Pressure is increasing in DENMARK over whether the country should continue to provide aid to Tanzania as ‘the economy had not made any headway for the last 35 years’ according to a visiting Danish MP. The IMF has approved the third annual loan package of $82 million for 1998/99. Other recent aid includes: USA -$325,000 towards the cost of the national population and housing census. CHINA -$100,00 for famine relief and 45,000 army uniforms. The AFRICAN DEVELOPMENT BANK -Shs 8 billion for the establishment of a small enterprise loan facility. NOR WAY -Shs 1 billion for the Basic Education Programme and Shs 2.5 billion for construction of a 66 kilovolt power line from Zambia to provide electricity to Sumbawanga. UNDP -Shs 2 billion for economic management and private sector development. The EU announced on February 3 that it would not continue the programme it has been supporting since the 1980’s to finance repairs to Zanzibar Port because of concerns over the political deadlock and the poor human rights record on the Isles. Some $330,000 was involved. The WORLD BANK and EUROPEAN INVESTMENT BANK ­$45 million to overhaul the Tanzania -Zambia Oil Pipeline. The WORLD BANK has also loaned $105 million for the repair of roads and sewerage systems and the provision of water in eight municipalities. The NETHERLANDS -Shs 12 billion for rehabilitation of hospital diagnostic services.

It is painfully clear that Tanzania will be unable to make significant economic progress until it is relieved of its crippling external debts, which currently swallow up a third of the annual budget for debt servicing alone. There is ample evidence of the crippling effect that this diversion of resources is having on health and education services and on economic infrastructure. In the last 13 years efforts have been made by the main industrial countries to provide relief from this damaging situation, supported and at times pioneered by the UK government, by offering facilities for rescheduling. The effect of rescheduling was to spread out repayments over a longer period of time, thus reducing the amount due in anyone year. It did nothing to reduce debt stocks and it soon became clear that the problems of some of the poorer countries would never be resolved until debt stocks were reduced to a level that could be reasonably sustained without serious detriment to education and health services and other government obligations. The result was the offer of debt reduction on what was known as the Naples terms (1994), the Lyons terms (1996) and now the Heavily Indebted Poor Countries (HIPC) Debt Initiative.

The underlying purpose of the HIPC Initiative was to reduce the debt stocks of qualifying countries to a ‘sustainable lever and to provide for the reduction to be distributed among the participating creditors on an equitable basis. The Initiative has, however, come under criticism. The UK government considers the process to be too slow and has pressed for faster implementation. Norway takes a similar view and is working to achieve a reasonable degree of flexibility. In a recent article in the Financial Times, German Chancellor Gerhard Schroeder disclosed details of a new German policy aimed at intensifying (whatever that may mean) and accelerating the implementation of the HIPC Initiative. The German proposal introduces the idea of total cancellation of debts arising from development assistance in certain circumstances. Since armed conflict and political instability gravely imperil all attempts raise living standards in poor countries, the Chancellor plans to raise at the June meeting of the Group of Eight a proposal to associate debt reduction with a comprehensive strategy for conflict prevention. As the Chancellor’s article was marked a ‘personal view’ it must be read with some caution.

Qualification for debt reduction requires the uninterrupted pursuit of a programme of adjustment and reform supported by IDA and the IMF over a period of six years. However the Boards of IDA and the IMF have agreed to a shortened second stage in the cases of six out of seven countries that have successfully completed the first three years of the qualifying period at the decision point. Tanzania reaches the ‘decision point’ towards the end of 1999 and it is theoretically possible that Tanzania might benefit from similar treatment by the Boards of the two institutions. Much will depend on Tanzania’s performance in the coming months.

$660 MILLION RELIEF
At ‘completion point’ a final assessment will be made of debt sustainability and debt relief beyond that level will be paid out. In the meantime Tanzania will continue to make crippling annual payments for debt servicing. The damaging effect of such payments has been recognised by the creditor countries and grants amounting to $660 million have been made by bilateral creditors, including the UK to cover three quarters of Tanzania’s expenditure on debt servicing this year. It is hoped that this degree of support will be forthcoming in subsequent years as Tanzania awaits a settlement at ‘completion point’.

Doubt has been expressed in some quarters as to whether the ‘sustainable level’ of debt sought by the HIPC Initiative will be low enough to meet the needs of the poorest countries. Norway has announced its readiness to consider means to achieve a further reduction of debt in the case of poor countries completing the RIPC debt relief requirements. Tanzania is one of 22 countries receiving the benefit of special priority treatment by Norway.
Roger Carter

On November 21 history was made in Nzega District when the first modem gold mine in the country to quarry gold extracted a 6kg piece worth $600,000 after 5 years of exploration and prospecting. This was at the Golden Pride Project at Lusu, 124 miles south of Mwanza, the site of a $50 million joint venture between Australian Resolute Mining and Canadian Samax Resources, the latter recently taken over (for a price of $ 135 million) by Ghana’s Ashanti Goldfields.

The Golden Pride Mine, which might become one of the biggest in Africa, sits on an estimated 2.7 million troy ounce gold deposit. It is an open-pit mine 1.67 miles long, 160 metres deep and 400 metres wide. A kilometre away from this open pit is the mine’s processing plant, which includes seven carbon-in-leach tanks, a five-tonne gold extraction circuit and a crusher. Annual production is expected to rise to as much as 150,000 ounces at a production cost of $210 per ounce -far below the world price of about $290 per ounce.

