Bulyanhulu mine, located in Kahama District, Mwanza

Gold is the most important driver of investment that Tanzania has ever seen. Foreign direct investment in gold exploration and mining totalled USD 2.5 billion from 1997 to 2007. Between them, African Barrick Gold (ABG), AngloGoldAshanti (AGA), and Resolute Mining Ltd currently produce over a million ounces of gold a year, worth USD 1.8 billion at the current (September 2011) price of USD 1,800 an ounce. Last year, gold accounted for nearly half of all exports. The three companies’ mines (Barrick has four, the other two companies one each) employ about 15,000 Tanzanians, with another 50,000 jobs created through local procurement of goods and services. The mining companies build roads, power supplies and water systems that serve local towns and villages. ABG has invested USD 100 million in electricity alone. The mines build schools and health facilities and pay local authorities to help run them. They are already among the biggest tax payers to the Tanzanian Revenue Authority (TRA) and they should pay more taxes as they finish paying back the loans that financed their mining operations.

With all this apparent good news, why do most Tanzanians consider the presence of foreign mining companies ‘a curse, not a blessing’, to cite a typical recent newspaper editorial? My recent research with the Africa Power and Politics Programme (APPP) suggests the following explanation [1].

First, enforcing mining rights proved to be a protracted and divisive process, irrevocably souring relations between the foreign mining companies (FMC) and local artisanal and small-scale miners. In August 1994 Sutton Resources, a small Canadian company, signed a Minerals Development Agreement (MDA) with the Tanzanian government for Bulyanhulu, located in Kahama District, Mwanza Region. Sutton spent the next two years trying to enforce its mining rights against resistance from local small-scale miners (dubbed ‘illegals’), who refused to move from the site. On 5 August 1996 54 miners were allegedly buried alive following the bulldozing of small mines during the enforcement of an eviction order.

Subsequent investigations found no evidence to support the claim of over 50 dead through ‘extra-judicial killings’ (Amnesty International’s description), but the damage was done. Sutton’s uncompromising approach in clearing the Bulyanhulu ‘illegals’ without compensation prepared the way for increasingly hostile relations between the FMCs and their Tanzanian hosts. In 1999 Barrick Gold, the largest gold mining company in the world, bought Sutton, and further acquisitions made it by far the largest player in Tanzania, producing about three-quarters of Tanzanian gold [2].

Second, the public outrage triggered by Sutton’s unsubtle approach to acquiring mining rights galvanised both local and international civil society opposition to the FMCs’ presence. Local NGO and media coverage of instances of alleged water pollution, mine invasions and shootings and the destruction of property reinforced latent public antipathy to the FMCs, who were also accused of benefiting from overgenerous tax breaks, fuelling suspicions that the secretly signed MDAs involved corruption among senior government officials.

On coming to power in December 2005, President Jakaya Kikwete promised that mining contracts and laws regulating mining activities would be reviewed. Opposition parties were quick to make political capital out of the FMCs’ poor public image and suspicion of corruptly negotiated deals. When in August 2007 Chadema opposition party MP Zitto Kabwe challenged the government’s non-transparent approach to its dealings with the mining companies, he was banned from parliament and instantly became a popular hero. Realising its mistake, the government quickly launched a Mining Sector Review Committee, headed by former Attorney General Mark Bomani. The Committee’s recommendations to raise both tax and royalties were incorporated in a new Mining Act, passed by Parliament in April 2010.

To the FMCs, the new mining law simply worsened an already deteriorating investment and business environment. They claimed that the TRA did not respect the tax conditions contained in the MDAs and that TRA officials practiced extortion, leading to costly litigation and arbitration. Another major issue for the FMCs was the empowerment of the Minister of Energy and Minerals to enter into negotiations to obtain an equity stake in any new mining venture at any time. ABG considered that the 2010 Mining Act, by granting ‘ministerial discretionary powers to make or interfere with commercial decisions’, was the source of ‘insecurity and unpredictability‘, had a negative impact on ‘governance and transparency’ and gave ‘room for abuse of power.’

While gold exploration slumped after the 2008 financial crisis, fears of further financial turmoil pushed up the value of mining shares. Big Gold in Tanzania has benefited tremendously from soaring gold prices. For example, ABG posted net profits of USD 223 million in 2010, an increase of 237% over 2009. [3] Resolute’s Golden Pride mine was scheduled to close, but is still producing after posting record profits in 2009. [4]

Between the big three and the thousands of small-scale mines employing hundreds of thousands of miners there is a ‘missing middle’ of small-to- medium mines. The explanation for this anomaly emerging from my research is that only large foreign companies can afford the high costs of Tanzanian gold mining. Lack of infrastructure means that FMCs have to invest in roads, water and power. Skilled labour is in short supply. The costs of maintaining mine security are high. Theft and destruction of property are quite common. Tax assessments are unpredictable and extortion practiced. [5] ‘Negotiations’ are time-consuming and costly. Expatriate staff frequently have immigration problems. Last, the process of allocating exploration and mining rights is slow, corrupt and inefficient. It can take up to two years to obtain a prospecting licence.

The FMCs are waiting to see how the 2010 Mining Act will be enforced. The ruling party CCM and Chadema, the main opposition party, agree that the government should take a greater cut from FMC profits, and sky-high gold prices are likely to renew pressures to introduce a windfall tax on gold sales. In 2010, ABG made pre-tax profits of USD 309 million – more than double the previous year–on gold production of 701,000 oz. Yet the USD 86.5 million paid to the Treasury in taxes represented only a 28% effective tax rate, compared with 56% in 2009. [6]

The confrontational relations that have developed between the Tanzanian government and FMCs are not conducive to the long-term sustainability of ‘modern’ mining in Tanzania. One mining executive cited by the Fraser Institute (2010) put it thus:

“… Tanzania has changed from a country encouraging foreign mining investment to one which actively discourages new investment, constantly harasses resident foreign miners and keeps changing the laws and regulations or abusing the operation of current laws and regulations to the detriment of the foreign miner and the benefit of the corrupt government.” [7]

As long as gold prices stay robust, ABG will continue to earn fabulous rents from mining Tanzanian gold and exporting its profits. Whether or not this is sustainable or ‘developmental’ is open to debate.

