; but in terms of the total value of all minerals produced, the country ranks only 11th out of the 28 African countries listed by IntierraRMG. South Africa dominates Africa’s minerals value list, with some US$60 billion of annual mineral production revenue, which dwarfs Tanzania’s US$2 billion, as well as Zambia’s US$7 billion (in second place in the African league table). Mozambique lies in third place (with about US$5.5 bil­lion) and Ghana is fourth with US$5 billion.

Gold (20%), coal (19%) and copper (9%) together accounted for almost half of total African mineral production revenue in 2012. Importantly, mineral prospecting and appraisal work last year enabled Tanzania to identify additional resources of each of these three key minerals, as well as other major metal and mineral resources, ensuring that the mineral sector has good potential to continue to contribute to the Tanzanian economy in the years ahead. (www.intierrarmg.com)

The Africa Mining Summit also demonstrated that the contribution of mining to economic and social development in Sub-Saharan Africa is under increased scrutiny and criticism. Minerals and petroleum are non-renewable resources, and unless the production gains are effi­ciently captured and invested by governments, the host countries could experience a net reduction in their national wealth.

Mineral taxation
In April 2013 the International Centre for Tax and Development (ICTD) published a paper entitled Low Government Revenue from the Mining Sector in Zambia and Tanzania: Fiscal Design, Technical Capacity or Political Will? Written by Olav Lundstøl, Gaël Raballand and Fuvya Nyirongo, it examines the impact of Tanzania’s mineral taxation regime on govern­ment (GOT) revenues over the last decade. This suggests that the GOT could have earned substantially more had it levied on an internationally competitive set of fiscal terms.

The authors illustrate the big turn-around in Tanzanian mining over the last 15 years, citing export statistics for gold, the country’s domi­nant mineral. The annual value of Tanzanian gold exports increased from just US$ 22 million in 1998 to US$ 2,200 million in 2011, reflecting a tenfold increase in the quantity produced and the large global price hike. However, government revenues from the mining sector have not risen correspondingly. The country’s mining tax regime during this period was basically an outcome of efforts to make the sector more attractive in the late 1990s, following decades of public ownership and stagnating levels of investment. In an attempt to address the perceived revenue imbalance, mining terms were tightened in 2004 and again in 2010 – though efforts to enhance revenue flows from existing mining operations were reportedly frustrated by fiscal stabilisation terms previ­ously agreed with the mining companies.

The ICTD paper compared mineral revenue-sharing between invest­ing companies and host governments in seven major mining countries worldwide, including Tanzania and Zambia, and then estimated the amount of mining revenue forgone by the government during the period 1998 – 2011 due to ‘ineffective mining revenue-sharing terms’. Noting that effective sharing of mineral benefits between companies and governments has been notoriously difficult to achieve, especially in Sub-Saharan Africa and certainly when compared with petroleum operations, the authors found that if Tanzania had performed as well as the best mining countries in the comparative benchmarking sample, the government might have collected an extra US$ 1 billion of tax rev­enue from large mining operations over the period 1998 – 2011. Total revenues might then have been US$ 1,831 million instead of the US$ 776 million it is understood the GOT earned. This would have been an increase of 136%, or very roughly US$ 75 million extra per year. (Zambia performed much worse, with a discrepancy of almost 300%).

The ICTD paper also examined the composition of the GOT’s mining revenues. Company data from the most recent Tanzanian Extractive Industries Transparency Initiative (TEITI) reports for 2008/9 and 2009/10 showed that six mines dominated the large-scale mining sector, all pre­dominantly in gold. These accounted for 85-90% of the audited export of gold from Tanzania as well as the majority of the direct investment, pro­curement and employment in the large-scale mining sector . However, ICTD’s analysis of these TEITI reports found that profit-based corporate tax made a very modest contribution to mining revenue, despite 5-10 years of operations under the current mine owners and a global mineral super cycle since 2005/6. Gross value-based corporate taxes, together with employee-based taxes, dominate the tax revenue collected from the mining sector. As is common in other mineral producing countries, certain fiscal exemptions are part of the mining regime, though the government is now trying to minimise their use. (For full text, see http:// www.ictd.ac/sites/default/files/ICTD%20WP9.pdf)

