BUSINESS AND THE ECONOMY

HIS BEST EVER
Karl Lyimo wrote with considerable enthusiasm in the Dar ‘Business Times’ describing President Mkapa’s regular monthly radio address to Tanzanians on September 30 as his best ever. He went on: ‘In it the President had vowed to try his hardest during his presidential tailpiece to transform the informal sector from a wayward economic waif into acceptability. Briefly put, Mkapa articulated upon the need to harness the dead capital that is rife in the informal sector and formally hitch it to the mainstream ‘formal’ economy….. Hitherto, the President said, the authorities in Tanzania, including the Government, had looked askance at the so-called informal sector, virtually treating it with disdain…. No longer. From now own, the focus would be on transforming it by harnessing it to the mainstream economy…. In the manner of a visionary on the Road to Damascus, Mkapa, by the Grace of God, had kept rendezvous with Reality itself. And this could only be a good thing for Tanzania and Tanzanians. Seemingly for eons, governments had fought running battles with the so-called informal sector of the economy in the mistaken belief that it was always up to mischief. The sector was given names such as the Black Economy, the Underground Economy, the Extra-Legal Economy -and more. Those operating in it were officially regarded as being no more than tax-evading villains, cheats and public enemies out to swindle the Government of revenue even as they sought its protection and its services. Then, on September 30 Mkapa had told Tanzanians that one of his major final missions as president would be to ensure that those in the informal sector would be enabled to enjoy the fruits of their labour under the umbrella of the mainstream economy. Their assets, which were not much more than dead capital today, would be turned into live capital.. …… to generate and regenerate wealth above-board ….. With his characteristic frankness, Mkapa admitted to the possibility that the Government and its institutions may have largely been to blame for what has been happening to the informal sector. Antediluvian laws and overly bureaucratic procedures may have served to shut the informal sector out of the mainstream economy. Corrupt public officials may also have contributed to the problem …. All these issues had to be looked into, and the requisite changes made so as to effectuate the revolution that was needed to rewrite economic history in Tanzania …..Detailed research had to be undertaken to establish who owned what, where and how much (value) in the informal sector. This should enable registration and certification of the assets so that the requisite steps could be taken to formalise the ownership, and embark on the road to bringing the dead capital to life………………… ‘

IN DEFENCE OF PRIVATISATION AND OF SOUTH AFRICAN INVESTMENT

In the midst of increasing criticism of South African investment in Tanzania President Mkapa tackled the issue head on in a speech on November 6. Quoted in the Guardian, he said that singling out South African investors for criticism was myopic; they were among the most successful foreign investors in the country. South Africa was better suited as a source of Foreign Direct Investment because of its proximity and its more realistic assessment of risk, one not unduly coloured by a biased and prejudicial international media. He said South Africans did not run away from challenges; they took them in their stride. When South African Breweries came to Tanzania, in their first years they experienced water and power shortages. They did not whine, or walk away … They built their own back-up power and water system. “It is such investors that are ideal for our particular circumstances in Tanzania: problem solvers, not problem identifiers; doers not whiners,” he said.

The President then went on to praise privatisation. He said he felt sorry for critics who picked on a few of the unsuccessful privatised firms to discredit the whole privatisation exercise. “I am an optimist, I prefer to use successful privatisations, such as that of Tanzania Breweries, to show that the decision of my party, CCM, to bring the private sector into the economy is the correct one.

It was correct when we began, it remains correct today, and it will be correct in the foreseeable future until someone comes up with a better framework to unleash human creativity, initiative, and entrepreneurship,” he said. He also said that, while demanding the extra revenue the Government gets from the private sector, the cynics wanted to retain labour laws meant for a socialist economy. “They enjoy the abundant supply of cold, quality beer in the evening; even as they debate the ignoble notion that Mkapa is selling the economy to foreigners, their bete-noire being South Africa,” he said.

HARBOURS AUTHORITY
The government has decided to lease activities of the Tanzania Harbours Authority (THA) to private operators, as part of its privatisation exercise. Communications and Transport Minister, Prof Mark Mwandosya, announced the establishment of a new body to be known as the ‘Tanzania Ports Authority (TPA).

