Invest in tanzania 2014 by Newsdesk Media

Invest in

TANZANIA

2014

An official publication of the Government of the United Republic of Tanzania

MARKING THE

50TH ANNIVERSARY OF THE UNITED REPUBLIC OF TANZANIA

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TANZANIA 2014

MARKING THE

50TH ANNIVERSARY OF THE UNITED REPUBLIC OF TANZANIA tanzania.newsdeskmedia.com

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Jane Douglas

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Herita MacDonald

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INVEST IN TANZANIA 2014

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INVEST IN TANZANIA 2014

Contents Forewords and introductions

His Excellency Jakaya Kikwete President of the United Republic of Tanzania

The Honourable Mizengo Pinda Prime Minister of the United Republic of Tanzania

Dr Richard Sezibera Secretary General of the East African Community

Welcome to Tanzania: the case for investment Significant gas reserves, strong economic growth, and recent market reform and trade liberalisation are among the factors that make Tanzania an inviting country for would-be investors

Tanzania’s half-century milestone Looking back at Tanzania’s progress over the 50 years since the historic union of Tanganyika and Zanzibar, and looking forward to what the country’s future holds in the light of its efforts to build a strong, diversified and competitive economy

Investment opportunities by sector

Great expectations A series of natural gas discoveries off the coast of Tanzania has garnered much publicity, but what does it mean for the country and for potential investors?

Bridging the gaps in road and rail Given its geographical location, Tanzania has the potential to become an interchange for a large section of Africa, but significant investment in transport infrastructure will be required first

Celebrating 50 years of Tanzania

Building on keen demand New budget allocations reflect the government’s recognition of the need for infrastructure development, while a blossoming tourism market and a pressing need for additional housing are both boosting Tanzania’s construction sector

Strategy for growth How the Tanzanian diaspora may be able to contribute to the government’s ambitious Development Vision 2025, which aims to turn Tanzania into a middleincome country by the target year

Made in Tanzania Tanzania’s growing manufacturing sector encompasses a variety of sub-sectors, and many of them remain unexplored. What recent investments have been made in the industry and where might further opportunities for investors lie?

Why invest in Tanzania

Energy boost Tanzania’s abundant resources of hydro, wind, solar, biomass and geothermal power are already attracting investors, but the recent discovery of gas reserves off the country’s coast could transform its power and energy supply

Her Excellency Liberata Mulamula Amabassador Extraordinary of the United Republic of Tanzania to the United States

Geological powerhouse Assessing the conditions and regulations for those looking to invest in Tanzania’s mining sector, and the continued impact of the country’s rich mineral resources on its economy

Opening the gateway With 1,424km of coastline, a new ‘mega port’ in development at Bagamoyo, and multimillion-dollar upgrades of existing facilities at Dar es Salaam under way, Tanzania’s ports are set to position the country as a ‘gateway to Africa’

The transformative power of ICT Change is fast in information and communications technology, as Tanzania is discovering. A series of ICT developments is having a positive impact on business in the sector, as well as on social initiatives

INVEST IN TANZANIA 2014

DAVID DOREY,TANZANIA COLLECTION/ALAMY

CONTENTS

On the move

BG GROUP

Mobile telephony and agent banking have greatly expanded the proportion of Tanzania’s population with access to banking services. But as markets widen, so competition increases, while other developments are seeing growth in the demand for finance

School report: raising standards Tanzania’s drive to increase access to education has resulted in huge rises in enrolment. Now, the focus must turn to quality, and private-sector involvement is key in development plans for the sector

Right medicine for healthcare ills Tanzania’s policy framework for encouraging private investment in health has been hailed as pioneering, but further work is needed to overcome the remaining obstacles to the goal of delivering accessible healthcare for all

The water-supply challenge Half of Tanzania’s population still lacks access to safe water, but initiatives by the government and its development partners are making significant improvements to the country’s water infrastructure

102

How to invest in Tanzania

118

Setting the foundation A guide for investors outlining government incentives relating to priority areas for investment and special economic zones, as well as the costs of starting a business, the tax environment and visa requirements

Investment case studies

122

Success stories Find out how international companies such as Sichuan Hongda, Aurecon, Bharti Airtel and Puma Energy have found success investing in Tanzania

Buried treasure: travels in Tanzania As one of Tanzania’s fastest-growing sectors, tourism has been designated a priority area for investment, which means that investors in the industry are being offered a variety of incentives

Arriving next season The challenges of breaking into an immature market are outweighed by the opportunities posed by Tanzania’s retail sector, which offers the chance to gain the loyalty of a young and growing consumer base with increasing purchasing power

Planting seeds of hope for farmers Tanzania’s agriculture industry accounts for around a quarter of the country’s gross domestic product, but steps are being taken to modernise the sector and adapt it to changing requirements, with the help of private business

