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.

The new South African management of the Tanzania Electric Supply Company (TANESCO) caused some surprise on June 11 by issuing a 21-day ultimatum to its customers to settle over Shs 100 billion in outstanding bills. Otherwise they would be disconnected. TANESCO Managing Director Rudi Huysen thanked the 70% of TANESCO customers who paid their bills promptly. Only 10% of Tanzanians had electric power. Others would have to wait a long time to be connected if people refused to pay for the supplies they were receiving.

The South African team had finally entered TANESCO head office on 17th May after protracted resistance from employees who wanted to get their terminal benefits before it took over. The new management has a two-year mandate to Improve TANESCO services before divestiture.

On April 29 President Mkapa had railed against the previous management saying it had failed to deliver, and that was why the government had decided to contract a foreign firm to run the company. The President noted that the decision was accelerated by revelations arising from audits carried out by three renowned international firms which had revealed gross mismanagement and misappropriation within the state-owned company. In the six years from 1995 to 2000 the company had recorded an aggregate loss amounting to more than Shs 125 billion. Another audit company, KPMG Consulting, revealed in its report that 36 per cent of revenue from the pre-paid (LUKU) meter system did not feature in any of the company reports since 1995. The KPGM auditors also revealed that since 1995 the TANESCO Board of Directors had approved tenders worth 5.6bn/-, which were beyond its powers to sanction. The KPGM report also accused the TANESCO management of failure to command revenue collection, poor management of company assets, funds misappropriation and power leakages which could have been contained. President Mkapa further quoted the report as saying that TANESCO did not know the actual number of its customers and that those who featured in its computerised system differed from the number of connected electricity users. “This means that a good percentage of electricity users have been using power without paying a single cent, since they were not being billed,” he said. He conceded that, as of November last year, government had also owed TANESCO some Shs 42 billion.

On July 3 power to the Tanzania Peoples Defence Forces (TPDF) and the Dar es Salaam Water Authority (DAWASA) was cut off. They promptly paid part of their outstanding bills. On 15th July TANESCO disconnected power to hundreds of houses in Zanzibar including those owned by government institutions and departments allegedly for not paying outstanding debts amounting to Shillings 31 billion. Following the success of this programme (people were queuing in TANESCO offices to settle their bills) the company was planning to embark on a campaign against people who have connected electricity to their houses illegally.

The Swahili press reported what papers called ‘a big row’ at the Friendship Textile Mill in Dar es Salaam on May 7 when Minister for Trade and Industry, Juma Ngasongwa, entered into a heated argument with workers. The problem was said to have started when the Minister accused the workers of “being lazy” while asking for a pay rise. One angry worker shouted “bull” and the Minister asked the police to arrest him. In the ensuing melee the meeting was called off and the Minister’s car was surrounded. In the end the arrested worker was released and the Minister was allowed to leave. Friendship is a joint enterprise run by Tanzania and China.

Thirty nine small-scale Tanzanite miners at Mererani, near Arusha, suffocated after an air compressor which was providing oxygen to one of the mines broke down. When the Government stopped mining operations at Mererani in July (a few days later) and gave small-scale miners 30 days to fulfil new conditions to improve safety, some 4,000 miners went on a rampage looting goods worth millions of dollars. They asked why one mine accident should lead to the closure of 300 other mines. Police arrested 15 miners before order was restored. Meanwhile, Tiffany’s in New York and other American jewellers have now resumed purchase of Tanzanite after earlier allegations that the trade was helping to launder money being used by terrorists.

Launching the 300m/- Contractors Assistance Fund (CAF) and officially opening the Contractor’s Annual Workshop in Dar es Salaam on May 28 President Mkapa directed the Ministry of Works and the Contractors Registration Board (CRB), to clear up what he described as the mess in the construction industry. “The government I head is the biggest contractors’ service user. I would like to tell you in black and white, that your sector is rotten. The government has lost patience”.

“Change your attitude and performance record, because jobs that you do cannot be hidden from the public eye. This has been proved during my up-country tours where there is an outcry that public funds have been swindled, following rapid deterioration of recently completed road works and other infrastructure”. The President said he was impressed by the measures so far taken by the Board to clean up the industry, including the axing of 1,164 poorly performing contractors.

Responding to a request by local contractors that the government should enact laws which would limit foreign contractors when it came to bidding for some projects the President said: “To me, enacting hostile legal mechanisms against foreign firms, won’t make local firms stronger, more honest or more competent”.

Exchange Rates: £1 = Shs 1,400. US$1 = Shs 990

KEY ECONOMIC DATA
At a recent Britain-Tanzania Society Seminar on development Ronald Fennel provided some useful economic data as an introduction to his presentation:

‘The population of Tanzania has increased fourfold since independence 40 years ago. At 32 million it compares with Kenya’s 28 and Uganda’s 20 million.