Brian Cooksey

References
[1] Financed by the British and Irish governments, APPP (www.institutions-africa. org) is managed by the Overseas Development Institute (ODI). ‘The investment and business environment for gold exploration and mining in Tanzania’, can be found at: http://www.institutions-africa.org/fileinfo/20110606-appp-background-paper-03-theinvestment- and-business-environment-for-gold-exploration-and-mining-in-tanzaniabrian- cooksey-june-2011 [2] Excluding small-scale gold production, which may be the equivalent of another large mine.
[3] ABG Annual report 2010, www.africanbarrickgold.
[4] www.resolute-ltd.com.au/. Resolute posted a gross margin of USD 71m on gold sales of 148,000 oz.
[5] ABG have outstanding tax claims with TRA of USD 120 million.
[6] ABG Annual report 2010, www.africanbarrickgold. In 2010, ABG paid only USD 0.5million in corporate tax.
[7] Fraser Institute 2010. ‘Survey of Mining Companies 2009/10, 2010 Mid-Year Update’ www.fraserinstitute.org

Dr Brian Cooksey, after teaching sociology at the University of Dar es Salaam, set up his own consultancy and research organisation. He has been actively involved in civil society and journalism and is a member of Transparency International.

Compiled by Valerie Leach

The main preoccupation of consumers in Tanzania has been the continued rise in the cost of living, caused by higher food and energy prices and exacerbated by the falling value of the Tanzanian shilling.

As illustrated in the graph in TA Issue 100, the Consumer Price Index has risen significantly over the last year. Overall, the consumer price index in October was 17.9% higher than it had been a year earlier. Food prices have continued their sharp rise. The National Bureau of Statistics reported that the prices of food and non-alcoholic beverages rose by 22.8% for the year ending October 2011. Fuel prices have also risen sharply – by 37.4% in the same period. The increasing prices of food and energy contrast with relatively stable prices of other items in the consumer price index (www.nbs.go.tz).

The exchange rate has been volatile. In mid-November 2011 the Tanzanian Shilling was around TShs 1,650 to the US $ and TShs 2,600 to the UK £ (Bank of Tanzania). Earlier in the month, it had depreciated to TShs 1,840 a dollar. The BoT Governor, Prof Benno Ndulu, announced measures to curb inflation and shilling depreciation that include tightening monetary policy, stemming volatility in the foreign exchange markets and curbing currency speculation. Some economists have faulted this stance, saying that these are simply short term measures and that the factors behind galloping inflation and shilling depreciation are more structural than monetary (Daily News).

Monetary and fiscal policies
The International Monetary Fund (IMF) said sub-Saharan countries’ monetary policies need to firmly focus on bringing non-food inflation back into single digits and sustaining it there to prevent inflationary expectations from becoming entrenched. “A tighter fiscal stance would also facilitate monetary authorities’ task of getting inflation under control,” IMF said in its June Regional Outlook released in October (Daily News).

The need for a tighter fiscal stance in Tanzania was highlighted by Peter Allum, division chief at the IMF African Department at the conclusion of the IMF’s latest Policy Support Instrument (PSI) review early in November. He warned that Tanzania’s overall recurrent spending had out-paced revenues and grant financing, contributing to growing fiscal deficits and a rising public debt stock. “It was agreed that the budget deficit in 2011/12 should be allowed to exceed the earlier programmed level of 6% of GDP to help finance the emergency power plan and accommodate expanded social spending,” said Allum. Savings in non-priority programmes were expected to reduce the budget deficit to around 6.5% of GDP by the end of June next year, and help tackle inflation, he said (Reuters and The Guardian).

Government Liquidity Problems?
Signs were reported that State coffers are running dry. Reliable sources have confided to The Citizen that in October a number of government workers in some district councils failed to get their pay in time, while some received partial payment. But Minister for Finance and Economic Affairs Mustafa Mkulo quickly dismissed the concern and maintained that the government was in a sound financial position and capable of meeting its financial obligations without any unnecessary delays. A source that asked not to be named at the Finance ministry said Geita was one of many councils whose workers either received their pay late or received less than what was due to them. The source also said the government had also failed to release funds for other charges (OC) for the second quarter of this financial year. According to the Finance Act, OCs for the second quarter are supposed to be released on October 1 (The Citizen).

Tanzania’s growth may top 6% this year
Tanzania’s growth this year may exceed the 6% forecast earlier due to the strong performance of its telecommunications, construction and financial services sectors, the IMF has said. The IMF cut this year’s growth forecast for the country to 6% from 7.2% in March, saying frequent power outages would hurt output. while food and fuel prices could push inflation higher. Tanzania’s economy grew by 6.3% in the first half of 2011 (Reuters and the Guardian).

Waiver of embargo on export of food crops
In mid-November, amid signs that there was no critical national shortage of food, it was announced that the government will soon waive the business embargo previously imposed on export of foodstuffs. Deputy Minister for the East African Community Dr Abdallah Sadalah revealed that the government would soon allow food transportation ahead of the embargo expiry towards the end of this year. Dr Sadalah said after signs of relief against the hunger threat the government was now looking at some possibilities to allow cross border food trade, especially to countries like Sudan and Somalia which were suffering from a severe food crisis. This follows President Kikwete’s mid-October directive that government institutions allow local traders to export surplus food to neighbouring countries, without causing any shortage. He also sanctioned selling of food to the United Nations World Food Programme (WFP), saying however, the country should remain with enough stocks. The President also urged government institutions to ensure surplus food in some regions is transported to urban areas to contain soaring prices and enable the poor to get food at affordable prices (Daily News).

