Exchange Rates: £1 = TShs 2,000
$1 = TShs 1,100

Presenting the government BUDGET estimates for the 2004/5 financial year on June 9, Minister of Finance Basil Mramba said priorities for help would be the poor sectors including farmers, peasants and petty traders. The Minister outlined measures which would be taken to support the agricultural sector as well as provide allocations for defraying transport cost for fertilizer to selected regions which get adequate rainfall for farming.
He proposed exemption from excise duty for wine and brandy produced from locally grown grapes in order to expand the local market and increase production in Dodoma Region, and black tea and packaged tea from VAT in order to enhance competitiveness following liberalisation of the tea market in the East African Community.
Mramba asked the Parliament to approve a TShs 3,347.5bn/- budget of which TShs 2,239bn/- was recurrent expenditure and TShs 1,091.5bn/- for development expenditure. Out of the total budget, TShs 1,739.2bn/- would come from domestic revenue and the rest from foreign loans and grants, the sale of shares in state companies and domestic financing.
The Minister announced increased excise tariffs on carbonated soft drinks and beer and established excise duty on satellite television broadcasting at a rate of 5% of the retail selling price as well as increased excise tariffs for cigarettes, wine and spirits. He also announced reduced visa fees for foreigners entering Tanzania on business from 200 US dollars to 50 US dollars. He said the government had allocated funds to cover emergency power supplies and that TANESCO would be supported to meet contractual charges in respect of IPTL and SONGAS.

Opposition leaders have criticized the government’s decision to increase funding for security organs saying the move would cause chaos in next year’s elections. Minister for Home Affairs Omar Mapuri defended the decision saying it was timely in the wake of increased banditry. “We’ll strengthen the war against banditry and other acts of evil. Our aim is to have free and fair elections. Power hungry people who would cause chaos will be dealt with accordingly,” he said.

Fees in government day secondary schools have been lowered to TShs 20,000/- from TShs 40,000/-. Each school will get TShs 20,000/- for each student to make up for the deficit, Mungai said, adding that non-commercial private schools and seminaries would each get a subsidy of TShs 10,000/- per student. He said the Government would also support people’s initiatives in the construction of libraries and laboratories. “A development subsidy of TShs 7 million/- will be given in support of people’s initiative in the construction of a classroom and TShs 9 million/- for a teacher’s house,” the Minister said.
The number of subjects on the secondary school curriculum would be reduced from 13 to 9 to put emphasis on core subjects, namely civics, Kiswahili, English, mathematics, biology, history, geography, physics and chemistry – Guardian.

The Government on July 6 announced increases in salaries of civil servants on average by 9% to 12.5% in the 2004/2005 financial year. According to the changes graduate teachers would get TShs 140,000 up from TShs 123,000 while graduate doctors would get TShs. 200,000 up from TShs. 66,000 monthly salary – Mwananchi.

The National Bank of Commerce (NBC) Ltd today has unveiled what it said was set to become the largest VISA-enabled ATM network ever in Tanzania. NBC was offering its clients this international service through its growing association with VISA International. The Bank also lowered its minimum balance on Savings Accounts to TShs. 5,000; it has established 29 Automated Teller Machines across the country and launched Internet Banking. The VISA connectivity will enable anyone with a VISA-enabled debit or credit card to access their external or foreign accounts through any NBC ATM in Tanzania.
NBC has a new Managing Director, Mr Christo de Vries, who has succeeded Gerald Jordaan, who in 1999 became the first non-Tanzanian managing director of NBC after privatisation of the formerly state-owned bank in a deal which brought majority shares under the ownership of South Africa’s Absa Group Ltd – Financial Times.

A group of hotels including the wildlife lodges at Lake Manyara, Ngorongoro, Seronera and Lobo and Mafia Island have been sold to private sector investors who paid some $11.6 million… The investors plan to invest a further $14 million in a upgrading the lodges – Guardian.

