BUSINESS ENVIRONMENT
The Bank of Tanzania announced this month that a credit reporting mechanism will be in place by the end of 2010. Tanzania was the first country in the EAC to pass regulations for a credit reference bureau, but has since fallen behind its neighbour countries in the implementation. Officials hope that creation of a public credit registry and licensing of private credit reference bureaus will allow banks to bring lending rates down and extend credit to more small businesses. However, only about 10% of Tanzanians have access to financial services. Such low penetration means it will take time for meaningful credit history data to accrue and translate to more widespread credit availability.
The Dar es Salaam Water and Sewerage Company (Dawasco) says water supply in the capital has begun to improve due to a crackdown on illegal siphoning of water out of the utility’s Kimara reserve tanks. Kimara locals and business operators had been stealing water through holes punched into the main water pipe running into Dar es Salaam. Water levels have doubled in the last three months thanks to the crackdown. Still, Dar’s water needs still far outpace daily supply: currently 450,000 cubic meters are demanded against 300,000 supplied.
Meanwhile, nationwide power rationing began yet again in mid-March after the state utility, Tanesco, announced failures at four power plants. Corruption and gross mismanagement of the country’s large hydropower dams has caused recurrent load shedding in Tanzania for decades.
The Tanzania Investment Centre (TIC) will now offer tax incentives to investors who import modern commuter buses for public transportation in Dar es Salaam, in an effort to cut down on city traffic and make transport more efficient.
DATA
- Bank of Tanzania has announced a target GDP growth rate for 2010 of 5.7%, up from 5% targeted in 2009, as the country begins to recover from global crisis fallout that depressed growth last year in the mining and tourism sectors. An unfavorable business environment has also been blamed for decreased investor interest in mining. However, agricultural and gold exports remained strong in 2009, which led in part to a balance of payments surplus for that year of USD429m. A decline in oil costs also helped narrow Tanzania’s current account deficit in 2009 by 24%.
- The IMF predicts 6.2% GDP growth for Tanzania in 2010, with a forecast of 5.5% for 2009. The fund revised those numbers upwards due to a stronger than anticipated recovery in the global economy and the Tanzanian government’s fiscal stimulus plan. The IMF also said inflation could fall to 8% by June, down from February’s 9.6%.
- An external audit of Tanzania's Africa Peer Review Mechanism (APRM) Country Internal Assessment report shows that the country is declining on a number of indicators, including: doing business, starting a business, registering property, access to credit, and protecting investors. The country has improved on trading across borders due to participation in East African Community (EAC) integration. However, auditors noted that many non-tariff barriers remain.
- A study out this month from research group Synovate shows that just 12% of Tanzanians are employed full time, 14% are working part time, and 17% are self-employed.
Tanzania’s Permanent Secretary for Finance and Economic Affairs announced this month that major reforms to the Public Procurement Act of 2004 are in the final stages and will soon be sent to parliament for review. Authorities are attempting to streamline procurement processes by cutting out delays, reducing costs and establishing quicker emergency procedures. Observers say public procurement is laden with inefficiency and corruption. This is a symptom of Tanzania’s deeply embedded bureaucratic culture, and is thus unlikely to change in the near term due to legislative reforms.
Liquefied Petroleum Gas (LPG) dealers criticized Tanzania’s energy regulator, EWURA, this month for attempting to regulate prices of LPG fuel products. LPG sellers say price caps would depress new investment in the sector, however consumers have complained of large price discrepancies in the local market. Industry experts continue to express confidence in EWURA’s efforts. Due to its large natural gas reserves, Tanzania has been attempting to promote the use of more gas (including car conversion programmes and talk of LPG-run buses) as a cost saver and relatively clean energy source. However, the cost of LPG remains prohibitive for many low income Tanzanians. And government inefficiency has kept upstream supplies from further development.
And finally, President Kikwete signed the Election Expenses Act 2010 in mid-March. He claims the legislation will reduce vote buying by forcing parties and candidates to disclose campaign spending amounts. Kikwete is under pressure from donors to cut down on corruption going into this year’s October election. However, it is unlikely that this new act will actually change much about the way patronage-driven campaigns are run on the ground.
INDUSTRY NEWS
Tourism:
- The Tanzania Tourist Board (TTB) announced in March that it is working with South African tour operators to promote Tanzanian tourism during this year’s World Cup. Airlines have agreed to reduce fares between Tanzania and South Africa, and the TTB will host Tanzanian cultural events in South Africa to attract more visitors.
- BP Africa announced in early March that it will pull out of Tanzania, Namibia, Botswana, Malawi and Zambia in an effort to focus and streamline its oil refining and marketing operations on the continent. Significant operations will continue in Africa’s largest oil producing countries as well as in South Africa. BP commanded 35% of the retail and service station market, and 70% of the aviation fuel market in Tanzania, as well as maintaining a significant stake in Tanzania’s LPG market and eastern Africa’s petroleum transit business. BP Tanzania Ltd was a 50-50 joint venture with the Tanzanian government. The government now says it may buyout BP’s shares. Alternatively, a new investor could come on board with government approval. Either way, officials say the venture’s businesses will not be shuttered. However, the loss of BP’s industry leadership is sure to affect the quality of Tanzania’s downstream services.
- Tanzania is also one of the markets that will be affected by Shell’s announcement that the company intends to divest from its downstream business in 21 African countries.
- Dominion Petroleum announced this month that that it will sell USD50m in shares to fund increased drilling in Uganda and seismic data tests on its offshore assets in Tanzania. In February, the company sold off much of its onshore assets in Tanzania. Industry observers say oil and gas exploration in Tanzania has been less than promising of late, and deteriorating business incentives may lead to less investment in the sector.
