Annual report 2016:2017 by BAKARI R. KACHEUKA ( +255 676510464 )

THE UNITED REPUBLIC OF TANZANIA

ANNUAL REPORT

2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

THE UNITED REPUBLIC OF TANZANIA

ANNUAL REPORT

2016/2017

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

TABLE OF CONTENTS

Authority’s Information........................................................................................................................v Letter of Transmittal............................................................................................................................vi Chairperson’s Statement.................................................................................................................... vii Director General’s Statement...............................................................................................................ix Sumatra Board of Directors.................................................................................................................xi List of Abbreviations used................................................................................................................ xii Report of the Directors for the year ended 30th June 2016...................................................................1 Report on the Audit of Financial Statements for the Financial year ended 30th June, 2017...............32

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AUTHORITY’S INFORMATION AUDITORS: Controller and Auditor General, National Audit Office, Samora Avenue/Ohio Street, P. O. Box 9080, Dar es Salaam, Tanzania. SUB – CONTRACTED AUDITORS: - Wiscon Associates (Certified Public Accountants) 2nd floor, Apex Towers Building, Lugoda Street, Area 11 Gerezani, P O Box 78999, Dar es Salaam, Tanzania. PRINCIPAL PLACE OF BUSINESS: Head Office, Mawasiliano House, A. H. Mwinyi Road/Nkomo Street, P. O. Box 3093, Dar es Salaam, Tanzania. BANKERS: National Bank of Commerce (NBC) Limited, Samora Branch, P. O. Box 9002, Dar es Salaam, Tanzania. National Microfinance Bank (NMB) Limited, Bank House, P. O. Box 9031, Dar es Salaam, Tanzania. Banking Department of Bank of Tanzania, 2 Mirambo Street 1184, P. O. Box 2939, Dar es Salaam, Tanzania Standard Chartered Bank, International House Building, Shaaban Robert Street/Garden Avenue, P. O. Box 9011, Dar es Salaam, Tanzania. SECRETARY TO THE BOARD: Director of Legal Services, SUMATRA Mawasiliano House, A. H. Mwinyi Rd/Nkomo Street, P. O. Box 3093, Dar es Salaam, Tanzania.

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LETTER OF TRANSMITTAL

Hon. Prof. Makame Mnyaa Mbarawa (MP) Minister for Works, Transport and Communication 5th Floor, TBA Building Moshi Street 404470 DODOMA Honorable Minister, In accordance with Section 46 of the Surface and Marine Transport Regulatory Authority Act, Cap 413, I have the honor to submit to you the Annual Report and Audited Accounts of the Surface and Marine Transport Regulatory Authority (SUMATRA) for the financial year ended 30th June, 2017.

Respectfully submitted

Eng. Dr John S. Ndunguru, CHAIRMAN OF THE BOARD SUMATRA

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BOARD CHAIRMAN’S STATEMENT

Eng. Dr John S. Ndunguru On behalf of the Board of Directors of the Surface and Marine Transport Regulatory Authority (SUMATRA), I am pleased to present the SUMATRA Annual Report for the financial year ended on 30th June 2017. The Board of Directors was established in accordance with Section 7 of SUMATRA Act, CAP 413 (as amended). The First Schedule of the Act provides that the Board shall meet as often as there is sufficient business to transact. During the period, the Board held a total of twelve (12) meetings; two (2) were ordinary meetings and ten (10) were special meetings. In these meetings, the Board discussed and deliberated on the Performance Reports, Audited Financial Statements, Plan and Budget of the Authority, Employee Performance Appraisals, Recruitment of employees, Board and its Committee’s Charters and TICTS and UDA-RT Tariff applications. The Authority’s duty is stipulated under Section 5 of SUMATRA Act and its functions are stipulated under Section 6 of the Act. Generally, the Authority is empowered by the Laws to regulate, promote and facilitate availability of efficient, safe, quality, reliable and economic transport services in the Surface and Marine Transport sub-sectors through competition and fair trade practices. The Second Five Year Corporate Strategic Plan (2013/14- 2017/18) was in the fourth year of implementation. The Plan has five strategic goals namely; Enhanced Authority’s capacity to effectively and efficiently discharge its regulatory responsibilities; Improved safety, security, and quality of the Surface and Marine Transport Services; Enhanced competitive and sustainable regulated surface and marine transport services that serve socio-economic needs of the public; Improved environmentally sustainable and socially compatible surface and marine transport services; and Improved legislative, regulatory, policy and institutional framework for regulated surface and marine transport subsectors. The Board played its oversight role by ensuring that the Annual Plan for the year ended 30th June, 2017 was focused on the implementation of the Strategic Plan with the view of realizing the Vision: to be a world class regulator in surface and marine transport services. The final annual revenue budget for the year 2016/2017 was TZS 51.40 billion. The revenue recognized as at 30th June, 2017 was TZS 44.75 billion, which were below the budgeted revenue by TZS 6.65 billion or 12.94%. The recurrent expenditure for the year amounted to TZS 42.65 billion, which is TZS 4.88 billion below the budget of TZS 47.53 billion. Capital expenditure during the year amounted to TZS 2.16 billion, out of which, TZS 1.76 billion was used to purchase property and equipment and TZS 0.40 billion covered costs of Intangible Assets acquired during the year. In

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general, the Authority’s financial performance during the year 2016/2017 is a positive reflection of our commitment to ensure that the strategic initiatives for the year were achieved. During the year, SUMATRA achieved improvements in the regulated transport sub sectors of ports and shipping, road transport, railway and maritime safety and security. A number of regulatory instruments (Regulations) were enforced and we received good support and cooperation from the stakeholders in all regulated sub-sectors. Major ports services were regulated to comply with the International Ship and Port Facility Security (ISPS) Code. Tanzania waters continued to be safe with no reported incident of piracy. The shipping services were improved in line with establishment of Regulations for Clearing and Forwarding Agents and enforcement of Regulations on Consolidation and Deconsolidation of cargoes. In the railway sub-sector, there is notable improvement in the quality of services due to Government support to the service providers and its commitment to invest in this sub-sector. Furthermore, the road transport sub-sector performed well during the year as a number of road traffic accidents for regulated vehicles declined from … recorded in the financial year 2015/2016 to… recorded in 2016/2017. This is a significant drop and we shall continue to work with all service providers to sustain the efforts and further lessen the number of accidents especially after the commissioning of the Vehicle Tracking System (VTS) which will address, among other issues, three (3) major factors contributing to road traffic accidents: Human Factors 76%, Vehicle Factors 16% and Road Factors 8%. We commit to make maximum use of the system which is expected to revolutionize safety monitoring of intercity buses and trucks. Despite the progress made in all the strategic areas of our plan, we are cognizant of many challenges in the subsectors which also served as opportunities for reassessments of our strategies towards improvement of services and growth of the transport subsectors. Through support from the Government and general public, we are sure of recording bigger progress in the years ahead. I wish to thank members of SUMATRA Board, Management and all Employees of the Authority for their sustained commitment and dedication in pursuit of better Tanzania through better regulation.

Dr. Eng. John S. Ndunguru CHAIRMAN OF THE BOARD

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DIRECTOR GENERALâ&#x20AC;&#x2122;S STATEMENT

Mr. Gilliard W. Ngewe The Surface and Marine Transport Regulatory Authority (SUMATRA) is pleased to report on its performance in this 13th issue of Annual Report and Audited Accounts for the financial year ended on 30th June, 2017. The report reflects on implementation of various regulatory activities in the regulated sub-sectors of ports and shipping services, road transport, railway transport and maritime safety and security services. During this financial year the Authority undertook a number of strategic initiatives geared towards enhancing Authorityâ&#x20AC;&#x2122;s capacity to effectively and efficiently discharge its regulatory responsibilities; the initiatives include enhancing financial sustainability of the Authority, enhancing Board effectiveness, improving internal controls, systems and processes and improving human resource capacity and working environment. Based on the identified need for improvement on various sectors, the Authority has been taking required measures timely. On the railway regulation, the Authority conducted trainings to Critical Safety Workers on both Tanzania Railways Limited (TRL) and Tanzania Zambia Railway Authority (TAZARA) staff to improve safety and adherence to planned maintenance and repairs. SUMATRA continues to oversee maritime safety and security. In year 2016/2017 there was no incident of piracy attack reported in Tanzanian controlled waters. The Authority strengthened monitoring and auditing of formal ports under the provisions of The International Ship and Port Facility Security (ISPS) Code, The Merchant Shipping Act, Merchant Shipping Regulations and Merchant Shipping Notices. The Authority further carried out inspections of small crafts and registered ships to ensure they were seaworthy and manned appropriately. During the period, 83% of inspected small crafts were compliant and thus issued with Local Safety Certificates. On regulation of ports and shipping services, SUMATRA engaged various stakeholders in a bid to strengthen regulatory oversight on informal ports. Regulatory mechanisms for the purpose were developed and participants of such private informal ports were identified and engaged.

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In a bid to improve regulatory framework, several regulations and rules were reviewed and published; six sets of regulations made under Merchant Shipping Act were Gazetted, three sets of regulations under the railways Act, one set of Regulations made FV under the Transport Licensing Act and one regulation under SUMATRA Act were Gazetted too. The Authority has managed to do Installation and Configuration of Vehicle Tracking System; by the end of the review period, a total of 239 buses were fitted with tracking devices and being monitored on real time basis. The pilot project period ended in 30th June, 2017. Thereafter, the Consultant shall continue to support and monitor the VTS system for three months. Installation of SURLIS / EPICOR/ Manifest Billing System/ Website/ e-Revenue Collection/ SMS based Application. SUMATRA continued with routine support ICT systems with whereby Migration to Epicor 10; Implementation of E-payment collection solution from MAXCOM; and Enhancement in SURLIS Online Application. Lastly, it is worth noting, as presented in the report, that during the financial year 2016/17, the Authority was able to finance its regulation activities. The Authority collected its revenue to a total of TZS 44,746.65 million against the approved budget of TZS 51,400.00 million. The total revenue for the year was below the budget by TZS 6,653.35 million, or 12.94% and was also below last yearâ&#x20AC;&#x2122;s performance by 4.19% or TZS 1,951.02 million. Operating expenses of the Authority had to be minimized to address the observed revenue collection shortfalls. As a result, expenses for the year were TZS 42,652.91 million against the budget of TZS 47,530.00 million; recording variance of TZS 4,877.09 million (or 10.26% below the budget). Monthly budgetary performance reviews were conducted to assess the extent to which financial resources were utilized in implementing planned activities and whether actual expenditures were within allocated budgets. Variations were investigated and reasons identified for corrective actions. The success story being told was a result of many hands mostly resting on cohesion within the institution built over the years, support and guidance provided by the Ministry of Works, Transport and Communications, effective leadership, oversight by the Board of Directors and the general public support. To all of them I convey my sincere gratitude. My fellow employees who are the eyes and ears of SUMATRA deserve special recognition for their continued loyalty and dedication to the ideals and strategic goals of SUMATRA. With such resourceful assets, SUMATRA is set to make it to greater heights in the years ahead.

Gilliard W. Ngewe DIRECTOR GENERAL SUMATRA

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SUMATRA BOARD OF DIRECTORS

Eng. Dr. John Ndunguru Chairman

Mrs. Hilda Ausi Gondwe Member

Eng. Alfred Nalitolela Member

Eng. Dr. Isack Legonda Member

Mr. Khalid Kachenje Director

Mr. Gilliard W. Ngewe Director General

Capt. Maregesi Manyama Member

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SUMATRA BOARD OF DIRECTORS LIST OF ABBREVIATIONS USED Abbreviation AFUR ATARA EATTFP EWURA FCT GoT HDV IFRS IMO IOMOU IPSAS ISSAIs IPSASB ISCOS LGA NBAA MRCC MSCL PAA PABX PAR PFA PMAESA PPA PPR PPRA SARA SSRA STCW SUMATRA SUMATRA CCC TABOA TATOA TCRA TICTS TIRA TPA TPF TRL TZS UDA-RT URT US$

xii

Description African Forum for Utility Regulators Association of Tanzania Regulatory Authorities East Africa Trade and Transport Facilitation Project Energy and Water Utilities Regulatory Authority Fair Competition Tribunal Government of Tanzania Heavy Duty Vehicles International Financial Reporting Standards International Maritime Organization Indian Ocean Memorandum of Understanding International Public Sector Accounting Standards International Standard of Supreme Audit Institutions International Public Sector Accounting Standards Board Inter-governmental Standing Committee on Shipping Local Government Authority National Board of Accountants and Auditors Maritime Rescue and Coordination Centre Marine Services Company Limited Public Audit Act No. 11 of 2008 Private Automated Branch Exchange Public Audit Regulation, 2009 Public Finance Act, 2011 Port Management Association of Eastern & Southern Africa Public Procurement Act Public Procurement Regulations, 2013 Public Procurement Regulatory Authority Southern African Railway Association Social Service Regulatory Authority Standards of Training, Certification and Watch-keeping for Seafarers Surface and Marine Transport Regulatory Authority SUMATRA Consumers Consultative Council Tanzania Bus Owners Association Tanzania Truck Owners Association Tanzania Communications Regulatory Authority Tanzania International Containers Terminal Services Ltd Tanzania Insurance Regulatory Authority Tanzania Ports Authority Tanzania Police Force Tanzania Railways Ltd Tanzania Shillings Usafiri Dar es Salaam â&#x20AC;&#x201C; Rapid Transport United Republic of Tanzania United States Dollar

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DIRECTORSâ&#x20AC;&#x2122;S REPORT FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

1. INTRODUCTION The Directors are pleased to submit this report together with the audited financial statements for the year ended 30th June, 2017, which disclose the financial position for the year and the state of affairs of Surface and Marine Transport Regulatory Authority (SUMATRA). 2. ESTABLISHMENT The Authority was established by the Surface and Marine Transport Regulatory Act, CAP 413 as a regulatory authority responsible for regulating the surface and marine transport sectors. The Act came into force on 15th August, 2004 as per Government Order No. 297 published on 20th August, 2004. The Authority has its Head Office in Dar es Salaam, and operates in twenty-six (26) regions in Tanzania Mainland. 3. DUTY OF THE AUTHORITY According to Section 5 of the Act, the duty of the Authority, in carrying out its functions, is to strive to enhance the welfare of Tanzania society by: (a) Promoting effective competition and economic efficiency; (b) Protecting the interests of consumers; (c) Protecting the financial viability of efficient suppliers; (d) Promoting the availability of regulated services to all consumers including low income, rural and disadvantaged consumers; (e) Enhancing public knowledge, awareness and understanding of the regulated sectors including: i) The rights and obligations of consumers and regulated suppliers; ii) The ways in which complaints and disputes may be initiated and resolved; iii) The duties and functions of the Authority; (f) Taking into account the need to protect and preserve the environment. 4. VISION AND MISSION STATEMENTS a) Vision Statement To be a world class regulator in surface and marine transport services. b) Mission Statement To regulate the surface and marine transport sub sectors for efficient, safe and environmentally friendly transport services. 5. PRINCIPAL FUNCTIONS OF THE AUTHORITY The Principal functions of the Authority, as stipulated in Section 6 of the SUMATRA Act (CAP 413), are to regulate the surface and marine transport sector, specifically: a) To perform the functions conferred on the Authority by sector legislation;

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5. PRINCIPAL FUNCTIONS OF THE AUTHORITY (Continued) b) Subject to sector legislation: i) To issue, renew and cancel licenses; ii) To establish standards for regulated goods and regulated services; iii) To establish standards for the terms and conditions of supply of the regulated goods and services; iv) To regulate rates and charges; v) To make rules for carrying out the purposes and provisions of the Act and the sector legislation. c) To monitor the performance of the regulated sectors, including in relation to:i) Levels of investment; ii) Availability, quality and standards of services; iii) The cost of services, iv) The efficiency of production and distribution of services, and v) Other matters related to the Authority; d) To facilitate the resolution of complaints and disputes; e) To take over and continue carrying out functions formerly of the Tanzania Central Freight Bureau set out in Section 4, 4A and 4B of the Tanzania Central Freight Bureau Act, 1981; f) To disseminate information about matters relevant to the functions of the Authority; g) To consult with other regulatory authorities or bodies or institutions discharging functions similar to those of the Authority in Tanzania and elsewhere; h) To exercise port state control of all foreign ships and flag state control of all Tanzanian registered ships; i) To regulate and approve marine services, safety equipment and marine services providers; j) To coordinate maritime search and rescue operations; k) To administer the Act; and l) To perform such other functions as may be conferred on the Authority by the Act or any other law. 6. CORE VALUES The following are the core values that the Authority undertakes to uphold in pursuing the attainment of its Vision: i) Accountability: Being accountable to our stakeholders and to the nation in the execution of the mandate and responsibilities bestowed upon the Authority. ii) Integrity: Being exemplary in our behaviour and acting with honesty and integrity in all our transactions.

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DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

6. CORE VALUES (Continued) iii) Professionalism: Adopting an approach that demonstrates professionalism in competency, character, attitude, and conduct. iv) Fairness: Being fair in all dealings with consumers, service providers and the other stakeholders and discharge our duties with neutrality and impartiality, without fear or favour. v) Transparency: Being transparent in all our activities and dealings and ready for public scrutiny. vi) Innovation: Always striving to reach out and embrace new technologies and innovative methods of executing our mandate and contributing to national development. vii) Teamwork: Upholding teamwork and collaboration in order to realize the synergies of working together. viii) Environmentally Friendly: Being sensitive to the environmental impact of the surface and marine subsectors and the need to promote measures to protect the environment. ix)

Results focus: Being results-oriented in the discharge of our mandate.