Things are looking up in the dusty city of Mwanza and its neighbouring districts. From early discovery up to 1965 Tanzania produced about 3 tonnes of gold per annum but virtually all production stopped following the imposition of widespread nationalisation under the Arusha Declaration. It is difficult to exaggerate however the potential for development of the country arising from this new gold rush. If all present investment plans come to fruition, Tanzania could be producing about 26 tons (855,000 ounces) of gold by 2001 representing some 10% of GDP compared with the present production of about 7 tons a year (2% of GDP) by small scale artisanal diggers.

Total reserves are estimated at some 20 million ounces.

Mining has started at several other new big mines:
The Kahama Mining Company at Buzwagi is being developed by Anglogold of South Africa (the world’s largest gold producer -some 200 tons per annum) and Pangea Goldfields of Canada. There are estimated to be about a million ounces of gold to be mined. Anglogold has vast resources of capital (some $20 million was available for investment in the second half of 1998) and is prospecting for gold at other sites in Tanzania. Also in Kahama District, at Bulyanhulu, Sutton Resources of Canada through the Kahama Mining Corporation Ltd., is prospecting deposits which might eventually total 7.2 million ounces. All this activity is bringing about major infrastructural improvements including the upgrading of 80 kms of road from Kahama to the mine site and the laying of a water pipeline from Lake Victoria.

Ashanti Goldfields, the 12th largest gold producer in the world, is investing $130 million in Geita District at Nyamulila Hill where there is estimated to be up to 2 million ounces. Ghana, whose gold production increased from 12 tons in 1988 to 56 tons in 1997 shows how rapidly gold production can be increased. An airport is being built at Geita, schools and dispensaries are being rehabilitated and there are plans to revive Nungwe Bay Port on Lake Victoria. Ashanti Goldfields is hoping to benefit from economies of scale through its newly acquired share of Golden Pride.

Also a new joint project involving the Tanzanian Defence Forces is expected to increase the benefit to the country by curbing smuggling and better organising the marketing.

Tanzania will obtain many benefits from. this new gold rush. The country will get royalties and, after the initial concessions to investors have been allowed for, considerable sums in income and corporation taxes. The recent imposition of VAT at 20% however has proved very unpopular amongst the investment community. There will also be employment opportunities and training in new skills for Tanzanians. Unfortunately, as the latest technology is being used, TA has been told that each mine will employ only about 200 people.

Tanzania is widely regarded as Africa’s best prospective exploration after Ghana for its geological potential and political stability. KPMG Peat Marwick Consultant Salim Bashir said that in the long-term mining would be the mainstay of Tanzania’s economy. Tanzania attracted more exploration expenditure in 1998 than any other African country -$57.70 million.

Anticipating this surge in mining the Eastern and Southern African Mineral Resources Development Centre has installed the first verification facility in Tanzania. It will assist buyers of gold and gemstones to determine the true value of what they wish to purchase. And the 1,500-strong Institute of Engineeers (IET) is intending to launch a division of mining and metallurgy to promote engineering technology for the fast growing mining sector.

Although during the last 18 months the Ministry of Energy and Minerals has issued more than 200 licenses for mineral exploration to local and foreign companies, the smaller gold exploration companies in Mwanza are finding it hard going because of the low gold price. In August last year it touched its lowest for 18 years at $270 an ounce but the price as this issue of TA goes to press is $295 per ounce. South African mines produce 400 tons a year but it is expensive to extract and the industry there is relatively stagnant as far as growth is concerned. Goldfield’s, South Africa’s second biggest gold company, has operating costs of $280 per ounce. It is anticipated that companies like Ashanti and especially Anglogold with their massive capital reserves and the latest cost-cutting technology will, before long, dominate the Tanzanian gold industry.

Exchange rates (November 1998): £1 = TShs 1,120 $1 = TShs 675

Tanzania is poised to be Africa’s next ECONOMIC GIANT after South Africa, should the flow of investments, trade and stability be sustained. It had all the potential and natural resources to surge ahead in social and economic development – Rev. Charles Stith, US Ambassador to Tanzania, quoted in the Daily News.

The TRUST BANK was closed on September 19 and the passports of its senior foreign officials were seized. This followed the takeover by the Central Bank of Kenya of the operations of the Trust Bank HQ in Nairobi due to insolvency. There had been a run on the bank by panicking depositors on September 18 when Shs 200 million had been withdrawn in a morning. By the end of November the bank was asking depositors to help rescue the bank. Under its plan there would be no curbs on withdrawals up to Shs 1.5 million but sums grater than this would be released over two years -Daily News.

A 25 year concession agreement has been signed under which the KILIMANJARO INTERNATIONAL AIRPORT has been taken over by a local company -Kilimanjaro Airport Development Company (KADCO) a subsidiary of Mott MacDonald of the UK.

Greenland Bank Ltd. in collaboration with Thomas Cook International has launched a ‘MONEYGRAM SERVICE’ which it claims will provide transferred money from anywhere in the world ‘in ten minutes’. The launching ceremony of this service was held at the Sea Cliff Hotel in Dar es Salaam -The Sunday Observer.

The government has washed its hands of the eight-months long conflict between TANESCO and the Malaysian-sponsored Independent Power Tanzania Ltd (IPTL) electricity project (see earlier issues of Tanzanian Affairs). TANESCO has presented its case to the Washington-based International Centre for the Settlement of Disputes (ICSID) -East African.

