Tanzania Country Brief: September 2010
Thursday, 14 October 2010
Latest updates on the business environment, deals, data, and industry news.

  • Political risk: In the run up to elections, bulk petroleum imports to Tanzania are likely to be delayed further as the minister responsible for issuing regulations on the import process has failed to do so thus far. The government initially halted the project out of concern that the prices of fuel would surge. The Dar stock exchange has also suffered somewhat since the beginning of election campaigns (see DATA below).
  • Deterioration in business environment: This year, the World Economic Forum (WEF)’s global competitiveness report has Tanzania slipping from rank 100 to 113. The study compares nations’ infrastructures, macroeconomic environments, health sector performance, primary education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication and innovation. A poor educational system and infrastructural weakness are cited as explanation for this poor performance – in fact, where infrastructure is concerned, Tanzania is ranked 128 out of 139 countries surveyed. Although Tanzania is East Africa’s second-largest economy, the WEF ranks it third in the region, after neighbours Kenya and Rwanda. On a more positive note, Tanzania fared relatively well in public trust of politicians, on which criterion it is ranked 62nd globally, and is ranked 50th in its dealings with the private sector. The report further praises the high involvement of women in the Tanzanian workforce.
  • Continued improvements at Dar port: As part of a USD19m equipment expansion plan, Tanzania International Container Terminal Services (Ticts) has acquired a new crane to aid in the improvement cargo handling efficiency at the Dar es Salaam port. The company recently lost its staggeringly inefficient monopoly recently when government authorities stepped in, in an effort to strengthen the port’s position as crucial to international trade for the region. Cargo dwell time has already decreased from 20 days last year to 13 days in 2010. The port currently handles 95% of Tanzania’s international trade and also services Malawi, Zambia, DRC, Rwanda and Burundi.

  • The Dar Es Salaam Stock Exchange All Share Index (DSEI) has dropped slightly from 1174.57 points to 1174.48 points since the beginning of general election campaigning. This is explicable in part by the shift of funds, declining interest of foreign investors in advance of the election, but might also be due to local institutions and investors turning their attention away from the stock market and towards, for instance, real estate.
  • Tanzania has managed to increase their foreign exchange reserves to USD3.7bn, which covers four months of imports. The figure also represents an improvement from last year’s forex reserves of USD3.551bn.
  • Bank of Tanzania’s Director of Economic Research and Policy, Dr. Joseph Masawe, remarked that Tanzania is recovering faster from the recent economic downturn than expected. While he anticipated a drop to 5% GDP growth from 7% growth in 2008, Tanzania has managed a 6% growth this year. The Tanzania shilling has also been appreciating against the US dollar, the British pound and the Euro, a boon for exporters.
  • Inflation has continued to drop from its 1995 highpoint of 30%, to 6.3% in June this year.

Pike Electric Corp wins government contracts: Under the two deals, worth almost USD65m combined, government will contract Pike Electric to work with Symbion Power LLC to work on the expansion of about 1,000 miles of distribution lines across Mwanga, Tanga, Dodoma, Mbeya and Iringa. Chairman and CEO of Pike Electric, J Eric Pike, said they aimed to train and employ Tanzanians to fulfil the contract.

  • Increased fines for fuel adulteration: In a bid to deter criminal activity in the fuel sector, the Energy and Water Utilities Regulatory Authority (EWURA) has increased the punishment for fuel adulteration – mixing diesel with paraffin - across the board. Previously incurring a TZS3m (USD1,975) fine, persecution can now include up to TZS100m (USD65,800) in fines as well as the revocation of licenses and deregistration of fuel tankers. Truckers transporting adulterated fuel are now liable to be persecuted in addition to wholesalers and owners/retailers of filling stations. The outcry over the crime over the last few months has caused a 70% drop in fuel adulteration since 2008. According to EWURA’s public relations officer, the new penalties have been in effective since August 2010.
  • Financial reform in the pipelines: The Bank of Tanzania is waiting for government approval on its second generation of financial reforms designed to strengthen the financial system, and is planning to introduce municipal bonds. These should allow local authorities to borrow from the public for long term projects, ending long waits for financial subsidies from the government.


