by Ben Taylor
February saw the maiden Tanzania-EU Business Forum in Dar es Salaam, bringing together over 600 business leaders from the EU and representatives of the Tanzanian government and business community.

Speaking at the event, Tanzania’s Vice-President, Dr Philip Mpango, invited investors from the 27 EU member states to explore untapped investment and business opportunities in Tanzania. He cited potential areas for investment as agriculture and agro-processing for value addition of local farm produce, as well as tourism, energy, mining, real estate, transport and logistics.

Dr Mpango, also a former Finance Minister, assured delegates of a conducive environment for trade and investment. “Just last year, the government repealed the Investment Act of 1997 and enacted new legislation that offers more incentives to strategic investors,” he said, adding that Tanzania is among the fastest growing economies in the sub-Saharan Africa at present.

At the same event, Dr Mpango urged Tanzanian businesspersons to also explore and take advantage of investment and trade opportunities in the EU.

Tanzania and the EU have been enjoying more cordial relations since President Samia Suluhu Hassan came to power in March 2021. In February 2022, the President visited the European Commission (EC) headquarters in Brussels and met with Commission President, Ursula Von der Leyen. Shortly after this meeting, the EU head of delegation to Tanzania, Mr Manfredo Fanti, stated that investors in the 27-member European bloc were happy with initiatives that the East African nation was taking to improve its business climate, saying this would foster increased Foreign Direct Investment (FDI) inflows.

According to the 2022 EU Investment in Tanzania Report 2022, imports to Tanzania from the EU were valued at €856 million in 2021, representing 12% of Tanzania’s imports, while exports stood at €456 million (10%). The report, which was jointly prepared by the EU Delegation and the European Business Group (EUBG), also found that over 100 companies from the EU have invested in the country, creating an estimated 151,000 jobs.


by Dr Hildebrand Shayo

2023/2024 budget amid thorny audit report
Tanzania’s national 2023/2024 budget debate is gaining thrust at a time when numerous flaws have been exposed by the 2021/22 report of the Controller and Auditors General (CAG), in addition to the global economic outlook that remains thought-provoking, flimsy, and unclear. The Russian vs Ukraine situation that is impacting other major economies might make this year’s 2023/2024 budget tricky.

The 2023/2024 national budget debate likewise is taking place at a time when capital markets are not functioning efficiently, and unemployment continues to persist as a major concern both at the national and global levels, but nationally at the time when the sixth phase government has been more transparent and embarrassing openness something which led to exposing the number of losses in government expenditure and revenue collection.

In these circumstances, advanced economies and important emerging nations such as Tanzania will be facing difficult policy choices, to strike a balance between the imperative of fiscal consolidation and the need for sustainable economic recovery and growth.

For emerging and rising economies, the road to a sustained recovery will continue to be challenged by several key concerns comprising capital inflows volatility, risks of domestic credit and asset price bubbles, commodity price instability, especially fuel and food prices, and inadequate resources. This will be coupled with limited fiscal space and large development needs, containing the need to achieve the MDGs.

Evaluation of economic trends and performance signals that the global economy will continue to struggle financially. Despite the realisation of unprecedented macroeconomic policy responses, including monetary and fiscal measures undertaken, uncertainties will continue regarding the path to economic recovery partly coping with the effects of Covid and the ongoing war between Russia and Ukraine.

Global headwinds
All is happening when the global economy continues to grapple with financial market fluctuations and macroeconomic imbalances, that is leading to increasing vulnerabilities in global economic recovery and weakening employment prospects across many economic sectors.

Against this setting, world output growth is projected to decelerate from an estimated 3.0% recorded in 2022 to 1.9% in 2023, indicating the world will have one of the lowest growth rates in recent decades. This makes the world economic situation and projection for the remaining 2023 present a gloomy and uncertain economic outlook.

Similarly, growth in cutting-edge economies has already declined from 5% recorded in 2021 to 3.8% in 2022 and 2.3% projected in 2023 a pace that, while moderating, will be satisfactory to restore output and investment to cope with the post-pandemic trend and impact of the on-going war in Russia and Ukraine.

Economic output in the US is expected to slow early this year in response to last year’s sharp rise in interest rates. Nonetheless, the output is expected to start growing again during the second half of 2023 as falling inflation might permit the Federal Reserve to cut interest rates, which would likely cause a rebound in sectors of the economy that are sensitive to interest rates. Further, US domestic consumption, the major driver of economic growth, is still sluggish as the foreign inflow starts to decline wary of emerging market uncertainty after the failure of three banks in the US during the last month of March 2023.

In Europe, the weak banking sector limits credit supply and hampers the pace of economic recovery. Households and firms across the euro area are currently feeling the effects of higher inflation and weaker economic activity, amid the ongoing energy crisis prompted by the war in Ukraine.

According to the European Central Bank’s November 2022 financial stability review, the deterioration in economic and financial conditions has increased the risks to euro area financial stability and how this might negatively affect emerging markets and developing countries through trade and financial channels thus adding to domestic weaknesses.

GDP growth in Germany, the largest economy in Europe, has increased by 1.8% in 2022. Notwithstanding high inflation, growth has been supported by the boost in demand that followed the post-pandemic reopening of the economy, and in particular, services although by the third quarter of 2022, investment and private consumption had not yet reached their pre-pandemic levels that led to a decreased in the fourth quarter with real GDP contracting by 0.2%. The weak private demand is the main factor behind this weak performance and the prolonged output gap.

On average, the BRICS group of five major emerging economies-Brazil, Russia, India, China, and South Africa has grown strongly since its inception in 2006. Accounting for 23% of the global economy, 18% of trade in goods and 25% of foreign investment, BRICS nations have formed an important force that cannot be ignored in the world economy. BRICS economies imply that the irresistible rise of emerging markets and developing countries has injected strong impetus to the reform of the global economic governance system that will have a considerable impact on other nations’ planning.

National challenges
Tanzania’s 2023/2024 national budget partly relies on development partners’ support, which is of course affected by global dynamics. And in addition, the recent CAG’s report has recommended serious action to be taken since currently, global economic growth is slowing amid a gloomy and more uncertain outlook.

Tanzania’s parliament will debate budgeting issues of respective sectors for a few months when the world’s three largest economies are stalling, with important consequences for the global outlook with inflation remaining a major concern.

Inflationary risks will remain high due to both external and domestic influences. The external risks will be associated with the possibility that the international financial crisis may persist, while the domestic risks will be associated with a context of slower demand due to the slow growth in private sector activities and low-capacity utilisation in many sectors.

All in all, higher-than-expected, although global inflation has been revised in part due to rising food and energy prices, especially in the United States and major European economies, will continue to trigger a tightening of global financial conditions and this will have further negative spill-overs from the war in Ukraine and as a result, global output will be affected enormously.

This year, inflation is anticipated to reach 6.6% in advanced economies and 9.5% in emerging and developing economies. Inflation has also broadened in many economies, reflecting the impact of cost pressures from disrupted supply chains and historically tight labour markets. These issues are critical to Tanzania as honourable MPs debate national budget for 2023/2024.


by Ben Taylor
Pro-business moves by President Hassan
President Samia Suluhu Hassan’s business-friendly outlook is sending positive signals across the globe, with Moody’s Investors Service chang­ing Tanzania’s outlook from stable to positive.

