Insurance Times Magazine Issue No. 4 (Dec 2015 - Jan 2016)

Insurance Times | Dec 2015 - Jan 2016

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From The CEO’s Desk MAGUFULI THE PRESIDENT

Farewell JMK – Welcome JPM Dear Readers, RECENTLY, TANZANIA experienced its most competitive multiparty general election since independence in 1961. The ruling Chama cha Mapinduzi (CCM) party won the presidential race, while largely sharing seats with the new opposition under a new opposition coalition going by the name Ukawa.

Dr. John Pombe Magufuli, the ruling party presidential contestant, was later sworn in as the fifth president of the United Republic of Tanzania on 5 November.

It is therefore apt to quote Dr Magufuli while on the campaign trail: “I want to lead the country to development and good welfare.

Everyone deserves a better life, irrespective of his or her political inclination.”

Indeed, these were among the many campaign promises that convinced voters to entrust him with the stewardship of the country.

It was evident from the election campaigns that Tanzanians are desirous of change – one that will bring prosperity in accordance with their social and economic aspirations. They are fully knowledgeable of the challenges that inhibit progress, which the new president immediately set out

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to tackle immediately after taking the helm at the Whitehouse.

As Tanzanians seek change in how they conduct their dayto-day business right from the household level to the Whitehouse, it is prudent to support the new helmsman. All citizens must work harder and commit time, skill and resources with the common purpose of taking the country where it belongs – at the top of the hierarchy in the community of nations.

As insurance stakeholders, we expect a greater improvement of the industry under Magufuli’s leadership. We are looking forward to increased support for indigenous insurance businesses.

Speedy implementation of policies to strengthen the micro-insurance platform will ensure that insurance services reach the masses, and that health and life insurance products bring benefits to the least privileged members of society.

This may appear daunting, but it is achievable through instituting policies geared towards improving insurance inclusion and penetration. Equally, we expect to see decisive support for the National Insurance Corporation (NIC) to ensure it achieves its mandate.

Insurance Times | Dec 2015 - Jan 2016

But as we welcome President Magufuli, it is equally fitting to pay tribute to former President Jakaya Mrisho Kikwete. During his speech at the Woodrow Wilson International Centre for Scholars in Washington DC in April, Kikwete said: “After 10 years, you need to move on.”

It was therefore quite satisfying just watching him on TV settling at his new Soga retirement home, smiling all over as he entertained visitors and perhaps looked forward to the coming soccer tournaments involving Taifa Stars.

Kikwete has played a significant role in our nationhood. He steered the country to greater democracy not only within the party but nationally, entrenching the freedom of the press. He has left a lasting impact in infrastructure development, the education sector, and many other key development areas.

To sum it up, JMK will be remembered greatly as an advocate and agent of stability in the region. We thank him for his enviable record of service and wish him a pleasant retirement.

Sudi Marungu Simba

CHIEF EXECUTIVE OFFICER

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PUBLISHER ZURICH GROUP LTD 5th Floor Green Leaf Tower Lumumba/Mkunguni Street P o Box 14310 Dar es Salaam, Tanzania Tel: +255 22 2184624 Fax: +255 22 2184623 www.zurichgroup.co.tz

C.E.O Sudi Marungu MANAGING DIRECTOR Fatma Abdulrazaq DIRECTOR Sallu Evarist PROJECT MANAGER Omary Aziz MANAGING EDITOR Mwirabi Sise CONSULTING EDITOR Isaac Mwangi CONTRIBUTORS Victor Babatunde, Maksudi Zamy, Anne Kiruku, Nelius Njagi, Elizabeth Wanjugu, Addah Zamm, Jovina Bujulu Graphic Designer Joe Ngari

SUBSCRIPTION RATES Annual rate: TSHS - 27,500/= KSHS – 250/= USHS – 41,500/= RWF – 9,500 BIF – 19,500 ZMK – 63,250

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The Editor’s Note Dear Reader, AS PART OF your financial planning, one of the most important components to remember is insurance. Many people do not take the necessary precautions to insure themselves, and it sometimes ends up costing them a substantial amount of money. You need several different types of insurance if you want to live a comfortable financial existence.

The primary reason that you need to buy insurance is to transfer risk. Insurance allows you to transfer financial risks from yourself to an insurance company. The insurance companies prepare for this risk because they charge premiums to their customers and keep a large amount of money in reserve. When a customer files a claim, the insurance company has the money there to pay it. This allows you to focus on other things instead of worrying about possible losses.

One of the biggest benefits of owning an insurance policy is that it can protect your property.

When you own an expensive piece of property, you want to make sure that you do not lose it to some type of damage. This is what auto and homeowner’s insurance policies are for. They allow you to have your property replaced or repaired if some type of damage occurs. It makes it possible for you to avoid saving money for these expenses on your own.

If you have a family, you may also want to buy insurance products that can protect them if you are unable to do so. This is the ultimate purpose of life insurance. If you die, life insurance will provide your beneficiaries with a lump sum amount of money. This money can be used to replace your current income and to help pay off any outstanding debts that you may have left behind. Without this type of insurance, your family may have serious financial problems after you are gone.

Many people also buy insurance so that they can limit the amount of out-of-pocket expenses related to health-care costs. With today’s healthcare system, an individual could easily go bankrupt if he/she did not have health insurance. Serious procedures can cost thousands of dollars; without a good insurance plan, this would have

Insurance Times | Dec 2015 - Jan 2016

to come out of your pocket. You could cover these risks by purchasing comprehensive health insurance or any other insurance policies.

Many business owners feel business insurance is an expense they cannot afford, or is a luxury for more established businesses.

Although it is that true business-oriented insurance can be expensive, this is an expense that every business – regardless of the industry, size or length of time in existence – needs to include in its budget.

If a customer slips and falls while in a business premises, or a product has a defect that injures a customer and yet that business does not have an insurance policy, this could spell the end of that business. If a company car is involved in an accident and someone is injured, that could be disastrous as well.

Business liability insurance covers accidents that occur on the business premises and any product defects and mishaps that may occur during normal business operations on and off the premises.

In this case, business insurance protects a business from closing due to a catastrophic loss. When a company carries insurance against these losses, any closure and loss can only be temporary. Companies should always consider business interruption insurance, a rider on their business insurance policy, to ensure continued cash flow for the duration of a closure due to a natural disaster.

Since insurance is not there for business beneficiaries, every individual or group is urged to take insurance for a better future.

People should build a habit of insuring themselves by joining different insurance firms.

Mwirabi Sise MANAGING EDITOR

From the Narobi Editorial Desk What will unlock the power of insurance in our midst?

INSURANCE HOLDS ENORMOUS potential, especially when it is considered that almost every other industry must have an element of insurance. In transport, investment, health and many other fields, insurance is essential in today’s world. Why, then, is this importance not reflected in certain national statistics?

When considering the contribution of various sectors to the economy as a whole, for instance, the contribution of insurance is fairly unimpressive. In East African countries, the contribution of insurance to GDP is about 1 per cent only. This is a dismal performance when compared with other sectors such as tourism, agriculture, or even banking.

This state of affairs becomes easier to explain when one considers insurance penetration in the region. In Kenya, the biggest economy in the region, this stands at only 2.9 per cent. Tanzania is even more disappointing, with insurance penetration at a mere 1 per cent.

These statistics offer food for thought if the status of insurance in the region is to improve. It has been said, and rightly so, that the low insurance penetration in the region offers plenty of opportunities for investors in the sector. But for these opportunities to be harnessed there is need for focussed and determined action. And there are many fronts on which such action is required.

The first is education and awareness regarding insurance products. Many people, especially those with little formal education, do not see the value of insurance in their lives – until something drastic happens in their lives, such as sickness or death. They are then forced to seek help from relatives and family friends, help that is not always forthcoming or sufficient.

There is also a perception among some people that it is extremely difficult to get paid for any claim from an insurance company, that the latter will seek any excuse not to pay genuine claims. The way to allay such fears

is through enforcing discipline in the industry, ensuring that claims are processed and paid speedily as they arise. Those that do not qualify for some reason should similarly be addressed to the satisfaction of all parties.

Moreover, insurance firms are bound to point out any factors that may make a claim invalid, rather than wait for a situation to arise and then refusing to pay.

Again, it would pay to make every process of insurance as easy and painless as possible. The comfort and convenience of customers should be paramount.

Thus, it should be possible for a customer to open a policy from their homes or offices, pay premiums easily through mobile money transfer or other convenient method, and make claims without having to make long and time-consuming trips to head offices in distant towns. This calls for innovative thinking to make insurance convenient and affordable.

Beyond policies such as motor insurance that are compulsory by law, perhaps the easiest forms of insurance to sell would be health and life insurance. Everybody in the community can see the troubles that various families go through during trying times, and it shouldn’t therefore be difficult to get people to pay for such policies. Of course, the benefits must be tangible, else people will pay for national health insurance only to realize later that affordable government hospitals to which they are entitled do not even have drugs in the first place.

Eventually, industry professionals must put together the right mix of initiatives to propel insurance to its rightful place in our national economies.

Isaac Mwangi is a communications lecturer and consultant based in Nairobi, and is consulting editor for Insurance Times. E-mail: isaacmwangi@minachariots. com

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Dear Readers, We value your ideas and welcome any contributions that can enrich public debate on the many issues of interest to our readers. We invite you to send your views, letters, and other contributions for possible publication. The Editor reserves the right to publish or not to do so.

Articles may also be edited for clarity and brevity.

Please send your contributions to: The Editor Insurance Times Magazine P.O. Box 14310 Dar es Salaam, Tanzania E-mail: editorial@insurancetimesmagazine.com

Insurance Times congratulates new Tanzanian leadership

The management and staff of Insurance Times Magazine congratulate the new Tanzanian leadership on their recent election victory and swearing-in. We want to reassure President John Pombe Magufuli (above), Vice President Samia Suluhu Hassan, and Prime Minister Kassim Majaliwa of our unwavering support. “We are committed to encouraging business growth and innovativeness, with the aim of ensuring that all Tanzanians can uplift their standards of living, especially through well thought-out insurance policies,� said Insurance Times Magazine Chief Executive Officer Sudi Marungu Simba.

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Insurance Times | Dec 2015 - Jan 2016

Contents MAGAZINE 14 Innovation InsureAfrika now seeks to connect millions of insurance customers with companies through its online platform

16 New markets: Kinshasa After decades of state monopoly, the Democratic Republic of Congo has finally embraced liberalization, opening up huge opportunities for East African insurance firms

23 Agricultural insurance

» p.28

Ugandan market gets a major boost following the introduction by Jubilee of a multiple cover for all kinds of perils faced by farmers

44 Dar traffic To solve the severe congestion on its roads, Dar City authorities are taking an integrated approach involving both buses and ferries

47 Kigali airport wins award Rwanda’s $17 million investment in airport renovations has paid off, with Kigali being recognized as the fifth best airport in Africa » p.64

53 Fuel adulteration Dar es Salaam-based Energy and Water Utilities Regulatory Authority uses technology to reduce contamination of fuel by more than 70 per cent

66 Corporate battle How a drawn-out legal battle between Britam and Acorn was finally settled through an out-of-court agreement » p.82 » p.72 Insurance Times | Dec 2015 - Jan 2016

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Insurance

From colonial days to now: How insurance sector started from scratch Part 1 In the early 1940s, the foreign insurance companies began to open branch offices in Tanganyika. Others appointed respectable resident agents.

By Omary Aziz

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historical account of the insurance industry in Tanzania falls under two broad categories. In the first place there, is that part of the account which is related to the introduction of modern insurance practice in the country.

This covers the period when Tanzania was under British colonialism.

The second category of historical development of insurance practice in Tanzania claims significance in the establishment of an indigenous insurance base. The narration of this development will cover the incorporation, growth and consolidation of the National Insurance Corporation of Tanzania Ltd (NIC).

Insurance in Tanzania is over 50 years old, with NIC having been established in 1963. But before that, during the early days of insurance in the country, the business was handled by private companies. These were only agencies or branches of insurance companies established in Europe. In most cases, these companies considered East Africa a business zone and preferred to operate from Kenya.

There are no reliable records to document the conduct of insurance in the German administration. Available records indicate that there were a number of multinational trading companies whose operations included insurance activity at agency level. For instance, the Deustche Ostafrika Gesellschaft, an old German chartered company, had a wide land concession, sisal plantations as well as a network of trading interests that included insurance.

That was also the case during the initial period of the British administration. Before insurance companies registered their operations here, it was the multinational trading companies such as Brooke Bond, Leibig, Mitchel Cotts, Smith Mackenzie, Dalgety, Tancot and Ralli Brothers

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which carried out insurance business as one of their many activities.

In the early 1940s, the foreign insurance companies began to open branch offices in Tanganyika. Others appointed respectable resident agents. These branches and agencies, however, concentrated their efforts on securing ready and easily accessible business for profit maximization. Their main operations were based in Nairobi, where the underwriting and claims’ settlement decisions were made.

The following companies were the first to register their operations in Dar es salaam, the capital city of Tanganyika, between 1945 and 1950: Union Life and General Insurance Co. (Indian) Queen’s Land Insurance Co. Ltd (Australian) Habib Insurance Co. Ltd (Indian) Warden Insurance Co. Ltd (British) The Royal Insurance Co. Ltd (British) The Liverpool, London and Globe Insurance Co. Ltd (British) The Central Insurance Co. Ltd (British) The Kenyan Insurance Co. Ltd (Anglo-Kenyan) The Alliance Insurance Co. Ltd (British) The Pioneer General Assurance Society (Kenyan) The Regal Insurance Co. Ltd (British) The Pan African Insurance Co Ltd (Kenyan) The Jupiter Insurance Co. Ltd (Indian) Many other insurance firms were registered to operate in Tanzania during the 1950s; at the time of independence in 1961, there were not less than 75 companies conducting insurance business.

In other words, modern insurance practices were introduced in Tanzania by British-incorporated insurance companies. These were colonial extensions of British economic interests. Their business was conducted through a traditional style of British administration and business techniques institutionalized to serve the colonial system.

The situation continued even after independence as more companies continued to establish their offices, until the incorporation of NIC in 1963. Even then, the new company continued to follow the British institutional model of operations, mutatis mutandis.

Insurance Times | Dec 2015 - Jan 2016

Why nobody is willing to let go of NHIF

By a Correspondent

Equity and accessibility are important features of the Fund that make it stand out from the crowd.

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he establishment of the National Health Insurance Fund (NHIF) in Tanzania came out of necessity in the light of economic constraints that existed during the mid-1980s.

The main purpose of establishing the scheme was to have a reliable and stable system of financing the health sector outside the general taxation system (which was by then overstretched) to ensure sustainability of services.

Arguably, Social Health Insurance (SHI) is a new development in Tanzania. The health sector reform agenda resulted into the birth of prepayment schemes, notably NHIF and CHF, in the late 1990s.

Thus, the concept of SHI is nearly a decade old and the benefits that come from it are now better understood than ever before.

In Tanzania, an institutional set up that represents SHI is the National Health Insurance Fund (NHIF), established by Parliamentary Act No.8 of 1999 in or-

der to facilitate access to health services among the local population. Despite reforms in health care financing, the majority of the population (around 80 per cent) has no form of health insurance.

In order to fill the coverage gap, the Fund is gearing up to increase its coverage through both CHF and NHIF windows. In a way, this limited coverage of SHI necessitates the government pursuing a dual financing approach to health care using tax finance and SHI. Nonetheless, the future of health care financing in Tanzania rests on the growth of social insurance, propelled by NHIF. At its inception in 2001, the Fund was meant to cover civil servants only, but now the scope of its mandate has extended to include both the public and private sectors. In the recent past, college students, nuns, the clergy and other religious ministries have been brought on board the NHIF safety net. Many organized groups (SACCOS, VICOBAs, and other

Contd Pg. 12 > >

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Insurance

> > Contd from Pg. 11 cooperative groups), and individual members are also subscribing to the Fund in large numbers.

Fortunately, the design of the Fund makes it possible for its beneficiaries to afford and access health care services at all levels of service in outlets throughout the country.

Affordability of NHIF’s contributions is not in question, with all manner of economically active people joining and enjoying the services. The Fund covers six individuals within a family -- one spouse and four children or legal dependants – at a contribution rate of 6 per cent of basic salary shared equally between employee and employer.

This means that an employee earning the minimum monthly statutory wage of Tsh180,000 ($85.7) will contribute Tsh10,800 ($5.1) per month, which translates into a contribution of Tsh1,800 (86 US cents) per head for each of the six beneficiaries mandated by law.

Pooling of incomes and risks, and the resultant cross-subsidization among a large pool of members, makes it possible for NHIF to finance health care more sustainably.

The steadily rising NHIF membership makes the Fund’s share in the National Health Account (NHA) significant, now accounting for a 20 per cent, up from 5 per cent in 2003.

Another notable feature of the Tanzanian SHI (NHIF and CHF) is being pro-poor, that is, addressing the health needs of the low income population segments, particularly in rural and sometimes hard-to12

reach areas. For example, the contribution of a mere Tsh5,000 ($2.4) to Tsh10,000 ($4.8) per annum can enable a household to access primary health care.

For example, in Igunga, this amount affords a household access to referral services at tertiary facilities. This is thanks to the wide network of public health facilities in Tanzania (owing to the efforts of MMAM). This network makes it easier for the majority of rural-based beneficiaries to access NHIF/CHF services within their proximity. Without a wide network of health facilities, particularly in rural areas, it would be near impossible to implement SHI in Tanzania.

Equity and accessibility are also important features of the Fund that make it stand out from the crowd.

NHIF’s contributions do not vary according to age or health risk of the population to be covered; the size and standard of the NHIF benefits package is the same for all beneficiaries regardless of their contribution amounts.

This is only possible because of the large pool of members, an advantage that NHIF enjoys. The coverage is expected to grow further in the future. In addition, NHIF has accredited over 6,000 facilities all over the country, and the NHIF card can be used to access health services all over the country at the facility of a contributor’s choice.

Besides, in the eventuality of retirement, the Fund continues to cover the retired member and his/ her spouse until death without further contributions. These unique

Insurance Times | Dec 2015 - Jan 2016

features make NHIF to be iconic in the delivery of health insurance services in the region and in Africa.

As regards socio-economic development, the Fund continues to play a remarkable role. For example, in recognition of the need to improve health service infrastructure, the Fund has made notable funding through its Equipment and Facility Improvement Loan Project, whereby the much needed medical equipment has been procured and health facilities have been refurAn employee earning bished in the minimum monthly both urban statutory wage of $85.7 will and rural areas. contribute $5.1 monthly In addition, construction of a Medical Centre of Excellence in Dodoma and a Teaching Hospital at UDOM is under way. These mega investments give leverage to government funding of health-related projects in the country.

The successful evolutionary path of establishing SHI in Tanzania has made NHIF an envy of many African countries that aspire to begin social health insurance schemes.

In view of some best practices, the Fund frequently hosts foreign delegates from the Sub-Saharan region and beyond who come to borrow a leaf from the NHIF experience in their endeavours to establish similar health insurance schemes in their own countries.

KPMG: Tanzania has room for all, old and new insurers alike By a Correspondent

Insurance penetration in Tanzania stands at a meagre 1 per cent

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global company that provides audit, tax and advisory services, the Kaiser Permanente Medical Group (KPMG) has said that Tanzania’s insurance sector holds a lot of potential for both existing and new players.

The assessment acts as a wake-up call for insurance companies and brokers to create strategies for reaching the untapped market segments through innovative products.

Recently, the audit firm brought together insurance brokers, leading underwriters, the Insurance Regulatory Authority and other key stakeholders from around East Africa at a KPMG-sponsored first annual brokers day.

Among the issues discussed was how to optimally utilize the available opportunities and support the growth of the sector.

Mohammed Jaffer, president of the Tanzania Insurance Brokers Association (TIBA), said there was still a huge untapped population as the existing players only served a small portion of the population.

Despite being East Africa’s most populous country, insurance penetration in Tanzania stands at a meagre 1 per cent, while about 13 per cent of the population

has access to formal insurance. This situation, according to Jaffer, presents a huge opportunity for the insurance sector.

The insurance sector in Tanzania is regulated by the Tanzania Insurance Regulatory Authority (TIRA), which was established to develop, promote and maintain an efficient, fair, safe and stable insurance industry in the country.

One of the challenges TIRA faces is to ensure coverage of rural areas, as well as to educate the general public about the importance of insuring their properties and lives. The media are used to promote education about insurance services.

KPMG East Africa Associate Director James Norman challenged insurers to expand to rural areas for the sector to have a greater impact on the economy.

“The insurance sector in Tanzania contributes only 1 per cent of the national GDP, as it is in Uganda. In South Africa and Kenya, the sector accounts for 14.1 per cent and 2.8 per cent, respectively,” said Norman.

But experts say that there is a need to have conditions that encourage the sector to flourish. Among the areas proposed for action is harmonization of regulations in East Africa to ensure smooth cross-border operations.

One blog, “Financial Service: Regulation Tomorrow,” says there are many opportunities in Africa given that the insurance market is largely untapped.

Areas that require attention include the mixture of civil and common law jurisdictions with different regulations, and there are ongoing efforts to harmonize some of these, for instance in Francophone coun-

tries. These are also commercial laws and common insurance regulations in the East African Community that are being examined.

Other areas are the law in dispute resolution, data protection, policy holder (and consumer) protection, exchange controls, local partner, foreign insurance and reinsurance restrictions and ownership and indigenization.

Within the EAC financial sector, the regional policies regarding the insurance sector are geared toward facilitating the attainment of a single market in insurance services. This will require the sector to move towards legal and regulatory harmonization, thus accelerating economic growth in the five partner states.

