BUSINESS NEWS

Exchange rates (August 1998): £1 = TShs 1,100 $1 = TShs 670

The new GOVERNOR OF THE CENTRAL BANK is Mr Daudi Balali (56) who has worked for the IMF in Washington for 21 years. His predecessor Dr Idris Rashidi said that he was considering starting his own commercial bank. Mr Enos Bukuku is the new chairman of the Board of the Tanzania Revenue Authority – the African.

Eight firms (7 overseas, 1 local) have presented bids for the purchase of 100% of the KILIMANJARO HOTEL in Dar es Salaam. It has been running at 15% capacity recently – Daily News

As this issue goes to press no solution seems to be in sight in the controversial Independent Power Tanzania Ltd (IPTL) – Songo Songo electricity saga, the background to which has been covered in several recent issues of TA. The idea was that the two projects would each supply about 100 MW of electricity to the national grid. The Malaysian-backed project is virtually ready to produce electricity but at what most seem to agree is an exorbitant price. Some observers believe that the original signing of the agreement for this project may have involved an element of corruption. Its defenders say that it was the best solution available at the time to an acute shortage of electricity. Meanwhile the World Bank/Canada supported Songo Songo gas to electricity scheme had finally been agreed and should have, by now, been under construction but the financial backers have stopped work because they believe that the costs of IPTL electricity will be so high and the total production so far in excess of need that TANESCO will not be able to support both. So far, three rounds of negotiation have failed to resolve this very difficult issue, and there appears to be a difference of opinion within government as to what to do.

The excellent new investigative newspaper the Daily Mail, which is the latest addition to the media empire of Reginald Mengi, (some describe him Tanzania’s Rupert Murdoch) has been running a series of articles on the parastatal SUKITA. It quoted Sukita Board Chairman Iddi Simba as admitting that this once vibrant business was now teetering on the verge of collapse. It was plagued by inefficiency, overstaffing and rampant vandalism he said. But the new restructuring programme should result in Sukita bouncing back and being able to compete effectively.

The Commonwealth Development Corporation (CDC) has bought the remaining 40% shareholding in the EAST USAMBARA TEA COMPANY. The company has 1,318 hectares of rain-fed tea close to Amani town and the estate is being merged with CDC’s existing Derema and Monga estates purchased in 1997 – Guardian.

ALLIANCE AIR’s income has gone up by 53% and the number of passengers by 44% in the last year. The airline hopes to break even in the near future and to make a profit next year. But the TAZARA railway made a loss of Shs 661 million in 1996/97 compared with a profit of Shs 3.9 billion in 1995/96 – Daily News.

The Chairman of the Parliamentary Committee on PARASTATAL ORGANSIATIONS has given ‘clean certificates of performance’ to 46 parastatal and public companies after reviewing their 1997/98 accounts. Amongst the companies are the TPDC, NDC, Tanesco, Air Tanzania, Tanzania Harbours, Coffee Board, National Lotteries, Cotton Board – Daily News.

The North Africa Investment and Trading Company from Libya has bought the BAHARI BEACH HOTEL in Dar es Salaam as part of an arrangement to reduce the debt of $70 million Tanzania owes Libya for oil – Daily Mail.

In order to encourage travel within East Africa the cost of the new East African PASSPORT has been set at the equivalent of $10.80 compared with $30.70 for a Tanzanian passport – East African.

The Jubilee INSURANCE Company has become the first private company to be licensed to operate in Tanzania – Daily News. The majority of shares in the Dar es Salaam AlRPORT HANDLING COMPANY (DAHACO) have been sold to South African Airways which beat the Alliance Airline, KLM, Swissair and an American company in the bidding – Daily News.

The International Finance Corporation (IFC) is providing a LOAN of $41 million to help in establishing a new fruit-flavoured soft drink called ‘Safi’ (meaning pure) – Business in Africa.

Tanzania’s sisal industry is on the up. When production dropped from 230,000 tons per year in 1964 to less than 20,000 tons following nationalisation of estates and competition from synthetic substitutes, many thought that the industry was finished. However, some 27 sisal estates and factories have now been bought by local and foreign companies, new investments are being made and the demand for sisal in fine yarns, carpets, buffing cloth, pulp and paper is increasing. The 98% of the sisal plant which used to be described as waste can now be used to produce biogas, electricity, animal feed, alcohol and pharmaceuticals – Guardian.

THE BUDGET

President Mkapa himself spoke on Radio Tanzania about the main feature of the 1989/99 budget – the introduction of VAT at the rate of 20% from July 1 to help raise revenue and avoid some of the losses incurred during the previous Sales Tax regime. He explained how V AT was used all over the world and that many items would be exempt including medicine, agricultural pesticides and fertilisers, the main foodstuffs, books, newspapers, water services, petroleum products, public transport, exported goods, investments and house rents. Sales tax, stamp duty and entertainment tax had been abolished, he said. All businessmen earning Shs 20 million or more per year had to register.

