Updates on the business environment, key deals, data releases and sector news.
BUSINESS ENVIRONMENT
Dar es Salaam-based Kamal Group announced this month that its Kamal Industrial Estate, Tanzania’s first private export processing zone (EPZ), will be complete in July 2010. The 300-acre, USD300m project located just outside the capital city has attracted local and foreign investors, with 24 plots already allocated. The Tanzanian government has also been busy promoting and launching EPZ projects in an effort to catalyse industrial development. However, investor interest thus far has been mediocre, due largely to lack of adequate local infrastructure and sluggish export markets.
Arusha municipality says it will spend TSH22bn (USD15.3m) on road improvement during the 2010/11 fiscal year, including tarmacking and repairing existing roads, installing drainage and traffic lights, and constructing several new ring roads to ease traffic congestion in the tourism centre.
Infrastructure: The new 720-metre, USD35m “Unity” bridge inaugurated this month connects Tanzania and Mozambique across the Ruvuma River. The bridge – built over the last five years by China Geo Engineering Corporation – was expected to boost cross-border trade tourism. However, road networks leading into the remote crossing remain dauntingly rough and often non-existent in the rain, which defeats the purpose of the bridge. It has also not been equipped with any immigration and customs border posts. Tanzania’s Finance Minister Mustafa Mkulo described this as ‘inadequate co-ordination’.
DATA
- According to Bank of Tanzania (BoT) Governor Prof Benno Ndulu, Tanzania’s economy has expanded by 6% growth in 2009, beating projections of 5-5.5%. For 2010, the BT forecasts 6.5% or higher as tourism improves, and the rainfalls give a boost to agriculture and hydroelectricity production.
- Zanzibar’s public debt declined in March 2010, to USD108.4m, down from USD110m in February 2010, according to the Bank of Tanzania.
- Tanzania’s year-on-year inflation rate rose to 9.4% in April 2010, according to the National Bureau of Statistics. Inflation had been on a steady decline since October 2009, when it stood at 12.7%. Officials attribute April’s increase to rising food and fuel prices. Local analysts warn that pulled donor funding and government spending ahead of October’s elections may also help boost inflation to double digits this summer.
- Tanzania’s current account deficit narrowed 23% year-on-year in March 2010 as the country earned more from gold exports and spent less on imports, the Central Bank said in May. Tourism revenues and export crop earnings were also up.
- The Tanzanian shilling dipped by TSH50 to the dollar to TZS1,456/1,510 in mid-May. Banking sector officials attributed the drop to a tight dollar supply and weak agricultural inflows, and warned that the shilling could continue to depreciate in June in the absence of intervention by the Central Bank.
REGULATORY AND LEGAL CHANGES
Energy regulatory officials say they will be using X-ray fluorescence analysers (XRF) provided by Global Fluids International SA to test imported fuel by the end of this financial year. The new gadgets will allow officials to spot test fuel rather than sending samples to a lab. The new system will send reports electronically to the revenue authority and is expected to increase government revenue collection and decrease the amount of adulterated and sub-standard fuel in the market. Authorities found 57 of 164 petrol stations sampled between June and December 2009 to be trading in sub-standard fuel.
INDUSTRY NEWS
Energy:
- Finland’s Wartsila announced this month that it will finally severe ties with the embattled Independent Power Tanzania Ltd. (IPTL) plant. Wartsila had been providing operation and maintenance services to IPTL since 2002, but the independent power producer stopped paying for the services in 2007. IPTL has long been criticised for providing overpriced, inefficient power, and was finally shut down several years ago – only to reopen in 2009 to provide emergency power during a national shortage. Tanzania has experienced chronic power shortages for the past two decades due to cyclical droughts and government mismanagement of the sector.
- And rumours circulating this month say BG Group may be seeking a share of Ophir Energy’s Tanzania offshore exploration blocks. Several major oil companies have now expressed a growing interest in Tanzania’s offshore real estate.
Aviation:
- Sahara Air Cargo began operating flights out of Dar es Salaam in May. The company’s 17-tonne capacity air freighter fleet now flies from Dar to the DRC, Comoros, Rwanda, Burundi, Uganda and Kenya. Sahara operates across Africa, Europe and the Middle East.
Mining:
- Tanzania’s gold exports were up to USD2.8bn in the year ending March 2010, from USD2.6bn in the same period last year.
- Meanwhile, Tanzanian Royalty Exploration Corporation reported the discovery this month of a significant gold deposit at its Msonga Prospect in northern Tanzania.
- South Africa’s AngloGold Ashanti reported a surge in first quarter profits in May, backed by strong performance from its Tanzanian and Brazilian gold mines, which offset low production in South Africa.