Exchange Rates: £1 = Shs 1,970
$1 = Shs 1,100

Praise for Tanzania from the IMF
Sebastian Paschal writing in Dar es Salaam’s Financial Times (March 24) gave a detailed account of the IMF’s first review of Tanzania’s $29.3 million Poverty Reduction and Growth Facility (PRGF) arrangement. This is the IMF’s ‘concessional facility’ for low-income countries. PRGF loans carry an annual interest rate of 0.5% and are repayable over 10 years. The review, which contained much praise for the way in which the Government had been handling the economy, has enabled the release of a further $4.2 million, which will bring the total amount drawn under the arrangement to about $8.3 million.
Extracts from the article/review: ‘The Tanzanian authorities deserve credit for maintaining macroeconomic stability and making substantial progress with structural reforms, which have paved the way for a steady but modest increase in real per capita income combined with low inflation’ – IMF.
Reflecting its good track record in the implementation of its reform program, Tanzania has received steady financial support and technical assistance from the donor community. In particular, debt relief under the enhanced HIPC Initiative has helped Tanzania to undertake higher social sector spending and maintain debt sustainability. At a recent meeting between the IMF and the Government, the latter revealed its plan to achieve a comprehensive reform of tax policy and tax administration. This would include the forthcoming adoption of a new Income Tax Bill and the Tanzania Revenue Authority’s implementation of a new three-year corporate plan, which the IMF said was a good move. The IMF commended Tanzania’s position on the income tax Bill.
The fund observed also that the rationalisation of the tax regime for mining companies, imposing strict controls on tax exemptions, would be important steps to contain revenue leakages. It added that maintaining a sound fiscal position and debt sustainability would also require firm control over non-priority expenditure and prudent debt management policies. According to the IMF, the newly passed amendments to the Land Act would facilitate bank lending by permitting the use of land as collateral. The IMF also supported the privatisation of the National Microfinance Bank (NMB) saying it would help to broaden access to financial services.
It appears also, however, that during the recent meeting with the Government doubts were expressed on the seriousness of the rising fiscal pressures emanating from growing subsidies for the energy sector. The IMF proposed action including formulation of a short-term plan and a medium-term reform strategy, which would aim at providing a reliable power supply, while reducing the electricity utility’s dependence on fiscal subsidies.
During the discussions, the Government underlined its commitment to the full implementation of its updated national anti-corruption strategy and action plan for 2003-2005, which the IMF say would be a crucial step for strengthening governance and boosting business confidence.
Despite Tanzania’s achievements in macroeconomic stability, however, the IMF noted that poverty remained widespread, especially in rural areas, and economic development had been uneven across the country.’

Natural Gas
Electricity produced by the Songosongo gas project (SONGAS) will be connected to the National Power Grid on June 17, this year, the Managing Director of TANESCO, Rudy Huysen, announced on April 2. SONGAS would add 75 megawatts to the national grid.
Artumas Ltd of Canada will be investing $32 million to develop a new gas field at Mnazi Bay in Mtwara region. The project will generate 12.5 megawatts of electricity and provide cheap power for the southern regions of Mtwara, Lindi and Ruvuma. – Mwananchi.

Savings locally and abroad
According to the East African, quoting Central Bank Governor Daudi Ballali (15th December), Tanzanians have ‘stashed away’ $2.5 billion abroad compared with the $1.7 billion they have placed in local savings banks. However, he said that an even larger sum was held as foreign savings a decade ago. Some of this money had returned to the country as a result of the move away from a command to a private-sector-driven market economy and the reduction of the inflation rate from 35% to 4.5%.

Foreign exchange capacity and inflation
Tanzania’s economy has the foreign exchange capacity to finance imports for eight months and two weeks instead of the six months recorded last year, according to the Bank of Tanzania (BoT). Gross international reserves had increased from $1.5 billion to over $2 billion. As regards inflation, the BoT report said that, despite adverse drought condition coupled with food insecurity, inflation had been contained at 4.6% for three consecutive months since October 2003.

Cut flower exports
The BoT has also reported that Tanzania earned 1.1bn/- from the export of cut flowers in the last quarter of the year. The cut flower was said to be becoming an important non-traditional export. Most of the flowers are exported to European countries, especially Germany and Switzerland. Roses are the major element – East African

HIS BEST EVER
Karl Lyimo wrote with considerable enthusiasm in the Dar ‘Business Times’ describing President Mkapa’s regular monthly radio address to Tanzanians on September 30 as his best ever. He went on: ‘In it the President had vowed to try his hardest during his presidential tailpiece to transform the informal sector from a wayward economic waif into acceptability. Briefly put, Mkapa articulated upon the need to harness the dead capital that is rife in the informal sector and formally hitch it to the mainstream ‘formal’ economy….. Hitherto, the President said, the authorities in Tanzania, including the Government, had looked askance at the so-called informal sector, virtually treating it with disdain…. No longer. From now own, the focus would be on transforming it by harnessing it to the mainstream economy…. In the manner of a visionary on the Road to Damascus, Mkapa, by the Grace of God, had kept rendezvous with Reality itself. And this could only be a good thing for Tanzania and Tanzanians. Seemingly for eons, governments had fought running battles with the so-called informal sector of the economy in the mistaken belief that it was always up to mischief. The sector was given names such as the Black Economy, the Underground Economy, the Extra-Legal Economy -and more. Those operating in it were officially regarded as being no more than tax-evading villains, cheats and public enemies out to swindle the Government of revenue even as they sought its protection and its services. Then, on September 30 Mkapa had told Tanzanians that one of his major final missions as president would be to ensure that those in the informal sector would be enabled to enjoy the fruits of their labour under the umbrella of the mainstream economy. Their assets, which were not much more than dead capital today, would be turned into live capital.. …… to generate and regenerate wealth above-board ….. With his characteristic frankness, Mkapa admitted to the possibility that the Government and its institutions may have largely been to blame for what has been happening to the informal sector. Antediluvian laws and overly bureaucratic procedures may have served to shut the informal sector out of the mainstream economy. Corrupt public officials may also have contributed to the problem …. All these issues had to be looked into, and the requisite changes made so as to effectuate the revolution that was needed to rewrite economic history in Tanzania …..Detailed research had to be undertaken to establish who owned what, where and how much (value) in the informal sector. This should enable registration and certification of the assets so that the requisite steps could be taken to formalise the ownership, and embark on the road to bringing the dead capital to life………………… ‘