“To provide the foundation for the process of harmonization of insurance laws in the region, there is need for common Acts of legislation and regulation of insurance across the region,” reads the EAC policy.

The insurance sector in the region has benefitted from studies that have assessed the sector from the perspective of the EAC regional approach. This is in addition to compliance with the principles of insurance regulation and supervision of the International Association of Insurance Supervision.

Noman has called upon the youth to take insurance services seriously given that they are the active population and eager to invest for their future.

Jaffer, on his part, expressed hope that the move towards formulation of policies in line with harmonization will have a positive impact.

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Insurance

‘InsureAfrika aims to connect insurance companies directly to consumers’ Gagandeep Hayer is providing innovative options for insurance consumers through his firm. He spoke to Elizabeth Wanjugu of ITM ITM: Tell us about your idea of using technology to reach insurance customers.

Hayer: I am very passionate about technology and how it can add efficiency to our day-to-day lives and the decisions we make.

When I had my first experience buying car insurance last year, I noticed that there were shortcomings in the industry. I was never informed about my policy details, what it entails, and what I am covered for and what I am not.

Neither was I given any other option from a different insurance company by the intermediary I was working with at that time. As a consumer, we are surrounded by so many choices in our day-to-day lives, like picking what food to eat or what clothes to wear or which soap to buy. I felt the insurance industry in Kenya wasn’t quite providing the options to consumers, despite having a number of players.

There was no place where consumers could quickly compare the products and make informed decisions. This is an industry which is still run in the same old traditional way, where intermediaries control the buyers and insurance companies rely on brokers to help them increase their sales.

After seeing these problems in the industry and having worked on similar ideas in the US, I decided that this market was ripe for innovation in the insurance sector and now is a good time as there is a big push in the ICT sector in Kenya to use technology and the Internet to reach consumers.

Hence, InsureAfrika.com was born as a result of using my passion for technology and experience, so as to solve problems in the insurance industry and put more control in the hands of the consumer to make well informed decisions.

During my research, I came across an IRA report of the Insurance Industry 2013. The report clearly documented that there are some serious problems that the industry is facing at the moment: Insurance education and awareness, brokers’ limited reporting and disclosure, staffing challenges, no transparency in understanding product details, insurance jargon that is too difficult to understand, and limited use of technology and the Internet in the insurance sector.

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Insurance Times | Dec 2015 - Jan 2016

The solution that InsureAfrika.com provides is an online platform which aims to connect insurance companies directly to the consumers, while solving the above problems and providing solutions to both sides.

To the insurance company, we provide direct contact with the buyers, complete ownership of buyer information, 24-7 display of products online, a nationwide reach of the products, the ability to educate buyers, and a new means of marketing and distributing products.

To the buyer, we provide one platform to compare products and insurance premiums, complete transparency in understanding product details, and easy-to-understand content on the importance of buying insurance.

ITM: How do you make money?

Hayer: By closing deals and selling flat rate leads, we make commissions with insurance companies.

ITM: How do you intend to generate online traffic?

Hayer: InsureAfrika is focusing on cost effective strategies to market the website. Some of the marketing strategies we are using include Search Engine Optimization through Google, through which users searching for various insurance services online will be targeted; paid advertising online targeting high traffic media which Kenyans use and partnering with them; strategic partnerships with companies and websites in related industries; social media through websites like Facebook and Twitter to give updates and spread the word online; and using YouTube Videos in educating consumers on how comparing insurance services online can benefit them.

ITM: Do you foresee growth in the coming years and will your idea survive?

Hayer:With insurance penetration standing at 2.93 per cent, there is a big potential for growth in the industry.

Since April 2015 when we started marketing the website, the response has been very promising so far, from both insurance companies as well as users. We have introduced this idea to about 20 companies so far and we have received positive feedback on our platform, with some companies requesting us to add few more features and others asking to work with us exclusively on certain lines of insurance. Some have already signed up, while we are going through the paper work with others. I am quite optimistic that more companies will start using this platform as a new means to market and distribute their products. The users, too, are loving the idea of reading about the products and also getting an instant quote online.

“Having over 2,000 users sampling insurance quotes on the website means, in actual shillings, approximately Ksh96 million ($932,000) worth of premiums have been compared and requested on the website – the total car insurance quotes requested is about Ksh52 million ($504,000), health insurance about Ksh43 million ($417,000), and travel insurance Ksh1.3 million ($12,600). This is the potential business that InsureAfrika could generate for insurance companies.

This should definitely increase as more people hear about us as well as more companies sign up with us.

ITM: What is your opinion on insurance perception in Kenya?

Hayer: More and more Kenyans are now becoming aware of the benefits of having insurance and are willing to learn more or purchase an insurance policy. Early feedback that we have received indicates that people are moving beyond just buying car insurance or getting a health insurance from their employers. They are now interested in buying insurance for their families or their house or when they travel.

This transformation is happening as people get more educated about the benefits of being insured. This education is taking a bit long; however, with the help of all the stakeholders – insurance companies, brokers, agents and websites like InsureAfrika.com – it can happen at a much faster pace. The Internet offers great advantages, with a wider reach and 24/7 availability of information. I think, as a stakeholder in this industry, that we need to educate consumers and present them with the options they have when they are ready to purchase.

ITM: How does selling insurance quotes in Kenya compare with other countries?

Hayer: Comparing insurance quotes is not a foreign concept. We all compare prices of various products and services before making a purchase, that’s just human. Even for insurance, some consumers compare the quotes – mostly by talking to one or more companies or brokers. The process is quite time consuming and tedious. InsureAfrika.com basically does the hard work for the consumers by putting all the quotes on one platform, which is similar to some US-based websites. Hence, the concept is not new. The US has been doing this for a while, but Kenya is catching up soon since the adoption of the Internet and technology in this country is faster than many other countries.

InsureAfrika shines in Most Innovative Start-Up awards

By Elizabeth Wanjugu

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nsureAfrika was selected as one of the top 30 most innovative start-ups in Africa last month in the 2015 DEMO awards.

The firm emerged as one of the top five companies out of more than 600 applicants. It will now represent Africa in DEMO FALL at the Silicon Valley, US, next April.

The firm, which helps connect insurance firms with buyers online, is now also in the process of adding life insurance products to its offering, starting with a funeral package.

The firm says it has received encouraging feedback on its website from about 2,000 users within a period of four months.

Of these users, 1,000 have requested car insurance quotes, 915 health insurance quotes and 121 travel insurance quotes.

“A good percentage of the users have already purchased insurance with us, showing that we are gaining the trust of insurance seekers. In fact, some who have used our website have been so pleased with the service that they have referred our service to others,” said the firm’s founder Gagandeep Hayer.

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Insurance

With $10m, EA firms can now tap into Kinshasa’s vast insurance market Lack of a competitive environment had exposed Congolese citizens to exploitation through expensive covers offered by the few insurance firms that have been operating in the country.

By Anne Kiruku

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he Democratic Republic of Congo has finally began considering foreign firms for licensing after years of monopoly, opening a new market front for East African firms seeking to expand further into the Great Lakes region.

Under new laws introduced in March, foreign companies will now be allowed to operate in the country so long as they can raise a minimum capital base of $10 million.

Lack of a competitive environment had exposed Congolese citizens to exploitation through expensive covers offered by the few insurance firms that have been operating in the country.

New insurance laws now replace the previous legislation that goes back to the immediate post-independence period of the 1960s. Those ancient laws aimed at curtailing capital flight from the DRC to the rich developed countries.

But despite the monopoly enjoyed by the state-owned insurer SONAS ( Socie’te’ Nationale d’Assurances), the insurance market in the country performed poorly as it encountered enormous challenges. These included non-payment of wages, misappropriation of funds, and a permanent state of tension and conflict between SONAS and brokers.

With that monopoly now effectively over, SONAS has moved quickly to partner with Kenya’s Jubilee insurance to tap into the rising demand in the country for insurance cover. The firm hopes to gain from the partnership through offering medical and life cover products. SONAS is owned and controlled by the government of Congo.

The newly established DR Congo Insurance

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Regulatory Authority and the Insurance Supervision that comes into force in 2016 are mandated with the task of regulating the sector.

The new insurance law in DRC has over 500 articles in seven books and covers insurance business, insurance and reinsurance undertaking, and special insurance organisations, among other areas. It is applicable to both insurance and reinsurance operations carried out in DR Congo. The new law however excludes insurance operations managed by social security.

Before starting their operations, insurance enterprises will be subjected to a measure of state control and must apply for and obtain approval from the Regulatory and Monitoring Authority for an insurance “ARCA.” Each enterprise seeking to operate in the insurance sector shall be created either in the form of a non-single-member public company or as a mutual association. Additionally, the enterprise must establish its head office in DRC. For enterprises wishing to set up in the form of mutual insurance, the Insurance Code defines these as non-profit groups whose purpose is to cover risks brought about by their members.

“We have already started our operations in DRC in partnership with SONAS and the business prospects are favourable,” said Jubilee Insurance CEO Patrick Tumbo. “All our expansion will be funded through internally generated cash and external borrowing.”

Jubilee is eyeing acquisitions and mergers both in Kenya and the region to expand its presence.

Insurance Times | Dec 2015 - Jan 2016

Sad story as Kenya’s former national insurer fails to wake up I

Kenya’s former president Daniel Toroitich arap Moi

By Elizabeth Wanjugu

T

he fate of the public-quoted Kenya National Assurance Company (KNAC) remains unknown after its demise in 2001, when it was placed under official receivership.

Efforts to revive the company proved futile as KNAC was deep in debt and the only way out of the huge mess was to sell its assets. The firm had collapsed due to mismanagement and asset theft cases by its employees. Its collapse Collapse was partly attributed to was also partly attributed political interference in the running to political interference in of the company during the era of the running of the company former president Daniel arap Moi. during the era of former president Daniel arap Moi.

n March last year, the company was scheduled to transfer Ksh400 million ($3.9 million) of policy holders’ money to the Unclaimed Financial Assets Authority (UFAA) in a move that would eventually shut down the firm.

Policy holders of the then giant insurance firm were asked to claim their payments in a period of four months before the insurer transferred all their funds to the UFAA. Officials of KNAC had stated that claim payments stood at Ksh3.9 billion ($37.9 million) and unclaimed funds held by the insurer were approximately Ksh400 million.

KNAC was running well as a big business in the insurance sector, since it had a national reach, until it was declared insolvent because of its immediate liabilities.

The liquidation process of the firm’s assets is an ongoing court case. The former insurer has been disposing of property since its closure, under its life fund, to pay off policyholders’ claims.

Following the company’s demise, government-owned insurance companies in Kenya have virtually no presence except for the National Health Insurance Fund, a social insurance scheme run by the Ministry of Health. Measures to revive government-owned companies in other sectors are usually rendered futile mostly due to corruption as well as the country’s debt woes caused by uncontrolled government spending.

However, the private sector continues to absorb new players in the insurance industry, which has seen new innovations and products, as well as mergers and acquisitions. Insurance penetration stands at about 2.9 per cent, opening new possibilities for banks and other industries that are now including an insurance component in their businesses, such as bancassurance.

Insurance Times | Dec 2015 - Jan 2016

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Insurance

Insurance right from the showroom: Jubilee teams up with CMC Motors Jubilee Insurance has partnered with the CMC Motors Group to offer a one-stop insurance package for the auto dealer’s customers.

By Anne Kiruku

T

he package will cover its entire fleet of products. Motorists purchasing vehicles from the dealer will enjoy the subsidized package that includes valuation, repairs and servicing of the vehicles.

The partnership between Jubilee and CMC Motors signals formalisation of an agreement the two firms have had over many years. Jubilee will now provide comprehensive motor insurance cover for vehicle models marketed by CMC in Kenya for a period of nine months, starting in October 2015.

CMC Motors is owned by CMC Holdings Ltd and was acquired by Dubai-based Al-Futtaim Group of Companies in 2014. During the signing of the agreement, Al-Futtaim Chief Executive Mark Kass said that CMC Motors had posted a

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Insurance Times | Dec 2015 - Jan 2016

growth of 25 per cent in the past nine months, proving that it had recovered from years of losses. Kass said that they were optimistic that the deal would provide a cheaper alternative to their clients.

“One-stop shop for motorists is a big gain for our customers, who will now no longer shop around for insurance deals from brokers. That cost has been absorbed by CMC, as well as valuation costs, since we will maintain records of all vehicles purchased from it,” said Kass.

The Al-Futtaim boss also said that the company had decentralised all operations since devolution from the national government to counties took effect in Kenya. He said that the company was now experiencing higher sales compared to the time 80 per cent of operations were done from the Nairobi office.

Jubilee Insurance Chief Executive Officer Patrick Tumbo said that their sales representatives will be located in all CMC branches and a 24-hour helpline had been put in place to handle customer complaints.

Al-Futtaim regional director Steve Faulkner said that more products would be rolled out in regions and countries where the two companies operate in a bid to ease clients’ headache of seeking motor vehicle and insurance services.

“Our business is to ensure that all vehicles on the road are in perfect form, while Jubilee ensures they are adequately covered right from the showroom and during daily use on the road,” said Faulkner during the signing of the agreement.

LAPF: Fostering insurance in a highly competitive area

By Staff Writer

R

etirement is a goal everyone wants to achieve after decades of hard work. A reward in the form of pension to insured people is a sign of the highest level of civilization. The Local Authorities Pensions Fund (LAPF) provides the means for employees across all sectors of the economy and self-employed persons to accumulate savings over their working life so as to finance their consumption needs in the event of contingencies, including retirement from a regular job.

The Fund was first established in 1944 to cover the employees of the then Native Authorities. Following the establishment of the Local Authorities Provident Fund, Act No. 6 of 2000, the Fund was transformed into an autonomous corporate body under a Board of Trustees.

The Fund continued operating as a Defined Contributions (DC) Scheme until 2006, when it was transformed into a Defined Benefits (DB) Scheme and worked as a provident institution under the ministry responsible for regional administration and local government.

Later, the Fund was converted into a pension scheme under Act No. 9 of 2006, to provide pension benefits to its members and safeguard their contributions by investing in safe and high-yield ventures.

LAPF Pensions Fund operates both Defined Contribution (DC) and Defined Benefits (DB) schemes. The difference between the two lies in the following facts: Under the DC Scheme, returns to members of pension plans backed by such funds may be purely dependent on the market, while under the DB Scheme returns to members are overlaid by a guarantee of the rate of return by the sponsor.

The latter has insurance that features a replacement ratio (pension as a proportion of income at retirement).

Most LAPF members are employees who fall under the DB scheme. This scheme offers the most complete type of income insurance package to its members, which is divided into two categories – long-term and short-term benefits.

Eliud Sanga, LAPF Director General

Long-term benefits include retirement pension, survivors’ pension and invalidity pension, while short-term benefits include maternity benefits, funeral grants and withdrawal benefits.For a decade, the social security sector in Tanzania has undergone great transformation. Implementation of the National Social Security Policy in 2003, and enactment of the Social Security Regulatory Authority Act No. 8 of 2008, changed completely the way the social security sector was operating in Tanzania. Providing the freedom for new employees to choose their Pension Fund during their first employment, the Social Security Regulatory Authority (SSRA Act Section 30), is among the milestones that have caused a great transformation of the sector. The sector has been operating under competition since 2010, whereby LAPF and another four Pensions Funds are aggressively competing for new entrants in the labour market.

In an effort to improve services to members and position itself better in the competitive market, LAPF has come up with various innovative services geared to improving members’ welfare. These services are the pre-retirement house loan, loans through employees’ savings and credit cooperative societies (SACCOS), education loan to members, retirees loans, and life start-up loan to new members.

These services have made LAPF the most popular Pension Fund in the market as members enjoy more financing avenues to improve their standard of living.

Financing of the scheme is done through contributions from both employees and employers on a monthly basis; this applies to members under the DB Scheme, who are statutory contributors.

A majority of the members registered in the DC Scheme on a voluntary basis are self-employed, and they raise and pay their pension savings on their own through the mechanism set out by the Fund.

In the DB plan, the employee’s pension benefit entitlement is determined by a formula that takes into account the months

of service and last salary of the employee.

The terminal benefits under the DB plan are categorized into two groups, namely a lump-sum amount just after retirement and monthly pension payable throughout the retiree’s lifetime.

This applies equally to those eligible for invalidity benefits. In case of death of a member who qualified for pension, dependants will receive an equal lump-sum and monthly pension payable to the deceased’s spouse and children. Spouses will receive a monthly pension for three years after the death of a member, while children will receive pension until they reach 21 years, and 25 years in the case of disabled children.

Currently, LAPF Pensions Fund has more than 7,000 pensioners enjoying their retirement benefits from the Fund. In Financial Year 2014/15, the Fund paid out Tsh88.6 billion as members’ benefits, including pension to retirees.

Despite the fundamental role of the social security sector to provide income replacement insurance to members, the Fund also plays a key role as an institutional investor to fuel economic development. LAPF has been actively participating in investing in the capital markets and other financial instruments. These investments enhance local capital generation in the economy. Returns gained from such investments provide an assurance of meeting the long-term and short-term financial obligations of the Fund in the form of benefits to members.

As at June 2015, the Fund’s asset base stood at Tsh978 billion ($466 million), whereas the Fund’s investments had reached Tsh926 billion ($441 million). The Fund’s membership base was 151,300 members.

LAPF encourages membership from all people in the country, the region and beyond who enter the labour market in Tanzania.

Insurance Times | Dec 2015 - Jan 2016

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Bancassurance, a brand new service from ACB Customers can now access a wide range of tailor-made insurance products that complement the bank’s other innovative solutions

A

kiba Commercial Bank Plc (ACB) is now a fully-fledged insurance agent with a mandate to offer both life and non-life covers.

The bank has signed an exclusive agreement with Sanlam for life assurance, and with UAP for non-life assurance covers – which include motor vehicle, all business and industrial covers, domestic packages, properties and buildings.

With this development, ACB customers can now access these covers at relatively low premiums. All this was made possible by the bank’s acquisition of a business licence from the industry regulator, the Tanzania Insurance Regulatory Authority (TIRA) last October.

The bancassurance service comes to complement the bank’s other products and services. In fact, bancassurance is only the latest of ACB’s new lines of business that offer extra value to its existing and potential customers.

The bank has distinguished itself as a one-stop centre for financial solutions for its customers. Its new product lines include trade finance, which comes with a full package of guarantees such as payment and advance payment, bid and performance bonds, and a variety of letters of credit.

As a financially inclusive bank, ACB continues to reach out to new customers throughout Tanzania using various strategies, especially through the use of modern technology platforms and agency banking services.

The rolling out of new products shows that ACB is a customer-centric bank that continues to value innovativeness, bringing fresh dynamism into the business world. This has resulted in enormous value creation through product offerings, portfolio diversification and new ventures. Cus-

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Insurance Times | Dec 2015 - Jan 2016

tomer convenience is paramount, too, and ACB Mobile customers can access digitized banking services with great ease.

The world we live in is full of uncertainties and misfortunes that may strike any person or business without warning. ACB has taken the initiative of recognizing and understanding the various risks that confront small-scale entrepreneurs, their assets and their lives; it has used this knowledge to develop an array of solutions designed to offer them a guarantee of security over their lives, assets and businesses – with the benefit of peace of mind that this entails.

ACB commenced banking operations in August 1997 as a fully-fledged commercial bank, with the primary focus of serving previously unbanked and commercially ill-equipped people around Tanzania. Over the years, the bank has grown and developed in many ways, principally through expansion of its branch network and steady growth of its balance sheet, shareholders’ wealth, and product offerings.

The bank has had a significant impact, transforming the social and economic fortunes of many Tanzanians – especially those at the bottom of the economic hierarchy. It continues to do so by offering innovative and customized financial solutions that suit the business as well as social needs of people everywhere; these solutions include loans for home construction, renovations and repairs, and home purchases.

In all its activities, ACB has been leveraging the use of technology to improve its products and services, making them more appealing, accessible and convenient for its customers.

RELAX, WE HAVE YOU COVERED We at Akiba Commercial Bank Plc are now oering tailored Insurance Services to our customers and the general public.

Call us and get covered for your speciďŹ c needs.

Insurance Times | Dec 2015 - Jan 2016

21

Insurance

Huge potential: 64pc of Tanzanians have never heard of insurance, says study A new study says that most Tanzanians are not aware of the insurance sector or the potential it holds, offering a huge potential market for service providers in the industry.

The Commissioner for Insurance, Israel Kamuzora

By Staff Writer

A

ccording to the FinScope Tanzania 2013 survey, 64.2 per cent of the population has never heard about insurance, while 5.6 per cent of the population does not know how or where to gain access to insurance.

The study found that 4.8 per cent of the population did not know how insurance works.

But the findings also call for market and regulatory action to ensure fast growth of the sector.

It will also take concerted efforts to enable all Tanzanians to understand the concept and importance of insurance in their daily lives.

The sector has continued to play a strategic role within the national economy by providing the national underwriting capacity and contributing towards mobilization of financial resources for sustainable economic development.

TIRA’s 2013 Annual Insurance Market Performance Report shows that the industry has grown at an annual average rate of 19.9 per cent in Gross Premium Written (GPW), from Tsh231 billion ($110 million) in 2009 to Tsh476 billion ($227 million) in 2013.

The national GDP and the finance intermediation sector GDP, in nominal terms, have grown at annual average rates of 16.3 per cent and 18.6 per cent, respective-

22

ly, between 2009 and 2013.

The insurance industry has therefore demonstrated a higher average growth rate than the national and the finance intermediation sector GDP over the five-year period (2009-2013).

Studies further show that the economy has a low insurance and micro-insurance uptake compared to developed countries.

