TRANSPORT

by Ben Taylor

Growth and growing pains for Air Tanzania

The fleet of aircraft operated by Air Tanzania (ATCL) continues to grow, with the arrival in December of a new Bombardier Q400. This is the eighth aircraft (two Boeing 787-8 Dreamliners, two Airbus A-220-300 and four Bombardier Q400s) to be purchased under the administration of President Magufuli, who has committed to reviving the national airline, with plans (and orders) in place to expand the fleet to eleven.

The plane’s arrival took place a day after President Magufuli had announced that the aircraft, which had previously been impounded in Canada in November had been released. The President did not give details of what was done that led to the release of the aircraft.

According to Foreign Affairs Minister, Palamagamba Kabudi, the seizure was because of a dispute between Tanzania and a South African farmer, Hermanus Steyn, “seeking compensation for a farm and other properties that was nationalized in the 1980s”. Mr Steyn had filed a claim in Canada.

This was the third seizure incident of an Air Tanzania aircraft, and the second in Canada. The third took place in August, when South African authorities impounded an Airbus 220-300 leased by Air Tanzania.

In October, ATCL indefinitely suspended flights to and from South Africa. The reason for the suspension was not disclosed, though it followed on from a temporary suspension that Minister of Works, Transport and Communication, Isack Kamwelwe, had described as being “due to xenophobic violence”. However, suspicions remain that the court action in South Africa may have played a role. The temporary suspension was put in place in September, the day after the impounded plane was released.

The Dar es Salaam-Johannesburg route was launched in June 2019, with ATCL operating four flights a week. The maiden flight on the route saw a delegation from the national carrier turned away at the Oliver Tambo International Airport, blamed on a “miscommunication” between the airport and immigration officials. Two Tanzanian Ministers, several ATCL officials and journalists were denied entry into the airport for a welcome ceremony.

Progress with rail revival
Tanzania Railway Corporation (TRC) started operating a new scheduled train from Dar es Salaam to Moshi via Tanga in December 2019, following successful trial trip one week earlier.

TRC is restarting the route after 25 years with trains that will have eight passenger wagons and the capacity to transport 700 passengers.

Earlier in 2019, freight services connecting Tanga and Moshi were restarted, with the hope of reducing heavy transport of cement on the trunk roads connecting Arusha and Moshi with the coast. The route was briefly suspended in October following rain damage.

At the launch event for the freight route, the Prime Minister indicated that the long-disused section of the line between Moshi and Arusha would also be restored. TRC has also reported that a feasibility study for extending the line as far as Musoma has been completed.

The upgrade of the Central Line to standard gauge (SGR) has also seen progress. TRC Director General, Mr Masanja Kadogosa, said the construction of the first SGR section from Dar es Salaam from Morogoro has reached 72% completion while the Morogoro to Dodoma section has reached 22%. TSh 2.1 billion from internal sources has financed this work.

New ship to be called “MV Mwanza Hapa Kazi Tu”
Minister of Works, Transport and Communication, Isack Kamwelwe, has announced that a new ship under construction in Mwanza is to be called MV Mwanza Hapa Kazi Tu.

The new ship, costing TSh 89 billion, will be 92.6 metres long, 17 metres wide and 11.2 metres high, with a carrying capacity of 1200 passengers and 400 tonnes of cargo. Upon completion it will be owned and operated by the government, plying the waters of Lake Victoria.

‘Hapa Kazi Tu’ is a slogan President John Magufuli used during 2015 presidential campaign. The slogan translates as Just work, nothing else.
The minister explained that there is an official government committee that devises names for government projects.

While on a campaign trail in 2015, President John Magufuli promised to build a new ship to replace MV Bukoba which was involved in a tragic accident 1996.

Looks don’t matter at Air Tanzania, says Minister
Deputy Minister of Works, Transport and Communication, Atastashta Nditiye sparked laughter in Parliament by stating that the government does not use beauty as a key criterion when hiring staff for Air Tanzania. He was responding to an MP calling on the airline to emulate other carriers by hiring staff with aesthetic qualities that attract clients to improve the airline’s visibility.

Nditiye explained there is a well laid down procedure that governs the hiring of staff at ATCL including that the applicant must be fluent in both Kiswahili and English and must have a certificate in either airport ground service or in-flight service. “Above all they must be of good conduct which has to be proven,” said Mr Nditiye.

AGRICULTURE

by David Brewin

Climate-Smart Agricultural Solutions
The Netherlands Development Organisation is providing $43.68 million for a fund aimed at increasing food production using Climate-Smart Agricultural Solutions in Tanzania, Kenya, and Uganda.

Project Manager Joseph Muhangwa has explained that the beneficiaries will be smallholder farmers, farm input providers, small and medium business enterprises, agricultural service providers and cooperatives which deal in the value chain of pulses, oilseeds, potatoes, and cereals in the three countries. The money will mostly go directly to various businesses that meet the relevant criteria during the next five years. The support is designed for businesses that are too risky for financial institu­tions to support, but which meet the project’s expectations. The project manager has been quoted as saying that businesses benefiting from the project must demonstrate involvement of smallholder farmers and be climate-smart or environmentally-sustainable. They should also be all inclusive in terms of women and youth. Most importantly the ideas should be replicable.

The maximum amount available for any given business is $224,000 or 50% of the total business case cost. In Tanzania the beneficiaries will be agricultural entrepreneurs in Mbeya, Katavi, Njombe, Ruvuma, Arusha, Kilimanjaro, Dodoma, Singida, Tabora and Manyara regions.

The programme’s aim is to increase production and income for 300,000 farmers and improve business performance for 50 small and medium entrepreneurs and 30 cooperatives. The program analyses the climate risk of food value chains and business opportunities in the three coun­tries.

Livestock and leather
Tanzania’s huge livestock population provides the economy with not only meat, milk and associated products, but also raw hides and skins which are processed into leather.

In the East African region, Tanzania has the second largest herd of livestock (after Ethiopia) and produces 3.9 million bovine hides, 2.5 million goat skins and 2.3 million sheep skins each year. But thousands of tonnes of skins and hides apparently go to waste.

Two Italian companies have signed an agreement with the prisons department and the Public Service Social Security Fund to establish two leather factories in Moshi in the Kilimanjaro region. The companies will invest $24.5 million to construct the two leather factories, managed jointly with Karanga Leather Industries Company in Karanga prison. The factories, one for shoe-making and another for tanneries, will be constructed on 25 acres of land at the industrial area within Karanga Prison and are set to be completed in 16 months. The Italian companies will provide both finance and technology for production of quality leather products for export to Italy and other European countries. The plant is expected to produce 1.2 million pairs of shoes per year.

President Magufuli has also invited Egyptian investors to invest in livestock-based industries modelled on Egyptian technology.

The cashew nut marketing saga
Details were given in the last issue of Tanzania Affairs concerning the intervention by President Magufuli in the marketing of Tanzania’s valuable cashew nut crop to help growers. The search for processes came at a time when the Tanzania government was still holding a huge stock of cashew nuts, estimated at 200,000 tonnes, which it bought from farmers in November last year after it failed to secure foreign buyers. It seems that the Kenyan company, Indo Power Solutions, which agreed to buy 100,000 tonnes of cashews from Tanzania, took the Tanzania government for a ride in the $180 million deal after it surfaced that the company was not known to have transacted any deals worth more than $10m and was a trader of various commodities but not cashews.

Cashew nut sales on the international market dropped 63% to $196.5 million last year, compared to $529.6 million in the 2017 trading period. Recent figures show that exports fell from 329,000 tonnes in 2017 to 120,000 tonnes in 2018.

Cashew nut production during the 2017/2018 season stood at about 240,000 tonnes; out of which, some 213,000 tonnes were produced by the government. Some 90% of the cashew nuts are exported in their raw form owing to the country’s low processing capacity.

To increase local returns, Tanzania is looking for investors to add value on the nuts and process them into products such as cashew nut cheese or butter, sweets, fruit drinks or distilled liquor lubricants.

The government has set aside 540,000 ha of land for agricultural expansion and industrial development.

