Exchange Rates: £1 = Shs 1,300.
$1 = Shs 925

‘INVESTMENT TO CONTINUE’ – IMF
According to the IMF’s World Economic Outlook for 2001, Tanzania is among five African countries which are expected to continue attracting investment and long-term economic growth because of its pursuit of sound macro-economic and structural policies. The other countries are Botswana, Cameroon, Mozambique and Uganda but Zimbabwe and Cote d’Ivoire come out of the report badly. The report said that the outlook for private investment, economic diversification and longer-term growth was generally brighter in countries that had pursued sound macroeconomic and structural policies. As a result of this, relatively strong growth of around 5% and above was expected to continue in the five countries.

“POWER RATIONING OVER” -MINISTER.
The Deputy Minister for Energy and Minerals Dr Ibrahim Msabaha has announced that the days of power rationing in Tanzania are over. He was inspecting the 100MW Tegeta-based Independent Power Tanzania Ltd (IPTL) plant. He said that the final take-off of the IPTL, after three years of stalemate, was a major boost to government efforts to ensure all Tanzanian’s got electricity. The dispute between the Malaysian-financed IPTL and the Tanzania Electric Company (TANESCO) was solved by the International Centre for the Settlement of Investments in the middle of this year.

EXCHANGE RATES: £1 = TShs 1,250 $1 = TShs 890

‘HIGHER IN HUMAN DEVELOPMENT’
According to the UN’s Human Development Report 2001 Tanzania has climbed from l56th position in terms of people’s life expectancy, income per person, educational enrolment and adult literacy to 140th out of 165 countries. Norway is the first. The Head of the Development Unit at UNDP Tanzania, Ernest Salla, said that, with poverty reduction at the heart of the government’s programme and the formation of the Poverty Reduction Strategy Paper (PRSP) and establishment of a national poverty monitoring system, the future for Tanzania was bright.

‘MARGINALISED IN TECHNOLOGICAL DEVELOPMENT’
According to the Technological Achievement Index (TAI), contained for the first time in the Human Development Report, Tanzania is also among nine countries classified as ‘marginalised’ in terms of technological innovation and achievement. They have been listed as the lowest in rank out of a total of 72 countries in the world in terms of creating and using technology. The HDR stresses that in this network age: “Any country that fails to make effective use of technology is likely to find itself falling behind in human development and marginalised in the global economy.

‘AMONG FASTEST GROWING ECONOMIES’
The Poverty Reduction Strategy Group has praised Tanzania’s 5.8% growth rate and described it as among the fastest growing economies not only in East Africa but in the whole of Africa. Uganda’s rate is 5% and Kenya’s 0.3%.

‘TOP IN FOREIGN INVESTMENT’
Tanzania has been placed at the top of Sub-Saharan African countries in attracting direct foreign investment for eight years, according to the report. Net foreign direct investment as a percentage of GDP increased from 0.3 per cent in 1992 to 2.1 per cent in 1998, compared with an average increase of 0.1 per cent for sub-Saharan Africa. Tanzania was described as one of the most improved countries in the region.

THE ‘GOLD STANDARD’
Outgoing UNDP Representative in Dar es Salaam, Sally Fegan­Wyles, told the Daily News on July 19 that Tanzania had become a ‘standard bearer for excellence’ in economic recovery, poverty reduction and the war against corruption after years of tough economic and political reforms. It was ‘the gold standard’.

THE BUDGET -‘VISIONARY AND BOLD’
This is how David Tarimo described, in the Guardian, Finance Minister Basil Mramba’s first budget since taking up his post. The writer referred to what he described as the clearly articulated vision that poverty reduction could only be realised by significant growth and that this growth was dependent on nurturing competitive industrial and agricultural sectors The boldness and ambition was seen in the increased revenue collection target of 12.1% of GDP compared with 11.7% for 2001 together with the significant reductions in import duties and certain other taxes. Changes made to ensure that agriculture would be competitive included the abolition of stamp duty on proceeds from sales of agricultural produce and the reduction of land rent on agricultural land by 66%. The five per cent cap on local tax (producer and livestock cess) announced two years ago was to be enforced. Changes to promote the local dairy sector included the banning of imported powdered milk and the imposition of suspended duty of 25% on other types of imported milk -except for infant milk. The VAT on milk packaging materials had also been abolished.