This calls for effective measures to further improve the insurance sector in Tanzania and to ensure it is affordable and adapted to the needs of Tanzanians.

The Financial Sector Deepening Trust (FSDT) conducted the Insurance Study in Tanzania 2012, which established that 12.7 million adults are not insured. A further 3.7 million adults are insured but still have unattended needs.

It was also found that 7.4 million people, which is about 30 per cent of the adult population, cannot afford insurance since they fall below the poverty line.

Some of the issues to be addressed include creating new business for insurance, building skills and capacity to trigger demand for insurance services, and product innovation.

Others are educating customers through the sales process, streamlining the regulatory

Insurance Times | Dec 2015 - Jan 2016

framework of community-based health insurance schemes, making the insurance distribution system as flexible as possible, and developing a risk-based framework that defines insurance as low risk so as to apply a simplified system of customer due diligence.

Some efforts have been taken to address these challenges, including forming partnerships with the aim of furthering the development of insurance.

FSDT, in partnership with the Tanzania Insurance Regulatory Authority (TIRA), the Centre of Financial Regulation and Inclusion (CENFRI), FinMark Trust (FMT) and Access to Insurance Initiative (A2II) will take part in diagnostic studies with the aim of hastening the development of the sector.

The studies are done to analyze the insurance sector in Tanzania, to understand its key drivers and constraints, and thereafter to design ways to fasten its growth.

Different stakeholders are involved in the studies, representing regulators, government ministries and departments, insurance companies, agents, brokers, consultants, industry associations, customers, distributors and even potential investors.

New insurance covers set to promote farming in Uganda

By Addah Zamm

I

nvestors in Uganda have been asked to focus on value addition in agriculture as well as the insurance sector, with Jubilee Insurance now initiating products to support farmers.

Despite agriculture being the backbone of Uganda’s economy, insurance companies have been reluctant to come up with suitable products for farmers, who employ over 70 per cent of Uganda’s labour force either directly or indirectly.

Jubilee agriculture products Jubilee Insurance has taken a step to introduce new insurance products in the Ugandan market that will change the perception of both insurance and farming.

Jubilee is a subsidiary of Jubilee Holdings Ltd. The firm transacts all classes of shortterm (general and medical) and long-term (life and pensions) insurance business through its subsidiaries. With 75 years of experience, a strong balance sheet and a proven track of record of financial stability, Jubilee has spread its sphere of influence throughout the region to become the largest composite insurer in Kenya, Uganda and Tanzania, respectively, and the largest in East Africa.

Today the company has ventured into one of the most neglected but profitable sectors in the country, agriculture. Jubilee has introduced a cover for multiple perils – it covers physical loss or damage

to growing crops caused by drought, uncontrolled pests and diseases, damage by hailstorms, flooding, wind storms and fire, among others.

According to Juliet Nabulya, who handles the agriculture section at the firm, the cover can be extended to include harvested yield being stored at the farm or any other place of temporary storage, and to apply when the crop is in transit to any recognized destination within the country.

She said it’s very important for a farmer to be protected against such perils because it guarantees a return on a producer’s investment on the insured crops should any unforeseen events occur.

Nabulya said that the cover also improves sustainability of crop production by enhancing access to credit for inputs.

She added that crop insurance, in particular, helps restore loss of income and reduces the need for liquid cash and emergency borrowing.

The insurance cover pays for the yield shortfall below guaranteed levels resulting from physical loss or damage to growing crops caused directly by the listed perils.

Farmers must have had actual production for five years to know cost of production per acre, they must know the expected selling price per unit of the produce, and must have completed a proposal form.

Wheat, maize, barley oats, millet, sorghum and rice are covered in the monocotyledon crops, while the dicotyledonous crops cover peas, beans, sunflower and canola, among others. Jubilee has also introduced greenhouse cover, which takes care of the plastic cladding and structures.

Livestock is covered, too, with indemnity

in respect to the insured’s livestock during the period of insurance, due to death as a result of accidents (lightning, internal and external injuries, wind storms, snake bites, flooding, etc.) as well as natural illness.

Misconceptions Most peasants have a low educational background. They are however responsible for producing 80 per cent of the country’s food requirements. Uganda’s population is growing rapidly, leading to an increasing demand for agricultural products.

Prevention saves money and heartaches. A little bit of savings could make a big difference to farmer’s safety and profitability. Agriculture has changed: There are new technologies, new practices, bigger equipment, and better ways to grow safe and nutritious food for an expanding world.

Today, people are becoming more interested in knowing where their food comes from and supporting farmers.

However, a section of the population has misunderstandings about the benefits of risk management that insurance brings to the table. Insurance protects one’s existing assets in that if one loses their assets, insurance helps one to get them back.

The insurance sector is regulated by the Insurance Regulatory Authority. So, there is no way a farmer can buy insurance and not get compensated in the event of a disaster that has been covered.

Most infrastructural developments that are taking place in Africa are being locally insured, and ZEP-Re is set to benefit a lot from these developments.

Insurance Times | Dec 2015 - Jan 2016

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Insurance

NIC: The waking insurance giant in Tanzania

By Omary Aziz

The liberalization of the insurance sector being a relatively recent phenomenon, the history of insurance in Tanzania is intricately intertwined with the nationalization of all major sectors of the economy soon after independence.

I

mmediately after gaining political independence, the nationalist government embarked upon a programme to decolonize and rehabilitate the economy. It had become evident that foreign insurance companies were engaged in transactions which were not quite responsive to the needs of the national economy, and the country’s new leadership sought to rectify this problem.

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In actual fact, however, commercial insurance practice in Tanzania had started much earlier in the early 1920s. During those years, insurance operations in the country were largely maintained as branches or agencies of foreign-based insurance companies.

At the end of the Second World War, some 30 insurance agencies were already

operating in the country; by 1957, the number had increased to 130. However, by 1966 the number of agencies had dropped to 104 due to closure of some offices following capital flight that took place during the early years of independence. The country achieved its independence in 1961 from British colonial rule.

It is against this background that the National Insurance Corporation (NIC) was established on 23 October 1963, with the task of carrying out the business of insurance in all forms and branches and to re-insure all or any of the risks undertaken by the company. Back then, the government owned 51 per cent of the shares of NIC, with the remaining 49 per cent

dustries and agricultural ventures.

In canvasing business, their methods were equally selective and discriminatory. The insurance services thus remained the exclusive privilege of the affluent, the businessman and the professional man.

Moreover, African lives were discriminated by underwriters for as they put it, “Natives were uninsurable and with substandard lives.” In the circumstances, only a few educated Africans and those belonging to the emerging elite class were insured – and that too at a loaded premium.

Since the initial days, insurance companies in the country conducted their operations through branches and agencies.

Their mode of business starved indige-

Life insurance policies during the nationalization era 30, 000 20, 000 10, 000 0 Year:

1965

1970

1975

shared among different private companies then operating in Tanganyika. These companies included Munich Reinsurance Company of Munich, West Germany, Swiss Reinsurance Company of Zurich, Switzerland, and Colin Hood Insurance (Tanganyika) Ltd, a Dar es Salaam-based firm of insurance and reinsurance brokers.

The government established the corporation mainly because large sums of the funds mobilized locally were remitted and invested abroad, with particularly no foreign exchange constraints. Insurance companies also negotiated excessive reinsurance treaties as a manoeuvre to manipulate their way into sending funds out of the country.

Secondly, when some insurance companies chose to invest locally, their investment priorities were geared towards profit maximization; they ignored national development projects except where there was absolute safety. Local investments were selectively channelled to urban-oriented projects, particularly in high class real estates. These private insurers were averse to high risk investment in new in-

1980

1985

nous people of information about the insurance sector.

With all these disadvantages facing the industry, the Tanganyika government took an initiative to establish the National Insurance Corporation. Paul Bomani, the then Minister for Finance, entered into an agreement with some insurance and re-insurance companies, giving birth to the National Insurance Corporation of Tanzania.

The company was incorporated on the 16 October 1963 as the National Insurance Corporation of Tanganyika Ltd. The name was changed to The National Insurance Corporation of Tanzania Ltd on 24 February 1964. The initial share capital was Tsh5,000,000, with a paid-up capital of Tsh1,450,000.

In 1967, the insurance industry under-

went a significant change following the government’s nationalization of insurance business as part of the Arusha Declaration.

The Declaration placed all major productive sectors of the country’s economy under state control. The Insurance Act No.4 of 1967 effectively made it illegal for any insurance company, other than the stateowned NIC, to transact insurance business in Tanzania.

The nationalization of the insurance industry was designed to control the large surpluses that were being transferred for investment outside the country. The Revolutionary Government of Zanzibar took a similar step in 1969.

There, a decree known as the Insurance Corporation Order No.11 of 1969 was made, restricting all insurance business to the Zanzibar Insurance Corporation (ZIC), the state insurance company.

Since then, these two companies operated as the sole insurance companies in the United Republic until l996, when the industry was once again opened to private participation following adoption of trade liberalization by the government.

In 1996, the Tanzania Parliament passed the Insurance Act No.18 of 1996.

The Act, among other things, liberalized the insurance business that had hitherto been a monopoly of the state-owned insurance companies, permitting private participation in the sector. Liberalization of the insurance sector sought to achieve the following objectives: Transforming the insurance industry into a sound and competitive agent for national savings mobilization and development investment channelling; Promoting the insurance sector as an effective catalyst for enhanced economic growth; Strengthening and promoting industry health and orderly growth through establishment of operating performance standards and prescriptions; Exempting the industry from undue interferences; and developing efficient, cost effective, comprehensive and customer-driven insurance services.

Contd Pg. 28 > >

Insurance Times | Dec 2015 - Jan 2016

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Insurance

Wide range of policies define NIC products Life Insurance

Education Super education provider Super education provider policy is a plan specially designed for providing parents with financial support for their children’s education.

Kinder education provider On maturity of the policy, the sum assured and accrued bonuses are paid by instalments over a 7-year period to provide fees for primary education. In case of death of the parent/guardian during the policy period, premiums are waived and benefits paid on the stipulated date of maturity.

Junior education provider On maturity of the policy, the sum assured and accrued bonus are paid by annual instalments over a 6-year period to provide fees for secondary education.

Term life insurance This plan of assurance provides that the sum assured shall be made only if the life assured dies within a defined period; if the assured survives the period, the assurance comes to an end and there is no payment.

Death and saving Endowments life insurance This is the most popular form of life assurance since it does not only provides protection for the family of the life assured in the event of his early death, but also assures a lump sum at any desired age.

Super life provider The plan can assist the proposer to arrange for his/her financial support to dependants to continue after his/her death. On maturity, the sum assured is paid at 200 per cent.

of death at any time within the selected term, the full sum assured is payable without any deduction or adjustment for the amount that may have been paid earlier by way of survival benefit.

20-year anticipated life insurance This plan of assurance provides for lump sum benefits at periodical intervals. In the event of death at any time within the selected term, the full sum assured is payable without any deduction or adjustment for the amount that may have been paid earlier by way of survival benefit.

25-years anticipated life insurance This plan of assurance provides for lump sum benefits at periodical intervals. In the event of death at any time within the selected term, the full sum assured is payable without any deduction or adjustment for the amount that may have been paid earlier by way of survival benefit.

Loan/credit upon death

Pure endowment This plan of assurance provides that the sum assured shall be made only if the life assured survives up to the end of the period.

If the assured dies, the assurance comes to an end, and there is no Credit life insurance payment.

The policy provides a cover to the borrower whereby the corpora15-year anticipated life insurance tion promises to pay the creditors This plan of assurance pro- the balance of the loan granted vides for lump sum benefits at upon the happening of the event periodical intervals. In the event (death of the debtor)

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Insurance Times | Dec 2015 - Jan 2016

Senior education provider On maturity, the plan pays the sum assured and accrued bonuses by annual instalments over a 3-year period to provide fees for university education.

Combine super education provider This is basically a combination of Junior and Senior; the sum assured and accrued bonus are paid by annual instalment over a 9-year period to provide fees for secondary and university education.

Cover costs for specified event

Medical insurance

The policy will provide for medical treatment as a result of illness or accident to a minimum limit ranging from Tzs.1 million to 5 million.

Pension

Group endowments Under this plan, the rate of pension fixed is converted into an actuarial equivalent lump sum required at the retirement age, and that amount is taken as the sum assured under an endowment assurance. With an increase in the salary, additional contributions will be applied to purchase further sum assured. In the event of death of an employee before retirement, the sum assured in force on the policy anniversary preceding death will be payable.

Annuities The pension benefits are secured under the following plans:Deferred annuity with return of premiums in the event of death during deferment period.

Under this plan, contributions are utilized to purchase pension starting from the retirement age, which is fixed by the employer. If

Fire insurance the employee dies before reaching the retirement age, premiums paid in his respect are returned to the Trustees of the Scheme. The Trustee may use this amount to pay to the widow or to any other dependant of the deceased employee. It will be appreciated that the death benefit under this scheme will necessarily be small in early years of employment as the amount paid by way of premiums will be small.

Deferred Annuity with return of premiums with interest in the event of death during deferment period.

Under this plan, the scheme of benefits is the same as under plan (i) above, with the exception that in the event of death of the employee before retirement, premiums paid in respect of that employee will be returned with a simple interest at 3 per cent per annum.

Deferred Annuity without return of premium in the event of death during the deferment period.

This plan again is similar to plan (i) with the difference that in the event of death of the employee before the retirement age, premiums paid will not be refundable. It will be appreciated that this plan does not provide for any death benefits.

Where an employer wishes to provide for some sort of death benefit to his employees, this plan may be taken in conjunction with group life.

Pensave This is a deposit administration plan for old age saving.

Gratuity This is the benefit (motivation) provided by an employer to employees when they successfully complete their contracts.

This is a contract whereby the insurer, in return for a premium, undertakes to indemnify the insured against financial loss which he may sustain by reason of certain defined property insured being lost, destroyed or damaged by fire, or other stated perils within a stated period, the liability of the insurer being limited to a specified amount called the sum insured.

Motor

Agriculture and forestry vehicles This class includes all tractors, Motor insurance is classified as engines or self-propelled implements follows; used for agricultural and forestry work only.

Private cars: This class covers private vehicle – saloons, station wagons double Special type This class includes all vehicles cabins and half-tonne pickups which are neither used to carry goods nor not falling under any category mentioned, such as ambulances, fire hired. engines, mobile canteens, refuse collectors, hearses, etc.

Commercial: Goods-carrying vehicles This class includes all trucks, lorries, trailers/ semi-trailers, tankers, pickups and tractors/horses which are used or designed to carry goods whether belonging to the insured or Motor trade Motor trade policy is designed not. for motor vehicle dealers, repairers, service stations and the like. The risk Hire cars This includes all saloon cars, sta- associated with these motor traders tion wagons and vans, etc., owned by can be either the loss or damage of individuals or tour operating compa- the motor vehicles or third party liabilities occurring in or on the premises, nies for hire. or when the vehicle is plying on the road.

Passenger carrying vehicles This covers all buses, mini or omni buses owned by individuals or tour operating companies for hire or private use.

Motor cycle

This class includes all motor-propelled cycles, including mopeds, tricycles and those permanently attached with a sidecar.

Sold!

Insurance Times | Dec 2015 - Jan 2016

27

Insurance > > From Pg. 25

Challenges and constraints The Arusha Declaration of 1964 brought about measures in the economy necessary towards achieving the political objectives. Immediate steps were taken to nationalize the “commanding heights of the economy.” These included banks, insurance firms, import and export houses, millers and food processing factories.

The Insurance Act 1967 had two basic implications: First was the nationalization of the 49 per cent shares of NIC held by private insurers and re-insurers, and secondly a prohibition against any other company carrying out life insurance business apart from NIC, beginning February 1967, and general insurance from 1 January 1968. This Act laid the foundation stone for the consolidation of NIC. A sound insurance industry would lead to more business in the life industry; this not only defines the level of development of the insurance industry, but also the standard of living of the people in the respective industry. The life insurance business during the nationalization era was impressive, rising from 947 policies in 1965 to 27,096 policies in 1982. This was not the highest, however, as the number of policies had peaked at 31,656 in 1980.

Since liberalization of the insurance sector, there has been limited development of the insurance sector in Tanzania.

This has hindered the sector’s contribution to the national economy, which has remained below 1 per cent.

The sector faces a number of challenges and constraints which impede its development, including a low uptake of insurance by a majority of the population, especially in the predominantly agrarian rural areas; a low savings culture due to traditional family safety nets; a low level of public awareness on insurance products and services; low financial literacy by the public; lack of a legal and regulatory framework for emerging insurance products in high demand such as Islamic insurance (Takaful) and agriculture Insurance; low contribution of life assurance to the overall insurance industry business volume; a shortage of insurance professionals; and a low underwriting capacity.

The national insurance policy, therefore, was formulated to address the existing challenges and constraints, and to provide guidance for an orderly development of the insurance sector in Tanzania.

To continue in the next issue.

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Sam Kamanga: Bringing excellence to the helm of NIC

S

am Kamanga started off as an engineer, but with time changed professions, rising to his current position of acting managing director of the Tanzania National Insurance Corporation (NIC).

From his humble beginnings in the Magomeni neighborhood of Dar es Salaam, Kamanga started his early education at Nanak (Gerezani) and Magomeni Primary Schools. He then proceeded to Tambaza Secondary school in Dar es Salaam, after which he got an opportunity to study in Nairobi, Kenya.

After excelling during his college education in Kenya, he returned home and worked with the Tanzania Railways Corporation and the then National Estates Designing Corporation (NEDCO). He later secured a German Academic Exchange Service (DAAD) scholarship to study in Germany. Upon completing his Master of Science degree in Engineering, he once again returned to Tanzania.

This time round, he worked as an engineer and entrepreneur. He then obtained an opportunity to further his education abroad yet again, this time in the United States. It was while there that he decided to make a career change into information technology (IT) and management. Kamanga is qualified in several different areas of information technology, from cyber-security and computer forensics to business continuity.

Kamanga worked with Target Corporation, US Bank, and Hennepin County (Metropolitan Health Plan). His career in insurance was launched while working with Metropolitan Health Plan, a Healthcare Insurance company based in Hennepin County, Minneapolis, Minnesota , in the US. After living in the US for 10 years, Kamanga and his family returned to their roots in Tanzania in 2008.

Back home, he worked as a consultant before joining NIC, where he served as the chief information officer and head of all ICT operations; in this task, he was responsible for ensuring the smooth running of IT operations within the institution’s head office and large branch network. He served the IDC – IT Advisory Council (East Africa) and was awarded the IDC CIO Summit 2013 Award in Cape Town, South Africa, for his contribution to the development of ICT in the region. IDC recognized his role as a founding member of the IDC IT Advisory council with a second award in 2014.

Kamanga has an avant-garde approach to insurance, making sure that NIC keeps up with the times and the ever-changing technology by encouraging the implementation of new thinking and methodologies in insurance. Since taking over his current position, he has made a positive transformation of the firm towards adopting an ICT-driven insurance approach.

Kamanga is the outgoing chairperson for the COMESA Council of Bureaux on third party motor vehicle insurance yellow card scheme and member of the Technical Committee on Regional Customs Transit Guarantee (RCTG). He has represented Tanzania at the COMESA third party motor vehicle scheme (yellow card) and various insurance forums.

Insurance Times | Dec 2015 - Jan 2016

ITM: Is NIC prepared to meet the growing expectations of the insurance industry?

Answer: NIC has the capacity to insure all assets and provide adequate protection against all risks. Likewise, NIC is capable of handling any claim which may happen thereafter.

claims settlements. This is a remarkable milestone.

ITM: Do you have the capacity not only to meet the high demands of customers but also to ensure your services and products cover the whole country?

Answer: Yes, we do. NIC has the capacity because it has a presence (regional offices) in all regions across the country. Also, we are looking forward to introducing different ways of reaching a wider customer base while taking advantage of the country’s technological advancement.

ITM: What should Tanzanians expect from you in terms of achievements?

Answer: Tanzanians should expect to see more improvements in service delivery.

ITM: What makes NIC an attractive investment?

Answer: NIC has a big network all over the country, which gives it great potential. We have a presence everywhere, in all regions including Zanzibar. We also have well trained and experienced people. Having been a monopoly for so many years, the company made many investments in buildings, which assures our clients that their claims will be honoured. NIC also has shares in many Tanzanian and foreign companies.

ITM: Do you expect a rise in foreign investment to improve business for insurers in the near future?

Answer: Yes, we do expect foreign investment to rise due to favourable economic growth and the attractive investment policy the government has in place. Our country boasts one of the fastest growing economies in Africa. This is in addition to political stability. All these factors make Tanzania one of the most attractive places for foreign investors.

ITM: Have there been improvements at NIC over the past 10 years?

Answer: NIC has gone through transformation; so far the company has achieved a steady growth of revenue as well as improved service delivery on

ITM: What are the biggest challenges NIC is facing to date?

Answer: The big challenge is maintaining the position of NIC towards regaining its glory in terms of market share.

ITM: What is the key plank of the fiveyear development plan of NIC? Answer: Increase in revenue and reduction of operational costs.

ITM: How would you appraise Tanzania’s insurance sector?

Answer: The sector is growing very fast; this can be witnessed by the increase in the number of new entrants into this market and growth of premiums, which stands at around 20 per cent annually.

ITM:Insurance penetration in Tanzania is well below the African average. What is holding the sector back?

Answer: Insurance penetration is set back by a number of factors. One of them is the cost of doing business vis-a-vis revenue in the rural areas and lack of insurance awareness by the majority of the Tanzanian population which lives in the rural areas. As the expected return for investing in the rural areas is little, many insurers tend to operate in the urban areas only. This leaves the people in rural areas without access to insurance services.