Electricity: The US “Power Africa” Initiative
On 2 July 2013, in the presence of President Kikwete, President Obama delivered a speech at the Ubungo Symbion Power Plant in Dar es Salaam. Drawing attention to the fact that nearly 70% of Africans lack access to electricity, a major obstacle to economic and social develop­ment, Obama profiled a major new initiative – “Power Africa” – that he had announced in Cape Town a few days earlier. Power Africa prom­ises to double access to electricity in Africa, as a first step bringing elec­tricity to 20 million homes and businesses. It will do this by matching public and private resources with projects led by six African countries that are committed to energy reforms, including Tanzania. The US is committing $7 billion in support of this new initiative and private sector companies have already committed more than $9 billion.

Obama cited the Ubungo plant as a model for replication across the continent: ”This facility was idle. But the Tanzanian government, under President Kikwete’s leadership, committed to making reforms in the energy sector. With support from the Millennium Challenge grant, General Electric, and Symbion, they got it up and running again. More Tanzanians got electricity”.

Obama appealed for a sense of urgency in African energy reform effort. One of the things he had learned from the business roundtable during his visit was that “if we are going to electrify Africa, we’ve got to do it with more speed…. It’s hard to attract private-sector business if they feel as if their money is going to be tied up forever in uncertainty. So we want to focus on speed, but we also want to do it right. And the United States intends to be a strong partner in this process”.

TRANSPORT

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by David Brewin

Dar-Chalinze expressway planned
Plans to upgrade the road between Dar es Salaam and Chalinze to a six-lane highway are well advanced, according to the Deputy Minister for Works Gerson Lwenge. The road will be operated as a toll-road. “The 110km Dar es Salaam – Chalinze road has been a headache to transport­ers and has been a cause of unnecessary delays and accidents. But with the implementation of the project, the cost of doing business will be cut down,” he said.

According to Tanroads, the project is expected to take three years and entails construction of six lanes to expressway toll road standards with service roads on both sides and grade separated interchangeability. Access will be controlled and embankments will be high enough to accommodate frequent underpasses and interchanges while maintain­ing good vertical profile. (Daily News)

Tanzania set to become port hub for East Africa
Dar-es-Salaam port has been ranked the top port in East Africa by the the 2012 East African Logistics Performance Survey by the Shipper Council of East Africa (SCEA). This significant improvement in logistics performance is due to drastic changes implemented by the Tanzanian Port Authority in processing cargo in Dar-es-Salaam. However, ship­ping a container from East Africa can still cost more than double than if it were shipped from the Far East.

In addition, new ports are expected in Bagamoyo (which will have the capacity to handle 20 million containers per year, compared with Dar es Salaam’s installed capacity of 500,000) and Tanga. Furthermore, exten­sive infrastructure improvements are planned at Mtwara, Tanga and Bagamoyo. (tanzaniaInvest)

EVEN MORE GAS DISCOVERED

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Roger Nellist, the latest volunteer to join our panel of contributors reports as follows on an announcement by Statoil of their third big gas discovery offshore Tanzania:

On 18 March 2013 Statoil and its co-venturer ExxonMobil gave details of their third high-impact gas discovery in licence Block 2 in a year. The new discovery (known as Tangawizi-1) is located 10 kilometres from their first two discoveries (Lavani and Zafarani) made in 2012, and is located in water depth of 2,300 metres. The consortium will drill further wells later this year.

The Tangawizi-1 discovery brings the estimated total volume of natural gas in-place in Block 2 to between 15 and 17 trillion cubic feet (Tcf). Depending on reservoir characteristics and field development plans, this could result in recoverable gas volumes in the range of 10-13 Tcf from just this one Block. These are large reserves by international stand­ards. By comparison, Tanzania’s first gas field at Songo Songo island has volumes of about 1 Tcf.