Zanzibar has passed a bill to introduce 15% VAT early in 1999. Tanzania’s mainland VAT rate is 20% -Business in Africa.

Mwanza Regional Commissioner James Luhanga has announced that, in spite of a temporary ban on importation of LAKE VICTORIA FISH into the EU (because of alleged cholera), new markets had been developed in the Middle East, Australia and the Far East. Tanzania had exported Shs 28 billion worth of fish last year, the highest ever and twice the receipts of 1996. Major General Luhanga said that Nile Perch was in high demand because experts say it is free from cholesterol -Daily News.

The foundation stone has been laid by President Mkapa of the long-awaited, $25 million, kilometre-long BRIDGE over the Rufiji River at Ndundu. The bridge is expected to be completed in 2000. The project is part of a 508km tarmac road project from Dar es Salaam to Lindi. Finance is being provided by the OPEC Fund, the Kuwait Fund and the Saudi Arabian Government -East African.

Tanzania’s COFFEE INDUSTRY (240,000 hectares) has an uncertain future according to ‘Business in Africa’ (October­November). It wrote: ‘For the last ten years production has stagnated at an average of 50,000 tonnes annually and current output at about 250kgs per hectare is among the lowest in sub­Saharan Africa (Zimbabwe -700-1,000 kgs per hectare), …. Causes include fluctuating coffee prices, high taxation, high cost of fertilisers and pesticides, low quality seedlings, under-funding of research…but the main cause is ageing coffee trees -many are over 70 years old and beyond their economic viability. However, some 17 new hybrid varieties of coffee with promising pest resistance have been developed, the EU is launching a $14 million rehabilitation scheme (six million seedlings) and experts say that Tanzania is capable of producing 145,000 tonnes per annum’.

Suzie Teete, Human Resources Manager of the TANZANIA CIGARETTE COMPANY, is advertising for Tanzanians living abroad to take up a variety of posts in the company. Starting salaries -about Shs 500,000.

South Africa’s ‘Trans-Africa RAILWAY Corporation’ has been given a 20-year concession to operate on the Tanzania Railways Corporation network. If it receives tax incentive clearance, it will run three locomotives and 200 wagons (shipped from Durban). They will be adjusted to fit Tanzania’s narrow 1,000mm gauge after conversion from the 1,067 mm South African gauge -East African.

The government has sold its 34% share of Tanzania Portland CEMENT Company to companies in Norway and Sweden for $8.45 million -Daily News.

Exchange rates (August 1998): £1 = TShs 1,100 $1 = TShs 670

The new GOVERNOR OF THE CENTRAL BANK is Mr Daudi Balali (56) who has worked for the IMF in Washington for 21 years. His predecessor Dr Idris Rashidi said that he was considering starting his own commercial bank. Mr Enos Bukuku is the new chairman of the Board of the Tanzania Revenue Authority – the African.

Eight firms (7 overseas, 1 local) have presented bids for the purchase of 100% of the KILIMANJARO HOTEL in Dar es Salaam. It has been running at 15% capacity recently – Daily News

As this issue goes to press no solution seems to be in sight in the controversial Independent Power Tanzania Ltd (IPTL) – Songo Songo electricity saga, the background to which has been covered in several recent issues of TA. The idea was that the two projects would each supply about 100 MW of electricity to the national grid. The Malaysian-backed project is virtually ready to produce electricity but at what most seem to agree is an exorbitant price. Some observers believe that the original signing of the agreement for this project may have involved an element of corruption. Its defenders say that it was the best solution available at the time to an acute shortage of electricity. Meanwhile the World Bank/Canada supported Songo Songo gas to electricity scheme had finally been agreed and should have, by now, been under construction but the financial backers have stopped work because they believe that the costs of IPTL electricity will be so high and the total production so far in excess of need that TANESCO will not be able to support both. So far, three rounds of negotiation have failed to resolve this very difficult issue, and there appears to be a difference of opinion within government as to what to do.

The excellent new investigative newspaper the Daily Mail, which is the latest addition to the media empire of Reginald Mengi, (some describe him Tanzania’s Rupert Murdoch) has been running a series of articles on the parastatal SUKITA. It quoted Sukita Board Chairman Iddi Simba as admitting that this once vibrant business was now teetering on the verge of collapse. It was plagued by inefficiency, overstaffing and rampant vandalism he said. But the new restructuring programme should result in Sukita bouncing back and being able to compete effectively.

The Commonwealth Development Corporation (CDC) has bought the remaining 40% shareholding in the EAST USAMBARA TEA COMPANY. The company has 1,318 hectares of rain-fed tea close to Amani town and the estate is being merged with CDC’s existing Derema and Monga estates purchased in 1997 – Guardian.

ALLIANCE AIR’s income has gone up by 53% and the number of passengers by 44% in the last year. The airline hopes to break even in the near future and to make a profit next year. But the TAZARA railway made a loss of Shs 661 million in 1996/97 compared with a profit of Shs 3.9 billion in 1995/96 – Daily News.

The Chairman of the Parliamentary Committee on PARASTATAL ORGANSIATIONS has given ‘clean certificates of performance’ to 46 parastatal and public companies after reviewing their 1997/98 accounts. Amongst the companies are the TPDC, NDC, Tanesco, Air Tanzania, Tanzania Harbours, Coffee Board, National Lotteries, Cotton Board – Daily News.