Banana research
More than 20 varieties of bananas are grown in Tanzania, although not all are suitable for human consumption. They are popular due to their non-seasonal nature and, apart from playing a key role in ensuring food availability all year round; the crop provides an annual income for households of about $1,500.

Furthermore, the banana plant trunk can be cut up for use as livestock feed, and its fibres can be used for fencing, making paper and crafting various works of art.

Late last year the Tanzania Agricultural Research Institute confirmed 16 new drought and disease resistant banana hybrid varieties in the banana producing regions of Mbeya, Kilimanjaro and Kagera.

Tanzania is also making plans for a new banana research centre. Belgium has pledged $1.29 million for a Centre of Excellence to be based at the Nelson Mandela African Institute of Science and Technology in Arusha.

Boosting rice output
Tanzania’s main food crops are maize, rice, sorghum, millet, legumes, nuts and other tubers, horticultural crops and coconuts, all produced largely by smallholder farmers.

Maize and rice are the most important staple food crops grown in most parts of the country. About two million farmers grow rice.

The Permanent Secretary in the Ministry of Agriculture, Matthew Mtingumwe, has announced a new 12-year plan to raise annual rice production from 2.2 million tonnes to 4.5 million tonnes. The strategy will be implemented between the government and with funding from the World Bank, Japan International Cooperation Agency and the African Development Bank.

Over the years crop production has been dropping partly due to low adoption of recommended agricultural production practices and lack of fertilisers. The 12-year plan to boost rice production can be viewed as a means of forestalling a food crisis in the region, with many African countries south of the Sahara counting below average rains and drought which has caused a sharp rise in cereal prices.

15 Coffee species facing extinction
According to botanist Aaron Davis writing in Nature, 15 species of coffee out of the 75 species grown in the East African coffee sector are threatened with extinction. Tanzania has been facing a dry season in many growing areas.

The Tanzania Coffee Board has estimated that about 450,000 families in Tanzania grow coffee. Arabica coffee accounts for more than half of the country’s production. It exports over 12,000 metric tons annually – mainly to Japan and Germany.

Poor agricultural practices among the mainly smallholder producers are causing the decline of Arabica and Robusta so that attention is very slowly being drawn back to wild coffee because of its tolerance of changes in the weather and resistance to pests and diseases. Robusta is becoming more popular because it resists coffee leaf rust in many locations, has higher productivity and lower market prices. It also has a high caffeine content.

The UN Environment Programme has identified improper land use, like slashing and burning, and the excessive use of chemicals as lead­ing causes of habitat and forest loss. In East Africa, commercial house construction has taken over even arable land that was initially used for farming. It is often straight, hard and termite resistance which makes it a favourite for use in minor construction. These, coupled with diseases, are causing growers to opt for wild coffee as it is a more attractive alter­native for the sustainability of coffee.

Game hunting blocks
Tanzania is introducing a new auction system for big game hunting blocks. The government says that this is aimed at emphasising trans­parency and curbing corruption in parts of the tourism industry. The Tanzania Wildlife Management Authority is auctioning off 26 hunting blocks for the first time. Eligible hunting companies will be allocated a maximum of five hunting blocks, each in different categories. Most of the hunting blocks are allocated within the 50 km² Selous game reserve ecosystem, a UNESCO World Heritage site known for its elephants, lions, zebras, black rhinos, giraffes and other species. Revenues from the tourism sector fetched $2.43 billion last year, up from $2.19 billion in 2017. Tourist arrivals totalled 1.49 million last year compared with 1.33 million a year ago. The government has said that it wants to bring in one million visitors a year by 2020.

BUSINESS & THE ECONOMY

by Ben Taylor

Parliament passes TSh 33 trillion annual budget
MPs overwhelmingly endorsed the TSh 33.1 trillion budget for the 2019/2020 Financial Year, a slight increase from 32.4 trillion in 2018/19. All CCM MPs endorsed the budget while the majority of opposition MPs voted against. Government expenditure is expected to reach 22.7% of GDP in 2019/20 estimates, up from 22.3% in 2018/19.

Of this amount, TSh 11.7 trillion is allocated for development projects. The minister said the development plan focuses on attaining 7.1% growth of Gross Domestic Product (GDP) in 2019 compared to 7.0% in 2018. The budget also aims to maintain inflation at between 3% and 4.5% and increase national revenue collection to 13.1% of GDP in the 2019/20 fis­cal year from this year’s 12.1%.

According to the Minister, Tanzania cemented its middle-income status last year by raising its per capita Gross Domestic Product (GDP) to $1,090, and noted that a strong year for agriculture had kept inflation down at 3.5%, the lowest level in 40 years.

Dr Mpango said the government seeks to put emphasis on the establish­ment and development of industries, especially those exploiting domes­tically produced raw materials. He said the focus will be on development of industrial clusters, Tanzania Automobiles Manufacturing Company Ltd (TAMCO) in Kibaha, Coast region, hide industry in Dodoma and special investment zones in Bunda, Dodoma and Benjamin William Mkapa in Dar es Salaam.

The budget also includes plans to spend TSh 9.7 trillion to service the public debt, which reached over TSh 51 trillion as of April, up from 49.9 trillion a year earlier. The Minister of Finance and Planning, Dr Philip Mpango, assured MPs that the debt remains manageable, according to the recent assessment by the ministry. He added that the present value of external debt against GDP is 22%, well below the allowable maxi­mum of 55%.

The Minister attributed the debt increase to the new loans that the coun­try acquired for execution of various development projects. These pro­jects include construction of Terminal III at Julius Nyerere International Airport (JNIA), upgrading the central railway to standard gauge, implementation of power projects as well as construction of roads and major bridges.

The Minister further announced that the country’s foreign reserve stood at US$ 4.4 billion, equivalent to 4.3 months of imports, as of April 2019. The amount exceeds the government target of four months’ worth of imports, according to Dr Mpango.

The budget also presented an opportunity for the government to refute claims by a section of MPs that business in the country was struggling due to poor business and investment climate. Dr Mpango and his Deputy Dr Ashatu Kijaji said the business environment in the country was superb and that more investors were willing to start businesses in Tanzania.

“Some MPs have been providing unrealistic statistics on business in the country, but the current statistics in the ministry show that businesses which are being shut are 16,252 while new businesses that are estab­lished are 147,817,” said Dr Kijaji. According to her, closing business was a normal practice worldwide and that some of the reasons for that were change of business, failure to compete with others, huge debts and accumulated taxes, among others.

As he presented the budget to parliament, Dr Mpango said the govern­ment was proposing to review 54 different fees and levies with a view to reduce and abolish some of them. “This is the first phase of implemen­tation of the blueprint for regulatory reforms to improve the business environment,” he said. The minister added that apart from the review of fees and levies, the review will also address the elimination of the existing duplication of responsibilities among the ministries, regulatory authorities and institutions.

Pauline Gekel (Babati, CCM) described it as “a special budget for Tanzanians”, that “has touched every mwananchi, poor, ordinary and big traders.”

Julius Karanga (Monduli, CCM) called it a win-win budget. “We hope people are going to receive it well because it is friendly budget that will help people generate income,” he said.

Opposition MPs were less positive, however. Acting Shadow Minister for Finance and Planning David Silinde said it was sad to see that 40% of the 2019/20 development budget had been directed to three projects namely Stiegler’s Gorge, the standard gauge railway and the revival of the Air Tanzania Company Limited (ATCL), instead of investing more on projects that touched directly on people’s lives.

He told the national assembly yesterday that despite the various changes in economic systems that the country has undergone, it has failed to remove the country and its people from abject poverty. He added that the government has failed to stick to its own five-year devel­opment plan, which states “that commercially viable projects should be left to the private sector, unless there is strong justification for doing otherwise”.

He said the opposition would have allocated 20% of the total budget to agriculture, 20% to education, 15% to industrial development and 10% to the water and health sectors respectively.

ACT Wazalendo leader Zitto Kabwe said the new budget is set more “to develop things rather than people” – infrastructure projects rather than public services. He also said that implementation of the budget is challenging because budgeted funds are not released in time or in full.

