BUSINESS & THE ECONOMY

by Ben Taylor

A Samia Stimulus
Among the many announcements and shifts in direction brought in by the new President, Samia Suluhu Hassan, is a new focus on encouraging investment and stimulating economic growth. She signalled this first when speaking at the swearing-in ceremony for new permanent secretaries on April 6 and then again in her first State of the Nation address to parliament on April 22.

“We intend to focus more on economic growth,” she told MPs. “We will continue the good work achieved during the previous administrations, change where necessary but with a view to promoting efficiency and productivity, guided by the national, regional and party manifestos.”

“Last year, our nation managed to enter the middle-income category where the per capita income increased to $1,080 from $1,036. It is a great achievement, but more effort is needed to accelerate the economy,” she added.

Framed as a package of measures to strengthen the country’s economic recovery from the effects of the global Coronavirus pandemic, the President spoke at length on the need to regain investor confidence. She noted that investors have been complaining about Tanzania’s unpredictable investment climate, hostile tax collection tactics and bureaucracy, saying the situation would change with her at the helm as Tanzania’s sixth president.

“The government will be taking specific steps to promote investment by looking into investment policies, laws, and regulations, remove clauses that are hampering smooth investments, including unpredictable policies, an unstable tax system and unnecessary bureaucracies,” she explained.
“The sixth phase government will take an uncompromising approach on this, and we will start with the blueprint (for the improvement of Tanzania’s business climate, which was approved in 2018). Issuance of permits and licences will be streamlined, and so will the process of issuance of land to investors.”

Under her administration, President Hassan said, the tax collection would focus on compliance instead coercion and intimidation. In partnership with the Tanzania Private Sector Foundation (TPSF), the government plans to put in place a system through which members of the private sector can forward their complaints directly to the government.

She added that the government will strengthen the Foreign Affairs ministry to drive investment. “Economic diplomacy will be our emphasis,” she stressed, saying the country’s relations with the outside world would now hinge on economic partnerships.

World Bank assesses the economic impact of the Coronavirus in Tanzania
Tanzania’s economy has fared relatively well under the Coronavirus pandemic, but still registered its first decline in per capita GDP for over 25 years, according to the latest Tanzania Economic Update, published by the World Bank in February 2021.

Titled “Raising the Bar: Achieving Tanzania’s Development Vision”, the report noted that Tanzania’s economy had suffered much less than its neighbours under the pandemic, but that it had still suffered. “The real GDP growth rate fell from 5.8% in 2019 to an estimated 2.0% in 2020, and … the global economic slowdown has adversely affected export-oriented industries, especially tourism and traditional exports, and caused a drop in foreign investment.”

A survey of 1,000 small and medium enterprises in Tanzania in June and July 2010 found that an estimated 140,000 formal jobs were lost and another 2.2 million non-farm informal workers suffered income losses. “Tanzanians employed in informal non-farm microenterprises tend to be especially exposed to economic shocks, as they often have limited savings to draw on in a crisis,” said the report. “Firms reported an average decline in sales of 36%, which has jeopardized the solvency of more than three-quarters of small and medium enterprises. Most affected firms have not benefited from any type of government support.”

“Although the government did not impose stringent mobility restrictions, the pandemic prompted firms and consumers to adopt precautionary behaviour, hindering domestic economic activity. Meanwhile, steep declines in production, consumption, and imports have significantly reduced fiscal revenue.” The result, according to the report, is that an additional 600,000 people could fall below the poverty line.

The report’s authors cautioned that the future of both the pandemic and the national economy remain highly uncertain. In particular, they noted that without quality information on the state of the outbreak in Tanzania, it remains difficult to plan and implement effective policies, both in terms of public health and managing the economy.

The report also warned that the country’s much-cherished attainment of lower middle income status (LMIS, officially achieved in July 2020) could be fragile. “Over the past 10 years, 23 countries have fallen from middle- to low-income status or from high- to middle-income status. … As the COVID-19 pandemic continues to depress global economic activity, Tanzania will need to endure an indefinite slump in external demand regardless of the effectiveness of its domestic health response.”

This fragility is also linked to the country’s unusual combination of middle-income status with persistent high levels of poverty. For countries newly achieving LMIS, the average poverty rate based on the international extreme poverty line is 30%, while Tanzania’s extreme poverty rate remains close to 50% percent. “Rapid population growth, slow and uneven job creation, low levels of education, and limited access to educational and employment opportunities, especially among women and girls, have reduced the inclusiveness of Tanzania’s economic expansion, blunting its effect on poverty reduction,” argues the report.

2021-22 Budget
The total value of the national government budget for 2021-22 will be TSh
36.23 trillion (USD $14bn), according to the budget framework present by Finance and Planning Minister, Dr Phillip Mpango to parliament on March 11. This represents an increase of 3.9% (TSh 1.35tn) over the 2020­21 budget, slower than the increase in previous years, and comparable to both the World Bank’s latest estimate of the rate of GDP growth (4.5% in 2021) and to the rate of inflation (3.7%).

Of this amount, TSh 26 trillion will be sourced locally, including TSh 22 trillion raised by the Tanzania Revenue Authority (TRA). Development partners will provide TSh 2.9 trillion in grants and concessional loans, representing 8% of the total. The government will source another TSh
7.3 trillion in form of domestic and foreign loans.

“It is the government’s view that implementation of the 2021/22 development plan and budget will stimulate economic growth, improve delivery of social services, create job opportunities as well as development for people and the nation at large,” said the minister.

The government, according to Dr Mpango, will focus much of the development budget on executing the ongoing priority projects before embarking on new ones. This includes the Julius Nyerere Hydropower Station (TSh 1.3 trillion), currently under construction at Stiegler’s Gorge on the Rufiji River, ongoing construction of the Standard Gauge Railway (TSh 3.2 trillion), and construction of passenger terminals and the purchase of aircraft for Air Tanzania (TSh 1.5 trillion).

BUSINESS & THE ECONOMY

by Ben Taylor

President Magufuli’s economic goals, and a charm offensive for investors
President Magufuli emphasised economic matters in his inaugural speech to parliament following his re-election in October. Over half the speech was devoted to economics, reflecting a new emphasis.

The President focussed on the need to manage the economy well so that the country attains higher economic growth, together with an emphasis on ensuring that growth benefits citizens. The aim is to achieve 8% growth, well above historic growth averages in sub-Saharan Africa of 4%, and above 5.5% growth projected for Tanzania in 2021.

Other goals listed by the President include the creation of eight million jobs, stabilisation of the shilling, keeping inflation in single figures, and reducing the interest rate.

The combination of two targets – 8% growth and 8 million jobs – was termed the 8-8 economic agenda by President Magufuli. The President also emphasised the importance of attracting both local and foreign investment in order to achieve these goals. As part of the new emphasis, the ministerial docket with responsibility for promoting investment and the Tanzania Investment Centre (TIC) have both been moved from the Prime Minister’s Office to the President’s Office.

Prof Kitila Mkumbo, the new Minister of State in the President’s Office (Investment), took this as his cue to launch a charm offensive to improve relations with existing investors, and to attract new investors. “It’s a new dawn for investors in Tanzania,” said the Minister. “We will continue to work closely with the private sector in promoting, facilitating, handling and developing investments in Tanzania. We recognise the private sector as an engine for economic growth and a valued and dependable partner in our endeavour to achieve the 8-8 agenda of economic growth and jobs creation.”

“We will seek to constantly and consistently engage and dialogue with members of the private sector and their member-based associations on how best to promote investment in Tanzania. We will openly and transparently listen to and welcome their ideas; and we will implement good and evidence-based ideas with a view to promoting investments in our country. In the same spirit, we express our commitment to continue working responsibly and in a friendly manner with development partners and like-minded civil society institutions in investments promotion and facilitation, fostering business enabling environment, as well as private sector development – and economic development in general.”

Prof Mkumbo tasked TIC to solve issues of nepotism and unnecessary delays when an investor wants to invest in Tanzania. He reiterated President Magufuli’s target that it should not take more than 14 days in enabling an investor to invest in Tanzania.