7. STRATEGIES OF THE AUTHORITY The Authority was in the 4th year of implementation of the Second Five Year Corporate Strategic Plan (2013/2014 – 2017/2018). The Corporate Strategic Plan for the Authority is the leading instrument for planning, priority setting and decision making. The Plan facilitates discharging of the role and functions of the Authority for the period of five (5) years. The Second Five Year Corporate Strategic Plan sets out strategic goals and objectives, targets, implementation strategies and performance measures. Specifically, the Plan adopts Results Based Management (RBM) approach, which emphasizes on the desired outcomes of the activities rather than the activities themselves. The Plan has the following strategic goals: i)

Enhanced Authority’s capacity to effectively and efficiently discharge its regulatory responsibilities;

ii) Improved safety, security, and quality of the Surface and Marine Transport Services; iii) Enhanced competitive and sustainable regulated surface and marine transport services that serve socio-economic needs of the public; iv) Improved environmentally sustainable and socially compatible surface and marine transport services; and v) Improved legislative, regulatory, policy and institutional framework for regulated surface and marine transport subsectors In order to realize the strategic goals, the Authority prepares annual plans and budgets with a result based management orientation as envisioned in the five year strategic plan. ANNUAL REPORT 2016/2017

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

8. KEY STRENGTHS AND RESOURCES The Authority has the following key strengths and resources, some are tangibles and others are intangibles: i)

Board of Directors The Board serves as the focal point and custodian of corporate governance in the Authority. The Board and its Committees have been effective in their role of providing strategic direction and oversight to the Authority and its employees. They exercised oversight of the implementation of strategy and operational plans by Management against agreed performance measures and targets. The Board’s roles and responsibilities included Policy Development, Strategic Planning, and Financial and Operational oversight. Generally, Board members were effective and responsible leaders.

ii)

Human Resource The Authority has a strong Management team supported by competent and motivated employees. By 30th June, 2017, the Authority had operating offices in all 26 Regions in Tanzania Mainland and had a total of 201 (2015/2016: 188) employees. All employees were selected and appointed on merit as a result of open competitive recruitment and selection process. The Authority has annual training plan which ensures at least 50% of all employees undergo short-term training to build capacity and improve their performances.

iii)

Regulatory Supporting Tools In the discharge of its regulatory duties and functions, the Authority was guided by the SUMATRA Act, sector legislations under Roads Transport, Railway Transport, Ports & Shipping Services and Maritime Safety and Security Services, Regulations and Standards. These tools enabled the Authority to effectively discharge its duties and functions judiciously and fairly during the financial year under review..

iv)

Cooperation and Support from Stakeholders The Authority has internal and external stakeholders and it has established a harmonious relationship with all its stakeholders. The Authority received cooperation and strong support from its stakeholders – consumers and suppliers of regulated services. Specifically, the Authority received continuous cooperation and support from the Government (Ministry responsible for Transport, Ministry of Finance and the Office of the Treasury Registrar), SUMATRA CCC, LGA, Shipping Agents, TATOA, TABOA, TPA, TICTS, and consumers of regulated services. In addition, the Authority has established working relationships with the Police Force (TPF) and other regulatory authorities within the country like EWURA, TCRA, TCAA, PPRA, TIRA and SSRA. The working relationship with regulatory authorities has resulted into formation of ATARA. The Authority has also established international networking with relevant organs including IMO, AFUR, SARA, IOMOU, ISCOS, and PMAESA.

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DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

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8. KEY STRENGTHS AND RESOURCES (Continued) v)

Financial Sustainability The Authority’s sources of revenue are provided under Section 41 (1) of the SUMATRA Act (CAP 413). The funds and resources of the Authority consist of: a) Fees collected by the Authority including fees payable for the grant and renewal of licenses; b) Levies collected from regulated suppliers; c) All other payments or property due to the Authority in respect of any matter incidental to its functions; and d) Any grants/donations bequests or other contributions made to the Authority The Authority collected TZS 44.74 billion in revenue made up of revenue from non-exchange transactions amounting to TZS 42.93 billion, revenue from exchange transaction amounting to TZS 1.14 billion and other gains amounting to TZS 0.67 billion. With this trend and continual commitment and support from employees and stakeholders, the Authority shall be able to discharge its regulatory functions and meet its customers and stakeholder’s expectations judiciously.

vi)

ICT Application Systems The Authority has automated and modernized its operations using ICT application systems, thus, improved provision of regulatory services. The ICT systems in operations include the following: • • • • • • • • • • •

Electronic Document Management System (EDMS), Passenger Service Vehicles Tracking System (VTS), SUMATRA Road Licensing Information System (SURLIS), Long Range Identification and Tracking of Ships (LRIT), Maritime Safety and Seafarers System, Integrated Financial Management System (IFMIS) based on Epicor 10.1, Integrated Payroll & Human Resource Management System, E-Revenue Collection System, Mobile Phones Online Inquiry System for Bus Fares, Cargo Manifest Billing System, and Time Attendance (Biometric) System.

In general, the ICT application systems have improved efficiency in service delivery. The Authority shall continue to use ICT related solutions to enhance efficiency and reduce costs of operations.

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DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

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9. BOARD OF DIRECTORS The Board was established under Section 7 of the Surface and Marine Transport Regulatory Authority Act (CAP 413), and it had seven members: Chairman (non-executive), five nonexecutive members and the Director General. The Board Chairman was appointed for a period of four (4) years effective from 11th December, 2014 and the Board Members were appointed for a period of three (3) years effective from 24th December, 2014. The Board operated with full members until 24th June, 2016 when the Board Chairman, Prof. Iddi S. N. Mkilaha, passed away. The Board operated without Chairman from 25th June, 2016. Therefore, Deputy Chairman, Mrs Hilda Ausi Gondwe assumed the responsibilities of Chairman from that date, and the Board has been operating with six (6) members ever since. During the year, no conflict of interest existed between the Directors and the Authority. Key management personnel, including Board Members, made declarations by completing a Form for Declaration of Related Party Transactions. The Form was designed and issued by NBAA for the purpose of making sure that every transaction done by an entity with related parties is adequately disclosed and thus provide users of financial statements with adequate information for decision making. The details on related party transactions are disclosed in Note 39 of the Authority’s financial statements. The following are members of the Board who served the Authority during the year under review for stated period:

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DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

9. BOARD OF DIRECTORS (Continued) Name

Position

Nationality

Qualification

Age

Mrs Hilda A. Gondwe

Member and Deputy Chairman

Tanzanian

Eng. Dr Isack A. Legonda

Member

Tanzanian

Capt. Maregesi Manyama

Member

Tanzanian

Eng. Alfred M. Nalitolela

Member

Tanzanian

Mr Khalid H. Kachenje

Member

Tanzanian

Mr Gilliard W. Ngewe

Member (Director General)

Tanzanian

Master in Development Studies (Planning), Institute of Social Studies, The Hague, Holland,1981; Bachelor of Arts, University of Dar es Salaam, 1975. Registered Professional Engineer (T), Engineers Registration Board; Environmental Impact Assessment Expert, National Environment Management Council (NEMC); PhD. Mechanical Engineering, Cardiff University, UK, 2012; MSc. Energy Engineering, University of Dar es Salaam, 2008; BSc. Mechanical Engineering, University of Dar es Salaam, 2005. Master of Business Administration, Milpark Business School, 2010; Master Mariner, Hull College of Further Education, UK, 1986. Chartered Fellow (FCILT), Institute of Logistics & Transport, 2006; Registered Professional Engineer (T), Engineers Registration Board, 2002; Diploma in Tropen Technologies, Cologne University of Applied Sciences, 1986; BSc. Engineering, University of Nairobi, 1972. Member of Chartered Institute of Logistics & Transport (CILT) 2009 and Tanzania Roads Associations, 2009; Advanced Diploma in Transport Management, National Institute of Transport (NIT), 1981. Master of Arts in Demography, University of Dar es Salaam, 1991; Bachelor of Arts (Geography and Economics), University of Dar es Salaam, 1986. Chartered Fellow (FCILT), Institute of Logistics & Transport, 2012; MBA in Finance & Banking, Mzumbe University, 2000; Postgrad. Diploma in Scientific Computing University of Dar es Salaam, 2004; Advanced Diploma in Transport Management, National Institute of Transport (NIT), 1990.

Service Period to June,2017

24th Dec. 2014 –30th June 2017

24th Dec. 2014 – 30th June 2017

1st June 2014 – 30th June 2017

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DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

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BOARD OF DIRECTORS (Continued) It should be noted that, before the Financial Statements were authorised for issue, Eng. Dr John S. Ndunguru, was appointed by the President of the United Republic of Tanzania, His Excellency, Dr John Pombe Joseph Magufuli to be the Board Chairman. The appointment of the Board Chairman was made in accordance with Sect. 7(2) of SUMATRA Act, CAP 413 and became effective on 1st December, 2017. During the year ended 3 0 t h June, 2017, the Board held a total of thirteen (13) meetings. Out of these, three (3) were ordinary meetings and ten (10) were special meetings. In these meetings, the Board discussed and deliberated on the following main issues: i) ii) iii) iv) v) vi) vii) viii) ix) x) xi)

Quarterly Performance Reports; Audited Financial Statements; Plan and Budget of the Authority; Employee Performance Appraisals; Recruitment of employees and renewal of employment contracts; Road Transport Regulations; Ports and Shipping Regulations; Licensing of UDART and payment of regulatory levy; Safety of school buses and St. Lucky Vincent School bus accident report; Review of interurban bus fares; and Report on working arrangement for Dar es Salaam port.

10. BOARD COMMITTEES The following were members of the Board Committees who served the Authority during the year under review for stated period: a) Audit and Risk Committee (ARC) Name

Position

Age

Nationality

Capt. Maregesi Manyama

Chairman

Tanzanian

Eng. Dr Isack A. Legonda

Member

Tanzanian

Mr Paschael Melkiory

Member

Tanzanian

Service Period to June,2017 26th June 2015 – 30th June 2017 26th June 2015 – 30th June 2017 30th May 2016 – 30th June 2017

Mr. Paschal Melkiory is not a Board Member. His appointment to the Committee was made in line with the best practice and the requirements of the Public Finance Act and its Regulations. Mr. Melkiory is a Certified Public Accountant (CPA) with Master Degree in Business Administration (MBA) (Finance and Banking) from Mzumbe University. He also holds a Certificate in Financial Management (CFM) from the University of Pretoria (SA). His appointment enhanced effectiveness of the Committee especially on the review of the Authority’s financial performance.

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DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

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10. BOARD COMMITTEES (Continued) During the year 2016/17, the ARC held a total of three (3) meetings. Out of these, two (2) were ordinary meetings and one (1) was a special meeting. In these meetings, the ARC discussed and deliberated on the following main issues: i) ii) iii) iv)

Implementation of the Vehicle Tracking Project; External Auditor’s Plan and Audit Fees; Financial Statements of SUMATRA and EATTFP; and Internal and External Auditor’s findings and recommendations.

b) Safety and Regulation Committee (SRC) Name Eng. Alfred M. Nalitolela

Position Chairman

Age 69

Nationality Tanzanian

Mr Khalid H. Kachenje

Member

Tanzanian

Mr Gilliard W. Ngewe

Member

Tanzanian

Service Period 26th June 2015 – 30th June 2017 26th June 2015 – 30th June 2017 26th June 2015 – 30th June 2017

During the year 2016/2017, the SRC held a total of six (6) meetings. Out of these two (2) were ordinary meetings and four (4) were special meetings. In these meetings, the SRC discussed and deliberated on the following main issues: i) ii) iii)

Draft Amendment of the Transport Licensing (PSV) Regulations, 2017; Draft Transport Licensing Goods Carrying (GCV) Regulations, 2017; Draft Transport Licensing (Motorcycle and Tri-cycle) Regulation, 2017.

c) Finance & Administration Committee (FAC) Name Mr Khalid H. Kachenje

Position Chairman

Age 65

Nationality Tanzanian

Eng. Dr Isack A. Legonda

Member

Tanzanian

Mr Gilliard W. Ngewe

Member

Tanzanian

Service Period 25th June 2016 – 30th June 2017 26th June 2015 – 30th June 2017 26th June 2015 – 30th June 2017

During the year 2016/17, the FAC held a total of five (5) meetings. Out of these, two (2) were ordinary meetings and three (3) were special meetings. In these meetings, the FAC discussed and deliberated on the following main issues: i) ii) iii) iv) v) vi) vii)

The Proposed Authority’s Succession Plan; Quarterly Performance Reports; Employees Performance Appraisals; Proposed construction projects for SUMATRA Dodoma and Mbeya offices; Construction of SUMATRA House at Head office, Dar es Salaam; Revised Organisation structure and Scheme of Service; and Annual Procurement Plan for 2017/2018.

ANNUAL REPORT 2016/2017

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

11. MANAGEMENT OF THE AUTHORITY The overall Management of SUMATRA is vested in the Board of Directors as the governing board under the supervision of the Minister responsible for Transport. The Director General is responsible for day to day operations of the Authority. The Authority’s Management team, which is under the supervision of the Director General, has requisite skills and competences. Thus, the team is capable of handling all operational and administrative matters efficiently. The Management, which is under the supervision of the Director General, is organized into eight (8) Directorates and three (3) Units as follows: a) Directorates: i) Directorate of Ports and Shipping Regulation; ii) Directorate of Railway Regulation; iii) Directorate of Road Transport Regulation; iv) Directorate of Maritime Safety and Security; v) Directorate of Economic Regulation; vi) Directorate of Finance, Human Resource and Administration; vii) Directorate of Internal Audit; and viii) Directorate of Legal Services. b) Units: i) Procurement Management Unit; ii) Information & Communication Technology Unit; and iii) Corporate Communication Unit. The Director General reports to the Board. All Directors and Head of Units report to the Director General.

ANNUAL REPORT 2016/2017

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

12. REVIEW OF BUSINESS PERFORMANCE 12.1 Key Performance Indicators (KPIs) The Authority’s KPIs and achievements for the period under review were as given below: SN

OBJECTIVE

ACTIVITY

Enhanced authority’s capacity to effectively and efficiently discharge its regulatory responsibilities

To collect revenue from the approved sources

EXPECTED TARGET Revenue growth target of 18% is achieved by June, 2017.

To develop staff through short and long-term trainings

5 staff to attend training at DMI

To finalise development of Succession plan policy

Succession plan developed and implemented by June, 2017.

To procure and install Vehicle Tracking Systems (VTS) for licensed intercity buses

Vehicle Tracking Systems (VTS) operationalized by June, 2017

To connect SUMATRA Regional Offices to National ICT Back Borne (NICTBB) To conduct Board Meetings and Board Committee Meetings

2 regional offices connected to the NICTBB by June, 2017 4 ordinary Board Meetings conducted by June, 2017

ACHIEVEMENTS TZS 44.74 billion was collected being 4.19% below previous year’s collection of TZS 46.70 billion. Nine (9) staff attended training at DMI. The target was surpassed by 4 staff who were earmarked but not trained in FY 2015/2016 The Succession Plan was developed using the Government’s Succession Planning Guidelines of August, 2011. The draft Succession plan was submitted to Senior Management meeting for discussion and improvement. The VTS started operations effective from 5th January, 2017. A total of 239 busses were fitted with tracking devices as of 30th June. 2017. Three (3) regional offices were connected to the NICTB. These are Simiyu, Geita and Katavi. Three (3) Ordinary Board meetings and 10 Special Board Meetings were conducted during the financial year 2016/2017.

ANNUAL REPORT 2016/2017

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

12. REVIEW OF BUSINESS PERFORMANCE 12.1 Key Performance Indicators (KPIs) The Authority’s KPIs and achievements for the period under review were as given below: SN

OBJECTIVE

ACTIVITY

Improved safety, security and quality of the surface and marine transport services

To scale up inspection and monitoring performance of regulated services

EXPECTED TARGET Number of road accidents involving regulated vehicles reduced by 10% from 2,282 recorded in 2015/2016.

2 annual inspections on infrastructure and 8 inspections on passenger trains for TRL and TAZARA conducted.

2 inspection visits to ports conducted by June 2017

Accidents for ships of more than 50 GRT reduced to zero and small vessel by 50%

ANNUAL REPORT 2016/2017

ACHIEVEMENTS Number of road accidents on regulated vehicles was reduced by 22% from 2,282 (2015/2016) to 1,788 (2016/2017). The decline is attributed to effective monitoring activities and introduction of VTS Two (2) annual inspections were conducted (one on TAZARA and one on TRL). On passenger trains, 8 inspections were conducted (4 TRL and 4 TAZARA). Five (5) Inspections were conducted at the ports of Dar es Salaam, Tanga, Itungi & Kyela, Kasanga, Bukoba Mtwara and Mwanza No ship of more than 50 GRT reported accident during the financial year

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

12. REVIEW OF BUSINESS PERFORMANCE 12.1 Key Performance Indicators (KPIs) The Authority’s KPIs and achievements for the period under review were as given below: SN

OBJECTIVE

ACTIVITY

Enhanced competitiveness and sustainability of regulated surface and marine transport services that serve socio – economic needs of the public

Developing Capacity of the Tanzania Shippers Council (TSC) to Participate in Industry Forums and Activities Locally and Regionally Reviews of TPA/TICTS on compliance with a ceiling of 65% container holding capacity as per SUMATRA Order SMTRA/03/2009

6. 7.

EXPECTED TARGET Average Dwell time for both Dar Port and TPA to be 7 days by June, 2017;

ACHIEVEMENTS The average Dwell Time was 10.4 days. • TPA dwell time was - 8.5 days • TICTS dwell time was - 12.3 days

Ship turnaround time of utmost 3.0 days at TICTS and 5 days for General Cargo at TPA by June, 2017.

• Ship turnaround time for TICTS container terminal was 1.8 days • Ship turnaround time for TPA were as follows: • Container terminal 2.3 days • General cargo 2.7 days Average reliability of To monitor Reliability of train locomotives for both the supply and running 500 km railways was 5,190(km/ operational efficiency between failures increased from 45% to failures) which is 1,038% of railway transport as compared to 500km 65% by June, 2017 services per failures. 80% of trains Only 75% train punctuality achieved punctuality was achieved. by June, 2017 This low performance (Average sectional was caused by speed maintained at deteriorated conditions 50kph and no. of trains of coaches and poor per week increased to track that imposed speed at least 4 times) restrictions of below 10kph in some areas.

ANNUAL REPORT 2016/2017

DIRECTORSâ&#x20AC;&#x2122;S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

12. REVIEW OF BUSINESS PERFORMANCE 12.1 Key Performance Indicators (KPIs) The Authorityâ&#x20AC;&#x2122;s KPIs and achievements for the period under review were as given below: SN

OBJECTIVE

ACTIVITY

Improved environmentally sustainable and socially compatible surface and marine transport services

To prepare a new merchant shipping draft regulations for prevention of pollution and Conduct Oil Spill exercise

9. 10.

11.

To conduct meetings with road transport stakeholders on environmental regulations and standards To inspect railway transport on compliance with national and international environmental regulation and standards Enhanced policy, To review laws, legislative, regulations and rules regulatory and institutional framework for regulated services.

ANNUAL REPORT 2016/2017

EXPECTED TARGET Reception facilities and systems for oil, garbage and sewerage collection from ships provided in all major ports by June 2017

2 meetings with road transport stakeholders on environmental regulations held by June 2017 4 inspections to monitor compliance of railway transport with National and International safety and environmental regulations and standards 3 laws, rules, and regulations reviewed or enacted by June, 2017.

ACHIEVEMENTS NMOSCR Plan was submitted to the Ministry responsible for Transport for approval. All major ports have established systems for oil and garbage collection which were inspected during the year. Two (2) meetings were held as planned.

