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Exchange rates (Mid-December) £1 = TShs 625 – 630
$1 = TShs 1,000 – 1,050

Following an encouraging statement by the IMF’s Senior Representative in Tanzania, Mr Festus Osunsade, in late September, to the effect that Tanzania’s economy was poised for take-off in the next 12 months, London became recently the centre of much activity on the INVESTMENT FRONT.

Over 100 people attended a conference sponsored by the Standard Chartered Bank and the Confederation of British Industries (CBI) on October 28 entitled ‘TANZANIA: THE OPPORTUNITES FOR BUSINESS TN THE MINERALS SECTOR’ which was addressed by, among others: Minister of Foreign Affairs and International Cooperation Jakaya Kikwete who spoke about the improved tax and financial incentives included in the TANZANIA INVESTMENT ACT 1977 which had been passed by the National Assembly in August; Minister of Energy and Minerals Dr. Abdallah Kigoda, who listed the increasing number of big investments being made in the mineral sector (the fourth most active country with 7.6% of all African exploration in 1996); the Executive Director of the new Tanzania Investment Centre (TIC) – which replaces the former Investment Promotion Centre (LPC), Samuel Sitta, who frankly admitted, in an impressive address, the investor-unfriendliness of Tanzania in the past; he gave the firm impression that things would be much better in the future; he added that the ‘Financial Laws Miscellaneous Amendment Act 1997’, also just passed by parliament, included a new investment code and clarified the actual powers of the TIC in becoming a ‘One-Stop’ Centre for investors; the incentives for mining were now the best in Africa he said; he warned investors to be careful however in dealing with local intermediaries; Chamber of Mines Chairman Samuel Lwakatare said that the minerals sector was now in an exciting phase and mentioned how useful much of the geological survey work conducted during British rule, and now kept in the archives, was proving to be; Sutton Resources (Canada) President Michael Kenyon described the preparation of the new ‘Minerals Act’ to be presented to the next session of Tanzania’s parliament as having been a ‘mature decision-making process’ and then listed a large number of current mineral investment plans; his own company had already invested $25 million, he said. Attorney-General Andrew Chenge chaired the second session of the conference with considerable aplomb and good humour.

The previous evening the UK-TANZANIA BUSINESS GROUP had organised a convivial dinner for the visiting Tanzanian delegates which was addressed by Minister Kigoda. He gave more information about the new investment climate and added that Tanzania was unique in having from 500,000 up to one million small scale artisanal miners. We could not pretend that they did not exist he said. Some companies had been able to CO-exist or strike deals with them. East African Association Chairman Christopher Buckmaster said that he was enormously encouraged by what he had heard; all wanted Tanzania to succeed but he hoped that there would be evaluations of what had actually been achieved under the new structures after the next 12 months and again after 24 months.

At the BRITAIN-TANZANIA SOCIETY ANNUAL GENERAL MEETING on October 17 Buckmaster had shocked many members by pointing out just how difficult it had been for investors in Tanzania during recent years. The Arusha Declaration had been a disaster he said; it had created an attitude, particularly at the lower levels of the civil service, which was hostile to investment; he mentioned the much better investment climate in Uganda; the infrastructure remained very weak in Tanzania, he said; there was little power and water in Dar es Salaam and only 45% of phone calls made connection; there had been breaches of contract following changes in policy; there was horrendous red tape (“I know of no country which is worse”) with banks having to make 200 file returns per year and hotels having to make 400; there were 20 separate operations to clear a container through the port; delays of up to six years to get land registered; a ‘frightful’ taxation system with endless tax audits; and, a ‘going rate’ of $5,000 for a work permit. On the other hand, at the top level there was a refreshing openness, better than in any other country he visited. Tanzania had the greatest potential in eastern Africa. Few countries had such a good record of peace and stability. Macro-economic indicators (inflation, interest rates etc.) were almost entirely encouraging. Yet Tanzania was an economic failure.

Faced with the difficult task of responding to this tale of woe, Tanzanian High Commissioner Dr. Abdul Shareef said that it was not fair to compare Tanzania with Uganda where the government took power by force and could impose its will, or Kenya which had been capitalist since day one. There was a price to pay for democracy. The new government’s economic policy was only two years old. People had grown accustomed to getting everything free. On corruption, he quoted Mwalimu Nyerere speaking in Edinburgh recently – “There is a receiver and a giver …..giving bribes is tax deductible here (in Britain) and is never condemned. It should be a criminal offence”.

The new INVESTOR’S GUIDE TO TANZANIA 1997 was launched at the conference. It is an impressive document which describes in detail how the new investment code will work in practice for minimum investments of $300,000 if foreign-owned and $100,000 if locally owned. It includes a table listing the rate of corporation tax, customs duties, sales taxes, capital allowance deductions and withholding taxes on some 15 different categories of investment. The three lead priority sectors are mining, infrastructure and export processing zones. There are no limits on the number of experts allowed on the immigration quota in the mining and petroleum sectors. Leases of land can be granted for from 33 to 99 years and rates of rent vary from farms outside townships @ Shs 600 per acre per year to industrial plots from Shs 75 to 150 per square metre per year. The text of the new Investment Act is included in the Guide.