A major step towards reducing industry’s production costs was the abolition of customs duty on capital goods and raw materials. Business was also said to have welcomed the abolition of the two per cent withholding tax on payments for goods and services; investors would welcome the abolition of withholding tax on interest on foreign loans. In raising revenue the Minister introduced a gaming tax and planned to raise significant revenue through abolishing the exemption from VAT that the government and its institutions previously enjoyed.

In the media the headlines concentrated on the Shs 30,000 million allocation for an increase in salaries of civil servants. OTHER HGHLIGHTS included an increase in airport charges; a fuel levy on petrol; increases in duty on beer, cigarettes and soft drinks; a halving of excise duty on locally-produced wine; new taxes on lotteries and casinos; VAT on computers, printers and accessories to be abolished; hospital equipment and taxes for drugs used to treat TB HIV / Aids and malaria abolished; VAT on education investment and ground transport for tourists abolished; Shs 8 billion provided for next year’s census.

The Minster said that expenditure would total Shs 1,764 billion and revenue Shs 991 billion leaving a gap of Shs 773 billion to be filled by external assistance and debt relief, the drawing down of reserves, the sale of shares in previously privatised public firms and by increases in taxation. But Chairman of the Parliamentary Finance Committee, Dr Juma Ngassongwa, a CCM MP, said that the fact that the economy was showing signs of recovery remained a mystery to the majority of Tanzanians who continued to suffer in poverty. He said that with a birth rate standing at 2.8 per cent the 4.2 per cent economic growth figure was brought down to a mere 1.4 per cent. Although agriculture was still the mainstay of the economy, government seriousness in insuring growth in the sector was not reflected in the development programme 2001 -2 nor in the national budget. Only 5.5 per cent of the budget had been allocated to the agricultural sector.

As ‘The Express’ put it ‘The agricultural sector, whose dismal performance (3.4% growth rate) last year largely contributed to the failure of the economy to reach the targeted growth rate of 5.1%, is still besieged by the same (seemingly intractable) problems which cannot be solved in a very short span of twelve months. These problems include: lack of investment in agriculture -the sector accounts for 50% of GDP but of all the projects sanctioned by the Tanzania Investment Centre, only 5% concerned agriculture; primitive farm-implements, such as the traditional hand-hoe which perpetually condemns the peasant farmers to subsistence farming; flawed marketing policies accompanied by mismanagement and corruption in the cooperative unions, and imperfections inherent in the marketing boards which inhibit efforts to increase production; low processing capacity of agro-based industries; and, lack of linkage between agriculture and industry. It does not appeal to an inquiring mind that, with a budgetary allocation of only 5.5% per cent to agriculture (compared with, for instance, 18% to Defence and Security, and 21% to administration), the government is really seriously committed to ‘revolutionizing’ agriculture, no matter how impressive the said ‘strategy’ may be on paper.

TANZANIA WINS IN ELECTRICITY DISPUTE
Tanzania has won in the three-year-long long dispute over the cost of the $150 million 100 MW Malaysian-financed Independent Power Tanzania Limited (IPTL) thermal plant project at Tegeta in Dar es Salaam. Production of electricity should finally start in October, the Minister for Energy and Minerals, Mr Edgar Maokola-Majogo has announced. The London-based International Centre for Settlement of Investment Disputes (ICSID) ruling issued on July 12 stated that the value of the plant would be reduced to $125 million, not $150 million as claimed and the cost of electricity would be $2.8m per month as proposed by TANESCO as against IPTL’s $4.2m demand. Maokola-Majogo also announced that the construction of the long-delayed 232-kilometre $300 million gas pipeline from Songo Songo to Dar es Salaam, would start in September and would be completed in 2003. He said the implementation of the gas project would go hand in hand with providing towns and villages along the gas pipe with power from gas and solar power at a cost of $13.3 million. The gas from Songo Songo would be used to generate power at TANESCO’s Ubungo gas turbines in Dar es Salaam and later at the IPTL plant.

