According to Bloomberg, SABMiller is planning a new  beer plant in southern Tanzania in the near future. No further information on the location was provided, however the new brewery will most likely be set up in Mbeya or Iringa, the main towns in southern highlands.

Due to rise in global commodity prices, and to make beer more affordable, the giant beer maker is planning to produce more cheaper, locally- influenced beer brands such as Chibuku Shake Shake and Eagle throughout Africa. Using local ingredients such as sorghum and cassava, the home-brew beer market in sub-sahara (excluding South Africa) is estimated to be valued at $3B, almost double the value of industrial beer market drinkers.

According to the company’s third quarter results, “Tanzania delivered larger volume growth of 4% [compared to other countries in Africa] despite infrastructure challenges”. Tanzania Breweries Limited (TBL) is the local subsidiary for SABMiller in the country.

Hello folks

I’m currently coordinating and organizing the event below slated to take place next week in NYC. You are most welcome to attend and show your support. Please visit www.investeac.com for further information. Thank you.

 

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President Kikwete promised that this year’s Leon Sullivan Summit in Tanzania would be of a lifetime. More than 2,000 delegates from 40 countries were expected to arrive for the summit, bringing together African and African-American business and political leaders to Arusha and Zanzibar, Tanzania from June 2-6.

The five day summit which opened yesterday will focus on investment opportunities in Africa, particularly in infrastructure development, tourism and other areas such as energy, manufacturing, housing and capital market.

Andrew Young, Rev. Jesse Jackson and actor Chris Tucker are some of the prominent business leaders attending the summit. Delegates will get a chance to visit Tanzania’s tourist attractions of Serengeti, Ngorongoro and Zanzibar.

For more information about the conference, please see:

http://www.thesullivansummit.go.tz

http://www.thesullivanfoundation.org/summit/summit8/index.asp

 

 

 

 

Last week, AP published a story quoting a report by United Nation’s Food and Agriculture Organization (FAO) citing Tanzania as one of 22 countries “particularly vulnerable” and “threatened” by current global food crisis.

This comes after the Minister of Finance Mustapha Mkulo was recently quoted by Bloomberg News saying that “Tanzania’s ability to meet domestic consumption needs may shield it from the type of food shortages and hunger affecting other parts of the developing world“.

Already, the food prices have caused the annual inflation to shoot to an almost double digit figure of 9.7% in April 2008.

Other “particularly vulnerable” countries are: Burundi,  Tajikistan, Sierra Leone, Zimbabwe, Ethiopia, Zambia, Central African Republic, Mozambique, Tanzania, Guinea-Bissau, Madagascar, Malawi, Cambodia, North Korea, Rwanda, Botswana,  Kenya.

The countries that are “particularly affected”, where the situation is much more dire, are Eritrea, Niger, Comoros, Haiti and Liberia.

The high rising cost of food has led to increased hunger, protests and riots in some countries. “High oil prices, growing demand, flawed trade policies, panic buying and speculation have sent food prices soaring worldwide. Food riots have occurred in Haiti, Egypt and Somalia this year”, AP says.

While there are a some analysts who still believe the jury is still out on the contribution of biofuel industry to the current global food crisis (they believe this emerging industry is being scapegoated), IFAD’s (International Fund for Agricultural Development) presentation at the recently concluded UN’s 16th Session of the Commission on Sustainable Development, stated that biofuels “appear to exert direct influence on the feedstock market” and that there are “statistically significant inter-linkages between” biofuels and agricultural commodities. These commodities such as maize, cassava, oilseeds and palm oil, predominantly used as food, and are now grown as feedstock for generating biofuel such as ethanol, particularly in Brazil and United States.

Other mentioned long term causes of the global food crisis are weather-related production shortfalls; gradual reduction in the level of stocks, mainly cereals since the mid-1990s; while on the supply side, change in consumption patterns from starchy foods towards more meat and diary in the last few decades, particularly in countries like India and China, have intensified demands for animal feed grains competing with food for human consumption. 

Ironically, rising food prices can bring a windful and a blessing to those farmers and economies with surplus food to sell to those in need.

 

 

 

 

The long anticipated flotation of a top Kenyan mobile phone company is expected to proceed today despite calls from some quarters to shelve the plan. Safaricom, billed  as the largest and the most lucrative IPO in East Africa, will be listed on Nairobi Stock Exchange (NSE) beginning Friday March 28 and close on April 23. The flotation is seen as a major test of investor confidence in Kenya after last December election violence.

The Government of Kenya plans to publicly float 25% (or 10 billion shares) of its 60% stake in the company. The remaining 40% company holdings are held by the British telecoms, Vodafone (VOD.L). Local investors, including citizens from East Africa Community (EAC) nations of Tanzania, Uganda, Rwanda and Burundi, are allocated 6.5 million shares. Foreign institutional investors are allocated the remaining 3.5 billion shares.

The company expects to raise 50 billion Kenyan shillings ($767 million) from the listing, at 5 shillings per share. Safaricom’s strength in the Kenyan mobile market has increased significantly over the past 5 years to 80% last year from 57% in 2002. At the time of the launch of its popular “M-Pesa” phone-based money transfer service 11 months ago, Safaricom had 5.8 million subscribers, compared with about 9.5 million now.

Allowing East Africans to directly take part in this IPO is seen as a major step in the intergration of the regional capital markets. Investors from the region, outside of Kenya, will have to open an account with the local Central Depository System Corporation (CDSC) at their local broker in order to participate in the IPO. However, the editorial of the Kenyan daily The Nation was less enthusiastic, questioning “Why can’t these foreign citizens buy shares at the market rate?” It appears old mindsets will die-hard and its going to take time to convince some pundits that capital raising should transcend our so-called “boundaries”.