However, with the current development of mobile banking and money transfer (M-Pesa, Tigo Pesa, Airtel Money, etc.) the trend is expected to change.

ITM: What is your market share today?

Answer: NIC market share at the moment is around 5 per cent.

ITM:What are your ambitions in term of market share and sales and what the challenges ahead?

Answer: My ambition is to see NIC market share increases to become the market leader in terms of revenue and claims service. The challenges are many: stiff competitions and premium undercutting.

Insurance Times | Dec 2015 - Jan 2016

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Insurance Times | Dec 2015 - Jan 2016

Insurance Times | Dec 2015 - Jan 2016

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Insurance

Why it is safer and cheaper for the public to use insurance brokers

Mohammed Jaffer is the president of Tanzania Insurance Brokers Association. He spoke to our correspondent about the role of insurance brokers in Tanzania's economy.

D ITM:

o you want to know more about TIBA? The Insurance Times Magazine (ITM) gives you detailed information about it through the following Q & A: What TIBA?

TIBA: TIBA stands for Tanzania Insurance Brokers Association. It is an institutional corporate Body brought into existence through the Insurance Act Number 10 of 2009.

TIBA is run by an elected Governing Council and is headed by a president. There is a Constitution and Code of Conduct in place to guide the Council. TIBA is a central organ for the brokers to advance and protect their interest. It also encourages the training and education of persons practising or intending to practice in the insurance industry.

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Insurance Times | Dec 2015 - Jan 2016

ITM:

A customer wishing to buy insurance can either go on a direct basis to the insurance company or use an agent, which is less complicated. Why should the insuring public use the medium of a broker?

TIBA: The world over, the insuring public mostly use the medium of the broker and they have good reason for taking this route. An insurance broker is a full time specialist insurance practitioner whose role is to collect raw information/data from the client on their risk exposures and refine the data into an insurable and transferable risk. Then the broker will have to find an insurance company that has the expertise and financial capacity to handle that particular risk. This is retail broking.

At times, if the risk is big and complex, the broker plays a role in placing the cover through international reinsurers outside Tanzania.

The other form of broking is reinsurance broking.

The role of such firms is to place a cover above the retention level of the ceding company. They do not deal with individuals; rather, they deal with both local insurers and international reinsurers. It is a bit complicated but interesting, as a risk that is in Tanzania can be spread to a number of countries overseas.

In all these cases, and because of the levels of professionalism expected from brokers, they are statutorily required to have a professional indemnity insurance cover in place. This protects the client in case of financial prejudice to the client arising from professional negligence.

ITM:

ITM:

•

Ensures that members are compliant with statutory provisions

•

Ensures high ethical standards and professionalism

•

Ensures a smooth and sound insurance industry

•

Insurance is a part of the financial sector and investors will always invest in a country with a stable financial industry. As such, both TIBA and the regulator play a complimentary role to ensure that insurance players contribute positively to the macroeconomic growth of the economy

Quite an interesting development has just taken place in Tanzania – the appointment of an Ombudsman in Insurance. The role of this position is conflict resolution between opposing sides in insurance.

ITM:

The second form of security is that, the regulator carries out spot checks and some of the issues they inspect are the books of accounts and bank accounts.

This is aimed at ensuring that no misuse of public funds is made.

Thirdly, all players are required to submit quarterly returns to the regulator. The purpose of all this is to ensure that the insuring public is protected.

However, at times, there are bad apples that may breach these provisions. Their licence is at risk of cancellation and black listing. If the client raise a com-

Insurers are known for taking their time to settle claims. In inflationary periods, surely the client is the loser. What advice do you give to the client?

TIBA: It is true that some claims take longer to settle than others, and during an inflationary period normally there are measures put in place by the regulator to protect the insuring public. The regulator has put in place claims settlement guidelines, wherein certain claims are to be settled within a certain time line.

My advice to the insuring public is that they should insure through a broker. A prudent broker would protect his clients through the creation of service level agreements with insurers. These agreements place obligations and duties on both brokers and insurers to deliver within certain parameters. The agreements can also be used as appraisal instruments by the clients, as a yardstick on whether to renew a policy with a particular broker or insurer.

Stories are told of insurance brokers who do not remit premiums to the insurance companies. What are the remedies to the unsuspecting customer?

TIBA: To begin with, it is wrong ethically and legally for an intermediary to misuse trust funds. All brokers are required by law to have a Trust Account and an Expense Account. Immediately the premium is received by the broker, the money has to be deposited into a trust account. On maturity, the money has to be remitted to the insurance company less the commission. This is the first form of security.

In the event of a dispute between a client and the insurer, how does TIBA help the client?

TIBA: Indeed, disputes are inevitable in business transactions; this includes insurance transactions. If a client approaches TIBA, the cause of the dispute is investigated. Most policies have an arbitration clause which allows other parties to come in between the two parties. The good part of TIBA coming in is that it resolves the issues at no cost to the client.

As an association, what relationship does TIBA have with the regulator?

TIBA: Much as the major role of TIBA is the protection of its members, it also works with the regulator in many ways, as follows:

ITM:

plaint with either TIBA or the regulator and the matter is investigated and the broker is found culpable, the licence is cancelled.

ITM:

Lastly, with all these advantages of insuring through a broker, why is it that only 60 per cent of insurance business is transacted through brokers?

TIBA: Ideally, higher levels of penetration are desired. As TIBA, we have created generic awareness campaigns to educate the insuring public about the broker’s role, the value addition, and more importantly to allay fears that it costs more to go through a broker. We have an outreach program, wherein we are using the media to communicate the benefits of taking out insurance and especially doing this though brokers.

Having said this, some clients would not prefer using brokers for connectional reasons.

My message to the insuring public is that they should take out insurance covers – be it educational, life, or general insurance – and be protected financially. It is more expensive not to insure than to do so. Above all, let them use the medium of insurance brokers to advise them on all their insurance matters.

Insurance Times | Dec 2015 - Jan 2016

33

Insurance

How businesses can guard against fires and allied perils

Fire and allied perils insurance is a specialized kind of insurance designed to cover the cost of replacement, reconstruction or repair.

By Rachel Nyanchama

P

olicies of fire and allied perils cover damage to the building itself and may also cover damage to nearby structures, personal property and expenses associated with not being able to live in or use the property if it is damaged.

Homeowners and property owners may consider fire insurance in addition to a property insurance policy if the property contains valuable items. A best practice would be to document the property and its related contents, which makes identifying the value of items damaged or lost much easier after a fire has taken place. A fire insurance policy may contain exclusions based on the cause of the fire, such as not covering fires caused by wars.

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Insurance Times | Dec 2015 - Jan 2016

Interest covered: Basically, this kind of insurance compensates for any loss or damage to the interests insured caused by any peril insured against. Interests covered include the following: Dwellings, offices, hotels, shops, all business establishments, etc.

Buildings / rental buildings including landlord’s fixtures and fittingsGodowns and warehousesIndustrial / manufacturing risksOil, gas and petrochemical industriesProperties in the openPerils Covered: Cover can be arranged for fire and lightning only, and can be extended to include allied perils such as storms, floods, bursting of water pipes, apparatus, riots, strikes, and malicious damage.

The object of this policy is to restore the business to the financial position that would have been achieved had the peril insured against not happened.

Limit of Indemnity: This is confined to the sum insured on each item subject to average condition. Compensation payable is usually the actual cash value at the time of the loss or, at the option of insurers, the cost of restoring the damaged property and its placement in the same condition as at the time of the loss, or replacement if agreed between the insurer and insured.

Exclusions: War risks, wear and tear, faulty design or materials, willful act or negligence on the part of the insured or his employees, loss or damage due to atmospheric conditions, previous items, gold, money, consequential losses and liabilities.

Premium: This is charged on a per mille basis on the total sum insured, and calculated on the basis of various risk factors, and the nature and conditions affecting the property.

Subject otherwise to the terms, conditions and other exclusions of the policy.

Business interruption insuranceBusiness interruption insurance (also known as business income insurance) is a form of insurance that protects the loss of income that a business suffers after a tragedy.

The income loss covered may be due to disaster-related closing of the business facility or due to the rebuilding process after a disaster.

This kind of insurance cover is different from a property insurance policy, which covers only the physical damage to the business, while the additional cover is done by the business interruption policy. This extra policy provision is applicable to all types of businesses, as it is designed to put a business in the same financial position it would have been in if no loss had occurred.

Concept: The object of this policy is to restore the business to the financial position that would have been achieved had the peril insured against not happened. To avail the benefits of this insurance, the insured should first have material damage insurance policy (e.g. a fire insurance policy).

Business interruption insurance helps to preserve the financial stability of the business by covering the anticipated earnings made from the use of an insured’s assets or business.

Coverage: Before business interruption insurance can operate, material damage must occur resulting in an interruption affecting the business. The policy will not operate unless: There is material damage insurance in force (e.g. fire insurance) covering the insured’s interest in the property at the premises specified and such damage resulting from a peril insured which caused the said interruption.

The material damage insurers have paid or admitted liability for damage.

Sum Insured: An adequate amount for the period chosen and depending on the net profits, standing charges of the insured’s business, such

as wages, rent, etc., but items like additional cost of working can also be covered.

Basis of Indemnity: This depends on the indemnity period chosen by the insured, which usually does not exceed three years from the date of the damages affecting the business and during which the policy protection operates.

Assessment of the indemnity is based on the value of stock immediately before the damage and compensation is calculated on the percentage basis for loss suffered by each item as mentioned in the policy.

Premium Rating: Calculated at a percentage rate on the sum insured. It is subject otherwise to the terms, conditions and exclusions of the policy.

Business insurance benefits Make sure your business is well protected so you can focus on your success, leaving the rest in the hands of professionals. Max Insurance tailors policies to ensure you get all the covers you need for the specific risks that you face and none that you don’t.

The firm can insure your business against risks of fire, floods, public liability, employer’s liability, business interruption, money and much more. Its policy can cover a wide range of businesses, from shops and restaurants to offices and hairdressers.

Benefits of getting a business policy Flexible policy Wide range of insurable limits Assistance 24 hours a day, 7 days a week, 365 days a year.

Specific solutions for each business type Very competitive prices Cover options offered Basic covers Property damageWarranty coverage extension (rain, wind, flood, vandalism, riots, strikes, smoke, hail, snow, impact of animals, aircrafts, land vehicles, etc.)

Loss of rent Water damage Legal protection Theft of cash Refrigerated goods Public liability Tenant’s liability Employer’s liability Business interruption insurance helps to protect you from your lost earnings in the event you cannot operate your business after a covered loss or if the loss causes a reduction in your earnings. This means if you lose income as a result of the loss, you can typically recoup those losses minus the expenses you would have paid anyway. So, if your merchandise was destroyed by a fire just before you shipped it out to customers, business interruption coverage may help you to get some of the related lost income back.

Insurance Times | Dec 2015 - Jan 2016

35

Islamic

Islamic banking in Tanzania: Hopes and challenges

By Khalfan Abdallah Salim

A

fter liberalizing the banking and finance sector, Tanzania is among countries in Africa experiencing new ways of banking to satisfy the needs of the market. From mobile banking to Islamic banking, Tanzanians are witnessing new business ideas, in the process making banking history. While the old conventional banking still dominates world economies, Islamic banking is growing very fast and has established itself as an alternative way to do banking business on just and fair terms.

In Tanzania, there is a great demand that drives changes in the field, not for the benefit of the few but the whole community – both spiritually and materially. A good example is provided by banks like KCBT, which launched first-of-its-kind Amana banking products in the Tanzanian market. This launch brought new banking experience, even though limited services were on offer. With the launch of Amana Bank, Tanzanians can now try Islamic banking services without fear or prejudice.

Islamic banking is banking without interest, but trading with profit. Interest is neither paid nor received, as stipulated in Shariah (Islamic sacred law). In spite of many misconceptions that it is for Muslims, all those who abhor interest in the conduct of business are the target market for these products – which have been structured under Qard Hasan, Unrestricted Mudharaba and Wadiah (form of Islamic contract). The asset/ lending side package has also begun to function under Murabaha to purchase orders.

While breathing the airstreams of hope through tackling the social and economic evils of interest, Islamic banking is bound by principles outsourced from Islamic commercial jurisprudence – fiqh Muamalat. These are principles such as absence of interest, usury or riba, in letter and spirit under the adage, “no pain no gain.” No Gharar [speculation] is practised, which refers to the uncertainty principle and covers certain types of uncertainty or contingency in a contract.

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Insurance Times | Dec 2015 - Jan 2016

Islamic banking is banking without interest, but trading with profit.

The prohibition on Gharar is often used to justify prohibition of such conventional financial practices as speculation, gambling, short selling and derivatives; it also encompasses the presence of social and ethical features such as avoiding undesirable investments and enhancing trade. Islamic investments exclude tobacco, alcohol, gambling and other “undesirable” sectors.

In the course of its business growth, Islamic banking in Tanzania is expected to face business, operational, legal and regulatory challenges. This is characteristic of lending products in the market through Shariah compliant instruments like Murabaha (cost plus profit sale), Bai Bithamanin Ajil [spot delivery with future payments], Bai Salaam and Istisnaa (advance payment with future delivery of goods), Musharaka (partnership/ joint venture), Diminishing Musharaka, Mudaraba (passive partnership) and Ijara (leasing).

Other challenges include Ijara wa Iqtina [lease to purchase] Qard Hasaan [benovelent loans], Sukuk (trust certificates), and equity participation in the form of shares of corporate entities.

However, these challenges can be overcome as days go by.

By complying with the requirements of Sharia, Islamic banking delivers 100 per cent spiritual benefit and Sharia-compliant products to the target market; this is achieved by not giving interest and successfully keeping customer deposits far from interest based/conventional lending and unethical investments.

Abdallah Khalfan Salim is a professional Islamic banker, having practised Islamic banking since 2008. He holds an MBA (Islamic Banking and Finance) from the Academy of International Modern Studies (AIMS), UK. Currently, he works with Gulf African Bank based in Nairobi, Kenya, as a Manager (Head), Sharia Department. Tel: +255 788 297400, +254 702 544111.

Tired of fraud and injustice by banks?

Here’s the solution Islamic banks serve both Muslim and non-Muslim clients who want to take part in transparent, certain, clean, just, ethical and profitable deals.

By Jamal Issa

T

he world is witnessing the fast growth of Islamic banking markets in different countries. For a long period of time, the majority of Muslims remained unbanked due to lack of an alternative banking system that takes their ethical and religious needs into account.

It was only in the late 20th century that a number of Islamic banks were formed to provide an alternative basis to Muslims.

But Islamic banking is not restricted to Muslims. Islamic banking is simply a system of banking that agrees with the ethos and value system of Islam, and is governed by the principles laid down by Islamic Law (Shari ah).

It is also referred to as Shari ah banking, Riba free banking, and Participative banking.

The service basis of Islamic banking is to be found in the ethical values and socially responsible system. These values include justice, mutual help, and free consent and honesty on the part of

the parties to a contract. They necessarily exclude fraud, misrepresentation and misstatement of facts, and injustice or exploitation. Taken together, these ideals form the basic principles of Islamic banking.

For that reason, Islamic banks serve both Muslim and non-Muslim clients who want to take part in transparent, certain, clean, just, ethical and profitable deals.

Islam prohibits the payment or acceptance of interest (riba) for the lending and receiving of money, as well as trade and other activities that provide goods or services considered contrary to its principles.

Interest-free banking is a broad concept designating a number of banking instruments or operations which avoid charging of interest.

This form of banking avoids not only interest-based transactions prohibited in Islamic law, but also unethical and an-

ti-social practices.

In a practical sense, Islamic banking is the transformation of conventional money lending into transactions based on tangible assets and real services.

The Islamic banking system allows banks to participate in activities linked to real economic activity. The system encourages equity-based structures backed by tangible assets instead of debt-based ones in investment, where in the conventional world the transactions may not necessarily have to be backed by any real asset.

The system of Islamic banking is founded on the ideals of participation and loss sharing. Islamic banks offer banking products that are moulded in a way that allows banks to participate in risk sharing with their clients instead of charging or paying fixed interest on loans and deposits.

Each risk-bearing instrument represents a real asset and earns a variable rate of return tied to the performance of that asset.

That way, the model of Islamic banking leads towards the establishment of a system which helps to achieve economic prosperity. jakham@rocketmail.com

Insurance Times | Dec 2015 - Jan 2016

37

Insurance Laws

Large payments can bring down any firm: Reinsurance spreads the risk

By Deusdedit S. Muhono

A

Reinsurance in brief: “The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract.�

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Insurance Times | Dec 2015 - Jan 2016

reinsurance contract is a contract of indemnity, meaning that it becomes effective only when the insurance company has made a payment to the original policyholder.

Reinsurance provides a way for the insurance company to protect itself from financial disaster and ruin by passing on the risk to other companies. Reinsurance redistributes or diversifies the risk or threat associated with the business of issuing policies by allowing the reinsured to show more assets by reducing its reserve requirements. The reinsurance industry became more popular during the late 1990s and early 2000s because natural disasters and mass tort litigation resulted in large payouts by insurance companies. Because of the large size of the payments, some insurance companies became insolvent.

The parties to the reinsurance contract are the reinsurer, the reinsured, and the original policyholder. The reinsurer is the third party or the company issuing the reinsurance policy.

Typically, reinsurers engage solely in the business of issuing reinsurance policies; however, any company that meets the requirements and is authorized to issue insurance may issue such policies. The reinsured is the insurance company that issued the first policy and is applying for reinsurance. The original policyholder or original insured is the party who purchased the original policy. When the reinsurance contract is between just the two insurance companies (the reinsured

and the reinsurer), the original policy-holder usually has no rights against the reinsurer.

Coverage and type of reinsurance The reinsurance policy covers the risk or liability associated with the original policy issued. The reinsurance policy must be for a specific insurable interest. The interest to be insured must exist at the time the reinsurance policy is issued; it cannot be created later. All or part of the liability of the original policy can be covered by the reinsurance, but nothing greater. The reinsurance policy cannot cover a period longer than the original policy.

Most often in practice, however, reinsurance policies are written to avoid problems later.

The two basic types of reinsurance are facultative reinsurance and treaty reinsurance.

Facultative reinsurance is issued on an individual analysis of the situation and facts of the underlying policy. It may cover all or part of the underlying policy. By deciding coverage case by case, the reinsurer can determine if it wants the risk associated with that particular policy. Facultative reinsurance is used by the reinsured to reduce the chance of loss or risk associated with a certain policy.

Treaty reinsurance, on the other hand, is written to cover a particular class of policies issued by the reinsured. Examples of classes covered by treaty reinsurance are all property insurance policies or all casualty insurance policies written by the reinsured. Treaty reinsurance automatically passes the risk to the reinsurer for all policies that are covered by the treaty, not just one particular policy. Treaty policies are more general than facultative policies because the reinsurance decision is based on general potential liability rather than on a specific enumerated risk.

In addition to the two types of reinsurance issued, there are two ways that coverage can be allotted between the parties: either proportionally or non-proportionally. In the case of proportional reinsurance, the reinsured obtains coverage for only a portion or percentage of the loss or risk from the reinsurer. The proportion of coverage is typically based on the percentage of premiums paid to the reinsurer.

For example, if the reinsured pays 40 per cent of the premiums to the reinsurer, then the reinsured recovers 40 per cent of its losses when it pays the original policyholder according to the original policy terms. The reinsured can only recover a portion of its total loss, not the entire amount. The amount actually paid by the reinsurer is not figured into the reinsurance contract, only the percentage of loss the policy will cover.

In contrast, non-proportional reinsurance covers a set amount of loss. A base or deductible amount is set in the reinsurance policy,

and any loss exceeding that amount is paid by the reinsurer. The amount being paid by the reinsurer has no relationship to the premiums received.

The reinsured, in effect, is reimbursed for all payments made under the original policy that exceeds the deductible amount. The deductible amount can be figured either by each event or in the aggregate. Either type of coverage can be used in either facultative or treaty insurance contracts. The terms of the policy depend on the situation and the relationship the reinsured and the reinsurer have had in the past. Reinsurance policy terms can be made to be flexible for the appropriate facts at the time.

Reinsurance requires utmost good faith among parties Utmost good faith and the doctrine of “follow the fortunes.� The duty of utmost good faith has several facets, including the requirement that both parties to the reinsurance contract deal with each other with candor and honesty. The duty assumes that both parties are sophisticated and knowledgeable in the insurance industry. As a result, they should be aware of what is relevant and

necessary for the other party to know.

The reinsured must follow the duty by disclosing all material facts to the reinsurer that relate to or affect the original policy and its calculated risk. The reinsured must essentially put the reinsurer in the same position as it would be in when deciding about the risks and the possibility of coverage on the original policy.

In addition, the duty requires that the reinsured act with honesty in negotiating any settlement with the original policyholder. If the settlement is not handled by following the appropriate business procedures, the reinsurer may not be bound by its terms and then does not have to pay under the policy coverage.

Lastly, the duty of utmost good faith requires the reinsured to provide adequate notice of any claim or potential claim to the reinsurer. Notice is required to make the reinsured aware of the possible need for available funds in case a claim is filed. Notice also allows the reinsured to participate, if desired, in the defense of the underlying claim. Practically, reinsurers may also use the notice of potential claims to determine renewal of, or change in, premiums under

The duty of utmost good faith requires the reinsured to provide adequate notice of any claim or potential claim to the reinsurer.

