THE ECONOMY

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‘HIGHER IN HUMAN DEVELOPMENT’
According to the UN’s Human Development Report 2001 Tanzania has climbed from l56th position in terms of people’s life expectancy, income per person, educational enrolment and adult literacy to 140th out of 165 countries. Norway is the first. The Head of the Development Unit at UNDP Tanzania, Ernest Salla, said that, with poverty reduction at the heart of the government’s programme and the formation of the Poverty Reduction Strategy Paper (PRSP) and establishment of a national poverty monitoring system, the future for Tanzania was bright.

‘MARGINALISED IN TECHNOLOGICAL DEVELOPMENT’
According to the Technological Achievement Index (TAI), contained for the first time in the Human Development Report, Tanzania is also among nine countries classified as ‘marginalised’ in terms of technological innovation and achievement. They have been listed as the lowest in rank out of a total of 72 countries in the world in terms of creating and using technology. The HDR stresses that in this network age: “Any country that fails to make effective use of technology is likely to find itself falling behind in human development and marginalised in the global economy.

‘AMONG FASTEST GROWING ECONOMIES’
The Poverty Reduction Strategy Group has praised Tanzania’s 5.8% growth rate and described it as among the fastest growing economies not only in East Africa but in the whole of Africa. Uganda’s rate is 5% and Kenya’s 0.3%.

‘TOP IN FOREIGN INVESTMENT’
Tanzania has been placed at the top of Sub-Saharan African countries in attracting direct foreign investment for eight years, according to the report. Net foreign direct investment as a percentage of GDP increased from 0.3 per cent in 1992 to 2.1 per cent in 1998, compared with an average increase of 0.1 per cent for sub-Saharan Africa. Tanzania was described as one of the most improved countries in the region.

THE ‘GOLD STANDARD’
Outgoing UNDP Representative in Dar es Salaam, Sally Fegan¬≠Wyles, told the Daily News on July 19 that Tanzania had become a ‘standard bearer for excellence’ in economic recovery, poverty reduction and the war against corruption after years of tough economic and political reforms. It was ‘the gold standard’.

THE BUDGET -‘VISIONARY AND BOLD’
This is how David Tarimo described, in the Guardian, Finance Minister Basil Mramba’s first budget since taking up his post. The writer referred to what he described as the clearly articulated vision that poverty reduction could only be realised by significant growth and that this growth was dependent on nurturing competitive industrial and agricultural sectors The boldness and ambition was seen in the increased revenue collection target of 12.1% of GDP compared with 11.7% for 2001 together with the significant reductions in import duties and certain other taxes. Changes made to ensure that agriculture would be competitive included the abolition of stamp duty on proceeds from sales of agricultural produce and the reduction of land rent on agricultural land by 66%. The five per cent cap on local tax (producer and livestock cess) announced two years ago was to be enforced. Changes to promote the local dairy sector included the banning of imported powdered milk and the imposition of suspended duty of 25% on other types of imported milk -except for infant milk. The VAT on milk packaging materials had also been abolished.

A major step towards reducing industry’s production costs was the abolition of customs duty on capital goods and raw materials. Business was also said to have welcomed the abolition of the two per cent withholding tax on payments for goods and services; investors would welcome the abolition of withholding tax on interest on foreign loans. In raising revenue the Minister introduced a gaming tax and planned to raise significant revenue through abolishing the exemption from VAT that the government and its institutions previously enjoyed.

In the media the headlines concentrated on the Shs 30,000 million allocation for an increase in salaries of civil servants. OTHER HGHLIGHTS included an increase in airport charges; a fuel levy on petrol; increases in duty on beer, cigarettes and soft drinks; a halving of excise duty on locally-produced wine; new taxes on lotteries and casinos; VAT on computers, printers and accessories to be abolished; hospital equipment and taxes for drugs used to treat TB HIV / Aids and malaria abolished; VAT on education investment and ground transport for tourists abolished; Shs 8 billion provided for next year’s census.

The Minster said that expenditure would total Shs 1,764 billion and revenue Shs 991 billion leaving a gap of Shs 773 billion to be filled by external assistance and debt relief, the drawing down of reserves, the sale of shares in previously privatised public firms and by increases in taxation. But Chairman of the Parliamentary Finance Committee, Dr Juma Ngassongwa, a CCM MP, said that the fact that the economy was showing signs of recovery remained a mystery to the majority of Tanzanians who continued to suffer in poverty. He said that with a birth rate standing at 2.8 per cent the 4.2 per cent economic growth figure was brought down to a mere 1.4 per cent. Although agriculture was still the mainstay of the economy, government seriousness in insuring growth in the sector was not reflected in the development programme 2001 -2 nor in the national budget. Only 5.5 per cent of the budget had been allocated to the agricultural sector.