The North Africa Investment and Trading Company from Libya has bought the BAHARI BEACH HOTEL in Dar es Salaam as part of an arrangement to reduce the debt of $70 million Tanzania owes Libya for oil – Daily Mail.

In order to encourage travel within East Africa the cost of the new East African PASSPORT has been set at the equivalent of $10.80 compared with $30.70 for a Tanzanian passport – East African.

The Jubilee INSURANCE Company has become the first private company to be licensed to operate in Tanzania – Daily News. The majority of shares in the Dar es Salaam AlRPORT HANDLING COMPANY (DAHACO) have been sold to South African Airways which beat the Alliance Airline, KLM, Swissair and an American company in the bidding – Daily News.

The International Finance Corporation (IFC) is providing a LOAN of $41 million to help in establishing a new fruit-flavoured soft drink called ‘Safi’ (meaning pure) – Business in Africa.

Tanzania’s sisal industry is on the up. When production dropped from 230,000 tons per year in 1964 to less than 20,000 tons following nationalisation of estates and competition from synthetic substitutes, many thought that the industry was finished. However, some 27 sisal estates and factories have now been bought by local and foreign companies, new investments are being made and the demand for sisal in fine yarns, carpets, buffing cloth, pulp and paper is increasing. The 98% of the sisal plant which used to be described as waste can now be used to produce biogas, electricity, animal feed, alcohol and pharmaceuticals – Guardian.

THE BUDGET

President Mkapa himself spoke on Radio Tanzania about the main feature of the 1989/99 budget – the introduction of VAT at the rate of 20% from July 1 to help raise revenue and avoid some of the losses incurred during the previous Sales Tax regime. He explained how V AT was used all over the world and that many items would be exempt including medicine, agricultural pesticides and fertilisers, the main foodstuffs, books, newspapers, water services, petroleum products, public transport, exported goods, investments and house rents. Sales tax, stamp duty and entertainment tax had been abolished, he said. All businessmen earning Shs 20 million or more per year had to register.

The new tax is proving very unpopular especially amongst tour operators who point out that the 20% rate is higher than that in Kenya (16%), Uganda (17.5%) and South Africa (14%). A bag of cement now costs Shs 4,300 instead of the previous Shs 3,700 and corrugated asbestos sheet Shs 9,600 compared with Shs 8,000. In his budget speech Finance Minister Daniel Yona reported that GDP growth rate had fallen from 4.2 % in 1996/97 to 3.3% in 1997/98 and exports had fallen from $794 million to $678 million. Inflation had been brought down to 13.2% in April from 17.2% in the previous year and was expected to fall to below 10% soon. In 1998/99 the government wanted to ensure that revenue did not fall below Shs 695 billion; it would not be borrowing from banks. Expenditure would total Shs 1,007 billion (74% of estimated requirements). The budget deficit would be Shs 312 billion of which some Shs 309 billion would come from external assistance.

The export tax on cotton, sisal, pyrethrum, coffee, tea and tobacco was being abolished. Taxes on beer and cigarettes would increase by an average of 5%. Tax exemption on newsprint was to be abolished ‘because newspapers are now considered to be strong enough’. There would be additional expenditure on education, health, roads and water. Taxes on vehicles were reduced; there would be no excise duty on smaller cars. The allowance for taxfree income remains at Shs 20,000 ($30) but housing benefit has now been fixed at 15% of an employee’s emoluments.

Opposition Shadow Finance Minister John Cheyo (UDP) MP presented an alternative budget but this was described by the government as too simplistic. All opposition MP’s, some 55 in number, walked out when parliament was sitting as a Committee of Supply on the issue of Shs 65 billion of unexplained ‘special expenditure’. Criticism of the budget centred on its lack of help for agriculture, on the waiver of tax exemption for newsprint and on problems in the new National Microfinance Bank. Cheyo attacked the government for wasting taxpayers money. He referred to the Shs 928 million being spent on the White Paper on Constitutional Reform and the Shs 82 billion being spent on defence compared with Shs 40 billion for education. CCM MP Joseph Mungai supported him and mentioned the waste of money on the ‘Uhuru Torch’ marches and on the cost of holding all parliamentary sessions in Dodoma rather than in Dar es Salaam.

The Zanzibar budget includes spending of Shs 60.37 billion, an increase of Shs 4.87 billion on the previous year. Shs 42 billion is for recurrent and Shs 17 billion for development.

