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Tanzanian Affairs is a magazine with news and current affairs issued by the Britain-Tanzania Society. It is published three times a year. The views expressed or reported are those of the person concerned and do not necessarily represent the views of the Britain-Tanzania Society. All the information is copyright – please refer here for more details.

PRESIDENT HASSAN WRITES A PUBLIC LETTER TO TANZANIANS

by Ben Taylor

President Hassan

President Hassan marks 30 years of multipartyism with a public letter to Tanzanians
To mark the 30-year anniversary of Tanzania’s adoption of multiparty democracy in 1992, President Samia Suluhu Hassan took the unusual step of writing a “letter to Tanzanians”. This was published in several newspapers on July 1st.

Under the title “I am determined to bring about political, economic change”, the President noted that the work of fighting for democracy was not yet complete. She explained that Tanzania was currently facing the same difficulties that existed when the multiparty system was re-introduced. “This is why in my leadership I believe in the so-called 4Rs – Reconciliation, Resiliency, Reforms and Rebuilding,” she said.

“It is important to explain how we entered the system,” she wrote. “President Ali Hassan Mwinyi formed the Judge Francis Nyalali Commission which reported that only 20% of Tanzanians wanted the multiparty system. The wisdom of Mzee Mwinyi and his fellow leaders allowed the minority to hold sway. Had they waited until the majority wanted multiparty politics, we wouldn’t be where we are today. This is one of the biggest lessons for politicians of my generation and for future generations. That as far as national interests are concerned, knowledge and wisdom are more important than numbers.”

“Instead of only hearing one voice and, sometimes, of one person, as we used to say ‘Long live the ideas of the chairman’, now Tanzanians are exposed to various political ideas. Even Chairman Mao once said ‘Let a hundred flowers bloom.’”

This reference to a slogan that Mao himself later rejected in the most vociferous of ways was the first of two references that surprised many observers. The second was perhaps even more startling, though for a different reason:

“In a famous 19th century comic opera called Iolanthe,” she wrote, “the creators Arthur Sullivan and W. S. Gilbert said something interesting about the American nation during that time: ‘Everyone born is either a conservative child or a liberal child’.” The President took issue with this view: “I do not believe in such presuppositions.”

Obscure references aside, however, the letter proceeded to set out her bold and democratic ambitions for the country under her leadership. “In building a better Tanzania I aspire to create a society that lives in harmony and understanding. I wish to foster unity regardless of our political, religious or ethnic differences. This will only be possible by creating a society in which everyone enjoys equal rights before the law, where there is no discrimination and where there are equal economic opportunities for all. I believe reconciliation cannot be attained where there is discrimination and where some people are denied economic and civic rights.”

This rhetoric became more specific: “Reforms in electoral laws will create a level playing field in our politics and give the electorate an opportunity to elect the leaders they want. In the economy reforms will ensure that more people, as opposed to a few, benefit from economic opportunities.”

“I am aware that people cannot eat reconciliation, resilience or reforms. … [O]ur main goal should be economic growth. And the growth should be sustainable enough to create employment to our youth and open up opportunities to all social groups in the country.”

“I am confident that we will be able to fulfil the goals of having a multiparty system,” she concluded. “Our main objective was not to have a multitude of political parties but to build a resilient and patriotic society that values reconciliation, with sustainable economic growth that benefits all. This is the best way to honour all those who fought for multiparty politics in our country.”

The President’s letter was commended by some and criticised by others.
“This is a wonderful move,” said Zitto Kabwe, the ACT-Wazalendo party leader. However, he also called on the government to turn the words into actions: “we need to see these issues taken to Parliament and various laws amended including those involving the political parties so that the goals and commitment of the President can be real…,” he said.

Chadema General Secretary John Mnyika said the President could have made better use of the 30-year anniversary to remove the constraints on political parties and by announcing speedy completion of the new constitution writing (see next article). He noted that the President did not write about removing “the illegal ban on public rallies”, finalising the constitution writing process or changing electoral laws.

Innocent Shoo, a lecturer at the College of Diplomacy was more positive: “If you do not have political freedom in the economy, many people are afraid to come and invest. What President Hassan is doing is ensuring the country builds itself economically because countries that have done so like Singapore were successful.”

NEW CONSTITUTION

by Ben Taylor

Where to start looking for a new Constitution?
With President Samia Suluhu Hassan having re-ignited the process towards enacting a new national constitution (see previous issue of TA), the debate has more recently shifted to the issue of where the process should begin: with one or other of the previous drafts developed as part of the most recent constitutional review process between 2010 and 2015, or with more public consultations and a clean slate?