As ‘The Express’ put it ‘The agricultural sector, whose dismal performance (3.4% growth rate) last year largely contributed to the failure of the economy to reach the targeted growth rate of 5.1%, is still besieged by the same (seemingly intractable) problems which cannot be solved in a very short span of twelve months. These problems include: lack of investment in agriculture -the sector accounts for 50% of GDP but of all the projects sanctioned by the Tanzania Investment Centre, only 5% concerned agriculture; primitive farm-implements, such as the traditional hand-hoe which perpetually condemns the peasant farmers to subsistence farming; flawed marketing policies accompanied by mismanagement and corruption in the cooperative unions, and imperfections inherent in the marketing boards which inhibit efforts to increase production; low processing capacity of agro-based industries; and, lack of linkage between agriculture and industry. It does not appeal to an inquiring mind that, with a budgetary allocation of only 5.5% per cent to agriculture (compared with, for instance, 18% to Defence and Security, and 21% to administration), the government is really seriously committed to ‘revolutionizing’ agriculture, no matter how impressive the said ‘strategy’ may be on paper.

TANZANIA WINS IN ELECTRICITY DISPUTE
Tanzania has won in the three-year-long long dispute over the cost of the $150 million 100 MW Malaysian-financed Independent Power Tanzania Limited (IPTL) thermal plant project at Tegeta in Dar es Salaam. Production of electricity should finally start in October, the Minister for Energy and Minerals, Mr Edgar Maokola-Majogo has announced. The London-based International Centre for Settlement of Investment Disputes (ICSID) ruling issued on July 12 stated that the value of the plant would be reduced to $125 million, not $150 million as claimed and the cost of electricity would be $2.8m per month as proposed by TANESCO as against IPTL’s $4.2m demand. Maokola-Majogo also announced that the construction of the long-delayed 232-kilometre $300 million gas pipeline from Songo Songo to Dar es Salaam, would start in September and would be completed in 2003. He said the implementation of the gas project would go hand in hand with providing towns and villages along the gas pipe with power from gas and solar power at a cost of $13.3 million. The gas from Songo Songo would be used to generate power at TANESCO’s Ubungo gas turbines in Dar es Salaam and later at the IPTL plant.

SUGAR CRISIS
A crisis in the sugar industry erupted in May this year when local producers threatened to suspend production, blaming the government for issuing 22 licenses to import 100,000 tonnes of ‘industrial’ sugar and thus spoil their market. The Guardian reported that the crisis deepened in June when a consignment of more than 6,500 tonnes of sugar was confiscated by the Tanzania Revenue Authority (TRA) after it was found to have been imported illegally. Early reports had it that the ‘game’ was being practised by some prominent businessmen, who used the name of the Tanzania People’s Defence Forces (TPDF) to avert paying import tax. On reaching the local market, the alleged businessmen sold the sugar at throwaway prices, thus, undercutting the price of locally produced sugar. In April, Minster for Industries, Iddi Simba, had been reported in The East African as having revoked 10 import licenses for 38,000 tonnes saying that the permits had been issued without his authority. Tanzania’s annual sugar requirement was said to be 290,000 tonnes and local sugar production about 180,000 tonnes so that importation, legally or clandestinely was necessary. Local sugar was highly taxed but imports could sell at much lower prices thus giving higher profit margins. Local producers argued that some of the permit holders imported refined sugar but declared it as raw sugar to cheat on taxes.

AND QUESTIONS ABOUT SHIPPING
The dynamic Minister Simba was in further trouble when it was reported on August 8 that the Parliamentary Select Committee on Finance and Planning had criticised Mr Simba’s handling of the privatisation (perhaps better expressed as ‘liberalisation’) of the Shipping Corporation (NASACO). He was said to have ignored a Cabinet Paper by issuing some 30 licenses for clearing and forwarding operations to foreign shipping companies. The Minister was quoted as saying that the question of corruption did not arise. “I am not in politics to make money” he said. “In fact I do not live on my ministerial salary”.

NEW RISK AGENCY
Tanzania has become one of the first seven countries to show interest in a new political risk insurance agency for Africa -the African Trade Insurance Agency (ITA) which is being supported by COMESA and the World Bank. The agency said that there were significant gaps in the political risk insurance market when it comes to the assumption of risk in cross-border transactions. Premium rates were likely to range from 0.4% to a maximum of 2.5% depending on the length and type of credit involved. Risks eligible would include embargoes, expropriation, inability to convert or transfer currency, imposition of import or export taxes of a discriminatory nature, war and civil disobedience -Press Release.

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