Category Archives: Business & the Economy

BIG PROGRESS IN TRANSPORT – SEA

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The MV Liemba pictured in 2011 (Spencer McCormick www.toaddis.com)

The MV Liemba pictured in 2011 (Spencer McCormick www.toaddis.com)


Lake Tanganyika’s MV Liemba

Approaching its 100th birthday, the lake steamer MV Liemba still travels once a week to ports on Lake Tanganyika in Tanzania and Zambia. Built in Hamburg in 1913, it was sunk by its German crew during the First World War when named the Goetzen. It has been many times rehabilitated but may now need to be sent into retirement – probably to become a museum. It has not escaped the eyes of Minister Mwakyembe who has been to Germany in the hope of rekindling interest in the ves­sel, for which many Germans are said to have much affection.

BIG PROGRESS IN TRANSPORT – RAIL

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China helps Tazara Railway again
Tanzania, Zambia, and China have agreed on 12 new projects to help improve the performance of the Tanzania-Zambia Railway (Tazara) line which has become dilapidated over recent years. Cargo has dropped from 1.2 million tonnes in 1992 to 330,000 tonnes in 2011-12. Passengers are down from its original 3 million capacity to 790,000 in the same period. China is providing £42 million for rehabilitation of 42 passenger coaches, 6 locomotives and rescue and lifting equipment.

Dar es Salaam commuting rail service

Minister of Transport, Dr. Harrison Mwakyembe (centre waving hand) accom­panied by officials from the Transportation Authority of Land Surface and Marine (Sumatra) on the first commuter train. Photo isaackin.blogspot

Minister of Transport, Dr. Harrison Mwakyembe (centre waving hand) accom­panied by officials from the Transportation Authority of Land Surface and Marine (Sumatra) on the first commuter train. Photo isaackin.blogspot

Tanzania’s first ever commuter rail service was launched on 29th October. The first route (operated by Tanzania Railways Ltd TRL) covers 20km between Ubungo-Maziwa and the central railway station, while the second is operated by Tazara and covers 25km between Mwakanga (Pugu area) and the Tazara station. Initially a single train is operating on each line, shuttling to and fro during the morning and evening rush hours. A one-way ticket costs 400TShs (about £0.15), and just 100TShs for pupils, comparing favourably to daladala fares which range between 500 shillings and 1,000 shillings depending on the journey.

Inaugurating the new service, Dr Harrison Mwakyembe said TSh6 bil­lion (£2.3 million) had been spent renovating train carriages and railway infrastructure for the TRL line while about TSh800 million (£0.8 million) was spent repairing the Tazara tracks. He thanked TRL officials for their decision to forgo purchase of brand new railcars in favour of renovating old ones which allowed the project to remain within budget.

As of December the government has stopped issuing licences to private companies that operate small commuter buses (daladalas) in Dar es Salaam, as part of its plan to replace them with much larger buses under a government-managed rapid transit system (DART) (see TA 98).

The Dar – Kigoma – Mwanza railway line
This line lost 83 kms of track in the floods last year and then had to cope with the disastrous contract with an Indian management company which eventually had to be terminated. A very limited service is now being offered. This line promises to be the Minister’s biggest headache.

Major new ports and railway
The biggest project being planned by Tanzania’s Ministry of Transport is the construction of a new port at Mwambeni Bay, Tanga. It is part of a grand project to develop an alternative sea route for Uganda and other land-locked countries such as Malawi, Zambia, Rwanda, Burundi, Uganda and the Democratic Republic of Congo, which have been depending on the overcrowded port of Mombasa. The project, a joint effort with Uganda, would include a new railway from Arusha to Musoma and a new port on the Ugandan side of Lake Victoria. Freight would be conveyed from Musoma dock by ferry to Port Bell pier – about 350 kilometres inside Uganda. A rail connection runs via Tororo to Gulu – nearly 600 kilometres on the Pakwach branch. North Gulu. A new line of roughly 250 kilometres would be constructed to Juba, and a further 550 kilometres to the Wau railhead in Southern Sudan. President Museveni of Uganda has repeatedly said that Musoma port was the “lifeline” of Uganda’s dreams.

A feasibility report prepared by UK-based consultants United Research Services recommended the construction of the new Tanga port because the present capacity would hit its maximum pressure in 2016. Although the existing port could be increased to accommodate short term traffic growth, it would become very congested. The team believe that export of soda ash from the proposed project at Lake Natron would only be possible with new port facilities. However, a section of industrialists saw no logic in constructing a new port at Mwambeni as opposed to undertaking the rehabilitation of the old port.

A speaker at a Stakeholders’ meeting on this final feasibility study said that talks about the new port dated as far back as 1968, when a founda­tion stone was laid on the proposed site. Conservationists at the meeting demanded that the project be scrapped to preserve the Coelacanth marine park (the primordial fish that was earlier believed to have been extinct since the end of the Cretaceous period) and sea tourism.

The Minister for Transport made his position clear and assured Tanga residents that the government had not forsaken Tanga. Reacting to the alleged threat to the Coelacanth, the Minister said that government was being very cautious over the matter, noting that a very thorough feasi­bility study had been conducted to make sure it was on the right track.

The report caused fresh outcry from environmentalists concerned that the proposed railway extension is expected to pass through the Serengeti National Park. This is a development which environmentalists are vehemently opposing, arguing that the ecosystem would be disrupted with noisy trains passing through the wildlife sanctuary. They claimed that this was what had caused the plan to be shelved during the days of the late President Nyerere when the idea was first mooted in the late 80s.

Officials of the two countries have said the project is provisionally estimated to cost $2.7 billion, out of which $1.9 billion is for the construction of the railway line, $672.6 million for the development of Mwambeni Port and $72 million for the development of Musoma dock.