But transport problems continue…

Youths in Dar es Salaam ferry passengers across Kigogo Road for TShs 500 per person. The area has become a nightmare for motorists and pedestrians, forcing commuter buses to suspend services along the route. (Photo by Fadhili Akida)

Section of the Arusha-Karatu road washed away by flash floods and landslides near Mto wa Mbu in November, causing communication routes to the Ngorongoro and Serengeti areas to be cut. (Picture Prisca Libaga - Maelezo)

Investment and technology
More promising news on economic development came from Kigoma, where Tanzania is about to have its own first ever copper smelter following an agreement between the Kigoma Regional Administration and an international firm, City Energy & Infrastructure, which has signed a Memorandum of Understanding committing itself to undertake a number of projects in the Region worth $500 million (about TShs 850 billion). Technicians are assembling a new power plant in Kigoma which is expected to make power shortage in the region a thing of the past (The Citizen).

Jatropha was in the news again. The Jatropha plant, which was previously avoided due to fear that it threatened food production, has reportedly gained popularity among smallholder farmers due to good prices offered in the market. Programme manager with Faida Market Link organisation, Thomas Silayo, said that over 19,000 smallholder farmers in central and northern Tanzania have started benefiting from the plant (The Guardian).

Telecentres – The government plans to build about 3,000 telecentres in underserved areas in a bid to narrow down the digital gap existing between urban and rural areas. At the telecentres the community will be able to access information through television and ICT tools such as the internet, fax and telephones.

Land – During the royal visit to Tanzania, pastoralists told Prince Charles and his wife Camilla that the current land tenure system was marginalising them. They also complained that foreigners were acquiring huge tracts of land in many areas for cultivating biofuel plants and for carving out conservation programmes at the expense of the indigenous people who were left landless (The Citizen).

Compiled by Valerie Leach
Economic management in Tanzania continues to be challenging. Large food surpluses in the West are stockpiled as transportation bottlenecks prevail, consumer prices rise, especially for food and fuel, and districts in the North of the country and neighbouring countries to the North face acute food shortages.

Bags of maize stuck at the railway station in Mpanda District, Rukwa Region, due to lack of transport. Photo: Musa Mwangoka - The Citizen

While a ban against private food crop exports officially remains in place, Tanzania has opened its doors to drought-affected countries to negotiate directly with it in the drive to procure food. “Neighbouring countries confronted with a food crisis are welcome to deal directly with the government instead of farmers, traders or agents in border regions for food purchases,” Prof Jumanne Maghembe, the Minister for Agriculture, Food Security and Cooperatives said. He said Tanzania has a surplus of 1.7 million tonnes of food. Tanzania’s move comes against a backdrop of rampant food smuggling to neighbouring countries. The Tanzanian police estimates that more than 400MT of maize is trucked daily out of the country through Mara, Arusha and Kilimanjaro to Kenya, South Sudan, Somalia and Ethiopia – East African News Agency.

Food prices in Tanzania have risen sharply. The National Bureau of Statistics (NBS) reported that the headline inflation rose to 13% in July from 10.9% in June. Prices of food and non-alcoholic beverages rose by 15.9% for the year ending July 2011. Food and non-alcoholic beverages account for 47.8% of Tanzanians’ ‘shopping basket’ – The Citizen.

Fuel prices have also risen sharply. The NBS reported that energy prices rose by 34.2% in the year to July 2011, compared with a rise of 29.0% in the year to June 2011. The increasing prices of food and energy contrast with stable prices of other items in the consumer price index.

Price movements of different components of the Consumer Price Index - Source: National Bureau of Statistics, www.nbs.go.tz

The Energy and Water Utilities Regulatory Authority (EWURA) announces new fuel prices fortnightly. Early in August EWURA published indicative prices which sparked a boycott by major oil importing firms. Following the boycott, EWURA slapped a three-month no-sale ban on BP Tanzania, a firm in which the government has a 50% stake, and strongly warned a couple of others. Two top executives of BP (Tanzania) Limited were arrested in Dar es Salaam. They were granted bail and are due to appear in court to answer charges related to economic sabotage. EWURA is also monitoring conduct of oil dealers Total and Oryx following reports that some of their filling stations resisted selling fuel at the new prices. New prices announced mid-August effectively restore the pre-boycott oil price levels. Minister Ngeleja justified the increase, saying it was prompted by two major factors: an increase in oil prices on the world market and a fall in the value of the local currency relative to the American dollar – The Guardian.

Huge queues at Sinza petrol station in August - Photo Jackson Odoyo

Tanzania’s economy to grow by 7.3% in 2012
Tanzania’s economy is expected to grow by 6.9% this year and 7.3% in 2012, according to a new report of the African Development Bank, African Economic Outlook. The report also says that the country’s economic growth faces great risks, including increasing fiscal deficit, and inflationary pressure from fuel and food prices. “The infrastructure deficit such as lack of reliable energy may pose a threat to the struggling economic growth not only in Tanzania but also in other countries,” said Prof Mthuli Ncube, the African Development Bank (AfDB) chief economist. Last May, the International Monetary Fund (IMF) cut its 2011 growth forecast for Tanzania to 6% from 7.2% in March, saying frequent power outages would hurt output while food and fuel prices could push inflation to higher levels – Daily News.

Imports and Exports
During the year ending May 2011, the current account deficit widened by 3.6 per cent to USD 2,607.4 million compared with the year ending May 2010. This was the result of a larger increase in imports than the increase in export earnings. The increased cost of imports was mainly on account of persistent increases in global oil prices. Moreover, there was a significant rise in imports of fertilizer that could be associated with the implementation of Kilimo Kwanza. In the year ending May 2011, a total of 313,400 tons of fertilizer were imported compared with 235,000 tons imported in the similar period a year earlier. In the year ending May 2011, the value of exports of goods and services amounted to USD 6,447.1 million, an increase of USD 1,399.3 million when compared with amount realized in the year ending May 2010. This development was largely driven by good performance in gold, manufactured goods, coffee, tobacco, cashew nut as well as receipts from travel and transportation services. Exported manufactured goods include cement, textile apparels, edible oil, wheat flour, plastic products, soap, paper products; and glass and glassware products. (Bank of Tanzania, Monthly Economic Review, June 2011).