IN DEFENCE OF PRIVATISATION AND OF SOUTH AFRICAN INVESTMENT
In the midst of increasing criticism of South African investment in Tanzania President Mkapa tackled the issue head on in a speech on November 6. Quoted in the Guardian, he said that singling out South African investors for criticism was myopic; they were among the most successful foreign investors in the country. South Africa was better suited as a source of Foreign Direct Investment because of its proximity and its more realistic assessment of risk, one not unduly coloured by a biased and prejudicial international media. He said South Africans did not run away from challenges; they took them in their stride. When South African Breweries came to Tanzania, in their first years they experienced water and power shortages. They did not whine, or walk away … They built their own back-up power and water system. “It is such investors that are ideal for our particular circumstances in Tanzania: problem solvers, not problem identifiers; doers not whiners,” he said.

The President then went on to praise privatisation. He said he felt sorry for critics who picked on a few of the unsuccessful privatised firms to discredit the whole privatisation exercise. “I am an optimist, I prefer to use successful privatisations, such as that of Tanzania Breweries, to show that the decision of my party, CCM, to bring the private sector into the economy is the correct one.

It was correct when we began, it remains correct today, and it will be correct in the foreseeable future until someone comes up with a better framework to unleash human creativity, initiative, and entrepreneurship,” he said. He also said that, while demanding the extra revenue the Government gets from the private sector, the cynics wanted to retain labour laws meant for a socialist economy. “They enjoy the abundant supply of cold, quality beer in the evening; even as they debate the ignoble notion that Mkapa is selling the economy to foreigners, their bete-noire being South Africa,” he said.

HARBOURS AUTHORITY
The government has decided to lease activities of the Tanzania Harbours Authority (THA) to private operators, as part of its privatisation exercise. Communications and Transport Minister, Prof Mark Mwandosya, announced the establishment of a new body to be known as the ‘Tanzania Ports Authority (TPA).

TANESCO
The Tanzania Electric Supply Company (TANESCO) has sought funding from the World Bank to the tune of 70m US Dollars (Shs 70 billion/-) for upgrading the electricity networks in Dar es Salaam, Arusha and Kilimanjaro regions. Managing Director Rudy Huysen said that the new TANESCO management had used a report already prepared by the Japanese International Co-operation Agency on upgrading of these power systems. Unfortunately, he added, no studies had been undertaken for other towns, which could enable TANESCO to seek donor support. The TANESCO Chief said that after attaining the company’s financial turn around, the management was currently busy working on the technical side in order to improve the quality of power supply. “We are glad that during the past seven months, only one grid-related failure has occurred which lasted for only two hours,” Huysen remarked. He attributed this performance to the implementation of maintenance projects undertaken in recent months. Regarding the current bad hydrology, Huysen said that half of TANESCO’s revenue was being spent on purchasing energy from Independent Power Tanzania Ltd (IPTL). There were plans in the near future to generate power using the Ubungo gas turbines although it would be expensive to do so as it would cost 12 US cents per unit (kWh) compared to 7 US cents that TANESCO sells to its customers.

TANESCO planned to layoff 1,060 workers at the end of September according to Deputy Managing Director, Steve van Staden, quoted in the Guardian. Van Staden said the retrenchment would be implemented in accordance with the voluntary agreement signed between union leaders and the management. TANESCO had targeted a 20% retrenchment of its workforce which stood at 6,331.

NATIONAL MICRO-FINANCE BANK
In mid-November, after much controversy, Parliament finally endorsed a Bill for privatisation of the National Micro-Finance Bank (NMB). Minister for Finance, Basil Mramba, said it was agreed that the bank should be privatised through a share structure under which 51 % of shares would go to Tanzanians (30% owned directly by the government; 21 % by individual Tanzanians, including workers of the NMB). The remaining 49% would go to a consortium of investors from within and outside the country. “We want to consolidate the capital base of this bank so as to improve micro-finance lending facilities” he said. He added: “The NMB has a weak capital base. It needs a capital of at least 27bn/-to build a strong foundation of customers’ deposits amounting to 395bn/-.” Other reasons for the divestiture of the bank were the need to acquire modem technology and credible management. He said that currently the NMB had offered credit amounting to only 18.7 bn/-, while the total market for micro-finance loans amounted to 50bn/-. The Minister also said that the bank had 15 branches, which had been incurring losses, and another 37 branches, which had been recording very small profit margins

COOPERATIVES
Tanzania would spend TShs 8bn to revamp the cooperative movement, Cooperatives and Markets Minister George Kahama told the Moshi Cooperative College convocation on December 6. He said 200 cooperative officers had already been trained so that they could help undertake the project democratically and commercially for the benefit of members. The project was being funded by the Norwegian Government. According to the Minister the college would be able to enroll between 3,000 and 7,000 students a year in a 10-year period Guardian.

LIVESTOCK RANCHES
The Government has announced that a number of state owned livestock ranches (covering 4 million hectares) will be subleased to investors; the National Ranching Company will retain only 20,000 hectares. The remaining areas will be subdivided into 4000-hectare mini-ranches for Tanzanian pastoralists. But the newly formed ‘Tanzania Pastoralists, Hunters and Gatherers Organisation’ (TAPHGO) and MPs from Ngorongoro, Longido and Simajiro have protested about what they describe as the secrecy of the privatisation process -Guardian.

