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Tanzania Country Brief: October 2010 Print E-mail
Tuesday, 09 November 2010
Updates on political risk, business environment, data releases, deals, key sectors, and regional news.


POLITICAL RISK

On 31 October 2010, Tanzania held presidential and parliament elections. Incumbent Jakaya Kikwete of the Chama cha Mapinduzi (CCM) won 5.3m out of 8.6m votes, a voter turnout of 43%. His closest competitor, Willibrod Slaa of Chama cha Demokrasia na Maendeleo (Chadema), won 2.3m votes. Seven out of Tanzania’s 18 parties competed in the presidential elections.

Overall, the elections passed without major incident. Delays in announcing results had led to clashes with the police in some places. Previously a flashpoint for outbreaks of violence, semi-autonomous Zanzibar remained peaceful after the island’s population had voted in favour of a power-sharing government between mainland’s ruling party and the island’s dominant opposition party in a referendum.

Although President Kikwete was widely expected to be re-elected for a second term, the opposition had, for the first time, gained credible ground in the campaign despite their limited means, indicating that Tanzania will, in the medium term, face an end of the uninterrupted rule of the CCM. With allegations of irregularities in the voter register and a clampdown on blogs, there are signs that this transition may not be as peaceful as Tanzania’s external image has so far suggested. For the next five years, however, business will continue as usual, even though there are hopes that Kikwete, free from the pressure to seek re-election, will use his second and final term to address corruption more forcefully.


BUSINESS ENVIRONMENT
Cargo handling improvement at Julius Nyerere International Airport:
After a successful refurbishment of Swissport Tanzania’s cargo warehouse, efficiency in cargo handling is expected to improve. For the first time, exports and imports will be held in separate areas, reducing the risk of cargo losses. However, the warehouse provides for only 850 tonnes of cargo, though the airport handles about 1,200 to 2,000 tonnes per month.

DATA
  • Tanzania gold revenues skyrocket: In the year to July 2010, Kenya’s gold export earnings rose by 62%, driven by the combination of higher volumes and rising prices. The 31% increase in gold export volumes was aided by Barrick Gold Corp’s Buzwagi Gold Mine, which started mining in June 2009. Gold was the year’s biggest forex earner, bringing in USD1.36m.
  • Foreign participation in the Dar Es Salaam Stock Exchange (DSE) has jumped to 40.4% this month, compared to 34.75% in July and September 2010. The bulk of foreign interest seems to have been in bank shares, in particular CRDB and National Microfinance Bank (NMB). DSE rules cap foreign ownership at 60%.


KEY DEALS

  • Foreign firms win power contracts: American companies Symbion Power LLC and Pike Electric Corp have secured a USD65m contract for the construction of an approximately 2,880 km long power transmission line to Mwanza, Tanga, Dodoma, Mbeya and Iringa. Construction will begin early next year and is expected to reach completion two years later. Symbion and Pike are already collaboratively engaged with three separate power projects collectively valued at about USD19m.
  • Symbion Power LLC and French firm Areva also won a USD45m contract for substation work in Zanzibar in April this year, and construction work is underway. These projects are a part of the USD206m Millennium Challenge Energy plan for Tanzania.


REGULATORY AND LEGAL CHANGES
Biofuel regulation:
The Tanzanian government will be enlisting the services of a consultant to help draw up a legal regulatory framework for the use of biofuels before they enter the Tanzanian market. Minister for Energy and Minerals William Ngejela also said that biofuel plants will not be farmed at the expense of other crops, but will rather be grown on unproductive land.


INDUSTRY NEWS
Agriculture

  • Maize traders bid for permission to export: Following the failure by the Arusha branch of the government Strategic Grain Reserve (SGR) to purchase thousands of tonnes of maize, Arusha and Manyara maize traders are seeking to have the ban on maize export waived. President Jakaya Kikwete has instructed the grain agency to seek ways to increase its storage capacity. Joshua Mitangi, regional manager of National Milling Corporation (NMC) said the problem will potentially be solved when the grain board becomes fully operational.