“The outlook change to positive reflects Moody’s view that political risks have lessened under the government’s new approach to promot­ing economic development and engagement with the international community,” Moody’s says in its latest change on Tanzania’s rating which was published in October.

Ratings such as those for Moody’s are used by investors globally in deciding on where and why they should invest their money in any particular economy.

President Hassan took over at a time when relations between the gov­ernment and some investors were somewhat uneasy. The sentiment then was that the country was excessively regulating foreign investors, and that Tanzania’s business climate had abruptly become unpredict­able.

As a result, despite promoting industrialisation, a report by the United Nations Conference on Trade and Development (UNCTAD) found that inflows of foreign direct investment (FDI) decreased by 24% between 2015 and 2017.

Later, relations between the government and the International Monetary Fund (IMF) soured when the latter criticised the former for its unpre­dictable economic policies and unreliable statistics. An IMF report in 2019 warned Tanzania of unpredictable and interventionist policies that worsen the investment climate and could lead to meagre [or even nega­tive] growth, was blocked from being published in the country.

But almost 18 months since the change of guard at State House, Moody’s said the government’s efforts to improve the business and investment climate and attract FDI, most notably in the mining and hydrocarbon industries, offers the prospect for higher potential growth and improv­ing international competitiveness. “Tanzania’s re-engagement with the IMF also has the potential to support higher government revenue generation capacity and unlock greater concessional financing from development partners, supporting debt affordability and increased social spending,” Moody’s said. “Initial steps to improve the business and investment climate include relaxing regulations for foreign work permits, streamlining VAT refunds, and tabling legislation that supports local businesses,” Moody’s noted.

Government officials and some analysts say the government has indeed managed to effectively tell the world that Tanzania was open for invest­ments and that its policies were predictable. “This change is a clear indication that the government’s efforts to create an enabling business environment were being noticed….This will instil confidence to investors that their money will be safe when they invest in Tanzania,” said the Deputy Minister for Investment, Industry and Trade, Mr Exaud Kigahe.

He said the government will keep on creating a friendly-business and investment climate to convince investors that investing in Tanzania could make them be sure of their tomorrow.

Dr Daud Ndaki, an economist from Mzumbe University, echoed this view, noting that the sixth phase government has achieved a remark­able milestone in building investors’ confidence. “This is a positive development. With this positive outlook, we are likely to attract more investors,” he said.

Separately, World Bank Vice-President Victoria Kwakwa praised President Hassan’s “economic miracle,” where key macro indicators showed a strong post Covid-19 position compared to many countries.

Indeed, growth data showed a healthy 5.4% annualised growth rate early in 2022, ahead of earlier projections. The Bank of Tanzania said money supply and private sector credit growth continued to rise swiftly, with the trend being attributed to monetary and fiscal policy accommodation, an improved business environment and recovery of private sector activities from the effects of Covid-19.

Private sector credit growth improved significantly in July and August, reaching around 20%, compared with the projection of 10.7% for 2022/23.
Further, Tanzania appears to have dodged the worst inflationary impacts of the war in Ukraine. Official estimates saw inflation reach 4.6% in August 2022, well below the double-digit figures seen in many countries, and below Tanzania’s own upper-range ceiling of 5%.

Economist and business analyst, Dr Donath Olomi, said there is positive change in perception towards investment and the business environment in Tanzania, which has been influenced by President Samia Suluhu Hassan’s government. “The economic potential has yet to be fulfilled, but we have come far, and there is this confidence as far as doing business in Tanzania is con­cerned. Trust has recovered, and the trajectory is good,” he said.

Census data published

Population census data

November 2022 saw the publication of the first findings from the 2022 national Population and Housing Census. The main headlines were drawn by the overall total population figure of 61.7 million, up by more than a third from 44.9 million in 2012, representing an annual growth rate of 3.2% since the previous census.

The population of Dar es Salaam has risen a little more slowly over the same period, from 4.4 million in 2012 to 5.4 million in 2022, an annual growth rate of 2.1%. Mwanza meanwhile has grown from 2.8 million to 3.7 million, an annual growth rate of 2.9%.

The overall population figure for 2022 is a little lower than the United Nations Population Division had projected (63.6 million at the end of 2021). Nevertheless, the annual growth rate over the past ten years is considerably higher than had been the case in the previous decade (3.2%, up from 2.7%).

In launching the initial report, President Samia Suluhu Hassan said it was estimated that by 2025 Tanzania will be home to 68 million people and that by 2050 there will be 151 million in the country.

Commenting on the figures, some economists said that rapid popula­tion growth makes it more difficult for low-income and lower-middle­income countries like Tanzania to afford the increase in public expendi­tures on a per capita basis. This, they say, makes it increasingly difficult to eradicate poverty, end hunger and malnutrition, and ensure univer­sal access to health care, education, water and other essential services.

Dr Wilhelm Ngasamiaku, an economist from the University of Dar es Salaam, said it will be important for the economic strategies of the coun­try to take into account the age structure of the population. “In previous census for example, we have seen that people below 18 years account for the majority of the population. This means as a coun­try, you must invest more on social services as demand for health and education will increase,” he said. “But if the majority is in the working age group, 15-59 years, it means we are going to need to re-strategise economically to make sure we create more decent job opportunities,” added Dr Ngasamiaku.

Others say a large population translates into more workers and more consumers who make a good market for locally-produced products for the general good of the economy.

Dr Lutengano Mwinuka, an agricultural trade economist from the University of Dodoma (UDOM), said the population growth provides an opportunity by providing a bigger pool of human capital. “For instance, in agriculture we have a lot of unutilised land across the coun­try. From the census data we can identify the size of the working age group and skills composition and thus we can appropriately develop economic development strategies,” he said.

The initial census data released in November does not include the age profile of the population. This data is expected to be released in 2023.


by Dr Hildebrand Shayo

Highlights on President Samia’s FY 2022/23 and what could be budget’s effect on business and investment
The total budgeted expenditure in the 2022/23 budget is TSh 41.5 trillion (USD $18bn). What does this budget mean? How is this budget going to be financed, and is this budget likely to speed up business’ growth, maintain or attract new investment to Tanzania ?

This FY2022/23 budget was tabled at a time the Tanzanian economy is growing at 4.9% compared to a growth of 4.8% in 2020. The increase was attributed to diverse efforts taken by the Government, including the execution of the Tanzania Covid Socio-Economic Response Plan and strategic investment, especially in energy, water, health, education, roads, railway, and airports infrastructure.

The economic activities with the highest growth rate at the time the FY2022/23 budget was tabled were arts and entertainment (19.4%); electricity supply (10.0%); mining and quarrying (9.6%); and information and communication (9.1%).

In 2021, the GDP at the current prices was TSh 161.5 trillion compared to TSh 151.2 trillion in 2020. Tanzania’s mainland population was estimated to be 57.7 million people in 2021 compared to 55.9 million people in 2020. Per capita GDP was TSh 2.79 million in 2021, compared to TSh 2.7 million in 2020. Further, the inflation rate increased to 3.8% in April 2022 compared to 3.3% in April 2021.