Statoil has been in Tanzania since 2007 and has an office in Dar es Salaam. It operates the licence on Block 2 on behalf of the Tanzania Petroleum Development Corporation (TPDC) and has a 65% working interest, with ExxonMobil Exploration and Production Tanzania Limited holding the remaining 35%. It is understood that under the Production Sharing Agreement that governs the operations, TPDC has the right to a 10% working participation interest in case of a development phase.

Commenting on the Tangawizi-1 announcement, the Tanzanian Minister for Energy and Minerals, Hon. Professor Sospeter Muhongo, said “The Tanzania Government is pleased to learn about additional gas resources discovered in Block 2 and remains optimistic on future developments”.
The Block 2 discoveries complement other recent gas discoveries made by the BG Group. The investors and the Government have both domes­tic gas utilisation and large-scale exports in mind.

For more information see: http://www.statoil.com/en/NewsAndMedia/ News/2013/Pages/18Mar_Tanzania.aspx

Map showing the Block 2 Licensing Area and locations of the gas discoveries Source: Statoil

Map showing the Block 2 Licensing Area and locations of the gas discoveries Source: Statoil


Great expectations
In February Samuel Kamndaya, the Citizen’s Business Editor, published some very useful background. Extracts:

‘Come 2023, natural gas will contribute up to 35% of the total market value of officially recognised final goods and services produced in Tanzania, analysts say. But that will happen only after companies that are prospecting for natural gas in the deep sea south of Tanzania get enough finds to attract investors into developing a Liquefied Natural Gas (LNG) facility for dissolving the hydrocarbon product for an export market. Getting to that stage, analysts caution, requires a great deal of patience, commitment, predictability and information sharing among key stakeholders–including the government, investors and wananchi, considering the massive investment required to realise the dream.
“You need a great deal of time, expertise and investment before bring­ing such a project to fruition,” said the BG Tanzania head of policy and corporate affairs, Fred Kibodya. “Developing an LNG project requires a massive investment of not less than $15 billion in the region.” His Statoil Tanzania counterpart, Ms Genevieve Kasanga, puts the estimated investment in setting up an LPG project in the region of $20 billion.

Tanzania’s GDP now stands at $23 billion. A 35% contribution to GDP, at the current rates, translates into an input of $8.1 billion. This is close to Tanzania’s entire budget of TShs 15.1 trillion (about $9.5 billion) for the current financial year. Agriculture contributes about 24% to Tanzania’s GDP and tourism comes second with a contribution of about 17%. If the country’s current economic growth projection of 6.5% is sustained, and a clear linkage is built between natural gas and the manufacturing and agriculture sectors, Tanzania should graduate into a middle income country.

“The fact that natural gas may bring economic fortunes to Tanzania can in no way be underestimated,” says Prof Humphrey Moshi of the University of Dar es Salaam. “But we should not expect wonders if there is no linkage between the sector and other dynamic sectors such as industries and agriculture.”

But Mtwara is not happy
The prospect of sending the gas by pipeline to Dar es Salaam for use by new industries there has caused considerable upset in Mtwara. People there want new industrial plants to be built in Mtwara, where the gas will come ashore, rather than in Dar es Salaam. There have been violent demonstrations in Mtwara, reportedly supported by Mtwara Urban CCM MP Hasnain Murji.

In early February, the Citizen quoted Mr Murji, who has publicly differed with the position of his party on transporting gas to Dar es Salaam, as calling for a Select Committee to probe controversies sur­rounding the matter. He asked for the Speaker’s directive on why Parliament had failed to form a committee as had been agreed earlier. House chairperson, Mrs Jenister Muhagama, said nothing could be done because the Speaker, Ms Anne Makinda, had already ruled on the matter. Parliament eventually dropped the idea of forming a select-committee because it was satisfied with the Prime Minister’s handling of the matter.

AIR TANZANIA RESUMES FLIGHTS

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Air Tanzania (ATCL) have resumed flights on the Kigoma-Dar es Salaam route following the successful repair of one of its planes. The Dash 8 plane was grounded at Kigoma Airport after one of its cockpit windshields developed a crack while airborne. The plane had flown for about 30 minutes but landed safely at the airport after the mishap.