PROGRESS IN AGRICULTURE

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While Tanzania’s economy, with the help of its increasing supplies of gas, forges ahead, the country’s agricultural industry receives less notice. In fact, agriculture is finally moving ahead rapidly under the influence of the Government’s ‘Kilimo Kwanza’ policies and also the greatly increased interest in agricultural investment by local and foreign investors. The latter, although very keen to bring in huge sums for investment, are operating in a climate of mounting criticism and suspicion that they are involved in ‘land grabbing’ and forcing peasant farmers off their land. Nevertheless, it is believed that some significant investments are being made. although often in an almost clandestine form. TA has been very limited in its coverage of agriculture and we need a volunteer to join our editorial team to cover at least some of the many exciting developments under way. We mention below a few of these – Editor.

Coffee farmers lined up for support
The German based development finance institution DEG – Deutsche Investitions-und Entwicklungsgesellschaft (German Investment Corporation) – has launched a Coffee Partnership for Tanzania (CPT), to bring together Tanzanian smallholder coffee farmers and DEG with private sector partners. The four-year project aims to increase the net income of 85,000 smallholder coffee farmers by doubling their yields and by improving the quality of coffee produced, thereby providing a better livelihood for up to 510,000 people.

DEG’s Project Director for CPT, Ian Lachmund, said that the project is financed by the Bill & Melinda Gates Foundation through a $ 8 million grant. The project activities include promotion of well-governed farmer groups, training of farmers in basic business and agronomy skills, improvement of farmers’ access to finance and affiliating producers to certification schemes – thereby increasing overall productivity and quality and improving smallholders’ access to stable export markets. “Additional activities in the areas of gender, seedling multiplication and distribution and renewable energy, as well as livestock and food pro­duction, will be undertaken to promote the environmental and social sustainability of the partnership,” he said – Guardian.

Agribusiness event
There were some 70 foreign and over 40 local investors at an Agribusiness Investment Showcase in late November. This brought together the government and private sector to display investment opportunities within the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) and to accelerate investment in this sector of Tanzania’s vibrant economy. SAGCOT’s objective is to foster commercially successful agribusinesses to benefit the region’s small-scale farmers, and to improve food security, reduce rural poverty and ensure environmental sustainability via the public-private partnership method. Initiated at the World Economic Forum (WEF) Africa summit in 2010, the aim is an inclusive, multi-stakeholder partnership to rapidly develop the region’s agricultural potential. The founding partners will include farmers, agri-business, the Government of Tanzania, SAGCOT and companies from across the private sector.

The event, held at the Bank of Tanzania (BOT) conference centre, was introduced by Prime Minister Mizengo Pinda. He highlighted the Government’s plan to invest USD 1.3 Billion to leverage about USD 2.1 Billion from the private sector to transform and commercialise small­holder agriculture in Tanzania. He also highlighted the tremendous potential for investment in agribusinesses in Tanzania with 44 million hectares of arable land, of which only about 25% are utilised, together with huge potential for livestock and fisheries development. The event attracted 70 foreign prospective investors and over 40 local companies aiming at taking advantage of investment opportunities within SAGCOT.

Mkulazi project
The government has assured peasant farmers living around the 63,000-hectare Mkulazi Farm that the proposed commercial agriculture investment project would not grab their land. Instead, the government would take precautions to ensure that any land ownership contracts will benefit Tanzanians living in the project area and the country at large.

The Tanzania Investment Centre (TIC) is running an intensive promotion of the Mkulazi area , named the Southern Agricultural Corridor of Tanzania (SAGCOT), to encourage local and international investment aimed at turning the area into a sugarcane and rice production hub. The project would see the construction of two sugar factories with an annual production of 300,000 tonnes, which would end the sugar shortage com­pletely and open doors for large exports.

As various investors visited the area to view the available potentials, villagers who run agricultural activities close by raised concern to government officials over the visitors’ commitment in developing the area and its impact on the lives of the neighbouring community. They said experience had shown that investors packed and left hurriedly after they failed to fulfill targeted obligations, without considering paying their workers, most of whom were residents of the area.

Responding to the concerns, Minister for Agriculture, Food Security and Cooperatives Christopher Chiza said the project was not expected to replace local residents in the area. “Investors will be given 63,000 hectares which will be owned legally by an individual who has submitted an application to TIC for privatisation. No single piece of land from farmers will be grabbed to fulfill investment purposes,” He added: “The government expects a strong partnership between the two sides. They are supposed to depend on each other….farmers should produce crops as raw materials for factories, while investors should guarantee farmers reliable markets.”

Mr Chiza said implementing the project would see development of infrastructure in the area through construction of roads and bridges. the installation of power systems and Tazara Railway services would be improved. Investors would bring technology that would be helpful in transforming traditional agriculture to commercial farming that was valuable in the fight against poverty in the country. “The government, through TIC, will carry out sensitisation meetings at grassroots level, aimed at increasing public understanding of the agenda and translate the available opportunities to a win-win situation,” he said –The Citizen.

Market opportunities
Tanzanian small farmers are among beneficiaries of a $210 million investment fund, promoted by the Export Trading Group (ETG) and aimed at opening market opportunities for traders. It is based in Tanzania and has operations in sub Saharan Africa. It connects smaller farmers to consumers around the world by procuring, processing and distributing agricultural commodities. It sells the goods to countries like China and India – The East African.

Land leases
According to Land Portal, a data base on international land deals, Tanzania has leased more than 1.4 million hectares to foreign companies from Europe and Asia including 100,000 hectares to a Norwegian company for the planting of trees and 45,000 hectares to a British company for the cultivation of sorghum. An American company’s efforts to lease 325,000 hectares in Rukwa region is being disputed because it is said to be threatening the livelihood 160,000 Burundi refugee households.

Cotton and Contract farming
Controversy surrounds discussion about investments in cotton contract farming by ginners and others but the government has stated that rules had to be followed if these were to be successful.