SUGAR CRISIS
A crisis in the sugar industry erupted in May this year when local producers threatened to suspend production, blaming the government for issuing 22 licenses to import 100,000 tonnes of ‘industrial’ sugar and thus spoil their market. The Guardian reported that the crisis deepened in June when a consignment of more than 6,500 tonnes of sugar was confiscated by the Tanzania Revenue Authority (TRA) after it was found to have been imported illegally. Early reports had it that the ‘game’ was being practised by some prominent businessmen, who used the name of the Tanzania People’s Defence Forces (TPDF) to avert paying import tax. On reaching the local market, the alleged businessmen sold the sugar at throwaway prices, thus, undercutting the price of locally produced sugar. In April, Minster for Industries, Iddi Simba, had been reported in The East African as having revoked 10 import licenses for 38,000 tonnes saying that the permits had been issued without his authority. Tanzania’s annual sugar requirement was said to be 290,000 tonnes and local sugar production about 180,000 tonnes so that importation, legally or clandestinely was necessary. Local sugar was highly taxed but imports could sell at much lower prices thus giving higher profit margins. Local producers argued that some of the permit holders imported refined sugar but declared it as raw sugar to cheat on taxes.

AND QUESTIONS ABOUT SHIPPING
The dynamic Minister Simba was in further trouble when it was reported on August 8 that the Parliamentary Select Committee on Finance and Planning had criticised Mr Simba’s handling of the privatisation (perhaps better expressed as ‘liberalisation’) of the Shipping Corporation (NASACO). He was said to have ignored a Cabinet Paper by issuing some 30 licenses for clearing and forwarding operations to foreign shipping companies. The Minister was quoted as saying that the question of corruption did not arise. “I am not in politics to make money” he said. “In fact I do not live on my ministerial salary”.

NEW RISK AGENCY
Tanzania has become one of the first seven countries to show interest in a new political risk insurance agency for Africa -the African Trade Insurance Agency (ITA) which is being supported by COMESA and the World Bank. The agency said that there were significant gaps in the political risk insurance market when it comes to the assumption of risk in cross-border transactions. Premium rates were likely to range from 0.4% to a maximum of 2.5% depending on the length and type of credit involved. Risks eligible would include embargoes, expropriation, inability to convert or transfer currency, imposition of import or export taxes of a discriminatory nature, war and civil disobedience -Press Release.

Tanzania officially became Africa’s third largest gold-producing country (after South Africa and Ghana) in July with the inauguration of its largest underground gold mine -the Bulyanhulu mine in Shinyanga run by the Kahama Mining Corporation Limited and Barrick Gold Corporation with a gold resource base of 14.6 million ounces. The Guardian described how an elated President Mkapa at the inaugural ceremony had indicated that in the rich and powerful stock exchanges of Toronto, New York, London, Paris and others they were learning to pronounce the Sukuma name, BULYANHULU, a village in a country they had never set foot in. As gold output from the mine built to full production, government royalty payments and taxes were expected to raise almost Tsh 12 billion ($13 million) for the economy in the first year alone, its contributions increasing as production at the mine rose. Addressing a huge audience at the mine site, which included delegates from around the world, the President attributed Tanzania’s quick leap to success to the country’s on-going economic reform measures. “The geological resources, however plentiful and attractive they may be, will remain unexploited, as indeed is the case in a number of countries, if the right enabling environment is not in place” he said. Tanzania had in the last five years received over one billion US dollars investment in exploration and mine development with the Bulyanhulu mine alone being worth US $ 280 million. Gold output was forecast to grow from 263,000 ounces in 2001 to 400,000 ounces a year by 2003. Mention was made of other benefits arising from the Bulyanhulu investment: Construction of a 68-kilometre road from the mine to the Kahama-Isaka road; construction of a 47­kilometre water pipeline from Lake Victoria to the mine, which is providing water outlets to communities along the way; an electricity transmission line from Kahama to the mine, which also providing power to the surrounding communities; and, the upgrading of Kahama Hospital.