Three (3) inspections were conducted. The inspections were conducted for TAZARA and TRL.

A total of three (3) Regulations were reviewed and submitted for publication; these are: i) The Transport Licensing (Public Services Vehicles) Regulations, 2017; ii) The Licensing (Motorcycle and Tricycles) (Amendment) Regulations, 2017; iii) The Transport Licensing (Goods Carrying Vehicles) (Amendment) Regulations, 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

12. REVIEW OF BUSINESS PERFORMANCE (Continued) 12.2

Financial Performance

The Authority earned a total of TZS 44.74 billion during the financial year 2016/2017; this includes the Authority’s revenue from Non Exchange Transactions of TZS 42.93 billion, revenue from Exchange Transactions of TZS 1.14 billion and other gains of TZS 0.67 billion. The revenues of TZS 44.74 billion were below the budgeted revenue for the financial year 2016/2017 of TZS 51.40 billion by TZS 6.66 billion or 12.96%. The decrease in revenue collection was attributed to under performance of regulated sub-sectors and decline in short term investments of surplus funds due to Redemption of Excess Capital of TZS 6.84 billion as directed by Treasury Registrar through letter with Ref. No. CEA.170/344/01 dated 14th June, 2016. The amount was remitted to the Treasury Registrar’s Investment Account at the Bank of Tanzania (BoT). If invested, the funds could have earned the Authority TZS 752.56 million during the year. In addition, the Authority suspended penalties on road transport services following the Court decision (Criminal Appeal No. 14 of 2014) that Regulation 4(3) of the Transport Licensing (Road Passenger Vehicle) Regulation, 2007 was contrary to the fine stated under Transport Licensing Act, Cap.317, 2002. Furthermore, the projected levy returns from UDA-RT, TRL and MSCL were not filed and paid as projected. The expenditure for the Authority during the financial year 2016/2017 amounted to TZS 42.65 billion, which is TZS 4.88 billion below the budget of TZS 47.53 billion. The saving is attributed to delays in taking commitment to the implementation of planned activities as a result of revenue collection performance, delays of undertaking planned recruitment following Government directives to suspend all recruitment pending verification of ghost workers, spilling over of some activities and effective control of expenditures by the Authority. Contribution to the Government Consolidated Fund was TZS 6.76 billion and contribution to other National and International bodies stood at TZS 2.47 billion. The surplus fund during the year was TZS 2.09 billion which goes to the Special Account as required by the establishing Act. Capital expenditure during the year amounted to TZS 2,160.53 million, out of which, TZS 1,757.95 million was used to purchase property and equipment, TZS 402.58 million covered Intangible Assets. Items procured included; office motor vehicles, servers, desktop and laptop computers, office furniture and payments for construction of SUMATRA Head office and purchase of Vehicle Tracking System. In general, the financial performance results indicate that the Authority’s existing sources of revenue can sustain its operations. However, the Authority will continue to monitor closely its current sources of revenue and explore other sources to enable it to sustain the expansion of its operations to the public.

ANNUAL REPORT 2016/2017

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

12. REVIEW OF BUSINESS PERFORMANCE (Continued) 12.3

Operational Performance (Implementation of the Corporate Plan Activities)

During the financial year 2016/2017, the Authority performed most of the planned activities. Some of the key results/major activities and developments which took place during this period included the following: A)

Enhancing Authority’s Capacity to effectively and efficiently discharge its regulatory responsibilities In a bid to achieve this goal, the Authority continued to finance its own operations through collection of its revenue from the approved sources. The revenue collected for the financial year 2016/17 amounted to TZS 44.74 billion. Moreover, the Authority continued to enhance its human resource through training whereby 91.7% of targeted staff attended relevant training on safety and economic regulation as well as customer care to balance the industry (operator/customer relationship). The Authority initiated a process of developing a succession plan with a view to aligning human resources to enable development of qualified pools of candidates ready to fill critical or key positions in the Authority. During the period, a draft Succession plan was developed and submitted to senior management meeting for discussion and improvement. Furthermore, the Authority continued with the construction of the SUMATRA Head Office building reaching 65% of its completion in order to provide adequate office facilities for the discharge of its functions. Moreover, the Authority extended connection of three (3) regional offices of Simiyu, Geita and Katavi to the National ICT backbone. This resulted into cumulative twentyfive (25) regional offices to have connection to the National ICT backbone. The extended connection is expected to enhance Authority’s capacity to exchange information between and among the Authority offices and share ICT resources and applications countrywide.

Improving Safety, security and quality of the Surface and Marine Transport Services A number of initiatives were taken under this goal; these included provision of public awareness programmes on roads transport safety, scaling–up monitoring and inspection of ports, scaling-up inspection of railway infrastructure, equipment and rolling stock and enhancing inspection and clearance of marine vessels. Due to these initiatives, the transport sector experienced a marginal reduction in number of accidents in the year. The following are salient performed activities: a)

Enhancing Safety in Railway Transport

Frequency of railway accidents during the period under review decreased on TRL and TAZARA respectively when compared to the previous year. Details on train accidents are summarized in Table 1.

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

DIRECTORSâ&#x20AC;&#x2122;S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

12. REVIEW OF BUSINESS PERFORMANCE (Continued) B) a)

Improving Safety, security and quality of the Surface and Marine Transport Services (Continued) Enhancing Safety in Railway Transport (Continued)

Table 1: Summary of Railway Accidents on TRL and TAZARA lines TYPE OF ACCIDENT TRL TAZARA 2016/17 2015/ 16 2016/ 17 2015/16 Injuries & Deaths Deaths 9 17 8 14 due to Train Injuries 15 25 5 7 Movement Collision 0 4 13 6 Major Train Accidents Capsizement /Derailment 84 26 20 11 TOTAL Accidents Major Damage to Wash-away Track Source: SUMATRA

From Table 1 above, reported accidents had declined from 84 in 2015/16 to 30 in 2016/17 for TRL while for TAZARA they decreased from 33 accidents reported in 2015/16 to 17 accidents reported in 2016/17. However, injuries on TRL increased in number from 15 to 25 between 2015/16 and 2016/17 respectively; while accident that resulted into deaths along TRL increased in number from 9 to 17 during the reporting period. Accidents along TAZARA resulted into 14 deaths compared to 8 deaths recorded in 2015/2016. Accidents which resulted in deaths along both TAZARA and TRL were a result of the tendency of pedestrians to walk along the mainline track. Moreover, human error due to poor workexperience of newly recruited workers and absence of succession plan emerged as a major contributor of accidents on TAZARA railway. The following are notable regulatory activities which were carried out in the railway subsector: i)

Annual Safety Inspection on Railway Infrastructure and Equipment The Authority conducted regular inspections on safety of infrastructure and equipment for both TAZARA and TRL. The inspection on TRL line was conducted between Dar es Salaam-Kigoma, Kaliua-Mpanda and Tabora-Mwanza. Results from the inspection found that the line had insufficient ballasts, bad state bridges, bad cross levels and weak track formation in many parts.

ii)

Monitoring Compliance of Commuter Operations with Safety Plans The Authority monitored operations and safety of commuter trains services for TAZARA and TRL in Dar es Salaam. Despite challenges both commuter trains were found to perform successfully. The challenges emanated from aged equipment and unstable tracks due to ballast deficiencies. On the service-side; both commuters were found to be congested especially at peak hours.

ANNUAL REPORT 2016/2017

DIRECTORSâ&#x20AC;&#x2122;S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

12. REVIEW OF BUSINESS PERFORMANCE (Continued) 12.3

Operational Performance (Implementation of the Corporate Plan Activities) b)

Enhancing Road Safety

During the year, number of reported accidents of regulated vehicles (buses, trucks and motorcycles) declined in comparison with the number reported in a similar period of last year. As such, number of trucks involved in accidents declined by 21.2% from 1,423 of last year to 1,122 in the review period. Consequently, the number of deaths caused by truck accidents declined from 550 to 418; equivalent to a decrease of 24%. Motorcycles involvement in road accidents increased from 1,935 to 2,630 causing 838 deaths compared to 891 deaths in July-June, 2015/2016; a decrease of 5.9% in number of deaths. The number of buses involved in reported accidents decreased from 367 to 283, equivalent to decline of 22.8%. Similarly, number of accidents and deaths caused by buses declined by 5.17% and 25.6% respectively. The observed achievement is attributed to enhanced monitoring activities, suspension of buses and taking offenders to court of laws. During the year 2016/17; thirty four (34) buses owned by eleven (11) different companies were suspended from operations due to frequent reported mechanical breakdowns and involvement in fatal road accidents. The owners were subsequently directed to carry out inspection of all fleet, re-test their drivers and put measures to enhance supervision to ensure compliance with all licensing conditions. Resumption of service provisions were subject to fulfilment of the stated directives. Table 2 summarizes reported road traffic accidents caused by buses, trucks and motorcycles for July-June, 2016/2017 as compared to similar period of previous financial year. Table 2: Accidents caused by Buses, Trucks and Motorcycles Vehicle Type

Vehicles involved

Number of Accidents

Jul.15Jun.16

Jul.16Jun.17

Jul.15Jun.16

Jul.16Jun.17

Jul.15Jun.16

Jul.16Jun.17

1,423

1,122

960

744

550

418

446

332

367

283

290

275

1,239

1,004

848

681

367

259

139

107

Motorcycles

3,358

2,508

2,630

1,935

891

838

Regulated Vehicles

6,605

5,057

4,912

3,723

2,160

1,875

Trucks PSV (excl. Daladala) PSV (Daladala) PSV (Hire)

Source: Tanzania Police Force (Traffic Police Department)

Number of Deaths

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

12. REVIEW OF BUSINESS PERFORMANCE (Continued) 12.3

Operational Performance (Continued) c)

Oversight of Vessel Safety

During the financial year 2016/2017 a total of 292 surveys and inspections were carried out on ships of 50 Gross Tonnage (GT) and above. This is an increase of 12% compared to a number of surveys and inspections carried out in a similar period in the FY 2015/2016. The Authority carried out a total of 4,985 surveys and inspections on vessels below 50 GT (boats) throughout the country during the financial year 2016/2017. This is an increase of 33% compared to the number of surveys and inspections carried out in the financial year 2015/2016. Awareness campaigns on safety operation of boats were increased such that 306 visits to cluster ports were conducted to boat stakeholders compared to 251 visits conducted in the similar period in the financial year 2015/16. d)

Issuing Seafarers certificates in accordance with the STCW Conventions and other requirements

During the financial year 2016/2017; the Authority continued discharging responsibilities in relation to International Convention on Standards of Training, Certification and Watch keeping for Seafarers 1978 as amended, with the objective of ensuring that the URT gives exhaustive effect on the implementation of the Convention. The Authority issued the following certificates: • 351 Certificates of Competency (COC) for Deck and Engine Officers compared to 105 COC issued in 2015/16, this is an increase of 234.3% for COC; and • 14,458 Certificates of Proficiency (COP) compared to 6,143 COPs issued in 2015/16, this is an increase of 135%. e)

Monitoring and Auditing of Ports for ISPS Compliance

SUMATRA in collaboration with Zanzibar Maritime Safety Authority (ZMA) continued to carry out annual Port Facilities Security Performance Review in compliance to the International Ship and Port Facility Security Code (ISPS). In the financial year 2016/2017, the Authority issued a Statements of Compliance to the following Port Facilities: Dar es Salaam, Tanga, Mtwara and Zanzibar Ports.

ANNUAL REPORT 2016/2017

DIRECTORSâ&#x20AC;&#x2122;S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

12. REVIEW OF BUSINESS PERFORMANCE (Continued) 12.3

Operational Performance (Continued)

Enhancing Competitiveness and Sustainability of regulated surface and marine transport services that serve socio-economic needs of the public To meet this goal, the Authority targeted to improve supply of transport services, transform urban transport provision; increase efficiency in provision of regulated transport services; promote regulated transport subsectors; as well as, enhance competition, capacity and effectiveness for ports and shipping services, railway, maritime safety and security. a)

Road Transport Regulation

Regulatory activities in road transport subsector include issuance of road service licences and timetables to public commercial vehicles, carrying out of roadside inspections to enhance compliance with existing regulations, implementation of MoUs with Local Governments to carry out agency functions as per the Motorcycles and Tricycles Regulations, 2010. A milestone is reflected through progress made in ensuring that operating vehicles meet standards, as well as reviewing operating conditions to attract new service providers. During the period under review, the Authority issued a total of 154,334 road service licences; whereby 47,397 licenses were for passenger vehicles, 92,346 were for goods vehicles and 14,591 licenses for motorcycles and tri-cycles. This was an increase from a total number of 123,217 licenses that were issued in the financial year 2015/16. Table 3 below shows monthly issuance of road service licences as at 30th June 2017. Table 3: Transport Licences & Time Tables Issued From 2015/16 to 2016/17 Licenses PSV Goods Vehicles Motor & Tricycles Total Licenses Issued Time Tables

2015/16 41,718 74,563 6,936 123,217 5,303

2016/17 47,397 92,346 14,591 154,334 1,161

Source: SUMATRA The licensing function recorded an increase of 13.61% passenger vehicles between 2015/2016 and 2016/2017; while licensing for goods-vehicles increased by 23.85% between the same periods. In the period between 2015/2016 and 2016/2017; there was an increase of 110.4% licenses on motorcycles and tri-cycles from 6,936 to 14,591; while there was a drop in issued time tables from 5,303 to 1,160 during the period of 2015/2016-2016/2017.

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

12. REVIEW OF BUSINESS PERFORMANCE (Continued) 12.3

Operational Performance (Continued)

Moreover, during the period under review, the Authority conducted roadside inspections in all 25 regions of Tanzania Mainland scheduled at the frequency of at least two quarterly regional inspections. These inspections served to enhance compliance with road licensing conditions and were done in collaboration with the Traffic Police Officers. As a result of the inspections regulatory measures were taken on vehicles for non-compliance with licensing conditions including route shortening, fare hiking, unlicensed operations, overloading, passenger harassments, operating on unauthorized routes and crew hygiene issues. a)

Ports and Shipping Services Regulation

In the pursuit to enhance port performance and adherence to established regulatory benchmarks, the Authority continued to receive quarterly performance reports from sea and lake ports for evaluation. The reports were received from TICTS and TPA for the ports of Dar es Salaam, Tanga, Mtwara, Mwanza, Bukoba and Kigoma. Ship turnaround time at the container terminal (i.e. TICTS) was 2.0 days and at the TPA conventional terminal was 1.85 days. This performance is an improvement from the regulatory benchmarks of 3 and 5 days set for the container terminal and the conventional terminal respectively. Furthermore, performance reports show that the dwell time has improved to 10 days in 2016/2017 compared to 7.8 days in 2015/2016. This improvement has attained the regulatory benchmark of 7 days. The Authority took the following initiatives to improve dwell time: Engagement of Stakeholders through meetings and forums to discuss on increasing efficiency in cargo clearance process in order to reduce the port dwell times. The meeting was held on 8th June, 2017 to operationalize 24/7 working arrangement. Also, Authority led the development of KPIs for all key players at DSM port through PIC meetings during the period of 2016/2017. The Authority conducted monitoring visits to ICDs and CFs and observed the following: • ICDs, CFs and Empty Depots are located in CBD area thus aggravating city congestion, • Most ICD’s did not observe 24/7 working arrangement, • Poor traffic flow due to poor layout plans in the ICD yards. b)

Guiding market conducts

The Authority continued to provide guidance on market conducts among operators. During the period there were two new registered complaint brought to the attention of the Consumer Complaints Units of the Authority. One notable complaint was submitted by Ms. New City Refrigeration Center Co. Ltd regarding a dispute over erroneous lodging of city refrigeration cargo by Service Provider under the name of Gulf BADR Group. The committee is still handling the complaint by convincing respective parties to resolve their dispute amicably.

ANNUAL REPORT 2016/2017

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

12. REVIEW OF BUSINESS PERFORMANCE (Continued) 12.3

Operational Performance (Continued) Additionally, the Authority had to resolve a number of other complaints which were not submitted directly through the Authority’s Complaints Unit; such complaints were received from service users who either approached SUMATRA Offices or phoned the toll free numbers to report the complaints. The complaints which were received were resolved amicably. Majority of the complaints were received from the road transport subsector, followed by those reported from the ports and shipping subsector. In road transport subsector, frequent complaints were received regarding hiking of bus fares, breaking down of buses en–route, delays in bus departure, dropping passengers before intended destinations and over-speeding. Recurring complaints in ports and shipping subsector related to overcharging of consolidation fees, delays in effecting cargo clearance and overcharging of storage and removal charge. The Authority coordinated training of Members of the Authority’s Consumer Handling Unit on the basics of handling complaints and exposed them to the existing legal instruments on complaints Handling Procedure. c)

Enhancing competition

The Authority undertook a study to Establish Extent of Competition in Regulated Surface and Maritime Transport Subsectors with the objective to promote effective competition for economic efficiency and growth in the regulated surface and maritime transport services. By the end of the review period, the Consultant had submitted the final report. The Authority is planning to present the report to stakeholders. d)

Licensing of Shipping Services Providers

The Authority issued licences to thirty seven (37) Cargo Consolidators/De-consolidators, Forty three (43) Miscellaneous Port Service operators. Furthermore, 728 Clearing and Forwarding Agents were registered during the FY 2016/2017. In addition; the Authority made several consultations with stakeholders, including RC Mwanza, in pursuit to issue licence to private port operators in Mwanza e)

Monitoring of Shipping Agents’ Compliance with Regulations

The Authority through Shipping Agency Licensing Committee undertook monitoring visits to all 38 shipping agents offices in five regions of which 29 were head offices and 9 branches. The objective of the visits was to ascertain compliance of the Agents with the regulatory requirements. Generally, the visits established that Monitoring of Shipping Agents’ Compliance with Regulations. The Authority organised Shipping Industry Consultative Forum on 11th January, 2017. The Forum attracted participation from various stakeholders including shipping agents, Port Authority, Customs, Clearing and Forwarding Agents, Freight transporters, 22

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

12. REVIEW OF BUSINESS PERFORMANCE (Continued) 12.3

Operational Performance (Continued) Government Ministries, Departments and Agencies. Moreover special Shipping Forum to discuss findings of RORO Consolidation study was held on 08th March, 2017. The Shipping Industry Consultative Forum is a mandatory forum under the SUMATRA Act, 2001 and TCFB Act, 1981 which provides stakeholders with an opportunity to exchange views on issues of standards, costs and services with the view to enhancing communication, consensus and overall competitive leverage in the industry.