The so-called “Warioba Draft”, also known as the “second draft”, was submitted by a Commission led by Former Prime Minister Joseph Warioba to the then President, Jakaya Kikwete, and debated by the Constituent Assembly (CA) comprising MPs and other prominent figures (incidentally with President Hassan as the CA’s Vice-Chair). Among (many) other things, this draft proposed a significant shift in the relationship between Zanzibar and mainland Tanzania – what became known as the “three government” model with Zanzibar, mainland Tanzania and the United Republic of Tanzania all having their own governments.

The CCM-dominated Constituent Assembly, following the advice of President Kikwete, made major changes to this draft, producing the “Proposed Constitution” in 2014, which was intended to be put to a public referendum. This draft retained many of the changes in the Warioba Draft, but dropped the three-government idea. Instead, it proposed that the relationship between Zanzibar and the mainland should remain largely unchanged from its current form.

The process stalled when opposition parties withdrew from the process in protest at the changes, undermining the popular legitimacy of the process. Time before the general election of 2015 to resolve the issues became too short, and after 2015 President Magufuli showed no interest in pursuing the matter.

Anna Henga, the executive director of the Legal and Human Rights Centre (LHRC) says the process should convene a new Constituent Assembly that “should use both the Second Draft Constitution and the Proposed Constitution during its debate”. She added that “doors should also be opened for Tanzanians to deliberate the matter through meetings, debates and media discussions.”

Tanzania Constitution Forum (TCF) executive director, Bob Chacha Wangwe, expressed a similar view: “An independent committee of experts should be tasked to produce a new proposed constitution, with content compiled from the Second Draft Constitution and the Proposed Constitution, that would be taken to citizens for voting during the referendum,” he said.
Joseph Warioba himself called on the Presidential Task Force to reconsider people’s views when it comes to the country’s new constitution, arguing that the public are currently being sidelined. “It is sad that people’s voices seem to be ignored. I see that leaders and intellectuals are given high priority to air their concerns on the matter leaving aside the common people,” he lamented.

The retired Vice Chairman of CCM, Mr Philip Mangula, agreed. “For the new constitution, it’s better to pay attention to people’s views,” he said.
ACT-Wazalendo secretary general Ado Shaibu said a national consultative forum should be convened to gather stakeholders from different parts of the country for dialogue. A committee of experts should then prepare a new proposed constitution from the second draft document and the first proposed constitution, which should then be put to a public vote.

After the CCM National Executive Council (NEC) held in Dodoma in June, the party’s Ideology and Publicity secretary Shaka Hamdu Shaka briefed reporters about key discussions and decisions. He said CCM and the leading opposition party, Chadema, have been engaged in consensus meetings, noting that the ruling party has been actively participating in every step of deliberations. “Considering the current environment, the government should see how best the new constitution writing process could be revived and completed for the interest of Tanzanians and the country at large,” he said.

This move was broadly welcomed by opposition party leaders. ACT-Wazalendo party leader Zitto Kabwe said his party welcomed the CCM initiative with two hands. “We at ACT Wazalendo have been at the forefront in providing advice on proper means of getting the document,” he noted.

Chadema’s deputy secretary general (Mainland) Benson Kigaila said they supported the moves towards a new constitution and also called for the formation of a truth and reconciliation commission to discuss unjust and undemocratic incidents under the previous administration. “The commission will be responsible to ensure that such incidents will not repeat in future,” he said.

Speaking later at a debate among political party leaders, in July, Mr Kabwe said CCM as a whole had never really wanted multipartyism, but gave in to pressure and the persuasion of its then leader Mwalimu Julius Nyerere. He said the “original sin” for Tanzania’s democracy was to treat it as “supplied by CCM,” which also “meant that they would take it back if they so wished, as we saw between 2016-2021.”

At the same event, Chadema party chairman, Freeman Mbowe, said the current constitution guarantees protection to almost all top leaders, which leads to those in positions of responsibility making mistakes and arbitrary decisions without fear of any reprisals or accountability. He thanked President Samia for showing the willingness to tackle the challenges.

Tanzania’s current constitution dates from 1977, a time when the country operated a single-party system with power highly centralised in the position of the President. It has not been updated to reflect the adoption of multiparty democracy. Among the main calls of stakeholders – particularly those in opposition parties – is for a new constitution to properly establish the electoral commission as an independent body.

TWAWEZA RESUMES PUBLICATION OF OPINION DATA

by Ben Taylor

A leading civil society organisation, Twaweza, launched a new report in August drawing on data from their Sauti za Wananchi (Voices of the People) series of nationally-representative public opinion surveys. The report found that a large proportion of the population (68%) were concerned about the rising cost of living.