The Bulyanhulu mine will operate alongside Australian Resolute’s Golden Pride mine whose annual production is around 202,000 ounces, and the Geita gold mine -a joint venture between Ghana’s Ashanti Goldfields and South Africa’s Anglogold.
Randall Oliphant, Barrick Gold’s President and CEO, said his company had chosen to invest in Tanzania owing to the country’s good governance, progressive economy, stable investment and legal climate. President Mkapa said “I know there is constant criticism that perhaps Tanzania has given away too much in creating a conducing environment for inward foreign investment especially in mining. But we remain fully committed to creating, maintaining and sustaining such an environment.

Tanzania’s mining development stalled after the country adopted socialism soon after independence in 1961. Production declined to an all time low of 84 ounces in 1975 against a peak of 100,000 ounces in 1938 under British rule, due to poor planning and management. But a new mining act in 1998 opened the sector to foreign investment and that policy is now bearing fruit, with Tanzania attracting investors even when gold prices have fallen to around 18-month lows.

TANZANITE
The mining of the gemstone Tanzanite is creating problems. The East African (18th June) reported that following the granting of mining rights to the South African mining company AFGEM two foreign businessmen had been deported on grounds of alleged involvement in the smuggling of Tanzanite. There had also been several violent clashes at the gemstone pits at Mererani, near Arusha, during this year claiming the life of one man. Small scale miners have also gone to court to challenge the AFGEM monopoly and alleged harassment of indigenous miners. An Indian owned company that polishes Tanzanite gemstones, was said to be experiencing problems in obtaining sufficient stones since AFGEM, had been given its license.

AFGEM is branding its stones making it difficult for Tanzanite smugglers to sell their unbranded gemstones. Another civil court case is underway. A former Tanzanian Director of AFGEM is suing the company for fraud. As this issue of TA went to press the High Court had demanded the immediate presence in court of one of AFGEM’s officials from South Africa.

Fierce competition was underway in mid-August between Britain’s Thomas de la Rue and Germany’s Giesecke & Devrient for the contract to supply the next batch of 980 million Tanzanian bank notes of varying denominations. According to The East African (August 13) the Bank of Tanzania favoured the German printer although it had had to withdraw a previous lot of Shs 1,000 notes which they had misprinted. The paper said that the German company had also been rejected by the European Central Bank for misprinting billions of Euro notes. The East African’s ‘source’ was reported to have alleged that, although de la Rue’s bid was much lower than Giesecke’ s, there was a lot of lobbying going on in order to obtain a ‘donation’. The position was described as stalemate.

Tanzania is set to become Africa’s third largest gold producer (after South Africa and Ghana) next year, producing over one million ounces following the opening of a third modern large scale gold mine later this year, says Tanzania Chamber of Mines Chairman Samuel Lwakatare, quoted in the Guardian. With two modem mines already in operation, revenues from gold production skyrocketed to 184 million dollars (about Shs 147,888m) last year compared with 3.3 million dollars in 1998. Canada’s Barrick Gold is set to open the country’s first underground gold mine in July in the northwestern Bulyanhulu, Kahama District, with annual production forecast at 400,000 ounces. The mine, sitting on gold reserves of 10 million ounces, will operate alongside Australian Resolute’s Golden Pride Mine whose annual production is around 202,000 ounces, and the Geita gold mine – a joint venture between Ghana’s Ashanti Goldfields and South Africa’s Anglogold. The Geita mine which began official production last August is Africa’s second largest gold mine with annual production estimated to total 500,000 ounces.