Highlights of the Budget Session of the National Assembly, June-August 2011
This year’s budget session has been a lively one with MPs from all parties questioning budget proposals. In three ministerial budgets the Premier had to intervene. The first time, he withdrew the Energy and Minerals Budget and asked Parliament for three weeks to prepare emergency plans to deal with power rationing. MPs had rejected budget proposals for the Ministry of Energy and Minerals, forcing the Prime Minister, who is head of government business in Parliament, to postpone it to August 13, when the government pumped in TSh1.2 trillion for short, medium and long term power generation aimed at easing the power crisis.

In addition, the MPs rejected budget proposals for the Ministry of Transport, prompting the cabinet to convene an emergency meeting that authorised an additional budget of TSh95 billion.

In the debate on the budget for the Ministry of Lands, Housing and Human Settlement Development, the Prime Minister moved quickly to allay MPs’ fears over land grabbing by assuring them that the government’s lease system guarantees that no one person can wholly own land in the country. “This is one thing that the government should be praised for,” the Prime Minister said. “No one can own land in this country and we have said that, come what may, we will not budge on this.” He added, however, that while there were areas where land is a critical issue, there was ample land in other areas that people were free to move into. “We should not fear to welcome investors in land if such investment will be beneficial for the country,” pleaded Mr Pinda – The Citizen.

Experts have warned that new tax waivers announced by the Treasury will further increase revenue losses incurred by the government through excessive exemptions and other generous fiscal incentives, which are currently put at nearly TSh2 trillion. The experts also argue that contrary to the government’s position, the fiscal incentives – which mostly comprise tax holidays, investment allowances and tax credits, timing differences, and general tax reductions – will not necessarily attract investments. Research undertaken by local and international institutions has established that the concessions play only a marginal role in influencing investors’ decisions. “Experience shows that a high occurrence of tax exemptions reduces the tax base, creates room for bribery and corruption, and increases the appearance of loopholes for tax evasion.” researchers at the Christian Michelsen Institute of Norway noted in their June 15, 2011 report on tax opportunities and challenges in Tanzania, Zambia and Mozambique – The Citizen.

Energy
Members of Parliament cautiously welcomed the government’s emergency power generation plan and called for prudent use of the billions of shillings that will be invested. But some opposition MPs accused the government of ignoring proposals to cut its unnecessary expenditure to fund the emergency plan instead of borrowing from the commercial banks – The Citizen.

The government’s emergency power production plan indicates that 572 megawatts (MW) will be produced between August and December, with the National Social and Security Fund (NSSF) coming in as a new player who will produce 150 MW. Other players who will contribute to the power pool are Symbion which will inject 112 MW, IPTL who will produce 100 MW and Aggreko who will supply 100 MW. The emergency plan will cost TShs 523bn. Tanesco will manage TShs 115bn from sales of power and the government will obtain a TShs 408bn loan from a bank – Daily News.

Aggreko generating equipment is offloaded in Ubungo, Dar-es-Salaam - photo Victor Makinda

Land
The government will establish the land bank to facilitate protection of land and make it easily available for investment purposes in a move which seeks to avoid conflicts among investors and villagers. It will also enable people in the area to benefit from land resource at the same time enhance sustainability of extensive land-based investments, Minister Tibaijuka told the National Assembly. She said under the new arrangement, villagers would have shares in the invested land but under invested value method of land valuation. Shares and profit will be shared among the investors, relevant district council and the central government. She said a bill for the establishment of the bank would be tabled in the House after completion of necessary preparations. The Minister also said that the government would establish Land Compensation Fund to be used for compensating parties moved from their land for national development projects – Daily News.

Agriculture
The government will implement two ambitious agricultural programmes during the 2011/12 financial year, namely the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) and the Marketing Infrastructure, Value Addition and Rural Finance Support Programme (MIVARF), to boost agricultural production. Presenting his office’s TShs 3.4trl budget estimates, the Prime Minister, Mr Mizengo Pinda, said that the government has set aside TShs 1.5bn while donors have pledged TShs 26.3bn for the 20-year SAGGOT programme. He said the government in collaboration with International Agriculture Development Fund, African Development Bank and Alliance for a Green Revolution in Africa would start implementing MIVARF next month. MIVARF to be implemented in 7 years, will cover all regions in the country plus Zanzibar – Daily News.

Crop Marketing
The Ministry of Agriculture, Food Security and Cooperatives is preparing a new procedure dubbed ‘commodity exchange markets,’ in order to improve the crop marketing system for major cash crops. Tabling his 2011/2012 budget estimates, Agricultural Minister Prof Jumanne Maghembe said his ministry, in collaboration with other sectoral ministries and stakeholders, were preparing the system which would be a special marketing system for farmers. “This system will start being implemented for crops which are already in the process of being sold through the warehouse receipt system,” he said. The Minister said further that the budget allocated for the Grain and Mixed Crops Board for implementation of the commodity exchange markets was TShs 8.19bn – Daily News.

Action by Parliament, the media and the judiciary continue on several allegations of corruption and Tanzania has again set a good example by revealing to the public more and more new cases of alleged corruption, or inefficiency in the public service.

The Richmond/Dowans saga
In what The East African describes as the ‘Scandal which just won’t go away’ (it was in 2006 that TANESCO contracted the Richmond Development Company to supply emergency electricity to Tanzania’s Tanesco) there has been a major new development. In 2008 Dowans (the company which took over from Richmond because the latter did not perform satisfactorily) appealed to the International Commercial Court (ICC) to arbitrate in its dispute with the government. The previous history of this case has been covered extensively in earlier issues of TA.