In response, the government warned that the survey was unofficial. “The findings are theirs (Twaweza) and we’ll look into them before we give the official government position. As the findings stand, they are not official,” said statistician general Albina Chuwa, responding to questions posed by Mwananchi newspaper.

On a positive note, the survey also found that a majority of citizens (68%) are satisfied with the improvement in delivery of social services and most 60% said they were happy with improvements in freedom of expression during the past six months.

The survey included a particular focus on recently introduced taxes and charges on mobile money transactions. The new levy was introduced in July 2021, then reduced by 30% in September 2021 and again in July 2022, making a total reduction of 60 percent of the previously set rate.

The survey found that 80% of citizens are aware of the introduction of the levy, but that citizens were divided on whether the levy represents a valuable new mechanism for raising money for public expenditure or an unnecessary burden on citizens’ own finances. A significant number of citizens (close to half) also report using mobile money services less often since the introduction of the levy – a finding that is supported by the mobile money services providers own accounts.

Aidan Eyakuze, the executive director of Twaweza, said, “Fees have increased the cost of important services, they have caused citizens to significantly reduce the use of these services and may in the end affect revenue collection.”

In order to balance the situation and build a just society, Mr Eyakuze said the government should listen to the voices of the people when making major decisions such as taxation. “The attention of the government will help build the confidence of the people, and increase their motivation to contribute to the development of the country,” he said.

“It’s not that people don’t want to be charged,” noted Dr Wilhelm Ngasamiaku, an economist from the University of Dar es Salaam (UDSM). “The importance of tax is known for the economy, but it increases pain. Dr Ngasamiaku noted that in recent years, a big effort was in encouraging rural citizens whose bank services have not reached to use mobile phones with the aim of promoting financial inclusion, through these charges, he believes the goal may not be reached.

Another economist from UDSM, Dr Jehovaness Aikaeli, said there were few dependable sources of revenue for the government, and as a result the government collected taxes from sources that were visible such as mobile money and bank transactions.

The survey conducted in October 2021 and July 2022 involved 3,000 respondents, comprising a representative sample of all adults in Tanzania. The survey was conducted by mobile phone, calling respondents who had previously participated in door-to-door surveys and consented to be reached again in future by mobile phone.

Publication of the findings represent a significant step both for Twaweza and for Tanzania more generally, as such data had become highly politicised under President Magufuli, and Twaweza – while continuing to collect some data throughout, had not publicly released any new public opinion data in Tanzania since mid-2018. At that time, the data had revealed a sharp decline in public approval of the President’s performance. The government then responded by challenging the organisation’s right to collect and publish such data. Twaweza’s executive director, Aidan Eyakuze – a Tanzanian citizen – had his nationality questioned publicly and his passport confiscated.

Since President Samia Suluhu Hassan took office, the government has taken a more open attitude to freedom of expression, including the right of organisations like Twaweza to collect and publish public opinion data. Aidan Eyakuze has had his passport returned to him, and this first release of data for four years is seen by some commentators as a test case for political and civil society freedoms.

At the time of writing (late August), it is less than a week since the data was released – too early to conclude on its impact. However, it is notable that the release prompted heated online debate, including attempts by some to attribute claims to Twaweza that were not supported either by the report itself or by Twaweza’s statements at the launch. “Twaweza Battles Misinformation,” read one online headline.

However, this use of fake news as a tactic strongly echoes the kind of responses seen by Twaweza in the past, particularly around the 2015 general election. It is very different from preventing such research from being conducted or published in the first place.

(Full Disclosure: The writer of this article – also the editor of Tanzanian Affairs – works as a consultant with Twaweza.)

TOURISM & ENVIRONMENTAL CONSERVATION

by James L.Laizer

Relocation of people from Ngorongoro hits the headlines
The relocation of people from the famous Ngorongoro Conservation Area is continued to hit the headlines whereby a number of families reported to have registered for leaving to Msomera village in the Handeni District in Tanga.

Police stand off with Maasai protestors


According to The Citizen of 23rd July 2022, the Deputy Conservation Commissioner (DCC) of the Ngorongoro Conservation Area Authority (NCAA), Dr. Christopher Timbuka, reported that 757 households with 4,344 people have voluntarily signed for the relocation so far. “The number of households that are currently registering to relocate from Ngorongoro is huge and satisfying compared to our manpower. We have the funds, but cannot construct all required houses at once, that is why we are relocating people in phases and moving according to the budget.”

The indigenous Maasai community has lived in the Ngorongoro conservation area, a UNESCO World Heritage site in northern Tanzania, for over a century now. However, they now face being moved out, as the authorities contend that their growing population is a threat to wildlife habitat.