Lwakatare explained that Tanzania’s mining development stalled after the country adopted socialism soon after independence in 1961. Production declined to an all time low of 84 ounces in 1975 against a peak of 100,000 ounces in 1938 under British rule. But a new mining act in 1998 opened the sector up to foreign investment and that policy is now bearing fruit, with Tanzania attracting many investors. Some 300 licences have been issued to mining companies while investment in gold exploration since 1998 is estimated at $870 million. The government aims for mining to contribute 10% of the Gross Domestic Product (GDP) by 2025 compared with 2% in 1998. Another gold mine operated by Afrika Mashariki with annual production estimated at 140,000 ounces is expected to open in 2000 Lwakatare said. “Other prospects in Geita, around the Lake Victoria greenstone belt are promising,” he added. Lwakatare said an evaluation project for nickel, cobalt and copper deposits in northwestern Kabanga district by Barrick Gold had proved successful. “There’s every possibility that if things remain correct, there’s potential for a big base metal mine opening soon,” he said, adding that exploration for copper and lead was also going on in the south near Lake Malawi.

IMF Deputy Director, African department, Anupam Basu, has commended the Tanzanian government for its remarkable macro-economic stability. It had managed to stabilise the inflation rate at five per cent, economic growth rate at four per cent and to have very strong foreign exchange reserves which had risen three times to over $900 million. “By maintaining these fundamental economic indicators, unlike other countries, Tanzania’s future stood to be very bright in a few years’ time” he said.

The Swahili daily Majira reported that for the last ten years Britain has been the leader in the number and value of investment projects in Tanzania. The paper quoted a report by the Investment Centre (TIC) saying that between 1990 and 2000 there were 255 British projects followed by Kenya (92), India (60), USA (59), Canada (54), Germany (54), Italy (50), China (47) and the Netherlands (41).

‘News Africa’ (9th April) reported that one of the largest ever foreign investments in Tanzania had been finalised in the telecoms sector. A consortium of MSI Cellular and the German telecoms services company Detecom had finalised a strategic investment agreement worth US dollars 120 million with Tanzania Telecommunications Ltd (TTCL). The commitment was to improve the fixed network and expand the cellular network to at least 800,000 lines. MSI cellular had been licensed by 14 governments in Africa.

In what he described as a remarkable development, Tanzania Investment Centre Director Emmanuel Ole Naiko told the Guardian in January that, during the year 2000, parastatal divestitures had been finalised in the cases of the Container Terminal of the Tanzania Harbours Authority and the Dar es Salaam Airport Cargo Handling Company. Others which had reached advanced stages included the Tanzania Telecommunications Company Ltd and the Dar es Salaam Water and Sewerage Authority. Other enterprises whose preparations for divestiture were well under way included the Tanzania Electric Supply Company, Air Tanzania Corporation, Tanzania Railways Corporation, the National Insurance Corporation and the National Microfinance Bank. He was concerned that investors had shown little interest in the energy sector even though Tanzania was facing an acute shortage of power. Manufacturing industry however had attracted 725 projects in recent years followed by tourism with 233 and agriculture with 117 projects. He said that strenuous efforts were being made to promote the information technology, human resources development and services sectors.

KLM Royal Dutch Airlines is introducing daily flights to Tanzania from Amsterdam from 28th May, making it the first international airline to do so. KLM’s regional manager in Tanzania said that passengers had increased from 891 to 1,582 per week during the last year – East African.

Recent grants of AID to Tanzania have included: JAPAN – Shs 4.8 billion for food, debt relief and rehabilitation of the Makuyuni-Ngorongoro Road and THE BILL AND MELINDA GATES FOUNDATION through the AFRICAN YOUTH ALLIANCE – Shs 165 million for prevention of HIV amongst adolescents.

Is Tanzania becoming an economic miracle?

Tanzania’s economic performance is receiving more and more praise from the international community. Some analysts are even wondering whether the country’s performance might be described as an economic miracle.

Under the heading ‘Tanzania’s new dawn’ the October issue of BUSINESS IN AFRICA presented a glowing review of Tanzania’s ‘rise from a socialist economic backwater to one of the most attractive investment destinations on the continent’. The article described it as a heartening story and pointed to the low inflation, the 5% GDP growth, the privatisation of two thirds of its public companies, and the likelihood of more than $5 billion in investment in the next five years.