Beyond parliament, Honest Ngowi, an economist from the University of Mzumbe, cautioned against unrealistic budget that cannot achieve the intended revenue targets. “The government has collected only 87% of its revenue target in the current budget. And yet, it has increased projected collections to TSh 19 trillion in 2019/20,” he said. “The budget for 2019/20 is to a tune of TSh 33.1 trillion, more than what we can raise. It is so unrealistic, it would be good to use what we have.”

Tax authority chief demoted amid business complaints
In June, President John Magufuli unexpectedly sacked TRA commis­sioner general Charles Kicheere, and appointed Mr Edwin Mhede to head the tax agency. Mr Kicheere was demoted to the position of Regional Administrative Secretary of Njombe Region.

Sacked along him was the Trade and Industry minister, Mr Joseph Kakunda, who was replaced by Mr Innocent Bashungwa.

The move came a day after the president met with business leaders from various parts of the country. The hundreds of traders spent more than 10 hours at State House, complaining vehemently about the dif­ficulties they were facing doing business: an “unfair” taxation regime, “harassment” by security and regulatory agencies, “bureaucracy”, and “corruption” dominated cries from the traders.

The meeting echoed the apparent gloom among the business commu­nity that has persisted for some time now, even as the government was trying to restore confidence and push positive reforms.

Mr Kichere, who was at the meeting, found himself in a tight spot as TRA received most of the flak, roundly accused of harassing traders through over-estimation of taxes and threats. “Many of TRA workers who deal with tax do not know what they are doing. They have turned themselves into the law,” complained Francis Noni, a businessman from Kondoa District.
The President appointed Mr Edwin Mhede as the new head of the tax agency. Mr Mhede becomes the fifth Commissioner General to serve since the election of President Magufuli in October 2015.

“If the systems and institutions are functioning properly, then he (the president) wouldn’t have to convene such meetings,” said Prof Haji Semboja, a former lecturer at the University of Dar es Salaam. “The President is supposed to make sure the systems work so that he gets ample time and energy to implement major national programmes like the industrialisation drive,” he added.

Professor of economics, Honest Ngowi, says the causes of the mess that businessmen exposed before the president should be looked at beyond TRA and individual capabilities. “It is the question of the whole institu­tional and legal framework in creating a favourable business environ­ment and investment climate,” he said. “Issues of ethics, the fear of God, bribes and over-estimations of taxes go beyond TRA. If we don’t touch on the kernel of the matter we may keep on changing individuals a thousand times without results.”

Small fall in national poverty rate
The poverty rate dropped from 28.2% in 2011/12 to 26.4% in 2017/18, according to the latest survey by the National Bureau of Statistics (NBS). This was the headline finding of the government statistics agency’s lat­est Household Budget Survey. 14 million Tanzanians spend less than TSh 49,000 each a month, putting them below the official basic needs poverty line.

The report also concluded that TSh 161 billion is needed each month to enable the total population to meet life’s basic needs, the National Bureau of Statistics (NBS) says. The amount has increased from the TSh 103 billion estimated in 2011/12, partly due to inflation and partly to the country’s growing population.

Three out of ten (31%) rural dwellers live below the basic need poverty line compared to 16% of those living in urban areas. The rates had dropped from 33% in rural areas and 22% in urban areas in 2011/12.
Poverty remains most prevalent in Rukwa Region, where about 45% of its residents live below the accepted poverty line. Other areas with high poverty rates are Simiyu (39%), Lindi (38%), Geita (38%), Mwanza (35%) Kigoma (35%), Tabora (35%) and Singida (34%).

Aside from basic needs poverty, 8% of the Tanzanian population spends less than TSh 34,000 monthly. This means that they fall below the food poverty line.

The food poverty line increased from TSh 26,000 per month in 2011/12 to TSh 34,000 in 2017/18. The basic needs poverty increased from TSh 36,000 to TSh 49,000 per adult per month, in the same period.

Compared to the 2011/12 survey, there is a change in the distribution of poor people. The proportion of poor population in rural areas decreased from 84% in 2011/12 to 81% in 2017/18, while the proportion of the poor who live in Dar es Salaam doubled from 1.5% to 3.0%, and the propor­tion in other urban areas rose from 14% to 16%.

Harsh economic realities for female-headed households
An increasing number of families across Tanzania are now being headed by a woman, a recent national survey has revealed. According to the 2017/18 Household Budget Survey (HBS), the proportion of female-headed families increased from 25% in 2011/12 to 28%, having already increased from 18% in 1991/92.

The survey also found that poverty among such households has also jumped from 20% to 27%. Previously, female-headed households had been richer, on average, than male-headed households, but this no longer applies.
The Household Budget Survey was conducted by the National Bureau of Statistics (NBS), in partnership with the World Bank, UN Women, Unicef and Global Affairs Canada (GAC).

Ms Mwajuma Hamza, director of the Tanzania Women Chamber of Commerce, says development interventions should focus on ensuring equal opportunities for women and men in all sectors. “Tanzania needs to wisely carve a future where both women and men can thrive even in the event that one has to assume the responsibility of taking care of the family,” Ms Hamza said.

The Statistician General at NBS, Dr Albina Chuwa, said the rise in female-headed households is not peculiar to Tanzania, but a global trend that is most pronounced in Southern Africa. (The Citizen)

British High Commissioner shares concerns on the business climate
The British High Commissioner to Tanzania, Sarah Cooke, said in May that British investors yearned for policy predictability, less bureaucracy and faster approval of new investments or projects. Speaking at a Tanzania-Britain business dialogue forum in Dar es Salaam, she said there could be a severe lack of business confidence in Tanzania over the next few years if nothing is done to improve business environment predictability.

The event brought together government officials, British investors and UK government representatives to discuss the business environment in the country. The UK is the second biggest investor in Tanzania after China with investments valued at $5.64 billion (TSh12.9 trillion), accord­ing to Ms Cooke. “Investors plan for the long term,” she said. “They need to know the rules of the game will not change abruptly without consultation.”

However, the Minister of State in the Prime Minister’s Office (Investment), Ms Angellah Kairuki, said policy reforms were inevitable, and urged investors to be ready to adopt to policy changes so that they could make good decisions on investing in Tanzania.

“Changing policy has its challenges, and everybody should understand that the government’s intention is to strike an appropriate balance between the rights and obligations of investors,” she said. “We need to provide sufficient protection to foreign investors while at the same time ensuring that legal obligations are upheld.”

Over 900 British companies are operating in Tanzania, with the British High Commission stating that nearly 300,000 jobs were created in the past 15 years. British investors have invested in diverse sectors, includ­ing energy, infrastructure and construction, manufacturing, tourism, agriculture and agri-business, consumer goods, financial services and telecommunications. (The Citizen)

TRANSPORT

by Ben Taylor

Dar Airport Terminal III open
President John Pombe Magufuli opened the Terminal III building at the Julius Nyerere International Airport on August 1, 2019. The new terminal has the capacity to handle 24 large planes concurrently, and six million passengers annually.

Together with the other two terminals, the entire airport will now be able to handle more than 8 million passengers each year. This represents a significant increase on the airport’s busiest year to date: 2016, when 2.5 million passengers passed through. It is expected that Terminal III will handle international flights, while Terminal II will in future only operate domestic flights. The old international terminal is now due for refurbishment and technical upgrading.

The construction of the new facility cost the government a reported TSh 705 billion (US$ 282m). Of this amount, the Tanzanian government paid 15% in cash, with the balance provided in the form of loans from a range of lenders including HSBC bank. “Terminal three has been built using taxpayers money. As it stands, they need to feel the benefit of their money,” noted the President. He therefore directed the Works, Transport and Communication Ministry to ensure that all business at the new premises should be Tanzanian-owned.

Construction of the new terminal building, by Dutch contractors BAM Group, began in 2014. It had initially been due to be completed in 2016, but this was delayed, reportedly due to shortage of funds and a dispute over VAT payments. President Magufuli ordered a probe into the airport project in February 2018 after project costs and construction schedules were derailed.