The registered Maasai families have to be moved to Msomera village, about 50km from Handeni township in Tanga region, 600km (370 miles) away from their ancestral land of Ngorongoro. The Arusha Regional Commissioner Hon. John Mongella was quoted as saying that the government has earmarked 400,000 acres of land for relocated Maasai households. In the video statement Hon. Mongela said that “There is no eviction here, all people who are leaving (are) voluntarily registered and the government is facilitating them.”

Although the Government officials are insisting that the relocation is voluntary, but the community remains sharply divided over the issue, with many reluctant to leave the only home they have ever known. The Maasai say the authorities are attempting to force them off their land in order to organise safaris and private hunting expeditions for tourists. The government however has rejected these accusations, but the issue has led to clashes between the pastoralists and police. One police officer was killed and several protesters were injured during demonstrations in Ngorongoro district’s Loliondo town.

Various local and international organisations have expressed their profound concern over ongoing efforts to relocate the Maasai from Ngorongoro. The United National Permanent Forum on Indigenous Issues called on the Government of Tanzania to immediately cease efforts to evict the Maasai people from the Ngorongoro Conservation Area as stated in the report of the 21st session in 2022 to be presented at UN Economic and Social Council (ECOSOC).

Further, the Forum called on the Government “to comply with the provisions recognised in the United Nations Declaration on the Rights of Indigenous Peoples, and other relevant international human rights instruments, and ensure the right of the Maasai to participate in decision-making, considering that [use of] their land in Loliondo for safari tourism, trophy hunting and “conservation” will affect their lives and territory.”

The Government issued a statement assuring the public and the international community that “the country abides by the rule of law and is a party to a number of international conventions and protocols with respect to human rights. Conservation is for the benefit of the people and in this regard the Government of the United Republic of Tanzania with continue to give priority to its people above anything else. … The exercise of implanting beacons around any protected area is a normal practice for all wildlife and forest protected areas in Tanzania and it is not strange for it to be applied to the Loliondo Game Controlled Area. The fact that the Government has decided to allocated the 2,500 square kilometres out of 4,000 square kilometres of protected land to the community testifies its commitment to its people and human rights plus community development activities as well. We therefore call upon the general public and the international community to ignore the ongoing propagated false allegations by some individuals and organisations that there is an eviction exercise and an infringement of human rights taking place in the Loliondo Game Controlled Area.”

A continuing dialogue between the government and the affected Maasai communities as well as adhering to the rights of the indigenous people is the best approach toward a fairly relocation process of the Maasai community in Ngorongoro. This would ensure the survival of the Maasai community, their ability to maintain livelihoods and fundamentally, their traditional way of life, whether in Loliondo or in Msomero.

Ten-year conservation plan launched
Tanzania launched an environmental conservation master plan as part of celebrations marking the World Environment Day. The master plan was launched by Prime Minister Kassim Majaliwa in the capital, Dodoma on Sunday 5th June 2022.

The government plans to take a number of measures to address the impact of environmental degradation caused by human activities. The Prime Minister directed the Ministry of Finance and Planning to allocate budget for its implementation in the next 10 years. The plan is aimed at reclaiming degraded areas in the country and at the same time controlling further environmental degradation, he added.

He urged government ministries and institutions, the private sector and individuals to fully participate in the implementation of the plan that he said focused on protection and conservation in 15 areas, including massive tree planting, controlling of invasive plants in protected areas, mobilization on the use of alternative energy to lessen dependence on firewood and charcoal, and controlling outbreaks of wildfires.

Other areas are protection of water sources, protection of animal corridors from encroachment by human activities, controlling of human-wildlife conflicts, and creation of a comprehensive waste management.

At the event, the United Nations resident coordinator in Tanzania, Mr Zlatan Milisic, commended the East African nation for efforts to conserve the environment in the face of climate change. “Tanzania has proved to be a trustworthy partner toward the conservation of the environment,” he said.

Mr Milisic also commended the government for mainstreaming the environment agenda into policies and decision-making as well as increasing engagement of the youth in the Environment Action Plan II. “Trees are now being planted and grown all over the country, including here in Dodoma where the Regional Commissioner is implementing the tree-planting campaign,” he said.

Speaking on behalf of Parliament’s Industry, Trade and Environment Committee, Mr Felix Kavejuru said nearly 500,000 trees were being felled annually, with 35% of them being cut down in Tabora, Shinyanga, Kigoma and central zone regions.