The rise in inflation was an outcome of reasons beyond the Government’s control including disruptions in the production and distribution chains of goods and services in the world market because of the Russian invasion of Ukraine.

The total proposed expenditure in the 2022/23 budget is TSh 41.5 trillion (USD $18bn) for recurrent and development expenditure. Out of that amount, TSh 26.5 trillion (USD $11.5bn) is allocated for recurring expenditure, equivalent to 63.8% of the total budget and TSh 15.0 trillion (USD $6.5bn) for development expenditure. The sources of funds are government domestic revenue (including LGAs own sources) estimated at TSh 28.0 trillion (USD 12.1bn), equivalent to 67.5% of the total; external grants and concessional loans estimated at TSh 4.65 trillion (USD $2.0bn) equivalent to 11.2% of the total; and domestic and external non-concessional loans TSh 8.8 trillion (USD $3.8bn) equivalent to 21% of the total.

The theme for the 2022/23 budget is Realising Competitiveness and Industrialization for Human Development. Priority sectors include agriculture, livestock, fisheries, energy, investment, and trade. Tanzania theme is very well in line with the EAC Partner States’ budget theme for 2022/23, which is Accelerating Economic Recovery and Enhancing Productive Sectors for Improved Livelihoods.

The budget however for FY 2022/23 aims to achieve macroeconomic policy targets of real GDP growth rate of 4.7% in 2022 and 5.3% by 2023; holding inflation between an average of 3.0% to 7.0% in the medium term; domestic revenue collection of 14.9% of GDP in 2022/23; tax revenue collection is projected at 11.7% of GDP in 2022/23; and maintaining foreign reserves sufficient to cover at least four months of imports of goods and services.

In FY 2022/23, the Minister for Finance and Planning further proposed several changes in tax laws including the Income Tax Act, the Value Added Tax Act, the Tax Administration Act, the Excise (Management and Tariff) Act. The Minister proposed amendments to existing provisions as well as new provisions in tax laws.

Tax and related changes
The Minister proposed the following amendments to the Income Tax Act, 2004:
• Introduction of a tax rate of 3.5% for taxpayers with turnover exceeding shillings 11 million but not exceeding shillings 100 million in a year.
• Improvement of the Tanzania Revenue Authority payment systems, to enable payments of taxes through mobile wallets.
• Recognition of alternative financing as approved by the Bank of Tanzania to be the same as conventional borrowing to enhance financial inclusion and access to finance.
• Granting the Minister for Finance powers to waive income tax for strategic investors after approval by the National Investment Steering Committee, as indicated under the Tanzania Investment Act, and as subsequently approved by the Cabinet.
• Abolishment of withholding tax exemption on rent paid by individuals for residential houses, apartments, and commercial premises. The Commissioner General for Tanzania Revenue Authority will enter an Agency Memorandum of Understanding with the President’s Office Regional Administration and Local Government on the administration and collection of this tax.
• Capital gain tax exemption on any transaction involved on the entry into force and implementation of agreements involving the transfer or surrender to a joint venture company of any project; or the authorisation, issue, distribution, or transfer to the Government of the free carried interest shares.
• Capital gain tax exemption on equity shares freely surrendered to the Government through the Treasury Registrar.
• Withholding tax exemption on coupon for corporate and municipal bond.
• Reduction of the withholding tax on service fees paid to nonresidents in the film industry from 15% to 10%.
• Introduction of 2% digital service tax on the turnover of non-resident service providers.
• Introduction of 2% final withholding tax on payments made to small scale miners.
• Introduction of an annual income tax of TSh 3.5 million per truck and passenger bus and
• Introduction of an advance income tax of TSh 20 per litre for retailers of petroleum products.

In relation to VAT, the Minister proposed exemptions on various items including the following:
• Raw materials and Machinery under Chapter 84 and 85 of the East African Community Common External Tariff solely and directly used in the manufacturing of fertilizers by an approved manufacturer. Exemption will be granted upon approval by the Minister for Agriculture.
• Unprocessed green vanilla pods for equity purpose as treatment of other unprocessed agricultural products that are exempted from VAT.
• Locally manufactured sisal twine.
• Ultra-High Temperature (UHT) milk and yoghurt, and dairy packaging materials.
• Pasture seeds (grass seeds) and pasture legumes seeds.
• Machines and tools solely and directly used by the military and armed forces. The exemption will be granted upon approval of the goods by the Minister responsible for defence and security. VAT exemption is proposed to be abolished on the supply of air charter services, as well as on smartphones, tablets and modems.

Other proposed VAT amendments:
• Treatment of alternative financing arrangement as conventional borrowing to enhance financial inclusion and accessibility of financial services.
• Zero rate for one year, locally manufactured double refined edible oil.
• Zero rate for one year, locally manufactured fertilizer.
• Grant power to the Minister for Finance to grant VAT exemption on strategic investments after approval by the National Investment Steering Committee (NISC).
• Expand the list of capital goods that qualify for VAT deferment to include tractors, trailers and semi-trailers, and other vehicles not mechanically propelled.

Changes proposed to the Local Government Finance Act include exempting crop cess on seeds to provide relief to farmers and enhance productivity, and reducing forest produce cess from 5% to 3% to provide relief to forestry traders and support growth of forestry sector.

Further, the Minister proposed to reduce the Workers’ Compensation Fund contribution rate from 0.6% to 0.5%, to align the rate payable for private and public sector employees; to reduce the rate of royalty from 3% to 1% on coal used as energy raw material in factories, to encourage investment; to introduce an export levy of 30% or USD$150 per metric tonne (whichever is higher) on copper waste and scrap metals, to protect local manufacturers.

On the Insurance Act, the Minister, expanded the scope for mandatory insurance to include public markets, commercial buildings, imported goods, marine vessels, ferries, and pontoons. On the Foreign Vehicle Transit Charges Act, he reduced transit charges for vehicles exceeding 3 axles from USD 16/100 km to USD 10 or its equivalent in convertible currency for every 100 km. On the Bank of Tanzania Act, he increased the limit on Government borrowing to not exceed 18% of approved domestic revenue in the current fiscal year instead of the current rate of one eighth of the domestic revenue collected in the preceding fiscal year.

Sources: MOFP budget speech for FY2022/23- presented at parliament-Dodoma, Tanzania. Effectiveness of the 2022/23 budget start 1st July 2022


by Arrad Tabandeh
Arrad is a TDT Volunteer currently studying at the London School of Economics and Political Science (LSE)

IMF approves more funding for Tanzania to deal with the effects of pandemic and war
In July the IMF Executive Board approved a forty month $1.05 billion extended credit facility (ECF) arrangement with Tanzania. This type of support is designed to provide financial assistance to countries with protracted balance of payments problems, and is part of a broader reform at the Fund to make their financial support more flexible and better suited to the needs of countries requiring more diverse assistance. It is seen as a major tool in providing medium-term support to Tanzania and its economic programmes aimed at stability and sustainability.

This follows the Fund’s emergency support to Tanzania in 2021, as overall financing since the start of last year is now equivalent to 300% of the country’s special drawing rights (the IMF’s own currency used as an international reserve asset and allocated between countries). The arrangement is expected to accelerate further bilateral and multilateral financial support.