Similar praise came from the usually critical ECONOMIST (October 21). In an article headed ‘A modest success story’ the article referred to President Mkapa as ‘privatising and liberalising with gusto’ and how the results had been striking. Average incomes had increased at about 1 % annually since he came to power. ‘Internet cafes on every corner throng with surfers learning about the outside world, chatting with relatives in Europe or hawking curios to buyers in Hong Kong….but Tanzania faces three main obstacles to faster economic growth -socialism squelched the entrepreneurial spirit. .. the infrastructure is improving but still primitive … and education is a mess … (Thank you Debbie Simmons for sending this item -Editor).

WORLD INVESTMENT REPORT (October 3) wrote that Tanzania was in 8th position in Africa and well in the lead in East Africa as the most attractive investment destination. It came three times ahead of Kenya and five times ahead of Uganda in a survey of 296 transnational companies by the UN Conference on Trade and Development (UNCTAD).

Dar es Salaam’s BUSINESS TIMES (September 22) under the headline ‘Why Tanzania attracts investors’ pointed out that in Harvard University’s ‘Competitiveness Report of 2000’ among the 24 African countries covered, Tanzania came 14th compared with Uganda 17th and Kenya 24th. In the Optimism Index Tanzania came second only to Nigeria whereas Uganda was 11th and Kenya 14th.

At the end of the World Bank Country Performance Review on September 5 Country Director Jim Adams said that Tanzania had achieved an impressive performance in its economic record and its portfolio during the past two years not only within the Africa Region but also relative to the performance of countries elsewhere. In the assessment 95% of the portfolio was described as satisfactory (75% in 1997) and projects at risk had fallen from 52% in 1997 to 5% this fiscal year.

“We are expecting in the near future that Swedish investment in Tanzania will increase and that Sweden will become one of the leading investors in the country” Sten Rylander, Swedish Ambassador said recently.

Tanzania has also just qualified, together with 34 out of48 African nations, for duty-free treatment in exporting to the USA under America’s new ‘African Growth and Opportunity Act (AGOA)’.

President of ‘Manchester Trade Limited’ Stephen Lande was quoted in the BUSINESS TIMES as saying that Tanzania possessed special qualities including a stable society, a strong democratic tradition, a reforming government, an educated population, a deep water port, hydro-electric potential and competitive location.

Two Philippine firms have won the lease for the container terminal at the Port of Dar es Salaam. They will pay an annual fee of $3.4 million and a royalty of $1 for each six-meter container. The terminal can handle 100,000 containers a year and it is hoped to increase this to 200,000 over the next ten years -African Decisions.

Alliance Air which began in 1995 ceased operations on October 10 following major differences between the partners and continuing losses. A group of businessmen were considering whether to continue it. -Dar es Salaam Financial Times.

Barrick Gold Corporation has increased its estimate of gold reserves at its Bulyanhulu project in northwest Tanzania by 40% to 10.5 million ounces. Production will start in mid-200l.

Exchange rates (August 15): £1 = TShs 1,200 $1= TShs 800

Minister of Finance Daniel Yona announced on May 25 that the budget requirement for 2000/2001 would be in excess of Shs 2.4 trillion but that the government could provide only 50% of this -Shs 1.3 trillion from its own resources. The estimate was almost double the previous year’s budget but Tanzania expected some $200 million (about Shs 160 billion) in debt relief under the HIPC initiative. Shs 15 billion would come from the sale of parastatals. Representatives of over 30 governments and international agencies at the Consultative Group meeting had promised about $ 1 billion (Shs 800 billion) for each of the next three years. Tanzania had achieved an average annual growth rate of 4.1 % during the last three years; it had not had to borrow from banks and inflation had come steadily down to 6% in April.

Main features of the budget:
-excise duty on cigarettes, beer and spirits up by 5%
-excise duty on 46 products abolished
-more money for social services
-reduction of the present 70 petroleum companies to only those with permanent infrastructure -to stem the loss of revenue
-an increase of up to 40% of the budget for social services (20% for defence)

Britain remains one of Tanzania’s main trading partners with some Shs 64 billion earned by British exporters last year said British High Commissioner Bruce Dinwiddy while launching ‘Trade Partners UK’ at the Dar es Salaam International Trade Fair on July 3. He expressed the hope that with Tanzania’s booming gold mining industry, exports to Britain, which currently consisted mainly of commodities, would grow so as to narrow the trade gap. He was delighted that the UK had been chosen as a safe depositary for Tanzanian gold. Under ‘Trade Partners UK’ a website offered details of 55,000 companies wishing to develop overseas trading links, he said -The Guardian.