Terminal I was originally constructed in 1956 by the colonial govern­ment, with capacity of handling 500,000 passengers a year. Terminal II, with capacity of handling 1.5 million passengers, opened in 1984. (The Citizen, The Guardian)

Hello Mumbai, London to follow soon?
The inauguration of Terminal III at JNIA came two weeks after the relaunch of long-haul flights to Mumbai, India by the national carrier Air Tanzania. A month earlier, the national carrier launched a direct flight from Dar es Salaam to Johannesburg in South Africa. This brings to seven ATCL’s number of international routes.

Passengers on the inaugural flight included the Minister for Works, Transport and Communications, Mr Isaak Kamwelwe, senior govern­ment officials, ATCL staff and journalists.

Mr Kamwelwe expressed optimism that the new route would help in cutting the time spent by passengers who had to connect through Nairobi, Dubai and South Africa. He added that the Mumbai route is of great importance in cementing relationships between Tanzania and India, noting that it would spur the growth of tourism and trade between the two countries. “India has high potential as a tourists source market, and we must take advantage of this by ensuring that we maxi­mally utilize the available opportunities,” the minister said.

The Mumbai route – to be operated three times a week – heralds the airline’s foray into the Asian market. Other planned routes are Bangkok, Thailand, and the Chinese city of Guangzhou.

Air Tanzania spokesperson Josephat Kagirwa said they are also plan­ning flights to London, to Lagos in Nigeria and Accra, Ghana. In addi­tion, a route to Nairobi, Kenya is anticipated.

Significant moves towards establishing the London route have also been completed. The airline has secured three landing slots per week for London’s Gatwick Airport. It is expected that flights will connect both Dar es Salaam and Kilimanjaro Airports with Gatwick on Wednesday, Friday and Sunday each week.

Before this route can begin operations, ATCL need to secure European Union safety standards certification. If Britain leaves the EU later this year as planned, this will require two signatory bodies to approve instead of one: a double headache for the airline, which only regularised its membership with the International Air Transport Association (IATA) recently, by paying back owed membership fees. However, ATCL has already completed the IATA Operational Safety Audit (IOSA).

Currently, there is no direct route from London to Tanzania. British Airways stopped operating the route after four decades in 2013, explaining that it was unable to do so at a profit.

Bagamoyo port development stalled
Talks on a proposed $10 billion development of a port at Bagamoyo have stalled. According to Tanzania Ports Authority (TPA) director gen­eral Deusdedit Kakoko, this is because investors’ conditions were likely to deny Tanzania maximum benefit from the project. “The conditions include investors’ demand that they be allowed to set charges for cargo passing through the port. They also want tax exemption on various goods in addition to being compensated for any losses incurred during implementation of the project,” he told The Citizen newspaper in early May.

An initial agreement on the project was signed in 2013 during a cer­emony witnessed by President Jakaya Kikwete and Chinese President Xi Jinping. The project was to have been executed by China and Oman’s State General Reserve Fund (SGRF).

In November 2017, SGRF announced that the project would entail the construction in phases of a maritime port built to international stand­ards. The first phase was planned to include the construction of four berths, two of which were to have been set aside for containers, one for multiple uses and another for support services. However, these plans now seem to be in doubt.

According to Mr Kakoko, it was odd that the developers sought tax exemptions on the grounds there was insufficient cargo in the country. “If the country has insufficient cargo, why do they seriously consider Tanzania for investment in railways and ports? The condition requiring the government to compensate the companies in case of losses is the worst. Who knows that they will incur losses? This demand can render the country bankrupt,” he said.

According to him, the doors for discussions were still wide open, noting that the interests of Tanzania will have to take priority. “We are waiting for them. We will be ready for equal participation provided they relax their conditions. They should just bring in the money and be ready to share it with the country, but they should forget about getting 100 per cent preferential treatment,” said Mr Kakoko.

A month later, the stakes were raised further when President Magufuli weighed in on a related matter. The President expressed his strong opposition to the proposed Bagamoyo Special Economic Zone, a 3,000-hectare port and industrial city north of Dar es Salaam.

According to the President, allowing the Bagamoyo initiative to pro­gress would halt expansion of other ports including Tanga and Mtwara, and would entail long tax breaks for investors in the special economic zone. The government has also argued that it would also lose some sovereignty in the management of the project.

The President suggested corruption may have been involved in the government’s payment of billions of shillings as compensation for local residents to create room. “This project has very difficult conditions. They are exploitative and awkward. We can’t allow it,’’ said President Magufuli.

China is in the process of establishing transport and trade infrastructure across Africa, Asia and Europe under the ambitious ‘Belt and Road Initiative’. The Bagamoyo investment was an important part of this global strategy to strengthen the country’s trade and other interests, drawing on the ancient Silk Road trading route.

Opposition leader Zitto Kabwe said President Magufuli was opposed to the project from the beginning. “The conditions he is saying is just diversionary,” said Mr Kabwe, adding that the project would put Tanzania in the world maritime map.

The Speaker of Parliament, Job Ndugai who has publicly expressed sup­port for the Bagamoyo project and challenged the government to roll it out, yesterday backtracked. “We didn’t have information about the stringent conditions that were attached to the project, as was explained by the President,” he said.

Horrific petrol tanker explosion in Morogoro
More than 80 people have been confirmed dead and 50 others serious injured after a fuel tanker exploded into flames at Msamvu in Morogoro town on August 10. Many of the dead were reportedly motor cyclists who were at the scene collecting the spilled fuel and food vendors who conduct their business along the Dar-Morogoro Highway.

The accident occurred about 200 metres from the Msamvu Bus Station in Morogoro town. “The lorry overturned and spilled fuel over 100 metres along the road,’’ said Morogoro Regional Commissioner, Dr Steven Kebwe.
President John Magufuli said he received the news with deep shock. “I have been saddened to learn such a big number of Tanzanians who lost their lives due to the accident. I am extending my condolences to the families of those, who lost their beloved ones and I wish a speedy recov­ery for those, who were injured in the accident,” he said in a statement.

AGRICULTURE

by David Brewin

“Operation Korosho” (Cashewnuts)
Tanzania’s cashewnut industry began to face serious problems in the last four months of 2018 which is the main harvesting season.

Performance of Tanzania’s traditional exports (source: Tanzania Revenue Authority & Bank of Tanzania)

President Magufuli and the Cashewnut Board of Tanzania (CBT), the regulator and main supplier of inputs, were in dispute. The President decided to remove CBT’s main source of income – a levy on raw cashew exports – and place the funds with the government. The Treasury already owed CBT over TSh 200 billion (US $86m) earned from a levy in previous years which had not been transferred. The CBT proposed a floor price of TSh 1,550 per kilogram, but the farmers considered this too low as it was claimed to be lower than the cost of production.

There was also a dispute over Tanzania’s main and long-standing policy of processing cashews locally rather than exporting them raw. The crucial issue was the low price international buyers were offering for raw nuts, compared with the exceptionally high prices of the previous year, when farmers were paid up to TSh 4,500 per kilo.

As the situation deteriorated, President Magufuli himself went to Mtwara, the centre of the industry, when the main harvesting season began in November and took over personal control of marketing of the crop. He sacked the chairperson of CBT, the entire Cashew Board, the ministers of agriculture and trade and others.
Meanwhile, Tanzanians had become aware of the importance of the crop to the overall economy. In the 2016/17 year cashew nuts brought in a sum in foreign exchange which was greater than Tanzania’s combined earnings from coffee, cotton, tea, cloves and sisal.

Tanzania has about 700,000 hectares of cashew nut farms. According to the Food and Agricultural Organisation of the United Nations (FAO), Nigeria, Guinea-Bissau and Ivory Coast are Africa’s top producers. Tanzania ranks fourth. However, it has only very limited processing facilities, many of which are old and outdated, for processing the crop before it can be marketed worldwide.

After examining the situation on the ground, the President announced that the government would purchase all cashew nut stocks from farmers and insisted that all the collected crop must be moved from primary cooperative unions for storage to government warehouses. It became known as ‘Operation Korosho’.

