by Ben Taylor
Jim Kim in Tanzania: World Bank to lend $2.4bn
The World Bank President, Dr Jim Yong Kim, visited Tanzania in March, promising $2.4bn worth of loans for infrastructure projects in Tanzania over the next three years. As part of a ceremony to lay a foundation stone for a new “flyover” interchange at Ubungo in Dar es Salaam, Dr Kim and President Magufuli witnessed the signing of three contracts worth a total of $780m – for improvements in transport infrastructure, water supplies in Dar es Salaam and urban development projects elsewhere in the country.
Further projects at various stages of planning include finance for upgrading port services and rail infrastructure in and around Dar es Salaam, and for projects in the health, education, agriculture and energy sectors.
“The World Bank has been a true friend in pushing our development agenda; they issue long term loans with an affordable interest rate of just 0.5 per cent,” said President Magufuli.
Dr Kim praised President Magufuli for the purge on corruption and his vision of development towards the Tanzania Vision 2025 which seek to transform the country into a middle-income economy. He added that the $2.4bn figure represented an increase of half a billion dollars over the previous three-year period. (Reuters, Daily News)
Uncertainty in cement
President Magufuli took steps to resolve the energy problems facing the Dangote cement works in Mtwara, though many questions remain unanswered and uncertainty around energy supplies for the sector looks set to continue for some time.
The dispute arose last year after the government proved unable to fulfil the promises it had made to Dangote Group with regard to supplies of gas to the factory, and then took issue with Dangote’s decision to import coal from South Africa – banning coal imports in response. The factory later suspended operations, citing “operational issues”, putting several thousand jobs at risk.
In March, the President directed that Dangote Group should be allowed to carry out its own mining activities to source coal locally, and instructed the National Development Corporation (NDC) to allocate the firm a section of Ngaka coal mine at Mbinga, in Ruvuma region. “You should therefore give Dangote a piece of land at the mine so that he can produce coal for his factory,” said President Magufuli, referring to Nigerian billionaire Aliko Dangote, who was in attendance. A week later, the Ministry of Energy and Minerals yesterday handed a 10-square-kilometre plot in Ngaka to Dangote.
Dr Magufuli also directed the Minister of Energy and Minerals, Prof Sospeter Muhongo, to make sure that natural gas was directly delivered to Dangote Cement Company as soon as possible. It doesn’t make sense that natural gas is transported to Dar es Salaam, some 500 kilometres away, and not to Dangote Cement, which is only about 10 kilometres from where the gas is produced,” he added.
However, a number of other cement companies have similar issues with supplies of energy, and the ban on imports of coal. ARM Cement Ltd, operating in the country as Maweni Limestone Limited (MLL) was reporting as saying it could well be forced to shut down its two plants in Dar es Salaam and Tanga after failing to obtain enough coal locally. According to MLL Chairman, the firm had entered into an understanding with Tancoal Energy Ltd to be supplied with 350 tons of coal per day without fail, up to February this year, but Tancoal was able to supply only 5,000 tons of coal in three months, against MLL’s total requirement of 17,000 tons per month.
Further, these other cement companies point out that giving Dangote the opportunity to mine coal was at best a temporary solution: “Dangote has targeted natural gas and that is why he constructed the plant in Mtwara. Once he’s connected with gas he will no longer be interested in heavy coal mining,” argued a senior manager of a large local cement company. They called for the import ban to be lifted until local sources had the capacity to meet demand.
President Magufuli agreed that Tancoal appeared unable to meet the demand. “Under the current arrangement, it is very difficult to ensure that the investor gets enough coal for cement production because of poor production capacity,” he said, and called for an investigation into the relationship between Tancoal and NDC.
Earlier, in January, the Tanzania Petroleum Development Corporation (TPDC) promised to provide the Dangote works with a connection to the natural gas pipeline by the end of the year. A ceramics factory, a food processing plant and the Coca Cola plant in Dar es Salaam were also promised connections this year, which would bring the number of connected factories to 41. (The Guardian, The Citizen)
Competing interpretations of IMF review
The release of a report by the IMF on the state of Tanzania’s economy noted both strengths and weaknesses in the economy.
“Tanzania’s macroeconomic performance remains strong. Economic growth was robust during the first half of 2016 and is projected to remain at about 7% this fiscal year. Inflation came down below the authorities’ target of 5% and is expected to remain close to the target, while the external current account deficit was revised down on account of lower imports of capital goods,” said an IMF statement. The statement also welcomed President Magufuli’s anti-corruption drive and tax revenue collection measures. “If sustained, [this] will provide a good foundation for the envisaged scaling up of infrastructure investment, starting with the 2016/17 budget.”
However, the statement also noted that President Magufuli’s approach to the management of the economy faces four key challenges that risk undermining the country’s macroeconomic stability. It listed these as a tight stance on macroeconomic policies, the slow pace of credit growth, slow implementation of public investment, and private sector uncertainty about the government’s new economic strategies.
This mixed report led to varied headlines. “IMF hails Dar over economic feat,” said the state-owned Daily News. In contrast, The Citizen went with a very different line: “JPM’s policies may hurt economy: IMF.”
Vodacom IPO
Vodacom Tanzania began an initial public offering (IPO) in March, the first in a series of mobile network listings expected on the Dar es Salaam stock exchange. The company plans to raise TSh 476 billion ($213 million) in an offering of 560 million shares at TSh 850 each, according to a prospectus issued to brokers, expects to list on the Dar es Salaam Stock Exchange in May.
This follows a law passed in 2016 requiring phone companies to sell at least 25% of their businesses to the public to boost local ownership.
“Vodacom Tanzania’s IPO valuation looks rich at a first glance,” said London-based investment firm, Exotics Partners. Nevertheless, analysts predict high demand for the shares. CEO of Zan Securities, Raphael Masumbuko said would-be investors were waiting for the IPO since the telecom Act was passed. “People from all walks of life are waiting for this IPO. We have been in constant pressure as to when Vodacom IPO will come out. The firm self-sales since it’s a household name,” he said.
With 31% of the telecoms market and 12.4 million active subscribers, Vodacom is the market leader in Tanzania. The country had over 40 million tele-subscribers by the end of 2016.
2,400 dollar millionaires in Tanzania Tanzania added an estimated 200 new dollar millionaires in 2016, according to a report by Knight Frank, bringing to the total number to around 2,400. The report is based on responses from 900 of the world’s private bankers and wealth advisors who manage over 10,000 clients with a combined wealth of around $2 trillion. The report also stated that Tanzania currently has two dollar billionaires, and predicted that this number would double in the next ten years.