BUSINESS & THE ECONOMY

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by Valerie Leach:

For those interested in the development of Tanzania, the encouraging article which follows (and other articles in this issue) outline, in detail, the beginning of a veritable industrial revolution in the country. Tanzania is changing – and very rapidly – Editor.

Inflation
The rate of inflation, while still high at 12.9% in October 2012, is falling – down from 19.8% in December and 17.9% in October last year. The rate of increase in food prices has also fallen steadily from 26.2% in January to 15.0% in October. Energy prices in the same period have fallen, though erratically, from 30.1% in January to 18.4% in October 2012. (www.nbs.go.tz)

Economy performing strongly
According to a statement issued by Mr Paolo Mauro, who led a team from the International Monetary Fund to Dar es Salaam in September–October, the Tanzanian economy has continued to perform strongly. “Economic activity has remained robust, with gross domestic product (GDP) growth projected at 6.5-7% in 2012. The current account deficit is large at 16% of GDP, reflecting strong aggregate demand, foreign direct investment related to natural gas exploration and development, and large oil imports for power generation to substitute for hydroelectric sources, owing to the severe drought. External vulnerabilities are made more manageable by the adequate level of foreign reserves. The budget deficit for 2011/12 at 5% of GDP was lower than programmed. Revenue collection was strong and government spending was well-contained, though not all domestic expenditure arrears were cleared by the end of the fiscal year.

The 2012/13 budget appropriately balances the need for sustained fiscal consolidation, preserving social spending, and creating room for critical infrastructure investment. External non-concessional borrowing has been in line with maintaining a sustainable debt outlook.

According to a Press Release from the IMF: “Economic growth is projected to remain buoyant in 2013, though risks remain. In particular, near-term challenges relate to the need to preserve ample and reliable electricity supply while ensuring the financial viability of the national power utility TANESCO, where sizable outstanding payment arrears have built up vis-a-vis suppliers following the emergency power plan introduced in late 2011.

“The outlook for the medium-to-long term is promising, with recent large off­shore natural gas discoveries. The current priority is to design and implement a regulatory and fiscal framework, integrated with the government budget, for the natural resource sector, ensuring that Tanzania’s population benefits fully from its natural resources.

“The Bank of Tanzania aims its tight monetary policy at bringing inflation down to single-digits in the next few months, complementing other efforts in this area by fiscal and structural policies. The government budget aims at containing the deficit to 5.5% of GDP in 2012/13. The IMF Mission welcomes the measures that the authorities are taking to improve public financial man­agement and urges the government to prepare rapidly an action plan to address challenges in the electricity sector.” (IMF press release, www.imf.org).

Strategic Oil Reserve
In an effort to stabilise oil supplies and cushion shortages, the Government is to set up a strategic oil reserve. The Deputy Minister for Energy and Minerals, George Simbachawene has said that the Government is in talks with the Government of Oman for supplies for the oil reserve, preferring this government-to-government arrangement over reliance on private traders. Joint efforts between this Ministry and the Ministry for Transport are also underway to speed up the functioning of single point mooring for improved oil discharging capacity at the port of Dar es Salaam which will be sited further out in the ocean to help decongest the port (East African).

Large deposits of gas
In late October, there was a meeting in Dar es Salaam of high-level gas industry professionals. There, the Chief Secretary, Mr Ombeni Sefue warned that the recent discoveries of large gas deposits in southern Tanzania will not lead to an overnight transformation of the national economy. Although these discoveries should help jump start economic growth, Mr Sefue emphasised the importance of ensuring that the gas resources are managed sustainably. Initially, the gas will be used nationally to shore up electricity generation. A World Bank specialist at the same meeting, Mr Albert Zeufack, advised that Tanzania needs to have the right infrastructure in place before the country is opened up to oil and gas investors. “For Tanzania to take full advantage of its resources, the country needs to invest in investing. This involves building the capacity to invest efficiently and profitably by developing human capital.” (Citizen).

Transport
Improvements to infrastructure, needed for Tanzania to be able to take full economic advantage of its favourable geographic location, were highlighted by Minister Mwakyembe in his speech to the Britain-Tanzania Society in London on 10 November 2012 (and see lead article above).

The Minister highlighted the governance of the ports and the actions he has taken to dissolve the Board of the Ports Authority and install a new Board with younger members.

While improvements have been made to the roads system in the past few years, too much heavy traffic is loaded on the roads and more cargo needs to be moved onto rail. The Government intends now to maintain the rail infrastructure, permitting companies to have their own rolling stock.

Mining
A ban on the export of raw tanzanite was introduced in 2010 as part of the Mining Act. The main buyers have been in the US and more recently in Europe, the Middle East and the Far East, with exports valued at between $100 and $300 million. In November 2012, Diamond International, the world’s largest tanzanite buyer and one of the largest jewellery retailers, announced that it will create a gemstone processing plant on the outskirts of Arusha. The plant will employ about 200 local workers who will be trained to cut and polish tanzanite for the export market (www.TanzaniaInvest.com).

After several false starts, uranium mining in the Mkuju River area is expected to be started by the Russian company JSC Atomredmetzoloto (ARMZ) who are in the final stages of negotiating a licence with the Government to construct a plant there starting in early 2013. The firm will be required to furnish plans for relocation, resettlement and compensation of people within the mining areas, as well as for the proposed treatment and disposal of ore and minerals recovered. An earlier dispute over income tax and stamp duty resulting from the firm’s acquisition of the uranium mining site from Uranium One is reported to have been settled. In October, the Government issued an environmental impact cer­tificate which allows the project to go ahead (East African).

Energy
A research note from Ecobank is quoted in The East African in November with an estimate of $994 million to go into offshore natural gas exploration in East Africa in the next twelve months – most of it in Tanzania and Mozambique. There will be investment in drilling 33 exploration wells, infrastructure, development of pipelines, liquefied natural gas plants, power plants and storage tanks. An export market can be opened up for industrial use in Japan, China, India and South Korea.