“We need to change our mindset. Officials working with investment facilitation institutions should not see themselves as bosses to investors, we should look at them as partners and your duty is to facilitate,” he said.

The Minister said the government’s key strategic approach for promoting investments in Tanzania will be based on implementing the Blueprint for Regulatory Reforms to Improve the Business Environment in Tanzania, which has been approved by the government. He promised to “embrace the use of the World Bank’s Ease of Doing Business Reports as one of the key feedback mechanisms on our progress,” aiming to raise Tanzania’s ranking in the World Bank’s Ease of Doing Business Index to at least 100.

Tanzania’s 2020 ranking on the index was 141, just below Zimbabwe. In comparison, Rwanda ranks 38th, Kenya 56th, Zambia 85th and Uganda 116th. Tanzania has never ranked higher than 127th.

“Additionally, we will put a sustainable feedback mechanism with investors and members of the business community so as to garner their views and assessments on how we are doing – and where government action is mostly needed,” said the Minister.

After several years of strained relations between government and business in Tanzania, the business community responded with cautious positivity to the President and Minister’s remarks.

Investors and business operators have complained in recent years that they have been compelled to deal with multiple regulatory bodies and other bureaucracies. This was compounded, in their view, by multiple taxes, inordinately high tax rates and lack of adequate information on investment opportunities, as well as unpredictability of extant policies and regulatory frameworks.

World Bank cautiously optimistic on Tanzania’s economic prospects in 2021
The World Bank has upgraded its projection for Tanzania’s economic growth this year, forecasting that growth would reach 5.5% in 2021, up from its earlier estimate of 2.5% for last year.

Tanzania’s real GDP had been growing at an average of 7% in the last decade. But the government lowered the projections for 2020 to 5.5% from the initial projection of 6.9% due to factors, including Covid-19, heavy rains that resulted in floods and destruction of transportation infrastructure, and delayed implementation of some projects.

Sectors like tourism were hard-hit by the pandemic as countries across the world introduced travel restrictions to control spread of the pandemic. At the same time, however, earnings from mining exports rose due to the rising price of gold in the world market during the pandemic.

Vodacom / Vodafone criticised for conspiring to undermine freedom of speech
Vodacom Tanzania, part of the Vodafone Group, a multinational company headquartered in Britain, has come in for criticism after allegations the company “caved to a government demand to filter and block messages containing certain terms associated with the country’s main opposition party”.

The issue arose when opposition supporters realised that some – but not all – of their text messages were not reaching their intended recipients. They noted that it appeared that messages containing the name of opposition Presidential candidate, Tundu Lissu, were being blocked.

Nic Cheeseman, Professor of Democracy at the University of Birmingham criticised both Vodacom Tanzania and the Vodafone Group for acquiescing in efforts to undermine credible elections. “Despite proudly proclaiming their commitment to promoting ‘inclusion for all’, ‘operating responsibly’ and contributing to the UN SDGs on their website, a Western company aided an authoritarian leader to undermine freedom of speech,” he wrote.

“Despite aiding and abetting an increasingly authoritarian government,” he added, “neither Vodacom Tanzania nor its parent group Vodafone Plc, has been forced to explain its behaviour. Perhaps even more tellingly, they have not even felt the need to apologise.”

“Instead, Vodacom Tanzania recently intensified its efforts to cosy up to the ruling party, appointing Thomas Mihayo –a known Magufuli ally, and a member of the National Electoral Commission (NEC) that just signed off on a flawed election – as its new Board Chairman.”

TRANSPORT

by Ben Taylor

Air Tanzania bouncing back from Covid-19?
From September, Air Tanzania began re-starting international flights that had previously been suspended in response to the Coronavirus pandemic. Direct flights to Hahaya (Comoros) resumed in September, followed by flights to Lusaka, Harare and Entebbe in October, and later also flights to Mumbai, India.

The resumption of the route to India is the result of a bilateral agreement between the two countries, establishing an “Air Bubble” connecting the two countries, signed in early November. Scheduled international flights have been suspended in and out of India since March 2020, but the country has similar bubble agreements with around 20 other coun­tries in addition to Tanzania.

ATCL managing director Ladislaus Matindi, said the airline is now operating at between 90 and 95% of its pre-Covid domestic market capacity, well above compared to 20% recorded earlier in 2020, during “the worst of the pandemic”.

A total of 12 out of 19 foreign airlines have resumed their flights to Dar es Salaam after the airlines had previously been grounded since March, according to the Julius Nyerere International Airport (JNIA) Terminal III acting manager, Mr Barton Komba. (The Citizen)

Trans-Africa rail connection on the horizon
The prospect of an east-west rail connection across central Africa is under discussion, with the Angolan government said to particularly keen on the plan. The idea is to link Angola and Tanzania via Zambia, using the existing TAZARA railway from Dar es Salaam to Kapiri Mposhi in Zambia. A new 2,100 km line connecting Kapiri Mposhi with the port of Lobito in Angola would complete the route. The two lines would share the same gauge and would ideally connect directly in Kapiri Mposhi.

“In order to have the railway link with Tanzania, the Angolan gov­ernment would construct a new railway line into Zambia that would further link to the 1,860km Tanzania–Zambia Railway,” said the Angola Ambassador to Tanzania, Sandri De Oliveira Sandri. He added that Angola was counting on “Tanzania’s collaboration in this effort”.

There is currently very little trade between the two countries. In 2015, Tanzania exported less than USD $5m to Angola, and Angola less than USD $500,000 worth of goods to Tanzania. An existing rail link between Angola and Zambia passes through the Democratic Republic of Congo and is in very poor condition – unused since 2015.

Angola’s main interest in the proposal is to simplify trade with China, which is the destination for over USD $25bn each year, more than half of Angola’s total exports – mostly oil. For Tanzania, the new line would provide an alternative route for trade with Europe and the Americas.
(The Citizen)

Chinese contractors win Central Line contracts

Map showing the existing central line railway line due for rehabilitation (dashed line) and proposed extension into Rwanda and Burundi (Map -US National Park Service)

Two Chinese companies have won a tender to construct Tanzania’s fifth lot of the Standard Gauge Railway (SGR) from Mwanza to Isaka (near Shinyanga) covering a distance of 341 km.

This was announced by Tanzania’s Minister of Foreign Affairs, Prof Palamagamba Kabudi, at a news briefing in early January, on the eve of a two-day visit to Tanzania by the Chinese Foreign Minister Wang Yi. According to Prof Kabudi, the construction which will cost TSh 3 trillion will be handled by China Civil Engineering Construction (CCEC) and China Railway Construction Company (CRCC).

The government through the Tanzania Railway Corporation (TRC) is constructing a 2,561 km SGR network that links Dar es Salaam, Morogoro, Dodoma, Tabora, Mwanza, Kigoma, Katavi and neighbour­ing countries of Rwanda, Burundi, Uganda and DRC.

The overall project is being implemented in phases, with the first round covering 202 km between Dar es Salaam and Morogoro. This was initially scheduled to be ready by November 2020 but heavy rains disrupted construction works. The second phase which is under imple­mentation involves 422 km between Morogoro and Makutupora in Singida Region.

In October 2020, Tanzania government signed a USD $60 million con­tract with a South Korean firm to supply trains for the standard gauge railway (SGR).

ENERGY & MINERALS

by Roger Nellist

Tanzania generates first wind power

In June 2020, in an important first step for Tanzania, a wind farm in Mufindi District generated 0.8 MW of electricity in test production. The wind plant has been developed by the Rift Valley Energy Group (RVEG) and consists of three large wind turbines which, when fully commis­sioned, are expected to generate 2.4 MW that will ensure affordable power to 32 villages which are currently being supplied by the 4MW Mwenga Hydro Plant. The network is the first private large-scale rural power network in Tanzania and any surplus power is sold to TANESCO under a power purchase agreement.

A spokesman for RVEG said: “The facility will ensure the continued availability of affordable power to the rapidly growing number of rural customers within the network, throughout the year, specifically in the dry season when the available water for the Mwenga Hydro Plant is low…… Additionally, it will cater for further expansion of the rural electricity distribution network into those remaining areas of villages that are located near the rural network area, and are still unconnected”. RVEG offered a discount price of TSh 25,000 (about £9) until October for new customers to get connected.