Insurance Times | Dec 2015 - Jan 2016

39

Insurance Laws

or the reinsured. Those defences can include impossibility of Misrepresentation: performance, an act outside the parties’ authority, actions by a party that are inconsistent with Usually, any defence available the policy, actions by a party that unreasonably increase the to either party to a contract risk, or misconduct by the parwould be available to either the ties. Any defence that would reinsurer or the reinsured. be an option for a party under the original insurance policy is available for the parties to the reinsurance policy. the reinsurance contract. The duty of utFraud: This defence is tied heavily most good faith that is part of reinsurance to the duty of utmost good faith because policies requires the reinsured and rein- both deal with the disclosure of material surer to deal honestly with each other. facts. For the reinsurer to assert the deAlso implicit to reinsurance policies is fence of failure to disclose, the reinsured the follow-the-fortunes doctrine. “Follow must have concealed some relevant or imthe fortunes” means the reinsurer should portant information. Relevant information follow along with the reinsured’s payment would include facts such as a claim previto the original policyholder. Provided the ously filed under the original policy or an reinsured makes a good faith payment that unusually high risk related to the original reasonably falls within the terms of the policy. The failure to disclose need not original policy to the policyholder, the re- be an intentional statement known to be insurer is then required to make payment false; it could be the reinsured’s failure according to the terms of the reinsurance to investigate and determine the truth of policy. The reinsurer should make the a fact. payment even if payment is not specificalWhen deciding if a fact or information ly mandated under the terms of the policy is material or relevant, the courts ask if but is arguably within the meaning of its the misrepresented or withheld informaterms. The doctrine is meant to encourage tion, if disclosed, would have changed the coverage by reinsurers and discourage reinsurer’s decision to issue the policy. unnecessary litigation by the parties over The false statement alone is not enough interpretation of the policy. to avoid liability; the reinsurer must have The follow-the-fortunes doctrine does acted upon that misrepresentation in such have limits to protect the reinsurer from a way that it was prejudiced. If the reinexcessive payments. The reinsurer is not surer’s decision or action would have obligated to cover payments made by the been different regarding the risk, it may reinsured that are clearly outside of the be relieved of liability. policy language. Also, the reinsurer is not obligated to follow the business fortune Original insured’s (policy holder) of the reinsured, only the insurance-relat- right ed fortune of the company. The reinsurer Generally, the original policyholder need only indemnify for the type of loss has no rights against the reinsurer. Beintended by the policy, not losses due to cause the original policyholder has no uncollectible premiums. Losses clearly contract with the reinsurer, they have no related to the business decision and not obligations to each other. This arrangethe policy are not within the scope of the ment can be altered by inserting landoctrine. The follow-the-fortunes doctrine guage into the reinsurance policy allowimplies a duty by the reinsurer to indem- ing the original policyholder to obtain nify reasonable payments made by the payment directly from the reinsurer. Such reinsured under the underlying insurance language often is effective only when the policy. reinsured becomes insolvent or is unable to pay. These clauses are not often used General defences in case one party because a reinsured can view such clausbreaches the reinsurance agreement es as a lack of confidence in its ability to Misrepresentation: Usually, any de- pay. The clause may be used in the case fence available to either party to a contract of a reassignment or sale of the policy to would be available to either the reinsurer another insurance company to protect the

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Insurance Times | Dec 2015 - Jan 2016

original insured.

Without specific language in the policy, the original policyholder has few rights with the reinsured. If the reinsured becomes overly active in the claim process and defence, it could open itself to a direct claim.

The original insured can bring an action against the reinsurer if the reinsurance policy requires the reinsurer to pay any claim directly to the original policyholder.

The original policyholder is considered a third-party beneficiary and can sue either the reinsured or the reinsurer. The recovery obtained by the original policyholder cannot be more than the total loss.

It is important for the individuals who seek to enter into insurance undertaking to understand the nature and type of insurance relationships they are intending to enter before signing the policy.

Next issue: Specific scenarios, requirements and basic principles that apply in reinsurance arrangements as per the Tanzanian Insurance Act of 2009.

Deusdedit Sise Muhono is an advocate working with the National Audit Office of Tanzania as a Performance Auditor. This article is based on his personal opinion, research, insurance and legal knowledge; it should not be used as conclusive advice for undertaking any insurance transaction.

Please consult your insurance advisor/consultant for further services.

Insurance Times | Dec 2015 - Jan 2016

41

Health and social welfare

Stunting and malnutrition are on the decline, but Dar needs to do more Lawrence Haddad is the director of the Institute of Development Studies, Sussex, and an economist. His main research interests are on the intersection of poverty, food insecurity and malnutrition.

By Staff Writer

T

anzania has achieved a sharp decline in child stunting, reducing its prevalence from 44 per cent to 35 per cent within the past 10 years.

According to the Global Nutrition Report 2015, this has been made possible through a significant reduction in poverty.

Between 2004 and 2014, the report says, inhibited growth in Tanzania dropped by 9 per cent. This implies a sharp decline in stunting among children.

The report, which was released recently in New York, attributes the good performance to the strong commitment shown by the Tanzania government and external partners through various programmes.

Lawrence Haddad, a lead author of the study and senior research fellow at the International Food Policy Research Institute, acknowledged that this commitment had led to increased funding for the implementation of various programmes aimed at addressing poverty.

Government’s spending on health increased substantially, from $383 million in 2008 to $622 million in 2014.

More than 160 million children worldwide under five years old are too short for their age, while more than 50 million others do not weigh enough for their height.

According to the 2014 nutrition public expenditure review, between 2010 and 2012 the total budget for the nutrition sector, though small, almost doubled; the Tanzania government’s share in that bud-

42

get is however quite low, at about 30 per cent.

“These are some potential explanations for the declines in stunting, but more research is needed for a more definitive answer,” said Haddad.

Ministry of Health and Social Welfare statistics show that from 2010 to 2014, thinness in women of reproductive age declined from 11 to 6 per cent, with vitamin A supplementation rates increasing from 61 to 72 per cent. Iron-folate supplementation during pregnancy increased from 3.5 to 8.3 per cent.

During this period, there was a decline in exclusive breastfeeding rates from 50 to 41 per cent, while the rates of infants and young children with minimum acceptable diets remained at 20 per cent.

“The household using iodized salt declined from 82 to 64 per cent,” notes the report.

Tanzania’s average annual rate of reduction in stunting from 2010 to 2014 was approximately five per cent – faster than the nearly four per cent annual rate required to meet the World Health Assembly (WHA) target.

But researchers say more must still be done if Tanzania is to meet its WHA stunting target by 2025.

In 2013 and 2014, Tanzania became one of the first countries to undertake a comprehensive review of the public expenditures of nutrition. The review

Insurance Times | Dec 2015 - Jan 2016

showed up areas for improvement and how vulnerable groups were not targeted properly like children, especially children under two years of age and pregnant women.

The report includes some interesting case studies. A 2006 study from Kagera region using four rounds of survey data collected from 1991 to 1994, for instance, showed that a combination of income gains and health programme intervention was more effective at accelerating stunting rate declines in the area at the time.

The study found that nutrition could be a driver of change or a barrier to progress, and that there were actions national leaders could take to end malnutrition in all its forms.

Malnutrition is an area of concern globally, with a third of the world population malnourished. The problem exists in every country, yet the possible “high-impact interventions” available are not being implemented due to lack of money, skills, or political pressure.

Haddad expressed his worry: “When one in three of us are held back, we as families, communities, and nations cannot move forward.”

This situation not only jeopardizes the lives of those who are malnourished, but also affects the larger framework for economic growth and sustainable development.

Insurance Times | Dec 2015 - Jan 2016

43

Infrastructure development

It may take buses or ferries, but traffic in Dar must start moving

By Sallu Evarist

L

ike in many other cities in developing countries, the problem of traffic movement in Dar es Salaam and its immediate suburbs has assumed new proportions, particularly during rush hours.

Indeed, many developing countries – particularly in Africa – are characterized by rapid urbanization and high growth in vehicle traffic, with serious consequences.

The most important of these is severe road congestion, which hampers mobility within cities. The majority of the developing world’s inhabitants depend on public transport services for their day-to-day movement, which raises the need for a safe, effective and efficient public transport system in major towns.

Public transport should be adequate and affordable to enable commuters to access it, while enabling them to pursue their livelihoods whether in rural and urban centres.

The introduction of coastal ferries in servicing commuters in Dar es Salaam will have a big impact on the city’s traffic pattern, where the developed ring roads

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Insurance Times | Dec 2015 - Jan 2016

The Mv Magogoni ferry, which connects Magogoni to Kigamboni.

will further facilitate the movement of commuters across the city.

Dar es Salaam covers an area of over 1,800 square kilometres, in what is by far the largest and most complex urban area in Tanzania with a population of over 4 million people as per the 2012 national census. The city is considered to be the fastest growing in East and Central Africa, and among the fastest in sub-Saharan Africa.

With the growing number of city inhabitants, public transport continues to be a challenge. The government has now opted for a modal integration approach. The fact that Dar es Salaam is privileged to have a navigable coastline makes it feasible to develop ferry transportation, complimenting both the Bus Rapid Transit (BRT) project and the ongoing urban railway initiatives by the Tanzania Railways Ltd (TRL) and Tanzania Zambia Railways Authority (TAZARA).

If such a modal integration approach were to be ignored, the complex logistical nature of traffic in Dar es Salaam could easily bring the city to a standstill. The

aging city transport network is proving incapable of handling the ever-increasing numbers of vehicles.

In an effort to tackle the problem, the government has introduced the BRT system, with privately-operated lanes that are expected to give much relief to city dwellers who had long become accustomed to suffering in unending traffic jams.Under the first phase of the BRT, Morogoro Road in Dar es Salaam is considered a pilot corridor, essentially due to the fact that it cuts across the city and offers a rational mobility axis for public transportation. The BRT service is expected to bring about a desirable impact on the city traffic pattern, reducing congestion and pollution.

The BRT project also integrates dala dalas (minibus taxis) into the plan of decongesting the city roads. The project will also benefit from the development of an additional ferry transport system to be operated either under Mechanical and Tanzania Electronics Services Agency (TEMESA), the Dar Rapid Transit (DART), or other private sector players. The system will require the government to create the necessary infrastructure, the major one being the construction of jetties from which private sector investors could provide fer-

ries.

Many coastal cities make use of water transport. Tanzania will have to work out ways to attract investment in ferry transportation to complement the BRT and urban railway services.

The Kivukoni Terminal could therefore serve as an inter-change, not only between surface transporters, but also between ferries and the overall surface modal services that can link commuters from Mbweni Township to Kivukoni and then transfer them to a BRT bus destined to Kimara Terminal. The Kivukoni Terminal is classified as a “turning point� for BRT services and should therefore reflect a critical modal inter-change.

The BRT programme is silent on developing a link with TEMESA, whereby the two agencies could work out suitable arrangements jointly to enable the Kivukoni Terminal to offer inter-change services to commuters from around the city.

Investment in ferry transport will benefit from the long coastline along the city of Dar es Salaam and encourage more people to travel by water.

By improving water transport, there will be room to reduce vehicular traffic on the highways. Passenger ferries

Officials of Strabag International and government officials in consultations after the latter toured a completed Bus Rapid Transit project bus station in Dar es Salaams.

Below: The Dar es Salaam transport network.

Contd on Pg. 46 > >

Insurance Times | Dec 2015 - Jan 2016

45

Infrastructure development

The Chief Executive of Dar es Salaam Rapid Transit (DART) Agency, Asteria Mlambo (second left, seated) and representatives of a newly formed company, UDA Rapid Transit, Robert Kisena (third right) and Sabri Mabruki (left) sign an agreement whereby the company will run a Bus Rapid Transit project for an interim period in Dar es Salaam.

> > Contd from Pg. 45 operating along the coastline, from the northern part of the city to the southern end, will relieve the overwhelmed Bagamoyo and the Kilwa roads. Travelling by ferry is more sustainable, cheaper, easier and considerably quicker.

But the public needs to be brought on board by being sensitized on the potential

46

benefits of coastal water. City commuter ferries will offer many opportunities to emerging coastal settlements and nearby satellite townships such as Bunju.

The idea behind BRT is to ease congestion in city roads such that many motorists will find it convenient to leave their cars behind, thereby bring about an over-

Insurance Times | Dec 2015 - Jan 2016

all improvement in traffic movement on selected roads. The envisaged city coastal ferries will carry this objective further through integration of the different modes of transport.

Sallu Evarist is a Dar es Salaam-based transport economist.

Rwanda shines as Kigali Airport is ranked fifth in Africa

So far, Rwanda has spent more than $17 million on renovations and expansion to improve the airport and aviation industry in general.

A

Canadian aviation website has ranked Kigali International Airport the fifth best in Africa this year.

According to “The Guide to Sleeping in Airports,” renovation of the airport is complete and was done proficiently, improving its efficiency and security.

In 2014, Britain’s Skytrax had ranked Kigali International Airport seventh best, going by the quality of services offered.

South Africa’s Cape Town International Airport and Johannesburg Airport were ranked first and second best airports in Africa this year, with the Algiers Hauari Boumediene in Algeria coming third. It was followed by the Sir Seewoosagur Ramgoolam International Airport in Mauritius.

Internationally, Singapore’s Changi International Airport was counted the best airport in the world, followed

by South Korea’s Seoul Incheon, while Tokyo Haneda in

Japan came in third.

Tonny Barigye, the head of communications at the Rwanda Civil Aviation Authority (RCAA), said the government of Rwanda will continue investing in the airport.

So far, more than $17 million has already been spent in renovations and expansion to improve the airport and aviation industry in general.

RCAA is working on the development of a new air traffic control tower and a VIP terminal. It also wants to enlarge the existing apron and improve ground lighting system next year. The construction works to expand the airport’s apron are expected to be complete by early next year.

The website, www.sleepinginairports.net is an internationally recognised travellers online guide that was established in 1996 and enables passengers to share their airport experiences around the world.

Insurance Times | Dec 2015 - Jan 2016

47

Finance, economy and business

Africa needs new power plants; ATI insures investors The first step for any investor is to understand the opportunities and challenges.

African Trade Insurance Agency CEO George Otieno

The energy sector in Africa presents a vast amount of untapped opportunities, and the African Trade Insurance Agency (ATI) can play a critical role in turning this potential into a reality.

By Staff Writer

W

hile the challenges may seem daunting, the opportunities in the African energy sector far out-weigh the risks – as long as investors come armed with the right type of protection. This is where ATI comes in.

In fact, if you were to peel back the layers of severe infrastructure deficits, lack of effective regulations and dispute mechanisms, and corruption and political risks, the potential in Africa’s energy sector is enormous. The key to working successfully in this sector is to enter the market fully equipped with the tools to protect you against risks that, if not managed well, could turn into pitfalls.

The first step for any investor is to understand the opportunities and challenges.

The demand for energy in Africa is huge, while the supply is limited. This shortfall results from multiple causes.

Eventually, the cost in terms of lost investments, higher production costs and potential overall productivity, is higher than the cost of producing the power itself. What is needed is investment in new energy, but this has not been the case due to a host of challenges.

At a micro level, lack of power affects a majority of households in Africa, which at just 26 per cent of house-

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Insurance Times | Dec 2015 - Jan 2016

holds has the lowest electrification rates in the world.

This translates into about 550 million people who do not have access to electricity. Without access, basic necessities such as proper refrigeration, safety after dark, and the ability to work, are denied to a majority of the population. This ultimately has an impact on economic and social development.

For energy dependent industries such as mines and manufacturers, expensive fuel generators are not an option. This has a direct impact on economic productivity in many regions. For example, there are millions of cattle in Kenya’s Maasai Mara, a vast territory that relies on cattle rearing and tourism, but the lodges and hotels in this area choose to fly their meat in from Nairobi simply because they lack access to the power required to refrigerate meat.

This translates into lower prices for the cattle owners, higher prices for processed meat, and lost employment for the region.

One additional problem hampers investment in new power generation. Government agencies are not always able to collect all the revenues generated from consumers. The typical causes are illegal wire-tapping and clients who simply refuse to pay their bills.

Without the capital generated from daily consumption, these agencies are not able to invest in additional capacity.

To make the leap from a situation where a majority of the population in most African countries do not have access to modern energy services to a scenario where they will do so by 2030, the World Bank estimates that new capital investment of about $48 billion will be needed every year just to sustain energy services at current levels.

The solution is to invest massively in new power plants and in better distribution networks. But the reality is that most African governments are already saddled with high debt ratios and just don’t have the money and expertise to do this.

Instead, many countries have turned to a more practical alternative.

Governments encourage national or international investors to set up power production facilities and then sell the electricity to the national grid. These arrangements can take many different forms. Sugar plantations, for instance, can make electricity out of bio-waste, or independent entrepreneurs can set up low cost solar power farms which can supply electricity to the local grid.

For governments, this can be the silver bullet to an issue that for many borders on a crisis. For investors, this can also be a lucrative proposition provided they have access to international finance, expertise and co-investors in the case of larger projects. All this can typically be done on a private basis without upfront government investment.

Regardless of the size of the project, no investor will provide financing without a reasonable return on their investment.

To protect their capital, most investors

will get a Power Purchase Agreement, or PPA. This is essentially a commitment by the government agency to buy all the power produced by the IPP at a given price during a certain period – usually more than 10 years and up to 20 years.

While the PPA does provide a certain level of security, there are other important risks to consider. Ten or 20 years is a long time – a lot can happen within that period.

Take the case of Zambia: In 2011, after President Michael Sata won the elections.

The new government challenged the decisions and commitments of the previous administration, alleging corrupt practices and unfair advantages given to investors.

During this 10 or 20-year period, countries can also split into two, such as happened in Sudan. A country could also go bankrupt or become isolated by the international community. These and other potential scenarios can leave the investor in a no-man’s land.

There is also an obvious economic risk to the investor. When a country is desperate for power, it will look for solutions that are available at short notice. It takes years to construct a dam or find the exact location for a geothermal power plant, and generators that use fossil fuels are much easier to set up. Even though these are environmentally unfriendly options that pollute, drain foreign currency out of the country and come with a higher production cost, they offer governments a more immediate solution.

Investors involved in these “quick-fix” operations should be aware that in five or 10 years, there will likely be cheaper and cleaner alternatives in operation and governments may be tempted to switch off these old installations, or at the very least

adjust the purchasing price to the level of the newer installations.

ATI was set up specifically to help African governments attract investments. By acting as the guarantor for governments, ATI insures investors and holds countries accountable to honour their contractual commitments.

The agency is exceptional because member governments are shareholders and they are bound by a special agreement with ATI. This accord binds governments to honour contractual obligations undertaken on all ATI backed projects. Under this scheme, if ATI has to pay a claim due to a member government’s actions, the government will fully reimburse ATI as part of the terms of their membership.

Failure to do this will trigger a series of measures that act as a powerful deterrent.

This set up has been designed with the aim of motivating investors to come into ATI member countries, while also giving every country the power to unlock all the resources that it has, above and under the ground.

In terms of building adequate infrastructure, the energy sector is key to moving African countries to the next level of development. If effective, this could be a game changer for everyone. For governments, this could potentially propel them to middle-income status and higher FDI inflows. And for investors, this level of economic development could help to create transparent and regulated business climates, making it much easier to uncover more opportunities within the sector. If you add risk mitigation to the arsenal, then companies entering this sector will have a much greater chance of success in Africa.

An eco-friendly energy combined cycle power plant in Belgium.

Insurance Times | Dec 2015 - Jan 2016

49

Finance, economy and business

Dangote giant factory set to make Dar the cement capital of Africa

When the plant starts work in 2016, the company would look at ways of reducing the price of cement.�

Aliko Dangote

By Staff Writer The Dangote cement factory being constructed in Mtwara, together with four other projects for cement mills in Arusha, Tanga, and Lindi, are set to propel Tanzania to become the largest cement producer in Africa.

The new Dangote cement factory will be the biggest cement project in East and Central Africa. The capacity of the Dangote factory is expected to be three million tonnes per annum, out of which the factory expects to get a good chunk of the country’s market share.

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Insurance Times | Dec 2015 - Jan 2016

The new Dangote factory will be the biggest cement project in East and Central Africa, with a capacity of three million tonnes per annum.

Tanzania is set to more than double its cement production capacity next year, once the Dangote factory is completed. The factory is also expected to ease pressure on prices of the product once it starts production.

Adjourning the 14th session of the National Assembly in Dodoma recently, Prime Minister Mizengo Pinda said the cement industry had the potential to become the largest contributor of government revenue as well as job creation.

Cement Production Capacity (Tonnes/Annum) Portland Cement TZ

1.4 m

Tanga Cement

1.25 m

Athi River Mining Tz

750,000

Mbeya Cement Plant

350,000

company’s investments in Africa are to be found in Nigeria, Tanzania, Cameroon, Senegal, Gambia, South Africa, Zambia and Ethiopia, among other countries.

Currently, the price of cement ranges from $90 to $105, mainly due to high energy costs and dependence on imported clinker.

The Dangote cement plant under construction in Mtwara, Tanzania

Pinda said the current production capacity in the country was 3.8 million tonnes per annum, but that this was expected to more than double to 8.3 million tonnes annually in the near future. Domestic consumption is also projected to increase to 3.9 million tonnes per annum, up from 2.25 million tonnes.

Pinda said that with the new entrants, there will now be a total of nine cement projects in Tanzania. To ensure that Tanzania exploits fully the huge potential in the industry, Pinda said the government would take strong measures to curb the importation of cheap cement, which had contributed to killing local industries and denied the country revenue.

Dangote Group President and Chief Executive Officer Aliko Dangote said during a recent visit to the country that when the plant starts work in 2016, the

company would look at ways of reducing the price of cement.

One of the measures, he said, would be to find ways of countering costs that arise as a result of distribution difficulties.