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Index of advertisers INVEST IN TANZANIA 2014

INTEGRATING & ADVANCING THE REGION’S ECONOMIES PTA Bank has a great deal of confidence in the economy and future of the Republic of Tanzania, and has been growing its financing in the past few years, notably in the power and infrastructure sectors, as well as tourism. So far, the Bank has approved and committed projects worth approximately US$ 405 million across various sectors in Tanzania. We have made significant inroads in the energy and transport sectors, providing various forms of short and long-term finance. We have and are supporting a pioneering independent power producer, Kilwa Energy Limited, a natural gas-fired power plant, which is expected to produce 343 MW of power. We have financed Tanzania Ports Authority in the replacement of the single point mooring and pipeline system, and also Zanzibar Telecoms Limited (ZANTEL) and Mt Meru Hotel in Arusha. Recently, we have joined other financing partners to throw our weight behind the Infrastructure Financing Programme of the Government of Tanzania, participating in a US$ 350 million dollar syndicated facility, and similarly supporting TANESCO through a US$ 200 million syndicated facility to finance powergeneration equipment from independent power companies. PTA Bank is the trade and development bank of the eastern and southern Africa region, covering 18 countries in COMESA, EAC and SADC. It was established in 1985 with a mandate to finance and foster trade, socio-economic development and regional economic integration in and across its Member States. It offers a broad range of products and services across both the private and public sectors, including debt, equity and quasiequity finance, as well as guarantees. Its investments cut across agriculture, industry, infrastructure, energy, trade and tourism, among others and are made on a commercial basis following sustainability principles. To complement its existing trade, project and infrastructure finance activities, the Banks recently launched a funds management and agency services operation, which will co-manage the COMESA Infrastructure Fund and the Tripartite Trade Finance Fund. In recent years, the Bank has achieved strong growth in excess of 30% and yielded above 10% USD equity returns. It has a current balance sheet of USD 2.6 billion with NPLs well under 5%. The Bank has successfully issued bonds on the international capital markets and in various African Member States. In 2013, the Bank’s international credit ratings were upgraded to AAA on local currency in Kenya and to BB on foreign currency. In the past year, the Bank has successfully attracted new sovereign and institutional shareholders, growing its core capital by a record 39% year on year. The Bank’s capital is open to sovereigns, central banks and institutional investors, such as pension funds, sovereign wealth funds, other development finance institutions and insurance companies. It has an authorized capital of USD 3 billion, of which USD 1 billion is in recently introduced class B shares suitable for institutional investors. PTA Bank’s diverse shareholding includes 18 African Member States including the Republic of Tanzania, 2 Member Countries, China and Belarus, and 4 institutional shareholders, namely the African Development Bank and the National Pension Fund of Mauritius, ZEP Reinsurance Company and Eagle Insurance Company. The Bank operates from three operational hubs: Nairobi, Harare and Port Louis, and has its administrative head office in Bujumbura, Burundi.

PTA BANK official@ptabank.org www.ptabank.org

THE EASTERN AND SOUTHERN AFRICAN TRADE AND DEVELOPMENT BANK

FOREWORD

His Excellency Jakaya Kikwete HOTNYCNEWS/ALAMY

President of the United Republic of Tanzania

t is my pleasure to present to you Invest in Tanzania 2014, which celebrates Tanzania’s achievements, identifies future challenges and highlights investment opportunities across the country. This year, Tanzania marks the 50th anniversary of Union Day, which saw mainland Tanganyika and the offshore Zanzibar islands merge to form one United Republic of Tanzania. The country now ranks among the 20 fastest-growing economies in the world. It has exhibited average growth levels of between six and seven per cent for over a decade, and the government is currently implementing a rebasing exercise that will increase GDP by as much as 20 per cent. The task before us now is to ensure that all Tanzanians can participate productively in the utilisation of the country’s natural resources, and reap the benefits of growth. The Tanzania Development Vision 2025 envisages a competitive middle-income economy, characterised by peace and stability, and enjoyed by a learned, healthy and prosperous people. To realise this vision, we have focused our efforts on eliminating business constraints and unleashing the country’s latent growth potential. In 2013, the government launched the Big Results Now initiative, designed to speed up development in six key areas: agriculture, education, energy, water, transport, and resources mobilisation. Alongside government efforts, we recognise that the private sector will play a pivotal role in the implementation of Tanzania’s national development plans. Private-sector involvement is required to generate enough funds to build more schools, deliver improved healthcare services, increase the country’s power supply, ensure food security and accelerate industrialisation. A thriving business community will also help Tanzania to compete on the global stage. With this in mind, we have been making great efforts to create an environment conducive to attracting both local and foreign investment. We have simplified bureaucracy, adopted successful economic liberalisation measures, and created a comprehensive package of investment incentives. Furthermore, Tanzania’s geographic location makes it an ideal place to locate business for transit trade. Bordering eight countries, six of which are landlocked, and with membership of the Southern African Development Community Free Trade Area and the East African Community market, Tanzania is a natural gateway for East and Central Africa. The country is also directly connected to the Indian Ocean, providing trade links to Asia. In particular, businesses are being encouraged to participate in developing the country’s natural gas capacity. Tanzania is in a formidable position, having recently discovered vast reserves on the east coast. This has made it a key destination for the global energy industry. Several major companies have already made investments in the sector, and plans are being drawn up to build a liquefied natural gas plant that will help Tanzania become a fuel exporter. It is expected that the post-2015 economy will be heavily driven by the responsible exploitation of natural gas. Prospects for the mining industry are also high, as the country has large, commercially exploitable deposits of a range of minerals, including gold, diamonds and various gemstones. There is also large scope for development in agribusiness, transport and logistics, and tourism. Tanzania has made great advances in the realisation of our strategic goals for national development. I have no doubt that the next 50 years will see Tanzania become a major regional market and a key global trade partner.