Tourism:
  • New flights, more tourists: Turkish Airlines and Oman Air Transport have added Tanzania to their flight schedules, encouraging expectations that this year’s tourist figures are expected to increase by 15%, and so revenue from the crucial tourism sector could increase to increase to USD1.3bn from USD1.2bn in 2009. However, given recent reports that Tanzania’s hospitality industry is already under pressure to expand to keep up with both its East African neighbours and its own growing tourism industry, the 15% increase in visitors will exacerbate a shortage of rooms in Tanzania’s hotels and lodges.

Banking
  • Tanzania Women Bank expands: TWB has issued TZS7bn in loans since the bank’s beginnings a year ago, and currently has deposits of TZS12bn. Managing Director Margaret Chacha has been calling on wealthier women to join the bank, to support the banks agenda of helping women to work their way out of poverty with specially tailored bank accounts and low opening balance limits. The bank currently has 17,758 customers. Over 14,000 or 80% of them are women.
  • Standard Chartered Bank to raise TZS25bn over the next ten years through a corporate bond. The bond has a fixed interest rate of 11% plus 1.25% at five years and was traded this month at secondary market on the Dar Es Salaam Stock Exchange (DSE).

Telecommunication
  • Telecoms firms urged to go rural: Dr Patrick Makungu, Deputy Permanent Secretary in the Ministry of Communications, urged providers to take reasonably-priced services to the rural areas at the launch for TiGo’s pre-paid BlackBerry service in Tanzania. He also offered assurances that the government would continue to promote an investor-friendly business climate in the country.
  • Zantel expands network coverage: Zantel seems to be heading in the rural direction. Having signed a deal with Zain Tanzania to roam on their network, Zantel was able to announce that it had opened 236 new sites on its network coverage, taking it out into many more remote villages. Zantel has invested USD140m over the past two years to make this expansion possible.

Mining
  • Fuel theft at Buzwagi lowers expectations for 2010 output: Following the systematic and organised fuel theft at the Buzwagi mine  that left over 40% of the mine’s workforce under suspicion, owners African Barrick Gold announced that they expected the 2010 gold production to fall by up to 30,000 ounces. The predicted output is now in line with 2009’s at 716,000 ounces.
  • TanzaniteOne no longer in the red: TanzaniteOne has managed to make a gross profit of USD1.8m, a net profit of USD0.7m in the first half of 2010, up from a previous USD0.6m loss. TanzaniteOne CEO Bernard Oliver attributed the turnaround to the rising price of Tanzanite and to sustained efforts to maximise value from their gemstone operations. Since the recently suspended ban to export raw stones over five carats in size will come back into operation next year, TanzaniteOne may be looking into building a high margin business by selling cut high-grade tanzanite.
  • More Uranium at Mkuju: More uranium has been discovered at Mkuju River Project, Ruvuma region. The planned processing plant should be able to recover 82% of the available uranium rather than the previously projected 79%, an expectation created by a recent definitive feasibility study (DFS). The DFS also projected a reduced acid consumption, and increased the production target to 4m pounds of uranium per year, up from 3.7m. Over 1,200 jobs will be created during the construction of the plant, as well as a further 600 permanent jobs. Tanzania’s uranium will bring in an expected USD220m in foreign exchange annually.


DEVELOPMENT FINANCE

  • IFC supports Tanzanian SMEs: The World Bank’s International Finance Corporation (IFC) has extended a USD3m trade finance guarantee to Diamond Trust Bank (DTB) Tanzania for onlending to SMEs. DTB Kenya and DTB Uganda have also received similar help. The IFC has been a shareholder in DTB Kenya since 1983, and has supported DTB’s Kenyan arm in similar ways previously.
  • Japan funds to aid Tanzanian HIV/AIDS fight, tourism: Japan has donated USD1.35m for HIV/AIDS control in Tanzania and for facilities at the Ngorongoro Conservation Area visitors centre, which attracts 4,000 tourists annually. Japanese Ambassador Hiroshi Nakagawa also promised to promote further Japanese investment in Tanzania.

REGIONAL NEWS
Finland supports East African Community:
Finland has committed EUR2m over two years to the EAC’s partnership fund. The European country has been a major funder of EAC programmes.



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