Tanzania Country Brief: November 2010
Tuesday, 04 January 2011
Updates on the business environment, data releases, industry, development finance and regional news.

BUSINESS ENVIRONMENT
  • Tanzania falls four places in WB Doing Business Report: Tanzania, the only East African country whose government has instituted no new policy initiatives to improve the business environment during the last two years, has dropped four places in the latest World Bank Doing Business report, an annual survey of 10 areas considered key for business. It currently stands at rank 128 out of 183 countries, behind Rwanda, Kenya and, as a new development, Uganda. While she praised the World Bank’s work, Joyce Mapunjo, the Permanent Secretary of the Ministry of Industry, Trade and Marketing, claimed the report had overlooked recent government initiatives, such as the shift to electronic registration for businesses.
  • Higher budget allocation for agriculture: One of the major areas of recent government investment has been agriculture, with attempts to bolster food security through farm subsidies, and President Kikwete said that Tanzania is now producing enough food and cash crops to feed itself. The recently re-elected President also promised that the government will redouble its efforts to increase the efficiency of the agriculture sector over the next five years: the allocation of finances to the sector will be increased to 10% of the national budget.
LEGAL AND REGULATORY
  • TRA to crack down on VAT taxpayers without Electronic Fiscal Devices (EFD): The Tanzania Revenue Authority (TRA) is cracking down on VAT-registered traders in the Kilimanjaro region who have not yet acquired EFDs. The deadline for this was 1 October 2010. The EFDs are expected to improve revenue collection for the TRA, but can also help management control in sales analysis and the stock control system.
DATA
  • Inflation: Consumer price inflation rose to 5.5% in November 2010, up from 4.2% in October, in response to higher fuel and food prices. Partly this is a seasonal trend as prices typically rise as the holiday season approaches. Throughout 2010, good weather has bolstered food production and helped to keep inflation in check.

INDUSTRY NEWS
Agriculture
  • Yields and revenues from tobacco crops increase in Urambo: During the 2009/2010 financial year, farmers in Urambo district produced 23.7m kilos of tobacco, earning them TZS76.8bn, up from TZS30bn in the previous year. Both higher tobacco prices and increased production (up from 15m kilos of tobacco in 2008/2009) contributed to the increase in revenues.
  • National Microfinance Bank (NMB) earmarks TZS100bn for agricultural lending: The bank announced their plan to fund agricultural development at their launch of the Kilimo account developed specifically for famers this month. NMB's Chief Commercial Officer, Kees Verbeeck, stated that TZS54bn will finance sugarcane farmers in the Turiani and Kilombero districts, tea plantations in Lushoto and barley growers in Arusha, Mbeya and West Kilimanjaro. The bank will also back tobacco farming in the Tabora, Shinyanga and Kigoma regions, as well as financing the purchase of commodities through the Warehouse Receipt System. NMB has a network of 139 branches and 350 ATMs countrywide.
  • Poor credit facilities for farmers affect food production: According to Lt. Col. Felix Samillan, project manager at Suma JKT Ltd, a parastatal established to engage in commercial activities, conservative lending conditions by banks and financial institutions restrict farmers in procuring the farm machinery they need to grow an adequate food supply. Meanwhile, a great number of tractors imported into Tanzania by Suma JKT Ltd sit idle. Samillan estimates that 20,000 tractors will be needed to reach food production targets, but only 8,000 of the machines are in use in Tanzania today.
Energy
  • Oil retail prices on mainland continue to rise: The national Energy and Water Utility Regulatory Authority (EWURA) announced that for the second month in a row, fuel prices are on the rise. Petrol prices rose by 2.49%, diesel by 1.01% for 5000ppm and 1.11% for 500ppm. Kerosene retail prices also increased by 1.89%. National expenditure on fuel imports was at USD 1.9bn in the year to August 2010, up from USD 1.38bn the previous year.
  • TANESCO announces countrywide power rationing: A drop in electricity generation has forced the Tanzania Electric Supply Company (TANESCO) to issue warnings that large swathes of the country will suffer daily power rationing. The blackouts are the result of a breakdown at Dar es Salaam's 180MW Songas power plant, fuel shortages at the 100MW Independent Power Tanzania Ltd (IPTL), and low water levels at the Kihansi and New Pangani hydropower plants. Regions to be affected by power rationing and blackouts include Dar es Salaam, Mwanza, Tabora, Dodoma, Mbeya, Mtwara, Lindi, Iringa, Singida, Shinyanga, Kilimanjaro, Arusha, Tanga and Mara.