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Business Machines Tanzania Limited (BMTL) Plot No. 39A New Bagamoyo Road, Victoria PO Box 1599, DAR ES SALAAM Tel: +255 2165555/ +255 2165517/ +255 2165518 Mobile: +255 0687014719-24 Email: bmtl@thecopycatgroup.com

www.bmtl.co.tz / www.copycatltd.com

BTML BRANCHES IN TANZANIA: ARUSHA, MBEYA, MWANZA, DODOMA

FOREWORD

The Honourable Mizengo Pinda SETH WENIG/AP/PA IMAGES

Prime Minister of the United Republic of Tanzania

t is a pleasure to present to you Invest in Tanzania 2014 – a publication that marks 50 years of progress in Tanzania, highlights our country to the global investment community and showcases the opportunities we have on offer. Across Africa, countries are looking for sustainable growth and embarking on the road to prosperity, and Tanzania is among those leading the way. Our position in Africa has gone from strength to strength – our projected growth over the next few years rests comfortably above the continent-wide forecast average of five per cent, and I am confident in our ability to continue on this upward trajectory. It is our vision that East Africa will be a region characterised by solidarity and growth – qualities that Tanzania is dedicated to fostering, and I am confident that strong patterns of economic growth and development here in Tanzania will be a boon for our neighbours, too. The commitment of the Tanzanian Government to bolstering all aspects of society and the economy has enabled our country to achieve immense milestones over the past years, and we have witnessed dynamic achievements underpinned by unwavering steadfastness from our leadership. We have worked to eliminate corruption, and our efforts in this area have reaped rewards in the form of new international partnerships – we not only enjoy bilateral relations with our neighbours in the East African Common Market, but also with countries including the United States, China and the United Kingdom. We have attached great importance to achieving unwavering political stability and peace – qualities that enhance our attractiveness as an investment destination. In the coming years, we are determined to employ these qualities as tools to support our ascent on international indicators. Our vision for Tanzania in the short term is outlined in the comprehensive Vision 2025, which acknowledges that the 21st century will be characterised by competition. With this in mind, we will ensure that Tanzania remains competitive in a global economy by striving to ensure that we facilitate an environment in which high productivity is complemented by a happy, healthy society. If we direct our resources and efforts towards a common goal, we will be on track to achieve our objectives for development and growth. Increasing business and investment in Tanzania will be a key contributor in reducing the poverty that continues to blight pockets of our country, and the government is committed to working with the private sector to ensure that the benefits of far-reaching reforms are felt across the economy. We have long held a view to create an enabling investment environment for the private sector, with the goal of anchoring private-sector business as an engine of economic growth. The challenges that Tanzania faces are surmountable, and, with the appropriate measures in place, we can ensure that risks are mitigated and investments are protected. I am very much encouraged by our progress so far, and I look forward to seeing deeper engagement with investors as we make headway into the next 50 years.

INVEST IN TANZANIA 2014

SGS: a world leader in quality Wherever you are in the world, in whatever industry, you can rely on our international teams of experts to provide you with specialised business solutions to make your business faster, simpler and more efficient. We partner with you to offer independent services that will help you reduce risk, streamline your processes and operate in a more sustainable manner.