There was a well attended Trade and Investment Forum at the American Embassy in London on April 27 at which the keynote addresses were given by Industry and Commerce Minister Iddi Simba and High Commissioner in London Abdul Shareef. It was designed to provide opportunities for US companies, especially those with regional headquarters in Europe, to interact with Tanzanian officials and business representatives.

President Mkapa commissioned the $165 million Geita Gold Mine on August 3. It is capable of producing 500 ounces (16 tonnes) of gold a year -Daily News.
The largest hotel operator in Africa, Southern Sun, a subsidiary of South African Breweries has launched a Rands 85 million project to build a Holiday Inn in Dar es Salaam -South African Times.

Tanzania has confirmed that it will withdraw from the 21-state Common Market for Eastern and Southern Africa (COMESA) when its one-year notice period ends.

Libya has announced that part of the $46 million debt Tanzania owes it will be turned into Libyan investment projects in Tanzania -East African.

The Government awarded 35% of Tanzania Telecommunications (TTCL) to the consortium Detecon of Germany and MSI of the Netherlands which is paying $120 million and has agreed to increase the number of connections from the present 140,000 to 800,000 by December 2003 -The Guardian.

The First Adili Bankcorp Ltd closed shop on May 15 and was placed under statutory management by the Bank of Tanzania.

A semi-autonomous agency -TANROADS -will take over from the Ministry of Works responsibility for maintaining and rehabilitating roads starting next year. According to the East African this action follows pressure from the EU which has set aside $200 million for roads but doesn’t want the government to manage the programme -East African.

Tanzania is the first African country to sign for a World Bank ‘Programmatic Structural Adjustment Credit’ ($190 million) to help sustain economic reform and speed up poverty reduction.

Tanzania has qualified for debt relief under the Heavily Indebted Poor Countries Initiative (HIPC) of 1996. This news was revealed by World Bank Country Director for Tanzania, James Adams, on April 7. He was quoted in the Dar es Salaam Guardian as saying that Tanzania would, effective from April 2000, start to benefit from a $2.2 billion debt relief programme extended by the IMF and World Bank/International Development Association (IDA). Tanzania’s eligibility, he said, was a recognition by the international community of the progress it had made in implementing economic reforms and achieving poverty reduction.

The $2.2 billion debt reduction would reduce the current total of $6.4 billion due to the international agencies and ‘Paris Club’ creditor nations participating in the relief operation to $2.6 billion. Some $2.4 billion of this debt was due to the International Development Association (IDA) the concessional lending arm of the World Bank, $294 million to the IMF and $20 million to the World Bank itself. Tanzania currently spends some 35% of its annual recurrent income to service its foreign debt which totals altogether $8.6 billion. Several other creditor such as China and Eastern Europe are not included in the debt relief operation.

However Tanzania would have to implement several conditions (or ‘conditionalities’ as they are described) before the bulk of the relief would be available. The country would have to implement a participatory poverty reduction strategy, maintain a stable macro-economic environment, implement measures specifically related to poverty reduction and get confirmation from other creditors that they would participate in the debt relief operation.

According to Adams the IDA debt relief of $1.2 billion would be spread over a period of 20 years and would cover 69% of the country’s debt servicing costs. The IMF debt relief of $152 million was expected to be delivered over 10 years and would on average cover 58% of the debt service obligation. There were two stages in the debt relief process -the ‘decision point’ when a country became eligible for relief which started now and a ‘completion point’ likely to be in 2001 after the conditionalities had been met. At ‘completion point’ the settlement was intended to bring about a level of debt which could be regarded as sustainable. Between now and the completion point, Tanzania would receive interim relief amounting to $26.5 million immediately and about $80.7 million in the immediately following years. After ‘completion’ Tanzania should be able to save $100 million annually.