AID

The IMF agreed in May to disburse the latest $50 million tranche of its Enhanced Structural Adjustment Facility (ESAF) loan. There had been some delay because of concern about the IPTL power project and uncertainty about the privatisation of the National Bank of Commerce. GERMANY has committed Shs 26 billion for the next two years for the debt buy-back scheme being prepared by the World Bank and for ongoing projects including health care, rural water supplies and education and training. FRANCE – Shs 223 billion for rehabilitation of the Mororgoro Power Sub-station. The NETHERLANDS – Shs 23.5 billion this year, largely for Multilateral Debt Relief and mixed credit financing, plus Shs 200 million for El Nino-damaged roads in the Kagera Region and support for primary education plus $1.5 million for environmental information management. JAPAN – Shs 8.2 billion for debt relief and the Dar es Salaam road improvement scheme. The UK – £2.5 million for the repair of roads, buildings and bridges destroyed by the El Nino rains. The EU – ECU 1.98 million for water and sewage services. RADIO FINLAND – $15,000 to Sauti ya Tanzania Zanzibar, one of the oldest radio stations in Africa, for equipment for its Pemba station~ the CHINA NEWS AGENCY had earlier agreed to provide the station with newscasts free of charge. The UN HIGH COMMISSION FOR REFUGEES has formally handed over to Tanzania $6.4 million worth of immovable assets (office buildings, staff quarters, godowns, police posts, schools and dispensaries) in former refugee camps in Ngara and Karagwe districts. IRELAND – $1 million for the establishment of a tourism training unit. The ORGANISATION OF PETROLEUM EXPORTING COUNTRIES (OPEC) will commit $1.6 million for desks and chairs to reduce the present shortages in Zanzibar primary schools. The BRITISH COMMONWEALTH EX-SERVICES LEAGUE has granted £5,500 as monthly allowances for 64 Dar es Salaam members of the Tanzania Legion Club. NORWAY – $1.2 million for AIDS education. IRELAND – Shs 20 million to help the Tanganyika Law Society (TLA) to start implementing its Constitutional Review Project. USAID – $4.85 million for health care projects and $7.1 mi1lion for rural roads, agricultural transport, democratic governance and family planning. ITALY – finance for the tarmacking of the Dar es Salaam – Bagamoyo Road.

The twenty nine members of the Organisation for Economic Cooperation and Development (OECD) have been busy for the last seven years negotiating a proposed ‘Multilateral Agreement on Investment (MAI)’ which, initially at least, is designed to create a ‘level playing field’ for investment between member countries of the OECD. It is beginning to create some alarm in developing countries including Tanzania however because of some of its proposed provisions. For example, the draft Agreement states that the MA1 would not allow developing countries which wished to join:

– to discriminate in favour of their own national investors compared with foreign investors;
– to place restrictions on the entry of or the nationality of key management personnel;
– to require investors to achieve a certain percentage of local content or export a certain proportion of output unless the investor gives some advantage to the country e.g. by offering to spend money on research.

The British government favours MAI in principle but over 120 questions have been asked in the British parliament and the European parliament has voted against the MAI by 437 votes to eight. Requests for exemptions from its rules fill 1,000 pages. The US negotiator said in February that his government would not sign it and a coalition of some 600 international organisations has come together to oppose the MAI.

Christine Lawrence, after discussing the matter with the World Development Movement (25 Beehive Place, London SW9 7QR Tel: 0171 737 6215) and sending them a copy of the last issue of TA (no 59) received the following reply:

‘There can be few better examples of the type of country whose long term future under an MAI regime gives rise for concern than Tanzania. There are real risks of a neo-colonialist scenario of low wage economies largely dependent on natural resources, with no available path to broad-based development. The Business Section of ‘Tanzanian Affairs’ No 59 mentions the great interest in a ‘Minerals Sector’ conference and (a few paragraphs later) concern for the fate of vast numbers of small scale mining labourers.

There is a good example of how the MAI might affect Tanzania on page 24 (of TA 59). The opening paragraph describes current efforts to attract foreign investment and states ‘there are no limits on the number of experts allowed in under the immigration quotas in the mining and petroleum sectors’ – implying that limits do exist in other sectors. Such limits ensure that local people are employed in the investment venture; thereby increasing their skills and creating potential for future home-grown industry. The MAI would abolish the right of countries like Tanzania to exercise such policies – the multinational would have the right to employ only expatriates should it so wish.

Tanzania could avoid this type of restraint by not signing the agreement but it would run the risk of being excluded from mainstream foreign investment, which is a key element of the development process, as evidenced by the existing enthusiasm outlined in ‘Tanzanian Affairs’. We have seen from the history of the World Bank structural adjustment programmes that it is virtually impossible for the poorest countries to opt out of economic prescriptions backed by the richest countries.’

Following discussions in the Britain-Tanzania Society, Tanzania Trade Centre Director in London, Simon Mlay, has made a number of other points:

a) the ability of Tanzania to generate enough foreign earnings to service and repay her huge external debt ($8.09 million on December 31 1997) and to provide foreign exchange needed to finance the development of infrastructure, education, health and other social services is a cornerstone of a sustainable development strategy and as such the Government should be able to exercise the option of favouring foreign investments that show commitment to sourcing raw materials locally as well as promoting exports. MAI prohibits government from seeking to promote this and strengthens investors’ reluctance to refuse to consider any such requirement even when there are ‘advantages’ on offer by the Government.

b) Tanzania’s rich natural resources (minerals, timber, arable land etc) are collectively owned by the people; the Government needs to promote the interests of the people by ensuring that they become stakeholders in partnership with foreign investors as the economy is liberalised. MAI will tie the hands of Government and make foreign investors unwilling to negotiate even where their operations entail displacing indigenous people whose livelihood depends on the resources taken over by the foreign investor.

c) OECD is the leading source of investments into sub Saharan Africa. Tanzania does not have the option of staying out of the MAT nor does it have a realistic chance of negotiating meaningful exceptions when they decide to accede Given the weak regulatory and legal framework and the silence of MAI in respect of off-shore registered companies, it should be of concern that MA1 could unwittingly worsen the drain on resources through tax evasion and dubious accounting practices.

d) Any multilateral agreement on investments or trade that is not negotiated within the framework of the UN systems (e.g. UNCTAD) with the full participation of all members is unlikely to fully represent the interests of developing countries.

According to the ambassadors in Washington of Tanzania, Kenya and Uganda quoted in the ‘Business Times’ the ambitious attempt by the three nations to bring about a political and economic federation will work this time because of the emphasis being placed on the private sector and the diminished government interference in the market.