Improving Environmental sustainable and socially compatible surface and marine transport services The Authority exercised oversight on issues of environmental sustainability and socio – economic needs while discharging its functions in connection with provision of regulated transport services. In road subsector, the Authority in collaboration with National Environmental Council (NEMC) conducted environmental preservation inspection along Dar es Salaam- Mwanza, Singida –Arusha and Arusha- Dar es Salaam highways. The inspection revealed that some areas along the highway were littered by food leftovers and most of toilet facilities of inspected terminal facilities were untidy. Emission testing was conducted at Ubungo Bus Terminal whereby fourteen (14) buses out of 51 tested buses failed the tests. The owners of these buses were instructed to rectify the identified snags accordingly. Also, the Authority conducted awareness programmes on the effects of exhaust emissions to the general public during the World Environment week which was held from 1st to 5th June, 2017. During the exhibition, the Authority conducted inspection of service-hygiene in operating buses by checking availability of dust bins among upcountry buses at Ubungo Bus Terminal. In the railways subsector, three (3) inspections in the railway transport to ensure full compliance with national and international environmental regulation and standards were conducted. Under maritime sub-sector, the Authority conducted inspections in port terminals to monitor provision of reception facilities for all kind of wastes from ships, which includes garbage, waste oils, metals and others. Likewise, the surveys and inspections were carried out on ships (57) and boats (1,153), to verify compliance with safety requirements; the vessels were inspected to determine if they carried environmental protection equipment such as waste bins, oils and metals containers on board. Moreover the Authority in collaboration with other stakeholders including Tanzania Ports Authority, Deep Sea Fishing Authority, TPDF Navy, Tanzania Police Forces, and other maritime operators continued monitoring ships plying the Tanzania waters on 24/7 basis via Dar es Salaam Maritime Rescue Coordination Centre (MRCC Dar)to prevent pollution.

ANNUAL REPORT 2016/2017

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

12. REVIEW OF BUSINESS PERFORMANCE (Continued) 12.3

Operational Performance (Continued)

Improved Legislative, regulatory, policy and institutional framework for regulated surface and marine transport subsectors. The Authority continued to implement a number of activities in fulfilling its goal of improving legislative, regulatory, policy and institutional relationship in the regulated transport subsectors. Progresses made during the reviewed period are as described here under: a)

Enhanced Policy, Legislative, Regulatory and Institutional Framework for Regulated Services

During the financial year 2016/17, the Authority initiated preparation of the following Rules/Regulations/Code of Conduct; with constructive involvement of stakeholders: • The Transport Licensing (Public Services Vehicles) Regulations, 2017; • The Licensing (Motorcycle and Tricycles) (Amendment) Regulations, 2017; • The Transport Licensing (Goods Carrying Vehicles) (Amendment) Regulations, 2017 Furthermore the Authority continued in participation in the process of domestication of the Maritime Labour Convention (MLC) on Seafarers matters. b)

Improved Access and Dissemination of Information

The initiative to improve access and dissemination of information focused on undertaking of research, studies, periodic surveys and performance reviews. Towards this end, progress has been made on three consultancy studies and one in-house study, namely: • • • • c)

Assessment on the extent of competition in regulated services Study on Improvement of Road Safety in Mainland Tanzania Study on causes, effect and mitigation measures of Road Congestion Demand and Supply of inter-city passenger services Implementation of MoU with Local Governments to Carry out Agency Functions as per Motorcycles and Tricycles Regulations, 2010

Signing of MoU between SUMATRA and Local Governments in Tanzania Mainland continued successfully. By the end of the reporting period a total of 162 out of 168 Municipal Councils, District Councils and Town Councils had signed MoU. Municipals/District/Town Councils which were yet to sign the MoU include: Itilima, Kahama, Ushetu, Mbinga, Tunduma and Nanyamba. Letters of reminder were sent to the remaining six (6) LGAs in order to speed up the signing process and issuing licenses to motorcycles transport operators.

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

13. HIGHLIGHT OF SIGNIFICANT ACCOUNTING POLICIES SUMATRA being a non-commercial public entity has prepared and presented its Financial Statements in compliance with IPSAS. The Authority’s significant accounting policies are provided under the Notes to the Financial Statements. The Policies have consistently been applied by the Authority throughout the reporting period. 14. FUTURE DEVELOPMENTS PLANS The Authority will continue to improve and modernize its regulatory services to the satisfaction of its stakeholders/customers. In particular, the Authority will roll out the Passenger Service Vehicles Tracking System (VTS) for monitoring of passenger vehicles to curb accidents which continue to cost lives and loss of properties. In addition, the Authority plans to construct its offices in Dodoma and Mbeya regions and it undertakes review of its Organisation Structure and Scheme of Service. Furthermore, the Authority plans to prepare its Third Five Year Corporate Strategic Plan (2018/2019-2022/2023) in the financial year 2017/2018. The education programs to enhance public awareness on the regulated services will be undertaken. 15. SOLVENCY AND GOING CONCERN The Board confirms that applicable accounting standards have been followed and that the financial statements have been prepared on a going concern basis. The Board has reasonable expectation that the Authority has adequate resources to continue in operational. The Authority’s total liability at 30th June, 2017 was TZS 13.43 billion (2015/2016: TZS 8.04 billion) and total assets was TZS 53.49 billion (2015/2016: TZS 52.75 billion). The Authority has never sought financing through leverage or source other than those specified in the enabling legislation. The Authority’s state of affairs as at 30th June, 2017 is shown in the accompanying statement of financial position. The statement of financial position as at 30th June, 2017 showed a net working capital of TZS 33.53 billion (2015/2016: TZS 40.56 billion) which indicates that the Authority was a going concern. The Board considers the Authority to be solvent on the basis of the working capital position. 16. RESPONSIBLE BEHAVIOUR TOWARDS STAKEHOLDERS/CUSTOMERS The Authority believes that the stakeholders/customers are what make the Authority exist. Several measures have been taken to institute a responsible behaviour towards members of the Authority and other stakeholders/customers. These measures include, but not limited to, holding interactive meetings, seminars and workshops; provide education through media and improving customer services at our offices. 17.

CORPORATE GOVERNANCE According to SUMATRA Act, CAP 413, the Board of Directors of SUMATRA consists of seven (7) Directors. During the year under review, the Board operated with six (6) members following untimely passing of the Board Chairperson Prof Iddi S. N. Mkilaha on 24th June, 2016. Apart from the Director General, no other Director held executive position in the Authority. ANNUAL REPORT 2016/2017

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

17. CORPORATE GOVERNANCE (Continued) The Board has the overall responsibility for the activity, including responsibility for identifying key risk areas, considering and monitoring investment decisions, significant financial matters and reviewing performance of management business plans and budgets. The Board is also responsible for ensuring that a comprehensive system of internal control policies and procedures is operative and is in compliance with sound corporate governance principles. With absence of the Board, the Minister responsible for Transport has the overall responsibility on such matters. The Authority is committed to the principles of effective corporate governance. The Directors also recognize the importance of integrity, transparency and accountability. 18. RISK MANAGEMENT AND INTERNAL CONTROL a) Risk and internal control assessment The Authority implements enterprise-wide risk management policy and framework, and Risk Management Manual. Each Directorate, Department and Unit has established its Risk Register which is being monitored for mitigations. Furthermore, the Authority has established Business Continuity Plan and Disaster Recovery Plan. b) Safeguarding of Authority’s Assets The Directors are responsible for safeguarding the assets of the Authority. Safeguarding assets include the methods of protecting and maintaining the Authority’s daily business operations. The Financial Rules and Regulations of the Authority has provided for the methods of safeguarding the Authority’s assets. c) Other Policies and Regulations The Authority has in place various policies and regulations documents including but not limited to HIV/AIDS Policy at Workplace, ICT Policy, SUMATRA Employees Loan Policy, SUMATRA Staff Rules and Regulations, Financial Rules and Regulations and Scheme of Service. These policies and regulations documents were developed to strengthen the internal control environment and enhance efficiency within the Authority. During the year 2016/2017, no incident of loss of Authority’s Assets was recorded. d) Compliance with Laws and Regulations The principal functions and operations of the Authority are governed by the SUMATRA Act, CAP 413. The Directors confirm that the activities and operations of the Authority were conducted in accordance with the Act and there was no information on non-compliance with other applicable laws and regulations that would have material impact on the Authority. e) Reliability of Accounting Records The Authority has employed sufficient and competent staff in the Finance Department and has in place a computerized accounting system (Epicor IFMS). Accordingly, proper books of account have been maintained and the financial statements are prepared and presented in compliance with the International Public Sector Accounting Standards (IPSAS).

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

19. EMPLOYEES’ WELFARE i) Management and Employees’ Relationship There was continued harmonious relationship between the employees of the Authority and the Management during the year under review. There were no unresolved complaints received by the Board from the employees during the year. A healthy relationship continues to exist between Management and COTWU- SUMATRA Branch. ii) Medical Assistance All members of staff, their spouses and a maximum number of four dependents (children) for each employee were provided with medical services by the Authority. During the year 2016/2017 the Authority used services of National Health Insurance Fund (NHIF) to provide medical services to its staff and their dependents. Furthermore, the Authority continued to raise awareness to staff on HIV and AIDS issues. During the year 2016/2017 a total of TZS 531.29 million (2015/2016: TZS 451.96 million) was spent to provide medical services to staff and TZS 44.37 million (2015/2016: TZS 34.47 million) was spent on HIV/AIDS awareness seminars. iii) Training Facilities Training Programmes have been and are continually being developed to ensure employees are adequately trained at all levels. Employees are given opportunity to attend short and long training programmes both locally and outside the country to upgrade their skills and enhance career development. During the year, one staff (2015/2016:1) was considered for long term training as per the Staff Rules and Regulations, 2012. iv) Financial Assistance to Staff Financial Assistance is available to all confirmed employees depending on the set assessment criteria as per the Employees Loans Policy, together with the Authority’s Staff Rules and Regulations. Further, Management has established Employees Loans Revolving Fund Account, which complements SUMATRA Savings and Credit Co- operative Society (SACCOS) Ltd, in provision of staff loans. v) Persons with Disabilities SUMATRA is an equal opportunity employer and as a matter of policy, recruitment processes are transparent and competitive. In case of applications for employment by persons with disabilities will be considered bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort shall be made to ensure that their employment with the Authority continues and appropriate training is arranged. It is the policy of the Authority that training, career development and promotion in case of persons with disabilities should, as far as possible, be identical to that of other employees.

ANNUAL REPORT 2016/2017

DIRECTORS’S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

20. GENDER PARITY The Authority is an equal opportunity employer and it had 201 employees during the year ended 30th June, 2017 (30th June, 2016: 188). Out of these, 154 were male and 47 were female as shown below: Gender Male

30.06.2017 154

% 76.62

30.06.2016 137

% 73.0

Female

23.38

27.0

201

100.0

188

100.0

Total

Generally, the Authority gives equal opportunity to all people on recruitment process to fill vacant employment posts. The established recruitment policy facilitates achievement of employment equity. In this regard, great care is taken when implementing the policy in order to ensure that education/professional qualifications, competencies and key attributes which are the basic criteria for selection and appointment, is not compromised. 21. RELATED PARTY TRANSACTIONS A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. Related parties are those who have the ability, authority and responsibility for planning, directing and controlling the activities or exercise significant influence in making financial and operating decisions. For the Authority, the Board members and key Management employees are related parties in this case. This includes any Director whether executive or otherwise. Specifically, they involve members of the Board of Directors and Management employees (Directors and Managers). The related party transactions are disclosed in Note 39 and include Board expenses and tax subsidy to motor vehicles loaned to Management employees. 22. CORPORATE SOCIAL RESPONSIBILITIES The Authority acknowledges its responsibility to respond to community social needs. SUMATRA’s Corporate Social Responsibility interventions included commitment to active participation in environment protection and promotion of socio-economic development of our society through extension of financial support towards implementation of community development projects. During the year 2016/2017 the Authority spent TZS 50.13 million (2015/2016: TZS 77.07 million) to support a number of social and economic development initiatives implemented throughout the country. 23. POLITICAL AND CHARITABLE DONATIONS The Authority did not make any political donations during the year ended 30th June, 2017. Donations were made as part of corporate social responsibility to institutions and charitable organizations to acknowledge SUMATRA’s responsibility to community social needs. The donations during the year were as follows:

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

DIRECTORSâ&#x20AC;&#x2122;S REPORT (Continued) FOR THE YEAR ENDED 30th JUNE 2017

23. POLITICAL AND CHARITABLE DONATIONS (Continued) S/No

Name of Recipient

Purpose of donation/contribution

TZSâ&#x20AC;&#x2122;000

Kamati ya Maafa Kagera

Contribution to the victims of Kagera earth quake

10,000

Director Ilala Municipal Council

Construction of class rooms and desks for Dar es Salaam Region.

5,000

Mfuko wa Madawati Geita

Chama cha Walimu Wenye Uziwi Tanzania

WOMESA Tanzania Chapter

Wailes Secondary School

SUMATRA - Ruvuma

SUMATRA - Kagera

Desks for Geita Region. Demonstration of challenges facing people with hearing difficulties during commemoration of World deaf day Exhibition of WOMESA activities during the Maritime Day Fund raising for school desks Construction of model of parking for Motor/Tri-Cycles of Ruvuma region Contribution to the SUMATRA victims of Kagera Earthquake

TOTAL

8,000 500 1,800 5,000 10,000 3,000 43,300

24. ENVIRONMENTAL CONTROL PROGRAMME SUMATRA believes that environmental awareness plays a vital role in shaping public attitudes. Public education inculcates the habits of preservation and conservation of nature in the general public. It is for this reason that SUMATRA has been reminding transport operators and the public at large to observe minimum environmental standards propounded by environmental conservation agencies. During the year ended 30th June, 2017 through its educational programs, SUMATRA continued to equip people with the necessary knowledge, attitude and motivation for the prevention of pollution and resource deterioration. Bus and truck operators were required as a matter of law to ensure vehicles are equipped with rubbish bins or litter bags to prevent passengers from indiscriminate disposal of solid waste that have far-reaching environmental consequences. Public notices warning passengers against such malpractices were encouraged. The public was also encouraged to plant more trees to help convert excess carbon dioxide back to oxygen. Similarly, those in the transport industry were encouraged to keep their cars in good running order, driving with more care at lower speeds and using lead-free petrol whenever possible. 25. AUDITOR The Controller and Auditor General is the statutory auditor of Surface and Marine Transport Regulatory Authority (SUMATRA) by virtue of article 143 of the Constitution of the United Republic of Tanzania as amplified under sections 9 of the Public Audit Act (PAA) No 11 of 2008. However in accordance with Section 33(1) of the same Act, M/s MAZARS Wiscon Associates were authorized to carry out the audit of the Authority jointly with the Controller and Auditor General. This Statement was approved by the Board of Directors on 20th December, 2017 and signed on its behalf by: Eng. Dr. John S. Ndunguru, Chairman

Signature:________________Date: 22/12/2017

Capt. Maregesi Manyama, Director

Signature:________________Date: 22/12/2017

ANNUAL REPORT 2016/2017

STATEMENT OF DIRECTORS RESPONSIBILITY FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

As required by Section 44 of the Surface and Marine Transport Regulatory Authority Act, CAP 413, the Directors are responsible to ensure that the Authority prepares financial statements that give a true and fair view of the state of affairs of the Authority as at the end of the financial year and changes in net assets of the Authority for the year. The auditorsâ&#x20AC;&#x2122; responsibility is to express an opinion on the financial statements based on their audit. The Directors are also responsible for safeguarding the assets of the Authority. The Directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with the requirements of the International Public Sector Accounting Standards (IPSAS). The Directors further accept responsibility for the maintenance of accounting records which may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control. The Directors are responsible for safeguarding the assets of the Authority and hence for taking reasonable steps for prevention and detection of fraud, errors and other irregularities. The financial statements were prepared on a going concern basis. However, on 16th November, 2017 the Parliament of Tanzania passed the Act to establish Tanzania Shipping Agencies Corporation (TASAC). The Agency will take-over maritime regulatory functions currently undertaken by SUMATRA. The Government has also formed a Committee to review the SUMATRA Act, CAP 413 after removal of maritime regulatory functions and the amendments may be submitted to the Parliament for enactment by 30th June, 2018. These developments might come up with two separate regulatory organs; one for Maritime sub-sector and the other for surface transport sub-sector. It is envisaged that the existing assets and liabilities of the Authority will be split between the two entities. The Board takes commitment to oversee the expected changes in the regulated industry with the view of enhancing efficiency, improving productivity and increasing investments within the sectors. Nevertheless, the Authority will continue to discharge its functions effectively until when the new organs are formed and become operational. This Statement was approved by the Board of Directors on 20th December, 2017 and signed on its behalf by:

Eng. Dr. John S. Ndunguru, Chairman

Signature:________________Date: 22/12/2017

Capt. Maregesi Manyama, Director

Signature:________________Date: 22/12/2017

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

DECLARATION OF THE HEAD OF FINANCE AND ACCOUNTING OF THE SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY (SUMATRA)

The Auditors and Accountants (Registration) Act. No. 33 of 1972, as amended by Act No. 2 of 1995, requires financial statements to be accompanied with a declaration issued by the Head of Finance and Accounting responsible for the preparation of financial statements of the entity concerned. It is the duty of a Professional Accountant to assist the Board of Directors/Management to discharge the responsibility of preparing financial statements of the Authority showing true and fair view of the Authorityâ&#x20AC;&#x2122;s position and performance in accordance with applicable International Accounting Standards and statutory financial reporting requirements. Full legal responsibility for the preparation of financial statements rests with the Board of Directors under the Statement of Directors Responsibility on the above page. I, Habibu J. S. Suluo, being the Head of Finance and Accounting of SUMATRA, hereby acknowledge my responsibility of ensuring that financial statements for the year ended 30th June, 2017 have been prepared in compliance with applicable accounting standards and statutory requirements. I thus confirm that the financial statements give a true and fair view position of SUMATRA as on that date and that they have been prepared based on properly maintained financial records.