Mineral Concentrate Exports resume
In May 2020, the government at last granted an export permit allowing 277 containers of gold and copper concentrate material to be released from Dar port for sale abroad by Twiga Minerals Corporation (TMC). The containers had been seized in 2017 following an order by President Magufuli prohibiting their export until unpaid taxes by Acacia Mining and other irregularities at Acacia’s three Tanzanian gold mines had been resolved.

Resolution of those issues came in the form of the suite of agreements that government negotiated with Acacia’s parent company, Barrick Gold. Those agreements were signed in January 2020 and put an end to the acrimonious dispute between the parties that had lasted for three years and significantly disrupted production at the mines. [The protracted saga has been reported in previous editions of TA]. The negotiated settlement has resulted in a radical restructuring of Acacia’s former gold mining operations -with the demise of Acacia, with Tanzania and Barrick becoming shareholders in the new joint venture company (TMC) and with the future economic benefits from mine production being shared (in as yet an unspecified manner).

The technical investigative committee that Magufuli established in 2017 to examine the value of the concentrates estimated that the 277 containers included minerals worth TSh 829 billion. That sum was very considerably more than the amounts declared by Acacia and the Tanzania Minerals Audit Agency.

In a statement Barrick also said that the shipping of some 1,600 containers of concentrate stockpiled from the Bulyanhulu and Buzwagi gold mines resumed in April.

Tanzania receives US$100 million from Barrick
At the end of May, in accordance with the terms of the negotiated settlement between government and Barrick Gold, Barrick paid $100 million (approx. TSh 230 billion) to Tanzania. It was the first tranche of the $300 million that the giant mining company agreed to pay to settle the long-running tax dispute between the parties. When presented with a representative cheque at a ceremony in Dodoma, the Minister for Finance and Planning, Dr Philip Mpango, said: “I congratulate Barrick for implementing our agreement and call upon other mining firms to emulate the move in ensuring a win-win situation”.

Tanzanite gemstone discoveries make latest billionaire
In June 2020, a small-scale miner Mr Saniniu Laizer from Simanjiru in Manyara Region sold two huge Tanzanite gemstones to the government and became Tanzania’s latest Shilling billionaire. With a combined weight of just over 14 kgs, they were valued at TSh 7.7 billion (about $3.4 million). Authorities confirmed that they were the biggest Tanzanites ever to be discovered. Mr Laizer was commended by both President Magufuli and Mines Minister Biteko, who signalled the importance of the small-scale mining sector in the country despite some detractors and that the discoveries proved that Tanzania did not have to be wholly dependent on foreign mining companies. Magufuli, speaking in a broadcast telephone call, said: “Laizer’s incident sends a signal that Tanzania is rich”.
Then Laizer’s luck struck for a third time. In early August, he announced he had discovered a third big Tanzanite stone weighing 6 kgs that was valued at about $2 million.

Tanzanites, which have a dark blue-violet colour, are one of the rarest gemstones on our planet. Remarkably, they are only to be found in Tanzania, where the law specifies that they must be sold to the government.

Williamson Diamond Mine sale?
The Williamson Diamond Mine at Mwadui is owned 25% by the Tanzanian government and 75% by UK-based Petra Diamonds (which also operates three diamond mines in South Africa). However, at the end of June Petra announced that it was facing mounting losses and debts because of depressed global markets, exacerbated by the Covid-19 pandemic (that had apparently caused the price of diamonds to drop from about $246 per carat before the coronavirus outbreak to $135 by March 2020). Petra therefore wished to divest its Tanzanian and South African assets and was also offering itself up for sale – as part of a strategic review of its commercial options.

However, Petra’s announcement seems to have taken the Tanzanian authorities by surprise. Government said it was not given prior notice of the announcement and would block the sale of the Williamson mine since it has a first right of refusal. In response, Petra said it had apologised for its oversight in not first communicating its sale announcement to the government, adding that it was considering all its options to determine what will be in the best interests of the company and its shareholders. Minerals Minister Biteko said government was dissatisfied with the manner in which Petra was going about resolving its problems.

BUSINESS & THE ECONOMY

by Ben Taylor

Tanzania formally attains Middle Income status

In July, the World Bank officially promoted Tanzania to the list of lower-middle income countries, recognising that the country has attained an annual per capita income of above USD $1,035. The World Bank calculation was based on economic data for 2019 and found that per capita GNI had increased from $1,020 in 2018 to $1,080 in 2019.

This is five years ahead of the official government target of achieving middle income status by 2025. According to William G. Battaile, the World Bank’s Lead Country Economist, “the upgrade is the product of the country’s strong economic performance of over 6% real gross domestic product (GDP) growth on average for the past decade”.

Tanzania joins 51 other countries on the lower-middle income list, including Kenya, Zambia, Nigeria, Ghana, Egypt and India, which includes countries with GNI per capita between $1,036 and $3,995.

Graduating to middle income status does not mean Tanzania will necessarily lose access to concessional financing from the World Bank. GNI per capita informs the decision on whether or not a country is eligible for loans from the World Bank’s concessional lending arm, but it is not the only indicator. Other factors, such as a country’s macroeconomic prospects, creditworthiness, risk of debt distress, vulnerability to shocks, institutional constraints, and levels of poverty and social indicators are also used to establish a country’s eligibility.

“I congratulate all my compatriots for this historic achievement. We had envisaged to achieve this status by 2025 but, with strong determination this has been possible in 2020,” wrote President Magufuli in a tweet.

Hassan Abbasi, the chief government spokesperson, explained that “discipline in financial expenditure and the prevailing peace and tranquillity also helped the country to earn the middle-income status.”

Economic data questioned
The Economist magazine published an article in July that questioned whether Tanzania’s economic data could be relied on. “The growth numbers do not stack up. From about 2017 several other indicators, from tax revenue to lending to the private sector, have slowed sharply. The IMF raised doubts last year when it said there were ‘serious weaknesses’ in the growth data. It pointed out that public-sector wages, lending to the private sector and imports were all falling while tax revenue was growing only weakly. The authors made it clear that the official 6.8% growth figure for 2017 was not credible. Publication of the report was blocked by the Tanzanian authorities. (The Economist has seen a copy.)

The IMF did later back down. It now reports Tanzania’s growth as 6.8% in 2017, 7% in 2018 and 6.3% in 2019.

However, The Economist notes that the IMF’s concerns have not disappeared. Performing their own analysis of official Government of Tanzania data, the magazine found several grounds to question official growth rates that have remained very steady at 6-7% in recent years. According to the magazine, tax revenue has shrunk in real terms, public-sector wages “crept up” by 2% in 2019, lending to the private sector by just 4%, the amount of money circulating edged up by only 2% in 2019, foreign direct investment has almost halved since 2013, exports and imports both fell between 2012 and 2018, and imports of machinery and construction equipment fell between 2015 and 2018.

“The growth numbers are out of line with almost everything else we are seeing out of Tanzania,” says Justin Sandefur of the Centre for Global Development, a think-tank.

The government says the economy will grow by 5.5% in 2020. That would, according to The Economist, “probably make Tanzania the best-performing economy in the world”. The IMF predicts 1.9%. [See below]

Covidonomics
With the true impact of Coronavirus on Tanzania remains impossible to verify, the likely economic impact is also uncertain. The discrepancy between the IMF and government growth projections in part reflect this uncertainty.

The African Development Bank (AfDB), lowered its growth forecasts for Tanzania as a result of the pandemic, though only from 6.4% to 5.2%. In contrast, the bank reduced growth forecasts for other east African countries by a much greater extent: from 6% to 1.4% in Kenya, from 6.5% to 2.5% in Uganda, and from 3% to -5% in Burundi.

“Real GDP growth in Tanzania will benefit from increased prices of gold, a major national export,” said an AfDB the report. Gold prices have reached above $1,900 an ounce, up 50% from May 2019, with the precious metal benefitting from its ‘safe haven’ status as the coronavirus outbreak triggered global economy fears.