In Tanzania, plans shave been announced to increase expenditure from $9 million in 2012 to $15 million in 2013 in recognition of the value of a dedicated operations infrastructure for oil and gas exploration in Tanzania. The company responsible has set out to develop the only world class facilities in the region with field maintenance facilities built in Mtwara which are said to exceed North Sea standard. Estimates of recoverable natural gas reserves have recently been revised from 28.74 trillion to 33 trillion cubic feet. (www.TanzaniaInvest.com)

In Mtwara, President Kikwete recently launched the construction of a Mnazi Bay and Songosongo Natural Gas processing plant and transportation pipeline. Tanesco has been directed to start building the plants under a project which is expected to be completed within 18 months. President Kikwete clarified that “Construction of the power plants should go parallel with laying of the gas pipelines because waiting until the project is completed will delay production of electricity”.

The processing plant will be owned by the Tanzania Petroleum Development Corporation (TPDC) and should generate more than 3,000MW of electricity, above the country’s target of 2,780 megawatts by 2015 for national use and should allow for surplus selling to neighbouring countries. The project should allow Tanzania to meet more than half of its power generation from natural gas, with 30 per cent from heavy oil and 15 per cent from hydro plants. The project is to be jointly implemented by China Petroleum and Technology Development Company (CPTDC), a unit of the China National Petroleum Corporation (CNPC) and the TPDC.

Foreign Direct Investment
According to the report titled Where to Invest in Africa – 2012 Edition recently released by the Rand Merchant Bank, Tanzania is the 10th most attractive destination for investment among 53 African countries. The ranking is based on three factors: market size, as measured by GDP at purchasing power parity for 2012; market growth rate, as reflected by estimated annual real GDP growth rates between 2011 and 2017; and an operating environment index, which captures the business environment. This index comprises four indicators: economic freedom, corruption, efficiency and business friendliness.

Tanzania’s prospects are bolstered by the discovery of oil and gas, especially the deep-water gas prospects off Tanzania’s coast.

When it comes to the security of investments, Tanzania, together with Botswana and Namibia have the most transparent, fair and efficient legal systems.

In relation to infrastructure, Tanzania still lags behind for the quality of overall infrastructure; not surprisingly the reports highlight that Tanzania stands out among the countries that should provide most of the opportunities for infrastructure construction businesses.

Access to financing also remains Tanzania’s most problematic factor for doing business in the country. The report is available at http://www.rmb. co.za/GlobalMarkets/pdf/whereToInvestInAfrica/RMB_wtia.pdf -(www. TanzaniaInvest.com)

Chinese investment reaches $1 billion
Mr. Lu Youqing, the Chinese Ambassador to Tanzania stated at the recent Huawei ICT Star programme for Tanzania education in Dar es Salaam that total investment of Chinese companies in Tanzania last year reached $1 billion. This makes China now the second largest provider of Foreign Direct Investments to Tanzania. Mr Youqing underlined that such investments from China are directed to local value addition of the products, which has resulted in the creation of more than 80,000 jobs and the reinforcement of the ties between Tanzania and China. The Huawei ICT Star programme for Tanzania education is aimed at fostering ICT training and development in Tanzania. Mr Bruce Zhang, Managing Director of Huawei Tanzania, said “This programme will be in partnership with the government of Tanzania and it will work with students starting from primary to university level.” (www.TanzaniaInvest.com)

Manufacturing performance
The recently released report, The Tanzania Industrial Climate Report, a product of a partnership between UNIDO and the Government of Tanzania, says that despite the past and current efforts to boost industrialisation in Tanzania, manufacturing still accounts for less than 10% of national GDP, making Tanzania one of the least industrialised countries in the world.

The report presents a quantitative assessment of the performances of the manufacturing sector in Tanzania, highlights the challenges and opportunities for Tanzanian industries and offers a number of high priority and practical industrial policy recommendations.

The areas of policy focus highlighted in the report include: the effect of regional integration on Tanzanian industry and the challenges ahead, the domestic and international opportunities that emerged in the new global market for manufacturers, the key role of modern skills for industrial development and the likely “quick-win” scenario of a resource-based industrialisation process. The report is available at: http://www.tanzaniainvest.com/downloads/Tanzania-Industrial­Competitiveness-Report2012-UNIDO.pdf

DOCTORS STRIKE

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A number of doctors have been involved for several months in an on/off strike in Tanzania demanding improvements in the health service in the country and in their remuneration. The media, in what may have been an exaggeration, wrote that the strike had ‘paralysed health sector operations in all major public hospitals.’ From the beginning the government has taken a hard line. It is believed to have sacked some doctors, brought in doctors from outside the country and firmly rejected the strikers’ demands.

There was considerable shock when Dr Steven Ulimboka, chairman of the Interim Doctors Committee and spokesperson for the doctors, was abducted, tortured and left for dead at the Pande forest in the northern precincts of Dar es Salaam. His injuries were so serious that he had to be moved to South Africa for six weeks to recover and did not return to Tanzania until August 12. He was reported in the media to have ‘failed to hold back tears’ when relatives, friends, activists and hundreds of other people welcomed him back at Dar Airport.

There is some mystery as to who kidnapped and tortured Dr Ulimboka. The Medical Association of Tanzania (MAT) Secretary General, Dr Rodrick Kabangila, said the Association was pleased with the recovery and return of one of their members. “His homecoming might also shed light on what actually happened and the persons who did what they did to him… we might know the truth eventually, regardless of the police reports on the arrest and charging of one man in connection with his tribulations.”