Our group profile

SGS is the world’s leading inspection, verification, testing and certification company. We are recognised as the global benchmark for quality and integrity. With more than 80,000 employees, we operate a network of more than 1,650 offices and laboratories around the world. Our core services can be divided into four categories: ■■ Inspection: our comprehensive range of world-leading inspection and verification services, such as checking the condition and weight of traded goods at transshipment, help you to control quantity and quality, and meet all relevant regulatory requirements across different regions and markets. ■■ Testing: our global network of testing facilities, staffed by knowledgeable and experienced personnel, enable you to reduce risks, shorten time to market and test the quality, safety and performance of your products against the relevant health, safety and regulatory standards. ■■ Certification: we enable you to demonstrate that your products, processes, systems or services are compliant with either national or international standards and regulations or customer-defined standards, through certification. ■■ Verification: we ensure that products and services comply with global standards and local regulations. Combining global coverage with local knowledge, unrivalled experience and expertise in virtually every industry, SGS covers the entire supply chain from raw materials to final consumption.

We are constantly looking beyond customers’ and society’s expectations in order to deliver market-leading services wherever they are needed. As the leader in providing specialised business solutions that improve quality, safety and productivity and reduce risk, we help customers navigate an increasingly regulated world. Our independent services add significant value to our customers’ operations and ensure business sustainability. As well as delivering services that promote sustainable development, our values also show a commitment to corporate sustainability. For us, sustainability is about managing a long-term profitable business while taking into account all the positive and negative environmental, social and economic effects we have on society.

Our vision

We aim to be the most competitive and productive service organisation in the world. Our core competencies in inspection, verification, testing and certification are being continuously improved to be best-in-class. They are at the heart of what we are. Our chosen markets will be solely determined by our ability to be the most competitive and to consistently deliver unequalled service to our customers all over the world.

Our values

Passion, integrity, entrepreneurialism and our innovative spirit. We continually strive to fulfil our vision. These values guide us in all that we do and are the bedrock upon which our organisation is built.

SGS IN TANZANIA

SGS was incorporated in Tanzania 50 years ago. It is the leading inspection, verification, testing and certification company in Tanzania with more than 300 permanent employees operating in Dar Es Salaam, Tanga, Mtwara, Mwanza, and the mine sites spread throughout the lake-zone area, as well as any other location where the need arises.

LABORATORIES

1. Geochemical In 1997, we started a geochemical laboratory in Mwanza, SGS Minerals Services Laboratory, offering geochemical analysis to meet mineral testing needs in Tanzania. Subsequently, we implemented dedicated on-site laboratory operations for the Golden Pride Mine, Geita Gold Mine, Bulyanhulu Gold Mine, Tulawaka Mine, North Mara Mine and the Buzwagi Gold Mine in a space of 10 years. All the analyses for exploration companies were done at our commercial laboratory in Mwanza. In 2003, SGS set up an environmental testing laboratory in Mwanza, supporting these mines by testing the quality of water and the effluents they release in the surrounding environment. The environmental departments ensure that the mines comply with the National Environmental Management Council requirements. We are part of the SGS global laboratory network that provides first-class geochemical analysis, including ICP-AES analysis, to mining and exploration companies throughout Africa and around the world. Our Mwanza commercial laboratory, an ISO/IEC 10725 accredited facility, was developed to serve Tanzania, and to provide access to our extensive mineral testing services worldwide. All our labs use the same global testing methods, analytical codes, and sampling preparation techniques to ensure uniform excellence for you. Through our Mwanza technicians, and those at our centres of excellence in South Africa and Canada, we support your exploration and mining efforts as a strategic partner and an independent analytical advisor. We act as your expert technical resource to facilitate the success of your mineral programme. 2. Environment Our clients are predominantly all the mines in Tanzania and beyond the country. Other clients include government institutions and private companies.

Environmental services The services we provide relating to the environment include testing water samples, for which we conduct physicochemical analyses on all types of freshwater samples; analysing soil samples to ensure the soil quality complies with environmental requirements; and testing samples from dust, fuel and emissions to make sure they comply with health standards.

OIL, GAS AND CHEMICAL SERVICES

Our integrity, vigilance and expertise combined with an unrivalled network of oil, gas and chemical laboratories help to uphold a reputation for quality products and customer satisfaction. As a worldwide service provider to the petroleum and chemical industries, we are at the forefront of developing new innovative products in addition to our existing areas of expertise, from quantity and quality control, laboratory and field testing, movement of hazardous samples and tank and container inspection services to tank and metre calibration and measurements audits.

GOVERNMENT AND INSTITUTION SERVICES

We support governments, institutions and organisations by applying valuable knowledge to verify trade information, and set up electronic business-processing operations. Our commitment is to sustain the enforcement of regulations, economic growth, market visibility and accountability for our customers. Our services include: ■■ Import verification; ■■ Valuation support; ■■ Origin validation; ■■ Risk management; ■■ Single-window; ■■ Pre-shipment/export verification/certification; and ■■ Electronic cargo-tracking systems (ECTS).