The price surge partly contributed to making gold Tanzania’s leading foreign exchange earner, overtaking tourism which has been hit hard by the Covid-19 global pandemic.

According to the Bank of Tanzania, gold export earnings increased by 47% to $2.5 billion in the year to 31 May 2020. This in part relates to the long-awaited resolution of the dispute between Acacia/Barrick and the government of Tanzania that had slowed production and exports from some of Tanzania’s biggest gold mines. (See Energy and Minerals section).

The Minister for Finance and Planning, Dr Philip Mpango has also argued that the government’s decision not to impose any form of lockdown in response to the Coronavirus pandemic will lessen the economic impact.

“The country’s decision to keep the economy open has offered a major relief to the private sector in terms of business resilience”, said Peter Mathuki, Executive Director of the East African Business Council.

A budget for complicated year, and for managing debt
With an election due in October and a global pandemic causing havoc to lives and livelihoods across the globe, government budget calculations have been even more complicated than ever this year.

Nevertheless, the main headline in the budget presented to parliament in June is that the government plans to spend 30% of the annual budget on debt payments – a total of TSh 10.5 trillion (approximately USD $4.5bn) over the next year. These figures represent a considerable increase over 2019, when budgeted debt payments totalled TSh 6.2 trillion, or 18.7% of the total budget.

The parliamentary budget committee acting chairman, Mr Mashimba Ndaki, said the committee’s opinion was that despite commendable efforts to service verified debts, payment should be expedited to avoid expensive penalties. “Servicing the debts will enable service providers to clear loans secured from financial institutions in order to provide services to the government. This is mostly important at these moments of Covid-19,” he said.

Beyond this headline, the budget continued to extend a package of measures aimed at promoting investment and spurring economic growth, building on a business environment improvement plan that began in FY-2019/20.

Under the theme “Stimulating the economy to safeguard livelihoods, jobs, businesses and industrial economy,” the government foresees a rise in spending and the budget will likely have a deficit of 2.6% of GDP in FY-2020/21. It is also projected that in FY-2020/21 tax revenues will account for 12.9% of GDP from 12.1% in FY-2019/20. These targets call for reforms to improve tax administration.

Reforms included in the budget include creating a business-friendly environment for taxpayers, enhancing the capacity of tax adjudication forums and improving the ability to enforce tax laws. These reforms are in part a response to a common complaint amongst businesspeople that some officials of the Tanzanian tax administration were treating businesses unfairly. They also include the abolishment or reduction of sixty (60) fees and levies that were charged by Ministries Departments, Agencies and Regulatory Authorities.

“The year 2019/20 is ending with unexpected circumstances resulting from the destruction of transport infrastructure caused by heavy rains/floods across the country as well as the Covid-19 pandemic. The government will allocate more resources to the health sector in order to fight against the Covid-19 and support other most affected sectors,” told Parliament.

Low income earners will have a reason to smile as Dr Mpango is raising the Pay-As-You-Earn threshold from TSh 170,000 to TSh 270,000 so as to give employees some disposable income. And savings groups will now only be required to pay income tax when their gross revenues exceed TSh 100 million per year, up from TSh 50 million.

COVID-19 HITS TANZANIA

by Ben Taylor

First cases of Covid-19 in Tanzania
[Editor’s note: As this is a fast-changing situation, the details provided here are likely to be somewhat out of date by the time this issue reaches readers. Nevertheless, every effort has been made to ensure the details were correct at the time of writing (April 24).]

The first recognised case of Covid-19 in Tanzania was recorded on March 16 in Arusha, a Tanzanian woman who had recently returned from Belgium. Two further cases were recorded two days later, one in Dar and the other in Zanzibar, both foreign nationals. Three more followed the day after that.

The government acted swiftly, closing all schools with immediate effect on March 17 and universities from the following day. Major sporting events were also suspended. A contact-tracing and testing system – designed with a potential Ebola outbreak in mind – was put in place.

Nevertheless, the number of cases crept upwards over the following days and weeks. The first death was recorded on March 31.

Initially, cases were limited to those having recently arrived in the country from countries where the outbreak was already more widespread. However, on April 9, the Minister of Health, Ummy Mwalimu announced that the first recorded case of local transmission had been detected around the start of the month.

At the time of writing, the number of recorded cases has begun to rise more quickly, reaching 284 cases and ten deaths as announced by the government on April 22, up from 32 cases ten days earlier.

As has been the case across much of the world, the government has struggled to find the right response to an unprecedented and overwhelmingly difficult situation.

Even before the first cases were recorded in Tanzania, the President and the Minister of Health had both begun urging Tanzanians to take precautions – handwashing with soap, social distancing where possible and refraining from handshakes.

Maalim Seif Sharif Hamad (left) and President Magufuli tap feet in greeting on March 3rd – photo State House


President Magufuli himself set a public example when meeting with opposition leader Maalim Seif Sharif Hamad (of ACT Wazalendo) on March 3: rather than shake hands, they tapped feet. The photo featured prominently in news coverage, and did much to raise public awareness of the virus.

On March 13, the President urged the media to dedicate time alongside their news coverage to educate the public about the virus.

More substantive policy measures, however, have been more piecemeal. After the closure of schools and universities, the next major policy response came on March 23, when it was announced that all international arrivals into Tanzania from Covid-19-affected countries would have to undergo 14 days quarantine in designated hotels (at their own cost). This prompted distress from many returning Tanzanian citizens, who complained that the designated hotels were tourist-class hotels at prices beyond anything they would usually pay.

Three weeks later, the Tanzania Civil Aviation Authority suspended all international commercial passenger flights to and from Tanzania until further notice, though in reality almost all such flights had already ceased operating due to restriction in other countries and measures taken by airlines for commercial reasons.

A faith-based response
The government also urged people to remain at home as much as possible, travel less on public transport and refrain from socialising. The message was somewhat undermined, however, by repeated public statements by the President and other national figures encouraging people to continue to attend their churches and mosques as normal, as the country needed their prayers.

The President, speaking while attending a Sunday service on March 22, said the virus was “satanic” and “it cannot survive in the body of Jesus. It will burn.”

This approach drew criticism both within and outside the country. Opposition leader, Zitto Kabwe, accused the government of “a lack of seriousness” and the President of being in “a state of denial.”

Nevertheless, the President doubled down on the message. Shortly before Easter he stated that “this is the time to build our faith and continue praying to God and not depending on facemasks. Don’t stop going to churches and mosques for prayers. I’m sure this is just a change of wind and it will go like others have gone.” And on April 16, the President called for three days of national prayer, saying God would protect Tanzanians from the virus.

Social distancing not in evidence at Palm Sunday mass in Full Gospel Bible Fellowship Church in Dar es Salaam

This earned the President a spot in a list of the “Notorious Nine” world leaders who “responded to the coronavirus with denial, duplicity and ineptitude,” compiled by a Canadian newspaper, the Globe and Mail. “Tanzania today remains the only country where the government has recommended church attendance as a way of combatting the virus,” the paper reported.

The Prime Minister, Kassim Majaliwa, has differed only a little in his stance. “Prayers in houses of worship are desirable,” he said, “but we also need to take necessary precautions.” He added, however, that as even wealthy countries have not been spared the pandemic, “it is time we sought divine intervention”.

On April 22, the President extended his advice a little beyond prayer
– to incorporate tradition medicine using steam inhalation. This, he said, was “scientifically very clear, because vapour is above 100 degrees centigrade and the virus will disintegrate,” before suggesting that concoctions made of Neem trees, onions and other ingredients could be beneficial, though without specifying whether as prevention or as treatment.

Scientists have concluded that this would have no positive effect, could cause burns and might make people more vulnerable to infection or to infections causing more severe problems. A Reuters fact check (not responding to President Magufuli, but to earlier online posts claiming steam inhalation as a cure), concluded that the idea was false, and indeed dangerous. Similarly, a BBC factcheck concluded that “any attempt to inhale steam at this temperature, would be extremely dangerous … and your lungs would certainly be irreparably damaged before reaching a temperature high enough to deactivate the virus.” Scientifically, it is very clear.

After making this suggestion, the president concluded that “we will beat Corona by working together, by putting an end to fear, by putting God first, and will beat Corona as we have been able to win other wars.”