In December 2010 the ICC ruled in favour of Dowans and required Tanzania to pay $65.8 million (TShs 94 billion) compensation for breach of contract by Tanesco. Tanzanians were shocked at the size of the award and many were very angry and wanted the government to refuse to pay. The President, parliament and the media were immediately involved in a huge controversy. Should Tanzania pay or not? Energy and Minerals minister William Ngeleja announced that he had received instructions from Attorney General Frederick Werema to pay Dowans. East African Cooperation minister Samwel Sitta and Works Deputy minister Dr Harrison Mwakyembe queried the legality and the speed with which the problem was being handled.
In a speech broadcast live on radio and television President Kikwete said he was not for or against payment. He said the issue was legal and the government would do everything possible to ensure that the penalty was successfully challenged so as to spare taxpayers the enormous cost. He also declared that he neither had shares in Dowans nor did he know the firm, adding that he was not protecting ‘friends’ alleged to have a stake in the company…. I don’t have even a single cent in shares in Dowans…..I agree with those who say that we should not hasten to pay Dowans all those billions of shillings,” he added.

Prime Minister Mizengo Pinda said a CCM committee had resolved to engage legal experts in pursuing the case so as to spare Tanzanian taxpayers.

The Guardian wrote about how the ICC’s judgment had come with a ‘stunning revelation on how the ‘Mafia style’ described in Mario Puzo’s novel the Godfather, had played a crucial role in awarding Richmond and later Dowans a lucrative tender deal.’ The paper went on to say that the judgment had indicated why Dowans had been awarded a multi-billion shillings compensation package, thanks to failure by Tanesco lawyers to include corruption in their main issues as well as the government’s move to break the laws it was supposed to supervise and respect.’

On February 20 the previously mysterious owner/principal shareholder of Dowans arrived in Dar es Salaam. He is Brigadier General (retired) Sulaiman Mohammed Yahya Al Adawi from Oman. He said that he had come to negotiate with Tanesco and talked of the possibility of varying some of the damages due to him. He did not want his photograph to be taken. He said he formed Dowans Ltd with the aim of assisting Tanzania with its power problems. He wondered the why the media had portrayed his company so badly.

He revealed that he had given power of attorney to a Tanzanian businessman-cum-politician, Rostam Aziz, a prominent CCM MP, who is also a member of the ruling party’s National Executive Committee. “There are people who are misinformed and have been criticising Dowans as a fake company even though it owns substantial power generation capacity.”

The next day Mr Al Adawi visited the generating plant. According to the Citizen, while entering the premises, security guards were seen saluting and no reporter was allowed to cover the visit. When asked later who the visitor was, the security guards said they did not know him but as he was accompanied by three people from the company they had allowed him in.

Speaking later, Mr Al Adawi said that he was touched by the power problems affecting Tanzanians and was ready to assist. “With good intentions and in the spirit of an amicable resolution, it is my sincere hope that Tanesco, the government and the people of Tanzania will listen to us so that we can together see how to work to alleviate the current electricity crisis.’

Richmond was ‘technically poor.’
In mid April, in a court case involving Richmond’s Tanzania Director, evidence was given which alleged that the Richmond Development Company LLC of Texas, had been ranked last among eight companies which had submitted bids for the original tender to produce 100 megawatts of emergency power. It was alleged that in the evaluation of the bids Richmond failed in the technical specifications but at a later stage the tender documents were taken over by the government – Majira.

The Radar scandal
The Citizen reported in February that former Attorney General Andrew Chenge had said that investigations by the Serious Fraud Office (SFO) of the United Kingdom and the Prevention and Combating of Corruption Bureau (PCCB) had confirmed his innocence from the 1999 corruption case. “I am happy that the truth has finally been revealed,” he said about allegations that he was involved in the controversial purchase of a military radar system from BAE Systems, which he partly oversaw while serving as Attorney General….. The purchase of the radar followed all procurement procedures in the country as proved in the court,” he said…..”I am very faithful. I have worked in all four phases of the government and when I resigned I was not fearing about losing my job because I knew that I had done nothing wrong.”

Mr Chenge resigned on April 20, 2008 as minister of Infrastructure at the height of the radar scandal investigations. His resignation followed a public backlash after it was revealed by the SFO that he had stashed about $1 million away in an offshore account as kickbacks from the military radar deal – Guardian. Tanzania and Kenya have unveiled plans to replace the radar system in their air traffic control with Automatic Dependent Survey Broadcast (ADS-B).

PCCB Employees sacked
The Prevention and Combating of Corruption Bureau has fired six of its employees and mutually agreed not to renew the contracts of five others due to unethical conduct.

At the annual PCCB workers’ convention in Arusha the head of the Bureau said that last year the PCCB had prosecuted 10 major corruption cases and 8 others had been submitted to the Director of Public Prosecutions for consent to prosecute.

Speaking at the same meeting the new Vice President of Tanzania, Dr. Mohammed Gharib Bilal, told leaders that they should concentrate their efforts on local government authorities and construction sector projects….. “We have major problems in procurement as we have little value for money in most such projects” he said – Mwananchi.

President Mkapa
Former President Benjamin Mkapa and his wife, Anna, have wound up their company (voluntary liquidation), ANBEM Limited which was alleged to have been linked with the controversial acquisition of the state-owned Kiwira coal mine. According to the Citizen, the ANBEM saga has damaged the legacy of Mr Mkapa, who was credited with transforming the economy and enhancing public accountability during his 1995-2005 tenure. But several politicians have strongly defended the former President, terming certain allegations of abuse of office as ‘baseless’.

Minister uncovers massive fraud
Minister of Construction John Magufuli has exposed a massive plot to cheat the government of an amount to the tune of Shs 5 billion for a Dar es Salaam road construction project. The Minister went to the site to find out the actual number of houses that would need to be compensated to allow the project take off. It was alleged that evaluation officials from Ilala, Kinondoni and Temeke municipalities had plotted to increase the costs. In some cases houses were ‘ghost’ ones. The minister directed all Dar Salaam District Commissioners to review the situation and report back to him as soon as possible – Mtanzania.

Suspected shoddy deal in Tanesco
The Parliamentary Standing Committee on Energy and Minerals has ordered Tanesco to submit to them all contracts entered into with gas exploration firms after the Committee became suspicious of the terms awarded to some firms. The Committee discovered that Tanesco had entered into a contract with a foreign firm that obliged it to buy gas for electricity production in US dollars rather than Tanzanian shillings which was not correct – Tanzania Daima.