The new tax is proving very unpopular especially amongst tour operators who point out that the 20% rate is higher than that in Kenya (16%), Uganda (17.5%) and South Africa (14%). A bag of cement now costs Shs 4,300 instead of the previous Shs 3,700 and corrugated asbestos sheet Shs 9,600 compared with Shs 8,000. In his budget speech Finance Minister Daniel Yona reported that GDP growth rate had fallen from 4.2 % in 1996/97 to 3.3% in 1997/98 and exports had fallen from $794 million to $678 million. Inflation had been brought down to 13.2% in April from 17.2% in the previous year and was expected to fall to below 10% soon. In 1998/99 the government wanted to ensure that revenue did not fall below Shs 695 billion; it would not be borrowing from banks. Expenditure would total Shs 1,007 billion (74% of estimated requirements). The budget deficit would be Shs 312 billion of which some Shs 309 billion would come from external assistance.

The export tax on cotton, sisal, pyrethrum, coffee, tea and tobacco was being abolished. Taxes on beer and cigarettes would increase by an average of 5%. Tax exemption on newsprint was to be abolished ‘because newspapers are now considered to be strong enough’. There would be additional expenditure on education, health, roads and water. Taxes on vehicles were reduced; there would be no excise duty on smaller cars. The allowance for taxfree income remains at Shs 20,000 ($30) but housing benefit has now been fixed at 15% of an employee’s emoluments.

Opposition Shadow Finance Minister John Cheyo (UDP) MP presented an alternative budget but this was described by the government as too simplistic. All opposition MP’s, some 55 in number, walked out when parliament was sitting as a Committee of Supply on the issue of Shs 65 billion of unexplained ‘special expenditure’. Criticism of the budget centred on its lack of help for agriculture, on the waiver of tax exemption for newsprint and on problems in the new National Microfinance Bank. Cheyo attacked the government for wasting taxpayers money. He referred to the Shs 928 million being spent on the White Paper on Constitutional Reform and the Shs 82 billion being spent on defence compared with Shs 40 billion for education. CCM MP Joseph Mungai supported him and mentioned the waste of money on the ‘Uhuru Torch’ marches and on the cost of holding all parliamentary sessions in Dodoma rather than in Dar es Salaam.

The Zanzibar budget includes spending of Shs 60.37 billion, an increase of Shs 4.87 billion on the previous year. Shs 42 billion is for recurrent and Shs 17 billion for development.

AID

The IMF agreed in May to disburse the latest $50 million tranche of its Enhanced Structural Adjustment Facility (ESAF) loan. There had been some delay because of concern about the IPTL power project and uncertainty about the privatisation of the National Bank of Commerce. GERMANY has committed Shs 26 billion for the next two years for the debt buy-back scheme being prepared by the World Bank and for ongoing projects including health care, rural water supplies and education and training. FRANCE – Shs 223 billion for rehabilitation of the Mororgoro Power Sub-station. The NETHERLANDS – Shs 23.5 billion this year, largely for Multilateral Debt Relief and mixed credit financing, plus Shs 200 million for El Nino-damaged roads in the Kagera Region and support for primary education plus $1.5 million for environmental information management. JAPAN – Shs 8.2 billion for debt relief and the Dar es Salaam road improvement scheme. The UK – £2.5 million for the repair of roads, buildings and bridges destroyed by the El Nino rains. The EU – ECU 1.98 million for water and sewage services. RADIO FINLAND – $15,000 to Sauti ya Tanzania Zanzibar, one of the oldest radio stations in Africa, for equipment for its Pemba station~ the CHINA NEWS AGENCY had earlier agreed to provide the station with newscasts free of charge. The UN HIGH COMMISSION FOR REFUGEES has formally handed over to Tanzania $6.4 million worth of immovable assets (office buildings, staff quarters, godowns, police posts, schools and dispensaries) in former refugee camps in Ngara and Karagwe districts. IRELAND – $1 million for the establishment of a tourism training unit. The ORGANISATION OF PETROLEUM EXPORTING COUNTRIES (OPEC) will commit $1.6 million for desks and chairs to reduce the present shortages in Zanzibar primary schools. The BRITISH COMMONWEALTH EX-SERVICES LEAGUE has granted £5,500 as monthly allowances for 64 Dar es Salaam members of the Tanzania Legion Club. NORWAY – $1.2 million for AIDS education. IRELAND – Shs 20 million to help the Tanganyika Law Society (TLA) to start implementing its Constitutional Review Project. USAID – $4.85 million for health care projects and $7.1 mi1lion for rural roads, agricultural transport, democratic governance and family planning. ITALY – finance for the tarmacking of the Dar es Salaam – Bagamoyo Road.

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