“The trend denies the country environmental products such as food, reliable water, drugs and clean air. The target of planting 1.5 million trees by each council annually should be emphasized. People should be educated on the need to shift to alternative energy and abandon firewood and charcoal,” he said.

World Environment Day, celebrated annually on June 5, is the United Nations’ principal vehicle for encouraging awareness and action for the protection of the environment. In Tanzania, the World Environmental Day has been a platform for raising awareness on environmental issues such as marine pollution, overpopulation, global warming, sustainable consumption and wildlife crime.

Tourists to enjoy high speed internet on Mount Kilimanjaro
Africa’s Tallest Mountain Mt- Kilimanjaro gets fast internet whereby the climbers now can upload their ascents to share with family, friends and followers in real time. The installation of the high-speed internet services on the slopes of Mount Kilimanjaro was implemented by a state-owned Service provider (Tanzania Telecommunications Corporation), whereby a broadband network set up at an altitude of 3,720 meters (12,200ft) above sea level at Horombo Huts. This is great news to tourists, tour guides as well as porters who previously, used to climb the Mount Kilimanjaro without the internet.

According to Nape Nnauye, Minister of Information, communication and ICT, the internet service will be extended to the summit of the mountain by the end of this year. The internet project would increase the visibility of the mountain and attract more visitors to one of the country’s leading tourist destinations where by tourists can now communicate worldwide from the summit of the mountain as well as improves the safety of mountain climbers and porters.

CENSUS UNDERWAY

by Ben Taylor
At the time of writing (late August), Tanzania’s decennial Population and Housing Census is underway. The exercise kicked off on August 23, 2022, according to Anna Makinda, the 2022 Census Commissioner, who explained that the data gathering exercise would last for seven days and cover the whole population in all households across the country.

The population census will be followed by enumeration of all buildings, which will begin on August 30 and will be done by the same clerks used in population census. This comprises the collection of information on all residential and non-residential buildings across the country. The intention is to inform policy change and strategic plans for the housing sector, as well as to assess the level of houses in planned and unplanned areas and the state of access to community services in various locations.

This is only the sixth time that Tanzania will be holding a national population and housing census since the country gained independence in 1961, with previous exercises taking place in 1967, 1978, 1988, 2002 and 2012.

President Samia Suluhu Hassan underlined the importance of the public to participate in the national census, saying it was crucial in planning the country’s development and for equitable distribution of resources. “Data collected through the census will enable the government to provide requisite social services such as education, health and water and address challenges facing some sections of the population, including persons with disabilities,” she said.

ENERGY & MINERALS

by Ben Taylor
Significant deal signed on LNG processing facility
Tanzania has signed a framework agreement with the Norwegian firm Equinor and UK-based Shell that brings the parties closer to starting construction on a $30bn project to process and export liquefied natural gas (LNG). The deal announced in June foresees a final investment decision by 2025, and a start of operations by 2029-2030 at a liquefied natural gas plant to be built in Tanzania’s southern coastal town of Lindi.

“We have never reached this stage of natural gas development in the history of our country,” said Energy Minister January Makamba during the signing ceremony. “This project will significantly change our economy,” he added.

President Samia Suluhu Hassan, also present at the ceremony, welcomed the preliminary agreement. “We have reached a good stage of discussions about the LNG project, but much work is still waiting for us to talk and make it competitive,” she said.

Plans for the LNG plant had stalled for several years under President John Magufuli, and President Hassan re-launched efforts after taking office in 2021.

“We had many stops but through [the] resolve of the government, we kept engaging, discussions and we believe Tanzanian gas presents a huge opportunity,” said Equinor country manager for Tanzania, Unni Fjaer.

Both Equinor and Shell have existing interests in natural gas in Tanzania. Along with US firm ExxonMobil, Equinor is exploiting an offshore block where it says it has found 20 trillion cubic feet of natural gas. Shell, together with Ophir Energy and Pavilion Energy, says it has discovered 16 trillion cubic feet of gas in two other offshore blocks in the same area.

Low-carbon energy potential, and projects
While Tanzania continues to seek to exploit her natural gas resources, the country is also powering ahead on low-carbon energy projects.

President Samia Suluhu Hassan stated while on a visit to the US in April that the country has a goal of producing 6,000MW from renewable energy by 2025. She said the electricity will be produced through a combination of hydropower, solar and wind projects.

The President was speaking at a discussion themed “A New Day for US-Tanzania Relations,” hosted by President and Chief Executive Officer of the Wilson Centre (and former US Ambassador to Tanzania), Mark Green.