Public Funds
The Controller and Auditor General (CAG) has released a new report that shows massive faults in keeping proper government accounts.

The report queries over-expenditure of a TShs 48 billion stimulus package, meant for rescuing businesses affected by the global financial and economic crisis. Speaking to journalists in Dodoma, the CAG, Ludovick Utouh, said he found no records to show who benefited with the package. Utouh also queried the delay in implementation of the national identity cards project saying it caused great losses to the nation – Mwananchi.

Compiled by Valerie Leach

Porters on the Mjonga River - photo John Nditi

An unidentified porter helps Mwnahawa Rashidi, a resident of Malowa Village, Kibati Ward in Mvomero District to cross a section of Mjonga River whose bridge was recently washed away by floods. The porters charge their ‘passengers’ 1,000/- for a ride on the back and 500/- for those who prefer a helping hand. Children and the sick are given a free ride – Daily News

Prices
Prices continue to rise at a higher rate than the Bank of Tanzania’s target rate of 5% in MKUKUTA II, the latest version of the Government’s growth and poverty reduction strategy. Moreover, poor households, who spend a larger proportion of their income on food than better off households, continue to be disproportionately affected by high food prices. Overall prices increased on average from 4.4% in the period 2002 to 2005 to 9.5% on average from 2006 to 2010. Food prices in the same periods rose from an average of 6.5% per annum from 2002 to 2005 to 10.6% on average from 2006 to 2010. The increase in local prices has been attributed to insufficient rainfall and international prices. – National Bureau of Statistics and Bank of Tanzania

Government Budget
The Government budget for fiscal year 2010/2011 was an ambitious one, increasing from TShs 9.5 trillion in 2009/10 to TShs 11.6 trillion. Reaching the revenue targets of this budget has been challenging. By January 2011, tax revenue collection was just over 90 percent of the budgeted revenue, and the shortfall in project grants was even larger at 71 percent, leading to an equivalent shortfall in development expenditure. There will be further pressure on revenue collections if the current power shortages continue and consequently industries and businesses cut their operations. TRA Director of Research and Policy, Mr Tonedeus Muganyizi told members of the Parliamentary Committee for Energy and Minerals in Dar es Salaam that the deficit in collection during the second half of the financial year may be as much as 30 percent. Strategies for dealing with the power shortages have been proposed: settling the Dowans dispute and providing fuel to run the IPTL generators. Recent rainfall in catchment areas of the large hydro systems have helped somewhat to alleviate the problem.

The budget for 2011/2012 incorporates a very modest increase to TShs 11.9 trillion. (The current rate of exchange is approximately £1=TShs 2,500.) Minister for Finance and Economic Affairs Mustafa Mkulo, announced a similar set of priorities for spending as in previous years: education, agriculture, energy, transport and communication infrastructure and development of industries, health, water, land and human settlements development, human resources development, science and technology, finance services development as well as crosscutting issues such as environmental protection. – Bank of Tanzania and Citizen

IMF Projects Brief Slowdown, Quick Recovery in Tanzania
A mission from the African Department of the International Monetary Fund (IMF) visited Tanzania during March 4-16, 2011. The IMF estimates that GDP growth in 2010 was 7 percent, and exports grew – manufacturing exports nearly doubled in the year. Projections for 2011 suggest a slower growth of 6 percent because of power shortages. With investment in additional electricity generation, the economy should bounce back, so that by the end of 2011, the rate of growth is expected to be 7 percent.

The IMF warned that achieving this rate of growth “will require careful control of expenditure commitments to keep them in line with available resources. The budget for the 2011/12 fiscal year (July to June) should begin the process of reigning in the fiscal deficit. Given the significant and legitimate spending needs—in areas such as health, education, and infrastructure—this will require a careful re-prioritization of expenditures, eliminating or reducing low priority spending, as well as measures to increase tax revenues.” – IMF Press Release No. 11/92

Mining
Gold continues to dominate export earnings, accounting for 40% of export earnings in the period July 2010 to January 2011. Mining is much more capital-intensive than it is labour-intensive, but Mr Greg Hawkins, chief executive, African Barrick Gold, said “The important thing for us is local employment – 89 per cent of our on the ground employees are local … Slowly but surely we’re starting to create an economy in the remote areas we operate in … We bring power and water to those communities … those are the two big things.” – Citizen

Coal – Expected growth in mining over the next few years will be significantly boosted by coal mining. According to the Tanzania Mining Report, “Coal is set to become one of the fastest-growing mining subsectors in Tanzania over the coming years, as the country looks to coalfired power stations to offset an energy shortage that is holding back its development.” – Citizen and Business Monitor International Ltd, Tanzania Mining Report Q2 2011

Uranium – Construction of the uranium mining plant for the Mkuju River Project in southern Tanzania will start in the first quarter of 2011 with operations beginning in the fourth quarter of 2013. Minister for Energy and Minerals, William Ngeleja, told The EastAfrican that the pre-feasibility study in March 2010 indicated that, once developed, the mine would produce 1,650 tonnes of uranium oxide a year, to become the eighth largest producer in the world. This will be the first major mining development in south eastern Tanzania. – East African

Rare Earth – Montero Mining and Exploration (listed in Canada) exploring rare earth deposits at Wigu Hill, could start production” quickly” because of the “high-grade, simple mineralogy” and “its close proximity to a major railway siding and the port of Dar es Salaam” – Business Times

Agriculture
Former United Nations (UN) Secretary General Kofi Annan has commended the Kilimo Kwanza initiative and expressed confidence in the potential of Tanzania’s agricultural sector. However, Mr Annan said after a three-day visit to Mbeya that much still needed to be done to make the dream of liberalising agriculture a reality. “I think Tanzania should copy what some other countries, like India, do. They ensure that small-scale farmers are serviced properly, something that makes it easy for them to acquire loans… the country should also increase investments in new agricultural technologies which will benefit smallholder farmers,” he suggested. – Citizen