- Revenue authority and standards officials detained a Bahrain-based tanker in Dar es Salaam this month after the ship offloaded USD3m worth of contaminated jet fuel. Oil marketing companies MGS International and Oryx had imported the fuel, and filed an urgent civil suit for damages claiming that the cargo was certified at its point of origin and must have been sullied while in transit. Authorities said the ship must remain in Tanzania until the case is settled.
- Airport authorities say the USD56m expansion of Dar es Salaam’s JK Nyerere International Airport, expected to be complete this July, will increase the number of planes processed per hour from 11 to more than 30. The expansion is necessary to decrease congestion at the airport’s two terminals and accommodate the aviation industry’s 14% annual growth rate. A new VIP lounge and conference room should also be ready by April in advance of May’s World Economic Forum to be held in Tanzania. Construction of a third terminal will eventually expand passenger handling capacity from the current 1.2m to 7m people per year.
- Local carrier Precision Air has added another aircraft to its fleet. The ATR 42-500 comes as part of a USD129m deal signed between Precision and ATR in 2006 for seven new planes. The last two are expected for delivery in June and July, bringing the fleet total to eight planes. Following this extensive expansion, Precision hopes to launch new routes to Angola and the DRC.
- Officials hope a newly established warehouse receipts system will help farmers in Tanzania gain access to credit and earn more from their crops. Farmers can now deposit their harvests at warehouses in return for receipts that can be used as collateral for bank loans. That should allow farmers to access the cash they need to prepare for the next season without being forced to sell their goods all at once at harvest time when supply is high and prices are low. However, farmers in Mbarali said this month that out of 107,000 tonnes of rice harvested in 2008/09, only 3,000 tonnes were sold through the warehouse system. Many rice farmers have been forced to sell at low prices, and do not have enough money to plant for the upcoming season. Tanzanian coffee prices are also down this month, by USD14, as the export season comes to an end.
- Dairy farmers called on the government this month to promote milk production in Tanzania by shutting out imports and lowering taxes on machinery and packaging. Tanzania imports millions of litres of milk from Kenya – one of the largest milk producers in Africa. Kenya’s Brookside Dairy recently expanded operations into Uganda, but has met an icy reception in Tanzania, where protectionist leanings run high.
- And Tanzania Distilleries announced this month that it will soon begin sourcing grapes from farmers in Dodoma for production of its wine brand Overmeer, which should greatly expand the local growing market. Tanzania is Africa’s second largest wine producer after South Africa, but production levels remain extremely low by international standards.
- Tanzanians will be allowed to purchase shares in African Barrick Gold’s upcoming initial public offering (IPO) in London after a decision this month by the Bank of Tanzania (BoT) to grant a waiver to the law prohibiting investment in foreign stock markets. Local commentators say the chance for Tanzanians to own stock in the gold mining giant could warm relations that have soured following allegations of exploitation by Barrick’s operations in the country. Barrick says it plans to reserve a percentage of the offering specifically for Tanzanians. However, experts warn that currently high gold prices could soon drop, disappointing eager and inexperienced investors. And in any case, the share price will be too high for many average Tanzanians to afford. Many are calling for the Unit Trust of Tanzania (UTT) to buy shares and arrange to sell them in Tanzania at a reduced cost to encourage more widespread participation.
- Financial numbers out this month for Tanzania’s insurance industry show strong growth in 2009, with gross premiums, investments, assets and net worth all up. Growth in the insurance market doubled that of GDP last year, with 25 insurers now operating in the country. March was also a good month for Kenyan Commercial Bank of Africa (CBA), which announced intentions to double its pretax profit this year. Bank officials say last year’s profits were largely funneled back into operations as the institution recovers from the global financial crisis and seeks further growth.
- And BancABC Tanzania, traditionally a corporate and investment bank, transitioned into the commercial sector this month by opening its first retail branch in Dar es Salaam.
- Five more mobile phone operators received licenses from the Tanzania Communications Regulatory Authority this month, bringing the total number of operators in the country up to 12. The new providers are: MyCell, Egotel, Rural Netco, Smile and ExcellentCom. Calling tariffs have come down by 75% since 2000 through strengthening of the market and competition, although the additional carriers will not do much to open the market further. The main operators remain Vodacom, Zain and Tigo.
DEVELOPMENT FINANCE
Canada has denounced reports that it would halve its aid contribution to Tanzania in 2010, promising instead to raise the contribution by CAD4m. Tanzanian government officials say they fear many countries may cut back on aid this year, although so far there is not widespread evidence of this trend. Meanwhile, Tanzania received a loan of USD235m at the end of March from the African Development Bank (AfDB). A small portion of the cash will go to finance another feasibility study for the planned Dar-Isaka-Kigali high-speed railway. The bank hopes to see concrete plans for public private partnerships come out of the study. The bulk of the rest of the loan will go toward improving road networks across Tanzania.
REGIONAL NEWS
Grumblings continued this month regarding stalled trade negotiations between the EAC and EU under the Economic Partnership Agreements (EPA). The negotiations, which have dragged on interminably past their original December 2007 deadline, made progress in early March when the EU agreed to extend development support to EAC states. However, hope that a final agreement would be signed by the end of 2010 may be optimistic, as officials have noted that upcoming elections will bring new trade ministers and a number of persistently divisive issues such as the Most Favoured Nation (MFN) exporting to the EU, although a full increase in tariffs on EAC goods is not likely in the near term as the two blocks continue to trade under an interim agreement.
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