The firm plans to buy 250 trucks to handle distribution of cement across Tanzania. Similarly, to handle the challenge of getting skilled labour for their operations, the company will take Tanzanian engineers to the Dangote Academy near Abuja for training.

Dangote said he hoped the new cement plant would first satisfy the local market.

Dangote is a Nigerian business magnate who is ranked by the Forbes magazine as the richest person in Africa and the 43rd richest in the world.

According to the company, they have a goal of becoming one of the world’s leading cement companies by 2016. The

It is projected that construction of residential and commercial housing will continue to dominate local cement demand in the medium term, at around 85 per cent.

The construction and housing sectors will therefore continue to be the main drivers of cement consumption in the country.

Available reports from the cement producers show that by next year, Tanzania is projected to become a net exporter of cement – fully supported by projected strong demand from its (import dependent) neighbours of Burundi, Rwanda, and the eastern Democratic Republic of Congo.

The projections show a diminishing role for the mining sector (mine construction) insofar as demand for cement is concerned.

It is projected that there will be a decline in production costs, supported by falling energy costs and improving energy supply. This, together with the expected entrance of new players (including Lake Cement and Arthi River), will lead to falling prices.

Factoring projected falling prices, it is also expected that revenue growth will be driven largely by volume, riding on the expected increase in demand (internal and external) especially from the neighbouring countries of Rwanda, DRC, and Burundi.

Tanzania Portland Cement is currently the country’s biggest producer, with a production capacity of 1.4 million tonnes per annum.

Comparatively, Tanga Cement has a capacity of 1.25 million tonnes per annum, while Athi River Mining Tanzania produces 750,000 tonnes per annum.

Mbeya Cement Plant has an installed capacity of 350,000 tonnes per annum.

Insurance Times | Dec 2015 - Jan 2016

51

Finance, economy and business

After wading through storms, DCB swings back to a profit path Trading remains an important part of the business model of the bank, which says it expects profits to keep increasing

By Staff Writer

H

ad the DCB Commercial Bank not been ready to face hurdles and accept risks in business when it started its banking services 13 years ago, it would not have reached where it is today.

In the first half of 2015, according to officials, the bank posted Tsh2.7 billion ($1.3 million) as profit after tax, compared with TSsh2.6 billion ($1.2 million) realized in a similarthe same period last year.

Speaking recently during the launch of the customer service week, Retail and Corporate Banking Manager Haika Machaku, said she was hoping for an even better performance this year. “We are expecting to increase profit after tax by 5 per cent to Tsh4 billion ($1.9 million) this year from Tsh3.8 billion ($1.8 million) posted last year.”

The number of customers at the bank, which was launched 13 years ago with a focus on serving small and medium-sized enterprises (SMEs), has risen from 250,000 in 2014, to 380,000 in 2015.

To ensure that the bank, which currently has eight branches, attracts even more customers and enhances its performance, Tsh29 billion ($13.8 million) has been set aside as loans for SMEs. This is an increase from the Tsh19 billion ($4.3 million) in loans issued last year.

The bank has already issued Tsh11 billion ($5.2 million) in loans this year. Over the past 14 years, it has issued loans valued at Tsh347.8 billion ($165.6 million) to 325,304 customers.

Saving and fixed deposit customers, too, have increased from 23,767 and 69,408 in 2013 to 27,580 and 74,649 in 2014, respectively.

Despite the headwinds experienced since it came into existence, trading remains an important part of the business model of the bank,

52

which says it expects profits to increase by 5 per cent to Tsh4 billion ($1.9 million) this year.

The year 2002, when the bank was established, was indeed a poor one for the bank, posting losses worth Tsh535,192,843 ($254,850) after tax. This declined to Tsh22,192,843 ($10,568) in 2003.

Despite these early setbacks, the bank continued to work tirelessly and in 2004, the fruits of their efforts started to be seen as Tsh447,606,550 ($213,145) was posted as profit after tax. The amount however went down to Tsh319,610,604 ($152,195) in 2005.

This trend was however quickly reversed, with the bank posting Tsh595, 508,501 ($283,575) in the next year, as profit after tax.

The bank recorded a profit after tax valued at Tsh1.4 billion ($666,666) in 2008, up from Tsh1.3 billion ($619,050) in 2007. In 2011, this figure stood at Tsh3.3 ($1.6 million) from Tsh3.2 billion ($1.5 million) that was recorded in 2010.

The bank’s profit amounted to Tsh3.7 billion ($1.8 million) in 2013, an increase from the Tsh1.9 billion ($904,800) that was recorded in the previous year; this profit level was maintained in 2014.

Insurance Times | Dec 2015 - Jan 2016

Fuel adulteration goes down as technology comes to the rescue

By Staff Writer

N

ew technologies have helped the Dar es Salaam-based Energy and Water Utilities Regulatory Authority (EWURA) to reduce fuel adulteration by more than 70 per cent during the past eight years, a senior official has said.

The authority’s Technical Manager in charge of Petroleum, Gerald Maganga, said the advent of sampling and testing, as well as fuel marking technologies, had made it possible for the port to reduce adulteration.

“With the technologies, fuel adulteration at the port and filling stations has decreased from 78 per cent in 2007 to below five per cent this year,” said Maganga, noting that this is leading to fair competition among petroleum operators.

Reduced adulteration of petroleum products, according to Maganga, had led to a decrease in demand for kerosene, from 30 million litres per month in

2007 to the current 10 to 3 million litres.

He said the trend implies that before using the new technologies, the demand for kerosene was high because they were being used in mixing it up with other petroleum products.

“It was difficult for us to distinguish between pure oil products, diesel in particular, from impure products, until the arrival of these technologies,” said Mr Maganga.

In-house research revealed that kerosene can be introduced into diesel for up to 30 per cent without affecting the technical specification of diesel, which encourages fuel adulteration and downgrades the quality of diesel.

The volume of petrol and diesel designated for the local market has however increased significantly, which translates to higher government collections.

The monthly demands for petrol and diesel has risen from 34 million and 69 million litres over the past eight years to

the current 51 million and 87 million litres, respectively.

The change in demand for the products has also prompted authorities to amend tax laws to make conditions more favorable to importers, according to Maganga.

Dar Rapid Transit Agency Chief Executive Officer Asteria Mlambo commended the efforts by other transport stakeholders, saying they were important in controlling harmful gas emissions from vehicles.

“We should collaborate with other stakeholders if we are to tackle air pollution from vehicles, thanks to EWURA for addressing the problem of adulteration and hence harmful gas emissions,” Ms Mlambo said.

Tanzania is among eight African countries that consume petroleum products with low pollutants, standing at 50 particles per million (50 PPM).

Insurance Times | Dec 2015 - Jan 2016

53

Finance, economy and business

Shoppers paradise: Tanzania ranked among top retail markets in Africa

By Staff Writer

54

T

anzania has been ranked among the top five destinations for retail market opportunities in Africa, the 2015 African Retail Development Index (ARDI) shows.

The country’s high potential for investors seeking to establish pure retail chains is due to the presence of little or normal formal shopping culture.The same reason was also true for other countries like Angola, Cote d’Ivoire, Ethiopia, Gambia, Rwanda, Senegal and Zambia – whose economies similarly offer opportunities for the growth of retail markets.

Out of the top 15 countries in the ARDI study, only Tanzania and Rwanda entered the list from the East Africa Community (EAC).

Rwanda, the fastest growing economy in the EAC, was ranked seventh, which implies that it is less competitive in terms of opportunities for the growth of formal markets than Tanzania.

Rwanda dropped from its surprise position as leader of the ARDI 2014, when it was ranked first and Tanzania fourth.

“Even as it slips, in this year’s ranking it remains a small but attractive market, with relatively low corruption and crime,” notes the report.

The change in Rwanda’s ranking resulted from a growth slowdown and global risk indicators, which have increased compared with last year.

Though Rwanda was ranked high in terms of its low level of corruption and crime, the financial and political risks have increased slightly, and the window of opportunity is starting to close.

According to the study, the top 15 economies underscored some interesting developments, with small countries like Gabon and Botswana ranked first and second respectively.

Ethiopia was ranked number 15 despite having

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Africa’s second largest population. The most saturated market, South Africa, took sixth position.

The A.T Kearney analysis dubbed, “Retail in Africa; Still the Next Big Thing,” used indicators like market attractiveness, country risk, market saturation and time pressure, to arrive at the ranking.

“Tanzania has a lot going for it as an attractive retail market,” said the report.

Tanzania was found to have a more attractive environment than its neighbours Kenya and Uganda because it has the largest population and the most stable economy in the EAC. Tanzania is also home to a relative stable political climate, about 50 million people, and more than 7 per cent annual Gross Domestic Product (GDP) growth.

The study says the country is starting from a low base: With only 30 per cent urbanization, high poverty levels, and less than $2,000 GDP per capita, which implies that the country is in its early stages of development.

It says therein lies the opportunity – the unsaturated market has one of Africa’s fastest growing sectors boosted by new shopping malls.

“Compare this with Kenya, which has one of Africa’s most developed markets – but also one of its most saturated,” says the ARDI study.

For investors, as the growth continues, the time may be now to establish a footprint and a brand because the economy is large enough for a mass-market concept; in addition, most of the country’s affluent population is concentrated around Dar es Salaam, which could be an attractive target for right retailer.

And when one considers the current small middle class and high poverty levels, entering the market today would require a basic value proposition and a long-term view to be successful.

Ndulu declared Africa’s Central Bank Governor of the Year

Prof. Benno Ndulu, the Governor of the Bank of Tanzania.

By Staff Reporter

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he Governor of the Bank of Tanzania, Prof. Benno Ndulu, has been awarded Central Bank Governor of the Year 2015 in Africa.

The award was announced recently by the Africa Investor (Ai), a leading international investment and communications group, during its 8th annual CEO Investment Summit in New York.

Prof. Ndulu was recognized ahead of nine other African central bank governors from South Africa, Uganda, Botswana, Sierra Leone, Rwanda, Nigeria, Namibia, Egypt and the Bank of Central African States, which caters for Cameroon, Gabon, Republic of Congo, Equatorial Guinea, Chad and Central African Republic.

The criteria used by judges to choose winners included competence in their field and a demonstration of how that competence has benefited investment in their country. They also examined each governor’s contribution to developing a hospitable environment for investment within their own country or sub-region.

The Ai Investment and Business Leader Awards reward exceptional business practices, economic achievements and investments across Africa, and recognize institutions and individuals improving the

continent’s investment climate. Other factors are contributions to economically sustainable development in the candidate’s country and to promoting Africa as an investment destination.

“Your achievements will no doubt continue to serve as an inspiration for business and government leaders working to raise Africa’s investment profile,” said Ai in their congratulatory message to Prof. Ndulu.

This is the second time for Prof. Ndulu to earn international recognition since becoming Governor in 2008. Six years ago, Emerging Markets, a renowned international magazine published in London, named Prof. Ndulu the Central Bank Governor of Africa for 2009.

The magazine recognizes achievements made by central bank governors and finance ministers by conferring them with awards during the annual meetings of the World Bank and International Monetary Fund.

The Ai Central Bank Governor of the Year award category is open to African Central Bank Governors (including Deputy Governors). This year’s summit brought together over 250 of Africa’s most prominent and influential business, government and development finance leaders, and five African heads of state.

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Finance, economy and business

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Finance, economy and business

Tanzania tightens laws in oil, gas and extractive industries

By Jovina Bujulu – MAELEZO

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wo new laws are set to tighten government control and create greater discipline in the management of resources in the energy and extractive industries in Tanzania.

Members of Parliament on 6 July passed two Bills – the Oil and Gas Revenues Bill, 2015 and the Tanzania Extractive Industry (Transparency and Accountability) Bill, 2015.Among other things, the two Bills spell stiff penalties to people misappropriating proceeds from the Oil and Gas Fund.

Contributing to the Oil and Gas Revenues Bill, 2015, Deputy Minister for Finance Adam Malima refuted the opposition’s claims that the proposed laws were lenient to embezzlers of funds derived from the oil and gas sub-sector.

“In fact, Section 21 of the proposed law clearly spells out penalties that a person who misappropriates the proceeds of the Oil and Gas Fund that will be established under this law will face,” he said.

He said a person who misappropriates the proceeds of the Fund will be liable on conviction to a fine of not less than the amount that the person has misappropriated or to imprisonment for a term of not less than 30 years or both.

Malima said that even a person who defrauds, attempts to defraud or conspires with another person to defraud the government in relation to the proceeds of the Fund, will be liable and will face similar penalties.

He also said the proposed laws impose similar penalties on a person who attempts to use or conspires with another person to use information on the Fund or documents relating to the Fund for personal benefit or to the advantage of another person.

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The Parliament building in Dodoma

In addition, he said, the court may make an order of forfeiture of assets or freezing of bank accounts in relation to an offence.

He further said that an offence committed under this Act will be deemed to be an economic crime triable in accordance with the Economic and Organised Crimes Control Act. Under the proposed law, an Oil and Gas Fund will be established to provide the framework for fiscal rules and management of oil and gas. It is proposed that the Fund will be divided into two separate accounts, all maintained at the Bank of Tanzania (BoT). These are the revenue holding and revenue savings accounts.

The Fund will be charged with receiving and disbursing oil and gas revenues to ensure maintenance of fiscal and macroeconomic stability, guarantee financing of investment in oil and gas, and enhance social and economic development so as to safeguard resources for future generations.

The Bill also provides for fiscal rules that give guidance on the financing of the government budget, financing the National Oil Company, fiscal stabilization, and saving for future generations.

It further provides for rates of such fiscal rules and the manner in which these rules may be changed.

The Bill also makes provisions relating to transparency and accountability, whereby the minister is required to publish records of oil and gas revenues and expenditures in the government gazette, websites of the government and the Ministry of Finance.

The main objective of the Bill will be to give effect to the Oil and Gas Revenue Management Policy, whose major

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aim is to ensure the revenues derived from the oil and gas industry are optimally collected and used in a manner that does not endanger fiscal and macroeconomic stability.

It is also intended that revenues accruing from oil and gas are invested in a manner that brings desired socio-economic development.

The MPs also endorsed the Tanzania Extractive Industry (Transparency and Accountability) Bill 2015, which seeks to ensure that there is transparency and accountability in the extractive industry.

The Minister for Energy and Minerals, George Simbachawene, told the House that the proposed law would help to ensure transparency and accountability in the extractive industry. He said this was in response to challenges faced by the government in managing extractive industries, including a low contribution to the national GDP as compared with the sector’s growth.

The Bill proposes the establishment of an Extractive Industries Transparency and Accountability Committee.

It further addresses the inadequate capacity of government institutions in overseeing the sector, and lack of transparency in disclosing information on investments in extractive industries as well as revenues accrued from natural resources extraction.

Mr Simbachawene said mining companies and statutory recipients were also required to submit information and data on all forms of taxes, charges made to the government and revenue, and an annual report with information on local content and their corporate social responsibility to the Extractive Industries, Transparency and Accountability Committee.

NMB to use credit bureaus, national IDs to keep defaulters away

National Microfinance Bank Managing Director Ms Ineke Bussemaker.

By Staff Writer

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redit reference bureaus and national identity cards will soon bring a major revolution in Tanzania’s banking sector, as bankers apply the two to deal with the problem of non-performing loans (NPLs).

National Microfinance Bank Managing Director Ineke Bussemaker told Insurance Times Magazine that the national identity card will be a starting point, in order to use the details to cross check with credit reference bureaus, introducing a new era to the whole country’s credit system.

“In the near future, we will not see some people fooling the banks when seeking loans. We will have room to establish the credit portfolio of the clients and then make a decision,” she said.

She said this when releasing the NMB financial

performance for the second quarter and half-year, where it was noted that the bank had maintained a good performance of NPLs at 2.8 per cent against the market average of 5 per cent.

The bank has established a special department to collect loans from defaulters, and it is also using other external institutions to implement loans collection.

Recently, NMB entered into an agreement with Dun & Bradstreet Credit Bureau to strengthen its credit management system and deal with defaulters.

“We are hoping to continue lowering the non-performing loans in order to protect our business,” said Ms Bussemaker.

National Microfinance Bank (NMB) is among institutions that are optimistic about measures to identify credible borrowers and reduce losses to defaulters.

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Entrepreneurship

Uganda group wins World Bank support for youth projects

By a Correspondent

C Nuba Elamin, co-founder of Buqisi-Ruux Collections

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onnect to Implement Development (C2iDev), a project that tackles youth unemployment by enabling young people to convert their ideas into jobs, is this year’s winner of the World Bank Group Youth Innovation Fund.

The team behind the project aims at helping youths who may not have the opportunities, links or expertise they need to take their business ideas to the next stage.

Youth unemployment affects 73 million youth around the world. Each year, the Youth Innovation Fund grants up to $10,000 for the accomplishment of inventive project ideas by individual young staff

or small teams.

The C2iDev team is currently focusing on Uganda, where youth account for 77 per cent of the population and more than 60 per cent of the unemployed. According to the 2010 World Bank Uganda Assistance Strategy, nearly 400,000 youth enter the labour force annually and it is critical to support them in their transition to employment in the wage and nonwage sectors.

This emphasis on employment for youth is not only an acute policy issue for Uganda and other emerging economies, but having jobs also lets young people gain more power as consumers, investors and change makers in their own countries. In turn, youth employment also motivates governments and the private sector to focus on innovation and developing competitive advantages.

Addressing gender inequality was also a very important factor for the project. Young Ugandan females are twice more likely to be unemployed than males, and this was considered to be a prime indicator in kick-starting a youth entrepreneurship programme in Uganda.

Through a competitive application process, 27 youths aged 18-30 were funded by C2iDev to receive intensive training in market analysis, financial planning, and business plan development to learn how to transform their burgeoning business ideas into reality. In addition, 70 per cent of the funded entrepreneurs were women.

C2iDev partnered with a local center, the Business Development Centre Uganda (BDC) to provide this business training to young entrepreneurs over 10 weeks. The team used online platforms and other information technology tools to create a global presence and keep in constant touch with the young entrepreneurs through Google hangouts, WhatsApp, Snapchat and Skype.

The training culminated in a Shark Tank style event in June 2015 in Kampala. The top 10 entrepreneurs were given a chance to compete for seed funding, as well as guided mentorship. The team of judges comprised experienced business professionals from the World Bank and the private sector.

First place went to an innovative African print shoe business, Buqisi-Ruux or “Queen of the Village”, which designs platform heels with African fabrics. The focus of the business is to sell quality

footwear in vibrant prints that speak to the diversity of the women of Africa and their multiplicity of languages, beauty and culture. Rated as one of the top five Made-in-Africa footwear brands, Buqisi-Ruux names each shoe after the woman who inspired its design.

Platform heels print shoes with African fabrics designed by Buquise-Ruux.

They are rated among the top 5 Made-in-Africa footwear brands.

“The training received at the BDC, courtesy of C2iDev at the World Bank, was definitely one of the best decisions I have made in a long time,” said Nuba Elamin, co-founder of Buqisi-Ruux Collections. “Projects like C2iDev are extremely important in working towards solving high rates of unemployment. I went into business for that very reason but it is very likely that without the opportunity to learn the important aspects of business, made available through the training, my business would have struggled to become a success.”To gain their hard won seed capital, the winners were required to train and guide at least two other youths from their community on how to launch their own business. This ensured that the trained entrepreneurs passed on their knowledge and expertise by developing new ideas into jobs, thus creating a multiplier effect.

Building on the project’s momentum, the team partnered with the Institute of

Design at Stanford to offer a free design thinking workshop for 25 entrepreneurs aiming at inspiring the essential element of creativity in problem solving, and to ensure creative ideas were acted upon.

“Many young people are graduates and still can’t get real jobs because they lack experience after graduating,” said Caitria O’Neill, “There are real opportunities for projects such as C2iDev to build a pipeline of potential employees from these graduates.”

C2iDev is eager to spout into these opportunities as it only costs about $150 (the cost of an expresso machine) to create a job in Uganda. The team is also looking for support to expand to other developing countries facing youth unemployment and underemployment around the Great Lakes region.

The young innovators involved with C2iDev come from various large funders.

This includes the World Bank Group, the International Monetary Fund, the Inter-American Development Bank and the African Development Bank.

The purpose of C2iDev is to invest in innovative ideas focusing on equal income and equal gender immersion in developing populations. It uses entrepreneurship to solve the unemployment problem, which is responsible for much poverty..

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Social Security

Social security funds now 6.3pc of Tanzania GDP

By Jovina Bujulu

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he proportion of social security funds to Tanzania’s Gross Domestic Product (GDP) has risen from 5.7 per cent to 6.3 per cent over the past two years.

This was revealed by Social Security Regulatory Authority (SSRA) Director General Irene Isaka in Dar es Salaam.

Isaka said that despite the fact that the eight social security services in the country cover only 2.1 million people, which is approximately 9.3 per cent of the population, the importance of the funds to GDP has gone up.

“Investment has been increasing at an average of 20 per cent per annum over the past five years,” said Isaka..

In her statement issued to the media in Dar es Salaam, Isaka said the value of investment from social security funds had grown from Tsh4.8 trillion in 2011/12 to Tsh6.7 trillion in the 2013/14 financial year.

“Income from investment has remained positive; for example, in 2014/15 it was 13.5 per cent compared to the inflation rate of 6.1 per cent,” she said.

The SSRA boss said that insufficient awareness of social security products and services, compounded by a large informal sector characterized by impulsive incomes, have largely affected the social security sector.

“Lack of social security coverage is in the informal sector is because many people think public pension schemes are only for employed personnel,” she said.