China-aided agriculture centre in Tanzania
The Demonstration Centre aided by the Chinese government at Dakawa in Morogoro region has been handed over. President Kikwete praised China’s assistance to Tanzania, saying that this project will be another boost to agricultural development in Tanzania. The centre will focus on research and training for local farmers to learn Chinese agricultural technology, such as advanced seed technology to achieve high yields. Under the operation of Chongqing Sino-Tanzania Agriculture Development Company, the project covers an area of 62 ha – Guardian

Telecommunications
The fast spread of mobile telephones in Tanzania is being followed by efforts by telecommunications companies to boost internet connections. One company, Zantel, recently announced a cut in the prices for its modems by about 50 per cent, from TSh 49,900 to TSh 25,000. The company has also doubled the volumes on selected bundles on its ‘Z-Connect’ internet service, without changing the price. “Our aim is to ensure that more people own personal internet modems to increase internet penetration,” Zantel’s acting marketing director, Mr Brian Karokola said in the statement. The fibre-optic Eastern Africa Submarine Cable System (EASSy) is now operational and provides improved and faster internet connectivity. – Citizen

Petty Traders in Dar es Salaam
One morning early in March, petty traders operating in the secondhand clothes market in Manzese found their stalls demolished in an exercise of Kinondoni municipal authorities with the support of the municipal auxiliary police. The traders had not been warned or notified of the pending demolition. Several people were reported to have been injured when the police used live ammunition and tear gas canisters to disperse petty traders who were protesting against the demolition exercise, blocking Morogoro road to express their grievances. The Kinondoni municipal council said the area needed to be cleared for the construction of infrastructure needed for the Dar es Salaam Rapid Transit (Dart) project.

However, on March 24, the Mayor of Kinondoni Municipality, Mr Yusuph Mwenda, told The Citizen on Sunday that they had allowed the traders to continue using the market temporarily, while talks were underway on where to relocate them. The municipal communication officer, Mr Sebastian Mhowera said that the municipality had sought advice from Tanzania Roads Agency (Tanroads) and Dart on the possibility of allowing the traders to continue with their businesses. In order to conduct their business the traders had taken out loans from CRDB, micro credit institutions or savings and loans associations, loans which had to be serviced, despite the damage to their business. – Citizen

Valerie Leach lived in Tanzania from 1994 to 2007. Initially recruited to work with UNICEF in monitoring, evaluation and social policy, she went on to be a policy analyst with REPOA, an independent Tanzanian research institution based in Dar es Salaam. She returned to UK in 2007, together with her adopted Tanzanian children, Francis and Rose, where she continues to contribute to REPOA’s work.

Kivukoni area of Dar-es-Salaam, with the Askari Monument to the right, and the Bank of Tanzania twin towers in the distance, near the ferry to Kigamboni. Photo Issah Michuzi http://issamichuzi.blogspot.com

Visitors to Dar-es-Salaam cannot fail to see evidence of the construction boom in the city. Perhaps most obvious is the number of skyscrapers being constructed in the central Kivukoni area (see photograph). One casualty is the Nyumba ya Sanaa (Nyerere Cultural Centre) which has been demolished to make way for a tower. The centre’s operations will be relocated to Msasani Village.

Map of the DART bus rapid transit project in Dar-es-Salaam, showing the six phases

An ambitious project to try and alleviate the chronic congenstion faced by commuters is the Dar es Salaam Rapid Transit (DART) project, which was launched by President Kikwete in September and is expected to start operating in 2012. The system will use guided buses (Bus Rapid Transit) on segregated bus lanes, and dala-dalas will no longer be allowed to operate on the routes, but will operate as feeder services to the DART arterial routes.

The project will comprise six phases and a total of 130km of road plus two workshops, five main stations and six feeder stations. The first phase has just been let to Chinese firm Beijing International Engineering Group (BCEG). The route follows Morogoro Road from Kimara – Ubungo – Kivukoni with branches to Kariakoo and Morocco. 145 articulated buses, each capable of carrying 140 passengers will operate on the route, with an expected 400,000 passengers using the system every day. Subsequent phases comprise Kilwa Road, Nyerere Road, Bagamoyo Road, and orbital routes. The scheme further includes cycle tracks alongside the routes with the aim of encouraging non-motorised transport in the city. Funding for the project comes from the World Bank and UNEP as well as the Tanzanian governemnt.

The government has also released a tender for construction of a road flyover at Tazara and a bridge at Bendera Tatu that will link the junction of Nyerere Road to Bibi Titi Road, also with the aim of reducing congestion.

Private development is gradually spreading outwards from the central areas of the city, for example a large mixed use project planned for Mchikichini, Illala district, with over 1,600 multi storey flats, office accommodation and hotels, jointly funded with a Malaysian company.

Construction work is also underway at Julius Nyerere International Airport (JNIA). Speaking at the official launch of the project, Tanzania Airports Authority (TAA) Director General, Mr Prosper Tesha said that the project would involve rehabilitation of taxiways, runways and sewage system, and is set to be finished by May 2011.

The Tanzania Zambia Railway Authority (Tazara) has signed a contract with a Chinese manufacturer for the manufacture and supply of 90 container wagons worth approximately US$5 million. The Chinese company was given eight months in which to manufacture and deliver the wagons which will be used in the transportation of containerised cargo and metals such as copper and manganese. Other components of the agreement are expected to follow including the supply of six new mainline locomotives, rehabilitation of three shunting locomotives and training of staff. Chinese ambassador to Zambia Li Qiangmin was quoted as saying that Tazara was a symbol of friendship between Zambia and China and his country was saddened by problems the company was facing. “We are sending a technical team to Tazara to investigate the problems and help them improve efficiency,” the envoy said. Tanzania’s Infrastructure Development Minister Shukuru Kawambwa was quoted as saying that the Chinese financing was intended to save Tazara from total collapse as the company had been experiencing major operational and financial problems with a debt burden of over US$100 million – Guardian.