Before the latest decision an assessment team from the US General Accounting Office which visited Tanzania in February had praised the arrangements being made by Tanzania and its sound plans for the use of funds from the HIPC initiative. They described Tanzania’s plans as better than those of Nicaragua, Bolivia and Uganda, countries already visited by the team. They intended to portray a positive image of Tanzania so that it would get priority in the debt initiative.
On February 16 it had been announced that Britain, whose Chancellor of the Exchequer Gordon Brown has been in the forefront of negotiations to relieve the debt of poor countries, would support the inclusion of Tanzania in the list of countries to receive debt relief.

HOW MUCH IS IT REALLY WORTH?
The subject of debt relief was the main theme of a full day international tribute to Mwalimu Nyerere organised by Jubilee 2000, the Tanzanian High Commission and the Africa Centre in London on April 19. Speaker after speaker condemned the World Bank/IMF and the Western powers and demanded total debt relief for third World countries. The situation was frequently described as a new form of slavery.

Mwalimu’s daughter Rosemary said that her father had always insisted that Tanzania’s debt was unpayable. Tanzania was spending $4 on debt servicing for every one dollar on education and $9 on debt servicing compared with one dollar on health. The debt was equivalent to $267 for each individual in the country even though the average annual income of Tanzanians was only $210.

Jubilee 2000 Senior Research Officer John Garrett told ‘Tanzanian Affairs’ that the real worth of the new debt relief was much less than indicated above and that the figure of $100 million per year was deceptive because much of the relief was on debt which could not be repaid -described as ‘unpayable’ debt. He estimated that the actual debt relief would amount to a probable drop in debt service payments from the present figure of $162 million p.a. to $150 million p.a., a reduction of some $12 million (7%) which would be nothing like enough to enable the government to significantly increase its expenditures on poverty reduction. However, a number of creditor countries were now giving 100% relief or were likely to do so in the near future. The recent sale of IMF gold would make only a small contribution to debt relief for Tanzania as it had to be spread over many indebted countries.

At a reception given by Tanzanian High Commissioner in London Dr. Abdul Shareef, he and Prime Minister Frederick Sumaye, who had been the opening speaker at the Jubilee 2000 meeting, explained to ‘Tanzanian Affairs’ the apparent contradiction between the World Bank’s interpretation of the proposed relief and that of Jubilee 2000. They said that Tanzania had never been able to pay the $1 billion p.a. of debt service charges that it should have been paying. It had been averaging only about 20%. Much of the difference had been paid through bilateral grants from creditor nations including the UK but Dr Shareef said that promised grants were not always received. The World Bank’s figures were based on a formula related to the start of the IllPC in 1986 when Tanzania’s debts were around $5 million and assumed that full payments were being made by Tanzania.

Dr Shareef said that, provided that nothing went wrong (he mentioned acts of nature such as cyclones or severe droughts) and that Tanzania a) continued to do as well or better economically as it was doing now, b) investment continued at the present pace, and c) the Tanzania Revenue Authority continued to collect adequate taxes then, in two or three years time, the country would begin to receive about the sum which Jubilee 2000 had estimated ($12 million p.a.) and that the 80% service charges which Tanzania had not been able to pay would be written off over a period of 20 years. He added that at the last meeting of the ‘Paris Club’ Tanzania had asked for 90% of the debt to be written off. Were this to be done the country would continue to pay what it was paying now provided that donor grants continued as at present.

“TWO ASPIRINS!”
The High Commissioner pointed out that Tanzania’s annual recurrent expenditure was about $110 million which meant that the debt relief represented only a very small contribution in real terms. He added that the $12 million per annum of relief was for a country with a population of some 30 million people. He likened the debt initiative to the situation in a hospital where a patient is on his deathbed, extremely ill and with a lot of pain. The doctor, instead of giving a blood transfusion, continues to take a pint of blood from the patient every month. He gives the patient two aspirins a day to relieve the pain!