Exchange rates (Early April 1998)
£1 = TShs 1,104
$1 = TShs 679

The Business Times reports that the ‘World Economic Forum Report’ in February ranked Tanzania as one of the best economic reformers in sub- Saharan Africa and said that Tanzania topped the ‘IMPROVEMENT INDEX’. IMF Senior Resident Representative in Tanzania, Festus Osunsade, commended the report as correctly ranking Tanzania. He said “Look at everyday life patterns; people are enjoying a greater choice of goods and services which means more freedom of choice, a good indicator of achieved reforms”. Another report, this time on COMPETITIVENESS, placed Tanzania 17th out of 23 African countries. First came Mauritius and Tunisia. Bottom were Nigeria and Angola.

World Bank Vice-President for Africa Jean Louis Sarbid has said at a week- long meeting of the SPECTAL PROGRAMME FOR AFRICAN AGRICULTURAL RESEARCH (SPAAR) attended by representatives from 32 African countries in Arusha in late February that he is impressed by Tanzania’s economic reforms and the positive growth in her economy. There should be an air of optimism in future he said -Daily News.

Two new privately-owned English language NEWSPAPERS were launched on February 9. They are ‘The African’ of the Habari Corporation and the ‘Daily Mail’ of the Guardian Ltd -Business Times.

TANZANIA’S STOCK EXCHANGE has been opened by President Mkapa and was scheduled to start full operations on April 15. As a test case, one listed company, Tanzania Oxygen Ltd., has sold 7.5 million shares to some 10,000 new shareholders. Investors were able to become shareholders for as little as Shs 5,000/-. President Mkapa bought 100 shares -Business Times

The government and TANESCO have got themselves into what the Business Times calls a potential disaster for the Tanzanian economy over ELECTRICITY SUPPLIES. World Bank Resident Representative Ron Brigish has expressed concern over delays in reaching agreement between the Government and foreign investors on the important Songo Songo Gas-to- Electricity project (to produce 37 megawatts of electricity) which has been holding up release of $200 million of World Bank money for the $325 million project. The Canadian investors are hesitating because of the forthcoming start of a $150 million project negotiated in 1994 between ‘Independent Power Tanzania Ltd’ (IPTL) and a Malaysian Chinese consortium (Merchmar) under which 100 megawatts of electricity would be produced (starting in mid-1998) at a cost to TANESCO of some $5 million per month, twice the current cost of electricity. Other new supplies are such that it seems unlikely that the additional power will be needed before 2004. TANESCO might have to pay for power which it would not be using and the cost could escalate over time. The Songo Songo scheme is front loaded by comparison.

As this issue of TA goes to press the Business Times has proposed three possible scenarios to deal with what it describes as ‘the mess’:

1) cancel or try to renegotiate the project as recommended by the Bank; the Malaysian bank financing the project however has recently had to be bailed out by the Malaysian government and does not want to hear any bad news from Africa; on March 17 IPTL issued a statement saying that the government should not try to renegotiate. It could cost Tanzania up to $300 million to do so, but the Business Times believes that IPTL could already be in breach of contract and that renegotiation would be possible;

2) do nothing and go ahead with the contract; TANESCO might soon find itself unable to pay and, if the government then bailed it out using IMF funds, relations with the Bank and IMF could deteriorate seriously;

3) sell the individual 10 megawatt generators to the mining industry which has an enormous demand for power; the industry could buy them outright or let IPTL use them to provide electricity on a commercial basis.

The MUFINDI TEA COMPANY, formerly owned by Lonrho and now owned by the Harare-based African Plantation Corporation LDC, has decided to grow coffee as well as tea and has been allocated 1,200 acres in addition to its existing 828 hectares. 80,000 coffee seedlings are ready for planting next season -Daily News.

The CONTROLLER AND AUDITOR GENERAL has reported that 64 out of 103 local authorities mismanaged about Shs 3.5 billion between 1993 and 1996. The mismanagement was done through unauthorised expenditure, questionable payments improperly vouched and unvouched expenditures -Daily News.

ALLIANCE AIR’S newly appointed Executive Director John Murray quoted in Business in Africa (November-December) has said that, in spite of some operational hiccups, load factors on the Heathrow route from Tanzania and Uganda were up to 55 tons a week and passenger bookings and passenger bookings were averaging 70%. The setting up of a new airline ‘Alliance Express Rwanda’ has been agreed and other deals are being discussed with Zambia and the Congo. Alliance is using Kilimanjaro as well as Dar es Salaam airport.

Two Tanzanian hotels have been accepted into the prestigious UK ‘SWL HOTELS OF THE WORLD’ an exclusive international marketing and reservations company -the Zanzibar Serena Inn and the Kirawira Tented Camp in the Serengeti National Park -Daily News.

Dar es salaam’s 34-year old KILIMANJARO HOTEL, which has been running at only 15% bed occupancy during the last two years, was plunged into crisis in February when the staff went on strike and locked out the management demanding payment of their salaries and an end to alleged embezzlement of funds. On March 6 the Board of Directors, with government support, suspended all 400 workers -Daily News..