Pre-shipment verification of conformity

The Tanzania Bureau of Standards (TBS) implemented the Tanzania pre-shipment verification of conformity to standards. Under this programme, TBS requires that regulated products imported in Tanzania

comply with the applicable national standards, technical regulations or approved international standards. Objectives ■■ Protecting the public against substandard products that can endanger public health, safety and the environment; ■■ Prohibiting the entry of expired and counterfeit products; ■■ Protecting local manufacturers against unfair competition from imported products that do not comply with national standards; and ■■ Establishing a quality import inspection regime that is in harmony with that of the East African Community member states.

ECTS SERVICES

OMNIS is a new ECTS by SGS. The system presents an advanced consignment traceability service with significant advantages, offering unparalleled added value. Its innovative design combines fleet management with consignment integrity to support the efficient and secure operation of transit logistics. The devices from Savi, which is the chosen SGS technology partner, are certified to be safe for all cargo types such as fuel tankers, containers, vehicles on own wheels, trucks for loose/bulk cargo, and so on. SGS exploits OMNIS to provide private source-to-destination tracking of assets and also tracking of transit goods under TRA’s ECTS programme. Key benefits of OMNIS ■■ Identification of illegal diversion of goods under customs control; ■■ Improved government revenue; ■■ Improved transit times; ■■ Real-time consignment tracking; ■■ Transparency; ■■ Uninterrupted movement of goods; ■■ Quick security bond cancellation; and ■■ Increased truck turnaround time.

install ECTS for private cargo security information purposes.

SYSTEMS AND SERVICE CERTIFICATION

SGS world-leading certification services, accredited by more than 40 accreditation bodies worldwide, enable you to demonstrate that your products, processes, systems or services are compliant with national and international regulations and standards. We provide comprehensive training and certification services from quality management and food-safety management systems through to environment management and health and safety management systems.

SGS TECHNICAL STAFFING SERVICES

With the SGS global network of offices, SGS technical staffing services can provide full manpower support for all projects. Services include: ■■ Worldwide office support to help manage transnational projects; ■■ Assistance with providing work permits/visas, flights, medevac, insurance and local transport; ■■ Contract recruitment, providing local and expatriate personnel on SGS payroll; ■■ Permanent recruitment; and ■■ Payroll and tax-compliant services. SGS works across a range of industries. Get in touch today and let us know how we can help you.

SGS Tanzania Superintendence Co Ltd African Assay Laboratories Ltd SGS Compound, Near TPA Gate #5, Nelson Mandela Road, Kurasini PO Box 2249, Dar es Salaam, Tanzania T: +255 22 2132131 F : +255 22 211 35 16 E: sgs.tanzania@sgs.com W: www.sgs.co.tz

The SGS OMNIS solution enables clients to voluntarily comply with TRA ECTS requirements. The programme can also provide private commercial solutions for clients who may wish to

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FOREWORD

Her Excellency Liberata Mulamula Ambassador Extraordinary of the United Republic of Tanzania to the United States

s Tanzania celebrates 50 years of unity, I am delighted to introduce this landmark publication, which highlights the progress and prosperity that has been achieved so far and the opportunities that await. Tanzaniaâ&#x20AC;&#x2122;s international relations are coming to the fore as economic growth and development drives global interest in its markets. Our cooperation and collaboration with the United States in particular demonstrates the kind of relationship that we hope to establish with other countries, too. Over the past few years, we have enjoyed mutual benefits with the United States in various fields of development, promoting common interests to move forward our joint vision for the future. For Tanzania, this means promoting a democratic, well-governed, prosperous, secure and healthy nation, in which institutions are supported to improve governance and eliminate corrupt practices. In the East Africa region, Tanzania enjoys a leading growth rate of seven per cent, and new discoveries of substantial gas reserves are set to further push forward the economy when production begins in the early 2020s, as outlined in current plans. Gold production continues to underpin growth amid consistent global demand and, as part of plans to place Tanzania on the international investment map, the country is preparing to launch a debut Eurobond. It is important to direct efforts towards fostering an enabling environment for investment. Implementing business-friendly policies and encouraging transparency are key requirements in creating an internationally competitive investment destination. To shore up social and economic advancement, it is crucial that support is given to povertyreduction measures. Empowering women is one fundamental way to reduce inequalities and propel both social and economic progress, while enhancing agricultural practices will safeguard food security and nutrition. I am confident that the measures we are taking in pursuit of a strong, stable economy will propel Tanzania into the competitive global investment environment. Tanzania enjoys bilateral relations with a number of partners around the world. We have registered hundreds of investment projects from China, and talks are under way with European countries to transform Tanzaniaâ&#x20AC;&#x2122;s ports into food ports. Across a wide range of industrial sectors, the investment climate is improving, and Tanzania is open to all those who are seeking opportunities in our flourishing markets. Tanzania enjoys social harmony, peace and stability; a knowledge-oriented society; and a strong, competitive economy, and it is these qualities that make our country an increasingly attractive destination in which to do business.