The government, then under pressure to find foreign buyers before the nuts started to rot, hurriedly signed a memorandum of understanding in early February with a little-known Kenyan – registered firm, Indo Power Solutions Ltd – for the purchase of 100,000 tonnes. These were bought and paid for.

Cashew nut factory in Mtwara (Ama Lorenz – Euractiv, Germany)

The President then ordered the Agricultural Development Bank to buy the remaining output and sent 75 army trucks to take the nuts into government depots.

The President announced also that the government had handed over the few still functioning cashew nut factories to the Tanzania People’s Defence Forces. But virtually all the factories were found to be needing rehabilitation and so the lack of spare processing capacity forced a change in ‘Operation Korosho’. Instead of looking for markets for processed cashews, the government began to look for markets for raw nuts. However, it is understood that the President’s efforts to sort out the issues were handicapped by the difficulty in identifying which people were eligible to pay, as many farmers had already sold their cashews to local unlicensed traders.

At the end of March 2019, the new Minister of Agriculture announced that the government intended to prosecute at least 780 people for trading in cashew nuts without business licenses.

Although Tanzania produces less than 10% of the world’s total cashew output, it benefits from seasonality by being the biggest producer of the nuts during the October – January harvesting period. Other cashew producers from West Africa usually harvest their crop in February or later.

Private and public sectors
Ever since former President Nyerere in the sixties, influenced by his visits to China, introduced his version of African socialism into the agricultural sector, small scale smallholder farming has remained dominant in Tanzania’s agricultural sector.

When President Jakaya Kikwete took over power he introduced a policy called “Agriculture First” (Kilimo Kwanza) in 2009 which was designed to introduce an element of foreign venture capital investment into the private sector so that there could be the possibility of accelerated production of certain crops. It was a radical policy to continue to support smallholders while promoting, at the same time, large foreign venture capital investment. One of the first projects was supported by a US $47m matching grant fund backed by a World Bank loan of US $70m.

Another project is the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) to support smallholders while promoting foreign venture capital investment. The government insisted that any fixed assets which investors purchase would, at some future date, be transferred to local rural district councils, which would hold the property on behalf of smallholders. SAGCOT is another ambitious public-private partnership, designed to attract global agribusiness where investors develop huge segments of fertile land.

Since coming to power in 2015 the Magufuli government has taken control of fertiliser and seed inspection and bulk procurement and re-empowered cooperative unions in crop purchasing thus undermining private exporters and contract farming. The dramatic takeover of the cashew market by the army on President Magufuli’s orders, have shown the deep commitment of the party and state apparatus to maintaining public control.

Land leases
A very large Swedish investment in an integrated sugar project with an out-grower component failed to take off after years of negotiating with the government over land and water rights.

A second project – a 5,800 hectare rice and maize growing venture, which was expected to be an effective out-grower project – is now up for sale after defaulting on a US $20m loan from the US overseas Private Investment Corporation. This has also not been a success. Eventually, the government decided to ask the World Bank to discontinue the project after prolonged wrangling over how the fund should function with the result that no grants were ever made.

Tanzania is also working on a new policy that will reduce leases of land owned by foreigners from 99 years to 33 years. The policy is likely to be introduced fairly soon. Foreigners will only be allowed to acquire such land after they have registered with the Tanzania Investment Centre.

Tanzania Tea auctions
Tanzania sells between 5,000 and 8,000 tonnes of tea each year through the Mombasa auctions in Kenya. In a bid to cut costs incurred in transporting tea to Mombasa for sale the government is planning to establish an auction in Dar es Salaam. The Tea Board of Tanzania stated that local tea auctioning would reduce transport costs, raise income for farmers and boost business at the Dar es Salaam port.

Higher yielding bananas
The International Institute of Tropical Agriculture, in partnership with Tanzania’s national research centres have developed hybrids of the popular banana called Mchare. These hybrids were bred with disease resistant wild bananas and are high yielding, with high levels of resistance against key pests. The hybrids can increase yields by between 30% and 50%, resistance to at least three major pests and diseases. The diseases that are being addressed by the project are Fusarium Wilt, and Black Leaf Streak disease (Sigatoka), nematodes and banana weevils.

BUSINESS & THE ECONOMY

by Ben Taylor

Audits, exchange rates and growth: economics in dispute
A series of arguments flared early in 2019 on economic and related matters, as the state of the national economy became an increasingly significant political battleground.

Average exchange rate TSh to US dollar (source oanda.com)

In addition to controversies linked to the annual audits of public sector institutions by the Controller and Auditor General (see Politics section, this issue), arguments arose around exchange rates and GDP growth figures. Tanzania’s leading English-language newspaper, The Citizen, apparently provoked official concern when it reported on a dip in the value of the Tanzanian Shilling. The government suspended the newspaper for 7 days, citing an article published on February 23rd with the front page headline: “Closely monitor fall of Shilling, experts caution.” The offending article reported that the TZS-USD exchange rate had slipped to TSh 2,415 per dollar at some forex bureaus, from 2,300 a week earlier, and stated that the shilling’s value had reached its lowest point for three and a half years. The paper then quoted the responses of Prof Honest Ngowi of Mzumbe University Economics Department and Dr Charles Sokile of Oxford Policy Management, a research and consulting firm, to the situation. Both economists argued that the situation should be monitored, that further depreciation would have economic consequences for Tanzania, and that the government should take steps to protect the Shilling. They pointed to large-scale infrastructure spending, this year’s decline in cashew nut exports and a fall in foreign investment as likely reasons for the Shillings’ reported woes.

A few days later, the government closed at least 50 foreign exchange bureaus in Dar es Salaam, citing concerns that the bureaus had been “flouting the law and regulations governing the business.” It is unclear whether this action was prompted by or linked to The Citizen’s reporting in any way. Indeed, the government carried out a similar clampdown on forex bureaus late in 2018 in Arusha. In both cases, the government argued that many forex bureaus were not properly licensed and that many were engaged in tax evasion.

The Citizen’s suspension attracted the attention of foreign diplomats. In a coordinated response, eight High Commissioners or Ambassadors – including the UK High Commissioner to Tanzania, Sarah Cooke – posted similar statements on Twitter. Their statements noted that their normal morning routine had been affected: “Usually I start my day with a fresh copy of the Citizen. Unfortunately it has been banned for a week. Is this sanction proportionate to the offence purportedly committed?”

It also drew attention from The Economist, which reported that in response to the suspension, “capital is reckoned to have fled to Kenya” and that “foreign-exchange controls are widely said to be imminent”.

The Shilling has since recovered most of its lost ground against the dollar – see chart above. The second economic row to break out focussed on the latest forecasts of the International Monetary Fund’s (IMF) for growth in Tanzania, and their latest report on the state of Tanzania’s economy. The IMF lowered its forecast for Tanzania’s economic growth to 4% this year and 4.2% in 2020 from a previous forecast of just under 7% in each case.

The government forecasts the economy will grow 7.3% in 2019 after an estimated 7.2% expansion last year, helped by investments in public infrastructure.

The IMF’s forecasts were first released on April 9, contained in data tables within their World Economic Outlook but without any accompanying explanatory text or commentary. This commentary was to be found in their 2019 Article IV Consultation Report on the Tanzanian economy, which had been due for publication around the same time. However, a statement posted on the IMF website noted that publication was not yet possible, as “the [Tanzanian] authorities have not consented to publication of the staff report or the related press release.”

The government said that it did not block the IMF report. Minister of Finance and Planning, Philip Mpango, told Parliament that government and the IMF were still discussing the report. “We are in talks with the IMF to sort out the problem before official publication,” he said.

Dr Mpango was responding to a question asked by opposition (Chadema) MP, Frank Mwakajoka: “The government blocked the IMF from publishing its report on the country’s economic status in violation of freedom of expression. What is the government afraid of?”