Another document presented at the conference was the 35-page THE MINERAL POLICY OF TANZANIA dated August 1997.

The severe DROUGHT which hit Tanzania early in 1997 caused a decline in many economic indicators later in the year. Severe power and water rationing had to be introduced in Dar es Salaam, revenue collection fell, inflation rose, the strategic grain reserve fell, the trade account deteriorated.

The long-delayed launch of TANZANIA’S STOCK EXCHANGE has been postponed again (until after March 1998) because of the failure to get any companies ready for official listing. Most of the 18 companies earmarked for flotation are reported still to have to complete internal structural changes and accounting procedures – Financial Times (Thank you Chuni Chande for sending me this items – Editor)

The successors to the National Bank of Commerce were officially born on October l. One, with 34 branches, is called NBC (1997) LTD and is designed to meet the needs of corporate and large business and personal customers and has as its Managing Director Dr. Francis Mlozi. The other, the NATIONAL MICROFINANCE BANK (NMB) will normally only lend sums of up to Shs 1 million ($1,666); it has 95 branches. But Minister of Finance Daniel Yona said that both banks were deficient in capital; private investors are to be invited to provide up to 70% of this; informal contacts are being made with selected large foreign banks. Meanwhile, Dar es Salaam has yet another bank – the Kenya Commercial Bank opened in October – Business News and East African. Asked in a recent interview on the subject of UNEMPLOYMENT what he was doing about a situation in which there were more job-seekers than jobs, Minister of Labour and Youth Development Sebastian Kinyondo said ‘The reverse is true. There are more jobs than takers, except in salaried jobs. The formal sector can absorb only a million people while the active labour force is about 13 million.. . . The problem is that some people don’t like to do particular jobs. We have people in the countryside who are not producing; graduates who won’t work in agriculture.. .we have to figure out how to get an entrepreneurial class.. . .we intend to cultivate the ‘can do’ spirit; it’s like creating an Indian or a Chinese out of our people – East African.

The 1997 VALUE ADDED TAX (VAT) ACT was passed into law on October 21; registration of potential payers was due to start in January 1998.

The BWAWANI HOTEL was closed temporarily on September 6. The Zanzibar government took it over and cancelled a 30-year lease agreement accusing the British firm, Zee Hotel Management Group, of running up unpaid debts of Shs 1.5 billion in rent and tax. The firm’s managing director Mr Deepak Khotari was ordered to leave the country and escorted to the airport- Daily News.

The MWADUI DLAMOND MINES have increased production by a ‘staggering’ 155% to 126,670 carats since the mines were rehabilitated three years ago – Bank of Tanzania.

The TANZANIA-CHINA FRIENDSHIP TEXTILE COMPANY has also made a U-turn since it was turned in July 1997 into a joint venture between the government (49%) and the private Chinese firm Dieqiu (51%) One month after privatisation the profit was Shs 5 34 million In the second month this shot up to Shs 120 million

MALAYSIA is making a major investment in Tanzania though a $105 million syndicated loan for the country’s first ‘build-own-operate’ 100 MW diesel power plant in Tegata. The loan is backed by a power purchase agreement, But, the World Bank does not approve and has threatened to withdraw its support for the huge Songo Songo gas into electricity scheme if the new plant goes ahead – Southern Africa Decisions, the Business Times, the East African.

RECENT AID: NETHERLANDS – Shs 46 billion during the next five years for development in Kagera, Shinyanga and Arusha regions. Tanzania is the largest recipient of Dutch aid in Africa and the third in the world. The visiting Dutch Prime Minister said that Tanzania was on the right track in development. A $20.9 million WORLD BANK-IDA Credit for primary and girls education and policy planning. The EU – Shs 2.84 billion for urban water supplies and rehabilitation of cotton research facilities. JAPAN – Shs 245 million for educational films for Zanzibar TV. NORWAY through UNICEF – $1.82 million for water and sanitation centres in the Coast, Iringa and Mwanza regions and the setting up of thee monitoring and management support centres. AFRICAN DEELOPMENT BANK – $62 million for structural adjustment. AFRICAN DEVELOPMENT FUND – $28 million for improvement of the road between Tanzania and Uganda. SWITZERLAND – a grant of Shs 4.8 billion in balance of payments assistance. GERMANY – $4.5 million for the renovation of buildings on Ocean Road in Dar es Salaam originally built by the Germans a century ago and which are now used by the Tanzania Cancer Institute. CANADA – Canadian$2.5 million for pulses and other food aid. EGYPT – $30,000 to Zanzibar for drugs and medical equipment. KOREA – $40,000 for vehicles. CHINA – $40,000 for food aid and six new locomotives. USA – $225,000 for military training.

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