  • Sugar production expanding: Tanzania’s sugar production this year is expected to be have increased by 27% from last year’s to an anticipated 318,000 tonnes. Prices have started falling, despite a global rise in sugar prices of about 45% since May, and Tanzania Sugar Board Director General Matthew Kombe warned to expect a further drop this season. The country’s annual demand of about 430,000 tonnes is left unsatisfied by the capacity of Tanzania’s four sugar producing companies, so the nation is still reliant on costly imports to bridge the gap.
  • Cotton prices soar: A shortage of cotton on the world market means Tanzanian cotton prices have doubled to TZS1,200 per kilo locally. Unfortunately, a dry spell in Tanzania earlier this year left the country unable to reap maximum benefits from the price boom, with production down to 190 tonnes. The Tanzania Cotton Board (TCB) predicts an output of 260 tonnes by the end of the season next month. Anticipation of favourable weather and increased motivation among farmers after the price boom means the TCB expect cotton production to rise to about 500 tonnes, but do not project that the elevated prices will stick.

  • Russian company to build hydroelectric dam: Russia’s Borodino Group has accepted a USD700m contract from Tanzania to construct a hydroelectric dam with a 222 MW capacity. Tanzania’s energy demand is close to 900 MW, but the country currently produces less than 800 MW. The dam is scheduled for 2018 completion, and the government has said they will need to invest USD1.5bn to improve electricity production and transmission over the next five years.

  • Expansion required: The CEO of the Tanzania Tourist Board (TTB) announced that there would need to be an expansion in the hospitality industry to match an anticipated tourism boom, and to keep up with neighbours Rwanda and Uganda, who have increased available hotel, resort and safari lodge accommodation aggressively in recent years. As the global economy normalises after the credit crunch, the TTB anticipates a sharp rise in tourism figures in 2011. Revenue from tourism is expected to rise from USD1.2bn to USD1.4bn next year.

  • KCB Tanzania to take on growing competition: As the banking sector expands in Tanzania, with five new banks entering the market in the last four quarters, KCB is launching a new strategy to deal with increasing competition. Managing Director Joram Kiarie says each member of staff will be required to attract a certain quota of new accounts in a bid to increase their Tanzanian clientele.

  • Operators slash rates: Kenya’s mobile price wars may have set a trend: This month, Tanzanian mobile operators Zain and Vodacom slashed rates in half, from TZS6 to TZS3 per second for off-network calls. Zain, Vodacom, Zantel and TIGO are all offering rates of TZS1 for on-network calls. Although other companies TTCL Mobile and Sasatel have yet to cut rates, it is anticipated that they will follow suit.

  • Development of Luika Gold Mine: Shanta Gold Ltd will invest USD20m in the development of Luika Gold Mine, to start in 2010’s fourth quarter, to advance its Tanzanian gold exploration programmes. The company already has a mining project at Singida gold mine which has a gold reserve of 480,546 oz, compliant with the Joint Ore Reserves Committee (JORC) code, and a resource of 1.03m oz.
  • Tanzanite export ban lifted: Tanzania has temporarily lifted its ban on raw tanzanite exports, allowing companies like TanzaniteOne Ltd to export rough stones larger than 5 carats. Exporters are being given exemptions dependent on stone-cutting capacity. The ban is feared to discourage the increase of Tanzanite cutting and polishing capacity within Tanzania.

World Bank/International Finance Corporation (IFC) loans Petra Diamonds USD40m: The IFC loan deal is intended to fund Petra Diamonds Ltd’s three year expansion plan at Williamson diamond mine in Mwadui, northern Tanzania. The mine has so far produced over 20m carats, about a third of the mine’s total potential, but has been making operating losses for fifteen years.

Donors to the EAC Partnership Fund have pledged nearly USD7m in support of the EAC in the 2010/2011 financial year. The basket fund has steadily increased its annual contributions which aim, among other things, to help facilitate EAC trade, capacity building, monetary union, resource mobilisation, and common market protocol.

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