On July 7 religious leaders held prayers for Dr Ulimboka and asked President Kikwete to form an independent commission of inquiry to investigate the abduction and torture. They also called for the immediate resumption of negotiations between the government and striking doctors to end the standoff. The clerics urged the government to drop the case it had filed at the High Court against the doctors before talks could resume.

BUSINESS & THE ECONOMY

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by Valerie Leach

The economy continues to grow at an encouraging rate, recovering quite well from the downturns in 2007 and 2009. Gold and diamond production rose sharply in the first quarter of 2012 compared to the same period in 2011; and because of much better rainfall, the rate of growth in agriculture has improved.


GDP, First Quarter, 2012. Source: National Bureau of Statistics, Press Release, Summary Report of Quarterly Gross Domestic Product, First Quarter (January–March) 2012, www.nbs.go.tz

Consumer price inflation, while still high, continues to fall from its peak of 19.8% in December 2011 to 17.4% in June 2012. The increase in prices of food and energy remains at over 20% annually, though the rate of increase has slowed in recent months. The IMF has commended the government’s tightened monetary policy for 2012/13, aimed at supporting disinflation towards a single-digit inflation target. (www.nbs.go.tz and www.imf.org)

Trade
The balance of trade has worsened in the year to June 2012 compared with the previous year. The increase in the value of exports, led by increases in the volume and value of minerals exports, was offset by an increase in the value of imports, largely driven by a rise in oil prices, coupled with an increased demand for oil for thermal power generation. There was also a substantial increase in imports of machinery and equipment for gas and oil exploration. (Bank of Tanzania, Monthly Economic Bulletin, July 2012, www.bot-tz.org)

Government Budget 2012/13 and Long-Term Perspective Plan

The new Minister for Finance & Economic Affairs, Hon. Dr. William Mgimwa

This time of year is budget time in East Africa, and the Tanzanian government budget was presented to the Bunge in mid-June. It proposed a budget of TShs. 15.1trillion, TShs. 3.2 billion of which is expected to be received as grants and concessional loans for development (TShs. 842 million in general support loans and grants, and TShs. 2.3 trillion in project grants and loans).

Among the tax measures to support local industries and create jobs were the abolition of VAT for textile mills, increased tax on imported edible oil and a review of the skills development levy. The budget also included the usual increases in excise duty on drinks and tobacco, as well as an increase in excise duty on mobile phone calls.

Some tax exemptions are to be removed, with a 10% VAT introduced for those previously exempt. Included in the abolition of tax exemptions was tax relief for non-governmental organisations, except that equipment donated to orphanages and schools remain exempt. (Daily News 14 June and Minister of Finance, June 2012).

In the course of the budget debate, Kondoa MP Juma Nkamia reported that 27,000 tonnes of edible sunflower oil was stalled in godowns in the district because of lack of reliable market. (Daily News 28 June).The budget includes an allocation of TShs. 1 trillion in 2012/13 to decongest roads in Dar es Salaam. (Daily News 6 July).

Thirty per cent of the total budget is intended for development projects (TShs. 4.5 trillion). The development plan puts priority on infrastructural improvements, including the Kurasini logistical and trade hub, rehabilitation of the central railway line and construction of a natural gas pipeline between Mtwara and Dar es Salaam, which will be funded through a loan from Exim Bank of China. Funds have also been allocated for power generation plants at Kinyerezi and for upgrading the north-west grid from Iringa to Shinyanga and from Makambako to Songea. (budget speech of the Minister of Finance www.mof. go.tz)

Minister Wasira, Minister of State in the President’s Office, said that large investment in gas exploration in Mtwara and other coastal areas meant that foreign direct investment increased substantially in 2011 to $854 million, from $434 million in 2010. (Daily News 15 June).

The main opposition CHADEMA Party proposed an alternative budget which put more emphasis on development funding and a reduction in recurrent spending, particularly on allowances, seminars, foreign travel and procurement of large luxury vehicles for government officials. (Daily News).

The Minister of Finance reported improvements in financial management, cit­ing the latest report of the Controller and Auditor General for the year 2010/11, in which unqualified audit reports for ministries, independent departments and regional secretariats improved from 71% to 85% in 2009/10. Unqualified reports in local authorities increased from 49% to 54%.

One important element of the budget of the Prime Minister’s Office was an allocation of TShs. 73.2 billion for the purchase of books for all primary schools, reducing the ratio of books to pupils from 1:10 to 1:2/3. This is 75% of the money returned from the radar deal. The remainder will be used to pur­chase 400,000 desks. The World Bank will fund access to telecommunications in areas not now served.

Long-Term Development Plan
A “Roadmap to a Middle Income Country” has been published by the Planning Commission. This long-term perspective plan (to 2025/26) is intended to set specific direction to meet the objectives of Tanzania’s Vision 2025 (published in 1999). The long-term plan provides the link between the Vision and the country’s medium- and short-term development plans. A series of three five-year plans aim to unleash growth potential, nurture an industrial economy and promote competitive export growth.

The plan’s targets for 2015 are to raise GDP growth to 8% and agricultural growth to 6%, reduce inflation to 4-5% and reduce the poverty rate to 19.3%, a particularly ambitious target since the latest data indicated that the population living under the poverty line was 33.6% in 2007.