Even as the Minister gave his response, a leaked copy of the report was already freely available online. The key paragraph is worth quoting in full: “Macroeconomic conditions have remained stable in 2017–18 but there is uncertainty about the pace of economic activity. Headline inflation has been below the central bank’s medium-term target of 5% and the exchange rate has been broadly stable. Official GDP data point to about 7% annual growth, but there are serious weaknesses in the data and other high-frequency indicators point to a more subdued pace of economic activity. For instance, during the 2017/18 fiscal year (July to June), public sector wages, credit to the private sector, and imports fell by 5.3%, 2.9%, and 7.7% in real terms, respectively, while tax revenues grew by 3.1% in real terms.”

The report further distinguished between a “baseline scenario”, in which the current direction of policy is maintained, and an “alternative scenario”. The lower headline growth forecasts relate to the baseline scenario: “a weak business environment and limits to the scale of public investment (from insufficient financing), together with the implementation of projects that may not have high rates of return are likely to constrain annual GDP growth to below the 6.3% average rate recorded between 1998 and 2017.”

The IMF noted that instead, “a more ambitious set of fiscal and market-friendly reforms and appropriate public investments would lead to higher potential growth [of around 6-7% per year]”. This alternative scenario would entail improvements to tax administration and expenditure management, revisions to recently-enacted legislation including the Statistics Act and mining laws, reforms to strengthen governance and lower the cost of doing business.

Finally, the report notes that the Tanzania government was more optimistic about growth prospects: “They considered that their recent estimates of economic growth properly reflect economic activity and envisage that real GDP growth will be in the order of 7-8% per year in the short to medium-term. They believed that their policies were based on robust public investment plans and would be supported by a rationalisation of regulations affecting the business environment.” This government view was also expressed by the Finance Minister when presenting the government Budget Framework for FY2019/2020 to parliament in March. Dr Mpango painted a positive picture about the state of the national economy. Dr Mpango said the government will continue to implement both fiscal and monetary policies to continue sustaining the economy. He said GDP grew by 6.8% during the third quarter of 2018, and that the inflation rate remained “low and stable, at 3% in January this year”. The minister also said extended broad money supply (M3) also grew by an average of 6.6% in 2018 compared with an average of 5.5% in 2017, due to increased lending to private sector.

He said the local currency has continued to remain stable against global major currencies due to implementation of monetary policy, the use of gas to generate electricity, which has reduced fuel imports and improved local production of goods which were previously being imported.

2019/20 Budget
In presenting the 2019/20 budget to parliament, the Finance Minister, Dr Mpango, said the government would focus on four key areas: expanding the country’s industrial base, improving public services, investing in mega-infrastructure, and reforms to strengthen the business and tax environment.

On industry, the Minister noted that “key projects will include construction of a Liquefied Natural Gas (LNG) plant, establishment and development of special economic zones, [establishment] of factories that will add value to agricultural, livestock and fisheries products as well as those that are aimed at adding value to minerals and other natural resources.” On infrastructure, he pointed to construction of the hydroelectric project at Stieglers Gorge on the Rufiji River, improving Air Tanzania Company Limited and building the standard gauge railway line linking Dar es Salaam to Dodoma, Kigoma, Mwanza and Rwanda.

The cost of the plan comes in at TSh 33.1 trillion, up slightly from 32.5 trillion in 2018/19. This increase of 1.8% is the lowest budget increase in recent years, lower than increases seen a year ago (2.5%), in 2017 (7.5%) and 2016, for President Magufuli’s first budget (31%). It reflects concern expressed by politicians and economists that ambitious plans to increase tax revenues in previous years were unrealistic.

This amount (33.1 trillion) will be raised from a combination of taxes (58%) and non-tax revenues (9%), local government taxes (2%), development partners (8%), concessional loans (7%) and non-concessional loans (15%).

Vodacom leadership
In early April, the Chief Executive Officer (CEO) of Vodacom Tanzania, Hisham Hendi, was arrested by Tanzanian authorities, along with eight others. Mr Hendi and the others were questioned by law enforcers allegedly for fraudulent use of network facilities, and some of the group, including Mr Hendi, were subsequently charged. The statement of charged mentioned a “pecuniary loss” to the Tanzania government and the Tanzanian Communication Regulatory Authority (TCRA) amounting to over TSh 11 billion. Other charges included importing, using and installing communication equipment as well as distributing frequency numbers without proper licences.

A week later, Mr Hendi and the others were released as part of a plea-bargain arrangement between Vodacom Tanzania and the Tanzanian authorities. “We pleaded guilty, we had a plea bargain with the Director of Public Prosecutions, and we pleaded guilty,” said Rosalynn Mworia, Vodacom Tanzania’s Director Corporate Affairs. The arrangement included making a TSh 5.28 bn (US $2.29m) payment to the government, and secured the release of all those who had been arrested.

Mr Hendi, an Egyptian citizen, had only been officially in position as CEO for a week before his arrest, though he had been acting CEO for around six months. His appointment came after Ms Sylvia Mulinge, a Kenyan citizen, failed to secure a work permit from the Tanzanian authorities. She had been appointed to succeed Mr Ian Ferrao effectively from June 2018, who had served in the role for three years.

The board of Vodacom Tanzania appointed Jacques Marais as acting managing director.

MO DEWJI ABDUCTION DRAMA

by Ben Taylor

In the early hours of the morning of October 11, 2018, the prominent businessman and philanthropist, Mo Dewji (see TA108 and other issues), was abducted outside the Colosseum Hotel in the Oyster Bay area of Dar es Salaam. He was released in the middle of the night ten days later on the grounds of the Gymkhana Club golf course. Mr Dewji (43), reportedly Africa’s youngest dollar billionaire, had been planning to visit the gym at the Colosseum Hotel, as part of his normal routine. Police said he was dragged away by masked armed men as he arrived at the hotel.

Paul Makonda, the Dar es Salaam Regional Commissioner, said: “They fired a gun and then they opened the gate. Initial information indicates he was kidnapped by whites travelling in two vehicles.”

This kicked off a police operation to identify the perpetrators and to find Dewji. However, the operation did not achieve decisive progress towards either goal, and security forces in Tanzania were left still racking their brains when Dewji was found ten days later.

The Inspector General of Police, Simon Sirro, said the kidnappers dumped Mr Dewji at the Gymkhana Golf Club grounds, close to State House, at around 2am and escaped. Footage showed a tired-looking Mo with dishevelled hair and wearing a t-shirt and jogging trousers as he thanked the police and President Magufuli for their efforts to find him.

Mr Sirro told reporters that the police found four guns including an AK47, three pistols and 35 bullets in the vehicle used in the kidnap. The abductors had tried to burn the car before they fled, he added. “All indications still show that the kidnappers were foreigners,” Mr Sirro said, adding that Mr Dewji told the police that “they were speaking English and very little Swahili.” Dewji later noted that he recognised their accents as South African.

Journalists were shown pictures of a dark blue car, a Toyota Surf, which Mr Sirro said entered the country six weeks before the abduction, from a neighbouring country that he did not name but which is widely believed to be Mozambique.

The motive of the kidnap has not been established, leaving Tanzanians with more questions than answers. The police were not forthcoming with information, fuelling rumours and direct allegations by opposition politicians that even the government was a suspect in this case.

The (UK) Times newspaper reported that some sources had “suggested that the Dewji abduction was planned not to end in his safe release, but the spontaneous national outpouring of distress prompted a change of plan. Although the government shared on social media platforms appeals for information, the president was quiet on the fate of one of his country’s most famous sons.”

A former soldier with experience of South Africa’s mercenary industry told The Times: “Complicity in the plot at a high level would have been needed for two white foreigners to enter and exit the country without detection.”

Questions have also been raised over Mo’s relationship with the government. He is believed to have been among the financial backers of the ruling CCM party in the 2015 elections, but this friendliness with the party seemed to wane after his business was hit with large fines over importation tax.

As far back as 2015, the newly-elected President Magufuli talked tough about the Dewji family’s unwillingness to hand over land they possessed to the government – land that was wanted for the liquefied natural gas (LNG) project in Lindi, southern Tanzania. The land title was subsequently revoked and handed over to the Tanzania Petroleum Development Corporation.

