by Ben Taylor
President Magufuli promises pro-business approach
President Magufuli has stated his government’s commitment to improving the environment for business and addressing the challenges faced by the private sector. The President was speaking at a meeting that brought together leaders of government and business, convened by the Tanzania National Business Council (TNBC).
He particularly directed the Minister of Finance and Planning, Dr Philip Mpango, and Tanzania Revenue Authority (TRA) Commissioner General, Charles Kichere, to develop a strategy to reduce the burden of backlog taxes to traders. He ordered the ministry and TRA to meet with business leaders and negotiate on outstanding tax demands, to ease the tax burden that threatens many businesses in the country. “We should have a human face and avoid being too rigid because the government relies on the business community to raise revenue,’’ said the president. He argued that if, for instance, someone owes TRA money that was accumulated in 10 years, the taxman could forego five years and collect the amount accumulated for five years.
President Magufuli further directed ministers to address within one week the various hurdles that traders complained of during the meeting. This includes issues of taxation, bureaucracy within government, and imports that render domestically manufactured goods uncompetitive, and outdated laws.
The chair of the Tanzania Private Sector Foundation (TPSF), Reginald Mengi, commended the government for proper supervision of the economy, proper investment environment and adequate access to business loans. However, Mr Mengi also noted that TPSF receives many complaints from businesspeople over TRA’s unfair calculations of various taxes. He further argued there is a need to compel foreign contractors to team up with local counterparts to transfer skills that will help the local contractors to execute similar projects in future. (The Citizen, Daily News)
Prospects for middle income status – the World Bank view
The World Bank, in its new Country Partnership Framework (CPF) for Tanzania, has said that Tanzania could achieve middle income status by 2025, but only if annual growth rates increase. The CPF, which provides the framework for all World Bank activity in Tanzania between 2018 and 2022, says growth will have to increase to over 7% from an average of 6.5% in recent years. To achieve such rates, the CPF states, will require aggressive reforms to ensure sustainable management of natural resources, address climate change risks, close the infrastructure gap and build human capital, starting this year, while also maintaining macroeconomic stability.
This builds on the November 2017 Tanzania Economic Update (TEU), in which the World Bank pointed to the need to accelerate the country’s rate of economic growth if it is to fulfil the economic and development ambitions expressed in the Vision 2025 and FYDP II.
“The economy is facing two important and related challenges, specifically the under-execution of the national budget and the decline in private sector sentiment,” according to the TEU. The low budget execution rate leads to “concerns regarding the credibility of the budget,” and constrains the government’s ability to achieve its targets. Further, while the Magufuli administration’s efforts to improve public administration, clamp down on corruption, and strengthen the tax administration are “well intended”, the transition has “caused uncertainty within the private sector”.
“There appears to have been an overall deterioration in business sentiment due to the perceived risks resulting from the unpredictability of policy actions related to the Government’s intensified efforts to collect revenue and to its anticorruption drive,” says the TEU. (The Guardian)
State pension funds to merge
The National Assembly has endorsed the Public Service Social Security Fund Act, 2017, under which all pension schemes in Tanzania will be merged to form two funds, one for the civil servants and another for the private sector.
The existing social security fund schemes – including the National Social Security Fund (NSSF), Parastatal Pension Fund (PPF), Public Service Pension Fund (PSPF), Local Authorities Pension Fund (LAPF) and Government Employees Provident Fund (GEPF) – will be streamlined into two funds, the Public Service Social Security Fund (PSSSF) and the National Social Security Fund (NSSF). Money in previous state funds will be moved to PSSSF at the commencement of the Act.
The move followed advice from the International Labour Organisation and a recognition that some of the funds were struggling to survive. The Minister of State in the Prime Minister’s Office, Jenista Mhagama, told parliament that the PSPF and GEPF were under severe financial pressure, and could be forced to cease operations imminently. Combining the funds will reduce administration costs, she explained. (The Guardian, The East African)
Online business registration
The Business Registration and Licensing Agency, BRELA, has launched a new online platform for business registration and other services. BRELA chief executive, Frank Kanyusi, said the Online Registration System would significantly reduce the time and costs associated with registering a business, adding that this would endear the country to investors and contribute positively to the government’s industrialisation drive. He said it previously took 3-5 days to complete all business registration procedures, but with the new online system, this can be completed within an hour.