  

Tanzania Tourist Board TTB

In case you missed it, there are only a few days left to participate in the “Ultimate Safari Sweepstakes” to Tanzania currently being promoted via CNN and CNN.com (see http://www.cnnpromos.com/tanzania/ or www.cnn.com/topics ). Please pay close attention to the rules and terms under which you can participate.

This promotion is part and parcel of the TV tourism campaign launched last October by Tanzania Tourist Board targeting the American market. The TV station has also been airing a separate spot about the sweepstakes for the past few weeks now (alongside the initial TV spot).

For those who have seen this new TV promotion, what are your thoughts?

BOT Bank of Tanzania

In the last few weeks, the Tanzanian government has come under intense pressure from the public, activists and the media to explain why it was quietly recovering money that was misappropriated under the External Payment Arrears (EPA) account operated by Bank of Tanzania (BOT), the country’s central bank (pictured left).

The public demands the release of names of people involved in the scandal and their immediate prosecution. The EPA scandal consists of fraudulent payment of about TSh133 billion ($116 million) made by the Bank of Tanzania to 22 companies in the financial year 2005/06 involving the repayment of the country’s external debt.

As of last week, according to a government pronouncement, nearly half of the money (Tsh 60 billion) had “mysteriously” found its way back into State coffers. The Attorney General and the Inspector General of Police have refused to disclose the names at this stage, pleading for patience because the investigation is still going on.

Speculation has been rife as to why the government would rather recover the loot than prosecute. While others believe the government may be shielding the culprits, the most plausible reason seem to be that the government has figured out that it has a weak case against the culprits in a court of law. It may well be that the EPA contracts the government signed are so weak and with little teeth to enable the prosecution of abusers of the debt servicing vehicle. The worst case scenario will be that the contracts were intentionally weakened by its framers, while eluding the watchful eye of IMF. Therefore, this may yet be another scandal (similar to the mining contracts that later had to be renegotiated), that will expose weaknesses in contract negotiation and contract drafting skills by the country’s State attorneys, and possible corrupt elements within the government who are short-changing public interests.

The scandal has already claimed the Governor of BOT as its first casualty. Daudi Balali was fired by President Kikwete back in January after he was implicated in the investigative reports carried out by Government’s Controller and Auditor General (CAG) and the accounting and audit firm, Ernest & Young. The President has been on an anti-corruption crusade lately. He dissolved his government last month after another multimillion dollar scandal blew up over emergency electricity power supply contract, engulfing his Prime Minister and two cabinet ministers who were subsequently forced to resign.

What are your thoughts? Do you trust the government when it says it is doing the right thing to recover the swindled money and deal with prosecutions down the road?

The projects to be financed under the recently signed Millennium Challenge Corporation (MCC) Compact agreement have been disclosed.

The agreement with Tanzania, approved last September and signed in Dar es Salaam on February 17, 2008 during Presidents George W. Bush’s historic state visit to the country, is valued at $698.1 million covering a 5 year period. This is the largest Compact ever issued by the United States through its MCC agency. The money will help Tanzania “reduce poverty and stimulate economic growth by increasing household incomes through targeted investments in transportation, energy, and water”.

Most of the money will go to transport projects ($373 million), to energy projects ($206 million), to water projects ($66 million) while $53 will be used for program administration.

The identified projects are:

a) Construction of Mainland Trunk roads:

(i) Tanga-Horohoro (68 km)

(ii) Tunduma-Sumbawanga (224 km)

(iii) Songea-Namtumbo (61 km)

(iv) Peramiho-Mbinga (78 km)

b) Improving of up to 35 km in five rural roads in Pemba Island as part of Zanzibar Rural roads component.

c) Improving aviation and public safety facilities at Mafia Island Airport.

d) Laying a new submarine electric transmission cable from the mainland to Unguja island, Zanzibar, to improve and support the existing cable that is reaching its limits in both capacity and lifespan.

e) Construction of a small hydro-power plant on the Malagarasi river and the extension of a mini-grid system in Kigoma Region.

f) Rehabilitation and extension of electricity distribution system to unserved areas in six regions identified as priority areas.

g) Improving water supply infrastructure in two cities of Dar es Salaam and Morogoro. This will involve expanding the Lower Ruvu water treatment plant capacity from 180 million liters to 270 million liters per day; and improving efficiencies in order to reduce physical leakages and commercial losses (biling, collection and theft) that cause about 60% of Dar es Salaam water to be lost before it reaches customers.

Each county signing a Compact is required to establish an entity to coordinate the implementation of the selected projects. In October of 2007 President Kikwete consequently appointed Bernard Mchomvu, a long serving Permanent Secretary and technocrat, to serve as CEO of Millennium Challenge Account-Tanzania (MCA-T). Tanzania qualified for the Compact after two years of implementing the Threshold Program that was valued at $11.15 million.

Lately there has been contradictory media statements on whether the ongoing violance in Kenya would benefit or harm her neighbouring economies.

However, most pundits agree that in the short-term, Kenya’s neighbours have the opportunity to rake in economic benefits from the Kenyan upheavals. The extent of this gain certainly depends on the duration of the crisis — it could prove substantial if the situation does not return to normal soon. Kenya’s economy is known for its resilience and will most likely bounce back fast to its pre-election levels if situation is contained soon. Early last month, Kenya’s Finance Minister Amos Kimunya was quoted as saying that the “post-election violence may cost the economy up to $1 billion but it could be recovered within a year”. A month later, this statement still holds water.

Uganda’s Finance Minister, Dr. Ezra Suruma, also expressed caution, saying “Uganda’s growth projections are within reach if the disruption is contained. But if the situation worsens, that would raise a question of the impact it would have on the economy.” Uganda’s economy was expected to grow at 6.9% this year. In both Tanzania and Uganda, production chains have been interrupted due to unavailability of raw materials, packaging materials and other inputs in the production processes of goods. This has underscored the importance of Kenya as a regional economic powerhouse. 