EUAID
The European Union and the Government have signed an agreement that will see the EU provide US $131 million in budgetary support for work in basic education, primary health, rural roads, water, HIV/AIDS, agriculture and the judiciary over the next two years. Total EU support to Tanzania in 2003 was estimated to have totaled $160.9 million -more than any other country in Africa. Tanzania was being favoured because of its considerable poverty, large population and its successful macro-economic and sectoral policy reforms.

Speaking about the present state of the economy recently President Mkapa said that the unanimous endorsement of this financial year’s budget by Members of Parliament was a clear indication that the Government was determined to remove major problems that were an obstacle to economic growth. “Nuisance taxes, including development levy, which was really a kind of poll tax, have been removed to enable more Tanzanians to participate and contribute meaningfully to the country’s development process,” he said. On regional economic integration, the President challenged Tanzanians to be open minded and adopt positive attitudes towards the market economy, adding that highly skilled and experienced manpower as well as a strong capital base were a prerequisite for any country to enter into economic integration competitively ….. “Some Tanzanians are still pre-occupied with the mind-set of a closed and controlled economic system” he said. “I would like to advise such people that that era is long gone and they should instead realise that regional economic integration is inevitable and we should be prepared to play an active role lest we be left behind while our neighbours progress.”

The Government has been under sustained attack in parliament and elsewhere over the performance of the Parastatal Sector Reform Commission (PSRC). Some MPs demanded to see all the contracts that the PSRC had entered into for the sale of parastatals. Minister of State (President’s Office) Planning and Privatisation, Dr Abdallah Kigoda, assured Parliament that the activities of the PSRC would be evaluated.

President Mkapa opened the new $30 million 970-metre-long Rufiji Bridge on August 2nd. It was described in the Guardian as possibly the best and longest overpass in the East and Central African region. It is expected to greatly ease the chronic transport problems in the southern regions of Tanzania. CCM efforts to make the ceremony into a CCM occasion were frustrated by CUF supporters who pulled down CCM flags.

Opposition has been growing to the continued heavy payments being made by the Government to Independent Power Tanzania Ltd (IPTL) -see Tanzanian Affairs No 75. Business News reported on July 25 that the Parliamentary Sectoral Committee on Investment and Trade had described the monthly bill of2.5bn/-, which TANESCO pays to IPTL, as economic sabotage and had demanded disciplinary action against those involved in signing the contract. Opposition spokesman for the ministry, Issac Cheyo (Bariadi East -UDP) asked what disciplinary measures had been taken by the Government against the officials who signed the IPTL contract. On August 14 the Guardian reported that IPTL, the thermal power generation plant in Dar es Salaam, was to be converted into a gas firing plant. The government announced the setting up of a commission to study conversion of the plant which had begun commercial operation in January last year. IPTL sells electricity to TANESCO under the terms of a 20-year power purchase agreement. The Government said it had secured a credit from the International Development Association (IDA) and intended to apply part of the proceeds of the credit to finance the conversion study which is expected to start in December and last for one and a half months. The major source of Tanzania’s electricity is from hydro power plants. However, because of incessant drought associated with power rationing, inviting the private sector to engage in power generation was seen as one way of getting rid of the problem.

TANESCO’s tough new South African management took the drastic step of cutting off power to Zanzibar for three hours one day in July and vowed to continue cutting power to the islands if power bills were not settled. TANESCO Director General Rudy Huysen said power was restored after Tshs. 174 million was paid by the Zanzibar Fuel and Power Corporation (ZFPC) as part of its monthly bill of about Tsh. 419 million.

The construction of the Songo Songo natural gas pipeline, which is likely to greatly improve the power supply situation in Tanzania, is proceeding apace and is scheduled for completion in May next year. However, the media report that local job seekers, who were hoping to secure jobs with the company undertaking the project, have been expressing anger that the contractor had hired foreigners, mostly Indians, for menial jobs which could be done by locals.

Tanzania Breweries Limited (TBL) has said that the company is experiencing about 20 -30 per cent decline in sales following Dar Es Salaam Regional Commissioner Yusufu Makamba’s order for bars to close at 11.00pm. TBL Public Relations Manager Aggrey Marealle said that about 20,000 bar attendants had lost their jobs in the 4,000 bars and other alcohol outlets officially registered in Dar Es Salaam. He told the press that it was most likely the Government would suffer in revenue collections following the beer sales decline. He said that on average bar owners who were selling about 15 crates of beer a day were now selling about eight. He agreed that there was a 1968 law prohibiting drinking after 11.00pm but said that times had changed, which made the law redundant. The law was passed when the main economic activity was agriculture but today a variety of activities were performed in the urban areas. He said Dar Es Salaam alone accounted for 40% of all commercial activities and that any hitches in the way commerce was conducted in the city would have grave economic consequences – Mwananchi.

The leader of a Sussex Chamber of Commerce trade mission to Tanzania told the ‘Business Times’ that trading opportunities in the country were increasing following notable improvements in macro economic fundamentals. He cited the low inflation rate, and good GDP growth rate.