Users of the service will be able to register a business name or change of particulars, pay various fees, file company related documents and annual returns, register industrial licenses, register trademarks and patents, or request information about registered businesses. It is hoped that in future users will also be able to get a taxpayer identification number (TIN), issued by the Tanzania Revenue Authority, and national identification number (NIN), issued by the National Identification Authority, through the same system “at the touch of a computer key”.
It is hoped that the platform will be of particular help to those based outside Dar es Salaam, who will no longer necessarily have to travel all the way to Dar to register a business. They will only need to have access to an internet connection. This applies similarly to those based outside Tanzania. “It is a huge stride that should have happened a long time ago,” said Mr Hussein Kamote, formerly of the Confederation of Tanzania Industries.
Tanzania is currently ranked 137th position overall in the World Bank’s Doing Business Report, which examines the ease of doing business in 190 economies across the globe. Starting a business, including registration processes, is among the key factors considered. Tanzania is even lower in the rankings on this issue: the country is ranked 162nd. (The Citizen)
President Magufuli has dismissed concerns that the national debt is becoming unmanageable, and stated his intention to continue borrowing to finance large scale infrastructure projects. “Tanzania still has room for further borrowing,” he said. “What matters are the projects into which we invest the borrowed money.” He pointed to the fact that the borrowed money was being invested in construction of mega infrastructure projects like standard gauge railway line and electricity generation like the Stiegler’s Gorge, saying such projects would boost the country’s economy and ability to repay the debts.
The President was responding to issues raised by the Controller and Auditor General (CAG) Prof Mussa Assad in his audit of national government accounts for the 2016/17 financial year. Prof Assad expressed concerned that if left unchecked, Tanzania’s debt could become unsustainable.
The Finance and Planning minister, Dr Philip Mpango said last November that Tanzania’s debt was USD $26 billion (31% of GDP) as of July 2017, a 17% increase from July 2016. The President argued that the debt remained sustainable and that the country still had room for further borrowing. “I know of countries which have debts of more than three times their gross domestic product (GDP),” he said, insisting that the most important thing is the management of the borrowed money and specific projects into which the money is injected.
Prof Delfin Rwegasira of the University of Dar es Salaam supported President Magufuli’s view. “The latest figures that we have from the IMF are that Tanzania’s debt is very sustainable and the President was right,” he said.
Limited sugar imports resume
The imminent threat of closure facing various sugar-intensive factors has been averted, following a government decision to speed up clearance of some consignments of industrial sugar at the Dar es Salaam port. The government has directed drink manufacturers to ensure that they only clear consignments of industrial sugar according to their respective production demands and said that production demands will strictly be monitored to see whether it tallies with the quantity of consignment.
This followed concerns contained in a report by the Confederation of Tanzania Industries (CTI) report, which was tabled before the Parliamentary Committee on Industry, Trade and the Environment. The CTI Chairman, Dr Samwel Nyantahe, said the shortage of industrial sugar in the market had reached critical levels, that one drink manufacturer had already ceased production and several others had raised alarm over possible suspension of production should they fail to obtain permit to clear the stalled sugar imports.
President John Magufuli had taken steps to restrict sugar important, designed to protect local manufacturers and consumers from adverse effects of cheap smuggled sugar being dumped in the market. (Daily News)
Chinese complaints about immigration rules
Chinese investors and authorities in Tanzania have raised concerns over tight work permit rules in Tanzania, saying the rules discourage investors. According to the Chief Economic Representative at the Chinese Embassy in Tanzania, Lin Zhiying, Tanzanian immigration authorities fail to recognise that some workers who lack academic certificates are nevertheless very capable. “We fail to utilise human resources from China,” he said, “just because most of them are coming in the country without academic certificates, where the existing system denies them opportunities despite the fact that they are able.”
With estimated total investments of around USD $10 billion in the country, Chinese investors need both local and foreign human resources, he argued.
Executive secretary of the Association of Tanzania Employers, Mr Aggrey Mlimuka, said that employers would like to see more relaxed labour and migration laws on foreigners working in the country. “We have prepared this workshop so that Chinese investors can meet and share their challenges with government officials and local business community, finding long standing resolutions,” he said, adding that there are some Chinese investors who have already moved their investments to other countries and some were on the move to go.
For her part, the assistant commissioner for work permits in the Prime Minister’s Office, Ms Mercy Jilala, advised the Chinese business community to report their challenges directly to responsible authorities.