Signed by: Habibu J. S. Suluo _______________________________ Position: Director of Finance, Human Resource & Administration NBAA Membership No.: FCPA 1516 Date: 20th December, 2017

ANNUAL REPORT 2016/2017

INDEPENDENT AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

To: Eng. Dr. John S. Ndunguru, Chairman, SUMATRA Board of Directors, P.O. Box 3093, DAR ES SALAAM. REPORT ON THE AUDIT OF FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30TH JUNE, 2017 Unqualified Opinion I have audited the financial statements of Surface and Marine Transport Regulatory Authority which comprise the statement of financial position as at 30th June, 2017, and the statement of financial performance, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies set out from page 35 to 75. In our opinion, the accompanying financial statements of the Surface and Marine Transport Regulatory Authority presented fairly in all material respects, in accordance with International Public Sector Accounting Standards (IPSAS) Accrual basis of accounting and in the manner required by the Public Finance Act, 2001 revised 2004. Basis for Opinion I conducted my audit in accordance with International Standards of Supreme Audit Institutions (ISSAIs). My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of my report. I am independent of SUMATRA in accordance with the ethical requirements that are relevant to my audit of the consolidated financial statements in United Republic of Tanzania and I have fulfilled my other ethical responsibilities in accordance with these requirements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my unqualified opinion. Emphasis of Matters Without qualifying my opinion, I draw the attention of the users of this report on the following matters to the financial statement: Matter 1: Ongoing procurement investigation In August 2016, SUMATRA entered into a contract with Computer Centre and Bsmart Technology SDN BHD (No.AE/025/2015-2016/G/22), at a contract value of TZS 2,444,482,155/- for the ‘Supply, Installation and Commissioning of Vehicle Tracking Software’. This tender was a subject of a PPRA investigation as at the time of audit. The results of the investigations might have significant impact on these financial statements. Matter 2: Going concern (Significant changes to SUMATRA operations); The Parliament of the URT has passed the Act which establishes The Tanzania Shipping Agency Corporation as a separate entity to regulate maritime transport. The Act has the effect of divesting the maritime and shipping operations from SUMATRA. The shipping operations contribute 63% to SUMATRA’s funding, and with the imminent establishment of the new entity, losing the shipping revenue is likely to have a significant impact on SUMATRA’s operations.

ANNUAL REPORT 2014/2015 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

INDEPENDENT AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS

Information Other than the Financial Statements and Auditor’s Report Thereon Management is responsible for the other information. The other information comprises of the Director’s Report and the Declaration by the Head of Finance but does not include the financial statements and our auditor’s report thereon. My opinion on the financial statements does not cover the other information and I do not express any form of assurance conclusion thereon. In connection with my audit of the financial statements, my responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or my knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work I have performed on the other information that there is a material misstatement of this other information, I am required to report that fact. I have nothing to report in this regard. Key Audit Matters Key audit matters are those matters that, in my professional judgment, were of most significance in my audit of the financial statements of the current period. These matters were addressed in the context of my audit of the financial statements as a whole, and in forming my opinion thereon, and I do not provide a separate opinion on these matters. I have determined the matters described below to be the key audit matters to be communicated in my report. No. 1.

Key audit matter Significant IT component

How my audit addressed the key audit matter

The Authority has a significant information I have involved my IT audit specialist in addressing this technology component in its operations. Its road matter and focused my work on evaluating and assessing licensing and shipping fee revenue is entirely the controls in place ensure based on computer application software. The • access to systems is authorised Authority also upgraded its financial reporting • systems are properly interfaced package as well as integrating a mobile money • Computer software maintenance is regularly performed platform with its road license revenue collection system. Therefore, in the event of any system • application upgrades are approved and controlled malfunction, there is significant risk pervasive • adequate business continuity and disaster recovery plans are in place. errors in the financials reports of the Authority, as well as significant impact on the Authority’s • Adequate security exist for internet based transactions and, operations. As a result, the access, interfacing, maintenance, upgrade, business continuity and • System availability is monitored and contingency plans are in place disaster recovery controls were significant to my audit. I also performed detailed analytical reviews to validate revenue reported in the financial statements. 2.

Compliance with procurement regulations The value of procurement during the year I have involved a procurement specialist in my audit team amounted to TZS 9,948,188,000, which is in addressing this matter. My work focused on: 19.4% of the total Budget. Therefore, the • Adherence to procurement procedures and magnitude of procurement transactions requires guidelines as spelt out in the PPA and PPR. strict compliance with procurement laws and • Evaluating value for money considerations in regulations. procurement activities and evaluations. As a result compliance with procurement PPA and PPR was significant to me in this audit.

ANNUAL REPORT 2014/2015 2016/2017

INDEPENDENT AUDITORS’ REPORT ON THE FINANCIAL STATEMENTS

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IPSASs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the entity’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. In addition, Sect. 10 (2) of the PAA No.11 of 2008 requires me to satisfy myself that, the accounts have been prepared in accordance with the appropriate accounting standards. Further, Sect. 48(3) of the Public Procurement Act No.7 of 2011 requires me to state in my annual audit report whether or not the audited entity has complied with the provisions of the Law and its Regulations. Report on Other Legal and Regulatory Requirements Compliance with the Public Procurement Act, 2011 In view of my responsibility on the procurement legislation and taking into consideration the procurement transactions and processes I have reviewed as part of this audit, I state that, Surface and Marine Transport Regulatory Authority procurement transactions and processes have generally complied with the requirements of the Public Procurement Act No. 7 of 2011 and its underlying Regulations of 2013. The engagement partner on the audit resulting in this independent auditor’s report is the Controller and Auditor General. Prof. Mussa Juma Assad, Controller and Auditor General of the United Republic of Tanzania __th December, 2017 National Audit Office of Tanzania, P.O. Box 9080, 11101 Dar es Salaam, Tanzania. Tel: 255 (022) 2115157/8 Fax: 255 (022) 2117527 Email: ocag@nao.go.tz

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

STATEMENT OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30TH JUNE 2017 Revenue: Revenue from Non-Exchange Transactions Shipping Services Fees Road Transport Licensing Fees Service Provider Annual Levy Marine Safety Fees Other Income Grant Income

NOTE

2016/2017 TZS’000

2015/2016 TZS’000

8 9

20,165,624 10,269,607 8,301,124

19,988,558 9,219,935 7,751,445

586,378

348,023

3,607,163

5,770,955

42,929,896

71,364 43,150,280

1,144,171 250 1,144,421 44,074,317

1,580,244 3,000 1,583,244 44,733,524

16,426,338 3,852,793

15,950,381 3,763,367

10,962,683

9,157,741

48,504

47,358

387,695

694,971

6,762,254

6,473,433

2,466,144

2,341,731

71,364

1,482,537

1,086,307

263,963

142,780

42,652,911

39,729,433

680,280

2,047,936

(7,949)

(83,789)

2,093,737

6,968,238

(1,046,869) 1,046,869

(3,484,119) 3,484,119

10 11 12 13

Revenue from Exchange Transaction Interest from Short Term Investments Rental Revenue from K’nyama House Total Revenue Expenses: Personnel Expenses Regulatory Expenses Administrative Expenses Financing Cost Board Expenses Government Consolidated Fund Contributions to other Bodies Grant Expenditure Depreciation Amortization Total Expenses

14 15 16 17 18 19 20 13 26 27

Other Gains/(Losses) Gain on foreign exchange transactions Loss on Disposal of Non-Current Assets Surplus for the Year Funds set aside for Office Accommodation

These financial statements were authorized for issue by the Board of Directors on 20th December, 2017 and were signed on its behalf by:

Eng. Dr. John S. Ndunguru, Chairman

Signature:________________Date: 22/12/2017

Capt. Maregesi Manyama, Director

Signature:________________Date: 22/12/2017

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

STATEMENT OF FINANCIAL POSITION AS AT 30TH JUNE 2017 ASSETS Current assets Cash and Cash Equivalents Short Term Investments Receivables from Exchange Transactions Receivables from Non - Exchange Transactions Inventories Non-current assets Property, plant and equipment Capital WIP - Office Building Intangible assets Capital WIP- Vehicle Tracking System Non-current assets held for sale TOTAL ASSETS LIABILITIES Current liabilities Payables Provisions Non-current liabilities EATTFP Interest Accumulation Employee Benefits Payable

TOTAL LIABILITIES NET ASSETS NET ASSETS Capital Fund Special Fund (Accumulated surplus/(deficit)) Revaluation surplus/reserve Office Accommodation Fund TOTAL NET ASSETS

Notes 21 22 23 24 25 26 42 27 42 28 29 30 31 32

2016/2017 TZS’000 6,680,518 16,273,284 107,810 16,567,780

2015/2016 TZS’000 19,794,726 7,192,502 98,186 15,150,041

312,992 39,942,384

724,550 42,960,005

7,731,988 3,336,804 489,268 1,994,121 13,552,181 53,494,565

7,420,955 1,977,833 350,654 9,749,442 44,099 52,753,546

2,673,634 3,740,921 6,414,555

1,540,317 859,917 2,400,234

0 7,017,516 7,017,516

316,064 5,326,478 5,642,542

13,432,071 40,062,494

8,042,776 44,710,771

647,463 16,123,927 1,731,247 21,559,857 40,062,494

647,463 16,819,073 1,731,247 25,512,988 44,710,771

These financial statements were authorized for issue by the Board of Directors on 20th December, 2017 and were signed on its behalf by: Eng. Dr. John S. Ndunguru, Chairman

Signature:________________Date: 22/12/2017

Capt. Maregesi Manyama, Director

Signature:________________Date: 22/12/2017

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 30TH JUNE 2017

At 01 July 2016 Surplus/(deficit) for the year

Capital Fund

Special Fund (Accumulated surplus/(deficit))

Revaluation surplus/reserve

Office Accommodation Fund

Total

TZS ‘000

647,463

16,819,073

1,731,247

25,512,988

44,710,771

2,093,737

(5,000,000)

(6,841,544)

(1,841,544)

Redemption of Excess Capital Expenditure Adjustment

99,530

(1,046,869)

Transfer from surplus

99,530 1,046,869

At 30 June 2017

647,463

16,123,928

1,731,247

21,559,857

40,062,494

At 01 July 2015

647,463

13,334,954

1,731,247

22,028,869

37,742,533

Surplus/(deficit) for the year

6,968,238

Transfer from surplus

(3,484,119)

3,484,119

647,463

16,819,073

1,731,247

25,512,988

44,710,771

At 30 June 2016

These financial statements were authorized for issue by the Board of Directors on 20th December, 2017 and were signed on its behalf by:

Eng. Dr. John S. Ndunguru, Chairman

Signature:________________Date: 22/12/2017

Capt. Maregesi Manyama, Director

Signature:________________Date: 22/12/2017

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30TH JUNE 2017 2016/2017 TZS ‘000

2015/2016 TZS ‘000

7,125,188 18,555,802 10,269,607 586,378 1,144,171 37,831 2,799,362 4,769,652

5,183,358 17,216,445 9,219,935 348,023 1,580,244 21,827 3,110,371 4,797,907

45,287,991

41,478,110

16,426,338 3,852,793 20,578,776 48,504 40,906,411 4,381,580

15,950,381 3,763,367 18,667,876 47,358 38,428,982 3,049,128

Cash flows from investing activities Acquisition of property, plant, and equipment & investment properties

(3,147,471)

(4,796,840)

Acquisition of intangibles

(2,396,698)

(273,265)

7,898

(5,544,169)

(5,062,207)

316,064

(34,857)

(3,867,182) (3,551,119) (4,713,707)

485,230 450,373 (1,562,706)

680,280

2,047,936

26,987,228

26,501,998

22,953,802

26,987,228

6,680,518 16,273,284 22,953,802

19,794,726 7,192,502 26,987,228

Note Cash flows from operating activities Receipts Service Providers Levy Shipping Services Levy Road Transport Fees Marine Services Fees Interest on Short Term Deposits Penalties – Marine Penalties – Road Transport Other Receipts Payments Employee costs Payments for Regulatory Expenses Administrative & Other expenses Financing Costs (Bank Charges) Net cash from operating activities

Net Proceeds on Disposal of Non-Current Assets Net cash from investing activities Cash flows from financing activities Increase/(Decrease) in CCTTFA Funds Increase/(Decrease) in EATTFP Interest Accumulation Increase in Deposits Net cash used in financing activities Net increase in cash and cash equivalents Net foreign exchange difference Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Reconciliation: Cash & Cash Equivalents Short Term Investments

These financial statements were authorized for issue by the Board of Directors on 20th December, 2017 and were signed on its behalf by: Eng. Dr. John S. Ndunguru, Chairman

Signature:________________Date: 22/12/2017

Capt. Maregesi Manyama, Director

Signature:________________Date: 22/12/2017

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNTS FOR THE YEAR ENDED 30TH JUNE 2017 Original Budget {A}

Adjustments {B)

Final Budget {A+B}

23,438,562 13,303,877

20,165,624 10,269,607

(3,272,938) (3,034,270)

10,286,367

8,301,124

(1,985,243)

461,838 3,503,911.06 50,994,555

461,838 3,503,911 50,994,555

586,378 3,607,163 42,929,896

124,540 103,252 (8,064,659)

212,243

1,144,171

931,928

300

250

(50)

212,543

1,144,946

931,878

51,207,098

44,074,317

(7,132,781)

Personnel Expenses

20,805,589

16,426,338

4,379,251

Regulatory Expenses Administrative Expenses

4,233,192 11,875,041

3,852,793 10,962,683

380,399 912,358

35,494 253,627

48,504 387,695

(13,010) (134,068)

7,710,264

6,762,254

948,011

2,618,529

2,466,144

152,385

1,746,500

(1,746,500)

47,531,734

42,652,911

4,878,824

Gain on foreign exchange transactions

195,264

680,280

485,016

Loss on Disposal of NonCurrent Assets

(7,949)

3,870,627

2,093,737

(1,776,890)

TZS ‘000’ Revenue from NonExchange Transactions Shipping Services Fees Road Transport Licensing Fees Service Provider Annual Levy Marine Safety Fees Other Income

Revenue from Exchange Transaction Interest from Short Term Investments Rental Revenue from Kijitonyama House Total Revenue

Actual Amount on Comparable Basis {C} TZS ‘000’ TZS ‘000’

Difference: Final Budget Vs Actual TZS ‘000’

Expenses:

Financing Cost Board Expenses Contribution to the Government Fund Contributions to other Bodies Depreciation & Amortization Total Expenses Other Gains/(Losses)

Surplus for the Year

3,870,627

The Authority prepares its budget on an accrual basis. As such, the budget and the financial statements are already on the same basis and further adjustments are not required to align the financial statements to the budget.

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

GENERAL INFORMATION i)

Establishment

Surface and Marine Transport Regulatory Authority (SUMATRA) was established by SUMATRA Act, CAP 413 as a regulatory authority in relation to the surface and marine transport sectors and came into operation effective from 15 th August, 2004 as per Government Order No.297 published on 20th August, 2004. The current address of the Head office of the Authority is: Mawasiliano House, A. H. Mwinyi Road/Nkomo Street, P.O. P. O. Box 3093, Dar es Salaam, Tanzania. ii)

Principal Activities

The Authority sectoral scope covers road transport; rail transport; port and shipping services; and maritime safety and security services. The principal activities of the Authority are disclosed in the Directors’ Report. 2.

AUTHORISATION OF FINANCIAL STATEMENTS The Authority’s financial statements for the year ended 30th June, 2017 were authorized for issue on 20th December, 2017 by the Board of Directors during its 52nd Ordinary Meeting held on 20th December, 2017.

BASIS OF PREPARATION The financial statements have been prepared on historical cost basis, except for buildings that have been measured at fair value. The statement of cash flows is prepared using the direct method. The financial statements are prepared on an accrual basis. Statement of Compliance The Authority’s financial statements have been prepared in accordance with and do comply with the International Public Sector Accounting Standards (IPSAS) as issued by the International Public Sector Accounting Standards Board (IPSASB). The Directors Report is prepared in line with the Tanzania Financial Reporting Standard No. 1 (TFRS 1) as issued by the National Board of Accountants and Auditors (NBAA). The financial statements are presented in Tanzanian Shillings (TZS), which is the functional and reporting currency of the authority and all values are rounded to the nearest thousand (TZS ‘000’).

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

CHANGES IN ACCOUNTING POLICIES AND ESTIMATES The Authority recognizes the effects of changes in accounting policy retrospectively. The effects of changes in accounting policy are applied prospectively if retrospective application is impractical. i)

New and amended standards adopted by the Authority The Authority used to prepare and present its financial statements in compliance with IFRSs. The Authority has adopted IPSAS as of 1 July 2014. The impact of this adoption has been disclosed in respective sections in these financial statements.

ii)

New standards and interpretations not yet adopted by the Authority Six (6) new standards were effective for annual periods beginning or after 1st January, 2017, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Authority. These standards are outlined below: • • • • • • •

IPSAS 33 – First-time Adoption of Accrual Basis International Public Sector Accounting Standards: IPSAS 34 – Separate Financial Statements IPSAS 35 – Consolidated Financial Statements IPSAS 36 – Investments in Associates and Joint Ventures IPSAS 37 – Joint Arrangements IPSAS 38 – Disclosure of Interests in Other Entities.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies outlined below have been consistently applied to all the years presented. 5.1 FOREIGN CURRENCY TRANSACTIONS Transactions in foreign currencies are initially accounted for at the ruling rate of exchange on the date of the transaction. They are translated into Tanzanian Shillings at the exchange rate ruling at the dates of the transactions. Trade creditors or debtors denominated in foreign currency are reported at the statement of financial position reporting date by applying the exchange rate on that date. Exchange differences arising from the settlement of creditors, or from the reporting of creditors at rates different from those at which they were initially recorded during the period, are recognized as income or expenses in the period in which they arise.

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 5.2 REVENUE RECOGNITION 5.2.1 Revenue from Exchange Transactions Sources of revenue of the Authority include: Shipping Service Fees, Road Transport Licensing Fees, Annual Levy on Gross Turnover, Shipping Agency License Fees, Maritime Safety Administration Fees and others. Revenue is recognized only when it is probable that the economic benefits associated with the transaction will flow to the Authority and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: i) Sale of goods: Revenue from the sale of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer, usually on delivery of the goods and when the amount of revenue can be measured reliably and it is probable that the economic benefits or service potential associated with the transaction will flow to the Authority. ii) Rendering of services: The Authority recognizes revenue from rendering of services by reference to the stage of completion when the outcome of the transaction can be estimated reliably. The stage of completion is measured by reference to labor hours incurred to date as a percentage of total estimated labor hours. Where the contract outcome cannot be measured reliably, revenue is recognized only to the extent that the expenses incurred are recoverable. iii) Interest income: Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. iv) Rental income: Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and included in revenue. 5.2.2 Revenue from Non-exchange Transactions Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognized: i) Government grants: Government grants are not recognized until there is reasonable assurance that the Authority will comply with the conditions attaching to them and the grants will be received. Government grants whose primary condition is that the Authority should purchase, construct or otherwise acquire non-current assets are recognized as deferred income in the statement of financial position and transferred to statement of financial performance on a systematic and rational basis over the useful lives of the related assets.