INVEST IN TANZANIA 2014

Preparing for Tanzaniaâ&#x20AC;&#x2122;s gas future Statoil is an international energy company with operations in 35 countries. Building on 40 years of experience in oil and gas production on the Norwegian continental shelf, we are committed to accommodating the worldâ&#x20AC;&#x2122;s energy needs in a responsible manner, applying technology and creating innovative business solutions. We are headquartered in Norway with approx. 21,000 employees worldwide, and are listed on the New York and Oslo stock exchanges. In 2007 Statoil signed a production sharing agreement (PSA) for Block 2 with Tanzania Petroleum Development Corporation (TPDC). Statoil Tanzania AS is the operator with 65% working interest with ExxonMobil Exploration and Production Limited as a partner with 35% interest. In 2012 and 2013 Statoil and its partner made the significant Zafarani, Lavani, Tangawizi and Mronge discoveries in Block 2, which covers an area of approximately 5,500 square kilometers and lies in water depths between 1,500 to 3,000 metres. The discoveries have proved 17-20 Tcf of in-place volumes and mark an important step towards a possible natural gas development in Tanzania. Statoil is proud to be the leading partner in the future development of the natural gas discovery in Tanzania. More information on www.statoil.com

INTRODUCTION

Dr Richard Sezibera Secretary General of the East African Community

t is with great pleasure that I welcome you to Invest in Tanzania, which marks the 50th anniversary of the union of Tanganyika and Zanzibar, and looks at present-day Tanzania’s role as a dynamic regional player in the East African Community (EAC). In terms of development over the past five decades, Tanzania has made great strides, and it is clear that the country is determined to continue forward with its social, economic and political progress. Home to one third of East Africa’s consumer market, Tanzania is fast becoming one of Africa’s leading destinations for foreign direct investment. With a growing portfolio of international partnerships and a sustained commitment to regional integration, there are economic gains to be made that will be felt across the EAC. Further still, with gross domestic product (GDP) still rising, Tanzania has good opportunities to drive economic development, foster growth and implement reforms where required. Attracting investment is a core objective of the Tanzanian Government, and broader integration will act as a catalyst for growth across the economic community, while still enabling our member states to retain their competitiveness. The EAC was established to support cooperation among the countries of East Africa and deliver benefits to each member state, and in November 2013, the EAC Heads of State signed the Protocol for the establishment of the East African Monetary Union, which aims, among other things, to reduce the costs associated with intra-EAC trade and transactions. These modernisation efforts are central to boosting intra-regional trade, and will play a key role in offering greater regional access to investors. Maximising engagement with foreign investors will underpin the region’s long-term development plans, and Tanzania and its neighbours have the resources to achieve accelerated growth, offering opportunities for current and prospective investors. Through a joint commitment to growing their economies, the member states of the EAC will enjoy a prosperous future.

INVEST IN TANZANIA 2014

Stable Economic Growth Attracts Investors Tanzania continues to do well in maintaining overall macroeconomic stability, which has been a fundamental factor behind the strong economic growth rates

GIZ – An innovative partner for Tanzania’s challenges of tomorrow

Tanzania’s medium-term growth prospects are around 7%, significantly boosted by natural gas discoveries. (…) The business environment could be further boosted by heightening Tanzania’s attractiveness to local and foreign investors through strengthening its human resource base and reinforcing overall institutional capacity and efficiency. (Source: African Economic Outlook 2013 www.africaneconomicoutlook.org)

Skills needed to match investors’ requirements Tanzania has made considerable efforts over the past three decades to improve investment climate with a view to attracting more Foreign Direct Investment

(FDI). The Tanzania Investment Report 2012 findings indicate that the stock of foreign investments rose at an annual average rate of 10.3% to USD 10,393.2 million in 2011 from the amount recorded in 2008 (…) Since the employment level under FDI related companies increased only marginally in skilled and unskilled categories of employment, the report recommends that the implementation of the skills localization policy be strengthened, e.g. through establishment of skills programs aligning with skills required by investors. (Source: Tanzania Investment Report 2012 www.tic.co.tz)

The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) offers sustainable and effective solutions in change processes. Our range of services is based on regional and technical expertise and on tried and tested management knowhow. GIZ is a German federal enterprise and operates in Germany and in more than 130 countries worldwide. We are a leading supplier of technical skills and vocational training to enhance local competences for dynamic economic development, tailored to needs and with strong practical relevance.

Cooperation is inspiring! We are proud to be your partner. GIZ is part of German Development Cooperation. www.giz.de giz-tanzania@giz.de +255 (0) 22 211 5901

PROJECTS

INTRODUCTION MOLLEL ELECTRICAL CONTRACTORS LTD is one of Tanzania’s oldest and largest domestic, commercial and industrial electrical and electro-mechanical installation contracting companies.