The short-term gains to Kenya’s neighbours would also depend on how fast they remove drawbacks that restrict their ability to take full advantage of the growing opportunities. For instance, it is reported that Dar es Salaam port is “unable to cope with the sudden demand for services” and it “needs to perfect its clearance system” in order to make the port of Mombasa irrelevant. Also, the Tanzania Ports Authority and the Tanzania Railways need to improve very fast the handling of cargo destined to landlocked countries .

Delays at Mombasa port led to diversions to Tanzanian ports as alternative routes to the landlocked countries of Rwanda, Burundi, Uganda and eastern DR Congo. According to Kenya Transportation Association (KTA), transportation movement in Kenya has gone down “to less than 50%” and its taking longer to deliver goods to the Great Lakes region. Nairobi’s “Business Daily” reported this week that “The illegal roadblocks set up by mobs in the Rift Valley and Western Kenya…had affected the turnaround times and significantly increased operational costs….the number of trucks crossing from Kenya to Kampala had gone down to less than 200 vehicles from 745 vehicles that crossed there daily…”

Two weeks ago, a section of the Kenya-Uganda railway was vandalized, suspending shipment of fuel and cargo to Uganda, its primary gateway. The repairs were expected to take at least one week to complete.

A major drop in tourist arrivals in Kenya has also been reported due to violence and travel advisories issued by western countries, and there are fears of wide reaching hotel closures and industry job layoffs. One tour operator reported up to 85 percent loses in clients for the year because of cancellations, with Kenyan guests opting instead for a Tanzania safari, Uganda safari or even Zanzibar where they can still enjoy other East Africa’s superb attractions.

In the midst of all the bad news from Kenya, Rwanda went ahead and launched their first stock exchange market this week, called the Rwanda Over-The-Counter Market (ROTCM). In other good news, Rwanda and Tanzania finalized plans to commence the construction of rail link extending central railway line from Isaka in western Tanzania to Kigali (expected to be completed by year 2013). Skipping Kenya, George W. Bush is also expected to arrive in the region next week to promote his AIDS initiatives, Millennium Challenge Corporation activities as well as foreign direct investments.

east africa rail links

city water

 A tap which used to provide free water for the residents of Manzese Squatter area and has been closed by the private water company, City Water.

This week, a London tribunal operating under the laws of United Nations Commission on International Trade Law (UNCITRAL), threw out a case against Tanzania brought by City Water Services, a subsidiary of British company Biwater. The tribunal consequently awarded the Tanzanian government $6 million in damages, and $1 million in legal costs.

The ruling is a small victory in a complex legal battle still being fought in other courts. It however vindicates the Tanzanian government, which terminated City Water’s contract to run water system in Dar es Salaam in 2005 after poor performance. It also vindicates local and international campaigners who are against water privatization plans in poor countries.

Despite public outcry that water supply should never be privatized due to its sensitive nature, Dar es Salaam’s public water utility company, DAWASA, handed over its operations to City Water in 2003 with the expectation that the approximately 3 million residents of Dar es Salaam will get improved water supply. Instead, within the 2 years of City Water, water availability in the city actually got worse compared to DAWASA days.

According to the London based Water Development Movement, “water privatisation was imposed on that country [Tanzania] by the World Bank in return for much needed debt relief”. Another campaign group, Food and Water Watch stated that, “Biwater benefited from a non-competitive contract process and financial backing from the World Bank [as well as the UK government], but it still managed to mismanage the project”.

Ruling is expected anytime this year in a separate legal case lodged by Biwater at the International Centre for the Settlement of Investment Disputes (ICSID) against the government of Tanzania. The case is being held in secrecy at The Hague and is thought to involve a claim for approximately US$20 million.

The negative experience in Tanzania is not an isolated case. In many poor countries, for example, Bolivia, Mali and The Gambia, water privatisation has consistently failed to deliver clean, affordable water to the poor.

Bank of Tanzania

 Bank of Tanzania “Twin Towers” in Dar es Salaam.

President Jakaya Kikwete yesterday fired the Governor of Bank of Tanzania (BOT), Daudi Balali, after an audit investigation uncovered fraudulent transactions involving the repayment of the country’s external debt.

A press release from Ikulu (State House) stated that “the president has been deeply angered and disappointed with what has happened” at the central bank, and acted to “revoke” Balali’s appointment after he received a damning audit report prepared by the global accounting firm, Ernest and Young, that revealed more than $116 million had been improperly paid to 22 firms through BOT’s external payment arrears account (EPA) in one financial year alone.

The EPA account was originally set-up the Government to help service balance of payment, whereby local importers would pay into the account in local currency and foreign service providers would then be paid back by BOT in foreign currency. However, due to poor foreign currency availability in 1980s and 1990s,  the debt within the account ballooned to $677 million by year 1999. Efforts under Debt Buyback Scheme and cancellations negotiated under Paris Club helped to reduce the debt level to $233 million in 2004.

Despite these efforts, unscrupulous officials and businesses were able to take advantage of one of the plans devised to reduce the account debt, whereby a creditor could endorse debt repayment to a third party. The audit report, sanctioned by the Government’s Controller and Auditor General (CAG) covering Bank of Tanzania’s 2005/2006 financial books, revealed that 13 companies used falsified records and claimed third party status and received BOT payments, while 9 companies couldn’t substantiate payments they received. Among these, 2 companies were not even registered by BRELA – Business Registrations and Licencing Agency. These companies are owned and operated by some of the most prominent business people in Tanzania.