No lockdown, “never”
The President has also shunned all calls for a lockdown. “Let us continue working hard to build our nation,” he said in mid-April. “Coronavirus is not and should not be a reason for us not working. Farmers should utilise the ongoing rains effectively, industrial owners should continue producing and I don’t expect any development project to stop.”

Some minimal social distancing measures were put in place. In addition to the closure of schools, universities and sporting events, this includes attempts to prevent overcrowding on public transport – no more passengers permitted than the number of seats – and some restrictions (later relaxed) on travel between Dar es Salaam and up-country locations. Many rural communities have put in place their own measures to fine or quarantine anyone arriving from Dar es Salaam – as many have done, recognising the lower risk associated with lower population densities and the possibility of growing your own food. The April 26 Union Day public celebrations have been cancelled, as has the Uhuru Torch race.

Opposition leaders say the country needs to take more urgent action to avoid potential disaster. Freeman Mbowe, the chairman of the largest opposition party, Chadema, posted on Twitter: “No lockdown because he (President Magufuli) wants to save the economy and his flagship infrastructure projects. The lives of our people cannot be repaired but the economy can! Lockdown or get locked out!”

The President has repeatedly resisted all such calls. On April 22, speaking in his hometown of Chato to security force leaders, he addressed the issue again: “There are those who have suggested that we lockdown Dar es Salaam. This is not possible,” he said. “Dar es Salaam is where we collect almost 80 per cent of the country’s revenue, we can continue taking measures to curb the virus but not by locking down Dar es Salaam. Never!”

At the time of writing, the truth is that social distancing has not become part of life for many in Dar es Salaam or other urban areas of Tanzania. Markets, public transport and bars remain crowded, as well as places of worship.

And the government faces some impossible choices in this regard. While a small number of Dar es Salaam residents – primarily those in middle class jobs – are able to work from home, the reality for many is that this would spell rapid and severe economic distress. Tanzania lacks the economic capacity to provide either direct financial assistance or food aid to the millions who would need it.

There is considerable debate about whether a lockdown might not be the best response in many African countries, where populations are both extremely young and financially vulnerable. Melissa Leach, the Director of the Institute for Development Studies (IDS) and James Fairhead, an environmental and medical anthropologist, both at the University of Sussex, have written that “the best policies for countries with young populations may not be lockdowns.”

Around 3% of Tanzania’s population is aged 65 or above, compared to around 18% in the UK and 20% in Italy.

“There may be better ways to save lives such as physically shielding and supporting the most vulnerable while allowing the wider population to gain immunity, whether through a vaccine when it arrives or by virtue of enough people catching and recovering from the virus itself,” they wrote. “Poor countries are much less able to cushion the potentially devastating economic impacts produced by lockdowns. This is if they are feasible in the first place. Effective lockdowns are near impossible in crowded low-income settlements that lack taps and sewers.”

“Today, some version of the lockdown has become most countries’ response to the Covid-19 pandemic. In years to come, we may look back on this moment as one in which an ideological practice emanating from older and wealthier countries was misguidedly “copy and pasted” by elites in younger and poorer societies, leading to marginal benefits in tackling the coronavirus but with the effect of increasing poverty and mortality among the poor.”

Nevertheless, most of Tanzania’s neighbours have opted for forms of lockdown that go well beyond anything being done in Tanzania. In Uganda, the country has been in strict lockdown since March 30. Movement is restricted, public gatherings are suspended and all but a small number of essential businesses are closed. This is enforced in Kampala and other urban centres by a heavy police presence on the streets. In Kenya, the government has not gone quite so far, though did introduce a nationwide 7pm-5am curfew and the closure of all bars and restaurants in late March, followed by a ban on movement in and out of Nairobi and other major urban centres in early April.

Health services
Much of Tanzania’s epidemic preparations have been with Ebola in mind, with contact tracing and testing and isolation of patients of a relatively small number of patients. It is not designed to cope with the large numbers of patients the current pandemic has seen around the world, nor with asymptomatic carriers.

The number of ventilators available is low (the precise number is unknown), stocks of protective equipment for health workers are minimal, even supplies of running water and electricity are unreliable in many hospitals. Five hundred ventilators were donated by Chinese entrepreneur, Jack Ma, on April 8, and several local business figures have donated masks, gowns and other equipment. Doctors have complained about a shortage of protective equipment.

Initially, all positive Covid-19 cases in Tanzania were being isolated in selected hospitals, including those with few or no symptoms. Since April 19, this is primarily the Amana Hospital in Ilala, Dar es Salaam. All other patients at the hospital were transferred elsewhere. Muhimbili National Hospital has been directed to refer all Covid-19 patients to Amana, and to focus exclusively on other medical needs. There have been some efforts to increase capacity at Amana and supply it with new equipment.

There have also been reports of unrest among patients in isolation at Amana. On April 24, it was reported that some patients had staged a breakout. Different reports stated this was either due to dissatisfaction at the poor standard of care being provided to more serious cases or due to frustration among patients with no symptoms that they were being kept for an unnecessarily long time against their will. Similar events were seen the same day in Nairobi, Kenya.

International support, and concern
Various donor agencies have pledged additional financial assistance to Tanzania to cope with the pandemic, though details in most cases are scarce. The government of Ireland responded very quickly, providing €1.5 million to support the national response seven days after the first case was announced. Tanzania has been promised part of a €1.2 billion package set up by the French government to support Covid-19-responses across Africa. The British government has pledged some direct support to Tanzania (“an initial” £2.7 million), but has put large amounts toward international efforts towards vaccine development (£544 million) and the work of international agencies (£200 million) including the World Health Organisation (WHO), UNICEF and the World Food Programme in combatting the pandemic. The EU has raised over €15 billion to support the global response, though this is likely to focus most on supporting economic mitigation and recovery. The US government has committed around $1.5m towards the Tanzanian response.

On April 22, President Magufuli thanked the World Bank for making loans available for financing the response, but suggested that the Bank should instead cancel debts owed by Tanzania and other developing countries. “Now is the right time for the World Bank, which has been touched by the crisis and has good intentions to assist us, to forgive part of the debts we owe, so that the money we are paying each month, and the interest, can be put towards responding to the Coronavirus crisis. This is my request, and I request also that other African countries should join in this call.

WHO Regional Director for Africa Matshidiso Moeti who also urged countries not to let Covid-19 eclipse other health issues.


On April 24, the WHO Regional Director for Africa Matshidiso Moeti said there were concerns about the rise of cases reported in Tanzania in the previous few days. “Certainly in Tanzania we have observed that physical distancing, including the prohibition of mass gatherings, took some time to happen and we believe that these might have been probable factors that led to a rapid increase in cases there.”

Uncertainty and trepidation
The coming months hold a high level of risk and uncertainty for the whole world, with every country facing its own unique challenges according to the local context – and a degree of luck. For Tanzania, it now seems unlikely that the outbreak will be contained, and therefore probable that the virus will spread rapidly in low income neighbourhoods of Dar es Salaam, as well as other towns and cities. It seems unlikely that health services will be able to respond effectively. And it seems likely that the economic consequences – lockdown or no lockdown – will be severe for many, with urban areas again likely to be hardest hit.

Lower population densities in rural areas may offer some protection – both reducing the chance of infections reaching rural communities and slowing the spread within such areas. In rural areas, households are also more likely to be able to produce a greater proportion of the food they need. The young age of the population may offer some protection, if fewer of those who contract the virus suffer severe symptoms, though this may also contribute to faster spread among asymptomatic carriers.

The truth is, however, that this situation is unprecedented in modern times. Nobody truly knows how it will play out, nor what the cost in lives will be, nor the impact on food security and the wider economy.

TRANSPORT

by Ben Taylor

Progress with financing for Standard Gauge Railway
The government has made further progress towards raising finance for work on upgrading the Central Line railway, after signing a loan agreement with Standard Chartered Bank Tanzania for $1.46 billion.

The money will go towards the estimated $14 billion cost of the project, which involves replacing the existing colonial-era line from Dar es Salaam to Dodoma and beyond with standard gauge track. Specifically, the Ministry of Finance and Planning said in a statement that the loan would fund the section from Dar to Matukupora, near Dodoma.

