by Valerie Leach:

For those interested in the development of Tanzania, the encouraging article which follows (and other articles in this issue) outline, in detail, the beginning of a veritable industrial revolution in the country. Tanzania is changing – and very rapidly – Editor.

The rate of inflation, while still high at 12.9% in October 2012, is falling – down from 19.8% in December and 17.9% in October last year. The rate of increase in food prices has also fallen steadily from 26.2% in January to 15.0% in October. Energy prices in the same period have fallen, though erratically, from 30.1% in January to 18.4% in October 2012. (

Economy performing strongly
According to a statement issued by Mr Paolo Mauro, who led a team from the International Monetary Fund to Dar es Salaam in September–October, the Tanzanian economy has continued to perform strongly. “Economic activity has remained robust, with gross domestic product (GDP) growth projected at 6.5-7% in 2012. The current account deficit is large at 16% of GDP, reflecting strong aggregate demand, foreign direct investment related to natural gas exploration and development, and large oil imports for power generation to substitute for hydroelectric sources, owing to the severe drought. External vulnerabilities are made more manageable by the adequate level of foreign reserves. The budget deficit for 2011/12 at 5% of GDP was lower than programmed. Revenue collection was strong and government spending was well-contained, though not all domestic expenditure arrears were cleared by the end of the fiscal year.

The 2012/13 budget appropriately balances the need for sustained fiscal consolidation, preserving social spending, and creating room for critical infrastructure investment. External non-concessional borrowing has been in line with maintaining a sustainable debt outlook.

According to a Press Release from the IMF: “Economic growth is projected to remain buoyant in 2013, though risks remain. In particular, near-term challenges relate to the need to preserve ample and reliable electricity supply while ensuring the financial viability of the national power utility TANESCO, where sizable outstanding payment arrears have built up vis-a-vis suppliers following the emergency power plan introduced in late 2011.

“The outlook for the medium-to-long term is promising, with recent large off­shore natural gas discoveries. The current priority is to design and implement a regulatory and fiscal framework, integrated with the government budget, for the natural resource sector, ensuring that Tanzania’s population benefits fully from its natural resources.

“The Bank of Tanzania aims its tight monetary policy at bringing inflation down to single-digits in the next few months, complementing other efforts in this area by fiscal and structural policies. The government budget aims at containing the deficit to 5.5% of GDP in 2012/13. The IMF Mission welcomes the measures that the authorities are taking to improve public financial man­agement and urges the government to prepare rapidly an action plan to address challenges in the electricity sector.” (IMF press release,

Strategic Oil Reserve
In an effort to stabilise oil supplies and cushion shortages, the Government is to set up a strategic oil reserve. The Deputy Minister for Energy and Minerals, George Simbachawene has said that the Government is in talks with the Government of Oman for supplies for the oil reserve, preferring this government-to-government arrangement over reliance on private traders. Joint efforts between this Ministry and the Ministry for Transport are also underway to speed up the functioning of single point mooring for improved oil discharging capacity at the port of Dar es Salaam which will be sited further out in the ocean to help decongest the port (East African).

Large deposits of gas
In late October, there was a meeting in Dar es Salaam of high-level gas industry professionals. There, the Chief Secretary, Mr Ombeni Sefue warned that the recent discoveries of large gas deposits in southern Tanzania will not lead to an overnight transformation of the national economy. Although these discoveries should help jump start economic growth, Mr Sefue emphasised the importance of ensuring that the gas resources are managed sustainably. Initially, the gas will be used nationally to shore up electricity generation. A World Bank specialist at the same meeting, Mr Albert Zeufack, advised that Tanzania needs to have the right infrastructure in place before the country is opened up to oil and gas investors. “For Tanzania to take full advantage of its resources, the country needs to invest in investing. This involves building the capacity to invest efficiently and profitably by developing human capital.” (Citizen).

Improvements to infrastructure, needed for Tanzania to be able to take full economic advantage of its favourable geographic location, were highlighted by Minister Mwakyembe in his speech to the Britain-Tanzania Society in London on 10 November 2012 (and see lead article above).

The Minister highlighted the governance of the ports and the actions he has taken to dissolve the Board of the Ports Authority and install a new Board with younger members.

While improvements have been made to the roads system in the past few years, too much heavy traffic is loaded on the roads and more cargo needs to be moved onto rail. The Government intends now to maintain the rail infrastructure, permitting companies to have their own rolling stock.