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 5.2 REVENUE RECOGNITION (Continued) Other government grants are recognized as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Authority with no future related costs are recognized in the statement of financial performance in the period in which they become receivable. ii) Other transfers: Other transfers include fees, fines, penalties, licenses, gifts, donations (including goods-in-kind), and transfers from other government entities. These are recognized when it is probable that the future economic benefits or service potential associated with the asset will flow to the entity; and the fair value of the asset can be measured reliably. Services-in-kind are not recognized as revenue, but are disclosed in the financial statements. iii) Local taxes and levies: Taxes and levies are recognized when the taxable event occurs and the asset recognition criteria are met. 5.3 NON-CURRENT ASSETS HELD FOR SALE Non-current assets and disposal group are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non-current assets (and disposal group) classified as held for sale are measured at the lower of the assetsâ&#x20AC;&#x2122; previous carrying amount and fair value less costs to sell. 5.4 PROPERTY PLANT AND EQUIPMENT PPE are initially recorded at cost, which are those costs directly attributable to bring them to the location and condition necessary for them to be capable of operating in the manner intended by Management. Subsequently, Property Plant and equipment are carried at cost less accumulated depreciation and impairment if any, except buildings which are reported at revalued amount less accumulated depreciation and accumulated impairment, if any. Repairs and maintenance costs, if not adding to the useful life of PPE, are charged to the statement of financial performance during the financial period in which they are incurred. The carrying amount of an item of PPE shall be derecognized on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognizing of an item of PPE is included in the statement of financial performance when the item is derecognized, unless where IPSAS requires otherwise on a sale and leaseback. ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 5.4 PROPERTY PLANT AND EQUIPMENT (Continued) Land is not depreciated; however, one of the fundamental principles of the land Policy that has been incorporated in the Government of Tanzania’s Land Act, 1999 is that when one is assessing compensation of land, one of the factors to consider is the market value of the land / real property. Depreciation on property, plant and equipment shall be provided for on a straight-line method to write off the cost of each asset to its residual value over its estimated useful life. The depreciation period for property, plant and equipment shall be as follows: Description

Years

Buildings

20 - 50

Plant & Machinery Motor Vehicles

5 - 15

Office Equipment

5 - 10

Computers and Accessories Furniture and Fittings

5 - 15

3-5 5 - 15

Residential Furniture and Equipment

5 - 15

Other assets

5 - 15

The assets’ residual values, useful lives and depreciation method are reviewed at the end of each reporting period and adjusted prospectively, if appropriate. In addition, the Authority stops charging depreciation on an asset when carrying amount equals its residual value.

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 5.5 IMPAIRMENT OF NON-FINANCIAL ASSETS Assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recovered. An impairment loss is recognized for the amount by which the carrying amount of the assets exceeds its recoverable amount. Impairment losses are recognised in the Statement of Financial Performance in the period in which they are incurred. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Authority estimates the assetâ&#x20AC;&#x2122;s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assetâ&#x20AC;&#x2122;s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the Statement of Financial Performance unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase. The Authority derecognizes items of Property Plant and Equipment and/or any significant part of an asset upon disposal or when no future economic benefits or service potential is expected from its continuing use. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of financial performance when the asset is derecognized. 5.6 INTANGIBLE ASSETS Intangible assets acquired separately are measured on initial recognition at cost. Where intangible assets are acquired in non-exchange transactions, the cost is their fair value at the date of the exchange. Subsequently, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. The useful life of the intangible assets is assessed as finite. Intangible assets with a finite life are amortized over its useful life as follows: Description

Years

Software

3 - 10

Intangible assets with a finite useful life are assessed for impairment whenever there is an indication that the asset may be impaired. The amortization period and the amortization method, for an intangible asset with a finite useful life, are reviewed at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on an intangible asset with a finite life is recognized in statement of financial performance as the expense category that is consistent with the nature of the intangible asset.

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 5.6 INTANGIBLE ASSETS Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of financial performance when the asset is derecognized. 5.7 LEASES i) The Authority as a Lessee Operating leases are leases that do not transfer substantially all the risks and benefits incidental to ownership of the leased item to the Authority. Operating lease payments are recognized as an operating expense in the statement of financial performance on a straight-line basis over the lease term. ii) The Authority as a Lessor Leases in which the Authority does not transfer substantially all the risks and benefits of ownership of an asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term. Rent received from an operating lease is recognized as income on a straight- line basis over the lease term. Contingent rents are recognized as revenue in the period in which they are earned. 5.8 CASH AND CASH EQUIVALENT Cash and cash equivalents are stated in the statement of financial position at face value. Cash and cash equivalents referred to in the statement of cash flows comprise cash on hand, cash at Bank, non-restricted current accounts with Bank of Tanzania, deposits held at call with banks with an original maturity of three months or less and investments with maturity periods of three months or less in money market instruments. 5.9 SHORT TERM INVESTMENTS Short term investments are deposits held at commercial banks as Fixed Deposit Receipts or Bank of Tanzania as Treasury Bills. Normally short term investments have original maturity of less than one year (12 months) and are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. 5.10 INVENTORIES Inventories consist of stationery and other consumables. Inventory is measured at cost upon initial recognition. To the extent that inventory was received through non-exchange transactions (for no cost or for a nominal cost), the cost of the inventory is its fair value at the date of acquisition. After initial recognition, inventory is measured at the lower of cost and current replacement cost. Inventories are recognized as an expense when deployed for utilization or consumption in the ordinary course of operations of the Authority. Cost is determined on Weighted Average basis. Provision for obsolete inventories is made on specific inventory items considered obsolete. Current replacement cost is the cost the entity would incur to acquire the asset on the reporting date.

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 5.11 PROVISIONS Provisions are recognized when the Authority has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits or service potential will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Authority expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of financial performance net of any reimbursement. 5.12 CONTINGENT LIABILITIES The Authority does not recognize a contingent liability, but discloses details of any contingencies in the notes to the financial statements, unless the possibility of an outflow of resources embodying economic benefits or service potential is remote. 5.13 CONTINGENT ASSETS The Authority does not recognize a contingent asset, but discloses details of a possible asset whose existence is contingent on the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the Authority in the notes to the financial statements. Contingent assets are assessed continually to ensure that developments are appropriately reflected in the financial statements. If it has become virtually certain that an inflow of economic benefits or service potential will arise and the assetâ&#x20AC;&#x2122;s value can be measured reliably, the asset and the related revenue are recognized in the financial statements of the period in which the change occurs. 5.14 PROVISION FOR OFFICE ACCOMMODATION The Authority has statutory obligation to provide office accommodation in all regions of Tanzania Mainland. A separate reserve has been created to serve as an operating account for the office accommodation requirements. A 50% of annual surplus from the statement of financial performance is transferred to the office accommodation reserve via the statement of changes in net assets. 5.15 REGULATORY RECEIVABLES Regulatory receivables are recognized initially at fair value and subsequently measured at value less provision for bad and doubtful debts. Specific provision is made in the financial statements against receivables considered to be doubtful of recovery.

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 5.16 EMPLOYEE BENEFITS i)

Short-Term Employees Benefits The cost of all short-term employee benefits, such as leave pay, is recognized during the period in which the employee renders the related service. The Authority recognizes the expected cost of employee rewards only when the Authority has a present legal or constructive obligation to make such payment, and a reliable estimate can be made.

ii)

Defined Contribution Plans The Authority provides retirement benefits for its employees. Defined contribution plans are post-employment benefit plans under which an entity pays fixed contributions into a separate entity (a pension fund), and the Authority will have no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods. The Authority and its employees contribute to the following pension funds: National Social Security Fund (NSSF), Parastatal Pension Fund (PPF), Government Employees Pension Fund (GEPF), Local Authority Pension Fund (LAPF) and Public Service Pension Fund (PSPF) which are defined contribution schemes. The Authority’s contributions to the defined contribution scheme are charged to the statement of financial performance in the year to which they relate.

iii)

Other Long - Term Employment Benefits a) Gratuities – These are paid to contract staff at the end of their contract period, which is approximately five years. The Authority provides for the expected liability on straight line basis over the contract period. b) Employee retention benefits – Established to encourage employees to continue serving the Authority until their retirement age. This is a retention scheme which is focused to employees of the Authority with outstanding performance. The benefits are accumulated at the rate of 5% of the basic salary of every employee and payable every four (4) years cycle.

iv)

Termination benefits Termination benefits are payable when employment is terminated by the Authority before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Authority recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than twelve months after reporting date are discounted to present value.

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 5.17 IMPAIRMENT OF FINANCIAL ASSETS The Authority assesses, at each reporting date whether a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred â&#x20AC;&#x2DC;loss eventâ&#x20AC;&#x2122;) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial re-organization and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

5.18 ACCOUNTS PAYABLE Accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer).If not they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. 5.19 RELATED PARTIES The Authority regards a related party as a person or an entity with the ability to exert control individually or jointly, or to exercise significant influence over the Authority, or vice versa. Members of key management are regarded as related parties and comprise the Board Members and Management employees. Related party transactions are disclosed under Note 39. 5.20 BUDGET INFORMATION The annual budget is prepared on the accrual basis, that is, all planned costs and income are presented in a single statement to determine the needs of the Authority. As a result of the adoption of the accrual basis for budgeting purposes, there are no basis, timing or entity differences that would require reconciliation between the actual comparable amounts and the amounts presented as a separate additional financial statement in the statement of comparison of budget and actual amounts. Explanatory comments are provided under Note 41 to the annual financial statements; first, the reasons for overall growth or decline in the budget are stated, followed by details of overspending or under spending on line items.

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 5.21 CAPITAL WORK IN PROGRESS Capital Work in Progress (WIP), which is an asset category of Property plant and equipment, is stated at cost and not depreciated. Recognition amount of Capital WIP is shown under property plant and equipment. Depreciation of Capital Work in progress commences when the assets are ready for their intended use. The balance of unrecognized amount of Capital work in progress compared to the contracted full price is disclosed as Capital Commitment. 5.22 COMPARATIVE FIGURES Figures for the previous financial statements have been regrouped whenever necessary in order to make them comparable with current year’s figures.

SIGNIFICANT JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY The preparation of the Authority’s financial statements in conformity with IPSAS requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods. Judgments In the process of applying the Authority’s accounting policies, Management has made judgments, which have the most significant effect on the amounts recognized in the financial statements. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including experience of future events that are believed to be reasonable under the circumstances. Estimates and Assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Authority based its assumptions and estimates on parameters available when the financial statements were prepared. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Authority. Such changes are reflected in the assumptions when they occur. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SIGNIFICANT JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY (Continued) i)

Useful Lives and Residual Values

Critical estimates are made by the management in determining depreciation rates for equipment and their residual values. The rates used are set out in the accounting policies section of these financial statements under Note 5. The useful lives and residual values of assets are assessed using the following indicators to inform potential future use and value from disposal: a) b) c) d) e) ii)

The condition of the asset based on the assessment of experts (professional valuers) engaged by the Authority; The nature of the asset, its susceptibility and adaptability to changes in technology and processes; The nature of the processes in which the asset is deployed; Availability of funding to replace the asset; and Changes in the market in relation to the asset. Going concern

The Authority’s management has made an assessment of the Authority’s ability to continue as a going concern and is satisfied that the Authority has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Authority’s ability to continue as a going concern. Therefore, the financial statements continue to be prepared on the going concern basis. iii)

Impairment of financial assets

Estimates are required to be made of what would be the impact of a loss event that has occurred after the initial recognition of a financial asset and which would affect the estimated future cash flows. The Authority assesses at each reporting date whether a financial asset or group of financial assets have been impaired. Only if there is objective evidence of impairment of a loss event, the financial asset is deemed to be impaired iv)

Revaluation of building

The Authority carries its buildings at fair value, with changes in fair value being recognised in the statement of change in net assets. v)

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model.

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

SIGNIFICANT JUDGEMENTS AND SOURCES OF ESTIMATION UNCERTAINTY (Continued) v)

Impairment of non-financial assets

The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Authority is not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. The impairment of non-financial assets is explained further in Note 5. vi)

Provisions

The Authority reviews its individually significant receivables and payables at each reporting date to assess whether an impairment loss/expense should be recorded in the statement of financial performance. In particular, management judgment is required in the estimation of the amount and timing of future cash flows when determining the impairment loss or expense. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. Provisions were raised and management determined an estimate based on the information available. The carrying value of provisions for expenses is given under Note 30, whereas the carrying value of provisions for employee benefits payable is given under Note 32. vii)

Fair value of financial instruments

Where the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, they are determined using valuation techniques including the discounted cash flows model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. The fair value of financial instruments is explained further in Note 7 (e). 7

FINANCIAL RISK MANAGEMENT Financial risk factors The Authority’s activities potentially expose it to a variety of financial risks, including credit risk and the effects of the changes in foreign currency exchange rates. The Authority’s overall risk management programme takes account of the unpredictability of foreign exchange rate trends and seeks to minimize potential adverse effects on its financial performance. a)

Market Risk

Market risk is the risk of changes in market prices, such as foreign-exchange rates and interest rates, affecting the Authority’s income or the value of its financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on the risk. This risk includes the following:

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

FINANCIAL RISK MANAGEMENT (Continued) i) Foreign exchange risk The Authority has some exposure to foreign currencies as had some receivables from service providers and monetary items balances in US Dollars, while significant operating expenditure are incurred principally in local currency. Receivables held at 30.06.2017 was US$ 2.4 million (2015/2016: US$ 2.9 million) and monetary balances were US$ 0.40 million (2015/2016: US$ 7.0 million) which are stated in the financial statements at exchange rates of TZS 2,173.00/US$ (2015/2016: TZS 2,134.00/US$). If Tanzania Shillings strengthened or weakened by 5% the reported gain or loss on foreign exchange would be higher or lower by TZS 20.1 million (2015/2016: TZS 802.4 million) and TZS 257.6 million (2015/2016: TZS 312.5 million) for receivables as shown below: Description Effect on Monetary Items Effect on Receivables from service providers

Change (Strengthen/ Weaken) 5% Appreciation 5% Depreciation 5% Appreciation 5% Depreciation

30.06.2017 30.06.2016 TZS’000 TZS’000 20,139 802,355 (20,139) (802,355) 257,598 (257,598)

312,489 (312,489)

However, this exposure does not result in a significant risk as foreign currency assets and liabilities are normally settled within a fairly short time. ii) Interest rate risk Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. SUMATRA does not have longterm deposits or borrowings therefore statement of profit or loss and other comprehensive income and operating cash flows are not highly affected by changes in market interest rates. b) Credit Risk Credit risk arises from cash and cash equivalents, deposits and outstanding receivables. The Authority mitigates risks on cash and cash equivalents by investing it’s excess cash in Treasury Bills at Bank of Tanzania.

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

FINANCIAL RISK MANAGEMENT (Continued) The amount that represents the Authority’s exposure to credit risk at 30th June, 2017 is made up as follows: 2016/2017

Up to 1 month TZS ‘000

1 to 3 months TZS ‘000

3 to 12 months TZS ‘000

Cash and cash equivalents

6,680,518

16,273,284

16,273,284 107,810

Over 12 months

Total TZS ‘000

Short Term Investments

Receivables from Exchange Transactions

107,810

511,003

6,752,757

2,344,835

TZS ‘000

19,794,726

7,192,502

7,192,502 98,186

Receivables from Non Exchange Transactions 2015/2016 Cash and cash equivalents

19,794,726

Short Term Investments Receivables from Exchange Transactions Receivables from Non - Exchange Transactions

98,186

868,260

7,218,010

1,882,070

6,958,671

5,181,701

16,567,780

15,150,041

Below is the Authority’s maximum exposure to credit risk: 30.06.2017

30.06.2016

TZS’000

6,680,518

19,794,726

Short Term Investments

16,273,284

7,192,502

Accounts receivable

16,675,590

15,248,227

39,629,392

42,235,455

Cash & Cash Equivalents

No collateral is held for any of the above assets and no receivables have had their terms renegotiated. The Authority’s accounts receivable that are not impaired are mostly due from employees who are still working with the Authority. The fair value of the of Authority’s assets and liabilities are explained under Note 37 to these financial statements. c) Liquidity Risk Liquidity risk is the risk of the Authority not being able to meet its obligations as they fall due. The Authority’s approach to managing liquidity risk is to ensure that sufficient liquidity is available to meet its liabilities when due, without incurring unacceptable losses or risking damage to the Authority’s reputation. The Authority ensures that it has sufficient cash on demand to meet expected operating expenses through the use of cash flow forecasts. On average, receivables are settled within 30 days after the due date, and payables are settled within 30 days of invoice. The table below analyses the Authority’s financial liabilities into relevant maturity groupings based on the remaining period at the statement of the financial position’s date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. The balances due within 12 months equal their carrying balances, as the impact of discounting is not significant. 54

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

FINANCIAL RISK MANAGEMENT (Continued) 2016/2017 TZS’000

2015/2016 TZS’000

7,017,516 6,414,555 13,432,071

5,326,478 2,400,234 7,726,712

3,917,492 4,076,974 7,994,466

At 30th June, 2017 Staff benefits payable Current Liabilities At 30th June,2016 Staff benefits payable Current Liabilities

Management monitors budgets of the Authority’s liquidity reserve on the basis of expected cash flows. d) Capital Risk Management The primary objective of managing the Authority’s capital is to ensure that there is sufficient cash available to support the Authority’s funding requirements, including capital expenditure, to ensure that the Authority remains financially sound. The Authority is the Government owned entity; it ensures that expenditures are always as per the approved budget in order to ensure that is always in operations. e) Categorization of Financial Instruments Carrying Value

Available for sale

Held to maturity

Loans and receivables

TZS ‘000

6,680,518

30th June 2017 Financial Assets Cash and cash equivalents Short Term Investments Receivables from Exchange Transactions Receivables from Non Exchange Transactions

16,273,284

107,810

16,567,780

39,387,589

16,273,284

16,433,787

19,794,726

7,192,502

30th June 2016 Financial Assets Cash and cash equivalents Short Term Investments Receivables from Exchange Transactions Receivables from Non Exchange Transactions

7,192,502 98,186

98,186

15,150,041

42,235,455

7,192,502

35,042,953

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

FINANCIAL RISK MANAGEMENT (Continued)

30-Jun-17 Financial Liabilities Current Liabilities EATTFP Interest Accumulation

Carrying Value TZS ‘000

Other Financial Liabilities TZS ‘000

6,414,555 6,414,555

2,400,234 316,064

2,716,298

30-Jun-16 Financial Liabilities Current Liabilities EATTFP Interest Accumulation

SHIPPING SERVICES FEES 2016/2017 TZS’000

Import Fees Export Fees Shipping Agents Licensing Fees

18,964,121 767,617 433,886 20,165,624

2015/2016 TZS’000

19,262,040 522,492 204,026 19,988,558

ROAD TRANSPORT LICENSING FEES License Fees Buses License Fees Trucks Motor/Tri-Cycle Fees Time Table Fees Log Book Fees