“Standard Chartered Tanzania acted as global co-ordinator, bookrunner and mandated lead arranger on the facility agreement that is the largest foreign currency financing raised by the ministry of finance to date,” the statement said, adding that most of the financing would come from Sweden’s and Denmark’s export credit agencies.

The loan repayments are spread over a 20-year timespan, but no details of interest rates were made public.

Road bridge brought down by floods

Kiegeya Bridge near Dumila destroyed by floods


Floods in early March brought down a major road bridge on the main road between Morogoro and Dodoma. This effectively left travellers and traders without a simple road connection between the country’s economic and political.

Following the collapse of the Kiegeya Bridge near Dumila, bus operators were forced to divert via Iringa to connect between Dodoma and Dar es Salaam and individual travellers had to pay higher ticket prices. Those transporting cargo by truck had to wait for a temporary bridge to be completed. This applied also to those connecting from Dar through Dodoma to other major towns including Singida, Tabora, Mwanza, Kigoma, Geita and Shinyanga, and to Rwanda and Burundi.

The Prime Minister, Kassim Majaliwa, while touring ongoing work to build a temporary replacement bridge, ordered that the acting manager for Tanzania Roads Agency (Tanroads) in Morogoro, Mr Godfrey Andalwisye, be removed from office. The Prime Minister felt that negligence by Tanroads engineers, failing to conduct routine checks on infrastructure, had contributed to the collapse of the bridge.

Mr Majaliwa asked Tanzania People’s Defence Forces (TPDF) and road engineers in Morogoro and Dodoma to join their forces and ensure that they find an alternative route so that vehicles can start passing the area as construction work on the bridge continues. A temporary crossing was brought into use a few days later.

Dar commuter rail route expansion proposed
The Tanzania Railway Corporation (TRC) has proposed expanding its network of commuter rail services in and around Dar es Salaam. Their plan involves the construction of six new lines, in addition to the three lines currently providing services to commuters on sections of the Central line and TAZARA line.

The proposed new lines would link Mikocheni-Ubungo-Tazara (route A), City Centre-airport (route B), Mwenge-Bagamoyo (route C), Pugu­Kibaha-Kunduchi (route D), Mtoni-Tabata-Ubungo-Mwenge (route E) and City Centre-Kigamboni via Nyerere Bridge (route F). A feasibility study a preliminary design were completed in December 2019, according to TRC.

TRC’s director of Corporate Planning and Investment, Ms Nzeyimana Dyegula, noted that rapid population growth in Dar es Salaam meant increasing need for commuter transport services.

“The annual population growth in Dar city is an average of 6.1%,” she explained, “with expectation of reaching around 10 million people come 2030 from current six million. The increasing population will also need transport.”

Approximately 6 million passengers (around 20,000 per day) used the existing commuter rail routes in Dar es Salaam in 2018.

Another legal and financial blow to Air Tanzania
Longstanding disputes between Tanzania and various international suppliers and financiers have caused multiple problems in recent years, hampering the revival of the Air Tanzania (ATCL) spearheaded by President Magufuli. The latest case came when a UK court ruled that ATCL will have to pay a Liberian company $30 million in compensation for an aborted aircraft leasing deal.

The case involved a 2013 aircraft-leasing deal from Willis Trading, signed by former ATCL managing director David Mattaka. UK High Court Judge Christopher Butcher ordered ATCL to pay the money plus interest that reportedly amounts to $10 million to the Liberian company.

Willis Trading went to court to enforce its claim after ATCL pulled out of the lease contract and subsequent compensation agreement in 2014. The government had challenged the deal which President Magufuli has publicly condemned.

Mr Mattaka was in March 2016 charged in court with abuse of office and abuse of position for signing the lease without complying with the relevant procurement legislation. The case is still pending in court in Tanzania.

The UK court rejected ATCL’s efforts to shrug off the debt by blaming its former CEO Mattaka.

The lease agreement stems from the Tanzanian government’s 2007 decision to expand and modernize the fleet of Air Tanzania which it partially owned then. The Ministry of Infrastructure Development gave permission to Mr Mattaka to lease aircraft as an interim measure until certain Airbus aircraft were available starting in 2011.

The agreement required the airline to pay $370,000 (TSh 851m) per
month for the used Airbus airplane. But work needed to be done on the plane, which operated flights only between May and December 2008 before being grounded again for additional maintenance work.

According to the judgement, after ATCL stopped paying for the lease, which resulted in a debt due to Wallis of more than $45 million, the parties reached a settlement in August 2013, in which the government agreed to pay $42 million (TSh 96.6bn). After making six payments up until October 2014, totalling more than $26 million (TSh 59.8bn), the government stopped making payments.

Previous cases have seen new or recently-purchased Air Tanzania aircraft impounded in Canada and South Africa following court decisions in favour of companies that have financial claims against the government of Tanzania.

ENERGY & MINERALS

by Roger Nellist

A resolution at last – Barrick acquires Acacia Mining
The long drawn out saga of Acacia Mining in Tanzania is at last drawing to a satisfactory close. Acacia was listed in the UK but 64% of its shares were owned by the Canadian mining giant Barrick Gold Corporation. Acacia operated three gold mines in Tanzania – at Bulhanyulu, North Mara and Buzwagi – but under the government of President Magufuli the firm was accused of wide-ranging irregularities, as we reported in earlier editions of Tanzanian Affairs. Last year Acacia was told in no uncertain terms to pack its bags and leave the country.

After high-level negotiations during 2018 and 2019 between the government and Barrick (in which Acacia was excluded) a Framework Agreement was concluded to resolve the politically and commercially explosive impasse. Under the terms of that agreement Barrick would acquire all of Acacia Mining and its assets and then establish a new joint-venture company in Tanzania to run those three gold mines in which government would assume a free 16% shareholding interest and play a direct role in running the operations. Among the other key terms, the economic benefits from the venture would be shared 50/50 between Tanzania and Barrick.

Barrick then sought to buy out Acacia’s minority (36%) shareholders and so become the 100% owner and controller of the former Acacia. Those negotiations took some months but on 17 September 2019, after certain legal processes were completed in Tanzania and in the UK, Barrick officially acquired the remaining Acacia shares in a deal that reportedly valued Acacia at $1.1 billion or more (a substantial improvement on Barrick’s initial offer of $787 million). Acacia Mining shares were immediately delisted and ceased to be tradeable on the London Stock Exchange and trading of them was suspended on the secondary Dar Stock Exchange too.

Tanzania and Barrick then moved quickly to establish their new joint-venture company. It is named Twiga Minerals Corporation (TMC) and was registered in Tanzania by mid-October. Its headquarters will be in Mwanza.

Apparently, though, there might have been some last-minute hiccups since by the end of the year no other details had been made public. Declining to explain why, the Ministry of Minerals did say that the ban on the export of mineral condensates still stood but confirmed that discussions were still ongoing. Commentators have speculated that two of the important matters yet to be fully resolved and holding up the overall new arrangement are the government’s insistence that gold smelting facilities should be established in Tanzania (so that the country can derive greater value-add from TMC’s gold mining operations) as well as the treatment of the former Acacia executives who were jailed last year for alleged money laundering, tax evasion and other crimes (see TA122 and TA124).

Temporary delay in LNG Project
In November 2019 the Tanzania Petroleum Development Corporation (TPDC) announced that the government’s negotiation of a Host Government Agreement (HGA) with the foreign oil companies that will develop the large Liquefied Natural Gas (LNG) project in Lindi had been temporarily suspended. The delay was to allow government to complete its ongoing review of existing Production Sharing Agreements (PSA), which was found to be necessary because some PSA issues apparently contradict or overlap with other contracts. It was not known when the review would be completed and the HGA negotiations could resume but the review was said to be at an advanced stage. However, official sources confirmed that the Ministry of Finance and Planning had already approved TSh 5.07 billion for compensating nearly 700 people who will have to move from the 2,077 hectares in Lindi Region where the LNG complex will be constructed. One of the partners in the project, Shell Tanzania, which also operates two of the offshore licences where large gas reserves have been discovered, said: “The HGA negotiations commenced in April [2019] and are currently on pause…. We are continuing to engage with the government and are supportive of the HGA process as it is an important step in agreeing the key commercial, technical and legal principles for the next phase of this important project”. It is reported that the other project partners, Equinor and Exxon-Mobil, have already invested in excess of US$2 billion in the other gas discovery licence. Equinor Tanzania recently clarified that the LNG project will take up to five years to construct once the HGA negotiations are concluded and should operate for at least 30 years.