The ‘East African’ (March 24) reported that Tanzania’s foreign exchange reserves had risen to $1,528 million as of December 2002, equivalent to 18 months of imports and the highest level of reserves achieved in the past 20 years. This was attributed to policy guidelines that required the Bank of Tanzania to maintain adequate reserves, the stability of prices, increased flows of donor support and debt relief.

The Tanzania Investment Centre at last year registered the largest number of new investors in the country since the department was established in 1997. 320 investors were registered, compared with 239 in the second best year, 1998. Most investment was in the manufacturing centre, followed by tourism. 80% of the investors were reported to be doing well.

Last year Tanzania’s mining industry earned about $400 million making it the second major foreign-exchange earner after tourism which brought in $725 million. It is predicted that within the next two years gold will be Tanzania’s main export -The East Africa.

President Mkapa said on 28th February that Tanzanians must accept the stark realities of globalisation and work hard to create a national economy that could fully benefit from that system. In his monthly national radio and TV address to the nation he criticised Tanzanians for being engaged in a futile debate on who owned what in the economy. “Unfortunately, most of our debates don’t show that we understand current global economic trends. What we hear on political forums is about calls for indigenous ownership of the economy and not how to create a patriotic national economy ….. Grants and loans can never be a substitute for hard work” he said referring to the heavy dependency of the country on foreign assistance.

On February 19 the Government announced that it had leased (for ten years) management of the Dar es Salaam Water Authority (DA WASA) to ‘City Water Services Ltd’ owned jointly by Biwater ofthe UK and Gauff Inenieure ofGermany. The company, together with the World Bank, African Development Bank and European Investment Bank will invest $160 million -Guardian.

The Bank of Tanzania has issued new 500/-, 1,000/-, 2,000/-, 5,000/-and 10,000/-notes. There was much surprise when, within a month, forged new notes appeared on the streets.

Since Kilimanjaro Airport was privatized in 1999 the number of airlines using it has increased from two to forty. The Tanzanian/European company in charge has just invested a further Shs 3.2 billion in restructuring and modernization -Sunday Observer.

The Government’s firm decision to privatize the National Microfinance Bank (established after the sale of the National Bank of Commerce in 1997) has attracted a lot of criticism not least from its own Board of Directors. Eventually, on March 1 the Government dissolved the Board. In February, such had been the strength of the opposition in parliament, that the Bill allowing for the privatisation had been withdrawn. It is to be presented again with a larger Tanzanian component in the shareholding. The Bill had proposed 51% shares to be held by a strategic investor, 30% by the Government and the rest by private local and other investors -Guardian.

The five-star Dar es Salaam Holiday Inn has won the ‘Six Continents Hotels’ Best Newcomer of the Year Award’, making it the best new Six Continents hotel in the world for the year 2002. There are some 3,000 hotels in the group worldwide.

The Tanzania Cigarette Company (TeC) said on March 31 that it had produced 4 billion cigarettes last year and had about 95% of the domestic market in the country. The Tanzania cigarette industry generates more added value for locally produced raw materials than any other industry in the country and employs 700 people. TCC has a network of 680 wholesalers and 40,000 retailers.

The Business Times (March 10) reported that, at long last, a buyer had been found for what was once Tanzania’s biggest and most prestigious hospitality establishment, the Kilimanjaro Hotel. It has been sold to ABS Holdings Ltd, a group of companies based in the United Arab Emirates, for $33 million after languishing for more than 10 years with no takers acceptable to the Government. The Kilimanjaro is to be refurbished to five-star standard.

As the pyrethrum planting season came to a close in April it was revealed that 1,500 tons were still in store in Mbeya and Iringa because no market had been found for the crop. Some experts believed that this was because of the poor quality compared with that of its principal competitors, Kenya and Tasmania. Kenyan farmers were able to sell a kilogram for between Shs 900 and 1,200 per kilo while Tanzanian farmers were selling at between Shs 350 and 500 per kilo. However, there were better prospects for the future because the Uyole Agricultural Research Centre had come up with a superb pyrethrum clone which could transform the prospects for the crop -Guardian.

MORE AID

Tanzania remains a very attractive destination for foreign aid and Zanzibar is no longer being subjected to donor boycotts. The Danish government has restored its humanitarian aid to Zanzibar with the grant of Shillings 746 million for medicines and medical equipment.

Other recent donor aid includes:
-Sweden -$50 million to support Tanzania’s 2003-06 Primary Education Development Plan. A joint statement by the governments said this had been the largest-ever sum approved by SIDA, Sweden’s international cooperation and development arm, to any partner country in the field of education.
-China -$1.2 million to ease transport problems in Zanzibar.
-Germany $86 million, mainly on water and sanitation projects for 2003-2004 making Tanzania the second largest recipient of German aid in sub-Saharan Africa.
-Japan $2.9 million in debt relief.
-The Global Fund to Fight Aids, TB and malaria -$2.3 million to Zanzibar; the USA is the largest contributor
-Canada -US$ 6.6 million for five years for universal primary education
-The EU -€38 million for the agricultural sector.