Addressing a conference of leading financiers in Dar es Salaam Prime Minister Mizengo Pinda stated that strong supervisory enforcement of financial regulations had enabled Tanzania to weather the storm during the recent world economic crisis without too much impact compared to other countries. Limited links with the global financial markets had also helped to keep the country’s financial sector strong and sound, as the world went through its most severe financial crisis in recent times. All major financial indicators of the local banking sector had remained strong he said. The banking system had remained adequately capitalised against any potential financial risk and the ratio of non-performing loans to total loans had remained within prudential limits. “Furthermore, the banking system has managed to keep enough liquidity to operate smoothly and cover its liabilities without recourse to the central bank.”

“Our banking system has maintained reasonable profitability”, he pointed out. He also announced that the Bank of Tanzania recently took steps to review the minimum capital requirements for commercial banks, raising it from Sh5 billion to Sh15 billion. This would consolidate the strength of the banking industry and enhance its ability to self-bailout in case of a crisis. On the proposed East African Monetary Union (EAMU), the PM said that recent reforms in Tanzania’s financial sector had placed the country in a better position for financial integration. Since these had been undertaken in various phases dating back to the early 1990s, the number of banks that operate in the country had increased to 42, up from only three public-owned banks in 1992. Insurance companies had increased from two in 1990s to 26 at present. The total assets of banks had risen significantly from an average of 6% of GDP in the early 1990s, to above 40% of GDP currently.

Warning to foreign traders
The government has issued a warning to foreign traders doing small business in Tanzania without following procedures. One of the requirements for a foreigner to do business in the country is that he should have a minimal capital of $300,000. Some foreigners are said to be entering the country for work on the mines or on major projects but later moving into petty trading in Kariakoo market in Dar es Salaam. The Guardian has reported that there has been an increase of shopkeepers of Chinese origin at several business centres in the city which were adversely affecting local businesses. However former Industry, Trade and Marketing Minister Dr Mary Nagu she said this was due to globalisation. “It is not only Tanzanians who conduct their businesses in the area, but also Congolese, Zambians, and Malawians” she said.

Big Korean investment
100,000 hectares of land in Tanzania’s Rufiji valley are to be developed by South Korean corporation KRC as part of Tanzania’s Kilimo Kwanza programme. In an interview with the BBC, Lee Ki-Churl, of the state-run Korean Rural Community Corporation, said the move would see Tanzanian farmers benefit from an education centre as well as from South Korean expertise on the ground. Plans envisaged half the land given over to local farmers with the rest being used to set up a food processing complex for exports to Korea. The initiative was said to be partly the product of Prime Minister Mizengo Pinda’s visit to South Korea to help develop economic ties between the two nations.

UK gives £103.5 billion
While some donors have decided to cut down on their donations towards General Budget Support, Britain is giving Shs 230 billion in the financial year 2010/11. This was said by the UK Parliamentary Under-secretary of State for International Development, Stephen O’Brien, during a visit to Tanzania. Earlier on, the British minister had a meeting with Finance Minister Mustafa Mkullo during which they had a profound discussion on the utilisation of the funding. “This will help in the priority areas as stipulated in the Mkukuta development strategy,” said the statement. Tanzania ranks third among the recipients of British aid – Mwananchi.

Train services from Dar-es-Salaam to Kigoma resumed in June, although limited to only one serice per week. Photo Jackson Odoyo

The problems facing Tanzania Railways Ltd (TRL) have not been resolved (they have been described in several issues of TA) but a number of new developments have been reported during recent months.

In May it was revealed that the India-based firm RITES was demanding $86 million (about Shs 125billion) as the cost of ending the 25-year deal it had signed with Tanzania three years earlier. However, the Guardian on Sunday claimed that the company hadn’t invested any money in the railways during all this time. The paper alleged that RITES had expected to use the TRL’s shares and assets it acquired in order to borrow $400 million from the International Finance Corporation/World Bank. As the quality of service on the main lines declined, the paper said, the government eventually agreed to buy back the 51% of shares RITES owns. Then, alarmed by the financial report presented by RITES, the government’s negotiation team was said to have asked for an independent auditor to verify the books of accounts, before any compensation deal could be reached. RITES apparently did not agree to this.

On June 8 the Daily News reported that the government had formed an interim management team to run Tanzania Railways Limited (TRL) while the government looked for a reliable and serious investor. RITES management had agreed to hand over the assets and operations of TRL as a decision to this end had been made by shareholders on both sides of the partnership.

TAZARA

The Tanzania Zambia Railway Authority (TAZARA), a company built with $500 million Chinese aid in the 1971’s and jointly owned by Zambia and Tanzania, is also in serious operational and financial trouble due to a fall in traffic and the old age of its locomotives, which have not been well maintained. The railway line runs some 1, 870 kilometers from Dar-es-Salaam to Zambia’s Kapiri Mposhi.

New Managing Director Akashambatwa Mbikusita-Lewanika, who was appointed in 2010 has said that the management is determined on turning around the company. It had developed a 2010 action plan which indicated what should be done to bring efficiency to the company. The company was expected to spend about $520, 000 on repairing 500 defective commercial wagons this year. The company currently had 1, 853 commercial wagons, of which only 988 were running. This rehabilitation exercise would see the company increasing its volume of cargo from the current 15, 000 to at least 72, 000 tons per month. The company’s liquidity problems had resulted in it accruing a huge debt which it was currently trying to off-set.

In 2008 the two governments had signed an agreement with the Chinese which would cover the provision of equipment, materials and other technical services valued at $40million and, in 2010, the Chinese gave the company a $39 million interest-free loan to revive its operations.

The Daily News (August 8) published a highly critical article saying that TAZARA’s low cargo load represented nothing but death itself. This view was in contrast to a TV documentary shown on British TV which was surprisingly up-beat. The programme showed a very open management struggling with great determination and remarkable resourcefulness. Among the suggestions made in the Daily News was that TAZARA should open its CEO position to international competition. ‘They should just borrow a leaf from the success of Kenya Airways (KQ) which employs the service of foreign experts in some of its important departments.’ It quoted a number of companies wanting to use the line including Tanzania Breweries, Mbeya Cement, Mufindi Paper Mills, plus the Chinese company mining coal in Chunya.