More optimistic news on gas
Several government Ministers and officials spoke at the Oil and Gas Congress 2019 that was convened in early October in Dar es Salaam. At it the Minister of Energy, Medard Kalemani, announced that four new licence areas with expected high gas potential were available to the industry for exploration and drilling work. Adjacent to already proven gas reserve areas, they include Ruvu, Western Songo Songo and North Mnazi Bay. According to the Minister they have a gas potential of more than 5 trillion cubic feet (tcf). If proven, the new discoveries would raise Tanzania’s total gas reserves to almost 63 tcf. At the same Congress the Minister of State in the Prime Minister’s Office, Angellah Kairuki, announced that she would shortly be tabling in Parliament a new Investment Bill that would help create a more conducive business environment. Investors should also benefit from the provisions of an Action Facilitation Bill that will create a single law unit across government to implement regulatory reforms (rather than the current Ministry by Ministry differential approach to such matters).

Delegates at the Congress also heard from Charles Sangweni, the acting Director General of Tanzania’s Petroleum Upstream Regulatory Authority (PURA). He explained that the ongoing review of the 11 existing PSAs was to bring them into line with the provisions of the two new major natural resource Acts enacted in 2017. He told the oil industry delegates to expect that government would announce a fifth competitive bidding round for petroleum licenses in about two years’ time when, hopefully, global oil and gas prices would be stronger than now. He envisaged that more than 20 offshore and onshore blocks would then be open to tender from the local and international petroleum industry. The last such bidding round was in 2013. Separately, Sangweni told reporters that Tanzania’s deep offshore areas have higher potential for gas discoveries than onshore ones but that there is a big disparity in the cost of drilling a single well; offshore in deep water a well may cost $100 million whereas an onshore well would typically cost about $30 million. (For comparison, in the early 1980s when various oil consortia were drilling wells onshore Tanzania and at Songo Songo Island a single well cost in the order of $10 million). According to PURA, a total of 96 wells have been drilled in the search for oil and gas in Tanzania to date and 44 of them have made gas discoveries. The vast majority of the other 52 wells, which were dry, were located onshore.

Songas – its plans and contribution
Songas is the Tanzanian company that generates electricity from gas, primarily sourced from the Songo Songo reserves. In round percentage terms it is owned 29% by TPDC, 10% by TANESCO, 7% by TDFL and 54% by UK-based Globeleq. Songas currently generates 180 Megawatts of electricity (which is roughly one fifth of the total power supplied to Tanzania’s National Grid) but in September 2019 announced its intention, subject to regulatory approval by TANESCO, to increase its generation to 250 MW in support of the government’s industrialisation programmes.

That same month Songas paid as dividends TSh 6.6 billion to TPDC and 2.2 billion to TANESCO. The company’s Managing Director, Nigel Whittaker, announced that since 2012 Songas has paid almost TSh 122 billion as dividends to the government and its agencies as well as 139 billion in corporate tax. He added that since the start of its operations in 2004 Songas has saved Tanzania about TSh 11 trillion in displaced fossil fuel imports that would otherwise have been necessary for power generation in the country.

Other extractives news in brief
Over the last two decades Geita Gold Mines (GGM) has been mining gold using open cast surface techniques. However, to improve production and profitability it now needs to switch to tunnelling and other underground mining methods for which its workforce of about 350 people are ill-equipped. Government is insisting that GGM explain what will happen to its current workers, notwithstanding the fact that the switch to underground mining at Geita is predicted to yield some $230 million a year. GGM executives have responded telling government that, although the majority of its workers are likely to be laid off, the company has begun training about 150 in underground mining techniques.

In 2019 the Zanzibar government signed a PSA with RAK Gas, a petroleum company based in the UAE. The agreement provides for oil and gas exploration work to be undertaken in the Zanzibar-Pemba block and aerial and other pre-drilling surveys have so far been conducted. In September the Zanzibar President, Ali Mohamed Shein, visited the UAE and met with the management of the RAK Gas company to be briefed on the initial survey work. On his return to Zanzibar he was at pains to stress that his government was fully committed to the project saying that, contrary to rumours, it does not flout the Constitution.

BUSINESS & THE ECONOMY

by Ben Taylor

World Bank highlights poverty reduction
The Tanzania Mainland Poverty Assessment Report, published by the World Bank, found that the national poverty rate fell from 34.4% to 26.4% between 2007 and 2018. The report attributed the trend to gradual improvement in living conditions and human capital.

The report also noted, however, that this success is not unmitigated, as poverty was not reduced as much as the population grew. This resulted in an increase in the absolute number of poor people, with 14 million in 2018 living below the poverty line, up from 13 million people in 2007.

Nor has poverty reduction kept pace with economic growth, with the result that inequality has worsened. According to the report, this is due to the concentration of employment in slow-growing sectors and the slow transformation of the economy. Industry and services – with fewer, better educated workers – are growing faster than agriculture, driving the growth and transformation of the economy.

“Vulnerability is still high, with findings showing that for every four Tanzanians who moved out of poverty, three fell into it,” according to the report. “A large number of non-poor people living just above the poverty line are at risk of slipping below it.”

However, the report also noted that country’s strategy to diversify toward solar energy has started to pay off, particularly in rural areas, where 33 percent of households use solar energy for lighting compared to 14 percent in urban areas.

The findings prompted the World Bank to call for more attention for agriculture, which it says offers opportunities for accelerating poverty reduction.

“Since agriculture already accounts for a quarter of total GDP and two-thirds of jobs, enhanced agricultural growth must be part of the strategy to create more and better jobs and alleviate poverty,” said World Bank country director Bella Bird during the report’s unveiling.

The World Bank said Tanzania’s economy will grow by 5.8% in 2020, up from 5.6% forecast for 2019, and growth will rise to 6.1% in 2021. These forecasts are lower than the government’s official estimate of 7.1%.

International concern over national debt
The International Monetary Fund (IMF) and the Brooking Institute have separately expressed concern at rising public debt in East Africa, including Tanzania.

The IMF, in its regional economic outlook report for sub-Saharan Africa, highlighted surging public debt-to-GDP ratios for Uganda, Burundi, Kenya, Rwanda and Tanzania. “An over-reliance on commercial public debt exposes sovereign balance sheets to greater rollover and exchange rate risks,” said the report. “An increase in debt from domestic creditors could crowd out financing for private sector projects,” the report also noted.

According to Brookings, these countries are shifting away from official multilateral creditors to non-concessional, commercial debt with relatively higher interest rates and lower maturities. The trend is raising concerns around debt sustainability given the possibility of higher refinancing risks and foreign exchange risks.

The region’s economies have fallen into a financial fix as they attempt to fund persistent budget deficits and implement mega infrastructure projects. As a result, the economies have resorted to massive borrowing from both domestic and international markets.

Tanzania’s public debt stood at $36.78 billion in February 2019, according to the Bank of Tanzania, representing 37.7% of GDP.

The country’s Finance Minister, Philip Mpango, attributed the increase to new loans secured to fund infrastructure projects such as construction of the terminal III of the Julius Nyerere International Airport, power generation projects, and the construction of roads, bridges and the standard gauge railway line.

CRDB Bank secures green finance accreditation
CRDB Bank has been accredited by the United Nations Green Climate Fund (GCF) for the implementation of green financing in Tanzania. CRDB Bank becomes the 3rd commercial bank in Africa to obtain this accreditation, after Ecobank Ghana and Attijariwafa Bank of Morocco.

The objective of the Green Climate Fund is to “support projects, programmes, policies and other activities in developing countries using thematic funding windows”. It is intended that the Green Climate Fund be the centrepiece of efforts to raise Climate Finance under the UN Framework Convention on Climate Change (UNFCCC).