The TANZANIA SISAL AUTHORITY is being sold for $6.5 million to Katani Ltd which is owned by Messrs Grecian Investments and Wigglesworth and Company both of the UK. The assets involved include eight sisal estates, Tanzania Cordage and Kilosa Carpet Company. The company has promised to rehabilitate the estates and to invest some $28 million in six months time. The divestiture of TSA began in 1993 and 10 estates have already been sold to Tanzanian investors for a cost of Shs 1.2 billion. There has been a revival in the sisal industry as new uses have been found for the fibres (for the making of alcohol, medicines, animal feeds and the generation of electricity) and as environmentalists have turned away from using synthetic materials like nylon and polyesters -Daily News.

Tanzanians are enjoying a new stronger BEER -when they can get it! It is called ‘Kick’ and is the latest production from Associated Breweries Ltd. Demand is said to be far greater than supply. Brew Master Bakari Machumu said that ‘Kick’ is left to mature for 28 days compared with 14 days for most other brews. -Business Times.

The TAZARA Railway Authority generated Shs 12.68 billion during the 1997198 fiscal year compared with Shs 9.9 billion the previous year. The rehabilitation programme has increased the number of freight wagons from 1,122 to 2,280 and passenger wagons from 70 to 79 -Daily News.

Exchange rates (Mid-December) £1 = TShs 625 – 630
$1 = TShs 1,000 – 1,050

Following an encouraging statement by the IMF’s Senior Representative in Tanzania, Mr Festus Osunsade, in late September, to the effect that Tanzania’s economy was poised for take-off in the next 12 months, London became recently the centre of much activity on the INVESTMENT FRONT.

Over 100 people attended a conference sponsored by the Standard Chartered Bank and the Confederation of British Industries (CBI) on October 28 entitled ‘TANZANIA: THE OPPORTUNITES FOR BUSINESS TN THE MINERALS SECTOR’ which was addressed by, among others: Minister of Foreign Affairs and International Cooperation Jakaya Kikwete who spoke about the improved tax and financial incentives included in the TANZANIA INVESTMENT ACT 1977 which had been passed by the National Assembly in August; Minister of Energy and Minerals Dr. Abdallah Kigoda, who listed the increasing number of big investments being made in the mineral sector (the fourth most active country with 7.6% of all African exploration in 1996); the Executive Director of the new Tanzania Investment Centre (TIC) – which replaces the former Investment Promotion Centre (LPC), Samuel Sitta, who frankly admitted, in an impressive address, the investor-unfriendliness of Tanzania in the past; he gave the firm impression that things would be much better in the future; he added that the ‘Financial Laws Miscellaneous Amendment Act 1997’, also just passed by parliament, included a new investment code and clarified the actual powers of the TIC in becoming a ‘One-Stop’ Centre for investors; the incentives for mining were now the best in Africa he said; he warned investors to be careful however in dealing with local intermediaries; Chamber of Mines Chairman Samuel Lwakatare said that the minerals sector was now in an exciting phase and mentioned how useful much of the geological survey work conducted during British rule, and now kept in the archives, was proving to be; Sutton Resources (Canada) President Michael Kenyon described the preparation of the new ‘Minerals Act’ to be presented to the next session of Tanzania’s parliament as having been a ‘mature decision-making process’ and then listed a large number of current mineral investment plans; his own company had already invested $25 million, he said. Attorney-General Andrew Chenge chaired the second session of the conference with considerable aplomb and good humour.

The previous evening the UK-TANZANIA BUSINESS GROUP had organised a convivial dinner for the visiting Tanzanian delegates which was addressed by Minister Kigoda. He gave more information about the new investment climate and added that Tanzania was unique in having from 500,000 up to one million small scale artisanal miners. We could not pretend that they did not exist he said. Some companies had been able to CO-exist or strike deals with them. East African Association Chairman Christopher Buckmaster said that he was enormously encouraged by what he had heard; all wanted Tanzania to succeed but he hoped that there would be evaluations of what had actually been achieved under the new structures after the next 12 months and again after 24 months.

At the BRITAIN-TANZANIA SOCIETY ANNUAL GENERAL MEETING on October 17 Buckmaster had shocked many members by pointing out just how difficult it had been for investors in Tanzania during recent years. The Arusha Declaration had been a disaster he said; it had created an attitude, particularly at the lower levels of the civil service, which was hostile to investment; he mentioned the much better investment climate in Uganda; the infrastructure remained very weak in Tanzania, he said; there was little power and water in Dar es Salaam and only 45% of phone calls made connection; there had been breaches of contract following changes in policy; there was horrendous red tape (“I know of no country which is worse”) with banks having to make 200 file returns per year and hotels having to make 400; there were 20 separate operations to clear a container through the port; delays of up to six years to get land registered; a ‘frightful’ taxation system with endless tax audits; and, a ‘going rate’ of $5,000 for a work permit. On the other hand, at the top level there was a refreshing openness, better than in any other country he visited. Tanzania had the greatest potential in eastern Africa. Few countries had such a good record of peace and stability. Macro-economic indicators (inflation, interest rates etc.) were almost entirely encouraging. Yet Tanzania was an economic failure.

Faced with the difficult task of responding to this tale of woe, Tanzanian High Commissioner Dr. Abdul Shareef said that it was not fair to compare Tanzania with Uganda where the government took power by force and could impose its will, or Kenya which had been capitalist since day one. There was a price to pay for democracy. The new government’s economic policy was only two years old. People had grown accustomed to getting everything free. On corruption, he quoted Mwalimu Nyerere speaking in Edinburgh recently – “There is a receiver and a giver …..giving bribes is tax deductible here (in Britain) and is never condemned. It should be a criminal offence”.