Daudi Balali has been Governor since 1998. The President replaced Balali with one of his two deputies, Prof. Beno Ndulu, who before joining BOT was a senior official at World Bank offices in Tanzania and lectured at the University of Dar es Salaam. Recent media reports claimed that Balali, (who has been out of the country for a couple of months now since the investigation started — reportedly in Boston, USA for medical reasons), had written a letter of resignation, but no one in the Government was ready to confirm receipt of the letter, even after some newspapers published its entire contents.

In his most brutal crackdown on corruption ever since he came to office in 2005, President Kikwete also directed the Attorney General, the Inspector General of Police and the Director of anti-corruption bureau to take appropriate legal steps to bring to justice all the individuals and companies implicated in the EPA scandal. He also directed the Board of Directors of the central bank to study the report and take appropriate reprimand actions to all Bank officials involved in the scandal.

The scandal started after Controller and Auditor General (CAG) finished its annual auditing of BOT books in August of 2005. Following a public outcry that was echoed by the Bunge (National Parliament) and the IMF over the findings, the President and CAG ordered an external investigation conducted by Ernest and Young from September to December of last year.  The public had been eagerly waiting for the contents of the audit report to be made public. It is still unclear if there will be investigations of BOT accounts in years prior to 2005/2006. Concurrently, Bank of Tanzania has been dogged by another investigation over the inflated cost of constructing the Bank’s headquarters, the Dar es Salaam’s 20 storey Twin Towers pictured above, which cost $25.48 million according to Group Five construction company).

What are your thoughts on this scandal and the way President Kikwete has reacted to the report? What do you think should be Balali’s fate? Should he be arrested and put to jail? Who else would you like to see taken to task? Please leave your comments.

Due to an untimely death in the family, this blog is currently on hold.

For further information please visit:

www.kanyamachiume.com

Thank you for visiting.

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Under pressure from environmental groups, the Tanzanian government seemed to have backed down, at least for now, from endorsing a proposed soda ash factory near Lake Natron in Arusha that could have threaten the survival of lesser flamingos.

Following a meeting last week between the Tanzanian ministry of environment, National Environmental Management Council (NEMC) and 14 environmental conservation groups, it has been reported that the soda ash project has been thrown out pending further environmental studies by the developer, Lake Natron Resources.

The developer was also told to look for alternative locations for the project. Majority of those who attended the meeting are said to have demanded that “the development should be rejected because of the risk of driving away the flamingos, harming other species and irreversibly damaging Lake Natron, which is protected by international law”. The light pink birds flock in their thousands to the lake from far-away places to breed every year. The flamingos are an important wildlife spectacle in the Great Rift Valley lakes in Tanzania, Kenya and Ethiopia.

Lake Natron Resources, a joint venture between National Development Corporation (NDC) and Tata Chemicals, a subsidiary of Indian conglomerate Tata Group, was planning a $400 USD investment to extract 500,000 tons of soda ash from the lake every year. Soda ash, or sodium carbonate, is an important ingredient in the making of glass, detergent, textile processing, metal refining, cosmetics, paper pulp and other industrial goods. On their corporate website, Tata Chemicals claims that they are recognized as “one of the most energy efficient and environmentally responsible companies in India.”

In the last few weeks, notable conservation groups such as Wildlife Conservation Society of Tanzania (WCST), BirdLife International and Royal Society for the Protection of Birds had vigorously campaigned against the project insisting that it will threaten the eco-system of the region.  They said that drastic human activity on Lake Natron (which accounts for half a million or 75% of world lesser flamingos and is a critical breeding ground for these birds for the last 45 years), could lead to complete extinction of the birds by altering the alkaline lake’s chemical balance, destroying the spirulina, a type of bacteria on which the flamingos feed, giving them their distinct rose-pink plumage. It will also disrupt the lives surrounding of nomadic Masai communities.  

According to The EastAfrican, the project would have involved pumping 100,000 litres of fresh water into the lake and 550,000 litres of brine (saltwater) from the area every hour, for the production of soda ash.

Initially, it was reported that the Tanzanian government had brushed away the environmental concerns over the project, emphasizing instead on the economic benefits of the project, such as a new access road, power plant, railroad, pipeline grid and later a pipeline for fresh water across the lake, houses for an estimated 1,225 construction workers and 152 permanent staff and their families.

 The decision to stop this project on its track and reevaluate its environmental concerns is a crucial victory to all those who would like to see sustainability issues take center stage in  investment decision making process.

 What are your thoughts? Are you happy with the decision to stop this project or would you like it to proceed? Do you think the economic benefits of the project are more important that the environmental concerns?

The chairman of Tanzania Mines and Construction Workers Union (TAMICO), Mr Mbaraka Igangula, was quoted over the weekend saying that wage disparity between foreign and local workers was one of the key reasons for the worker strike at Barrick Gold’s Bulyankulu gold mine. He said the weeklong strike will continue until workers’ grievances on pay, health and risk allowances are met.

According to an article published by Reuters over the weekend, “about 1,000 of its 1,971 workers had walked off the job last Thursday [October 25th] in what Barrick termed as an illegal strike. Barrick said it had fired half of the mine’s work force, and production had been halted”. Igangula denies that the strike was illegal and said all correct legal procedures were followed in organising the strike.

According to Igangula,

… a foreign worker earned 24 million Tanzania shillings ($20,820) a month, while a local worker took home a minimum wage of 200,000 shillings [$180]. A Tanzanian professional worker received $4,000 a month, he said. Foreign workers also received a bonus of 20 percent of their salaries, which is denied to local workers, Igangula added…local workers did not receive any risk allowance for exposure to hazards while working in the mine.

News of the strike come as a surprise considering how Barrick Gold Tanzania and the Tanzanian Government have always touted job creation and social responsibility work by mining companies as some of the key benefits the country is enjoying from the growing mining sector. To the extent that over one third of workers at Bulyankulu are unsatisfied with their working conditions gives credence to the growing public outcry that a “win-win” situation is yet to exist between mining investors and the country. The great disparity in wages indicated above revives the question of whether Tanzanian workers are being treated fairly by major foreign companies in the country.