Tanzania’s informal sector accounts for about 87 per cent of the estimated 22.5 million-strong labour force, including workers in the agricultural sector.

These informal workers are not under contract, as they are engaged on small jobs. Many of them are self-employed and their earnings depend on the general performance of the working environment or market conditions.

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However, according to SSRA, the average increase of pensioners in social security funds has improved, from about 72,751 in the year 2011/12 to about 100,000.

In absolute terms, the National Social Security Policy recommends that action be taken to attract the informal sector by removing the obstacles that prevent informal workers from joining the system.

It recommends that this be done through legal and legitimate procedures.

“In order to win back members’ and prospective members’ confidence, social security schemes have to increase efficiency, decrease bureaucracy and enhance transparency and good governance,” Isaka said.

She said the authority had moved to initiate a member-centric approach and rolling out of services and products to suit members according to the different sectors. This also involves improving the business process of existing schemes, said Isaka.

“SSRA in partnership with the schemes and employers is implementing a policy for extension of social security to include a large part of the labour force from the informal sector, which covers small-scale agriculture, mining, fishing and petty businesses,” she said.

“We are currently encouraging supplementary schemes for different social protection needs such as health insurance, special lines of credit, pensions, and other types of benefits which are over and above the traditional benefits provided by mandatory and social assistance programmes,” she said.

Notably, this year’s record return on assets from the funds was 13.5 per cent, well above the inflation rate.

“With this return, the funds can maintain their asset classes and be able to pay benefits, which are enhanced through the Pension Benefit Harmonisation Rules of 2014, and pay other short-time benefit sustainably,” Isaka said.

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Social Security

Pensions: NSSF Uganda aims to raise $5.6b

NSSF Managing Director Richard Byarugaba

By a Correspondent - Kampala

U

All NSSF staff will be supported by excellent processes and a strong financial base to deliver better results

ganda’s National Social Security Fund (NSSF) has come up with strategic interventions to help it increase contributions from the current Ush5.8 trillion ($1.5 billion) per year to Ush20 trillion ($5.6 billion) annually by 2025.

Managing Director Richard Byarugaba said this during the third NSSF Annual Members Meeting (AMM) held in Kampala, Uganda, on October 21.

The meeting’s main agenda was strengthening of the Fund’s association with its customers and laying the foundation for the Fund’s operations for the next ten years. Byarugaba said that up to now, the Fund has based itself on effectiveness and simplicity, which has brought up a better performance than the previous year.

Byarugaba said the Fund will continue to make good financial decisions and also look into ways of nurturing small businesses in the coming years.

“The strategy that will deliver the customer experience will be based on building a strong economic base so we can secure a better life for our members, innovating and becoming more relevant to our members, excelling in business processes that affect our members, and making NSSF a pleasing place to work for our staff so they can serve our members better,” Byarugaba said.

All NSSF staff, he said, will be supported by excellent processes and a strong financial base to deliver better results and give members a reason to stay in the Fund.

Over the next 10 years, the Fund hopes to achieve

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growth in customer contentment to over 90 per cent, offer members with a return of at least 2 per cent above the 10-year inflation rate, grow the Fund size to Ush20 trillion ($5.6 billion) and become one of the best pension Funds worldwide.”

Treasury Permanent Secretary Keith Muhakanzi said Uganda was keen to see that NSSF, which is the country’s national pension scheme and its largest financial institution, continued to remain a major player in the sector and played an even bigger role in the economic development of the country.

The NSSF holds the meeting annually to update its members and other stakeholders on the state, performance, goals and outlook of the Fund. It is also a forum where the Fund receives feedback and responds to concerns from members through an interactive session.

This Annual Members’ Meeting recognized the most complaint contributors through the Employer Compliance Awards. Up to 25 institutions and companies were awarded in different categories including the best employer per branch across the Fund’s 19 branches.

The meeting attracted over 700 people from various walks of life. “To build a strong financial base, we aim at preserving our members’ savings through prudent investments that provide a real return to members. This will be determined by improvement in compliance and unlocking the value in key projects in Lubowa, Pension Towers and Temangalo,” Byarugaba said.

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Social Security

Britam vs Acorn: How takeover bid fuelled $388m war

Acorn has claimed that Britam’s unsuccessful push for a majority stake in the property firm was the reason for the falling out and was what had triggered the court battle.

By Anne Kiruku

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A

bid for a majority stake by Britam Holdings in Acorn Group is said to have been behind one of Kenya’s most vicious corporate battles, which came to an end after the two firms agreed on the terms of an out-of-court settlement.

The legal battle, which is a classic case of partners turned foes, began in November 2014 after four top executives at Britam resigned to form their own advisory company, Cytonn Investment.

Within weeks of its formation, Cyntonn was appointed the lead transaction advisor for a series of projects estimated to be worth Ksh40 billion ($388 million), which included a large proportion from Acorn. Cytonn had apparently bagged several projects they had initiated while its directors were still working at Britam’s asset management subsidiary. Britam refused to take it lying down: The company moved to court and sought to have the real estate developer’s accounts frozen.

Acorn has claimed that Britam’s unsuccessful push for a majority stake in the property firm was the reason for the falling out and was what

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had triggered the court battle.

In fact, Acorn Chief Executive Officer Edward Kirathe traces the roots of the falling out to his rejection of a proposal made by Britam Managing Director Dr Bension Wairegi for the latter to increase its stake in Acorn.

“When Britam realized that Acorn was not willing to accede to their demands to enable them acquire a larger equity interest, they orchestrated a deliberate plot to arm-twist Acorn by unilaterally withdrawing funding,” Mr Kirathe said Britam bought a 25 per cent stake in Acorn in November last year and was said to have been keen on getting a majority stake in the property firm, whose client list includes such top firms as Coca-Cola East Africa, Deloitte East Africa and Equity Bank.

The High Court has now approved an outof court settlement between the two firms. Britam, which is also listed on the Nairobi Securities Exchange, is a diversified financial services firm with interests in insurance as well as asset management. Acorn is a property management development company.

A suit between Britam and its former em-

ployees will however proceed. This is because the agreement reached is between Britam and Acorn only and excludes the ex-employees of Britam, who were part of the respondents. Britam accuses the former employees of using their positions to siphon money from the company and forming rival companies dealing in similar services.

The dispute, pitting Britam on the one hand against Acorn and Britam’s former employees on the other, started late last year in what became one of the most high profile court battles in Kenya’s corporate history.

Britam, through its lawyers led by Fred Ngatia, filed five suits against Acorn and its affiliated entities, as well as former employees, in a bid to recover over Ksh5 billion ($48.5million) in cash and land that it said had been irregularly transferred from Britam to Acorn and its related entities by Britam’s former employess.

Acorn retaliated by filling a judicial review application at the High Court stopping criminal and civil proceedings.

The legal tussle has seen some of the Acorn employees arrested and detained for several days in police cells.

The settlement recorded in court effectively withdraws the lawsuits between the two companies. Under the agreement, Acorn Group will return to Britam the irregularly transferred funds and land, which had been acquired without the requisite approval and authority from Britam board.

On its part, Britam has agreed to relinquish its interest in Acorn Group and projects initiated by the firm on Jogoo Road, Baba Dogo, Lavington and Kitengela suburbs in Nairobi. Under the terms negotiated, Britam has further agreed not to pursue any criminal complaints against Acorn or any of its directors.

“Under the terms of the settlement, Britam and Acorn have agreed to pursue their real estate strategies independently.

The settlement is only between Britam and Acorn” said Dr Wairegi.

Following the legal settlement, Britam will recover high-value land in Nairobi which includes five acres in Kileleshwa, 2.5 acres in Mlolongo and 182 acres in Lukenya, Machakos County. The projets have an estimated value of Ksh40 billion ($388 million). Acorn has also agreed to transfer to Britam the mandate to operate the various bank accounts and cash balances in relation to these projects.

Suits and counter-suits defined tussle between Britam, Acorn

By Anne Kiruku In November last year, Britam’s senior employees Edwin Dande (Chief Executive), Elizabeth Nkukuu (Portifolio Manager), Shiv Arora (Investment Analyst) and Patricia Wanjama (Head of Legal Affairs) quit to form Cytonn Investment, a consulting firm. The four were later dragged to court with accusations of illegally transferring money to bank accounts held by Acorn Group, a real property developer where Britam held a 25 per cent stake.

Britam also accused Acorn and Acorn’s associated firms of a conspiracy to defraud the company. On November 12, 2014, it moved to the High Court and filed a case to have the bank accounts of their former employees frozen. The civil division judge, David Onyancha, further upheld the ruling to extend the orders on November 26; he said this was in order to preserve the application filed by Britam Ltd and to ensure the money and title deeds which were subject of the suit before the court were not interfered with. The judge further stopped any transfer of the properties traced and purportedly acquired using the illicitly transferred funds.

Acorn immediately fired Britam as lead transaction advisor in its real estate development projects and hired Cytonn, the firm associated with Britam’s former employees.

Jude Brian Anyiko, the then acting Chief Executive Officer of British American Asset Managers (BAAM) swore an affidavit saying that the four employees had held positions of trust and were in a fiduciary relationship with BAAM. They allegedly breached the trust bestowed upon them and hatched a conspiracy to make payment and execute contracts without approval. BAAM is the asset management arm of Britam.

One of the unauthorised contracts executed without authority of the board was a joint venture agreement to make monetary contributions to real estate development projects under and controlled by Acorn and affiliated companies.

Britam claimed that it conducted internal investigations and a legal audit, which were done by Coulson Harney Advocates, and discovered that the four employees had instructed transfer of funds without authority of the

board and relevant investment committees.

A whopping Ksh1.1 billion ($10.7 million) was paid off as “expenses” but instead siphoned to various firms associated with Acorn, including Edenvale Development LLP, Starling Park Properties, Crimsom Court Development LLP, Sinopia Properties LLP and Mikando Properties LLP. BAAM claimed that Acorn used the money to purchase properties in Nairobi, Machakos and Kajiado counties.

A further unauthorised transfer of Ksh2.7 billion ($26.2 million) was made to firms owned and controlled by Acorn, including Crescent Development LLP. BAAM accused Acorn of dishonesty for receiving seed capital for its development projects from funds “illegally and fraudulently transferred from BAAM.” Cytonn, in its response to Britam’s affidavit, insisted that the transfers were approved

by BAAM’s designated signatories and that the suits were a wild goose chase aimed at arm-twisting Acorn into selling a majority stake to Britam.

“I personally informed the board of the deal pipeline; the Britam executive committee was also aware of the deal pipeline. These disbursements had been approved prior to release of the funds,” said Cytonn CEO Edwin Dande.

Acorn, in response, filed an application seeking that Justice David Onyancha disqualify himself from the case. It argued that Britam’s advocate Fred Ngatia acted for the judge in other suits, raising questions of conflict of interest.

The case has been ongoing, with Britam pushing for the arrest of its former employees and Acorn executives for criminal offences.

The accused hit back at Britam by filing a petition in the Judicial Review Division of the High Court where they claimed that the investment firm had in fact not lost any funds, but was using suits in the civil division to blackmail them.

The main tussle, which was between Britam and Acorn and had attracted a multiplicity of lawsuits, has now come to an end with the out-of-court settlement.

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Social Security

Unmasking the bitter foes: Britam, Acorn and Cytonn

By Anne Kiruku

By Anne Kiruku

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he three corporate entities that have been embroiled in the highly publicised legal tussle all have interests in Kenya’s growing real estate sector, even though Britam has a much longer history in the corporate world than the other two.

Britam Britam, which changed its name to Britam Holdings Ltd in June, is a financial services provider quoted on the Nairobi Securities Exchange, where it was listed in September 2011. The company has 30,000 shareholders. It has interests scattered in the Eastern and Southern Africa region with offices in Kenya, Uganda, Tanzania, Rwanda, South Sudan, Mozambique and Malawi.

Dawood Rawat, a Mauritian, and Jane Michuki, a Kenyan and managing partner at Kimani and Michuki Advocates, each control shares worth more than Ksh1 billion ($9.7 million) in the company. Some of the other top individual shareholders include investment banker Jimnah Mbaru, Equity Bank chairman Peter Munga, Equity Bank CEO James Mwangi and Britam CEO Benson Wairegi.

The company offers a wide range of financial products and services in insurance, asset management, banking and property.

The firm’s product range includes life, health and general insurance, pension, unit trust, investment planning, wealth management, off-shore investment, retirement planning, discretionary portfolio management, property development and private equity.

Britam Holdings Ltd began its operations as Britam Insurance Company (Kenya) Ltd in 1965. A local company was incorporated in 1979, and Britam Asset Managers was established in 2004.

As at 30 June 2014, the insurance company had an asset base of over Ksh55 billion ($534 million). The firm, which diversified into financial services provision, boasts of 548 permanent employees and 1,946 financial advisors.

The company is headed by Chief Executive Officer Dr Benson Wairegi.

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Old and truly moneyed? Britam unveils 10-year plan for retirees

Cytonn Investment Cytonn is an investment consulting firm offering alternative investment solutions to institutional and individual high net-worth investors, both local and international, who are interested in the East African region.

The firm says that they offer alternative investment solutions based on four main products: real estate, structured solutions, private equity, and advisory. The firm prides itself in its ability to focus on alternative investment to find common value and returns for their clients, since most investment opportunities in sub-Saharan Africa are not in the listed market.

The firm was formed in 2014 by four former employees of Britam: Edwin Dande (Chief Executive), Elizabeth Nkukuu (Portifolio Manager), Shiv Arora (Investment Analyst) and Patricia Wanjama (Head of Legal Affairs).

The company is headed by Edwin Dande, who is the managing partner and chief executive officer.

Acorn Group Acorn Group is a real estate company offering property development and property management expertise in the delivery and orchestration of developments in East and Central Africa.

One of the key focus areas of the company is to respond to socio-economic trends and provide developments that satisfy the needs of local communities.

The demand for affordable housing has been growing significantly due to urbanisation, the growing middle class and the increasing youthfulness of the population, and so this has informed the growth portfolio of the company.

Some of the shareholders of Acorn Group are Real Insurance, which is owned by former KenGen CEO Eddy Njoroge; Coca Cola East Africa; Deloitte East Africa; and Equity Bank.

The company is headed by Edward Kirathe, who is the chief executive officer.

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he British-American Investment Company (Britam) has unveiled a new product targeting retirees who don’t want to take all their retirement money with them

home.

The product, to be marketed as the Platinum Drawdown Plan, is available to individuals aged 50 years and above. The asset management and insurance company said the new product will allow retirees to re-invest and take away some portion of the fund as income.

A policy holder will be required to invest a minimum of Ksh5 million ($48.5 million) from their retirement fund. One can also continuously top up the initial amount from other sources.

A policy holder will also be required to pay an initial fee of 3.5 per cent of the lump sum, for which the company may decide at its discretion to give a discount.

According to the firm, last year Ksh5 billion ($485,500) worth of retirement money came into the market. “There has been a growing demand from the market on how retirees can make their pension income work for them after retirement, hence the diversification and the launch of the new product,” said Britam’s Chief Executive Officer Benson Wairegi.

The new product is being unveiled at a time when there has been increased pressure on the industry to innovate and increase its penetration of various demographic groups.

According to the Insurance Regulatory Authority, insurance penetration in Kenya has remained low at less than three per cent in most product lines; insurance penetration decreased from 3.4 per cent to 2.8 per cent last year. This realization has not only attracted foreign investors into the industry, but has also pushed the demand for new products higher.

The firm says that pension benefits under the new plan will be invested with capital guarantees against investment losses for a minimum of 10 years. After this period, the policy

holder can receive a refund of the remaining fund, continue with the Drawdown arrangement, or purchase an annuity to provide an income for life. The retirees should be having retirement benefit savings in a scheme registered with the Retirement Benefits Authority.

The company says that the product will allow retirees to reinvest and grow their retirement fund since the fund will be invested in a guaranteed fund, where it will continue to grow as the customer accesses the income. The customer will also have the ability to choose their income, with every year the customer choosing to access any amount up to a maximum of 15 per cent of the lump sum deposited, as long as the fund will run for a minimum of 10 years.

The company says that the product will allow flexibility on frequency of income, and clients can choose not to access any income until a later date or to vary the frequency of accessing the benefits every year to suit individual income needs.

The company is also targeting retirees who want to purchase an annuity at a later date, or have other sources of income and do not need a guaranteed income from their retirement savings. “It is also an option to members of provident funds and retirees who choose not to take away or use all their benefits as a lump sum.

It also suits those who wish to leave an inheritance to their beneficiaries,” said Mr Wairegi. If one dies, the balance in one’s fund is passed over to the nominated beneficiaries.

“If the deceased was above 65 years, beneficiaries get favourable tax treatment since the benefits are not taxed,” added Mr Wairegi.

Britam is keen on growing its market base and is looking at bancassurance, where insurance companies are partnering with banks to sell insurance products in banking halls, as a new revenue drive.

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Science and technology

Airtel rolls out insurance for mobile subscribers

By Nelius Njagi

An interesting part of the deal is that customers are not restricted in how to spend their airtime – whether voice, messages or data.

I

n what can perhaps be called a stroke of genius, the Airtel mobile network in Kenya has developed a free life insurance cover for all its customers.

Dubbed the Airtel Free Living Plan, the new policy will benefit Airtel customers above the age of 18 who will have registered through their mobile phones by dialing a short digit code.

The policy is based on how much airtime is spent within a month. The month is counted as 30 days beginning the time one has officially registered. The insurance policy covers life, accidents and hospitalization.

Due to the conditions of the policy, it has been ranked as one of the most friendly medical cover policies in the country, especially because it has no exclusions.

The new arrangement is being rolled out through partnership with Pan African Life Insurance and Micro-ensure. Pan African Life Insurance is one of the oldest insurance companies in Kenya, while Micro-ensure is famous for policies that mostly favour middle and low-income individuals. Together with Airtel, they plan to fund the project that promises to bring affordable insurance to more Kenyans.

The airtime to be spent is the sole determinant of how good a cover any subscriber will enjoy. The least amount that can be spent in order to qualify for the covers is Ksh250 ($2.5). This allows one to get a cover for Ksh1,000 ($9.7) in hospitalization, and Ksh10,000 ($97) in life and accident cover. The largest cover is when one spends Ksh2,500 ($24.3) and above; this immediately qualifies for Ksh10,000 ($97) in hospitalization and Ksh250,000 ($2,430) in life and accident cover.

In between these rates is Ksh500 airtime, which

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is awarded Ksh2,000 ($19.4) in hospitalization and Ksh25,000 ($243) life and accident cover. If one spends Ksh1,000 ($9.7) in airtime, this qualifies the subscriber to obtain a cover worth Ksh5,000 ($48.5) in hospitalization and Ksh100,000 ($970.8) in life and accident cover.

An interesting part of the deal is that customers are not restricted in how to spend their airtime – whether voice, messages or data. According to a local Airtel agent, Pamela Kimani, once a customer registers for the plan, a record of all forms of airtime usage is kept.

“Whether you call or subscribe to other services that charge you airtime, your usage counts when it comes to awarding the insurance cover.”

The Airtel cover was launched in July but is expected to take effect in hospitals as from November 2015.

Perhaps the most intriguing part of the deal is that there are no limits as to how the airtime is spent. A record of airtime usage, whether for calls or messages, is kept to find out how much one will have spent in an entire month.

With only three per cent of Kenyans buying insurance covers, insurance has never really been a priority for a majority of the country’s citizens, never mind the rising cases of accidents and hospitalization.

The policy proves to be friendly for even the average student. According to a customer, Ogenia Nawire, spending at least Ksh250 ($2.5) per month is very easy for her, considering all the phone calls and online activities she participates in. “I find the policy very affordable; at least now when I spend airtime, I get medical cover too.”

Reducing wastage through food technology: FPPE 2015 leads the way

By Nelius Njagi

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anufacturers and specialists in the food industry who converged on Nairobi at the beginning of November for the third edition of the Food Processing and Packaging Exposyum (FPPE) were agreed on one thing: food wastage can be greatly reduced through the use of appropriate technology.

The Insurance Times Magazine participated in the exhibition, which also featured such well-known names as Bosch and Multivac. Others included the Kaak Group, Mitsui Chemicals and Gustav. The Kenya Private Sector Alliance and Kenya Association of Manufacturers also participated in the exposyum.

With 18 German companies showcasing their latest technology and services, the exposyum presented an excellent opportunity for Kenyan stakeholders in the industry to meet leading manufacturers of machinery for the production and packaging of food and beverages, and learn about the latest developments and trends in the sector.

Guests and experts converging at the Kenya International Convention Centre (KICC), where the event was held from 3-5 November, were treated to exhibitions and a series of seminar talks. The expo was spearheaded by German firm Messe Dusseldorf. The exposyum was aimed at manufacturers of machinery, plants, processes and services for the food processing and food packaging industry.

The event kicked off with an official welcome address from the director of FPPE and Dusseldorf Germany, Thomas Dohse.

Others who spoke included Deputy German Ambassador to Kenya Michael Derus and Principal Secretary in the Ministry of Industrialization and Enterprise Development Dr. Wilson Songa.

Most of the booths displayed breakthroughs in technology that enhances packaging of food in ways that reduce wastage.

Among the most outstanding was one from Coveris, a European-based company that has spread to all major European markets. The company’s packaging technology offers a longer shelf life for perishable products.

The theme “Save Food” dominated presentations at the conference accompanying the exhibition. This was organized by the collaborators of the Save Food Initiative: the Food and Agriculture Organization, the United Nations Environment Programme and Messe Dusseldorf. It aimed at encouraging dialogue and awareness on food losses and what various industries, policies and research can do about it. The vision is to bring stakeholders

involved in food supply together and support them in developing effective measures to aid in stopping food losses.