The family also owns an expansive sisal farm in Korogwe, Tanga, which had been subject to a separate dispute. In December 2017 the government moved to repossess the land, but learnt that MeTL (Mo’s group of companies) had secured a loan from an international bank using the title.

Dewji was born in 1975 in rural Tanzania. His father, Gulam Dewji, transformed his mother’s shop into a thriving import-export business, which enabled Mo and his siblings to be sent to private schools and exclusive sports clubs. Mo showed a talent for golf, and his father sent him to the Arnold Palmer Golf Academy in Florida. But, when it was clear he wouldn’t make it to a professional grade, he enrolled at Georgetown University, in Washington DC, to study international business and finance.

Dewji returned to Tanzania and joined the family business as chief financial controller and quickly set about expanding the operation. MeTL is now the country’s largest home-grown business employing a reported 24,000 people and accounting for an estimated 3.5% of gross national product (GDP).

He has featured on the cover of Forbes magazine, which ranks him as Africa’s 17th-richest person with a fortune of $1.5bn. He also served as an MP for ten years from 2005, representing Singida Urban constituency for CCM.

“I thank Allah that I have returned home safely. I thank all my fellow Tanzanians, and everyone around the world for their prayers. I thank the authorities of Tanzania, including the police force for working for my safe return,” tweeted Mo in his first public words following the ordeal.

AGRICULTURE

by David Brewin

Abnormal climate change
As countries all over the world are reeling from abnormal climatic change, Tanzania has, during recent months, been unable to escape many of the effects. Parts of the country have suffered from severe drought and the onset of the rains in March exacerbated problems in various parts of the country. Some homes, roads and farms have been destroyed but Tanzania appears to have suffered less than most of its neighbours from these problems.

Need for more sugar
Tanzania has a sugar cane deficit of 135,000 tonnes. Prime Minister Kassim Majaliwa is therefore issuing import permits to private sugar manufacturers, enabling them to import while seeking investment in both cultivation and processing of sugar as a permanent solution.

The government is also setting aside approximately $300,000 to companies wishing to develop sugarcane plantations in Tanzania.

The National Social Security Fund as well as certain pension funds are contributing to sugar cane cultivation and production at Mkulazi Farm in the Morogoro Region. The Mkulazi Sugar factory, which is under construction, hopes to start production in January 2019, and produce 30,000 tonnes of sugar per year.

In Kagera Region, the Sultanate of Oman has agreed to invest new funds to increasing production at its factory from 60,000 tonnes to 300,000 tonnes per year.

Coffee
Tanzania is not a major coffee exporting country but it does produce Arabica (70% of coffee exports from Tanzania) of high quality in Moshi and other areas, and also Robusta (30%) which is the basis of cheaper instant coffee. In 2017/18, Tanzania ranked 19th in the world in terms of coffee production, exporting 48,000 metric tonnes to countries such as Germany, Japan, Italy, Belgium and France.

The Moshi Coffee Exchange is an auction which takes place every week in the Kilimanjaro Region, where licensed exporters can purchase coffee alongside unlicensed local exporters.

Other counties with significant exports of coffee are Ethiopia (33% of its exports), Rwanda (27%), Uganda (18%), with Tanzania on 5% and Kenya on 4%.

According to Tanzania Coffee Board Acting Director General Primus Kimayo, coffee production dropped to 780,000 bags in 2016/17 from 1.03 million bags in 2015/16. It was expected that there would be further reductions to 716,000 bags in 2017/18. This makes it difficult for farmers to meet the government’s target of 1.6 million bags by 2021.

Tanzanian coffee producers could produce more if farmers focused on all aspects of the production process and increased yields substantially. In Uganda, for example, in 2013 the government deployed the army to provide agricultural extension services and employed soldiers to improve production of coffee seedlings.

But the recent dramatically increased popularity of coffee in Europe and China. For example, a heading to an article published by the British Guardian newspaper read “Coffee culture is taking China by storm”. It pointed out to Tanzania that opportunities could arise to benefit by increasing its production, especially of premium Arabica coffee grown mainly in Moshi District.

Nile Perch & Human Rights
Controversy has been caused in Tanzania over dwindling stocks of Nile Perch fish in Lake Victoria caused by over-fishing. Research by the Tanzanian Ministry of Livestock and Fisheries shows that there are an estimated 1 million tonnes of fish in Lake Victoria – mostly the Nile perch – valued at between $300 and $500 million. It is estimated that in 2017 Tanzania harvested 300,000 tonnes of Nile perch. Harvests in Kenya and Uganda were about 50,000 tonnes and 350,000 tonnes respectively.

The three countries involved (Tanzania, Uganda and Kenya) are so concerned about the over-fishing that they have launched a joint operation known as “Save the Nile Perch” with fishing industries in the Lake starting to implement the plan. Each country has provided a budget of USD $600,000 each to go towards the cost. Controversy has arisen in the Tanzanian parliament as the government introduced measures to protect the Nile Perch stocks from being further reduced due to overfishing, and also to reduce corruption in the industry.

No time was lost in beginning to implement the project, but as strong measures began to take effect, MPs in parliament began to reflect on concerns about side effects. The MP for Geita, Constantine Kanyasu, spoke of high fines of up to 50 million Tanzanian Shillings ($22,000) imposed on fishermen found in possession of immature fish.

The MP for Ubungo, Saed Kubenea, described the operation as humiliating for residents, as officers were beating people, confiscating fishing gear, and soliciting bribes from the fishermen. “We want the operation halted and the Tanzanian government to review its plans and come up with another operation that would be conducted with respect for human rights,” he said.

The MPs asked the government to form a special committee to review the exercise.

Carrots
The Arumeru District Commissioner has imposed a blanket ban on the importation of Kenyan carrots in a bid to protect local producers from competition. He stated: “During the harvesting period, carrots are imported to Tanzania from Kenya but, by the powers I have been given by the President, not a single carrot will be imported into the district.” He said that he and all carrot farmers would stand along the Arusha-Moshi highway to inspect all lorries, to ensure that middlemen did not import a single carrot from Kenya. These actions have, of course, brought into question Tanzanians commitment to open its borders for cross-border trade, as required by the East African Communities Common Market Protocol.

ENERGY & MINERALS

by Roger Nellist

Tanzania’s mining sector turmoil continues
The ban on the export of mineral concentrates that the government imposed in early 2017 is still in force and has hit the country’s major gold producer, Acacia Mining, hard. The company has been forced to stockpile its output, especially from its Bulyanhulu gold mine, and as a result this year has suffered a big drop in its revenues and cash reserves. In an effort to contain costs Acacia initiated in the summer a process of voluntary redundancies but in September, in a leaked internal memo from the company’s Managing Director, Mr Assa Mwaipopo, employees were told that it had become necessary to adopt a compulsory retrenchment scheme, beginning that month with a staff consultation process. Employees would be consulted on the staff retrenchment selection criteria, the timing of lay-offs and the terms of the severance package. It is understood that this is the second time that Acacia Mining has retrenched its Tanzanian workforce since the government’s mineral export ban came into effect.

Acacia’s parent company – the Canadian (Toronto based) Barrick Gold Corporation – owns 64% of Acacia Mining and this year has itself embarked on a massive staff reduction programme. Barrick’s Executive Chairman, John Thornton, said in September that he was seeking to achieve a leaner organisation and that, having slashed middle management by half to about 700, “we want to get it down to 300”.

In October, industry reports suggested that Barrick wished to take back full ownership and control of Acacia Mining, though it was uncertain whether that meant all three of Acacia’s Tanzanian gold mines or just Bulyanhulu. (The other two mines that Acacia operates are North Mara and Buzwagi). Estimates then put the value of the remaining 36% stake in Acacia at about $300 million. However, the potential buy-back was thought to be complicated by two big issues. First, Barrick was in merger talks with Randgold Resources, its big African gold producing rival, and needed to finalise that mega deal (rumoured to be worth more than $18 billion) before the merged group could find solutions to the Acacia Mining problem. Also, Barrick had just concluded a 50-50 deal with the Shandong Gold Corporation, a large Chinese mining company, under which each company will purchase 50% of the other’s shares. The Chinese deal is important for Tanzania because it can bring additional capital, technical expertise and importantly political connections. Thornton commented: “It’s one thing to be a Canadian company. It’s another to have China as your partner”. The second complicating issue is that Acacia is still in dispute with the Tanzanian government over its earlier concentrate exports and the bill it has been handed of $190 billion in unpaid taxes; Barrick has been trying to resolve the dispute and is unlikely to want to take back full ownership of Acacia until those major matters are settled.