The airline may be about to have a new lease of life following a recent visit by President Kikwete to Oman. It is believed that the Omani Development and Investment Company has agreed in principle to invest $100 million (TShs160 billion) in ATCL. Sheikh Salim Al Harthy, Chairman of Al Hayat said: “We thank His Majesty Sultan Qaboos Bin Said of Oman and President of Tanzania (Jakaya) Kikwete for the chance they have offered us as we plan to build an airline training cen­tre, good offices for ATCL, to buy planes and engage in other develop­ment activities. (The Citizen)

SWISS BANK ACCOUNTS

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Swiss Ambassador Olivier Chave has revealed that the Swiss National Bank have found certain ‘shadowy individuals’ who have spirited TShs303.7 billion ($178 million) out of Tanzania to what were described as ‘Alpine offshore havens with a reputation for secrecy.’ During a courtesy call on CHADEMA Deputy leader, Zitto Kabwe, in January this year, he said that if Tanzanian officials provided evidence that the money had been fraudulently obtained, the Swiss national authorities would wire it straight back to Tanzania. “We have done that several times – we once returned cash stashed in our banks by former Nigerian president Sani Abacha,” he said, and added that Tanzania could also recover back taxes on the money.

Needless to say this soon created a storm in Parliament. Mr Kabwe said he thought that the Tanzanian authorities did not really want to get the money back. The Kigoma North MP then tabled a private motion proposing the formation of a select committee to probe the matter, but the motion was rejected. According to the Citizen, MPs began to sling accusations and there was apparently a threat that Mr Kabwe would name and shame the thirteen individuals allegedly involved.

The Speaker of the National Assembly Anne Makinda brought the debate to an abrupt end with the assertion: “Government will use its organs to establish the truth, with assistance from international inves­tigators.”

Prime Minister Mizengo Pinda was adamant that the issue be handled carefully because it was “sensitive.” He assured the public that govern­ment would do all it could to expose the faces behind the Swiss billions. Anti-corruption chief Edward Hosea said his office would do whatever it could to figure out whose cash was hidden in Swiss bank accounts.

BUSINESS & THE ECONOMY

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By Paul Gooday & James Pringle

Strong economic growth predicted
Tanzania’s economy is expected to see higher growth than other countries in East Africa. This is according to two new surveys by the World Bank and investment firm PineBridge, which highlighted the services and construction sectors and increasing global demand for gold as the key drivers of growth. PineBridge predicted the Tanzanian economy will grow by 7% in 2013, com­pared to 4.5-6.5% for other countries in the East African Community. (East African)

According to the Standard Chartered Bank Economic Outlook for Tanzania, developments in the energy sector will continue to bolster economic growth both in 2013 and over the medium term, driven by the discoveries of natural gas reserves off the coast of Tanzania estimated at 28.9 trillion cubic feet. The continued growth in agriculture, a successful cotton crop and investment in infrastructure should further brighten the economic outlook, combined with the expected increase in receipts from tourism, gold and manufactured goods.

Tanzania is included in Standard Chartered Bank’s ‘7% club’ – a list of coun­tries with GDP growth strong enough to make the economy double in a decade. (www.tanzaniainvest.com)

Inflation
The rate of inflation for January 2013 has decreased to 10.9% from 21.1% recorded in December 2012. The decrease is explained by the speed of price increases in commodities decreasing compared to December 2012. The infla­tion rate for food and non-alcoholic beverages decreased to 11.9% in January 2013 from 13.1 % recorded in December 2012. (www.nbs.gov.tz)

IMF Verdict
An International Monetary Fund (IMF) mission, led by Mr. Paolo Mauro visited Dar es Salaam from 21 February to 6 March and issued this statement: “Tanzania’s economy has continued to perform robustly. Economic growth is projected at about 7% in 2013. Inflation has continued to fall, albeit more slowly than envisaged, and is projected to be in the single digits by mid-2013.

