Tanzania Country Brief: December 2010
Monday, 24 January 2011
Updates on the business environment, data releases, key deals, industry news, development finance and regional news.

  • Foreign involvement at DSE on the rise: The Dar Es Salaam Stock Exchange (DSE) has seen a surge in foreign involvement during the final quarter of 2010, as bank equities grow. Foreign ownership is restricted to a maximum of 60%, but foreign involvement in DSE activity currently stands at almost 80%, up from less than 4% at the end of 2009.
  • Power rationing to continue into 2011: Orca Exploration Group has announced that two of its gas wells at Songo Songo would be shut down for maintenance. Experts postulate that the closure may last up to a month, but Orca spokespeople gave no word on the expected date of re-opening. This development is predicted to prolong power shortages and rationing into the first quarter of 2011. But with the expected addition of 100MW from Ubungu and Dar Es Salaam and another 60MW from Mwanza at the end of 2011, as well as the news that the Tanzania Electricity Supply Company (TANESCO) have contracted Norwegian company Jacobsen Elektro SA to install a new 105MW plant by 2012, the government hopes that Tanzania will be assured of an adequate electricity supply by 2013.

  • 2010 brings increased investment and more jobs: In 2009, the Tanzania Investment Centre (TIC) registered 579 projects worth a total of USD2.461bn. In 2010, these figures have risen, leading to higher employment creation: 600 projects worth USD2.8bn have created 70,000 jobs, up from 56,998 jobs the previous year. TIC officials attribute this growth to an improved business environment and global recovery from economic crisis.
  • Inflation: November’s consumer price inflation rose marginally from 5.5% in November to 5.6% in December 2010. In November 2010, Tanzania introduced a new method of calculating the inflation rate, and reduced the weight of food in the basket of goods and services from 55.9% to 47.48%. Rising food and fuel prices, as well a weakened currency, threaten to put pressure on consumer prices over the coming months.

  • EIB to co-finance Tanzania electricity transmission line: The European Investment Bank (EIB) announced that it would be co-backing a USD468m project to build a 667km high-voltage transmission line from the Iringa region to the gold fields of Shinyanga. The EIB has pledged to contribute USD135m to the Tanzania Backbone Interconnector Project project, which is being undertaken by the state-run Tanzania Electric Supply Company (TANESCO). Other funding partners on the project include the World Bank, the African Development Bank (AfDB), the Japan International Cooperation Agency (JICA), the Korean Economic Development Cooperation Fund and the Tanzanian government.
  • Exploration at P-Z PSA to resume: Antrim have signed an agreement for the Pemba-Zanzibar exploration licence offshore and onshore (P-Z PSA) with Ras Al Khaimah Gas Tanzania Ltd (RAK Gas) and NOR Energy As (NOR) that modifies its carried interest, and an agreement between RAK Gas and NOR gives the former the option to acquire control of the P-Z PSA. RAK Gas will re-negotiate the P-Z PSA exploration work programme with the Tanzania Petroleum Development Corporation (TPDC) and obtain access rights to the licence area.

  • Hospitality industry struggling to keep up with rising tourist volumes: Speaking at the opening of the Mt Meru Hotel, the Minister for Natural resources and Tourism, Ezekiel Maige announced that the current tourism accommodation capacity of Tanzania stands at 27,000 beds, 3,000 beds short of anticipated demand, and of the government’s 1m-tourist-per-annum goal. The tourism sector currently accounts for about 17.2% of GDP, with forex receipts growing to USD1.2bn from USD260m over the last 15 years. Tourist arrivals stood at 714,000 in 2009.
  • Tanzania to construct USD120m, 50MW wind power plant: The effects of drought at Tanzania’s hydropower stations and the continued rise of fuel prices have forced Tanzania to resort to power rationing with widespread blackouts. This has encouraged the planned construction of Tanzania’s first wind power-station, a 50MW plant in Singida. Construction is expected to begin in February 2011 at the earliest and is estimated to take 15 months. Ownership of the venture is shared between the government-run National Development Corporation (NDC), which holds a 51% share, and the privately owned Power Pool East Africa Ltd. Tanzania’s energy demand stands near 900MW, while its output is less than 800MW.
  • Tariff increase: The Tanzania Electric Supply Company (TANESCO) announced an 18.5% hike in tariffs starting in the new year.
  • Cooking gas prices rise: Cooking gas prices rose 10% in late December 2010, the second time the commodity’s price was increased within the month. The likelihood that many households will resort to using charcoal spurs concerns about the environmental impact. Dealers report that the extreme winter weather in Europe has caused a 33% increase in the price of cooking oil on the world market, and the threat of piracy in the Indian ocean has reduced the number of trade ships coming into the Dar Es Salaam port.
  • Tanzania brewery suffers from power shortages: Power fluctuations in Arusha have increased the cost of doing business for local brewer, Tanzania Breweries Limited (TBL). But company spokespeople say that the company is absorbing the cost, and that there are no immediate plans to hike product prices. The plant produces about 30,000 crates of beer daily, and the increased costs are cutting into the firm's profit margins.
  • TANESCO and Akiba Commercial Bank to issue loans to new electricity users: Tanesco and the bank have entered into an agreement to offer households loans – to be paid off within two years – to connect their homes to the national electricity grid. Currently, connection charges start at TZS450,000, dependent on distance from the main connection point. A TANESCO spokesperson stated that the loans would be issued with 'affordable' interest rates, and that the company hopes to increase its customer base by an average of 100,000 new users annually.