The purpose of this ECF is to assist Tanzania with the spill-over effects from the war in Ukraine which is stalling the country’s gradual recovery from the pandemic. The programme draws from the key priorities of the government’s Five-Year Development Plan which commits to the improvement of living conditions through measures aimed at building a “competitive and industrial economy for human development”. The authorities will therefore use this additional funding in accordance with the Plan and invest in infrastructure, skills-training, as well as strengthen the business environment to facilitate private sector success. Contributions are also thought to be made towards scaling up vaccination efforts.

The IMF has forecasted Tanzania’s GDP to grow 4-5% each year from a base of about $65 billion in 2021, with the current account deficit floating around 4% of GDP. Therefore, while financing of $1 billion across nearly four years covers a relatively small amount of the deficit, it is still sufficient in driving reforms and building a sustainable base for future revenues and growth.

Speaking to “Daily News”, a cross-section of economists said they were optimistic that the credit will offset the rising prices of commodities. They also suggested that the fund should be used to provide subsidies on imported fertilisers, to reduce prices of the soil nutrient encouraging the country to become more self-reliant. It is hoped that this could go some way in alleviating the worsening cost of living crisis.

Mr. Bo Li, Deputy Managing Director at the IMF mentioned how executive directors “commended authorities for their economic response to the pandemic and the policies enacted to mitigate the spill-overs from the war in Ukraine”, but also referred to the “considerable development and reform challenges and external headwinds” that the country is facing. It is against this backdrop as well as “recognising Tanzania’s strong track record in reform implementation” that the directors supported the country’s request for an ECF arrangement.

The directors also highlighted the authorities’ continued work in “rebalancing expenditure towards social spending and improving its efficiency and execution.” They welcomed the progress made in establishing fiscal transparency in the nation alongside emphasising the importance of raising government revenue to address priority spending, including the containment of rising food and fuel prices. This can also help pave the way for a more sustainable fiscal policy in the country, freeing up room for longer-term development.

Plans are in place to pay out $150 million immediately. The financing is Tanzania’s first IMF policy-reform funding programme in a decade and comes after the Washington-based lender raised the country’s risk of debt distress to moderate from low last year. For now the fund has encouraged the implementation of Tanzania’s ambitious reform agenda, alongside stressing the need to continue to address climate risks.


by Dr Hildebrand Shayo

Banks’ lending rates to business, and the effect on economic growth in Tanzania
The issue of banks in Tanzania being advised to reduce loaning interest rates is on the lips of politicians, government officials, the President herself, borrowers and loan seekers, whether small or large, seeking loans to run their businesses. Despite these efforts and calls, interest rates charged by lending institutions remain high, something that in-turn affects the growth of productive economic activities, business especially for SMEs and start-up businesses that offer employment on one hand but also tax base for government revenue. Why are interest rates not declining in Tanzanian market? Is the approach used to reduce rates wrong or inappropriate? Or is there a problem in the financial system and interest rates setting system in Tanzania? These are the issues that need reflection with an economic eye to assess why the situation remains the same despite countless calls to reduce the rates. This assessment described concludes with hints as to why it will be thought-provoking to bring down lending rates and what can be done.

Gain access to loans, interest rates and business lending setting panorama
As clamour to lower lending rates continues, Tanzanian borrowers, small or large should not expert reduced loans interest rates soon, notwithstanding lowered policy instrument rates and regular government officials’ reminders that include other strict measures issued by the Bank of Tanzania.

The conventional approach stems from the fact that interest is the return for the productive use of principal. Since physical capital is purchased with monetary funds, then, the rate of interest is taken to be the rate of return over capital invested in physical capital assets. Whereas the demand for investable capital draws from investment decisions of the business sector, the supply of capital results from supplies of savings derived from households. Loanable funds are the sums of money supplied and demanded at any time in the money market, where: funds available for lending are inclined by the savings of the people and the additions to the money supply (normally through credit creation by banks), while demand for loanable funds is determined by the need for investment plus desire for hoarding.

Within this theoretical background, although BOT practises different measures such as reducing statutory reserves money (SRM) lowering Repos, lending to banks, and reducing yields for debt instruments, these efforts have not yet translated into effective lowered lending rates as anticipated.

Actual lending rates remain at around 16% by most banks, except one bank that recently announced the reduction of rates for personal loans targeting farmers. This makes it harder for borrowers to access loans, and indeed the cost of finance makes it challenging to make profit.

High rates are good for the banks and their shareholders but damaging to viable economic activities that are vital for county’s economic growth. High banks rates also discourage prospective borrowers from applying loans, as others have opted to borrow from individual private lenders or family members.

Presently, there are some banks which lend up to 21% – four times of the BOT policy rate – while maximum mortgage lending rates in Tanzania is 19%. Digital lenders issuing loans through mobile money services, which are assumed to be cheaper due to lower operating costs, lend at a fixed cost between 11% and 15% of the loan among. This is repaid within a much shorter time period: up to a month. When annualised, rates charged by telecoms are a killer, though many users do not realise on how is expensive the loan through mobile phones can be.

Research on informal lending market finds loans at rates that are higher than mobile lenders or banks, as the cost of funds are ranging from 30% to 50% per month. Here risk of non-payment is the key driver.

The main drivers of high lending rates in Tanzania’s lending market are high operating costs, non-performing loans, and cost of funds. Interest income is the major earning stream for all banks.

Tanzanian banks’ operating costs are related to employee salaries and benefits, which account for an average of 44% of the banking industry operating costs and have been increasing over time. Folks familiar with banking industry supposes that maximum monthly salary of large bank CEO is TSh 60m (around USD $25,000), very roughly equivalent to a profit of a bank branch. Likewise, monthly pay for CEO of other medium and small bank ranges between TSh 15-30m.

The implications of these, is simple that efforts should be directed at improving operation efficiencies aiming at reducing banks operating costs. The key areas of attention are with respect to employees’ salaries and how to improve bank’s productivity.

Another notable cost that is not often taken seriously is the cost of premises and equipment – rent, transport fleet, equipment and utilities – which together constitute another 16% of the banking industry operating costs. In this case, ICT advancement in the country in service provision could bring these costs down somewhat.

As far as non-performing loans (NPLs) are concerned, this has become a major problem for most banks. Factors affecting NPLs comprise global financial crises, credit screening weakness, a decrease in supply of loans partly, and capital enhancement measures. In Tanzania, banks are aiming to comply with the regulator’s benchmark of at most 5% of NPLs. Some banks have gone beyond this figure due to various genuine reasons, including economic uncertainty and instability of the labour market, as well as unethical practices among loan officers. Each of these drivers nonetheless are subject to discussion as each might have its own story.

Cost of funds is another factor that keeps banks’ lending rates high, banks cannot lend money at lower rates than they themselves pay. According to BOT, in Tanzania, the overall interbank cash rates which banks uses to lend each other, up to the period of seven-day ranges between 4.4% to 4.5% while overnight was at 3.72%. Here, some banks that have good relationship with each other usually outsource expensive funds outside the country when there is liquidity shortage locally and vice versa.