Economic policy will aim at further moderating inflation, preserving a sustain­able debt outlook, and increasing foreign reserves, which will be facilitated by further enhancing exchange rate flexibility.
The mission was encouraged by the authorities’ readiness to moderately tighten monetary policy to meet their inflation objective of 7% by end-2013. It supported the authorities’ aim for a further reduction in the budget deficit in 2013/14, based on revenue targets, and also transparent support to the power sector. (IMF press release, www.imf.org)

IMF Loan imminent
Tanzania has indicated that it will borrow $114m from the International Monetary Fund, under the standby credit line agreed in 2012. This credit is intended to provide a financial cushion against a reduction in external demand and access to global finance.

The high cost of imports of machinery for oil and gas exploration, and the Eurozone crisis, have had a negative impact on Tanzania’s balance of pay­ments. The IMF loan will act as a buffer against this problem, and will strengthen Tanzania’s position as it prepares to borrow upwards of $600m from the international debt market. (The East African)

Chinese President visits Tanzania, announces $10bn port in Bagamoyo
The recently appointed Chinese President, Xi Jinping, visited Tanzania in late March. He signed a range of economic partnership agreements and announced a $10bn project in Bagamoyo to construct a new port, complete with transport links and an industrial zone. Other agreements covered improvements to Tanzanian hospitals and the building of a Chinese cultural centre.

This was only the second country President Xi has visited since becoming President, after Russia, and was the first stop of a three-country tour of Africa. In a speech given to launch the Julius Nyerere Conference Centre in Dar es Salaam, built with Chinese support, President Xi spoke of the long history of China’s good relations with Tanzania. Details of the Bagamoyo port project have not been released, but according to the Economist Intelligence Unit the scale of the investment suggests a port 20 times the size of Dar es Salaam port. The terms of the Chinese finance for the port, and its operations, are not yet known, but it is expected to become operational by 2017.

A report in the Telegraph noted that China is the second-largest foreign investor in Tanzania, with stakes in agriculture, coal, iron ore and infrastructure, and quoted China expert Jonathan Holslag, head of research at the Brussels Insitute of Contemporary China Studies, as saying that Mr Xi was keen “to showcase that China’s approach to Africa is different from the West,” and that “…China is reviving [their] partnership with Tanzania by investing heavily in its infrastruc­ture”, such as railways that could provide a vital link to Chinese-run mines in the Democratic Republic of Congo.

Later in President Xi’s tour, he joined other leaders of the BRICS grouping (Brazil, Russia, India, China and South Africa), to announce the formation of a new Development Bank. This move was widely seen as a challenge to western-dominated financial institutions, in particular the World Bank. (CNN, Economist Intelligence Unit, Daily News, Guardian.)

Gas
Protests broke out recently in Mtwara region over the extraction of gas and the construction of a pipeline to transport the commodity to Dar es Salaam for refining and eventual sale. The protests caused damage estimated at $929,000 in vandalised property. Four people are said to have died in the riots and scores injured.

Local residents want the gas processing plant constructed in Mtwara instead of Dar es Salaam. Uwesy Salum Hamisis, chairman of the Mtwara elders, said the residents want the government to honour an earlier pledge to set up manufac­turing industries, including fertiliser, cement, glass and ceramic plants. Former president Benjamin Mkapa who hails from Mtwara has also raised concerns about the project. However government officials said the gas plant will remain in Dar es Salaam. (East African)

Mining
Peak Resources, an Australian firm, is expected to earn $361m annually from the Ngualla rare earth project in Mbeya region. According to Shaw Stockbroking Ltd, Ngualla is among the top three rare earth projects outside China, and has a pre-tax net profit value of $1.57bn. The site has mineral resources of 170 million tonnes. (The East African)

Banking
Barclays and Absa Group have announced they plan to combine their Africa operations. This deal, worth £1.3bn, would create the largest retail bank on the continent. It follows Barclays’ 2005 purchase of a majority stake in Absa, and efforts since 2011 to integrate the two banks’ operations. Absa would acquire Barclays operations in nine countries, including Tanzania.