THE ‘NEW’ AIR TANZANIA

Tanzania’s flag carrier, Air Tanzania Corporation Limited (ATCL), was launched on April 1st. Chairman, Ali Mafuruki said that the former Air Tanzania Corporation, which was recently acquired by South African Airways, would have new routes. “To the West we are looking at Lagos and other points in West Africa and to the North, Europe beckons with London as the first planned destination” he said. However, new routes would only be opened when they proved to have commercial value. In phase one, A TCL would increase its flights to Johannesburg, Nairobi and Entebbe. In the coming weeks the company would embark on the first stages of developing Dar es Salaam as a hub. “When the troubled skies in the Gulf clear, we shall launch our services to Dubai and Muscat. The company would introduce an additional three Boeing 737’s and two De Havilland Dash-8 aircraft. The government owns 51% of the ATCL -Sunday Observer.

FISHERIES ENVIRONMENT IMPROVING

According to the Dar es Salaam Mirror (March 20) dynamite fishing, once rife in the Tanga region, has in recent years witnessed a decline, thanks to concerted efforts by the Tanga Coastal Zone Development Programme (TCZDP), Government and the community at large.

Brief extracts from the article: ‘The TCZDP was launched in 1994 with the principal objective of ensuring the sustainability of marine resources in the districts of Tanga, Pangani and Muheza … .In the early 1990s, there was increased pressure on fisheries resources leading to a decrease in fish supply. The major cause was dynamite fishing which was responsible for the destruction of an estimated 12% of Tanga region’s 1996 reefs. This, coupled with intense fishing resulted in diminished catches in 90% of the reefs. Under the Programme, joint patrols were established to enforce fisheries regulations and a ban was imposed against dynamite fishing. The number of recorded blasts in Tanga region had dropped to less than five a month from over 180 a month in 1994.

Other measures taken included closure of certain reefs for fish stock replenishment and reef recovery. Also, fish aggregating devices and mariculture were tested as potential alternatives to inshore fisheries.

THE DEEP SEA
The East African reported on March 17 that Tanzania was planning new measures against pirate fishing boats along its coastal areas and its 200km ‘Economic Exclusive Zone’. The Government was proposing to establish in July a ‘Deep Sea Fishing Authority’ (DSFA), which would have powers to arrest pirate boats. Minister for Natural Resources and Tourism Mrs Zakia Meghji, was quoted as estimating that over 70 illegal fishing vessels were operating in Tanzania’s waters and were targeting tuna, kingfish, lobsters and prawns.

Both Tanzania and Zanzibar have licensed vessels to fish their waters but trawlers from as far afield as Japan and China are said to be illegally fishing. French naval forces operating in the Southern Indian Ocean Zone pledged to help arrest illegal fishing vessels along Tanzania’s coastline and were reported to have chased away 80 illegal trawlers over the past year.

AND IN LAKE VICTORIA
Fishermen in Kagera Region are reported to be ignoring the ban on seine nets introduced by the three East African countries five years ago. Fisheries officials estimated that there were more than 200 seine nets, employing more than one thousand people, operating in the region threatening to deplete the 21 Nile perch breeding sites in the Lake; these nets sweep the area, catching even immature fish. It is estimated that there are 52,000 small fishermen on the Tanzanian side of Lake Victoria who earn about $72 million a year from 220,000 tonnes of fresh Nile perch. A source from Tanzania’s Lake Victoria Fish Processors Association told The East African that Kenya and Uganda had succeeded in controlling the number of beach seines in their part of the shared lake. The fishermen at Nyamikazi, Igabiro, Nyasheni and Kamawa beaches in Tanzania however used the seine nets between 11pm and 5am to avoid arrest, then buried the nets in the sand. Some fishermen from Nyamikazi said the illegal fishermen have been catching about 10 tonnes of Nile perch daily, 60% of which are immature, weighing below 1.5kg. A task force leader from the Department of Fisheries Management of the ‘Lake Victoria Environmental Management Project’ in Kagera region said between 1998 and 2001, some 400 fishermen had been arrested and 50 seine nets and other illegal fishing gear destroyed. During the same period, about 50 criminal cases were filed at the regional court against fishermen using illegal methods but, according to officials, “the future still looks bleak.”

NEW SOFT LOAN
The East African (November 25) reported that Tanzania was to receive a $27 million soft loan from the IMF following the successful completion of the fifth review of its economic performance under the ‘Poverty Reduction and Growth Facility’ (PRGF). Such loans carry a concessional interest rate of 0.5% repayable over 10 years with a five-and-a-half year grace period on the principal payment. This will be another drawing from Tanzania’s three-year PRGF arrangement for a total soft loan of $169 million, approved by the IMF in April 2000. So far, Tanzania has drawn $l34 million under the arrangement.

SOUND ECONOMIC POLICIES
The statement quoted IMF Deputy Managing Director Shigemitsu Sugisaki as saying: “Tanzanian authorities are to be commended for their steady pursuit of sound economic policies which, notwithstanding serious capacity constraints and an often adverse external environment, has resulted in strong economic performance…. Economic activity remains buoyant, inflation is low, and international reserves are at a comfortable level owing to steady flows of foreign assistance and direct investments…. “Good progress has been made in the implementation of the ‘Poverty Reduction Strategy’”.