Tanzania is endowed with a rich resource base, easy geographical access to international markets; it has a peaceful and politically stable environment and has been able to forge a cohesive national identity. And yet it is among the 10 poorest countries in the world. GNP per capita is $280, compared with Kenya $360, Sub Saharan Africa average of $500 and East Asia and Pacific $970.

Yet there are encouraging signs in macroeconomic performance particularly since Mkapa’s presidency has built on earlier gains. Inflation is down from 30 percent in 1996 to 5 percent last year. Foreign Exchange Reserves have grown from the equivalent of 6 weeks imports in 1998 to 20 weeks in 200 1. Tourism has grown from 1.8% of GDP in 1997 to 7.6% in 1999 worth just under $600 million. Exports stand at $937 million but the trade gap is large with imports at $1.57 billion -including donor funded imports ….. .

Social statistics are not so encouraging. Tanzania’s place on the UNDP Human Development Index has slipped from 127th in 1991 to 156th in 1999 out of 174 countries. Real income per head is only thirty percent higher than at Independence. 50% of the population live on less than $1 a day. Life expectancy at birth is 45, compared with 48 for Kenya and 69 for East Asia and the Pacific.

Tanzania has been the largest recipient of donor aid in sub Saharan Africa in absolute terms: $16.8 billion between 1970 and 1996. Starting with $38 million in 1970 it reached $1.2 billion in 1992, fell to $830 million in 1996 when ‘policy reform wavered’ and is back up to $1.1 billion this year. This amounted to almost $40 per capita in the 80s and 90s, well above the average’ for Sub Saharan Africa and above the ‘successful reformers’ Ghana and Uganda.

These inflows have to be set against the debt burden, the present value of which was $4.9 billion in 1999. As the IMF reported Tanzania has established a solid record of economic performance over the past several years, thereby enabling it to access substantial debt relief. Annual debt service has fallen from $303 million in 1989 to $116 million in 2001, i.e. about 12 percent of current exports.

In a general sense Tanzania’s popularity with the donor community over the years and its recent willingness to engage in economic policy reform has resulted in a favourable flow of aid. There continue to be concerns about the reality of self-reliance, but we all live in a ‘joined up world’ as some leaders of the industrial world continually assert.

Compared with these aid flows, the impact of increased foreign direct investment has been much less significant in financial terms, although it has brought with it entrepreneurial skill and some training that can double the benefits. Foreign direct Investment in 1999 was $183 million and $193 a year later. Yet this investment has been focussed on three main areas -mining, tourism and services/consumption such as breweries and telecommunications. Some investors fear the lack of institutional infrastructure in the legal and fiscal areas. Some Tanzanians on the other hand perceive the infusion of Gulf capital and South African investors as infringing on their sovereignty. Both recognise the need to improve physical infrastructure, an area where the government with donor help is likely to bear the principal responsibility to introduce a maintenance culture.

There is little doubt that many of the economic policy prescriptions adopted by Tanzania over the last two decades (and even before that) have been prompted by the fashions of donor development economists. Tanzania has benefited from intensive study by highly qualified economists of differing political persuasions . …… Ujamaa villages tried to change society too fast. The move to effective privatisation in the 90s was too slow …… ‘

COAL MINING
Development of a $600 million surface coal-mining operation in Ludewa district, Iringa region, close to the border with Malawi, is expected to commence at the end of 2003 following successful negotiations with investors. After commissioning in 2006 or 2007 it will have a production capacity of 1.5 million metric tons and is expected to generate 400 MW of electricity. It may also provide energy to a proposed iron ore project in the same district which will process vanadium and titanium concentrates for export and iron and steel products for local and international markets -East African.

NEW SHIPPING BILL
Government has stopped issuing licences to clearing and forwarding agents, pending new shipping legislation. The agencies will be allowed to work until 30 June, after which the work will be taken over by the National Shipping Corporation (NASACO). The attorney general’s chamber is now preparing a bill to be tabled before the parliament -Mwananchi. (The Shipping Bill when it was presented to Parliament in April came under heavy fire from MP’s and had to be substantially changed NASACO was heavily criticised The Bill was still being debated when this issue of Tanzanian Affairs went to press -Editor)

TANZANIA A FRENCH PRIORITY
France has added Tanzania to the list of 40 countries in its ‘priority zone’ in a strategy to gain more influence in East Africa. Tanzania will now be eligible for more grants than loans. As the first example of this there have been joint army operations in Tanzania financed by and participated in by French forces -East African.

SOUTH AFRICA
Philip Magani, a CCM MP, has said that it was a well-known fact that Britain and India were the leading trade partners of Tanzania, yet South Africa now ‘determined the country’s economy.’ He said this was probably due to most of the gold going to South Africa. At a meeting of the Parliamentary Finance and Economic Committee, the Permanent Secretary to the Ministry of Finance said that the Tanzania shilling had been declining due to the recent decline of the South African rand by more than 40% -Mwananchi.