Absa currently owns a 55% stake in the National Bank of Commerce (NBC), one of Tanzania’s leading retail banks. The Absa Chief Executive, Maria Ramos, said that no job losses or management changes would result from this move. (Financial Times, with thanks to John Sankey for this item)
The Tanzanian Minister for Finance and Economic Affairs, William Mgimwa, has called on local banks to stop raising lending rates, to encourage economic growth. The government now expects banks to peg their rates to the Bank of Tanzania rate, rather than to Treasury bills yield rates. (East African)

Agriculture
Tanzania’s Parliament on 4 February 2013 adopted a new government pro­gramme to provide loans to young people under 35 who are interested in start­ing agricultural businesses. TShs 200 Billion ($24 Million) will be earmarked annually from the national budget for the project. The Youth Fund will be an important means to curb the problem of youth unemployment. It will empower the young population to create their own employment opportunities, stimulate food production and help the country meet agricultural demands.

The new project is part of the government’s plan to invest a growing share of its budget in agriculture. According to the Director of Youth Development in the Ministry of Information, Culture and Sport, Mr Elisante Ole Gabriel, the gov­ernment will provide more details on how and where to apply for access to the Youth Fund, which will be available from 1 July 2013. (www.TanzaniaInvest.com)

Tanzania expects to earn $200m in revenues for coffee exports in the 2012­2013 season, compared to original projections of $250m. This reduction is a result of bumper harvests in South America and reduced demand in Europe and the US. Global prices have dropped by 24% in the past year, and are expected to fall further. The Tanzania Coffee Board plans to expand coffee acreage to an annual production target by 2020 of 100,000 tonnes, compared to 65-75,000 tonnes at present.

The outlook for tea is more positive. Industry managers across the region are expecting high prices following low production worldwide. This is despite a prolonged drought that affected East African tea estates early in 2012. (East African)

Construction and Housing
The National Housing Corporation (NHC) has officially announced a project to build two new satellite towns in Meru and Arusha-Rural Districts, where it owns more than 1000 acres of land. In 2011, 430 hectares were acquired at the cost of TShs 8.6 Billion ($5.4 Million) by the newly established Arusha District Council Trust Company. Hundreds of residential houses and shopping malls will provide low-income earners with ultra-modern residential houses. The houses will be for rent or sale. The project will also boost the District Council’s revenues.

NHC is state-owned and is Tanzania’s oldest public real-estate developer. It operates under the Minister for Lands, Housing and Human Settlement Development. Arusha is a vibrant dynamic urban centre which serves as the capital for the East African Community. The proposed new cities represent the biggest project the Arusha region has ever embarked on. A great deal of support from development partners in and outside the country will be required. (www.tanzaniainvest.com)

BIG PROGRESS IN TRANSPORT – AIR

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Fastjet FTZ1A (Airbus A319) shortly after landing in Dar es Salaam JNIA on its inaugural flight (Fastjet).

Fastjet FTZ1A (Airbus A319) shortly after landing in Dar es Salaam JNIA on its inaugural flight (Fastjet).

New ‘no frills’ airline launched
A new ‘no frills’ airline called ‘Fastjet’, modelled on the Easyjet airline which has revolutionised air travel in Europe, was launched in Africa on November 29th. The famous entrepreneur Sir Stelios Haji Ioannou, who started Easyjet, has joined with Lonrho’s airline, which flies in West Africa to establish the new group. Significantly, Fastjet chose to begin in Tanzania and Dar es Salaam airport will be its first African hub. It has already leased two planes, has 15 more on order (all Airbus A319s with a capacity for up to 156 passengers), and plans to build up to a fleet of 40.

Tanzania’s dynamic Minister of Transport, Dr Harrison Mwakyembe, spoke about the unusually speedy implementation of this vast project when he addressed a crowded AGM of the Britain Tanzania Society in London in mid November. Fastjet plans to expand from Tanzania into Kenya in 2013 and then to Ghana and Angola which are already served by the Lonrho airline. It is advertising for pilots, passenger services agents, cabin crew and crew managers and also for retail sales agents in the East African media.