Chief among Tanzania’s portfolio of renewable energy projects is the controversial 2,100MW Julius Nyerere Hydropower Project (JNHPP) at Stiegler’s Gorge, where construction is well under way (see previous issues of TA). Two smaller hydropower projects – the Ruhudji and Rumakali projects, both in Njombe region – are also lined up to begin producing 358MW and 222MW respectively. In combination, these three projects will nearly triple the country’s electricity supplies from the 2021 level of just over 1,605 MW.

Tanzania is also pressing ahead with both wind and solar power projects. In July, Energy Minister, January Makamba visited the site of a proposed 150MW solar farm in Kishapu District, Shinyanga Region. He explained how the project, financed by the French development agency AFD, will eventually feed power into the national grid, providing energy particularly to Simiyu and Mwanza regions, as well as to communities surrounding the plant.

Tanzania is recognised as having an abundance of the solar radiation necessary for generating large-scale power year round. It is estimated that 83% of the country’s land area has a high level of annual average radiation, and 14% has very high levels. This means the solar resource for power generation is viable in most, if not all, the country.

The President told the audience in the US that Tanzania has a target to produce between 600MW and 700MW of electricity from solar.

Similarly, the country has high potential for wind-power projects, with several parts of the country having strong and predictable wind patterns. Projects already underway include a 100MW plant near the town of Singida and a 300MW project near Makambako.

Geothermal energy potential is also being developed, with an initial focus on providing direct heat for agricultural and industrial purposes including greenhouse heating, grain drying, etc.

Currently, with per capita annual energy consumption of just 103KWh, Tanzania ranks in the bottom ten nations in the world, below even the norm across sub-Saharan Africa. In the past ten years, while the population has increased by 32% and electricity demand by an estimated 400%, total installed power generation capacity has increased much more slowly, from 1,521MW to 1,700MW: a pace equivalent to roughly one percent per year.

Fuel subsidies introduced to cushion citizens from price increases
In May, the government announced moves to protect consumers in Tanzania from the rapid global rise in fuel prices by introducing a TSh 100bn (USD $43m) monthly subsidy. The subsidy took effect on June 1st and resulted in a reduction in prices at the pump of around TSh 300 per litre.
Petrol, diesel and kerosene prices had risen to record highs of above TSh 3,000 per litre earlier in May after global oil prices shot up following Russia’s invasion of Ukraine.

Nevertheless, as global prices remain high, pump prices in Tanzania have continued to rise despite the government subsidy. In early August, the Energy and Water Utilities Regulatory Authority (EWURA) announced new price caps for fuel that saw prices for petrol and diesel rise to levels never recorded before in the local market. A litre of petrol in Dar es Salaam will cost TSh 3,410, while in Mtwara the same will cost TSh 3,762.
“Fuel is a strategic and very important product,” said the executive director of the Tanzania Association of Oil Marketing Companies (Taomac), Raphael Mgaya. “If the government continues with its efforts to ensure the commodity is available at affordable prices by the end user, then it will help strengthen the economy and reduce the risk of inflation,” he added.

BUSINESS & THE ECONOMY

by Dr Hildebrand Shayo

Highlights on President Samia’s FY 2022/23 and what could be budget’s effect on business and investment
The total budgeted expenditure in the 2022/23 budget is TSh 41.5 trillion (USD $18bn). What does this budget mean? How is this budget going to be financed, and is this budget likely to speed up business’ growth, maintain or attract new investment to Tanzania ?

This FY2022/23 budget was tabled at a time the Tanzanian economy is growing at 4.9% compared to a growth of 4.8% in 2020. The increase was attributed to diverse efforts taken by the Government, including the execution of the Tanzania Covid Socio-Economic Response Plan and strategic investment, especially in energy, water, health, education, roads, railway, and airports infrastructure.

The economic activities with the highest growth rate at the time the FY2022/23 budget was tabled were arts and entertainment (19.4%); electricity supply (10.0%); mining and quarrying (9.6%); and information and communication (9.1%).

In 2021, the GDP at the current prices was TSh 161.5 trillion compared to TSh 151.2 trillion in 2020. Tanzania’s mainland population was estimated to be 57.7 million people in 2021 compared to 55.9 million people in 2020. Per capita GDP was TSh 2.79 million in 2021, compared to TSh 2.7 million in 2020. Further, the inflation rate increased to 3.8% in April 2022 compared to 3.3% in April 2021.

The rise in inflation was an outcome of reasons beyond the Government’s control including disruptions in the production and distribution chains of goods and services in the world market because of the Russian invasion of Ukraine.

