Economy


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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.

 

 

 

 

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?

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

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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?

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