Exchange rates: 1 £ = TShs 2,124 1 US$ = TShs 1,216
The onset of the fourth government in the history of Tanzania came without the usual stories of inheriting empty coffers which is a very good sign of things to come. The market welcomed the new government enthusiastically with the CRDB Bank announcing a record profit of TShs 4bn. However, the value of the Shilling has been falling while headline inflation continued on an upward trend to 5.4% in February 06 from 4.5% in September ‘05.
The TRA, the Tanzania counterpart to the IRS in UK, exceeded its revenue collection target for January 06 by TShs 5.6bn citing improved revenue collection techniques among other measures. However due to the poor performance of traditional exports such as tea, cashew nuts and cotton the current account deficit in January 06 widened to USD 89m. While the Media and Tanzanians in general seem to have accorded Mr Kikwete high marks for his first 100 days in office, the Dar Stock Exchange has continued its lacklustre performance with market capitalisation increasing by 2% by the end of March 06 from TShs 2714.79bn in January – a decline of 2.8% in US dollar value. This indicates a negative perception of the growth potential of the economy, hence the negative growth in value of the traded shares in dollar terms. This does not however take into account the cost of exchanging shares as well as the inflation effect which will further reduce the value of underlying assets. (See Table).
|Company||January 2006||March 2006|
|TShs||US $||TShs||US $|
Market activity would be enhanced if more successful companies could be encouraged to list. For example, there is a good case for the CRDB bank to list. The bank’s shares are currently being traded across its branch network only. This decreases its liquidity, thus denying the shareholders a chance to realise its capital appreciation (Its share price for the year to March 06 averaged TShs100).
Mr Mkapa’s government came in with the El Nino weather phenomenon; drought has welcomed Mr Kikwete to office. The Bank of Tanzania (BOT) is warning of increased inflationary pressure due to prolonged drought which necessitates increased imports of foodstuffs and petroleum products thus worsening the trade deficit.
Exports of non-traditional goods (apparel, iron, steel, footwear, plastic products) increased by about 13%. Manufactured goods increased to US$4.3m from US$0.4m in January as a result of footwear exports. Most of the manufactured exports were to Burundi, Rwanda, the Democratic Republic of Congo, Uganda and Malawi thus demonstrating that peace in these countries is in Tanzania’s strategic and economic interest.
Sisal products, which could earn the country over US$500m annually through commercialisation and product diversification – to include biogas and electricity generation – is expected to increase with the construction of a commercial sisal plant in Tanga.
With June approaching, Mama Meghji will present the first budget for this government which should set the tone of ‘New Vigour’ in economic policy. Tanzania’s spending on the key areas of Agriculture, Education, Health and Infrastructure remains very low as a percentage of GDP per capita. One would not be wrong to continue to expect that the increasing rate in revenue collection should be reflected in government spending on these key areas.
An Ancient Chinese proverb says that;
“If you want one year of prosperity, grow grain.
If you want ten years of prosperity, grow trees.
If you want a hundred years of prosperity grow people.”
This explains the massive size of the quality labour force being generated in China and India today. No wonder the West is taking notice. So should we.
Other economic developments reported in the press include the following:
De Beers, the world’s leading diamond mining company is to invest $150 million in a new processing plant at Mwadui Williamson Diamonds to enable the firm to process 16 million tonnes of material annually and increase diamond production to a million carats as well as extending the life of the mine by a further twenty five years – East African
The Controller and Auditor-General’s report, released to parliament in February, indicted Tanzania’s missions abroad for financial mismanagement amounting to TShs 567,951,935. The money was supposed to have been remitted to the retention revenue account at the Bank of Tanzania. The High Commissions mentioned included those in Zambia, Nigeria, Uganda and Malawi. The report said that the High Commission in London had purchased and paid TShs 12,493,922,420 to acquire Chancery House but there was no evidence of possession of a title deed for the property. An audit of the payment vouchers for the financial year 2003/04 showed the existence of un-vouched and improperly vouched expenditures of TShs 7,369,193,685 according to the report quoted in the Guardian.
A $200 million undersea cable system will help more than 15 countries along Africa’s eastern coast to access efficient, cheaper telecommunications and internet services by the end of 2007.
It will comprise more than 8,000 km of optical fibre cable, which transmits information in the form of pulses of light, and will link up with the various national landline networks at ‘landing points’ such as Durban, Port Sudan, Maputo, Mombasa, Dar-Es-Salaam and Zanzibar. In terms of speed, cost, efficiency, volume, and capacity, optical fibre is unmatched by any other technology, including satellite communication. At least 27 companies have made commitments to invest – IRIN, South Africa.
Serengeti Beer Ltd. (SBL) has started selling its products in Australia and Britain and reported that demand was steadily increasing in the Netherlands and other European countries. – Mtanzania.
The South African rail parastatal Transnet, has leased eight locomotives to Tanzania Railways Corporation (TRC) to boost capacity on the routes to the land-locked Congo, Zambia, Uganda, Rwanda and Burundi. The locomotives operate on a 1,067mm (wide gauge) and 1,000 mm (narrow gauge) rail network. TRC operates on 1,000 mm gauge while Tazara operates on 1,067mm gauge. They will be based in Tabora and run on the Tabora-Mwanza and Tabora-Kigoma lines. Most of the locomotives were transported under their own power by rail on normal 1,067mm gauge bogies to Dar es Salaam where they were fitted on 1,000mm gauge bogies – East African.
The report ‘Foreign Private Investment in Tanzania in 2004’ issued by the Bank of Tanzania and others contains the views of existing foreign investors on their future plans. Of 1,242 companies surveyed 72% indicated a willingness to expand their investments in the country, 22% said they would maintain their present levels and only 5% indicated their intention to withdraw. The most important factor affecting their views was the domestic and regional political stability.