The total proposed expenditure in the 2022/23 budget is TSh 41.5 trillion (USD $18bn) for recurrent and development expenditure. Out of that amount, TSh 26.5 trillion (USD $11.5bn) is allocated for recurring expenditure, equivalent to 63.8% of the total budget and TSh 15.0 trillion (USD $6.5bn) for development expenditure. The sources of funds are government domestic revenue (including LGAs own sources) estimated at TSh 28.0 trillion (USD 12.1bn), equivalent to 67.5% of the total; external grants and concessional loans estimated at TSh 4.65 trillion (USD $2.0bn) equivalent to 11.2% of the total; and domestic and external non-concessional loans TSh 8.8 trillion (USD $3.8bn) equivalent to 21% of the total.

The theme for the 2022/23 budget is Realising Competitiveness and Industrialization for Human Development. Priority sectors include agriculture, livestock, fisheries, energy, investment, and trade. Tanzania theme is very well in line with the EAC Partner States’ budget theme for 2022/23, which is Accelerating Economic Recovery and Enhancing Productive Sectors for Improved Livelihoods.

The budget however for FY 2022/23 aims to achieve macroeconomic policy targets of real GDP growth rate of 4.7% in 2022 and 5.3% by 2023; holding inflation between an average of 3.0% to 7.0% in the medium term; domestic revenue collection of 14.9% of GDP in 2022/23; tax revenue collection is projected at 11.7% of GDP in 2022/23; and maintaining foreign reserves sufficient to cover at least four months of imports of goods and services.

In FY 2022/23, the Minister for Finance and Planning further proposed several changes in tax laws including the Income Tax Act, the Value Added Tax Act, the Tax Administration Act, the Excise (Management and Tariff) Act. The Minister proposed amendments to existing provisions as well as new provisions in tax laws.

Tax and related changes
The Minister proposed the following amendments to the Income Tax Act, 2004:
• Introduction of a tax rate of 3.5% for taxpayers with turnover exceeding shillings 11 million but not exceeding shillings 100 million in a year.
• Improvement of the Tanzania Revenue Authority payment systems, to enable payments of taxes through mobile wallets.
• Recognition of alternative financing as approved by the Bank of Tanzania to be the same as conventional borrowing to enhance financial inclusion and access to finance.
• Granting the Minister for Finance powers to waive income tax for strategic investors after approval by the National Investment Steering Committee, as indicated under the Tanzania Investment Act, and as subsequently approved by the Cabinet.
• Abolishment of withholding tax exemption on rent paid by individuals for residential houses, apartments, and commercial premises. The Commissioner General for Tanzania Revenue Authority will enter an Agency Memorandum of Understanding with the President’s Office Regional Administration and Local Government on the administration and collection of this tax.
• Capital gain tax exemption on any transaction involved on the entry into force and implementation of agreements involving the transfer or surrender to a joint venture company of any project; or the authorisation, issue, distribution, or transfer to the Government of the free carried interest shares.
• Capital gain tax exemption on equity shares freely surrendered to the Government through the Treasury Registrar.
• Withholding tax exemption on coupon for corporate and municipal bond.
• Reduction of the withholding tax on service fees paid to nonresidents in the film industry from 15% to 10%.
• Introduction of 2% digital service tax on the turnover of non-resident service providers.
• Introduction of 2% final withholding tax on payments made to small scale miners.
• Introduction of an annual income tax of TSh 3.5 million per truck and passenger bus and
• Introduction of an advance income tax of TSh 20 per litre for retailers of petroleum products.

In relation to VAT, the Minister proposed exemptions on various items including the following:
• Raw materials and Machinery under Chapter 84 and 85 of the East African Community Common External Tariff solely and directly used in the manufacturing of fertilizers by an approved manufacturer. Exemption will be granted upon approval by the Minister for Agriculture.
• Unprocessed green vanilla pods for equity purpose as treatment of other unprocessed agricultural products that are exempted from VAT.
• Locally manufactured sisal twine.
• Ultra-High Temperature (UHT) milk and yoghurt, and dairy packaging materials.
• Pasture seeds (grass seeds) and pasture legumes seeds.
• Machines and tools solely and directly used by the military and armed forces. The exemption will be granted upon approval of the goods by the Minister responsible for defence and security. VAT exemption is proposed to be abolished on the supply of air charter services, as well as on smartphones, tablets and modems.

Other proposed VAT amendments:
• Treatment of alternative financing arrangement as conventional borrowing to enhance financial inclusion and accessibility of financial services.
• Zero rate for one year, locally manufactured double refined edible oil.
• Zero rate for one year, locally manufactured fertilizer.
• Grant power to the Minister for Finance to grant VAT exemption on strategic investments after approval by the National Investment Steering Committee (NISC).
• Expand the list of capital goods that qualify for VAT deferment to include tractors, trailers and semi-trailers, and other vehicles not mechanically propelled.