Regulator’s role and financial market dynamism in Tanzania
In recent years, the BOT has announced various policy measures to ease lending rules which include lowering the statutory minimum reserves requirement, lowering the discount rates as well as providing regulatory flexibility on restructuring of loans. For instance, in 2021, the central bank lowered its benchmark lending rates from 7% to 5% to cushion banks from Covid-19 impact. This together with the policy change aimed at to provide additional space for bank to borrow at a lower cost, hopes to encourage lower rates by banks. To spur liquidity, the regulator correspondingly resolved to lower statutory minimum reserve to 6% from 7% effective June 8, 2021.

Various initiatives as stated in this analysis are now being practiced by various financiers including commercial banks. Initiatives such as cluster marketing where employees of the government established parastatals and corporate establishment are able to enjoy good, lowered lending rates may inspire many to get loans at costs that are low compared to what banks charges, but for how long? These tactics exclude important economic groups such as traders, farmers and businesspeople. And importantly they do not target help at start-ups and SMEs viewed as riskier prospects, though these could benefit from lower rates.

Policy Implications
Attempts examined in this article to help deal with high lending rates alone on the other hand will not bear fruits without political will. As such, top government officials, including President Samia Suluhu Hassan on various occasions, have made an appeal to the banks to rethink and consider lowering lending rates telling them that they are part of the wider economy. Likewise other leaders also have from time to time have been calling for banks to reduce lending rate, but this is unworkable in real sense.

The implications of the analysis expressed in this article are that high interest rates signal banking sector inefficiency, and when that occurs it hampers not only financial development but also economic growth and potential productivity enhancement.

In June 2021, the President said, “financial institutions need to cut real interest rates in line with measures implemented by the BOT,” and suggested that rates for short term loans should be lowered to below 10%. Will banks in Tanzania heed the President’s call, or will they turn a deaf ear?

Hildebrand Shayo, BA (hons) MA, PhD, is currently a manager, responsible for Economic Research and Planning at TIB-DFI Development Bank, wholly 100% owned by the Government of Tanzania. TIB development bank is one of development financial institution responsible for financing long-term infrastructure and development projects with development impact.


by Ben Taylor

Natural Gas processing back on track?
The prospect of a liquified natural gas (LNG) project is back on the rails after stalling for years. Negotiations for its actualisation formally kicked off in January after inking of a crucial agreement.

Minister for Energy, Mr January Makamba, said the project would require an investment of a staggering TSh 70 trillion (USD $30bn).

The Minister was speaking after an agreement was signed between the Tanzania Petroleum Development Corporation (TPDC), on behalf of the Tanzania government, and Baker Botts LLP as a transaction advisor to the government. The signing at Gran Melia Hotel followed two days of talks between the UK-based legal firm and senior government officials.

The minister said it was the scale of the project that led the government to conclude that international expertise was needed, and thus to look for external consultants to lead the discussions. The search commenced through an international tender which, he said, was won by Baker Botts (UK) LLP, who will work in partnership with Tanzanian law firm, Apex Attorneys.

“We hope with this agreement, the road is cleared for realisation of the project,” he told journalists.

Tanzania has an estimated 57 trillion cubic feet (tcf) of natural gas reserves, mostly off shore, in Lindi Region. Of this, 43 tcf are recoverable while 23-25 tcf qualify for commercial exploitation.

According to Makamba, discussions between the government and other partners are expected to last until the middle of this year. “Thereafter, an agreement will be signed. This will give a timeframe for the imple­mentation of the project and the like”, he said.

Mr Makamba said the government was keen to see the take-off of the project so that the economy can benefit from the huge gas resources. If completed, the massive project would supply liquified gas for the households and for the export market.

A lead partner with Baker Botts (UK) LLP Hamish McArdo said he was optimistic on the swift conclusion of key issues in the project. He said his London-based firm was experienced in upstream oil and gas projects, especially in legal, technical and commercialisation aspects.

The decision to appoint a foreign firm for this work has attracted some criticism from pundits. They noted that other agreements, including that with Barrick Gold were concluded by Tanzanian legal experts, led by former Constitution and Legal Affairs Minister Palamagamba Kabudi.

In response, Mr Makamba explained that what was being sought was not legal advice but rather a consultant in LNG discussions who had the necessary ability and experience.

“If you look at the terms of reference, there are four types of skills needed. They are financial, commercial, technical and legal. This is the expertise that TPDC was looking for in a process that ended yesterday and which started in 2018,” he said.

“Globally, for discussions like this, countries that have never imple­mented a project like the LNG always look for additional expertise to advise them in the negotiating process. The country has its own position on what it wants to achieve in the project and then the firm supports this,” he said. He added that Tanzania had regulations that compel a foreign company to strike partnerships deals with a local firm, noting that that was why Baker Botts will work in partnership with Apex Attorneys.
The executive director of HakiRasilimali, which strives for indigenous participation in natural resources projects, Ms Racheal Chagonja, said there was no problem with the firm being offered the job. Nevertheless, she stressed the need for transparency in all processes.

“The experience we have had in negotiating mining contracts since 2017 is that they were shrouded in secrecy. Things need to be different as we now negotiate natural gas deals,” she said.

Kabanga Nickel prospects looking strong
The Kabanga Nickel Project has secured a $100 million investment from the world’s biggest mining company, BHP, of which it has allocated $10 million to acquire the hydromet tech to ensure that finished Class 1 battery grade nickel, copper and cobalt will be produced in the country. This was according to Kabanga Nickel’s Chief Executive Officer, Chris Showalter, in an extensive interview with The Citizen newspaper.

Globally, demand for nickel is projected to rise sharply in coming years, due to its importance to the battery technology used by electric vehicles.

“We are very pleased BHP decided to invest in Kabanga,” he said. “To recap the investment, an initial $40 million will be invested into Kabanga together with $10 million into Lifezone – the technology com­pany owner of the hydromet refining technology to be applied at the project.”

With an additional $50 million planned, BHP’s share in Kabanga Nickel will reach 17.8%, valuing the project at $658 million. This is the first new investment by BHP in Africa in years. “This investment secures access to a world class nickel sulphide resource and is aligned with BHP’s strategy to capture opportunities in future-facing commodities,” said a BHP spokesperson.

Showalter also explained that Kabanga Nickel had been moving fast since taking over the project in January 2021, working with the govern­ment to ensure that they have all the right mining and refining licences and the proper environmental permits, and working with the commu­nity to agree their needs, to agree resettlement proposals where neces­sary and to create the right community initiatives to ensure local people also derive benefits from the project.

Showalter talked up the environmental credentials of the nickel they will produce in Tanzania. “Nickel from Kabanga will be refined using hydrometallugy, rather than smelting,” he said, “which reduces emis­sions by around 80 percent. It will also be refined in Tanzania rather than being shipped around the world, reducing emissions further.”

He said this will increase demand for Tanzanian Nickel, because car and battery makers are under pressure to reduce carbon emissions both in their own operations as well as their supply chains. As a result, “they are likely to prefer our nickel than that produced by dirtier methods in places like Russia.”

Asked when the operation would start to produce, Showalter said that they expect mining to commence in 2025. He added that they will be updating the development plans over the next 12-18 months, which will firm up their timeline.

Renewable Energy Potential
Assessments of the potential for generating electricity from renewable sources – wind and solar – in Tanzania have concluded that the poten­tial is very high.