The strike also raises the question of whether our labour laws, mining laws and mining contracts sufficiently protect local workers in foreign corporations and whether the Ministry of Labour is sufficiently empowered to ensure fair compensation scales and standards, if available, are being enforced by the private sector. However, the recent introduction of minimum wage rates for various private sector areas is a step in the right direction. The question of enforcement of these minimum wages still remains unanswered, and this has allowed many private businessness to ignore the new Government directive.

What are your thoughts on the Bulyankulu strike and the new private sector minimum wage rates? Do you think the strike is fair? Or would do you agree with Barrick that current wages are competitive enough to local workers?

As promised, here is the Tanzania TV commercial produced by Tanzania Tourist Board

Despite an 18% decline in FDI investments last year compared to the year before, Tanzania once again led her East African neighbours by attracting more foreign direct investments, mostly due to investment for expansion in the mining industry.

 According to UNCTAD’s “World Investment Report” which came out last week, Tanzania’s FDI stood at $377 million in 2006 (down from $448 million realized in year 2005). Uganda trailed at $307m, Burundi attracted $290m, Kenya raked in only $51m while Rwanda managed $15m.

As a sub-region, East Africa saw an increase in FDI from $1 billion in 2005 to $2 billion in 2006. However, this sub-region still ranks lowest compared to other African subregions in attracting FDI.

Tanzania ranked 4th out of 10 major recipients of FDI among African LDCs. Sudan led the list, followed by Equatorial Guinea, Chad, Tanzania, Ethiopia, Zambia, Uganda, Burundi, Madagascar and Mali. Overall (including non LDCs), the report cited top 10 African recipients of FDI (in descending order) as Egypt, Nigeria, Sudan, Tunisia, Morocco, Algeria, Libya, Guinea, Chad and Ghana.

According to the report, the FDI amounts to Africa doubled in 2 years – from $17 billion in 2004 to $36 billion in 2006. The increase is driven by investors seeking new mining locations in response to increasing global demand and rise in commodity prices. However, Africa’s share in global FDI fell to 2.7% in 2006 from 3.1% the year before. FDI outflows also rose from $2 billion in 2005 to $8 billion in 2006.

What are your thoughts about the concentration of FDI that largely goes into mining sector in Africa? Do you think Tanzania and other African countries can successfully leverage this mining and energy boom and translate it into growth in other economic sectors?

Tanzania Petroleum Development Corp (TPDC) recently opened the bidding process for hyrdrocarbon exploration in six blocks situated in the interior of the country. Energy and oil companies are invited to submit their offers to explore these areas by December 3.

The new locations stretch from southeast to northwest of the country, namely Lake Eyasi-Lake Manyara-Lake Natron area; Ruhuhu area; Kilosa-Kilombero area; South Selous area, Malagalasi area; and south Lake Tanganyika area.

So far, oil and natural gas explorations have centred along the coastline, both onshore and offshore, involving about 14 global energy companies such as Petrobras, Shell International and Dominion Oil & Gas. According to Reuters, so far three areas with natural gas deposits have been found.

What are your thoughts about this move to invite more companies to prospect oil and gas in the country? Will the discovery of oil bring more benefits than harm? How can we ensure the “curse of resources” doesn’t befell us?

Click here to read the bid information. The following map shows current and new exploration areas:

Speaking at an African Finance Ministers press conference in Washington DC this past Saturday, the Finance Minister, Hon. Mrs. Zakia Meghji stated that unlike in the past, Tanzanians these days no longer view IMF as an enemy, but rather as an ally in their quest for development.

The Minister said the following in her opening remarks:

Now, on the role of the IMF, if I can just talk quickly, we can say that Tanzania’s relationship with the IMF has gone through swings since we joined the Fund in the 1960s, actually, right after independence. In short, one can say that Tanzania has moved from viewing the Fund as an enemy – previously, when you would talk about the IMF, people on the street would be very negative —through a period which could be characterized as a “reluctant reformer” to the current status now, of a mature stabilizer in implementing an IMF-supported program under the Policy Support Instrument”. 

 Tanzania's Minister for Finance Zakia Meghji joins other African finance ministers for a news conference on issues impacting the continent at International Monetary Fund Headquarters in Washington, Saturday, Oct. 20, 2007. (AP Photo/J. Scott Applewhite)

 Tanzania’s Minister for Finance Zakia Meghji joins other African finance ministers for a news conference on issues impacting the continent at International Monetary Fund Headquarters in Washington, Saturday, Oct. 20, 2007. (AP Photo/J. Scott Applewhite)

When asked to clarify, the Minister added:

When I said that presently, the Fund is looked at as an “ally,” I was comparing it, of course, with a number of years before. And as I said, our contract with the Fund goes way back into the sixties. I remember that time when Tanzania decided to be a member of the Fund, the demonstrations that took place amongst students at the universities–I was in the university at that time. So the way that the Fund was portrayed was as an institution from outside that wanted to tell the Tanzanian people what to do. And having come from an independence period in the sixties, people saw the Fund as another colonial thing.

But things have changed, as I said, and also the policies, which of course, to the Fund and to the leadership, it was important that we have these policies in order to reduce poverty and to have economic growth. So people didn’t like some of them. For example, the question of the cash budget–so there was a situation whereby people would spend money without planning, and at the end of the day, there were problems, of course. But then, later on, people started understanding that actually, what the Fund was talking about was economic growth–poverty reduction and economic growth–put it that way. And, as I pointed out, a number of reforms therefore had to take place. Initially, they were saying that there would be no changes, but when the reforms brought a lot of changes in Tanzania, the people now say that the Fund is an ally”.