2,906,387 6,568,158 722,836 24,634 47,592 10,269,607

2,845,830 6,049,162 263,541 22,162 39,240 9,219,935

6,763,422

6,122,741

1,499,530

1,522,172

10,000 28,172 8,301,124

106,532 7,751,445

10. SERVICE PROVIDERS LEVY Tanzania Ports Authority (TPA) International Container Terminal (TICTS) UDA RT Others

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

11. MARINE SAFETY FEES Unregistered Vessels Survey Fees

155,723

148,991

Ships/Boats Survey Fees Ships/Boats Registration Discharge Book Fees STCW Certificate Fees Seafarers Sign On/Off Fees Crew Recruit License Application

124,998 13,265 8,949 282,612 480 351 586,378

116,520 7,726 9,137 64,992 220 437 348,023

37,831 2,799,362 769,970 3,607,163

21,827 3,110,371 2,638,757 5,770,955

12. OTHER INCOME Penalties – Marine Penalties – Road Transport Miscellaneous Income

13. GRANT INCOME AND EXPENDITURE There was no Grant Income in the financial year 2016/2017 (2015/2016: TZS 71.36 million). The EATTFP project was closed in the financial year 2015/2016. 14. PERSONNEL EXPENSES Salaries and Wages Leave Passage Fuel and Transport Assistance Housing Assistance Staff Utilities Assistance Staff Motor Vehicle Maintenance Transfer Allowance Staff Car Tax Subsidy Responsibility Allowance Gratuity Staff Terminal Benefits Staff Furniture Allowance Statutory Contributions: Pension Contributions Skills Development Levy Contribution to Workman Compensation Fund (WCF)

2016/2017 TZS ‘000 8,630,262 658,668 907,073 1,689,370 263,214 78,130 96,496 54,196 2,171 636,656 966,643 128,193 14,111,072

2015/2016 TZS ‘000 8,942,336 621,947 870,866 1,590,866 251,731 81,334 76,197 48,827 1,800 530,308 613,713 14,051 13,643,976

1,206,166 1,053,931 55,169 2,315,266 16,426,338

1,144,070 1,105,229 57,106 2,306,405 15,950,381

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

15. REGULATORY EXPENSES Advertisement Meetings and Conferences Monitoring and Evaluation Dispute Resolutions Investigations Stakeholders Seminars Review of Tariff & Charges LRIT Expenses Compensation for Regulatory Restriction Consultancy Fees

590,114 504,542 999,263 0 128,807 698,558 12,219 35,139 239,179 644,972 3,852,793

363,354 561,201 1,075,206 0 20,389 1,129,411 21,644 39,642 187,630 364,890 3,763,367

2016/2017 TZS ‘000 242,954 229,964 1,020,547 531,290 698,448 29,812 1,484,823 183,471 812,775 1,395,581 59,491 2,542,514 30,926 2,400 66,258 7,796 40,447 55,222 15,708 28,528 210 205,441 1,053,131 79,693 50,130 95,123 10,962,683

2015/2016 TZS ‘000 278,833 153,335 965,292 451,964 1,841,458 19,056 1,669,351 101,671 726,707 485,612 53,463 683,266 25,656 6,343 66,258 120,843 34,469 131,856 16,703 29,552 1,731 86,350 1,029,154 22,193 77,066 18,068 3,000 58,491 9,157,741

16. ADMINISTRATIVE EXPENSES

Office Provisions and Awards Special Assignment Cost Travelling Expenses Medical Expenses Recruitment & Training Staff Uniforms Office Rent Office Security Guard Postage, Telephone and Telex Printing and Stationery Insurance Rates & Taxes Audit Committee Expenses ICT Steering Committee Expenses Audit Fees Audit Expenses HIV/AIDS Seminars Tender Board Expenses Professional/Membership Subscriptions Zone Expenses Region Office Running Expenses Review & Formulation of Key Sector Legislation Repairs, Maintenance & Utility Expenses Business Promotion Corporate Social Responsibilities International Trade Fairs & Exhibitions Contingencies Bad and Doubtful Debts

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

17. FINANCE COST 48,504

Bank charges and other bank expenses

47,358

18. BOARD EXPENSES Board Meetings and Related Expenses Directors Fees

310,492 77,203 387,695

668,971 26,000 694,971

19. CONTRIBUTION TO GOVERNMENT CONSOLIDATED FUND The Finance Act, No. 16 of 2015 required remission of 15% of annual gross revenues to the G o v e r n m e n t Consolidated Fund. During the year 2016/2017 the Authority remitted to the Government Consolidated Fund TZS 6,762,254,000.00 (2015/16: TZS 6,473,433,000.00). 20. CONTRIBUTIONS TO OTHER BODIES

City/Municipal/Town Councils SUMATRA Consumers Consultative Council Fair Competition Tribunal(FCT) Fair Competition Commission (FCC) Maritime Education Fund International Subscriptions for the GoT TOTAL

2016/2017 TZS’000 369,239 696,328 202,400 328,900 869,277 2,466,144

2015/2016 TZS’000 138,168 696,328 220,800 358,800 250,000 677,635 2,341,731

The Authority is required to pay contributions to national and international organizations. Contributions to international Organisations are made on behalf of the Government to organisations such as International Maritime Organization (IMO), Intergovernmental Standing Committee on Shipping (ISCOS), Port Management Association of Eastern and Southern Africa (PMAESA), African Forum for Utility Regulators (AFUR), Indian Ocean Memorandum of Understanding on Port State Control (IOMOU) and Southern African Railways Association (SARA). 21. CASH AND CASH EQUIVALENTS

Cash on hand

30.06.2017

30.06.2016

TZS’000

8,699

6,657

Cash at bank:

NBC Bank Ltd

546,508

13,123,859

NMB Bank Ltd

67,923

429,210

5,991,887

6,235,000

Bank of Tanzania (BoT) Cash in Transit (eRevenue)

65,501 6,680,518

19,794,726

A total of TZS 7.21 billion was committed for construction of SUMATRA House, and development of Passenger Vehicle Tracking. Details are given under Note 42. ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

22. SHORT TERM INVESTMENTS Tanzania Investment Bank (TIB) Bank M Commercial Bank of Africa (CBA) BOA Bank Bank of Tanzania (BoT) Sub Total

30.06.2017 TZS’000

16,273,284 16,273,284

30.06.2016 TZS’000 3,929,856 1,089,807 1,086,419 1,086,419 7,192,502

The Authority invests its excess cash in short term investments at the Bank of Tanzania (BoT) for periods of less than twelve (12) months. Cash is invested to earn return and avert possibility of losses which could occur by holding money in current accounts. During the year Short Term Investments were TZS 16.27 billion (2015/2016: TZS 7.19 billion). 23. RECEIVABLES FROM NON EXCHANGE TRANSACTIONS Interest Receivable from Short Term Deposits Investments

30.06.2017 TZS’000 107,810

30.06.2016 TZS’000 98,186

24. RECEIVABLES FROM NON-EXCHANGE TRANSACTIONS Receivables from Service Providers Receivables for Staff Benefits (GEPF) Staff loans Staff advances and Imprest Other receivables Prepayments Less: Allowances for impairment of receivables

Movement of allowances for impairment of receivables receivable Balance brought forward Charge during the year Exchange Variation Balance carried forward

Age analysis of Receivables from Service Providers: Neither past due nor impaired 1- 30 days Not impaired & overdue 31 - 60 days Not impaired & overdue 61 -360 days Not impaired & overdue 360 above

ANNUAL REPORT 2016/2017

7,355,204 7,017,516 2,344,835 1,263 182,514 327,740 17,229,072 (661,292)

7,894,072 5,181,701 1,882,070 106,039 197,055 565,166 15,826,103 (676,062)

16,567,780

15,150,0411

(676,062) 16,000 (1,230) (661,292)

(616,882) (58,491) (689) (676,062)

5,895,376 800,169 609,429 50,230 7,355,204

6,297,293 540,107 763,665 293,007

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

25. INVENTORIES 30.06.2017 TZS’000 187,246

30.06.2016 TZS’000 279,463

5,694

4,021

Stock of Revenue Receipts

21,426

55,866

Stock of Certificates

69,357

79,075

134,615

306,125

418,338

724,550

(105,345)

312,993

724,550

Stock of Stationary Stock of Materials

Stock of Licenses Less: Provision for obsolete stock

The provision of obsolete stock is made on road licenses which were withdrawn from use following decision to enhance licensing controls by printing licenses direct from SURLIS. During the financial year 2016/2017, TZS 1,395.58 Million (2015/2016: TZS 485.6 million) was recognised as an expense for stationery and consumables carried at net realisable value. The increased in this expenditure as compared to previous year was a result of using most secured licenses printed from automated system (SURLIS). This is recognised in administrative expenses.

ANNUAL REPORT 2016/2017

62 355,949 75,983 69,307 375,731 567,015 1,757,946

20,600

807,655

1,766,040

1,304,961

9,205,755

Other equipment

ANNUAL REPORT 2016/2017 110,630 1,237,234 130,229 991,292 349,622 2,819,007

257,800

1,521,634

20,600

706,600

795,059

1,033,111

6,543,604

Other equipment

Motor vehicles Plant and machinery Furniture & fittings Computer equipment

Leasehold Land Land and buildings

2,208,800

2015/2016

Motor vehicles Plant and machinery Furniture & fittings Computer equipment

Leasehold Land Land and buildings

2,729,269

Additions

277,692

01 July

257,800

36,268

Cost / Revaluation

2,319,430

2016/2017

(29,599)

44,098

Transfers

Cost / Revaluation

(127,257)

(77,772)

(20,311)

(29,174)

(13,938)

(4,921)

(1,734)

(7,283)

Disposal

9,205,755

1,304,961

1,766,040

807,655

20,600

2,729,269

257,800

2,319,430

10,993,862

1,867,055

869,679 2,140,037

96,583

3,129,317

535,492

2,355,698

30 June

734,885

123,326

257,772

76,397

2,575

261,925

12,890

1,784,800

255,382

622,773

165,938

5,150

709,777

25,780

01 July

charge 15,204

(5,295)

(5,463)

(1,664)

(1,563)

(2,236)

Disposal

1,086,307 (36,392)

151,499 (19,443)

376,655 (11,654)

94,836

2,575

447,852

12,890

1,482,537

197,702

608,414

74,183

6,532

580,502

Depreciation

1,784,800

255,382

622,773

165,938

5,150

709,777

25,780

3,261,874

451,420

1,229,624

237,885

11,682

1,290,279

40,984

30 June

Balance

Accumulated depreciation and Accumulated impairment Balance Balance

26. PROPERTIES, PLANT AND EQUIPMENT (PPE) (FIGURES IN TZS “000”)

7,420,955

1,049,579

1,143,267

641,717

15,450

2,019,492

232,020

2,319,430

7,731,988

1,415,635

910,413

631,794

84,901

1,839,038

494,508

2,355,698

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017 SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

402,577

21,806 692,895

21,806

419,630

Total

160,879

273,265

310,742

434,144

236,945

91,835

Additions

236,945

Website costs

2015/2016 Software - administration Software - infrastructure

Total

2016/2017 Software - administration Software - infrastructure Website costs

Cost / Revaluation 01 July

Disposal

Cost / Revaluation

27. INTANGIBLE ASSETS (FIGURES IN TZS “000”)

21,806 692,895

434,144

236,945

21,806 1,095,472

744,886

328,780

Balance 30 June

199,461

4,702

69,443

125,316

4,702 342,241

212,223

125,316

Balance 01 July

142,780

3,627 263,963

163,683

96,654

Amortisation charge

Disposal

342,241

4,702

212,223

125,316

8,329 606,204

375,906

221,970

Balance 30 June

Accumulated depreciation and Accumulated impairment

350,654

17,104

221,921

111,629

13,478 489,268

368,979

106,811

Carrying value 30 June

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

28. NON-CURRENT ASSETS HELD FOR SALE The Motor Vehicles valued at TZS 44,099 million which were presented as held for sale in the financial year 2015/2016 have been reclassified to non-current assets. The assets were not disposed until 30th June, 2017 pending approval from the Government.

Opening Balance Adjustment for the year Motor Vehicles

29. PAYABLES Accrued Expenses* Customer Deposits** Staff Claims: Unpaid Leave Compensation for Regulatory Restrictions

30.06.2017

30.06.2016

TZS’000

44,099

14,500

(44,099)

29,599

44,099

2,479,199 68,203

1,446,587 29,271

7,927

64,459

118,305 2,673,634

1,540,317

* Accrued expenses are those incurred and claims for their settlements were not received until year end. ** Customer deposits are payments made in advance by service providers before issuance of their licenses or certificates. Amounts due to staff are shown as Staff Claims. 30. PROVISIONS Provision for Audit Expenses Government Consolidated Fund Provision for PAYE payable Workman Compensation Fund (WCF) Other Provision

62,357 1,961,116 -

62,357 484,878 53,000 57,105

1,717,448 3,740,921

202,577 859,917

Other provisions principally comprise amounts outstanding in respect of Stale Cheques and claims which remained unpaid as at the reporting date. The movement of these provisions is as shown below:

Provision reversed

859,917 3,740,921 (375,039) (484,878)

1,985,168 859,917 (69,985) (1,915,183)

3,740,921

859,917

Opening Balance Addition during the year Utilized during the year

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

31. EATTFP INTEREST ACCUMULATIONS

At 01 July Received during the year At 30 June

2016/2017 TZS’000

2015/2016 TZS’000

316,064 (316,064) -

281,207 34,857 316,064

The interest earned and accumulated on the EATTFP Bank accounts as on 30th June, 2016 was paid to the Ministry of Finance & Planning by Cheque No. 001881 dated 30th December, 2016. The payment was made in accordance with the requirements of the Development Credit Agreement (DCA). No interest was earned in the account for the year 2016/2017 as the EATTFP and its bank accounts were closed in the financial year 2015/2016. 32. PROVISION FOR EMPLOYEE BENEFITS PAYABLE Staff Benefits Payable represents provision for accrued end of contract gratuity to Management employees who are engaged in 5 years contracts and Employees Retention Scheme Benefits to all staff. The amount payable as at 30th June, 2017 was TZS 6.5 billion as shown below:

Opening Balance: Gratuity Payable Employee Retention Scheme Less: Payments During the year Gratuity Paid Employee Retention Scheme Add: Provision for the year Gratuity Payable Employee Retention Scheme Additional Interest Gratuity Payable Employee Retention Scheme Closing Balance: Gratuity Payable Employee Retention Scheme

30.06.2017 TZS 1,839,964 3,486,515 5,326,479

30.06.2016 TZS 991,458 2,926,034 3,917,492

(339,167) (151,501) (490,668)

(79,203) (176,854) (256,057)

636,656 896,057 1,532,713

609,511 611,742 1,221,253

234,328 414,663 648,991

318,198 125,593 443,791

2,371,781 4,645,735 7,017,516

1,839,964 3,486,515 5,326,479

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

33. CAPITAL FUND The Authority does not have a share capital, according to provisions of the Surface and Marine Transport Regulatory Authority Act, CAP 413. However, Section 52(4) of the Act provides that property, rights and liabilities of the former Tanzania Central Freight Bureau (TCFB) are vested in the new Authority (SUMATRA). Therefore, all assets and liabilities were taken over by the Authority, which resulted to net assets of TZS 647 million forming the Capital Fund. 34. SPECIAL FUND 30.06.2017 TZS’000 At Start of the Year Adjustment Net Surplus Fund for the Year Utilization of the fund Office Accommodation Fund Redemption of Excess Capital At End of the Year

16,819,073 99,530 2,093,737 19,012,340 (1,046,869) (1,841,544) 16,123,928

30.06.2016 TZS’000 13,334,954 6,968,238 20,303,192 (3,484,119) 16,819,073

Section 42 of SUMATRA Act, CAP 413 requires all the surplus funds for the year to be transferred to Special Fund. According to the Act, these funds are used only for one or more of the following purposes: a) b) c) d)

Consumer education or information projects; Special non-recurring projects; Budgeted capital expenditure; or Major rate regulating inquiries.

35. REVALUATION RESERVE TZS 1,731,247,000 The revaluation reserve of TZS 1,731,247,000 included a revaluation surplus of TZS 1,210,664,000 as a result of revaluation of the Authority’s assets as at 30th J u n e , 2014 by an independent valuer M/S JL Consultancy Company Limited. The asset revaluation was conducted using Replacement Cost Method which considers price of same asset if is to be purchased on the basis of same value. 36. OFFICE ACCOMODATION FUND

At Start of Year Provision for the Year Redemption of Excess Capital At End of Year

ANNUAL REPORT 2016/2017

30.06.2017 30.06.2016 TZS’000 TZS’000 25,512,988 22,028,869 1,046,869 3,484,119 (5,000,000) 0 21,559,857 25,512,988

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

36. OFFICE ACCOMODATION FUND (Continued) Since inception the Authority’s Head Office and other offices are in rented buildings. This has resulted in Authority incurring huge costs in terms of rent. To relieve the Authority of the high costs of rent, the Board at its 18th Special Meeting approved a capital expenditure budget for property acquisition. The budget is to be financed by creating a fund titled “Acquisition of Office Accommodation Fund’’ which is being financed by setting aside funds from revenue income with effect from the year 2006/2007 and future subventions from annual incomes as approved by the Board from time to time. The office accommodation fund as at 30th June, 2017 was TZS 21.56 billion. 37.

FAIR VALUE OF ASSETS & LIABILITIES The table below shows an analysis of assets and liabilities at fair value by level of the fair value hierarchy. Assets and liabilities are grouped into levels 1 to 3 based on the degree to which the fair value is observable: Level 1 - fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 - fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as a price) or indirectly (i.e. derived from prices); and Level 3 - fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Carrying Value TZS ‘000

Level 1 TZS ‘000

Level 2 TZS ‘000

Fair Value Level 3 TZS ‘000

30-Jun-17 Financial Assets Cash and cash equivalents Short Term Investments

6,680,518 16,273,284

Financial Liabilities 30-Jun-16 Financial Assets Cash and cash equivalents Short Term Investments

19,794,726 7,192,502

38. TAXATION Surface and Marine Transport Regulatory Authority is a Government Agency, thus it is exempted from payment of direct tax, except VAT and other duties payable by other Government Agencies as per Second Schedule of Income Tax Act, 2004.