By 2025, the plan projects that the percentage of people employed in agricul­ture will have fallen to 41%, compared to the current 75%. Similarly ambitious targets are set for export growth, from 28% of GDP in 2010 to 40% in 2025. Sharp reductions in pupil:teacher ratios are planned both at primary and secondary levels. (Tanzania Long-Term Perspective Plan, Roadmap to a Middle Income Country, President’s Office, Planning Commission, June 2012 www.tanzania.go.tz/pdf/mpango%20Elekezi.pdf)

BIG NEW GAS DISCOVERY

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Map of Tanzania oil/gas exploration zones (source Heritage Oil plc)

Tanzania is in the midst of a vast programme of energy development aimed at putting an end to the country’s repeated cuts in supply of electricity (see TA 101). And in March 2012 there was some very good news for Tanzanians:

BG Group announced a significant gas discovery from its Jodari-1 exploration well in Block 1, located approximately 39 km offshore southern Tanzania and in a water depth of 1,150 m. Their evaluation suggested gas reserves in the range of 2.5 to 4.4 trillion cubic feet (tcf). When combined with their previous discoveries (Chaza-1 in Block 1, and the Chewa-1 and Pweza-1 discoveries in Block 4), total gas reserves are estimated at up to 7 tcf. The gas was found in rock formed during the Oligocene epoch between 23 million and 34 million years ago; the same age of rock in which huge gas reserves were discovered recently off Mozambique by an American investor.

The partnership between BG Group (60% and operator) and Ophir Energy (40%) has had exploration successes in all four wells drilled so far in Tanzania, and their next target for drilling is the Mzia-1 location, about 23 kilometres to the north of Jodari-1.

BG Group is a world leader in natural gas, with a strategy focused on connecting competitively priced resources to specific, high-value markets. Active in more than 25 countries on five continents, BG Group claims that it combines a deep understanding of gas markets with a proven track record in finding and commercialising reserves. The Group emphasises however that the figures above are all forward-looking estimates and, as such, they are only predictions. Actual results may differ materially.

Ophir Energy is a conglomerate in which Indian Steel magnate Lakshmi Metal holds 14% of the shares, the hedge fund Och-Ziff (10%), the Polish millionaire Jan Kulkzic (10.6%), plus Tokyo Sexwale, the South African tycoon who was jailed with Nelson Mandela on Robben Island. Ophir’s chief executive Nick Cooper commented that Jodari 1 is the biggest discovery in the company’s history. Reacting to this exciting news, Ophir’s stock market valuation rose substantially on the London Stock Exchange.

Biomass fuels
Biomass-based fuels, namely firewood, charcoal and bio-residues, still dominate the energy balance in Tanzania, accounting for about 90 percent of the primary energy supply. About 42 million cubic metres of wood were consumed in Tanzania in 1999, of which 26 million cubic metres were consumed in rural areas as firewood and 14 million cubic metres in the urban areas mainly as charcoal. The fuel is used predominantly for household cooking and heating.

It is estimated that around 40,000 bags of charcoal enter Dar es Salaam city daily and a comparable amount enters the other major Tanzanian towns, a combined total consumption of around 2,650 tonnes each day. Wood and charcoal are technically renewable fuels with near zero net carbon emissions, since the amount of carbon dioxide emitted when they are burnt is equivalent to the amount of carbon dioxide absorbed when they were growing. However, their uncontrolled use is leading to deforestation and accompanying environmental problems such as soil erosion, and also to urban air quality problems. A forestry expert with Tanzania’s Natural Resources and Tourism Ministry, Stephen Bandoma, said charcoal use could be reduced if there were alternative energy such as natural gas and solar power. However, he added, “Many ordinary people cannot afford alternative energy and instead end up using charcoal. Few people can afford to buy Liquefied Petroleum Gas (LPG) when the price of a cylinder has risen from TShs 20,000 two years ago to TShs 50,000.”

Energy efficient stoves manufacturered by TaTEDO (Lundgren - UNEP)


One way of improving the situation would be to make cooking stoves more efficient, and TaTEDO (Centre for Sustainable Modern Energy Expertise) among others have been promoting more energy efficient stoves for nearly two decades with modest success.

Alternative energy
Since 2006, the UN Environment Programme (UNEP) has worked hard to raise awareness of alternative sources of energy. Their programme refers to a range of technologies, including solar-powered fridges for storing vaccines, road surfacing material made out of molasses, ships powered by the sun and grease-consuming bacteria.

A recent World Bank credit of $22.88 million includes funds for a study on the implementation of small hydropower projects in rural areas and capital subsidies to bring down the cost of energy. Investment opportunities exist for developing hydropower dams, solar photovoltaic systems and biomass based electricity co-generation in sugar, wood, and tea factories to provide electricity.

The rural energy projects developed with the help of the Bank will ultimately be owned and implemented largely by the private sector, NGOs and conservation initiatives, largely independent of the national utility, Tanzania Electric Supply Company Ltd (Tanesco). Nationally, total installed generation capacity is 1,219 MW, of which hydropower comprises 561 MW (46%) (Kidatu, Kihansi, Mtera, Pangani, Hale, and Nyumba ya Mungu) and thermal (gas and diesel) 658 MW (54%).

Warning on biofuel production
East African Cooperation Minister Samuel Sitta has revealed that the government is in the process of formulating a new policy on bio-energy production. He warned against growing bio-fuel products on vast lands without adequate research, saying that bio-energy production competes with food production and they do not complement each other. Sitta also cautioned that if precautions were not taken, production of bio-energy would turn villagers into labourers. The idea that government should direct more efforts to the production of jatropha was still theoretical. Special emphasis must be given to food production.

Business as Usual
The international oil firm Puma Energy, who took over BP’s operations in Tanzania in 2010, is planning a new $11 million investment to ensure sufficient oil and petroleum supply for domestic and industrial use. Maregesi Manyama explained to TA that the investment would be for construction of additional fuel storage tanks, re-branding retail and commercial sites and improving automation loading facilities.

Thanks to Judie and Thomas Mwarabu for sending a number of news items relating to energy from the Guardian. Other information from www.tatedo.org

TANZANIA’S EXCLUSIVE ECONOMIC ZONE

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The United Republic of Tanzania’s decision to seek an extension of its exclusive economic zone (EEZ) has sparked a hot debate in the Zanzibar House of Representatives, with Zanzibaris threatening to withdraw from the deal. Debating a private motion tabled by CUF Representative for Mji Mkongwe Ismail Jussa, the lawmakers demanded the resignation of a minister who had allegedly taken part in formulating the application, which had already been tabled before the UN.