While it is true that over the years Tanzania has graduated in her relationship with IMF to the point of currently operating under a PSI and thus driving its own development agenda; and while its true that IMF policies have evolved over the years to a degree where they are more favorable to the LDCs, the argument of whether IMF and World Bank past policies had done more harm than good will continue unabated. Whether majority of Tanzanians view the IMF and World Bank as “allies” is also up for debate since many more still feel that the improved macro-economic environment is largely on paper; that improvements can be seen but it hasn’t significantly changed their daily lives. 

You can read the entire transcript of the African Minister’s press conference here.

What is your opinion on Minister Meghji’s statement? Do you agree that Tanzanians these days no longer view IMF as an enemy?

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Recently, there has been intense media reports (mostly coming out of Kenyan media and bloggers) pressuring Tanzanian government to ditch SADC (Southern Africa Development Community) in favor of EAC (East African Community).

Tanzania is also being pressured to rejoin COMESA (Common Market for Eastern and Southern Africa) after they pulled out in 2000 to avoid what it termed as duplication of efforts that consequently led to high membership costs. Recently, some industrialists and traders in Tanzania were also reported as advocating for the country’s return to COMESA. 

Observing few responses from Tanzanians to such pressures, I engaged in a friendly and healthy debate with a Kenyan blogger from Business in Focus in an attempt to outline Tanzania’s position (my views are strictly personal). The Kenyan blogger, going by the name “branded”, had posted a stinging article claiming that Tanzania’s negative public opinion against fast-tracking East Africa Federation was “diminishing chances of regional cooperation”. He made further incendiary accusations, claiming that “having strong ties with SADC makes TZ unlikely to represent the interests of the EAC region” and went on blame Tanzania for pretty much everything under the sun when it comes to regional cooperation issues.

The discussion with the blogger started under this link and later continued here as well.

What is your take? Do you think Tanzania should quit SADC and rejoin COMESA?

Prominent Chief Executive Officers in the country last week presented their vision of how to position Tanzania to achieve hyper-growth over the next 20 years.

The presentation was made to President J. Kikwete at the annual CEO Roundtable held in Dar es Salaam last week. It aims to create a $176 billion dollar economy for 58 million people with a GDP per capita income of $3,000 by year 2025. (Currently, the size of the economy is $12.4 billion, population of 39 million with a per capita of $340 dollars, according to World Bank statistics).

To achieve this, it means the economy needs to grow at an exponential rate of 15.8%per annum over the next 18 years (in the past 5 years or so, the economy has been growing at a range of 6-7% annually). They argued that even though this may look challenging, but its not unprecedented. Angola’s economy, for instance, grew at 18% rate in 2005 and is projected to grow at 38% in 2008.

They advised Tanzania to focus on 5 key sectors to bring this hyper-growth:

a) Commodities, particularly minerals – The country has estimated mineral potential valued at $1.28 Trillion. Mineral processing and refining industries (value addition) need to be encouraged. Develop secondary industries out of mining boom by using earnings from the commodity boom to diversify to other industries.

b) Energy (oil, gas, hydro and bio-fuels) – Develop reliable sources of energy. A level playing field is needed as well as a sound regulatory framework (smart mineral policies).

c) Retail economy, particularly Tourism – Need to transform from heritage tourism (sight-seeing) to “lifestyle tourism” (e.g spa and recharge holidays) where tourists engage in activities. Focus should be to encouraged few tourists to spend more money; rather than increasing the number of tourists visiting the country to earn more money.

d) Financial services, particularly Housing financing – Strong demand for housing, population growth and migration all provide opportunity for hyper growth through construction and mortgage lending services. Build a country of home-owners, producers and consumers.

e) Infrastructure development –Needed  to support all of the above. Also, develop IT, telecomm and mega projects such as developments of waterfronts and marinas, casino cities and weekend gateway areas. Aim to develop Tanzania into an international financial center and a trade gateway to the Far East.

In addition to the above, development of human capital is key to higher productivity. To this end, investment in education should be escalated. The public service also needs to transform its mindset to be able to deal with globalisation.

What do you think? Do you think these CEOs are dilusional in thinking that we can have this level of hyper-growth in Tanzania?

It can be done. Play your part! ~ Mwalimu Julius Kambarage Nyerere.

Happy Nyerere Day!

This year, Kenya replaced Tanzania in the list of Top 10 reformers out of 178 global economies, according to the recently released World Bank’s ‘Doing Business 2008’ report. African countries that featured in this year’s “Top 10 Reformers 2006/07” survey were Egypt (1), Ghana (3) and Kenya (8). Last year (2005/06),  Tanzania ranked number 10 in the list, while Ghana, the only other African country in last year’s survey, stood at 9. Therefore, not only did Ghana remain in the list, it also improved her status significantly to 3rd position this year. 

It is easier to start a business in Rwanda compared to her East African neighbours. For instance, there are 9 procedures and takes 16 days to set up business in Rwanda while in Tanzania there are 12 procedures and takes up to 29 days to do the same.  In the “Starting a Business” category,  Rwanda scored 63, Tanzania 95 (up 6 places from last year’s 101 position), Kenya scored 112, Uganda 114 and Burundi 124. 

Tanzania still remains a notable reformer in Africa. She significantly cut the cost of starting a business in the past year, making her and Mauritania two of the cheapest places to register a business in Africa.

In East Africa, it is easier to do business in Kenya (72), compared to Uganda (118), Tanzania (130), Rwanda (150) and Burundi (174).   

Click here for complete economic rankings of “Doing Business 2008” report. Click here for information on notable reformers this year.

What are your thoughts on Kenya’s impressive showing this year as a top 10 reformer?