Established and incorporated in November 1981 under Certificate of Incorporation Number 8552, the company limitlessly promotes and showcases its services and activities through good workmanship and cost-effective solutions to all electrical installation requirements. Guided and managed by a capable Chairman, Mr Adam Lebayos Mollel, who is also the largest shareholder, Mollel Electrical Contractors Limited provides a full range of Electrical and HVAC services coupled with specialised installation work related to designing, execution and maintenance of electrical systems and fire-detection and alarm systems.

Working hand-in-glove with clients and main contractors, the company undertakes electrical contracts all over Tanzania and its teams are constantly engaged in ensuring timely completion of projects, testing, commissioning and handing over.

The company’s key clients include private property developers, such as: • Oysterbay Hotel Office Developers; • Oysterbay Shopping Centre; • Mlimani City Holdings Ltd; • Delina Apartments; and • JD Pharmacy. Government of Tanzania projects, such as: • Vice President’s Residence and Offices at Tunguu, Zanzibar; • Vice President’s office along Luthuli Road, Dar es Salaam; • National Records Centre, Dodoma; • Treasury Square Building, Dodoma; and • Singida Referral Hospital. Parastatals, such as: • National Social Security Fund; • Tanzania Harbours Authority; • Tanzania Revenue Authority; • Parastatal Pension Fund; • Government Employees Provident Fund; • Bank of Tanzania; and • Security, safety and surveillance systems.

Completed electrical and fire-detection and alarm system installation work at the proposed offices for the Vice President of Tanzania

Government Employees Provident Fund, Dar es Salaam

REGISTRATION Mollel Electrical Contractors Ltd is registered with the Contractors Registration of Tanzania as class one electrical works contractor; class one specialist contractor in the field of heating, ventilation and air conditioning; and class two specialist in the field of fire-detection and alarm systems.

College of Education Technology, University of Dar es Salaam

33 Years of Commitment and Excellence For the past 33 years, Mollel Electrical Contractors Ltd has been involved in many big electrical and HVAC installation projects, crediting the company with invaluable expertise and dedication.

The company has successfully completed many high-profile projects as per signed contract agreements. The company’s highly skilled and dedicated engineers are always striving to push the company forward and advance the company’s endeavours in meeting clients’ expectations. Being a part of this team is always a great privilege and honour and hopefully we shall always be of service to our esteemed clients.

Adam Mollel, Chairman

Completed electrical installation work at the state-of-the-art Msasani Multipurpose Complex, Dar es Salaam

Proposed teaching block for the Faculty of Aquatic Science and Fisheries, University of Dar es Salaam

HEAD OFFICE

BRANCH OFFICE

Plot No 38, Themi Industrial Area, Njiro Hill PO Box 6010, Arusha, Tanzania Tel: +255 754 260846 | +255 767 210124

Branch Office Plot No 93B, Msese Road off Kinondoni Road PO Box 75733, Dar es Salaam, Tanzania Tel: +255 222 668486 | 2666981 Fax: +255 222 666450 Mobile: +255 757 882222 | +255 754 379102 | +255 765 965391

Email: info@mec.co.tz | Website: www.mec.co.tz

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Welcome to Tanzania: the case for investment The investor interest generated by the discovery of Tanzania’s gas reserves is well known, but the country also offers opportunities for investment in a variety of sectors, writes Dianna Games

anzania has been propelled into a frontier zone in the global energy industry by the discovery of significant gas reserves off its coast. Over the past few years, successful exploration for hydrocarbons has attracted some of the world’s biggest oil multinationals, such as BG Group, Ophir Energy, Statoil and ExxonMobil. Billions of dollars of investment are being earmarked for a country that is still officially designated as ‘least developed’ by the United Nations Conference on Trade and Development (UNCTAD). Tanzania has been on a positive trajectory for a decade, with sustained growth of between six and seven per cent a year. It has successfully transformed from a socialist, centrally planned economy to one that embraces market principles and seeks out foreign investment in its myriad opportunities. Several factors have contributed to making it a priority destination for international capital: market reform, trade liberalisation, its location as a trade transit point for the six landlocked countries on its borders, and its close proximity to growing markets such as Kenya, Mozambique and Uganda. President Jakaya Kikwete, outlining Tanzania’s success in attracting investment, said that in 2005 the country received $150 million of foreign direct investment. In 2013, it attracted $1.7 billion, highlighting the change in fortunes. Cited by international investment analysts as one of the countries underpinning the Africa Rising narrative, Tanzania is reaping the benefits of political stability, economic reform and a proactive approach by the government to addressing the country’s