Accreditation followed an extensive due-diligence assessment, conducted by GCF to ascertain the bank’s preparedness in managing climate change programmes. It means CRDB Bank will be able to finance multiple large-scale projects with high impact to the social and economic development of Tanzania.

Tanzanian bureaucracy drove VW to Rwanda?
A former Minister, Charles Kitwanga, told parliament in November that Volkswagon, Europe’s biggest carmaker, decided to invest in Rwanda after attempts to set up a car assembly in Tanzania failed due to ‘deep­rooted bureaucracy.’

Mr Kitwanda urged the current administration to urgently address bureaucracy to attract more investors as the country gears for industri­alization. “The bureaucracy we have in our system is so bad,” he said. “VWs are now made in Rwanda, they were to be assembled here.”

Last year, Rwanda’s first domestically built car rolled off the assembly line at Volkswagen’s new factory in Kigali. Mr Kitwanga says he wasn’t happy with the fact that a neighbouring country was making strides with a business that should have been put up in Tanzania.

In the latest World Bank ‘Doing Business 2020’, Rwanda maintained its position as the leading country in East Africa on the ease of doing busi­ness. Tanzania came a distant 141 out of the 190 countries in the index.

Tigo-Zantel merger
A merger between Tigo Tanzania and Zantel was recently concluded. In a joint interview with Forbes Magazine, the directors of the two companies said customers had expressed concern about the merger and its benefits but were assured that due to the strong integration of the companies the customers will enjoy services of the highest quality.

They said the merger brings together the strengths of both companies as well as providing the best of both Mainland and island, urban and rural areas.

Tigo Tanzania Executive Director, Simon Karikari, said he believes that the merger will create the best cellular telecommunications sector in Tanzania now and in the future, adding that a market with such integrated companies will drive creativity.

Plea bargains encouraged for economic crimes
The Director of Public Prosecutions (DPP), Biswalo Mganga, has announced that the government has opened a special bank account to enable those who are accused of economic sabotage and have sought amnesty to return the money to the government. According to Mr Mganga, the account has been opened at the Bank of Tanzania following a government directive.

Mr Biswalo told reporters that people accused of economic sabotage related offences, who seek to be pardoned, will have to deposit the money to the account upon approval by the court.

AGRICULTURE

by David Brewin

Food reserve steps in as food prices rise sharply
The National Food Reserve Authority (NFRA) released 3,000 tonnes of maize into the market in early January, in response to a rapid rise in food prices. Prior to the release, wholesale maize prices in Dar es Salaam had reached TSh 87,000 for a 100kg sack, compared to around TSh 50,000 twelve months earlier.

NFRA chief executive, Milton Lupa, told The Citizen that the decision to release thousands of tonnes of maize into the market was aimed at stabilising prices. “CPB (the Cereals and Other Produce Board) will also release maize flour into the market in Dar es Salaam,” he added.

A number of regions – including Dodoma, Tabora, Singida, Mara and Shinyanga – will be supplied with maize from NFRA’s storage facilities, while Dar es Salaam will receive maize flour from CPB.
Opposition politician, Zitto Kabwe had earlier decried the high food prices and accused the government of failing to set aside adequate funds for buying reserve food. “In October 2015 when the fifth phase government came into office, the country’s food reserves amounted to 253,000 tonnes. However, they have since declined to 55,000 tonnes, which is equivalent to one kilogramme for every Tanzanian,” said Mr Kabwe.

Mr Lupa said an evaluation by the Agriculture ministry showed that 25,000 tonnes of maize were needed to offset any shortage up to March, this year, and 35,000 tonnes to May, adding that NFRA expects to purchase 110,000 tonnes of maize in May and June, this year. He said NFRA will this week dispatch 7,000 tonnes of maize to Zimbabwe in line with an agreement to supply the country with 20,000 tonnes of the cereal.

Two months previous, in November, Agriculture Deputy Minister, Hussein Bashe, had said the government would use the grain reserve to ease food shortages but would otherwise leave market forces to determine how much consumers would pay for the commodities. “When maize prices were low, MPs blamed the government for banning exports at the expense of farmers. This time we have opened up and we will not intervene so that farmers can also benefit from the price increase,” said Mr Bashe, answering questions in Parliament.

“The government will not control prices but will promote more production, reduce production costs and create an enabling environment for competition which will regulate the prices,” he said.

World Bank report focusses on Agriculture
The World Bank’s latest Economic Update on Tanzania – titled ‘Realizing the Potential of Agriculture for Inclusive Growth and Poverty Reduction’ – paid particular attention to the country’s agriculture sector.

The agriculture sector provides livelihoods directly to around 55% of the population (and three quarters of the poor) and indirectly to a further 15% within related value chain functions such as traders, transporters and processors. The report also found that 368,000 new medium-scale farms established in Tanzania between 2008 and 2014 created 13 million days of additional work annually for hired workers.

The authors emphasise the importance of having supportive public policies and spending which attracts private investment, in order to catalyse a transformation in agriculture. “What we are seeing for example is that medium-sized farms grew from 23% of all farm land holdings in the country in 2008 to 35% in 2014; and these are in the 5–20 hectare (ha) range, compared to the typical smallholding of 1–2 ha, whose numbers are decreasing” said Holger Kray, World Bank Agriculture Practice Manager and co-author of the report.

“The current trends in agriculture offer a tremendous opportunity to catalyse private investment, both local and foreign, and raise the incomes of the poor,” said the World Bank Country Director for Tanzania, Ms Bella Bird. “For Tanzania to speed up the agricultural transformation process, it should increase the quality and pace of needed policy reforms to make a business environment for agriculture more profitable and predictable,” she noted, adding: “We congratulate the government of Tanzania for improving the environment for agribusiness, by implementing local and national fiscal reforms, including removal of over 100 agriculture fees and taxes and limiting the use of export bans; a huge step forward.” (The Citizen, Daily News)

Cashew payments for 2018/19 still incomplete as 2019/20 market is extended
The government has not quite yet completed payments to cashew nut farmers for their 2018/19 crop. “The government has paid TSh707 billion out of TSh723 billion required, therefore we are supposed to make the remaining payment of TSh16 billion,” said the Minister of Agriculture, Japhet Hasunga, in early January.

The Minister added that the government’s evaluation team was still assessing eligibility of unpaid farmers, noting that payment would be concluded after the exercise has been completed.

This followed a meeting between Prime Minister Kassim Majaliwa and cashew farmers from Ruangwa, Masasi and Tandahimba districts, after which the Prime Minister directed the ministry to conclude paying cashew farmers unpaid monies.

It also emerged that Tanzania has exported almost all the raw cashew nuts that were purchased by the government last season (213,000 tonnes out of the 225,000), according to the ministry of Agriculture. This earned $251.7 million (around TSh 580 billion), considerably less than the TSh 720 billion that the government’s chief spokesperson, Dr Hassan Abbas, said the government had spent in purchasing the nuts from farmers. It is also less than half the amount ($575 million) earned from the 2017/18 harvest, largely due to fluctuating global prices.

The ministry also said that over 4,800 tonnes were given to domestic processors, out of which over 800 tonnes have already been processed for export and domestic consumption. “We are looking for buyers of the remaining 4,000 tonnes. Some will be provided to local firms to strengthen the domestic processing capacity,” said Mr Hasunga.

Meanwhile, auctions for the 2019/20 crop of cashew nuts in Mtwara, Lindi and Ruvuma was extended by nine days to ensure that the entire crop is sold.

“This means that farmers remaining with unsold cashew nuts – and buyers who are willing to buy the crop – can continue to trade,” said the Minister, adding: “The government is aware that some farmers still have unsold stocks and they should, therefore, take advantage of the extended period.” Other regions with later harvest seasons, such as Coast, Tanga and other regions were not affected by the new deadline.

At the time of writing, 209,000 tonnes of raw cashews had been sold in the auctions, out of a projected total harvest of 290,000 tonnes in the 2019/20 farming season.

The Ministry is sticking to its promise not to interfere in raw cashew nut prices this year.