But that is not the only problem Acacia Mining faces. In late October Mr Mwaipopo (the company’s Managing Director) appeared in court in Dar es Salaam charged with several serious criminal offences including money-laundering, tax evasion and forgery. The executive denied all charges but was remanded. He is one of three senior Acacia officials facing charges at the Kisutu Resident’s Magistrate Court, all of whom deny the charges. The other two are Acacia’s former Vice President for Corporate Affairs, Deo Mwanyika, and the Bulyanhulu gold mine’s Corporate Relations Manager, Alex Lugendo. The charges claim that in one transaction, $719 million was transferred into the account of a government official.

Acacia Mining issued a statement in response to these and other matters. “In light of recent developments in Tanzania,” the statement read, “the Company is now considering its position including in particular with respect to the Government actions and the charges now being brought.”

More work for the TEITI
At the end of October in Dodoma the Minister for Minerals, Ms Angella Kairuki, launched the Board of the Tanzania Extractive Industries Transparency Initiative (TEITI) and commissioned it to compile a special register detailing the ownership, shareholders, revenue and income of Tanzania’s extractive companies and operations. Acknowledging that this would not be an easy task she emphasised that such a register was essential to enable Tanzanians to know who owns what and for the government to satisfy itself that the country is obtaining its rightful share of the revenues generated from mineral, gas, and perhaps eventually oil, production. The Minister announced that some regulations would be changed to ensure that the TEITI can audit the extractive operations thoroughly. The TEITI Board is chaired by the former Controller and Auditor General, Mr Ludovick Utouh.

BUSINESS & THE ECONOMY

by Ben Taylor

Government seeks to allay investors’ concerns
The government sought to reassure investors that the private sector is seen by government as a key partner in Tanzania’s goal of becoming a semi-industrialised middle-income economy by 2025. This followed reports that a number of recent regulatory changes had been introduced that were perceived as unfriendly to business.

The government’s reassurances came at a meeting of more than 50 investors from various countries in Dar es Salaam in October, organised by the Mwalimu Nyerere Memorial Academy.

“In almost every country the private sector is a catalyst for sustainable development. The government acknowledges the contribution of the private sector to the country’s economic growth,” the Permanent Secretary in the Prime Minister’s Office (Policy, Coordination and Parliamentary Affairs), Prof Faustine Kamuzora, told participants in the symposium.

Earlier, some participants had expressed concern about tax rates and a perceived lack of private sector consultation in implementation of mega development projects.

Similar debates were heard elsewhere in Dar es Salaam among a different group of investors. The Second Annual Private Equity in Tanzania Conference, arranged by the East Africa Venture Capital Association (EAVCA), discussed ways of financing the country’s industrial aspirations with the stated aim of “restoring Tanzania’s status as a preferred investment destination in this part of Africa.”

EAVCA executive director Eva Warigia said political and regulatory changes in recent years have projected a negative image of Tanzania to prospective investors. “We think that information circulated through local and international media has damaged our reputation. We therefore called the investors to show them the reality and possible opportunities for investment,” she said. “In any democratic country, political and regulatory shifts are inevitable but truth be told, the Tanzanian government is supportive of the private sector.”

An associate analyst with Control Risks Company, Ms Patricia Rodrigues, assured investors that it is less risky to invest in Tanzania than elsewhere in East Africa. She attributed this to political stability and strong economic growth.

CEO Roundtable of Tanzania chairman Sanjay Rughani, who is also chief executive of Standard Chartered Bank Tanzania, said potential areas for investment include commercial farming, digital services, oil and gas, transport and logistics and social services.

“I have been working in the private sector in the country for a long time and also attend many public-private dialogues in my capacity as CEOrt chairman and member of the Tanzania Private Sector Foundation.

Tanzania falls in ease-of-doing-business survey
Tanzania has fallen to 144th position in the World Bank’s Doing Business Report, from 137th a year earlier. This is the 16th in a series of annual reports investigating regulations that enhance business activity and those that constrain it across the globe. It’s stated aim is to advance both regulatory quality and efficiency.

The Minister of Industry, Trade and Investment, Charles Mwijage, said that Tanzania’s drop in the rankings was a result of various procedural checks instituted to reduce malpractices in the business sector. He said he hopes that the measures instituted will facilitate future improvements. “These rankings don’t give me a headache because we have been dealing with some challenges, and I’m sure the measures we have taken will help to improve the business climate,” Mr Mwijage told The Citizen in an interview.

Among her East African neighbours, Tanzania ranked in fourth place. Rwanda is on top (ranked 29th globally), followed by Kenya (61st) and Uganda (127th), while South Sudan (185th) and Burundi (168th) were at the bottom.

The most challenging issues for Tanzania, according to report, were cross-border trade, protecting minority investors and resolving insolvency.

Mr Mwijage said to address these challenges, the government would continue to implement plans and policies, which include reducing fees and taxes and reducing delays in business transactions. He said Tanzania did not perform well on paying taxes due to the fact that many businesses are informal with owners who consider taxes as a nuisance and not obligation. “We are continuing to change the mindset of our business community because many were used to the ‘business as usual’ way of doing things,” he said.

On delays which have pushed Tanzania down the cross-border trade rankings, Mr Mwijage said these were caused by checks of vehicles to avoid trafficking of arms and people. He also said the government has improved export and import procedures and infrastructure as well as constructing One Stop Border Posts to ease procedures and save time.

Tanzania performed slightly better in starting business, getting electricity, getting credit, enforcing contracts, paying taxes, registering property and construction permits.

Issues raised in the report are similar to those cited in the government’s statement of commitment to increasing the ease of doing business: the Blueprint on Regulatory Reforms to Improve the Business Environment.

The blueprint mentions regulatory inconveniences caused by overlapping of functions of various regulatory authorities, as well as the duplication of registration requirements of the Social Security Regulatory Authority (SSRA), Business Registration and Licensing Authority (BRELA) and Tanzania Employment Services Agency (TAESA). There are also conflicting geographical restrictions regarding work permits and residence permits, the blueprint says.

Overhaul underway at Dar Port
A government initiative – the Dar es Salaam Gateway Maritime Project (DMGP) – has begun implementation, with the aim of enabling the port of Dar es Salaam to operate at world-class level. The project, delivered by the through the Tanzania Ports Authority (TPA), is designed to improve cargo handling at the port.

The first phase of the project will cost an estimated USD $150 million and involves deepening and strengthening existing berths numbers 1 to 11 to 14.5 metres, plus the construction of a new, multipurpose berth at Gerezani Creek. The project will also see deepening and widening of the port entrance channel and turning circle to 15.5 metres, and of the harbour basin in the port to 14.5 metres, plus improving the rail linkages and platform in the port.

TPA says it is aiming to introduce faster truck and wagons turnaround times from the port, and to auction overstayed cargo abandoned at the port, so as to get more space to serve customers and stakeholders in a more efficient manner.

Given the traffic forecast, the TPA-DMGP project follows the growing global trend of creating capacity ahead of demand. This is alongside construction of new ports at Chongoleani in Tanga Region, Bagamoyo and Mwambani Bay and KwalaRuvu Dry Port 47 miles west of Dar es Salaam. The Chongoleani Port will be dedicated to handling crude oil shipments for the upcoming Uganda-Tanzania pipeline.

Expansion of port capacities is being delivered in tandem with the development of inland road and rail networks, including upgrades to the Central Line and TAZARA railways. The completion of the DMGP project and implementation of other projects at various other ports will fast-track Tanzania’s quest for industrialisation and support the regional quest to attain fast social-economic development.