The event was supported locally by ikapaMedia EastAfrica, who provided press coverage, photo sessions and technical support. Kenyan companies at the event included Azuri, whose booth offered an interesting way of ensuring food preservation through drying and packaging.

The event attracted participants from about 10 countries, including East Africa. Speakers were drawn from as far afield as Germany, Nigeria, Burundi, the Netherlands and Benin.

Meanwhile, ikapaMedia will early next year host the Water, Electricity and Power Expo (Wepex 2016) at KICC. This is the leading platform in East Africa for Water, Electricity and renewable energy sectors and will take place from 2-4 February.

The exhibition is being organized jointly with 2Art Fair based in Egypt.

Over six countries from around the world will be expected to participate, showcasing the latest technologies and equipment as well as sharing ideas and best practices with the world’s leading players in the water, electricity, power and renewable energy sectors.

Among others, the expo will aim to assist and facilitate exhibitors to access business and investment opportunities in Kenya and the East African Region, as well as facilitate technology transfers in the water and energy sector.

Nurdin Mohammed of Insurance Times at the magazine’s stand at the Food Processing and Packaging Exposyum in Nairobi. The exposyum included presentations by various companies and professionals (bottom left).

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Climate Change

From lower harvests to climate change, Zanzibaris have reason to worry

The possible effects of climate change are just one of the many problems facing the coastal communities of Zanzibar.

By Jovina Bujulu

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ffected by illegal fishing practices and climate change, small-scale fishermen in Zanzibar are embracing ecotourism and seaweed farming in a desperate effort to conserve coastal ecosystems and grow the local economy.

Seaweed farming has long provided a decent livelihood in Zanzibar, an archipelago of islands off Tanzania. During lower tides, seaweed farmers – most of them women – wear traditional Swahili dress as they harvest, half-submerged in the blue-green water.

Commercial-grade seaweed has many uses, from toothpaste to a food additive. However, local fishers complain that the water is slowly warming, resulting in less seaweed. For the year 2014/2015, they harvested four tonnes of seaweed less, due to the warming climate.

The possible effects of climate change are just one of the many problems facing the coastal communities of Zanzibar, which is known for as a rich melting pot of cultures. The island also boasts a lush marine ecosystem and stately coral reefs. For centuries, coastal dwellers have based their livelihoods on marine and

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coastal resources.

The fishing village of Kizimkazi is illustrative of this reliance on the Indian Ocean. It is a fishing hub for villagers within the Menai Bay Conservation Area, a protected ecosystem where tourists visit to see the abundant sea turtles, coral reefs, and bottlenose dolphins.

Amina Taku, a 70-year-old resident of Kizimkazi, rises at dawn in time for the high tide so as to collect shellfish for sale to hotels. She and other fishers, who have been working since the 1970s, say they have observed diminished returns as the fish population declines, and with it the catch size.

“I have been fishing since 1973,” said Shaaban Foum Haji. “We used to have a lot of fish, but today we can go fishing for two days and come back empty-handed, with nothing or just enough to pay the fuel cost.”

These hard times have now seen the return of the unsafe and devastating practice of blast fishing in Tanzania. Blast fishing – which involves dropping explosives into the water – has recently reached wor-

Seaweed farmers in Zanzibar

rying proportions. It takes only about $8 worth of dynamite to stun and kill about 400 fish. Moreover, the business of buying and selling dynamite has increased the risk of insecurity across the country.

“We face many challenges,” says Ramla Talia, project coordinator. “Blast fishing ruins the entire ecosystem and biodiversity by turning coral reefs into ashes and destroying all kinds of fish species. Illegal fishing by industrial trawlers is another issue that, along with the volatility of climate change, deeply impacts livelihoods in the region.”

In preparation for its engagement in the Indian Ocean region, the World Bank identified key high-value fisheries as well as obstacles to their effective management.

The new South West Indian Ocean Fisheries Governance and Shared Growth Program (SWIOFish) includes Comoros, Madagascar, Mauritius, Mozambique, Tanzania and Seychelles.

In Tanzania, SWIOFish focuses on tuna, prawns, small pelagics, octopus, reef fisheries and mariculture such as seaweed, to enhance the economic importance of these fisheries and mariculture to local employment.

“The integrated regional approach of SWIOFish brings in coastal communities on the Indian Ocean as co-managers of their own resources,” says Ann-Jeanette Glauber, project task team leader. “The project focuses on priority fisheries, the longstanding problem of blast fishing and the relatively low private sector investment in marine fisheries to-date.”

The project’s predecessor, the Marine and Coastal Environment Management Project (MACEMP) covered 147 communities and included a wide range of activities. The new $36 million SWIOFish Tanzania Project fo-

cuses more intensely on priority fisheries in 60 communities and targets a transformation of livelihoods through the improved governance of priority fisheries.

Coastal community involvement is the foundation of the project, which seeks to work in partnership with the government in daily management of marine resources. Communities also develop ecotourism opportunities by participating in the management of the Menai Bay Conservation Area – a popular haven for whale tourism, fishing and diving – as well as Jozani Chwaka Park, known for its mangroves and rare colobus monkeys.

There is hope that with good governance, ecotourism and private sector investment will gradually transform livelihoods through the development of the fisheries sector.

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Tours and Travel

Land of Wonders: Of the 7 great sites in Africa, 3 are in Tanzania

By Jovina Bujulu

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f the Seven Natural Wonders of Africa, three are from Tanzania! These are the Ngorongoro Crater, the Serengeti National Park and Mt. Kilimanjaro. The Ngorongoro Crater is the Cradle of Mankind, where it is said that the first man made his first steps.

Tanzania is a fabulous nation, covering 804 km of some of the finest unpolluted beaches in Africa. Its white sandy striking beaches provide a serene atmosphere for relaxation and sunbathing. Situated off-shore are Zanzibar and Pemba, the exotic �twin spice islands� that are famous for their history and beaches.

The Mafia Island Marine Park, located south of Dar es Salaam, is presumed to be one of the most thrilling diving locations in the world. Further south, there is another marine park, the Mnazi Bay Park, which is excellent for diving and other marine sports.

Tanzania is the only country in the world to have allocated nearly 28 per cent of its total land area for wildlife conservation, which includes the World Heritage Sites. It came as no surprise, therefore, that the Travel & Tourism Competitiveness Report of the World Economic Forum placed Tanzania second worldwide (after Brazil), for its natural environment, several World Heritage natural sites, rich fauna, and its large-protected land area.

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The country boasts of seven World Heritage Sites: Ngorongoro Conservation Area, Serengeti National Park, Selous Game Reserve, Stone Town, and Zanzibar, the ruins of Kilwa Kisiwani and Songo Mnara, as well as the Kondoa rock art site. There is also the luminous Mount Kilimanjaro, which offers a trekking experience to summits of the highest free standing mountain in the world.

With a population comprising more than 120 ethnic communities, Tanzania boasts a rich history and diverse cultures. It’s people are considered some of Africa’s most warm, charming and hospitable people, offering the richest of African culture for international visitors.

Also known as “Africa’s Haven of Peace”, Tanzania is one of Africa’s most peaceful and politically stable countries, both in terms of national security and safety on the streets. It is a flourishing democracy and prospering economy.

Last summer, Sunderland AFC announced that it had pioneered a football partnership with Tanzania. The club received a delegation from Tanzania led by President Jakaya Kikwete and

Symbion Power CEO Paul Hinks.

The delegation met with senior club officials and city leaders, including SAFC Chairman Ellis Short and CEO Margaret Byrne.

Sunderland’s partnership in Tanzania continues to develop, with Commercial Director Gary Hutchinson’s recent visit to the East African country further strengthening the bond between this astoundingly beautiful country and Barclays Premier League members Sunderland.

If you are the kind of person who becomes mesmerized by wildlife programmes on TV, then the new seventh wonder of the world – the Serengeti – is the place for you. This is where the world’s largest and most spectacular animal migration takes place.

Tanzania teems with a large quantity of wildlife. The Selous, for example, is the world’s largest Game Reserve; other national parks include Lake Manyara, Tarangire, Arusha, Mahale, Gombe, Katavi, Rubondo, Katavi , Mkomazi, Mikumi and Ruaha. All of these are home to millions of magnificent and easily viewed wildlife.

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Tours and Travel

TTB targets West Africa in tourism push At present, most tourists visiting the country come from Europe and the United States.

TTB Acting Managing Director Devotha Mdachi.

Kampala, Uganda.

By Staff Writer

T

he Tanzania Tourist Board (TTB) expects more visitors to start streaming in from West Africa as it seeks to make the country a preferred destination in Africa.

This follows the signing of a Memorandum of Understanding (MoU) between the Board and the travel trade website Wakanow.com, a Nigerian travel booking portal.

This is part of the country’s drive to expand source markets of holidaymakers visiting the country. At present most tourists visiting the country come from Europe and the United States.

According to TTB Acting Managing Director Devotha Mdachi the MoU signed in September in Dar es Salaam aims at promoting tourist destinations in both Tanzania and West Africa.

The organization’s market diversification efforts are already having an impact in Asia, where Tanzania is now attracting more visitors, particularly from China and Japan.

Mdachi told Insurance Times Magazine that Wakanow.com will promote Tanzania’s attractions on its website and air them on DSTV and the Ebony TV Channel travel show.

“Before we signed the MoU, Wakanow.com officials were in the country to scrutinize and understand Tanzania’s tourism prospects and attractions, so that the two organizations can work together to promote them in Nigeria and

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other parts of the world,” Mdachi said.

At present, income from tourism and travel accounts for 17.5 per cent of Tanzania’s GDP. In 2014/2015, Tanzania hosted around 1.14 million holidaymakers, and a million holidaymakers-cum-business travelers, all of whom earned the economy nearly $1.9 billion.

The sector employs close to half a million people directly, and contributes almost 25 per cent of total export earnings. According to Bank of Tanzania figures, tourism has overtaken gold as the country’s leading foreign exchange earner.

The central bank’s latest Monthly Economic Review shows that forex earnings from travel trade improved from $1.75 billion in the year ending June 2013 to $1.97 billion during the corresponding period in 2014.

Likewise, this year, the tourism sector earned up to $2.19 billion. Income from gold, by contrast, has declined over the past three years.

The July 2015 MER shows that gold fetched $1.89 billion in the year ending June 2013, but raked in $1.47 billion during the same period in 2014. During the year ending June 2015, foreign exchange earnings from gold exports slumped further to $1.22 billion.

Mdachi is optimistic about the future. She says the TTB international tourism promotional campaign is paying off well, with the country now experi-

Insurance Times | Dec 2015 - Jan 2016

encing more tourist arrivals compared to past years.

According to the five-year tourism marketing blueprint rolled out in 2013, Tanzania expects to host two million tourists by 2017. The target is to boost forex income by doubling revenue from the current level of $2 billion per annum.

The predictable growth has led to an increased demand for hotel capacity and calls for more flights to the country.

At present, the country focuses on wildlife conservation and sustainable tourism, with about 28 per cent of the land being protected by the government.

This is the largest percentage of any country worldwide.

The World Bank says that tourism in Tanzania has a large potential for growth, not only for boosting foreign exchange earnings but also creating more jobs.

To achieve this, diversification of tourism activities is being emphasized.

There are recommendations to further integrate local communities and small operators into tourism activities, through benefit-sharing processes. Additional review will involve the current complex system of taxes and fees, as well as the non-transparent use of revenues collected from tourists.

Tanzania’s famous attractions include Mt. Kilimanjaro, Serengeti National Park, Ngorongoro Crater, and the saline beaches of Zanzibar.

ASSAUD: Uniting university students in the actuarial profession

By Alfred Obed L. - UDSM

ASSAUD stands for “Actuarial Science Student Association of the University of Dar es Salaam.” As a student-run association, ASSAUD deals with actuarial science at the University of Dar es Salaam.

As a discipline, actuarial science uses mathematical and statistical methods in insurance and financial theorem to assess financial risks. In other words, it applies the mathematics of probability and statistics to define, analyse and solve financial implications of uncertain future events.

Traditional actuarial science largely resolves around the analysis of mortality and the production of life tables, and the application of compound interest.

What does ASSAUD do?

ASSAUD strives to provide members with a better understanding of the actuarial field, and creates the opportunity to build relationships among actuarial students and faculty. In this case, it exposes students to professional applications of actuarial science, provides resources for actuarial students and engages in positive community volunteer work.

ASSAUD is also dedicated to educate the public on what “Actuarial Science” is and what one can do/become when he/she pursues a degree in Actuarial Science at the University of Dar es Salaam or at any other university around the world. We do this by visiting high schools and teaching students on the subject and also giving the tips on what it takes to be an actuary.

Who is an actuary?

An Actuary is a business professional who deals with the financial impact of risk and uncertainty.

Actuaries have a deep understanding of financial security systems, their reasons for being, their complexity, their mathematics and the way they work.

We run a variety of events to strengthen our students’ leadership, networking, professional, and actuarial skills. Actuarial science students can meet with different officials in different insurance companies, social security and pension funds, the stock market (DSE), banking and financial institutions and the government, where the students can present themselves and get to learn more about those fields.

ASSAUD also operates an alumni wing where graduate students from actuarial science at the University of Dar es Salaam can meet with current students in to exchange ideas and share experiences on their work in the actuarial field.

Membership requirement Members of ASSAUD shall be, or shall have been, students at the University of Dar es Salaam who are pursuing (or have pursued) a BSc in Actuarial Science programme.

Members may also be frequently asked to donate some amount of money for the association to fulfil its regular programmes.

A career in actuarial science utilizes a person’s knowledge in mathematics, economics, finance, and risk theory in the business world. Our members range in age from freshmen to graduate students. We encourage interaction among students, faculty, and industry professionals.

Contact us: Phone: +255(0)786991422 +255(0)689746610 Facebook: https://www.facebook.com/ASSAUD.GR

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Ideas of Dr. Saqware

IFM certifies ‘Insurance Times’ for sector use

An instrumental figure in Tanzania’s insurance sector, the scholar will write a regular column, ‘Ideas of Dr. Saqware’

The Dean of the Faculty of Insurance and Social Protection (FISP), Dr. Baghayo Abdallah Saqware.

By Staff Writer

T

he Faculty of Insurance and Social Protection at the Institute of Finance Management in Dar es Salaam has endorsed Insurance Times Magazine, calling it an informative and educative tool for insurance and related disciplines. It has consequently recommended its use in academic institutions.

The endorsement is an acknowledgement of the magazine’s incisive coverage of the insurance and social security fields in Tanzania and across the region.

In a letter to the magazine, the dean of the faculty, Dr. Baghayo Abdallah Saqware, recommended that insurance practitioners and related fields should use the magazine to publicize their business products, so as creating a common access point and source for all information about the industry.

Dr. Saqware has agreed to contribute professional articles for publication in Insurance Times Magazine in the field of risk management and social security.

This is in keeping with the magazine’s philosophy and aims, enabling professionals in the industry to contribute articles and provide critical information to enrich our coverage of topical issues in the insurance industry.

Dr. Saqware is an instrumental figure in Tanzania’s insurance sector. Insurance Times Magazine will be hosting a page, to be known as the “Ideas of Dr. Saqware,” in which ideas on risk management and social security industry will be discussed.

This is in line with our passion to give readers professional insights on the insurance industry and related disciplines, including information on the latest research into the sector.Insurance Times Magazine expresses its appreciation to Dr. Saqware, the Faculty of Insurance and Social Protection, and the Institute of Finance Management for their continued support as we deepen our cooperation for the good of the insurance industry in Tanzania and beyond.

To advertise, call Tel: +255 22 2184624 Dar es Salaam, Tanzania Published by Zurich Group Ltd 78

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Entertainment

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Cryptic message from the past leads James Bond (Daniel Craig) to Mexico City and Rome, where he meets the beautiful widow (Monica Bellucci) of an infamous criminal.

After infiltrating a secret meeting, 007 uncovers the existence of the sinister organization SPECTRE. Needing the help of the daughter of an old nemesis, he embarks on a mission to find her. As Bond ventures toward the heart of SPECTRE, he discovers a chilling connection between himself and the enemy (Christoph Waltz) he seeks.

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Star Wars: The Force Awakens L

ucasfilm and visionary director J.J. Abrams join forces to take you back again to a galaxy far, far away as Star Wars returns to the big screen with Star Wars: The Force Awakens. The film stars Harrison Ford, Mark Hamill, Carrie Fisher, Adam Driver, Daisy Ridley, John Boyega, Oscar Isaac, Lupita Nyong’o, Andy Serkis, Domhnall Gleeson, Anthony Daniels, Peter Mayhew and Max Von Sydow.

Kathleen Kennedy, J.J. Abrams and Bryan Burk are producing with Tommy Harper and Jason McGatlin serving as executive producers.

The screenplay is by Lawrence Kasdan & J.J. Abrams and Michael Arndt. Star Wars: The Force Awakens releases in U.S. theaters on December 18, 2015

The Last Witch Hunter

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he modern world holds many secrets, the most astounding being that witches still live among us. Centuries ago, Kaulder (Vin Diesel) managed to slay the all-powerful Witch Queen, decimating her followers in the process. Before her death, she cursed the valiant warrior with her own immortality, separating him from his beloved wife and daughter in the afterlife. Her resurrection now threatens the survival of the human race as Kaulder, the only one of his kind remaining, faces her vengeful wrath.

No Escape

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n intense international thriller, No Escape centers on an American businessman (Wilson) as he and his family settle into their new home in Southeast Asia. Suddenly finding themselves in the middle of a violent political uprising, they must frantically look for a safe escape as rebels mercilessly attack the city. Directed by John Erick Dowdle and written together with his brother Drew, No Escape stars Owen Wilson, Pierce Brosnan and Lake Bell.

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Sports

Where speed meets talent: The world of Thomas Ulimwengu

The young player has been described as a quick, balanced, highly skilful and powerful striker.

By Mwirabi Sise

T

homas Emanuel Ulimwengu was born on 14 June 1993 in Dodoma region, where he played for a local club team at Area C. Dodoma is the capital of Tanzania.

At the age of 14, Ulimwengu was selected for the Dodoma Region under-seventeen team (U-17). Soon after, he was selected through a nationwide talent search to join the first class of the Tanzania Soccer Academy, a joint project between the Tanzania Football Federation and British investors.

Ulimwengu impressed the soccer academy and

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In the 2009/2010 Tanzania Premier League season, Ulimwengu played on-loan for Moro United.

was soon called up to the Tanzania U-17 national team. He was joint top scorer in the 2009 CECAFA U-17 Championship, in which Tanzania finished second. After his good performance in the competition, Ulimwengu was regularly called up by coach Marcio Maximo to practise with the senior national team, the Taifa Stars.

In the 2009/2010 Tanzania Premier League season, Ulimwengu played on-loan for Moro United.

The following summer, he represented Tanzania in the 2010 Copa Coca Cola African Championship in

Thomas Ulimwengu in action

South Africa, where he scored nine goals in five matches.

In July 2010, Ulimwengu joined Swedish Development outfit Athletic Football Club, with which he competed in the Gothia Cup and Stockholm Cup. He trained with the club for one year while waiting for eligibility to sign for a senior team.

After Ulimwengu’s 18th birthday in 2011, there was much speculation as to where he would sign for the 2011/12 football season. The striker had links to a number of clubs, including TP Mazembe

in the DR Congo Premier League, AS Monaco in Ligue 1 and Hamburger SV in the Bundesliga.

On 31 August 2011, Ulimwengu joined four-time African Champions League winners TP Mazembe Englebert of DR Congo. He scored one goal in his TP Mazembe debut, with the match ending in a 2–1 victory over Congolese side Don Bosco.

After representing Tanzania many times at the U-17 and U-20 levels, Ulimwengu finally made his senior debut for the country as a substitute in the opening

match of the CECAFA Senior Challenge Cup against Zambia.

He made his first start for the national team in the following match against Burundi, but sustained an injury in that match and had to sit out the rest of the tournament. Tanzania went on to win the competition, and became the 2011 CECAFA Champions.

In 2011, Ulimwengu returned from Sweden to join the Tanzanian Olympics team in their 2012 qualifiers. He scored crucial goals in both their 2–1 loss away match against Cameroon, and their 2–1 victory against Cameroon in the return leg. Tanzania knocked Cameroon out on penalties and was drawn against Nigeria for their next qualifying match.

In June 2011, Ulimwengu played in the Olympic qualifier against 2008 Olympic silver medalists Nigeria. He scored in the 85th minute of the match to lead Tanzania to a 1–0 victory. But Tanzania lost to Nigeria in the return leg on 18 June 2011, and was knocked out of the Olympic qualifiers.

Since 2011, Ulimwengu has been a key member of the Tanzanian national team, playing in all important matches and tournaments.

He also played a crucial role in Tanzania’s promising but ultimately unsuccessful 2014 World Cup qualifiers campaign.

He scored critical goals against both Morocco and Ivory Coast. He went on to win the Goal of the Year award for his goal against Ivory Coast in the Tanzanian Football Awards.

The young player has been described as a quick, balanced, highly skilful and powerful striker. He possesses excellent ball control and positioning, and is capable of beating defenders in one-on-one situations as well as creating space for teammates.

Ulimwengu can hit a great shot from any distance, has superb vision and fantastic passing and dribbling ability. He is known to come up with outstanding opportunities with fellow striker Mbwana Samatta. He threatened the defence of the Morocco national side by teaming up with Samatta, successfully beating Morocco 3–1 in the 2014 World Cup qualification campaigns in Dar es Salaam, Tanzania.

The 22-year-old , in DRt He plays for African champions TP Mazembe based in that country, but plays international football for Tanzania when called upon.

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