Changes proposed to the Local Government Finance Act include exempting crop cess on seeds to provide relief to farmers and enhance productivity, and reducing forest produce cess from 5% to 3% to provide relief to forestry traders and support growth of forestry sector.

Further, the Minister proposed to reduce the Workers’ Compensation Fund contribution rate from 0.6% to 0.5%, to align the rate payable for private and public sector employees; to reduce the rate of royalty from 3% to 1% on coal used as energy raw material in factories, to encourage investment; to introduce an export levy of 30% or USD$150 per metric tonne (whichever is higher) on copper waste and scrap metals, to protect local manufacturers.

On the Insurance Act, the Minister, expanded the scope for mandatory insurance to include public markets, commercial buildings, imported goods, marine vessels, ferries, and pontoons. On the Foreign Vehicle Transit Charges Act, he reduced transit charges for vehicles exceeding 3 axles from USD 16/100 km to USD 10 or its equivalent in convertible currency for every 100 km. On the Bank of Tanzania Act, he increased the limit on Government borrowing to not exceed 18% of approved domestic revenue in the current fiscal year instead of the current rate of one eighth of the domestic revenue collected in the preceding fiscal year.

Sources: MOFP budget speech for FY2022/23- presented at parliament-Dodoma, Tanzania. Effectiveness of the 2022/23 budget start 1st July 2022

IMF FUNDING

by Arrad Tabandeh
Arrad is a TDT Volunteer currently studying at the London School of Economics and Political Science (LSE)

IMF approves more funding for Tanzania to deal with the effects of pandemic and war
In July the IMF Executive Board approved a forty month $1.05 billion extended credit facility (ECF) arrangement with Tanzania. This type of support is designed to provide financial assistance to countries with protracted balance of payments problems, and is part of a broader reform at the Fund to make their financial support more flexible and better suited to the needs of countries requiring more diverse assistance. It is seen as a major tool in providing medium-term support to Tanzania and its economic programmes aimed at stability and sustainability.

This follows the Fund’s emergency support to Tanzania in 2021, as overall financing since the start of last year is now equivalent to 300% of the country’s special drawing rights (the IMF’s own currency used as an international reserve asset and allocated between countries). The arrangement is expected to accelerate further bilateral and multilateral financial support.

The purpose of this ECF is to assist Tanzania with the spill-over effects from the war in Ukraine which is stalling the country’s gradual recovery from the pandemic. The programme draws from the key priorities of the government’s Five-Year Development Plan which commits to the improvement of living conditions through measures aimed at building a “competitive and industrial economy for human development”. The authorities will therefore use this additional funding in accordance with the Plan and invest in infrastructure, skills-training, as well as strengthen the business environment to facilitate private sector success. Contributions are also thought to be made towards scaling up vaccination efforts.

The IMF has forecasted Tanzania’s GDP to grow 4-5% each year from a base of about $65 billion in 2021, with the current account deficit floating around 4% of GDP. Therefore, while financing of $1 billion across nearly four years covers a relatively small amount of the deficit, it is still sufficient in driving reforms and building a sustainable base for future revenues and growth.

Speaking to “Daily News”, a cross-section of economists said they were optimistic that the credit will offset the rising prices of commodities. They also suggested that the fund should be used to provide subsidies on imported fertilisers, to reduce prices of the soil nutrient encouraging the country to become more self-reliant. It is hoped that this could go some way in alleviating the worsening cost of living crisis.

Mr. Bo Li, Deputy Managing Director at the IMF mentioned how executive directors “commended authorities for their economic response to the pandemic and the policies enacted to mitigate the spill-overs from the war in Ukraine”, but also referred to the “considerable development and reform challenges and external headwinds” that the country is facing. It is against this backdrop as well as “recognising Tanzania’s strong track record in reform implementation” that the directors supported the country’s request for an ECF arrangement.

The directors also highlighted the authorities’ continued work in “rebalancing expenditure towards social spending and improving its efficiency and execution.” They welcomed the progress made in establishing fiscal transparency in the nation alongside emphasising the importance of raising government revenue to address priority spending, including the containment of rising food and fuel prices. This can also help pave the way for a more sustainable fiscal policy in the country, freeing up room for longer-term development.

Plans are in place to pay out $150 million immediately. The financing is Tanzania’s first IMF policy-reform funding programme in a decade and comes after the Washington-based lender raised the country’s risk of debt distress to moderate from low last year. For now the fund has encouraged the implementation of Tanzania’s ambitious reform agenda, alongside stressing the need to continue to address climate risks.