The IMF has just completed a two week mission in the country to conduct a second review of PSI (Policy Support Instrument) and declared that the economy is “strong.” GDP growth rate was at 6 3/4% for fiscal year 2006/07 and is on track to exceed 7% next year.  In their statement released yesterday, they attributed the economy’s strength to a rebound in the agricultural sector and improved electricity supply. Other strengths were in fiscal performance, in revenue performance and as a result of debt relief under the Multilateral Debt Relief Initiative (MDRI). The foreign reserves had also grown to a record $2.3 billion.

In the short run, the two main challenges mentioned by the mission were inflation and achieving the ambitious 2007/8 budgetary targets in revenue and expenditure.   

Inflation, currently at 7.8% as of August, needs to be reduced to a target of 5% which is “critical toward reducing high interest rates, supporting productive investment and growth, and reducing poverty”. In this regard,  they welcomed the Bank of Tanzania’s efforts to strengthen monetary policy implementation. On the budget, IMF said it “rightly reflects the key priorities of the government to further increase social spending while scaling up infrastructure investment significantly.”

IMF’s statement also stated that “despite rapid growth in recent years, the financial sector remains small, and there is a need to accelerate financial sector development, notably by addressing the legal framework for land ownership and the weak capacity of the judicial system.”

The statement ended by saying it was looking forward to the timely completion of the special audit on the EPA account at the central bank currently conducted by Ernest & Young.

The three-year PSI for Tanzania was approved by the IMF Executive Board in February, 2007, and the first review was concluded in June. The PSI (Policy Support Instrument) is designed for low-income countries that may not need IMF financial assistance, but still seek close cooperation with the IMF in preparation and endorsement of their policy frameworks. PSI-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners.

By the end of the third quarter (last week of September), the Tanzanian Shilling had modestly strengthened against the USD.  The strengthening was due to large increase of forex in the market, aggressive tightening of liquidity by Bank of Tanzania and the recent global weakening of the USD against other major currencies. 

Last week, the Shilling was trading at 1,230/= against the USD compared to 1,281/= at the end of the first quarter. By today, the currency had dropped further to 1,190/=. Dealers predict the Tsh. to further appreciate in the next few months as conditions continue to persist.

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Large donor inflows in the month of July were also partly responsible for the appreciation. The foreign exchange reserves grew to 2.3 billion USD over the last few years, according to Deputy Governor of Bank of Tanzania, Prof. Beno Ndulu and IMF statistics.

The central bank is reported to be aggressively fighting the inflation (currently at 7.8%, above the 5% desired by the IMF) by selling foreign currency, hence increasing its supply while reducing Tsh in the circulation.

 For further information about this story please read the following links:

http://africa.reuters.com/country/TZ/news/usnL10577842.html

http://www.ippmedia.com/ipp/guardian/2007/10/08/99985.html

http://africa.reuters.com/wire/news/usnL26859874.html

http://www.dailynews-tsn.com/page.php?id=8942

New TZ logo in the TV campaignAt an event in New York city recently, Tanzanian President Jakaya Kikwete launched the first ever TV tourism campaign targeted at the American market. The campaign, known as “Tanzania – Land of Kilimanjaro, Zanzibar and the Serengeti”, will be aired on CNN news outlets (CNN America, CNN Headline News, CNN Airport as well as CNN.COM).

The TV spot started appearing on CNN America prime time about two week ago. However, a search for the video on CNN.COM so far didn’t yield any result. Also, no information was immediately available on the total cost the government of Tanzania will incur in this TV campaign or for how long it will take place.

This TV campaign seems to precede the once touted marketing initiative called “Branding Tanzania”. Almost two years after this initiative was placed under the President’s Office, the results of the effort are yet to be known. “Branding Tanzania” aimed at identifying our current brand, measure its strengths and weaknesses, and eventually come up with a comprehensive marketing campaign that will shape the country’s  international image to attract investors and tourists among others. 

Currently, America is the second leading source of tourists in Tanzania.

The press release of the campaign launch can be found here.

What are your thoughts about this publicity blitz? Overdue? Too expensive? Is the cost justified? Do we have the capacity to accomodate the surge in the number of tourists that we should expect from this campaign?

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NEWS UPDATE:

Media reports that came out last week reported that the cost for this media blitz stands at $1 million. However, I was unable to independently verify this number. On the other hand, what I could confirm through Bradford Group, who are the representatives of Tanzania Tourism Board in America, was that the spot will run in circles for eight months through the spring of 2008 on CNN outlets.

According to yesterday’s article on the Financial Times, AngloGold is reported to have also reached a contract renegotiation settlement with government of Tanzania . The move follows similar renegotiations with Barrick Gold and Resolute mining companies. Lately, there has been a growing public outcry that the country benefits little from the growing mining sector. The newly elected government promised to roll back some concessions and renegotiate all mining contracts to arrive at a “win win” situation between government and investors.Some of the gains from renegotiation excerise are:

a) Removal of 15% additional capital allowance on unredeemed qualifying capital expenditure. This tax holiday had effectively delayed payment of 30% corporate tax until the mining company had recouped costs of their initial capital. The removal of the clause will move forward the day when companies with start paying the corporate tax. Barrick Gold has agreed to pay $7 million a year for 5 years as advance payment for corporate tax. AngloGold will start paying the corporate tax in year 2011, four years earlier than initially expected.

b) Mining companies will pay yearly $200,000 to the local government near their respective gold mine to be used for community projects.

c) Removal of exemption to Resolute from paying corporate tax on foreign employees. The removal of this clause will force Rosolute to pay $2.2 million yearly in corporate tax.

d) The mining royalty will remain unchanged at 3% despite claims that it is one of the lowest compared to other gold producing African countries.