The new INVESTOR’S GUIDE TO TANZANIA 1997 was launched at the conference. It is an impressive document which describes in detail how the new investment code will work in practice for minimum investments of $300,000 if foreign-owned and $100,000 if locally owned. It includes a table listing the rate of corporation tax, customs duties, sales taxes, capital allowance deductions and withholding taxes on some 15 different categories of investment. The three lead priority sectors are mining, infrastructure and export processing zones. There are no limits on the number of experts allowed on the immigration quota in the mining and petroleum sectors. Leases of land can be granted for from 33 to 99 years and rates of rent vary from farms outside townships @ Shs 600 per acre per year to industrial plots from Shs 75 to 150 per square metre per year. The text of the new Investment Act is included in the Guide.

Another document presented at the conference was the 35-page THE MINERAL POLICY OF TANZANIA dated August 1997.

The severe DROUGHT which hit Tanzania early in 1997 caused a decline in many economic indicators later in the year. Severe power and water rationing had to be introduced in Dar es Salaam, revenue collection fell, inflation rose, the strategic grain reserve fell, the trade account deteriorated.

The long-delayed launch of TANZANIA’S STOCK EXCHANGE has been postponed again (until after March 1998) because of the failure to get any companies ready for official listing. Most of the 18 companies earmarked for flotation are reported still to have to complete internal structural changes and accounting procedures – Financial Times (Thank you Chuni Chande for sending me this items – Editor)

The successors to the National Bank of Commerce were officially born on October l. One, with 34 branches, is called NBC (1997) LTD and is designed to meet the needs of corporate and large business and personal customers and has as its Managing Director Dr. Francis Mlozi. The other, the NATIONAL MICROFINANCE BANK (NMB) will normally only lend sums of up to Shs 1 million ($1,666); it has 95 branches. But Minister of Finance Daniel Yona said that both banks were deficient in capital; private investors are to be invited to provide up to 70% of this; informal contacts are being made with selected large foreign banks. Meanwhile, Dar es Salaam has yet another bank – the Kenya Commercial Bank opened in October – Business News and East African. Asked in a recent interview on the subject of UNEMPLOYMENT what he was doing about a situation in which there were more job-seekers than jobs, Minister of Labour and Youth Development Sebastian Kinyondo said ‘The reverse is true. There are more jobs than takers, except in salaried jobs. The formal sector can absorb only a million people while the active labour force is about 13 million.. . . The problem is that some people don’t like to do particular jobs. We have people in the countryside who are not producing; graduates who won’t work in agriculture.. .we have to figure out how to get an entrepreneurial class.. . .we intend to cultivate the ‘can do’ spirit; it’s like creating an Indian or a Chinese out of our people – East African.

The 1997 VALUE ADDED TAX (VAT) ACT was passed into law on October 21; registration of potential payers was due to start in January 1998.

The BWAWANI HOTEL was closed temporarily on September 6. The Zanzibar government took it over and cancelled a 30-year lease agreement accusing the British firm, Zee Hotel Management Group, of running up unpaid debts of Shs 1.5 billion in rent and tax. The firm’s managing director Mr Deepak Khotari was ordered to leave the country and escorted to the airport- Daily News.

The MWADUI DLAMOND MINES have increased production by a ‘staggering’ 155% to 126,670 carats since the mines were rehabilitated three years ago – Bank of Tanzania.

The TANZANIA-CHINA FRIENDSHIP TEXTILE COMPANY has also made a U-turn since it was turned in July 1997 into a joint venture between the government (49%) and the private Chinese firm Dieqiu (51%) One month after privatisation the profit was Shs 5 34 million In the second month this shot up to Shs 120 million

MALAYSIA is making a major investment in Tanzania though a $105 million syndicated loan for the country’s first ‘build-own-operate’ 100 MW diesel power plant in Tegata. The loan is backed by a power purchase agreement, But, the World Bank does not approve and has threatened to withdraw its support for the huge Songo Songo gas into electricity scheme if the new plant goes ahead – Southern Africa Decisions, the Business Times, the East African.

RECENT AID: NETHERLANDS – Shs 46 billion during the next five years for development in Kagera, Shinyanga and Arusha regions. Tanzania is the largest recipient of Dutch aid in Africa and the third in the world. The visiting Dutch Prime Minister said that Tanzania was on the right track in development. A $20.9 million WORLD BANK-IDA Credit for primary and girls education and policy planning. The EU – Shs 2.84 billion for urban water supplies and rehabilitation of cotton research facilities. JAPAN – Shs 245 million for educational films for Zanzibar TV. NORWAY through UNICEF – $1.82 million for water and sanitation centres in the Coast, Iringa and Mwanza regions and the setting up of thee monitoring and management support centres. AFRICAN DEELOPMENT BANK – $62 million for structural adjustment. AFRICAN DEVELOPMENT FUND – $28 million for improvement of the road between Tanzania and Uganda. SWITZERLAND – a grant of Shs 4.8 billion in balance of payments assistance. GERMANY – $4.5 million for the renovation of buildings on Ocean Road in Dar es Salaam originally built by the Germans a century ago and which are now used by the Tanzania Cancer Institute. CANADA – Canadian$2.5 million for pulses and other food aid. EGYPT – $30,000 to Zanzibar for drugs and medical equipment. KOREA – $40,000 for vehicles. CHINA – $40,000 for food aid and six new locomotives. USA – $225,000 for military training.