- Australian uranium company Mantra Resources may be the first to negotiate a major new mining contract with the Tanzanian government under the country’s new mining legislation that provides for a free government stake in all new mining projects. Analysts say the state stake may be 10 to 15% in Mantra’s case, and will not hurt the potential profitability of the uranium mining project, which will be the country’s first.
Agriculture:
- The Sugar Board of Tanzania said this month that annual sugar output for the year beginning in April 2010 may rise 20% from 2009-10 levels due a better weather outlook.
- Tea output for the 2009-10 year ending in June may also rise 3.1% from last year, according to a statement by the Tea Board of Tanzania this month.
- Saudi Prince Sultan Bin Mohammed Bin Saud Al Kabeer said during a visit to Tanzania in May that he may consider investing in some of the country’s farmland. The prince has already sent a team of experts to scout land in Iringa, Lindi and Mtwara. Foreign appetite for farmland has come under harsh criticism in Africa, with similar projects having already been derailed in several countries including Kenya. Foreign farming is certain to spark even more controversy in Tanzania, where land is an especially sensitive issue.
Banking/Investment:
- Several banks introduced Islamic banking products this month in Tanzania. Absa Group’s National Bank of Commerce (NBC) and Stanbic Bank now offer a range of services in line with Sharia Law to cater to the country’s large Muslim community. Absa, a South African subsidiary of Barclays, also reported possible plans in May to hold an initial public offering for NBC on the Dar es Salaam stock exchange.
- Gulf African Bank also announced this month plans to expand into Tanzania and Uganda by the end of 2010. The Islamic bank also wants to expand its operations in Kenya, and is considering investment in Islamic insurance products for the region.
DEVELOPMENT FINANCE
Tanzania’s Finance Minister attempted to assure the country in May that USD220m in withheld donor budget support for the 2009/10 financial year will not adversely affect development plans. He said the government is already in talks with Stanbic Bank to secure a commercial loan to cover the missing funds, which are needed to support roads, electricity, water and railway projects. Donors say they are not happy with what they see as an unfavourable business and investment environment in Tanzania. Meanwhile, Japan granted Tanzania USD10.3m this month for emergency food supplies.
At the end of May, Tanzania was expecting a team from the US Millenium Challenge Corporation (MCC) to check up on progress in implementing the USD698m, five-year investment programme (‘compact’) signed in 2008. The MCC funds will be invested in water, transport and energy projects. Tanzania has to executive all spending agreed during the five-year period or will lose any funds not spent. So far, there is not much t see on the ground: Most projects are still on planning and contracting stages.
REGIONAL NEWS
Kenya, Tanzania, Uganda, Rwanda and Ethiopia have signed a landmark agreement regarding use of the Nile River Basin, after over a decade of talks about rights to the river water. Egypt and Sudan both refused to sign the treaty, which would replace the 1929 and 1959 agreements with the British under which the two countries together control 87% of the resource, with Egypt taking the majority. Egypt has said it will not sign any accord that reduces its quota.
But upstream states say they are no longer willing to accept Egypt’s effective veto as they pursue irrigation and hydropower projects. Ethiopia especially, which holds the source of the Blue Nile, is planning to construct several major hydropower dams for power generation that would affect the flow of the river downstream. Rwanda relies indirectly on equitable management of the Nile basin for sustainable irrigation of its agricultural sector, in which nearly 90% of the population still works. Burundi and the DRC are expected to sign the agreement in coming months.
As populations soar and food security plummets, many experts say control over water will increasingly become a flashpoint for conflict in Africa. Top officials from Kenya, the DRC and Burundi visited Cairo in late May in an effort to find a diplomatic solution to the potential crisis. For a workable agreement to be reached, Egypt must recognize that its uncompromising stance is no longer tenable. Despite declared support from Italy and lobbying by Egypt to convince other countries to cut off funding for upriver projects, many western donors have expressed strong support for hydropower development in the region. Egypt can also no longer rely on American backing against so many states in eastern Africa, a region where the US sees growing strategic interests. But the depth of Egypt’s reliance on the Nile – given that Egypt receives much less rainfall than the other riparian states – along with the country’s relative bargaining power in Africa, means that resolution of the current stalemate remains a long way off.
Kenya and Burundi joined Uganda, Tanzania and Rwanda this month in officially ratifying the East African Community (EAC) Common Market Protocol, set to come into effect 1 July 2010. Ironically, after dragging its feet the most, Tanzania was the first country to sign. Tanzania also waived visa requirements this month for Burundians. Kenyans, Ugandans and Rwandans are already exempt.
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