A Government-formed committee came up with the following recommendations to be incorporated in existing and future mining contracts: 

a)  100% depreciation in capital for the first year reduced to 80%, and then 50% the year after.

b) Withholding tax on technical services increased from 3% to 5%.c) Service fees for administrative expenses increased from 3% to 15%.

d) Contribution to the “Empowerment Fund” for $125,000 a year.

e) Provisions requiring mining companies to buy local products and services.

The following is a Kiswahili excerpt of a speech by Hon. Nazir Karamagi, Minister of Energy and Minerals, delivered in the National Assembly a few months ago in response to a debate over Buzwagi gold mine project. The Minister highlighted the gains from contract renegotiations:  (more…)

Tanzania plans to increase access to electricity from the current 10% of the population (current population is 39 million) to 25% within 6 years . According to Minister of Energy and Minerals, Nazir Karamagi, the goal of 25% electrification has been pushed forward from 2010 to “2012 or 2013” due to “some delays”.

 Currently, the country generates 744 megawatts (MW) (561 from hydropower, 183 from natural gas), with additional 200 MW expected by end of year 2008.  Annual electricity demand is expected to rise to more than 1,100 MW by 2010.

Recently, the government also announced plans to liberalize the task of distributing electricity in the country by lifting the monopoly enjoyed by TANESCO, the State power utility. https://tzcommoncents.wordpress.com/2007/09/19/govt-ends-tanescos-monopoly-mramba/

Read the news article at the following link.

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According to National Bureau of Statistics, this last August the monthly inflation stood at 7.8%, representing a 1.2% drop since July. At that time, the rate had shot up to a staggering 9.0%. The drop is certainly a welcome development and should improve the current business environment.

 According to Bank of Tanzania, by comparison, the inflation was at 5.5% in August of last year. Generally there has been an upswing in monthly inflation figures since January of 2006 due to rise in global oil prices, drought and the energy crisis that befelled the country at the time. However, many pundits have attributed this July’s rise in inflation as due to new budgetary measures, particularly the introduction of excise duty on fuel. The levy paid by road users was increased from 8 USD cents to 16 USD cents per litre of petrol and diesel. It has been reported that industrialist and transporters have since passed on this cost to consumers, fuelling the inflation. When Zakhia Meghji, Minister of Finance, announced the fuel levy in her last budget speech, she downplayed any inflationary effects it may cause, saying the economy was resilient and pleaded with unscrupulous industrialists not to artificially raise prices.

 Annually, this year’s inflation is also projected to fall below last year’s 6.2% figure to 5.2% (according to Ministry of Finance and JP Morgan emerging market research, June 8, 2007). Next year, the annual inflation is expected to fall further to 4.5%, which is close to the annual levels experienced in 2005 (4.4%) and 2004 (4.1%).

(more…)

United States Millennium Challenge Corporation (Washington, DC)
PRESS RELEASE
18 September 2007
Posted to the web 18 September 2007
Washington, D.C.
The Millennium Challenge Corporation’s Board of Directors approved a five-year, $698 million Millennium Challenge Compact with the United Republic of Tanzania that seeks to reduce poverty, stimulate economic growth, and increase household incomes through targeted infrastructure investments in transport, energy, and water.

“This agreement is a testament to Tanzanians’ commitment to building a better life for themselves and their children,” said MCC CEO Ambassador John Danilovich. “MCC congratulates the people of Tanzania for developing a comprehensive program designed to address Tanzania’s key constraints to economic growth—an inadequate transportation network, insufficient and unreliable supply of energy, and a shortage of clean and safe   water.   Chosen by Tanzanians, the investments to improve the transport, energy, and water sectors will provide a catalyst to reduce poverty and spur economic growth.” (more…)

New York

September 18th, 2007

Minister of Trade, Industry and Marketing, Hon. Basil Mramba, today made what he termed as “the first official public announcement” that the Tanzanian Government will now allow private energy companies to distibute power in the country.

Speaking at the 2nd annual Tanzania Investment Forum in New York, Minister Mramba said that the move will effectively end TANESCO’s long held monopoly in power distribution. “From now on, any qualified company will be able to apply for licence to generate and sell electricity to the market”. Minister Mramba added that what remains is the official passage of the law which is currenty being prepared. The added that the amendment is expected to be tabled in the Bunge sometime this year in November at the earliest or by April of 2008.

Since early 1990’s, private power companies in the country have been generating their own electricity using gas and diesel fired turbines but were required by law to sell only to TANESCO, the Government owned power utility company. In recent years, few exemptions where given to mining and gas companies to generate and distribute power for their own use to support local operations. Today’s announcement, however, will open the field to more players from inside and outside the country to add power to the National grid and supplement TANESCO’s role of distributing electricity to urban and rural consumers. In recent years, due to various reasons such as economic and population growth as well as structural problems, TANESCO had been unable to cope with the rising demand for electricity in the market. For this reason, the liberalization of power distribution had been lobbied for a long time by the businesses and consumers alike as one of the panaceas to the power crisis in the country.

In other major news today, the board of directors of Millenium Challenge Corporation have approved a $698 million Millennium Challenge Compact to Tanzania to reduce poverty, stimulate economic growth, and increase household incomes through targeted infrastructure investments in transport, energy, and water.

THE historical Hotel 77 in Arusha has been sold to the Kempinski Hotels, the Minister for Tourism and Natural Resources, Prof Jumanne Maghembe, told the ‘Daily News’ yesterday.

Prof Maghembe said the government has sold the hotel and all its assets through the Presidential Parastatal Sector Reform Commission (PSRC). He, however, did not say it was sold what price.

“The main aim to sell it is for the investor to build a high standard hotel for the city,” he said.

The minister said that Kempinski Hotels would upgrade the hotel to a five-star status and will have over 300 rooms. The village-style hotel was built specifically for the Group of Seventy Seven Nations meeting held in Arusha in 1979. (more…)