According to the World Bank, Tanzania has a solar energy potential greater than that of Spain and wind energy potential greater than that of the US State of California. With such great potential for solar and wind energy resources, Tanzania is naturally appropriate for producing solar and wind energy as a feasible alternative source for modern energy sup­ply from the national grid.

The Ministry of Energy (MoE) in collaboration with Tanzania Electric Supply Company Limited (Tanesco) and Rural Energy Agency (REA) under the support from DANIDA and SIDA conducted wind energy resource assessments. Among other areas with potential, the assessment identified that Makambako in Njombe region and Singida have suf­ficient wind speed for significant grid-scale electricity generation with an average wind speed of 8.9 m/s to 9.9 m/s.

Solar energy resources with high potential are widespread across the country, but particularly in Dodoma, Singida and Shinyanga regions. High solar energy levels are ranging from 2,800 to 3,500 hours of sun­shine per year.

Given the rapidly rising cost of fossil fuels, the rapid fall in the cost of renewable energy and the global urgent need to reduce emissions of carbon dioxide, these opportunities are likely to play a major role in Tanzania’s future power generation strategies.


by Ben Taylor

Government cuts growth forecast, secures IMF loan
In September, the Tanzanian government slashed its growth forecast for 2021 to 4%, down from 5.6% announced in June. This was expressed in a letter to the International Monetary Fund (IMF). The government attributed the lowering of growth projections to the decline in performance of key sectors due to Covid-19.

“Some key sectors have been seriously hit by the third wave of Covid-19 in the first six months of 2021 that has forced us to review projections,” said Emmanuel Tutuba, permanent secretary in the Ministry of Finance and Planning. He noted that the tourism sector in particular suffered in the first and second quarters.

Growth figures and forecasts have been a source of tension in recent years between the government of Tanzania and major development partners including the IMF and the World Bank.

IMF Resident Representative, Jens Reinke, commented that the government has shown commitment for economic recovery following the Covid-19 pandemic. He made the remarks in approving an IMF loan worth USD $567 to help finance the urgent balance of payment needs, stemming from the effects of coronavirus pandemic.

The government also announced it will also table a supplementary budget before Parliament in February 2022, after the disbursement of the IMF funds. “This is a new source of income that will need approval of Parliament in agreed areas,” said Mr Tutuba, describing this as a normal legal requirement.

Later, the Bank of Tanzania’s monthly economic review for the year to October 31, 2021 reported an 11% rise in exports of goods and services compared to the equivalent period 12 months earlier. Exports amounted to USD $9.6 billion in the year to October 31, 2021, up from $8.6 billion in previous year.

This was driven by a rise in exports of manufactured goods and non­traditional goods other than minerals. Exports of goods increased by 10.4%, with non-traditional goods rising by 13.4%.

Analysts attributed the trend both to a recovery from the past impact of Covid-19 and in part to the efforts of President Samia Suluhu Hassan to establish a more supportive business environment.

“The right signals from the President bolster traders and investors’ confidence to invest in the country,” said Prof Abel Kinyondo of the University of Dar es Salaam’s School of Economics. He recommended, however, that these signals needed to be translated into legislative and policy reform in order for the positive trend to be sustained.

New statistical masterplan forthcoming
The World Bank senior economist in Tanzania, Rob Swinkels, has said the organisation is working with the government of Tanzania to support implementation of the new Tanzania Statistical Master Plan (TMSP) 2022-2027. Mr Swinkels gave the assurance after meeting with the National Bureau of Statistics (NBS) on the matter.

He said the bank is the long partner of the government in the development of the statistics system, which among others, is in response to demand for better information on updates in living standards and policy implementation. He added that the Bank has supported the implementation of TMSP 2010-2018, together with other development partners.

Speaking at the meeting, the Director General of the Tanzania National Bureau of Statistics, Dr Albina Chuwa said, “The World Bank project will help us achieve our vision for statistical development to support the government with quicker and better data to underpin the policy process”.

In a separate development, NBS has requested USD $80m financial support from the World Bank to help in conducting the 2022 Population and Housing Census. The request was by Dr Chuwa, saying the support would go into the purchase of more equipment to be used in the census whose preparations are at an advanced stage.

UK government pursues increased trade with Tanzania
November 2021 saw a UK-Tanzania Business Forum held in Dar es Salaam. It brought together government and business to discuss the trade and investment relationship between the two countries, and opportunities for increased economic partnership.

The UK Prime Minister’s Trade Envoy to Tanzania, Lord Walney (John Woodcock), was in attendance as part of his first visit to Tanzania since his appointment to the role in August. He expressed the UK’s commitment to increasing Tanzania’s exports to the UK market, and investment by British businesses in Tanzania.

“Our particular focus will be on supporting quality and sustainable UK investments into Tanzania that create jobs, inclusive economic growth and mutual prosperity,” he said.

UK Trade Envoys are parliamentarians appointed by the Prime Minister, drawn from both Houses and across the political spectrum. The roles are unpaid and voluntary. These new appointments bring the total number of Trade Envoys who help support the UK’s trade and investment agenda to 36, covering 76 different countries.

Currently, trade between the two countries is highly imbalanced, with the value of Tanzania’s exports to the UK reportedly standing at a mere £29 million per year, while its imports are worth £127 million.

To raise Tanzania’s exports to the UK, Prime Minister Kassim Majaliwa urged the UK to bring in capital and inject it into various sectors especially in value addition. Mr Majaliwa also said UK-funded technical assistance and analysis will help to inform the prioritisation of economic reforms that the private sector could benefit from. He said Tanzania will continue to create an enabling business environment to increase investor’s confidence.

Industry and Trade minister Kitila Mkumbo said it was the government’s wish to see more Tanzania’s products sold in the UK market. “The trade volume between Tanzania and the UK is relatively large. But it is one-sided as it favours the UK more. We import more than what we export,” said Prof Mkumbo.

The forum was attended by over 20 companies from the UK, 150 British and Tanzanian (joint ventures) companies attending in-person and a further 300 participating virtually. It was organised by TanTrade, the British High Commission, the Tanzania Private Sector Foundation and Zanzibar National Chamber of Commerce.

UK aid to Tanzania in precipitous decline

Official aid provided by the UK to Tanzania has fallen sharply in the 2021-22 budget, to £28.5m. This represents a 68% drop compared to 2020-21 (£89.2m) and a massive 86% drop compared to 2015-16 (£204.8m), according to figures released by the Foreign, Commonwealth and Development Office (FCDO).

The drop is most directly linked to the UK government’s decision to abandon its commitment to provide 0.7% of GDP in official development assistance, which came into effect in the most recent budget. It is also linked to the incorporation of the former Department for International Development (DfID) within the Foreign and Commonwealth Office (FCO), now renamed as FCDO. However, though these changes have accelerated the decline of UK aid to Tanzania, the decline started several years earlier.
In 2020, Prime Minister Boris Johnson mentioned Tanzania explicitly as an example of a country where too much aid was provided, in contrast to countries in eastern Europe such as Ukraine and the Balkans, which are more strategically important to the UK.

Development practitioners within Tanzania responded with dismay to this argument, saying they were “left questioning the UK government’s assessment of what constitutes British interests.”