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

39. RELATED PARTY TRANSACTIONS Transfer of resources and/or obligations between related parties in SUMATRA during the year ended 30th June, 2017 included the following: a)

Board Expenses

The Board of Directors is the body of appointed members who jointly oversee the activities of the Authority. Their expenses are set out below:

Board Meetings and Related Expenses Directors Fees

2016/2017 TZS’000 310,492 77,203 387,695

2015/2016 TZS’000 668,971 26,000 694,971

b) Remuneration of Key Management Employees Key management personnel include Director General and other members of Management having authority and responsibility for planning, directing and controlling the activities of the Authority. Their remunerations are set out below: 30.06.2017 TZS’000 2,194,482 2,947,747

30.06.2016 TZS’000 2,143,490 2,406,822

5,142,229

4,550,312

At 01 July Addition during the year

549,005 -

675,040 80,695

Repayment

(80,967)

(206,730)

At 30 June

468,038

549,005

Short-term employee benefits Post-employment benefits

Loans to Key Management Employees

Tax Subsidy to Motor Vehicles Loaned to Management Employees SUMATRA offers Tax Subsidy on Motor Vehicles loaned to the Heads of Divisions and Departments as stipulated in the Authority’s Staff Rules and Regulations, 2012. During the financial year 2016/2017 no Tax Subsidy was paid (2015/2016: TZS 48.83 million).

40. LEASE COMMITMENTS The Authority has operating leases for the offices in which it carries out its operations (as lessee). In addition, the Authority has one residential house at Kijitonyama, Dar es Salaam which it leases to a former employee who was transferred to the parent Ministry and later retired from public service. The future minimum lease payments under operating leases are as follows: 68

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

40. LEASE COMMITMENTS (Continued) Authority as a Lessee

Not later than 1 year Later than 1 year

30.06.2017 TZS’000 1,484,823 1,669,351 3,154,174

30.06.2016 TZS’000 1,669,351 697,287 2,366,638

30.06.2017 TZS’000 250 3,000 3,250

30.06.2016 TZS’000 3,000 6,000 9,000

Authority as Lessor

Not later than 1 year Later than 1 year

41. EXPLANATION OF VARIANCE BETWEEN BUDGET AND ACTUAL AMOUNTS The Authority’s actual revenues for the year 2016/2017 were TZS 45.08 billion which are below the budget of TZS 51.4 billion by TZS 6.32 billion. The above result is due to underperformance of regulates sub sectors and delayed completion of review of regulatory instruments. The expenditure for the Authority amounted to TZS 38.64 billion, which is TZS 8.89 billion below the budget of TZS 47.53 billion. The saving is attributed to spilling over of activities and effective control of expenditures. Details of overspending or under-spending on line items are provided below:

Original Budget {A}

Adjustments {B)

TZS ‘000 TZS ‘000 Revenue from Non-Exchange Transactions Shipping 23,438,562 Services Fees

Actual Final Amount on Budget Comparable {A+B} Basis {C} TZS ‘000

TZS ‘000

23,438,562

20,165,624

Road Transport Licensing Fees

13,303,877

10,269,607

Service Provider Annual Levy

10,286,367

8,301,124

Difference: Final Budget Vs Actual Comments TZS ‘000 (3,272,938) Under collection resulted from decline in shipping cargos in the year. (3,034,270) More collections were projected from goods carrying vehicles and UDART but were not realized. (1,985,243) Decline in remittance from TPA & TICTS due to performance below expectation of the shipping sub sector.

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

41. EXPLANATION OF VARIANCE BETWEEN BUDGET AND ACTUAL AMOUNTS (Continued)

Original Budget {A}

Adjustments {B)

Marine Safety Fees

TZS ‘000 461,838

TZS ‘000 -

TZS ‘000 461,838

TZS ‘000 586,378

Other Income

3,503,911.06

3,503,911

3,607,163

50,994,555

42,929,896

212,243

1,144,171

300

250

212,543 51,207,098

Original Budget {A}

Adjustments {B)

Personnel Expenses

20,805,589

16,426,338

Regulatory Expenses

4,233,192

3,852,793

Administrative Expenses

11,875,041

10,962,683

Financing Cost

35,494

48,504

Sub-Total 50,994,555 Revenue from Exchange Transaction Interest from 212,243 Short Term Investments

Rental Revenue from Kijitonyama House Total Revenue

Expenses:

Actual Final Amount on Budget Comparable {A+B} Basis {C}

ANNUAL REPORT 2016/2017

1,144,421 44,074,317 Actual Final Amount on Budget Comparable {A+B} Basis {C}

Difference: Final Budget Vs Actual Comments TZS ‘000 124,540 Introduction of new Seafarers Certificates and enhanced monitoring activities 103,252 Redemption of excess capital and delayed review of Regulatory instruments (8,064,659) 932,928 Return on short term investments were underestimated due to suspension of using commercial banks. (50) 932,878 (7,132,781) Difference: Final Budget Vs Actual Comments 4,379,251 Under expenditure is attributed to suspension of recruitment leading to late reporting of new staff. 380,399 Saving is due to budgetary controls and spilling over of planned activities 912,358 Effective expenditure controls and use of Government facilities whose charges were favorable (13,010) Increase in number of financial transactions with commercial banks

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

41. EXPLANATION OF VARIANCE BETWEEN BUDGET AND ACTUAL AMOUNTS (Continued)

Original Budget {A}

Adjustments {B)

Board Expenses

TZS ‘000 253,627

TZS ‘000 -

TZS ‘000 253,627

TZS ‘000 387,695

Contribution to the Government Fund Contributions to other Bodies

7,710,264

6,762,254

2,618,529

2,466,144

1,746,500

47,531,734

42,652,911

195,264

680,280

(7,949)

3,870,627

2,093,737

Depreciation & Amortization Total Expenses Other Gains/ (Losses) Gain on foreign exchange transactions

Actual Final Amount on Budget Comparable {A+B} Basis {C}

Loss on Disposal of Non-Current Assets Surplus for the Year

3,870,627

Difference: Final Budget Vs Actual Comments TZS ‘000 (134,068) Over expenditure is attributed to Increase in number of Board activities-including review of sector legislations, drafting of Regulations and capacity building and oversight roles. 948,010 The difference is associated with the Provision after end of year results 152,385 The target of remittances to LGAs was set high with expectation that collections from motor cycles/tricycles will increase significantly. (1,746,500) The Depreciation & Amortization were not provided as part of initial budget. 4,878,824 485,016 Increase is attributed to higher than expected exchange rate movement (7,949) Loss on Disposal was not projected at the beginning of the year. (1,776,890)

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

42. COMMITMENTS 42.1

Capital Commitments

The Authority had two (2) capital commitments worth TZS 7,210,567,000 as at 30th June, 2017 (2015/2016: TZS 10,563,659,000). The commitments were for construction of SUMATRA Head Office on Plot No. 456/160 along Nkrumah Street Dar es Salaam and development of Vehicle Tracking System. The contract for construction of SUMATRA House was signed with the contractor, Catic International Engineering (T) Ltd, on 23rd July, 2015 at TZS 10,097,010,000 and TZS 3,336,804,000 was paid to the contractor as at 30th June, 2017 (2015/2016: TZS 1,977,833,000). Amount remained unpaid and committed was TZS 6,760,206,000. The Passengers Vehicle Tracking System was supplied by JV M/s. Computer Centre (T) Ltd and BSMART Technology SDN.BHD at a contract price of TZS 2.44 billion. Amount paid to the supplier as on 30th June, 2017 was TZS 1,994,121.000 (2015/2016: TZS Nil) thus amount remaining unpaid and committed is TZS 450,361,000. S/N 1 2

Particulars Construction of SUMATRA House Vehicle Tracking System Total

42.2

30.06.2017 TZS’000

30.06.2016 TZS’000

6,760,206 450,361 7,210,567

8,119,177 2,444,482 10,563,659

Commitment on Redemption of Excess Capital

SUMATRA received letter Kumb. NA. CAB.21/406/01/39 dated 11 December, 2017 from the Treasury Registrar demanding Redemption of Excess Capital of TZS 3.00 billion (2016/2017: TZS 6.84 billion). The letter demanded the amount to be remitted to the Government Consolidated Fund. The amount committed on 30th June, 2016 was paid to Government Consolidated Fund in July, 2017. S/N 1

Particulars Redemption of Excess Capital Total

30.06.2017 TZS’000

30.06.2016 TZS’000

3,000,000 3,000,000

6,841,545 6,841,545

30.06.2017 TZS’000

30.06.2016 TZS’000

1,661,756 1,190,601 2,852,357

1,190,601-

42.3 Procurement Commitments a) Goods:

Due within one year Due beyond one year Total

ANNUAL REPORT 2016/2017

1,190,601

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

42.3

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

Procurement Commitments (Continued)

The amount committed for 2016/2017 of TZS 2.85 billion (2015/2016: TZS 1.19 billion) includes contracted amounts which remained unpaid for supply of office furniture, computers, printed licence papers, handheld EFD devices and power generators to be installed in regional offices. b) Works:

Due within one year Total

30.06.2017

30.06.2016

TZS’000

307,653

34,362

307,653

34,362

Works committed on 30th June, 2017 of TZS 342.02 million (30th June, 2016: TZS 34.36 million) comprises outstanding amounts on contracts for Geometric Survey of SUMATRA Plots for construction of Dodoma and Mbeya offices and unpaid amounts on contracts for partitioning of SUMATRA offices of Njombe, Morogoro, Kigoma and Songwe regions. c)

Consultancy Services:

Due within one year Total

30.06.2017 TZS’000

30.06.2016 TZS’000

433,104 433,104

635,163 635,163

Consultancies which remained unpaid at the year-end thus committed are for supervision of construction of SUMATRA Head Office on Plot No. 456/160 along Nkrumah Street Dar es Salaam, Study on Road Safety, Study on Congestion in major cities, Study on Extent of Competition on the Regulated Services and Review of SUMATRA Organisation Structure. d)

Non-Consultancy Services

Due within one year Total

30.06.2017

30.06.2016

TZS’000

143,850

109,965

143,850

109,965

The committed amounts are for contracts for Airing of TV programs with local TV broadcasting stations and annual maintenance of computers and PABX systems. 43. CONTINGENT ASSETS 43.1

Notifications to Offenders

The Authority had no contingent assets as at 30th June, 2017 (2015/2016: TZS 87.6 million). Contingent assets for 2015/2016 arisen from notifications issued to offenders as per the Transport Licensing (Road Passenger Vehicles) Regulations, 2007. However, no revenue was collected from the issued notifications following the Court decision that SUMATRA penalties under Regulation 4(3) of the Transport Licensing (Road Passenger Vehicles) Regulation, 2007 were contrary to the fine stated under Transport Licensing Act, Cap.317. ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

43.2

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

Levy Returns

The Authority had contingent assets amounting to TZS 603.66 million as at 30th June, 2017 (2015/2016: TZS 485.68 million) arisen from outstanding levy returns from Marine Services Company Limited (MSCL) and Tanzania Railways Limited (TRL). The outstanding levy returns were as follows: 30.06.2017

30.06.2016

TZS’000

Marine Services Company Limited

409,735

371,596

Tanzania Railways Limited

193,920

114,079

Total

603,655

485,675

Levy returns were being filed without effecting payment as required by SUMATRA Levies and Fees Regulations, 2005 (Government Notice No. 291 published on 23/09/2005). MSCL and TRL has made commitment to pay outstanding levies on small instalments. It is probable that they will honour their commitments. 44. FUNCTIONAL CURRENCIES AND PRESENTATION CURRENCY The functional currency of the Authority, which is also its presentation currency, is Tanzanian Shillings (TZS). The values in this report are rounded to the nearest thousand (TZS ‘000’). 45. ULTIMATE CONTROLLING ENTITY The Government of the United Republic of Tanzania is the Ultimate Controlling Entity of the Authority. 46. EVENTS AFTER THE REPORTING DATE 46.1

ESTABLISHMENT OF TASAC

On 16th November, 2017 the Parliament of Tanzania passed the Act to establish Tanzania Shipping Agencies Corporation (TASAC). The Agency will take-over maritime regulatory functions currently undertaken by SUMATRA. The Government has also formed a Committee to review the SUMATRA Act, CAP 413 after removal of maritime regulatory functions and the amendments may be submitted to the Parliament for enactment by 30th June, 2018. These developments might come up with two separate regulatory organs; one for Maritime subsector and the other for surface transport sub-sector. It is envisaged that the existing assets and liabilities of the Authority will be split between the two entities. However, this event had no impact on the result for the financial year ended 30th June, 2017 and the financial position of the Authority after the reporting date.

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

46.2

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

APPOINTMENT OF NEW BOARD CHAIRMAN

The President of the United Republic of Tanzania, His Excellency, Dr John Pombe Joseph Magufuli appointed Eng. Dr John S. Ndunguru to be the new Board Chairman of the Authority. The appointment of the Board Chairman was made in accordance with Sect. 7(2) of SUMATRA Act, CAP 413 and became effective on 1st December, 2017. Prior to this date, the functions of the Board were headed by the Deputy Chairman, Mrs Hilda A. Gondwe. Nevertheless, this event had no impact on the result for the financial year ended 30th June, 2017 and the financial position of the Authority after the reporting date. 47. ASSETS PLEDGED AS SECURITY FOR LIABILITIES None of the Authorityâ&#x20AC;&#x2122;s assets have been pledged as security for liabilities. 48. COMPARATIVE FIGURES Comparative figures have been re-grouped wherever necessary to make them comparable with those of the current year.

ANNUAL REPORT 2016/2017

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

Regional Offices & MRCC

SUMATRA REGIONAL OFFICES /MRCC CONTACTS TOLL FREE NUMBERS: 0800 11 00 19 AND 0800 11 00 20 1. SUMATRA ARUSHA REGION P. O. Box 2648 Tel: +255 27 252 0149 Mob: +255 758 807730 Email: arusha@sumatra.go.tz ARUSHA. 2. SUMATRA COAST REGION P. O. Box 30851 Tel: +255 232 402 002 Mob: +255 758 807760 Email: pwani@sumatra.go.tz KIBAHA. 3. SUMATRA DAR ES SALAAM REGION P. O. Box 3093 Tel: +255 222 203 010/1 Mob: +255 758 807731 Email: dar@sumatra.go.tz DAR ES SALAAM. 4. SUMATRA DODOMA REGION P. O. Box 1742 Tel: +255 26 232 0046 Mob: +255 758 807732 Email: dodoma@sumatra.go.tz DODOMA. 5. SUMATRA GEITA REGION P. O. Box 594 Tel: +255 28 232 0046 Mob: +255 758 807733 Email: geita@sumatra.go.tz GEITA.

8. SUMATRA KATAVI REGION P. O. Box 235 Tel: KATAVI. 9. SUMATRA KIGOMA REGION P. O. Box 1256 Tel: +255 28 280 2445 Mob: +255 758 807746 Email: kigoma@sumatra.go.tz KIGOMA. 10. SUMATRA KILIMANJARO REGION P. O. Box 6917 Tel: +255 27 275 0904 Mob: +255 758 807747 Email: kilimanjaro@sumatra.go.tz MOSHI. 11. SUMATRA LINDI REGION P. O. Box 727 Tel: +255 23 220 2914 Mob: +255 758 807748 Email: lindi@sumatra.go.tz LINDI. 12. SUMATRA MANYARA REGION P. O. Box 191 Tel: +255 27 25 100 54 Mob: +255 758 807749 Email: manyara@sumatra.go.tz BABATI.

6. SUMATRA IRINGA REGION P. O. Box 1311 Tel: +255 26 270 3151 Mob: +255 758 807734 Email: iringa@sumatra.go.tz IRINGA.

13. SUMATRA MARA REGION P. O. Box 1317 Tel: +255 28 262 0414 Mob: +255 758 807750 Email: mara@sumatra.go.tz MUSOMA.

7. SUMATRA KAGERA REGION P. O. Box 677 Tel: +255 28 222 0363 Mob: +255 758 807735 Email: kagera@sumatra.go.tz BUKOBA.

14. SUMATRA MBEYA REGION P. O. Box 6129 Tel: +255 25 250 3466 Mob: +255 758 807751 Email: mbeya@sumatra.go.tz MBEYA.

ANNUAL REPORT 2016/2017

SURFACE AND MARINE TRANSPORT REGULATORY AUTHORITY

NOTES TO THE FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED 30th JUNE 2017

15. SUMATRA MOROGORO REGION P. O. Box 1417 Tel: +255 23 261 3863 Mob: +255 758 807752 Email: morogoro@sumatra.go.tz MOROGORO.

22. SUMATRA SIMIYU REGION P. O. Box 342 Tel: +255 28 270 0194 Mob: +255 758 807764 Email: simiyu@sumatra.go.tz BARIADI.

16. SUMATRA MTWARA REGION P. O. Box 925 Tel: +255 23 233 3179 Mob: +255 758 807753 Email: mtwara@sumatra.go.tz MTWARA.

23. SUMATRA SINGIDA REGION P. O. Box 105 Tel: +255 26 270 3151 Mob: +255 758 807765 Email: singida@sumatra.go.tz SINGIDA.

17. SUMATRA MWANZA REGION P. O. Box 2624 Tel: +255 28 254 0690 MWANZA.

24. SUMATRA TABORA REGION P. O. Box 82 Tel: +255 26 260 5385 Mob: +255 758 807766 Email: tabora@sumatra.go.tz TABORA.

18. SUMATRA NJOMBE REGION P. O. Box 1050 Tel: Mob. +255 758 807 755 Email: njombe@sumatra.go.tz NJOMBE. 19. SUMATRA RUKWA REGION P.O. Box 547 Tel: +255 25 280 0511 Mob: +255 758 807761 Email: rukwa@sumatra.go.tz SUMBAWANGA. 20. SUMATRA RUVUMA REGION P. O. Box 627 Tel: +255 25 260 2985 Mob: +255 758 807762 Email: ruvuma@sumatra.go.tz SONGEA. 21. SUMATRA SHINYANGA REGION P. O. Box 87 Tel: +255 28 276 2743 Mob: +255 758 807763 Email: shinyanga@sumatra.go.tz SHINYANGA.

25. SUMATRA TANGA REGION P. O. Box 657 Tel: +255 27 264 2083 Mob: +255 758 807767 Email: tanga@sumatra.go.tz TANGA. 26. SUMATRA SONGWE REGION P. O. Box Tel: Mob: +255 758 807721 Email: songwe@sumatra.go.tz VWAWA. 27. SUMATRA MARITIME RESCUE COORDINATION CENTRE (MRCC) P. O. Box 3093 Tel: +255 22 211 129/325/326/327 Mob: +255 758 807728 Email: mrcc@sumatra.go.tz DAR ES SALAAM.