TANESCO
The Tanzania Electric Supply Company (TANESCO) has sought funding from the World Bank to the tune of 70m US Dollars (Shs 70 billion/-) for upgrading the electricity networks in Dar es Salaam, Arusha and Kilimanjaro regions. Managing Director Rudy Huysen said that the new TANESCO management had used a report already prepared by the Japanese International Co-operation Agency on upgrading of these power systems. Unfortunately, he added, no studies had been undertaken for other towns, which could enable TANESCO to seek donor support. The TANESCO Chief said that after attaining the company’s financial turn around, the management was currently busy working on the technical side in order to improve the quality of power supply. “We are glad that during the past seven months, only one grid-related failure has occurred which lasted for only two hours,” Huysen remarked. He attributed this performance to the implementation of maintenance projects undertaken in recent months. Regarding the current bad hydrology, Huysen said that half of TANESCO’s revenue was being spent on purchasing energy from Independent Power Tanzania Ltd (IPTL). There were plans in the near future to generate power using the Ubungo gas turbines although it would be expensive to do so as it would cost 12 US cents per unit (kWh) compared to 7 US cents that TANESCO sells to its customers.

TANESCO planned to layoff 1,060 workers at the end of September according to Deputy Managing Director, Steve van Staden, quoted in the Guardian. Van Staden said the retrenchment would be implemented in accordance with the voluntary agreement signed between union leaders and the management. TANESCO had targeted a 20% retrenchment of its workforce which stood at 6,331.

NATIONAL MICRO-FINANCE BANK
In mid-November, after much controversy, Parliament finally endorsed a Bill for privatisation of the National Micro-Finance Bank (NMB). Minister for Finance, Basil Mramba, said it was agreed that the bank should be privatised through a share structure under which 51 % of shares would go to Tanzanians (30% owned directly by the government; 21 % by individual Tanzanians, including workers of the NMB). The remaining 49% would go to a consortium of investors from within and outside the country. “We want to consolidate the capital base of this bank so as to improve micro-finance lending facilities” he said. He added: “The NMB has a weak capital base. It needs a capital of at least 27bn/-to build a strong foundation of customers’ deposits amounting to 395bn/-.” Other reasons for the divestiture of the bank were the need to acquire modem technology and credible management. He said that currently the NMB had offered credit amounting to only 18.7 bn/-, while the total market for micro-finance loans amounted to 50bn/-. The Minister also said that the bank had 15 branches, which had been incurring losses, and another 37 branches, which had been recording very small profit margins

COOPERATIVES
Tanzania would spend TShs 8bn to revamp the cooperative movement, Cooperatives and Markets Minister George Kahama told the Moshi Cooperative College convocation on December 6. He said 200 cooperative officers had already been trained so that they could help undertake the project democratically and commercially for the benefit of members. The project was being funded by the Norwegian Government. According to the Minister the college would be able to enroll between 3,000 and 7,000 students a year in a 10-year period Guardian.

LIVESTOCK RANCHES
The Government has announced that a number of state owned livestock ranches (covering 4 million hectares) will be subleased to investors; the National Ranching Company will retain only 20,000 hectares. The remaining areas will be subdivided into 4000-hectare mini-ranches for Tanzanian pastoralists. But the newly formed ‘Tanzania Pastoralists, Hunters and Gatherers Organisation’ (TAPHGO) and MPs from Ngorongoro, Longido and Simajiro have protested about what they describe as the secrecy of the privatisation process -Guardian.

EUAID
The European Union and the Government have signed an agreement that will see the EU provide US $131 million in budgetary support for work in basic education, primary health, rural roads, water, HIV/AIDS, agriculture and the judiciary over the next two years. Total EU support to Tanzania in 2003 was estimated to have totaled $160.9 million -more than any other country in Africa. Tanzania was being favoured because of its considerable poverty, large population and its successful macro-economic and sectoral policy reforms.

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