“We believe the move is short sighted, as there are global benefits to providing humanitarian aid to developing countries like Tanzania. A glaring example of this is the current coronavirus pandemic. A unified global response to the pandemic is in everyone’s interests, including the UK’s.”

A representative of the British High Commission in Tanzania responded that “bilateral aid represents one element of the UK’s contribution to Tanzania’s development. UK businesses and investors are a key source of foreign direct investment. And significant amounts of UK aid are channelled through non-bilateral mechanisms, including through major contributions to International Financial Institutions and multilateral programmes. Taking all channels into account, the UK remains one of the largest providers of aid to Tanzania.”

Some analysts have also linked the specific decline in aid to Tanzania to the country’s recent record on governance and democracy, and even to its unusual response to the Coronavirus pandemic.

“Where we have any such concerns on these issues, we have raised them with the Government of Tanzania,” said the BHC spokesperson. “The UK’s relationship with Tanzania remains vibrant and strong. In the year ahead, we will have a major focus on girls’ education and support for Tanzania’s efforts to improve its business environment and build a resilient and productive economy. We will also be working in partnership with Tanzania on climate change, tackling transnational serious and organised crime, and strengthening democratic institutions and the development of civil society.”


by Ben Taylor

Kabanga Nickel mine approved
A potentially lucrative new nickel mine has been approved at Kabanga, in Ngara Distrist in north-west Tanzania. The Ministry of Minerals in October awarded a mining licence for the project to Tembo Nickel Corporation Limited (TNCL). After a two-year construction phase, commissioning is expected to start at the end of 2024. The overall capital cost estimate for Kabanga (including a 20% contingency for overruns) is USD $1.3 billion.

Minerals minister Doto Biteko said the feasibility report showed total deposits of 58 million tonnes of nickel ore.

“The mining operations are expected to be conducted by underground mining method whereby production is expected to reach an average of 600,000 tonnes of ore per annum in the first five years, and later to 2.2 million tonnes per annum,” he said.

Operating at full capacity, and assuming the resource proves to be as productive as expected, the mine has the potential to become the world’s third largest nickel mine.

The concentrates produced from the mine will be transported to refinery which is to be built in Kahama District. This will include an estimated 33,000 tonnes of nickel per year, and smaller amounts of copper and cobalt. The inclusion of an in-country refinery is seen as key to ensuring the project won government approval. The plan is to process the metals in a refining process that uses less electricity and has a reduced carbon footprint.

The government expects to collect an estimated $7.5 billion (TSh 17.2 trillion) through various fees and taxes over the mine’s 33-year anticipated lifespan. In addition, the government expects the mine and refinery to directly provide over 1,000 jobs.

TNCL is majority-owned by Kabanga Nickel Ltd, a UK-based mining firm, with the government of Tanzania holding a free-carried 16% stake. In a parallel deal with Barrick Gold and Glencore, the previous owners of the project, Kabanga Nickel acquired all data and information relating to the previous mineral resource estimation, all metallurgical test work and piloting data, analyses and studies, including a comprehensive draft feasibility study report produced in 2014 and subsequent updates. Barrick and Glencore lost their licence to develop the site in 2018 when new mining laws were introduced.

Kabanga Nickel describes the site as “the largest development-ready nickel sulphide deposit in the world, unmatched in scale and grade, with at least 30 years life of mine and further exploration upside. An extensive amount of exploration and resource definition has been completed to date, setting the Kabanga nickel project on a well-defined path to production.”

Chris Showalter, CEO of Kabanga Nickel described the issue of the licence as “a clear vote of confidence for the Project and team by our partners in the Government of Tanzania”. He acknowledged their support and as they move the project forward, and noted that development activities currently underway at the Kabanga Nickel Project can now accelerate in scale.

Kabanga will play a major role in accelerating the supply of much needed battery metals, essential for the global transition to a low carbon economy. The project will produce Class 1 nickel and cobalt products – two of the key elements used in lithium-ion batteries for electric vehicles (EVs) – and copper. The World Economic Forum has estimated that demand for high-purity nickel for EV battery production “will increase by a factor of 24 in 2030 compared to 2018 levels”.

Nevertheless, environment concerns remain significant. The US Environmental Protection Agency considers hardrock mining – such as this project – the top polluting industry in the US, and there is a long history of toxic emission problems at such operations around the world.

With this and the carbon emissions of mining in mind, Kabanga Nickel argue that the project will have a substantially lower environmental impact than most nickel mining. “Kabanga’s hydromet process is a game-changer,” says the company. “Traditionally, nickel sulphide deposits require smelting for beneficiation, which has a significantly greater environmental impact. Kabanga will be different, delivering Class 1 nickel on a sustainable basis.” They add that as a complete cradle-to-gate nickel operation, “refined metals will be produced in-country without smelting or the transportation of large volumes of concentrate over long, intercontinental distances,” reducing carbon emissions as a result.

Key to this is the adoption of an unusual, but more efficient refining process that replaces tradition energy-intensive smelting with “hydromet”, or hydrometallurgy – the use of water-based, solutions to extract metals – which has less than half the carbon footprint of smelting.

The nickel resource in Kabanga was discovered almost 50 years ago in the northwest corner of Tanzania, and has been the subject of repeated exploration programmes and feasibility studies by some of the world’s leading mining companies. Anglo American, BHP, Glencore and Barrick have collectively invested hundreds of millions of dollars in drilling and project analysis. It has never previously proved viable to exploit the resource, due primarily to its remote location. A combination of rising nickel demand – prices have more than doubled since 2016 – and more efficient technology for refining the ore have changed this calculation.

Tesla CEO, Elon Musk, has asked companies to “please mine more nickel.”

“I would emphatically say we are very much positioned to start delivering to Mr. Musk and all other strategic battery EVs,” said Kabanga Nickel CEO Chris Showalter.

Gold mining
The later months of 2021 saw several significant developments in Tanzania’s gold mining sector, some of which continue to reflect the major shake-up of the industry under President Magufuli (see previous issues of Tanzanian Affairs).

First, Minerals Minister Doto Biseko announced that negotiations were progressing well for a new large scale gold project was expected at Nyanzaga in Mwanza region. Under the project, the Australian mining firm OreCorp is expected to invest around USD $500m.

Previously the project had been a joint venture between Acacia and OreCorp, but Acacia sold it’s stake to the Australian firm in 2018. Acacia and its parent company, Barrick Gold, has in recent years been involved in a fierce dispute with the Tanzanian government over tax liabilities, and while the specific dispute appears to have been largely resolved, Acacia and Barrick have been scaling back some of their involvement in other projects in Tanzania – including Nyangaza as well as the Kabanga Nickel project (see above).

The second development also involves Barrick Gold, in the form of their joint venture with the Tanzanian government, Twiga Minerals Corporation. In this case, Barrick expanded their investments in Tanzania by acquiring six new prospecting licenses for their Bulyanhulu Gold Mine, again in Mwanza region.

Barrick’s chief executive Mark Bristow said the acquisition was a “significant step” for the company.

At the same mine, Barrick also commissioned a new laboratory for testing minerals that speeds up the pace at which testing can be done. The laboratory can also process 1,000 samples in one day, compared to one sample per 12 hours previously, boosting the company exploration efforts by enabling rapid turnaround of critical operational information. The lab also gives more accurate analysis of gold, silver and other elements.