According to the Citizen: ‘They bayed for the blood of Mr Ali Juma Shamuhuna, the Zanzibar Minister for Energy, accusing him of betray¬ing Zanzibaris by helping to prepare the application.’ Mr Jussa argued in the House of Representatives that marine and oil issues should be the preserve of Zanzibar and that the Union government had no business making the application. In addition, backbenchers led by Mr Jussa demanded that the Zanzibar government send a delegation to the UN if the Union government ignored their plea.

Tanzania’s Minister for Lands, Housing and Human Settlements Development, Prof Anna Tibaijuka, recently led a delegation to the UN to present a request for the extension of the Extended Continental Shelf (ECS), which lies 150 miles beyond the current 200 miles of the EEZ – The Citizen.

TOURISM & ENVIRONMENTAL CONSERVATION

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Compiled by Mark Gillies

Travel agents often mistakenly sell Africa as a timeless, changeless place. They do so to appeal to a perceived need to escape from the pressures of modern life. They are of course utterly wrong, both in the case of Tanzania and any other African nation. However, what is correct is the connection between Tanzanian tourism and the sustainable management of the natural environment. In both these areas, there has been considerable activity over the first quarter of 2012.

The Serengeti road saga
Kenya’s Daily Nation reported how Tanzania’s appeal to block a case against the construction of a highway across the Serengeti National Park had been dismissed by the Appellate Division of the East African Court of Justice. It ruled that the court had full jurisdiction to hear the case because the park was part of the transnational ecosystem straddling Kenya and Tanzania and that matters pertaining to environmental conservation cut across nation states and were therefore included in the EAC Treaty.
The ruling came after the Tanznania’s Attorney-General had objected to the hearing of a case which was filed by the Nairobi-based NGO African Network for Animal Welfare (ANAW) in December 2010 and which was against the tarmac road project. The case was set to be heard at the court before Tanzania’s objection last year. Tanzania argued that the court had no jurisdiction to hear the case on grounds that it was a matter of a sovereign nature, not falling under the EAC protocols; and that any legal dispute on the Serengeti National Park should be handled by the Tanzania’s courts as the park was within Tanzania’s borders and managed locally. The ruling means that the main case can be heard at any time.

The concern generated by the proposed road (although the Tanzanian Government has now shelved the plan) by the tourism sector as well as environmentalists is an example as to how aware the sector is of the need to both maintain Tanzania’s natural resources and the country’s international reputation as a quality tourism destination in the ultra-competitive long-haul travel market.

Mounting insecurity in Zanzibar
Salma Said, writing in The Citizen, describes how mounting insecurity is threatening the tourism sector in Zanzibar, the island’s major foreign exchange earner. He reported that nearly 60% of the Zanzibar Association of Tourism Investors (ZATI) members were affected by robberies and other criminal incidents last year, prompting stakeholders to appeal for speedy government intervention. Other operational pressures were listed as erratic electric power, unreliable water supply, poor communication and visible refuse. The ZATI chairman stressed the importance of maintaining Zanzibar’s world-acclaimed historical sites. These concerns were echoed by Italian ambassador to Tanzania. Pierluigi Velardi, from whose country 36 per cent of tourists to Zanzibar originate. He also appealed to the Zanzibar government to improve the main airport.

Some tour operators have indicated that they do not sell Zanzibar as a paradise because it is not: it is part of a developing nation with a fascinating history located in the tropics. However, many agents do and ‘Paradise’ is what many tourists want; they don’t want litter, insecurity and warm beer. The provision of ‘Paradise’ (as a tourism product at least) is dependent upon a well- managed and protected natural environment. There will always be threats to this environment, for whatever reason, but the last three months have seen the launch of positive environmental protection initiatives.

The Daily News reported how the authorities have seized chain saw machines from illegal operators in Unguja Island. This follows the government ban against illegal use of machines in forests announced by Mr Sheha Hamdan, Director of Forestry in the Ministry of Agriculture and Natural Resources. At a gathering to launch regulations against use of chain saw machines at Maruhubi, guests were treated to the burning in public of five confiscated chain saw machines. Use of a chain saw without a permit now carries a fine or a six month prison sentence.

Speaking at the gathering, Acting Minister for Agriculture and Natural Resources Mr Ramadhani Abdallah Shaaban stressed the need for a major re-forestation exercise, and joint efforts in reducing illegal chain saw operations. Mr Shaaban expressed his concern over alarming deforestation, estimating that about 950 hectares of trees had been cleared illegally between 1997, when the forestry laws were set, and 2007. He attributed the trend to growing demand for wood, ignorance, greater use of machines and population growth.

Sadly, the threat of deforestation looms over much of rural Tanzania due to increased subsistence farming, the growing need for charcoal and commercial logging. The Daily News reported from Arusha how this has pushed African sandalwood trees to the edge of extinction in Ngorongoro and Karatu districts, Arusha Region. Used for its scented wood and to extract oil for making perfumes and various pharmaceutical products, African sandalwood is in high demand in China, India, Malaysia and the United Arab Emirates. A single one tonne pickup full of sandalwood logs can fetch up to TShs 1 million or more and the trade is big business.

Although the threats remain, it is encouraging to see community environmental protection initiatives continuing. The Daily News reported how 12 representatives from Olerienmagaiduru and Mgongomageri villages in Ngorongoro District have vowed to campaign against human activities threatening the survival of the Loliondo forest reserve after attending an intensive training course on forest assessment sponsored by the Frankfurt Zoological Society.

Loliondo is home to three crucial forest reserves covering about 10,000 hectares, which together form part of the Serengeti and Lake Natron ecosystem. The training aimed to broaden participatory forest management of the Sarian community forest reserve that is shared by the two villages. Six representatives from each village attended to be educated in and equipped with techniques to preserve and conserve the Sarian forest, in line with the national forest policy that gives communities wide opportunity to participate on forest management.

