BUSINESS & THE ECONOMY

by Ben Taylor

Government claims ownership of Airtel Tanzania
President John Magufuli has instructed Finance and Planning Minister Philip Mpango to institute measures that would enable the government to acquire full ownership of Airtel. The government currently owns 40% of the company’s shares.

TTCL board chairman Omar Nundu and CEO Waziri Kindamba said the company had officially embarked on a “war to recover the firm’s lost shares”. “Airtel … is an asset of Tanzania Telecommunications Co.,” said President John Magufuli. “A terrible game was played. I don’t want to say more than that.”

Airtel Tanzania is now jointly owned by the government of Tanzania through TTCL (40%) and Celtel Tanzania BV, an affiliate of Zain Africa BV which was acquired by Bharti Airtel International in November 2010.

TTCL’s case is being built using records traced back to 1998, when the Cellnet Company was launched under TTCL’s full ownership. Cellnet operated until 2001 when it was rebranded to Celtel Tanzania, again under the ownership of TTCL which owned the entire operating infrastructure installed at a cost of $5 million.

The company was later sold and rebranded as Zain and thereafter as Airtel Tanzania. Subsequent decisions by the then TTCL management and board of directors, as well as, the Treasury Registrar reportedly handed control of the mobile firm to private investors in what TTCL is now arguing is free-ride ownership at its expense. The corporation claims it invested $82 million in the early stages of establishing the company.

A TTCL board meeting in 2005 is in the spotlight for approving the transfer of TTCL’s 10.25 million shares to an investor Mobile Systems International (MSI), which boosted its share to 60% against 40% of the government. Bharti Airtel acquired the 60% shareholding in 2010.

“We would like to highlight that our acquisition of the said 60% share-holding in June 2010 was in full compliance with and following all approvals from the Government of Tanzania,” said Bharti Airtel in a Business & the Economy 17 statement. (The Citizen, Bloomberg)

Reduced dependence on foreign finance
A report by the National Bureau of Statistics (NBS) and the Ministry of Finance and Planning shows that government revenue from foreign sources has been cut from 46% in 2003/04 to 13% in 2015/16. Foreign sources include official development assistance (ODA / aid) and other grants and loans.

The report indicates that the fall in dependency on foreign sources is largely a result of increased domestic revenue, mainly resulting from ongoing expansion of economic activities and improved efficiency in revenue collection by the Tanzania Revenue Authority (TRA).

Total revenue collection reached TShs 15.8 trillion in the 2015/16 financial year, up from TShs 3.39 trillion in 2003/04.

Possible land ownership by foreigners
The Ministry of Lands, Housing and Human Settlements Development has raised the possibility of allowing land ownership by foreign nationals in Tanzania. Under the current arrangement, foreigners are not allowed to own land in Tanzania but are granted ‘durative rights’ to have access to land for investment through the Tanzania Investment Centre (TIC).

A new National Land Policy is proposed, which will put in place new mechanism for land administration and management in the country. This includes enabling foreign land estate developers to have title deeds to the land after which they can sell their houses on the open market.

The Minister, Mr William Lukuvi, said it was time the policy was changed to accommodate changes in the land sector. “The government finds it appropriate to amend the policy to improve land administration and management in the country,” he explained.

The Minister explained that with the new policy the government seeks to survey and plan the entire 948,000 square kilometres in Tanzania and allocate land for industry, agriculture and residential areas. The envisaged new policy will also introduce a requirement to have land officials at village level in order to curb land conflicts and rampant selling of land.

The new policy has been developed in consultation with key stakeholders, and now awaits official endorsement from the meeting of permanent secretaries and finally the cabinet.

Disputed economic data
A disagreement flared between opposition MP, Zitto Kabwe, and the Bank of Tanzania (BoT) over official economic data. Kabwe conducted his own analysis of BoT data on inflation and the money supply, concluding that the rate of GDP growth was around 0.1%, much lower than the official estimate of 5.7%.

In making this claim, Kabwe tapped into widespread public unease at the state of the country’s economy. This view says that clampdowns on tax evasion and corruption have over-reached, leading to a shortage of cash in the economy and a slowdown in growth. Indeed, even official BoT data shows sharp declines in lending to the private sector and in the broad money supply, and smaller declines in both imports and exports, lending some credibility to Kabwe’s argument.

However, economists such as Justin Sandefur of the US-based Center for Global Development (CGD) have argued that elements of Kabwe’s analysis are flawed, though agreeing that there are grounds for concern. “Even if the official growth figures aren’t wrong, the opposition’s main critique still applies,” he wrote.

Following the publication of his analysis, Kabwe was arrested and charged both with sedition and under the Statistics Act. This latter charge represents a test case for the controversial law, which criminalises the publication of false or misleading statistics.

Meanwhile, the World Bank has cautioned against growing public debt in Tanzania. Speaking at the launch of a Tanzania Economic Update (TEU), World Bank Africa Chief Economist, Albert Zeufack, said that across Sub-Saharan African, “debt is rising very fast such that it’s almost crossing the HIPC levels which is not sustainable.”

According to the new TEU, the level of public debt in Tanzania has increased by more than 30% over the past 5 years, although this debt remains sustainable at around 40% of GDP by June 2017. The report states that increased level of public debt in recent years has been driven by increased non-concessional borrowing from both the domestic and foreign markets.

“In 2016/17, the cost of public debt service increased significantly, consuming about 14% of domestic revenues,” reads the report. The report argues that Tanzania’s public debt “appears to remain sustainable”, but adds that “additional short-term borrowing could increase liquidity vulnerabilities, especially if a significant portion of new loans is contracted on the domestic market. Thus, the debt portfolio needs to be monitored closely, as the growth of domestic debt could exacerbate tight liquidity conditions, while increased debt service costs could reduce the fiscal space for development spending.”

Observer newspaper reports contentious links between Vodacom and Tanzanian elites
An investigation by the (UK) newspaper, the Observer, into the African interests of British mobile phone company, Vodafone, has raised significant questions about the selection of local partners when the company established Vodacom in Tanzania.

The paper reported that in 1999, a company owned by Rostam Aziz acquired a 10% stake in Vodacom Tanzania and that by 2007, he had increased his shareholding to 35%. Local investors were required to lend money to Vodacom to enable the firm to expand its network, but the Observer found that Vodacom lent the money to Mr Aziz’s company so that he could meet this obligation. His share purchases were not funded by these loans.

Vodafone says that by 2012 Aziz’s company owed Vodacom and Vodacom Tanzania a total of $52.5m, though this is disputed by Mr Aziz. In 2014, he sold half his stake, netting $240m, and Vodacom is now looking to buy out the remainder of his stake. The deals have led to him appearing in Forbes as Tanzania’s first dollar billionaire.

Aziz became an MP in 1994 and later the national treasurer for the ruling party. He helped to fund and managed President Jakaya Kikwete’s campaign for the 2005 elections. In 2007, a US embassy cable noted his “extraordinary influence”, quoting a fellow politician who said: “I don’t know what magic that guy has, but he is the power behind the throne.” In 2011 he resigned as an MP amid corruption allegations that he strenuously denies.

The former chair of the UK parliament’s Public Accounts Committee, Dame Margaret Hodge, questioned whether Vodafone could have done more to ensure that ordinary Africans benefited from the transactions. “Vodafone should not just hold its nose while the wealthiest in Africa get even wealthier,” she said. “They could have used their power to ensure that, where there were local ownership rules, the ordinary people of the country benefited, rather than the wealthy elite.”

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