DEBT CANCELLATIONS
Norway has cancelled all Tanzania’s remaining debt amounting to Shs
7.4 billion; Italy (Shs 128 billion) and Belgium (Shs 21 billion) have done the same. These countries signed the Protocol of Amendment to agreements under the ‘Paris Club’ and ‘Heavily Indebted Poor Countries’ (HIPC) debt alleviation programme on November 22nd. The USA and Austria had cancelled their debts earlier.

AID DEPENDENCE
In a frank criticism of Tanzania’s aid dependence, Finnish Ambassador to Tanzania Jorma Paukku, interviewed in the Business Times (November 2nd) said that the main reasons for this dependence were the Government’s misguided policies – supported and funded by donor agencies – that were not supportive of sustainable economic growth and did not encourage private initiative and entrepreneurship. Asked what Tanzania was still doing wrong, the Ambassador said that the Government and especially the President were giving out many correct signals -‘work harder to get rid of the dependence; create a conducive environment for investment; improve education; decentralise; strengthen democratic decision-making at the local level.

But at the level of implementation, the role of the private sector was not well understood. Big, mainly foreign, investors received favourable treatment but Tanzania’s own private sector was not given opportunities. The government was still constraining and controlling production and marketing chains that should be left to the private sector (coffee, tea, cloves). It was not helping small farmers to cope with monopolistic buyers (cashew nuts, pyrethrum). The incentive system in general gave the wrong signal to investors, civil servants and users of services. Few investors outside mining and tourism were to be found because of perceived high risks. Result-oriented performance was not rewarded but participation in seminars and workshops was. A lack of transparency and deficiencies in accountability left room for corruption and unfair practices.

The Ambassador gave a long list of policies and practices which should be changed; more initiatives at the grass roots level; new systems for transparency and accountability; civil service reform; better understanding between the public and private sectors; creation of public-private partnerships; private sector participation in service provision (for example water supply and sanitation, waste management and recycling, energy, health and education); treatment of farms as private enterprises; and, reform of the legal sector because both the quality of legislation (for example the 1999 Land Act) and the time it takes to have court cases resolved left much to be desired.

STOCK EXCHANGE LIBERALISING
As part of ongoing financial sector reforms the Dar es Salaam Stock Exchange is expected to allow foreign portfolio investment towards the end of 2002 -Guardian.

BIG INCREASE IN AID
Describing a new US ‘Millennium Challenge Account’, an American spokesman in Dar es Salaam said that, if fully implemented by the US Congress, this would represent one of the biggest increases in US foreign aid spending in half-a-century, with assistance rising about 32% in real terms.

NEW GOLD MINE
President Mkapa opened, on September 13, the new North Mara Gold Mine of the Afrika Mashariki Gold Mines Ltd. Four hundred people are being employed at the mine and Tanzania can expect to earn an extra $50 million per annum plus other taxes. The mine is expected to last for eight and a half years.

Of 326 state-owned firms privatized in Tanzania so far, 122 have been sold to local investors. The Parastatal Sector Reform Commission (PSRC) has announced that of those enterprises sold to foreign investors only 14 were 100% foreign owned. The rest were in joint ventures with local partners or the Government -Majira.

AIR TANZANIA
The Guardian reported on October 10 that the government had picked South African Airways (SAA) to buy 49% of the shares in a new jointly owned ‘Air Tanzania Company Ltd’ (ATCL). The deal was signed on December 2. SAA paid $10 million, largely for the airline’s flying rights (Air Tanzania had few assets) and agreed to inject a further $10 million into a capital and training account to finance the business plan it has proposed for turning round the ailing airline. The PSRC said in a statement: ‘SAA, as the strategic partner, intends to make Dar es Salaam its ‘East African Hub’ as part of its strategy to form a golden triangle between southern, eastern and western Africa’. SAA is to bring technical, commercial and managerial expertise and will also provide extensive training and skills transfer to local staff including retraining of pilots and air crews. SAA intends to replace the fleet with Boeing 737-800’s, 737-200’s and wide-bodied 767-300’s. It is planned to extend the route structure to the Middle East and West Africa and consideration is being given to introducing international routes to London and Bombay. 243 personnel out of the airline’s workforce of 493 would be retrenched to pave the way for this privatisation. In addition to the money to be realised from the sale of one of Air Tanzania’s planes, the Government is to release an additional Shs 4 billion to help to solve administrative problems.

Kenya airways, one of eight airlines which had shown an interest in buying ATC (six others dropped out earlier) finally pulled out because the proposed development of an alternative hub in Dar es Salaam would not be viable for Kenya Airways as it is only an hour away from Nairobi. Kenya Airways would have preferred the formation of a joint regional East African carrier. Kenya Airways Director for Legal affairs praised the PSRC for conducting the bidding in a transparent way, fair to all bidders.

TANZANIA HARBOURS AUTHORITY
The Director-General of the Tanzania Harbours Authority (THA) has complained to President Mkapa about the effects of the privatisation of the container terminal at the port of Dar es Salaam. Midst allegations of bribery, which have been made under several privatisations, the DG noted that the profits of the THA had fallen from Shillings 10 billion the year before divestment to only Shs 40 million for the fiscal year ending June 2002. The THA admitted however that waiting times in the port had been brought down from eleven days to just two days.