Further good news came from Iringa, where The Daily News reported that President Kikwete has said the government will not allow pastoralists or farmers to return to the Ihefu wetlands because the area is of great economic significance to the nation. The President said it was time for political leaders to take decisions that might anger the public but benefit the nation. He said the world is grappling with water scarcity and many people are scrambling for the little that is available due to climate change. The President said Ihefu pours its waters into the Great Ruaha from where the Mtera dam generates electricity.

The Rufiji basin, an important irrigated farming area, also depends on Ihefu. In celebrating Water Week, the President also inaugurated the Iringa Urban Water Project, expected to benefit 200,000 people in Iringa town, neighbouring communities and villages.

The project cost a total of Euro 33,458,000 (about TShs 73bn) and was implemented by Iringa Urban Water Supply Authority (IRUWASA). Euro 17,076,000 (about TShs 35) was donated by the European Union while the rest came from the Water Basket, the Federal Republic of Germany and IRUWASA.

And finally…
An experienced porter, Wilfred Moshi, who has been climbing Mount Kilimanjaro for decades, was set to become the first Tanzanian to conquer the highest peak in the world, Mount Everest, in May. Moshi raised the $100,000 required from mountain climbing enthusiasts in the UK, USA, Middle East, and New Zealand. The whole exercise was expected to take ten weeks. We wish him luck. Safari njema Bw. Moshi.

AMBITIOUS PLANS TO END ENERGY CRISIS

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The East African and other media outlets have been reporting on the ambitious new investment plans being drawn up which should fairly soon see a dramatic improvement in production of energy – and hopefully an end to the energy crisis.

In what African Report described as the largest ever single Chinese investment in Tanzania, an agreement worth $3 billion (about TShs 4.8 trillion) has been signed to develop the Mchuchuma coal and Liganga iron ore projects (The Citizen). The NDC will hold a 20% stake with the Chinese firm holding the remaining 80%. The projects will be implemented in two phases – the first phase will entail laying the groundwork at Mchuchuma and eventual mining of coal to be used in generating electricity, while the second phase will involve exploration and extraction of iron ore from Liganga.

Symbion is set to supply 205 MW to the national power grid in support of the government’s emergency power plan. Under the firm’s expansion plan, Symbion would import more than 205 MW of generating equipment, adding new power to the grid incrementally from October, and the full 205 MW capacity will be available to Tanesco by the end of the year (The Guardian).

The country has borrowed $63.4 million from the Export Import Bank of Korea which will help to build a power transmission line which will link future sources of electricity in the south of Tanzania with the north of the country.

Plans are being drawn up for a huge 2,100 MW new electricity plant at Stiegler’s Gorge in the Rufiji River Basin. It will be built using Brazilian technology and will be developed by Brazil’s Odebrecht company.

A Norwegian power engineering company has signed an agreement for a 100 MW turnkey project at Ubungu (using natural gas) in Dar and another at Nyakato near Mwanza (using heavy fuel oil). Finance totalling $530 million is coming from HSBC in Norway to support 15% from the government. Power is due to be switched on by June 2012.

Tanzania has also secured a $250 million dollar loan from a consortium of local and global financial institutions, including the Standard Bank of South Africa, to fund rural roads and production of electricity.

Finally, Tanzania has signed production sharing agreements ($75 million) with two oil companies to explore for oil and gas at Lake Rukwa and Nyuni East Songo Songo.

The blame
Rice farmers in the Ruaha River Basin have been blamed for the ongoing power crisis. The principal engineer at the Mtera Dam has claimed that uncontrolled rice farming is behind the decreased water flow into the dam.

Judie and Thomas Mwarabu have sent us the following weather warning published by the Tanzania Meteorological Agency (TMA) in Mwananchi in September which was partially vindicated by a week of early and heavy rain in mid-October:

TMA predicted that several areas of the country could face serious disasters such as floods, soil erosion and major damage to the infrastructure and environment during the short rains (vuli) between October and December. Other areas, which would not suffer from the effects of flooding, are expected to be faced with food shortages and perhaps famine due to insufficient rainfall. TMA has for the first time not only published this information in a highly professional way, but has also made clear which areas are threatened and gone on to make recommendations to deal with them. The government was advised to prepare itself thoroughly by designing strategies and creating new ways of protecting the economy of the country, by putting pressure on the Disasters Corps to ensure the preparation of sufficient and up-to-date supplies of all kinds, including air, road and waterborne transport, tents, blankets, medicines and rescue equipment.

People complain that Tanzania has repeatedly suffered from such disasters but they come again and again because the government has not learned from them.

The Tanesco monopoly on power production might be abolished, according to a report in Tanzania Daima. The government was said to have plans to amend current electricity laws to allow private companies to produce and supply. Minister of Finance Mustapha Mkulo said that “Currently we have power producers who remain with excess energy but they cannot sell it on to neighbouring communities. The new amendments will allow them mechanisms to sell it”.

The dependence of energy supplies on rainfall was demonstrated once again by the following report (slightly abridged) from The Guardian of 7th October before the very heavy rains mentioned above. By early October, hydropower generation at the major dams, Mtera and Kidatu, had been drastically reduced as water levels dwindled even further, President Kikwete admitted. This was after the President was informed that the Kidatu plant, with a capacity to generate 200 megawatts, was producing only 40 MW and the Mtera plant was generating only 30 MW while it has the capacity to produce 80 MW. The Kihansi plant was producing 90 MW against 180 MW, Nyumba ya Mungu 3.5 MW against 8 MW and New Pangani 20 MW against 68 MW. The country was relying on electricity from Songas – generating 182 MW, Ubungo 100 MW, Tegeta 45 MW and Symbion 70 MW.