A ban on the export of raw tanzanite was introduced in 2010 as part of the Mining Act. The main buyers have been in the US and more recently in Europe, the Middle East and the Far East, with exports valued at between $100 and $300 million. In November 2012, Diamond International, the world’s largest tanzanite buyer and one of the largest jewellery retailers, announced that it will create a gemstone processing plant on the outskirts of Arusha. The plant will employ about 200 local workers who will be trained to cut and polish tanzanite for the export market (

After several false starts, uranium mining in the Mkuju River area is expected to be started by the Russian company JSC Atomredmetzoloto (ARMZ) who are in the final stages of negotiating a licence with the Government to construct a plant there starting in early 2013. The firm will be required to furnish plans for relocation, resettlement and compensation of people within the mining areas, as well as for the proposed treatment and disposal of ore and minerals recovered. An earlier dispute over income tax and stamp duty resulting from the firm’s acquisition of the uranium mining site from Uranium One is reported to have been settled. In October, the Government issued an environmental impact cer­tificate which allows the project to go ahead (East African).

A research note from Ecobank is quoted in The East African in November with an estimate of $994 million to go into offshore natural gas exploration in East Africa in the next twelve months – most of it in Tanzania and Mozambique. There will be investment in drilling 33 exploration wells, infrastructure, development of pipelines, liquefied natural gas plants, power plants and storage tanks. An export market can be opened up for industrial use in Japan, China, India and South Korea.

In Tanzania, plans shave been announced to increase expenditure from $9 million in 2012 to $15 million in 2013 in recognition of the value of a dedicated operations infrastructure for oil and gas exploration in Tanzania. The company responsible has set out to develop the only world class facilities in the region with field maintenance facilities built in Mtwara which are said to exceed North Sea standard. Estimates of recoverable natural gas reserves have recently been revised from 28.74 trillion to 33 trillion cubic feet. (

In Mtwara, President Kikwete recently launched the construction of a Mnazi Bay and Songosongo Natural Gas processing plant and transportation pipeline. Tanesco has been directed to start building the plants under a project which is expected to be completed within 18 months. President Kikwete clarified that “Construction of the power plants should go parallel with laying of the gas pipelines because waiting until the project is completed will delay production of electricity”.

The processing plant will be owned by the Tanzania Petroleum Development Corporation (TPDC) and should generate more than 3,000MW of electricity, above the country’s target of 2,780 megawatts by 2015 for national use and should allow for surplus selling to neighbouring countries. The project should allow Tanzania to meet more than half of its power generation from natural gas, with 30 per cent from heavy oil and 15 per cent from hydro plants. The project is to be jointly implemented by China Petroleum and Technology Development Company (CPTDC), a unit of the China National Petroleum Corporation (CNPC) and the TPDC.

Foreign Direct Investment
According to the report titled Where to Invest in Africa – 2012 Edition recently released by the Rand Merchant Bank, Tanzania is the 10th most attractive destination for investment among 53 African countries. The ranking is based on three factors: market size, as measured by GDP at purchasing power parity for 2012; market growth rate, as reflected by estimated annual real GDP growth rates between 2011 and 2017; and an operating environment index, which captures the business environment. This index comprises four indicators: economic freedom, corruption, efficiency and business friendliness.

Tanzania’s prospects are bolstered by the discovery of oil and gas, especially the deep-water gas prospects off Tanzania’s coast.

When it comes to the security of investments, Tanzania, together with Botswana and Namibia have the most transparent, fair and efficient legal systems.

In relation to infrastructure, Tanzania still lags behind for the quality of overall infrastructure; not surprisingly the reports highlight that Tanzania stands out among the countries that should provide most of the opportunities for infrastructure construction businesses.

Access to financing also remains Tanzania’s most problematic factor for doing business in the country. The report is available at http://www.rmb. -(www.

Chinese investment reaches $1 billion
Mr. Lu Youqing, the Chinese Ambassador to Tanzania stated at the recent Huawei ICT Star programme for Tanzania education in Dar es Salaam that total investment of Chinese companies in Tanzania last year reached $1 billion. This makes China now the second largest provider of Foreign Direct Investments to Tanzania. Mr Youqing underlined that such investments from China are directed to local value addition of the products, which has resulted in the creation of more than 80,000 jobs and the reinforcement of the ties between Tanzania and China. The Huawei ICT Star programme for Tanzania education is aimed at fostering ICT training and development in Tanzania. Mr Bruce Zhang, Managing Director of Huawei Tanzania, said “This programme will be in partnership with the government of Tanzania and it will work with students starting from primary to university level.” (

Manufacturing performance
The recently released report, The Tanzania Industrial Climate Report, a product of a partnership between UNIDO and the Government of Tanzania, says that despite the past and current efforts to boost industrialisation in Tanzania, manufacturing still accounts for less than 10% of national GDP, making Tanzania one of the least industrialised countries in the world.

The report presents a quantitative assessment of the performances of the manufacturing sector in Tanzania, highlights the challenges and opportunities for Tanzanian industries and offers a number of high priority and practical industrial policy recommendations.

The areas of policy focus highlighted in the report include: the effect of regional integration on Tanzanian industry and the challenges ahead, the domestic and international opportunities that emerged in the new global market for manufacturers, the key role of modern skills for industrial development and the likely “quick-win” scenario of a resource-based industrialisation process. The report is available at:­Competitiveness-Report2012-UNIDO.pdf

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