Banking
  • Diamond Trust Bank (DTB) launch mobile banking: The DTB product, Touch 24/7, will allow transfers up to a limit to any bank in Tanzania, and will also allow users to access bank statements and process balance inquiries. DTB's branch network has been growing steadily over the past two years, increasing in number from 6 to 12.
  • Bank of Tanzania (BoT) raises capital requirements for commercial banks: The Bank of Tanzania has raised minimum capital requirements for commercial banks from TZS5bn to TZS15bn to render banks more resilient against crises. The tier 1 capital ratio has been raised from 2% to 4.5%. The regulation change follows a recent central bankers and regulators meeting in Switzerland, aimed at preventing a further financial crises. It also comes ahead of planned integration in an East African Community's monetary union, which could make Tanzania more vulnerable to shocks.
  • NMB posts strong profit: NMB has announced a net profit of TZS13.58bn in the three months ending September 2010, up from TZS10.7bn in the same quarter in the previous year. The increase in profits is attributed to revenues from loan interest, which generated TZS33.10bn in the third quarter of this financial year. Revenues per share have accordingly increased by TZS6. Customer deposits reached TZS1.68trn, and NMB's workforce grew to 2,593.
Telecommunications
  • Airtel launches new offer: After the rebranding of Zain Tanzania, Airtel have signed outsourcing agreements with technology companies Nokia Siemens, Huawei and Ericsson for all their markets in sub-Saharan Africa. In Tanzania, the company is hoping to attract new subscribers to their network by offering a Nokia 1280 mobile phone, Airtel SIM card and TZS39,000 in airtime for TZS39.000.
  • Vodacom M-PESA receives Gate Foundation grant: The Bill and Melinda Gates Foundation has given Vodacom Tanzania a grant worth USD4.8m to improve their mobile money platform M-PESA. M-PESA currently has an estimated 5m subscribers in Tanzania, and with the grant, the company hopes to extend its services to the wider unbanked population in the country. The grant is part of the Gates Foundation's USD500m plan to increase global access to savings accounts, and improve financial security for the world's poor.
  • Sasatel to reduce internet tariffs: Tariffs for Sasatel's unlimited internet packages have dropped to TZS 1000 for an hour, and TZS 3000 for a day. Unlimited access for a week will cost TZS 8,000, and TZS 30,000 for a month.
  • Zantel launches highlife customer lounge: In an effort to improve the efficiency of customer service, Zantel has launched a ‘highlife lounge’, essentially a walk-in service area for all customers on the competitive highlife package, which includes voice, data and a loyalty programme. Becoming a highlife customer incurs a one-off TZS1000 charge.
Mining
  • Revenue from Tanzanite sales on the rise: The gradual recovery of the global tanzanite market has allowed TanzaniteOne to sell USD 3.78m worth of the stone in 2010's third quarter, after producing 616,285 carats. The company posted a USD1.8m gross profit in the first quarter of 2010. TanzaniteOne will continue to ramp up production and increase profit margins by processing the stone locally.
  • •    Gold exports rise in 2010: Tanzania's gold export revenues rose 59.2% in the year to September 2010 as a result of increases both in volumes of gold exported, and in the price of gold on the global market. Export values increased to USD 1.5bn from USD 906.5m last year. The export volume has increased to 36.8 tonnes from 31.0 tonnes, and the price of gold has risen to USD1,157.9 per troy ounce from USD896.2 per troy ounce in September 2009.

DEVELOPMENT FINANCE
  • Tourism Ministry refunds almost TZS3bn to Norway: The Ministry of Natural Resources and Tourism has been forced to repay Norway TZS2.8bn lost due to misappropriation by ministry officials. Audit reports revealed that some of the money had simply disappeared while others had been spent inappropriately. Last year, Norway announced a suspension of aid when audits revealed that millions of dollars had been lost to corruption.
  • Foreign aid declines, forcing down government expenditure: In July and August 2010, a drop in foreign aid has upset Tanzania's balance of payments, affecting expenditure, particularly development expenditure. Of a predicted TZS336.68bn in aid, only TZS182.76bn were collected. According to a September 2010 report issued by the BoT, domestic revenue collection stood at TZS753.1bn, falling short of the estimated TZS 829.11bn, putting more pressure on the budget deficit.
  • Sweden backs rural electrification initiative: Sweden will provide USD30m in support the Rural Energy Fund. Currently, only 12% of the population have access to electricity, and among rural populations, this proportion is as low as 1%. Not only does this have a negative effect on the environment as the use of wood leads to deforestation, but it also hinders the government's 'Kilimo Kwanza' green revolution initiative designed to modernise Tanzanian agriculture. The Rural Energy Fund has immediate plans to bring power to a further 41 rural areas.
  • Small Entrepreneurs Loan Facility (SELF) targets 820,000 small entrepreneurs: SELF is funded by the African Development Bank (AfDB). In the first phase, USD 6.83m of a total USD30m were disbursed to 70,000 entrepreneurs. The current phase is similarly planned to combine fund disbursal with capacity building. In Self's second phase, 1.23m people, half of whom will be women, will be enrolled in a project aimed to strengthen financial service delivery.

REGIONAL NEWS
IMF will support EAC monetary union:
The IMF's support to planned East African Community monetary union will go towards the construction of an institutional framework, and capacity building. Secretary General of the EAC, Juma Mwapacha said the EAC would be drawing from the experiences of West Africa and the EU, both of which also benefited from IMF support as they moved towards monetary integration.



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