‘Taking the country by storm.’
The Citizen wrote that the launch had taken the country by storm, as the airline transported 900 passengers in eight flights from Dar to Mwanza and Kilimanjaro and back on its first day! The airline’s management told investors that demand for seats on these routes far outstripped supply. In slightly over a week, Fastjet had recorded 8,000 bookings for its first two routes and the Fastjet.com website had received over 20,000 hits in its first four days. Fastjet sells air tickets as cheap as $20 (TShs 32,000) one way pre-tax, although most tickets are expected to sell at around TShs 120,000 according to Chief Executive Ed Winter. This is still significantly less than its main competitor, Precision Air, which charges about TShs 375,000 for a return ticket between Dar es Salaam and Mwanza excluding taxes. Precision Air operates three flights a day on the Dar-Mwanza route. Air Tanzania (ATCL) operates one flight a day for the same route, while Fastjet now operates two flights a day.

The London Times, in its coverage, emphasised the new airline’s mascot. In an article under the heading ‘Parrot prepares to take to the skies,’ it wrote that Sir Stelios had taken the African grey parrot as the airline’s mascot. It said that the African grey was renowned for its intelligence and therefore the perfect personification of the smart way to fly.

What will happen to Precision Air and Air Tanzania?
Precision Air, the main Tanzanian airline, has been developing rapidly and, unlike Air Tanzania, is a well managed and successful airline. It has 13 aircraft and is not paying dividends to shareholders from its profits (TShs 634 million last year) but using them instead to modernise its fleet. It seems likely to face strong competition from Fastjet on the routes it covers. However, according to the East African, it may have already adopted a strategy to protect its Tanzanian market. In November it received a new 50-seater ATR 42-800 plane, thus being the first airline to operate this new model, and is expected to receive two more as part of a three year $100 million fleet expansion plan. ATR (Aerei da Trasporto Regionale or Avions de Transport Régional) is a French-Italian aircraft construction company headquartered in Toulouse, France. The ATR’s are able to land at most of Tanzania’s airstrips many of which have hangers that cannot accommodate bigger planes.

Air Tanzania Company Ltd has had such a blighted history, exacerbated often by poor management, that many are said to be wondering if it has any future in the new age of fierce competition. But it struggles on and in October 2012, after a long gap when it was not operational, it took to the air again with its two aircraft – a 50-seater Dash SQ-300 and a leased Boeing 737-500. It also has to cope with other competition in Tanzanian airspace including planes from Link, Kenya airways, Fly 549, Air Uganda and Rwandair.

Older airlines not afraid
Immediately after the first Fastjet flights the two older airlines issued a statement which said that Fastjet was not a threat to their businesses because of the quality of their services and customer loyalty that they had cultivated over a long period.

ATCL Acting Commercial Director Mwanamvua Ngocho noted: “I don’t see any threat, though we perceive the coming of Fastjet as a challenge for us to come up with more innovative services. These are business techniques which aim at capturing human psychology without necessarily reflecting the real cost of travelling…Otherwise, we will work together without any problem,”. She also expressed doubts about the sustainability of the low budget airline, saying it would take a short time for Tanzanians to understand that the real flying cost is almost the same as other airlines especially with bags and other luggage taken into account.

Fastjet said they were not launching a price war with other operators but aimed at stimulating the market by attracting new travellers who had not been flying before. As this issue goes to the press, there are reports, as yet unconfirmed, of a possible partnership with Emirates and moves to establish a hub in South Africa (London Times 5th December).

Third air terminal for Dar
The government has called for bids from 20 international firms for the construction of a third terminal at the Julius Nyerere International Airport in Dar es Salaam as traffic increases substantially each year. The expanded airport aims to step up passenger numbers to 8 million per year. The successful bid will be announced in January 2013 and the work will be done under a public/private partnership arrangement. The airport was constructed in 1984 when passenger numbers were 1.5 million.