TANZANIA TELECOMMUNICATIONS COMPANY
An agreement was signed on 23 February 2001 between the Tanzania Telecommunications Company Ltd. (TTCL) and a Netherlands/German consortium –MSI/Detecon under which the latter would buy 35% of the shares. The consortium paid $60 million for its shareholding in February 2001 but has still not paid the remaining sum due of $60 million. TTCL workers began to allege in August 2002 that there had been serious financial irregularities. They were reported in the Guardian to have appealed to President Mkapa to remove Minister for Communication and Transport Prof. Mark Mwandosya and to terminate the contract.

In September the Tanzania Revenue Authority intervened in the case as it suspected that there had been tax default. Also in September, officers from the Prevention of Corruption Bureau (PCB) started looking into the finances of the company. The Company then employed Ambassador Paul Rupia and Mr Gideon Kaunda to ‘deal with a lot of misunderstandings in the press and in parliament about TTCL’. In October the government contracted a London-based international firm to handle the dispute after Messrs MSI/Detecon had served the government with notice of arbitration. At the end of October, 58 representatives of the workers in Arusha walked out while TTCL Chief Executive Officer Fred van der Voort tried to address them. On 31st October the workers said that they would stage a peaceful march on State House to see President Mkapa to complain about the alleged irregularities and the company’s failure to make the second payment. (Further details of this are given under TANZANIA IN THE INTERNATIONAL MEDIA below -Editor).

THE DAR ES SALAAM WATER AND SANITATION AUTHORITY (DAWASA)
According to The Express (September 24) DAWASA has been trying to enter into a ten-year lease contract with a private company for the provision of water supply and sewerage services. Pre-qualified bidders were said to include Biwater of the UK, Gauff of Germany, and, General des Eaux and Sauer International of France. But, according to the paper, the bidding process was being sabotaged by photographs circulating on the internet showing a crocodile and snakes purportedly taken from DAWASA water transmission pipes. DAWASA Director Boniphace Kasiga said that the photographs were not from the water utility nor taken along neither its transmission pipes from the Ruvu River, neither from the Lower nor the Upper Ruvu.

NATIONAL INSURANCE CORPORATION
The Deputy Minister of Finance said on October 4 that the Government had instituted plans to ensure that mistakes made during privatisation of certain firms did not resurface. He was explaining to workers at the National Insurance Corporation that they had no need to worry about the possible privatisation of the corporation ­Guardian.

Exchange rates: £1 = Shs 1,500 US$1 = Shs 960

TEN GOOD REASONS
Speaking at the inaugural session of Tanzania’s International Investors Round Table, in Dar es Salaam on July 17, an initiative supported by the World Bank and the IMF which seeks to improve the investment climate in Tanzania, World Bank President James Wolfensohn said that the Bank supported President Mkapa’s determination to stay the course, encourage private investment and resolutely address the AIDS crisis in the country. President Mkapa gave Mr Woolfensohn ten reasons why foreigners should invest in Tanzania – political stability, correct economic and fiscal policies, abundant resources, investment incentives, unrestrained transfer of capital and profits, investment guarantees, settlement of disputes, the one-stop Tanzania Investment Centre (TIC), Tanzania’s qualified access to Europe and the USA’s AGOA and its geographical location which enabled it to reach a market of over 250 million people in East, Central and Southern Africa. Mr Wolfensohn then added an 11th attribute – President Mkapa’s able leadership. – The East African.

BUDGET SUMMARY
Finance Minister Basil Mramba presented his budget for 2002/2003 on 13th June. It was addressed primarily to the weaker sectors of the economy such as agriculture (allocation increased by 101%) and poverty reduction programmes. Investors’ interests were covered by reduced taxes on imported raw materials and on capital and interest on dividends. He included measures to raise the civil service minimum wage to Shs 53,130 but tax exemption on civil servants’ vehicles was stopped. He announced the launching of an Export Credit Guarantee Scheme and said that taxes on cement, aviation fuel, matches, casinos, land, tyres and bicycles were to go down while the road toll would go up. The inflation rate was targeted at 4.25 per cent this year. Foreign reserves would pay for importations for six months.

Four foreign firms have submitted bids for leasing and managing Tanzanian Railways: Comazar Consortium (Great Lakes Railways) from South Africa, Geneses and Wyoming Inc (USA), Canac (Canada) and SNCF (France). Later this year the four pre-qualified bidders will be invited to submit their plans for leasing and managing the network. The winner is expected to be announced in September – Mtanzania.

Mwananchi (August 1) reported that two of the three firms bidding for the leasing of the Dar es Salaam Water Corporation (DAWASA) had withdrawn as they were not happy about the conditions of the lease and the state of the Corporation. This left BiWater from UK in partnership with Gauff Ingenieure of Germany as the only bidders.

Bill Gates of Microsoft, the world’s richest man, has agreed to become a special goodwill ambassador for Tanzania and help to persuade fellow chief executives of some of the world’s top companies to invest in the country – Daily News.