  • CRDB Bank shares attract foreign interest: Foreign investment in CRDB Bank shares increased in December 2010, but the share price – among the lowest in East African banking – has so far remained steady as a result of ample supply.

  • Price wars take their toll: After three operators dropped tariffs to less than TZS0.5 per second, concerns are rising that investment and quality in the sector will suffer in the longer term. Zantel CEO Norman Moyo predicts low profitability, reduced investment in telecommunciations infrastructure, and, as a result, high network congestion. Moyo called on the national regulator to investigate the sustainability of the price cuts. Despite his negative outlook, Moyo sought to all fears that Zantel is doing badly, claiming that the launch of a second submarine cable will allow Zantel to increase internet penetration, as mobile subscriber figures mount.
  • Government debt to Telecoms company TTCL reaches USD3.5m: The government of Tanzania has accumulated a debt on accumulated services bills to Tanzania Telecommunications Company Limited (TTCL) of over TZS7.2bn, or USD3.53m. TTCL CEO, Mr Said Said told the Minister for Communication, Prof Makame Mbarawa, that his company is in need of about TZS322bn, or USD230m, as capital for their expansion plans, and if the government paid up, TTCL would be in a position to begin extending its services across the country. Prof Mbarawa said that the government has laid aside the money to pay the arrears, and that he would push for a timely delivery of the payment. However, the Minister failed to give himself a deadline in his efforts.
  • Tanzania's mobile phone VAT is makes handsets expensive: Tanzania has kept its 18% VAT charge on mobile phones despite pleas from handset manufacturers to scrap it. A spokesperson for Nokia East and Southern Africa stated that her company in particular has been lobbying Tanzania's government to follow in neighbouring Kenya and Rwanda's footsteps and waive VAT. The Nokia C3 will sell for TZS225,000 in Tanzania, and for the equivalent of TZS180,000 in Kenya and Rwanda. However, so far the Tanzanian government has shown no signs of movement on the issue. Nokia announced a new partnership with Vodacom Tanzania in December 2010.

  • Tanzania cement production expected to boom in 2011: While regional cement production is expected to grow at 13% in 2011, Tanzania's cement industry is set to experience 18% growth, a Tanzania Securities study revealed. Tanzania Securities CEO Moremi Marwa said the company expects 18% growth in demand, provided that the retail business, infrastructure development and mining investments stay on track. The construction sector, the main impetus to growth in cement production, has been seeing a 10% per year expansion. Tanzania still has the lowest cement consumption per capita in Africa.
  • 2010 was a good year for gold exports: According to the Bank of Tanzania (BoT) 2010's export volume of gold stood at 36.8 tonnes, compared to 31.0 tonnes the previous year. This is partly a result of the recommencement of exporting activity by the Buzwagi Gold Mine. Prices of gold stood at USD1,157.9 per troy ounce in September 2010, compared with USD896.2 in September 2009. However, longstanding concerns over beneficiaries of the mining industry persist: Tax revenues from gold have not been made public, and a lack of transparency remains a problem for the Tanzanian mining sector, despite recent reforms.

Government of Tanzania and UN endorse four-year, USD773m development plan: The United Nations Development Assistance Plan will run from 2011 to 2015, and will build on lessons learned from the 'Delivering as One' pilot operation in Tanzania. This is the first time that the government and the UN will jointly embark on a four-year integrated business plan, which will lay out the UN agencies' contributions to the existing national poverty reduction plans. The UNDAP will focus on strengthening country systems, policies and processes to improve human rights and alleviate poverty, covering areas including economic growth, environment and climate change, education, health, HIV and AIDS, social protection, governance, refugees, emergencies and disaster response. The plan will be financed by the UN and additional donors.

Kenya, Tanzania and Uganda sign MoU on currency: The Memorandum of Understanding signed between the three nations stipulates that the local currency of each country will be accepted as a local medium of exchange in both of the other signatory nations. The MoU is expected to take effect in December 2011, and, depending on the results of this operation, it may be extended to other EAC members, Rwanda and Burundi. This new development is intended as a step towards East African monetary union, scheduled to be adopted in 2012, but poses a hefty thread to the vibrant money-changing businesses in border towns.

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