Barrick also updated its third quarter performance in which Mr Bristow said both Bulyanhulu and North Mara mines were set to meet their 2021 production targets as well as to replace depleted reserves through brownfields exploration.

Finally, the Tanzania Revenue Authority (TRA) won its case at the Court of Appeal against Geita Gold Mine (GGM) relating to VAT payments on fuel supplied to contractors. The case dated back more than ten years, and saw GGM given a tax bill for TSh 6bn.

GGM’s first attempt to fault TRA’s tax bill suffered a loss at the Tax Revenue Appeals Board (TRAB) which sided with TRA and dismissed the tax case. The company’s second approach was to challenge the TRAB decision was at the Tax Revenue Appeals Tribunal (TRAT), which decided again in favour of TRA in 2012. Dissatisfied with the TRAT, GGM took the case to the Court of Appeal in Dodoma to challenge the decision. In November 2021, the Court of Appeal came down against GGM.

Energy strategy
Unpredictable rainfall and high demand for electric power have plagued Tanzanian consumers – both domestic and business – for many years. Power rationing was introduced by Tanesco once again in November 2021 after what they described as a shortfall of 345 MW at hydropower generation stations due to drought.

In response, the business community called on the government to find a lasting solution to power woes, including stopping rationing electricity in industrial areas during production peak hours.

Confederation of Tanzania Industries (CTI) advocacy and policy director Akida Mnyenyelwa said industrial areas needed a very stable power if manufactures were to operate at full capacity. Otherwise, he cautioned, the use of standby generators was not economically viable due to high running costs. “The scarcity of electricity linked to hydroelectric power generation poses a lot of woes to investors because we depend on the power that is not sustainable,” said Coca-Cola managing director Unguu Sulay.

“We have to refocus our attention away from hydroelectricity towards solar, wind and or natural gas,” recommended Mr Sulay.

Zitto Kabwe, leader of opposition party ACT-Wazalendo, said there were legal obstacles preventing effective power generation in Tanzania. He noted that Tanzania’s power system masterplan and its subsequent updates sufficiently prescribe national energy supply strategies, but that implementation had been suspended since 2016. The consequence, he said, was that “lined up investments such as those targeting gas exploration, investment in renewable energy and so on, weren’t fulfilled.” According to him, one of the immediate solutions to the power conundrum would be the implementation of the power system masterplan.

Earlier, the newly appointed Energy Minister, January Makamba, highlighted ten focus areas for his new portfolio to strengthen the sector. He promised reform to the leadership and management of Tanesco and the Tanzania Petroleum Development Corporation (TPDC). He promised also to revive the long-stalled negotiations over a proposed Liquid Natural Gas (LNG) processing plant in Lindi.

The Minister said the government will focus on improving cooking energy as 70% of people use forest products and other biomass which are not sustainable for development. He also said the government would look at affordable and reliable energy from the private sector through independent power producers and focus on the renewables and go big now that tech allows stability of production. “There needs to be proper decision making. Tanzania is blessed with multiple energy resources (wind, solar etc). Tanzania can become an energy powerhouse,” he said.
Looming over all these debates is the hydroelectric power plant currently under construction at Stiegler’s Gorge. The controversial dam – a pet project of the late President Magufuli – is designed to have the capacity to supply 2,115 MW to the national electricity grid, a massive increase on the total national generation capacity of 1,600 MW in 2020. The dam will not have this capacity until at least 2027, however, though the first turbine could come online in June 2022, supplying up to 235 MW of power.


by Ben Taylor

Controversial mobile money tax introduced, partially retracted
The most controversial and headline-grabbing move in the 2021-22 budget was a new tax on sending and withdrawing money on mobile phones. A levy of between TSh 10 and TSh 10,000 was introduced on mobile money transactions.

The effect varies according to the particular network being used and the amounts of money involved, but for example, the cost of a transfer of TSh 15,000 on Airtel Money would rise from TSh 350 to TSh 960, while the cost of a TSh 600,000 transfer on the same network would rise from TSh 1,000 to TSh 7,400.

The government hoped the move would raise a total of TSh 1,254 bn over the course of the year. Framing it as a “Patriotism Levy”, Finance and Planning minister Mwigulu Nchemba said it was important that every Tanzanian took part in it.

Given that 2019 saw mobile money transfers in Tanzania worth approximately $40 billion, representing over 60% of the country’s GDP, this new tax could potentially have a major impact on the circulation of money, on poverty reduction efforts, and on the economy as a whole.

The change prompted a major outcry from economists and citizen groups across the country. Richard E. Ms homba, Professor of Economics at La Salle University, Philadelphia, USA, wrote that “the end does not justify the means”. He added that though this type of levy “may be a convenient tax window, it may also lead to a slowdown in economic activities and exacerbate inequality in the country.”

In previous research, the global association of mobile phone network operators, GSMA, found that taxes of this kind are generally “regressive in nature, undermining the fundamental concept of tax equity.”

The Legal and Human Rights Centre (LHRC) filed a court case challenging the new levies.

A few days after the levy came into effect on July 15, the Tanzania Mobile Network Operators Association (TAMNOA) said the business has dropped drastically, therefore asking government to amend the new charges.

The government responded to these complaints by first announcing in late July that possible changes to the levy were under discussion, and President Samia Suluhu Hassan directed the Minister of Finance and Planning, Dr Mwigulu Nchemba and his Communications and Information Technology counterpart Dr Faustine Ndugulile to review mobile money transaction charges.

Then, at the end of August, the Ministry of Finance and Planning released a statement saying Dr Nchemba had signed the amendments of the Regulations for Electronic Transactions Levy for 2021 with a view to reduce the rates by 30%.

Business leaders welcome 2021-22 budget
Finance and Economic Planning minister Mwigulu Nchemba in June tabled the TSh 36.3 trillion budget before Parliament, with a bundle of fiscal measures that business associations say contain promising prospects. A slightly-revised budget was approved by parliament two weeks later, with a value of TSh 36.6 trillion.

Headline measures in the budget include a cut in PAYE from 9% to 8% for the lowest taxable band, cuts on various import tariffs and abolition of VAT on imported metals and raw materials.

Confederation of Tanzania Industries (CTI) policy specialist Frank Dafa said the budget generally brought relief to the manufacturing sector and the move could boost investment and increase job opportunities.

“There are significant improvements in the taxes and levies of employers and manufacturers. So the relief provided will stimulate industrial growth,” said Mr Dafa, adding that the abolition of the 15% additional import duty on industrial sugar was commendable. The local manufacturers have been complaining about the requirement which left their billions of shillings in the hands of the government due to delayed refunds.

Tanzania Bankers Association (TBA) chairman Abdulmajid Nsekela echoed the sentiments, saying that it was a relief budget. He said if the budget would be implemented accordingly it would create conducive environment for business, translating into more opportunities for banks to provide finance.

Nevertheless, CEO Roundtable chairman Sanjay Rughani said “a deeper look on the impact from the newly introduced taxes on mobile money transactions plus daily levy on SIM card is necessary as it can constrain the financial inclusion agenda and can have other implications.”