Dar es Salaam, the commercial capital of Tanzania, is home to the country’s largest port, which also serves the six neighbouring landlocked countries

lingering challenges. Not only is it attracting investor interest as a result of its significant gas reserves, but it is also the fourth largest gold producer in Africa, is home to some of the continent’s prime tourist attractions, and has swathes of untapped agricultural land and national parks. Furthermore, it is rapidly urbanising, and the growing population, currently at about 49 million, offers considerable growth opportunities for consumer-goods companies. Tanzania is also a member of two economic blocs that are driving regional integration in their respective areas: the 15-member Southern African Development Community (SADC), which provides access to South Africa’s vast economy, and the five-member East African Community (EAC), which offers the country preferential access to another major economy – Kenya. Gross domestic product (GDP) growth is being driven by increased output in a number of sectors, with 2012 seeing growth in telecommunications by 20.6 per cent; financial services by 13.2 per cent; and manufacturing by 8.2 per cent. Mining grew by 7.8 per cent and is, together with tourism and agriculture, the country’s top foreign exchange earner. Tanzania’s gold industry, meanwhile, has seen better times, its heyday having been a decade or so ago. In recent years, the industry has suffered from a declining gold price, high costs of production, partly because of erratic power supply, and a dearth of new investment by mining companies. The 2013 gold output was one of the lowest in years. However, there are other areas of mining that are showing plenty of promise. For example, the country is gearing up to export uranium, and its production of tanzanite – as the only country in the world where the stone is found – has been a unique success. The country’s poor infrastructure has hampered development, but it also presents an opportunity for private-sector investors in areas such as power, housing, road-building and energy.

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THOMAS MUKOYA/REUTERS

WHY INVEST IN TANZANIA

Tanzanian president Jakaya Kikwete and Chinese counterpart Xi Jinping during the Chinese state visit in March 2013. Economic ties between the countries reach back to the 1970s

Although gas production is not expected until at least 2020, the country is gearing up for a potentially bright future as a gas producer, which is likely to boost the already high economic growth rates. Oil multinationals are considering investing billions in constructing liquefied natural gas (LNG) facilities in Tanzania in order to be able to export to international markets in the future. An energy consultancy estimates that Tanzania, together with neighbouring Mozambique, where large gas deposits have also been found, could eventually produce significantly more LNG than Qatar, currently the world’s biggest LNG exporter.

Regulating natural resources Drawn up in 2012 and released late last year, a new draft of Tanzania’s natural gas policy will be critical to determining the benefits that the country will reap from the resource riches off its coastline, while still making it attractive enough for oil multinationals to plough billions of dollars into exploration and production. The government aims to use gas to boost power generation in Tanzania itself, a country that survives on just 1,041 megawatts (MW) at the moment. Chronic power shortages make it costly to do business and have hampered development. Tanzania’s former finance minister, William Mgimwa, stated that the gas-fired power will reduce the price of electricity to about eight cents per kilowatt hour (kWh), from a current price of more than 40 cents. This will, in turn, help to make locally made goods more competitive by lowering the cost of production and reducing the cost of living for Tanzanians. The country is also seeking investment in renewable energy sources. Tanzania was endorsed by the Climate Investment Funds (CIF) in 2013 – these are unique financing instruments drawn up by developed and developing countries alongside multilateral development banks to deal with climate-change issues. Among other things, they provide funding for countries to make the shift to low-carbon energy sources. The plan is designed to shift Tanzania from its growing dependence on fossil fuels and limited hydropower resources, towards a more diversified energy mix, making use of the country’s abundant geothermal and solar resources. The CIF

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A worker prepares for operations on the seabed section of a gas pipeline linking Mtwara to Dar es Salaam, which was funded with a $1.2 billion loan from Exim Bank of China

plan features a geothermal development component intended to produce more than 100MW, as well as an element focusing on renewable energy for electrification in rural regions. Alongside drawing up a legal framework for the gas industry, the government is cognisant of the need to regulate the energy sector, particularly geothermal development. Today, investors in energy are being licensed under the Electricity Act 2008. In many areas of infrastructure, China has a significant presence. The two countries have enjoyed a close political relationship for decades; their economic linkages date back to the 1970s, when China helped to build the TAZARA railway linking Dar es Salaam to central Zambia – which was, at the time, one of the biggest infrastructure projects in Africa. Although the railway’s fortunes have declined over the years, the relationship with China is at an all-time high. Tanzania was one of the first African countries to be visited by Chinese premier Xi Jinping in March

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Dar es Salaam, which is congested and hampered by inefficiency. It can take up to 20 days – compared with the international standard of two – for ships to dock and unload goods, hindering trade and incurring large costs for shippers and companies. The Tanzanian Government is also taking measures to improve the efficiency of the Dar es Salaam port, which is the gateway for most of the country’s trade and cleared the equivalent of 60 per cent of Tanzania’s GDP in 2012. It also provides sea access to the country’s six landlocked neighbours – Malawi, Zambia, Burundi, Rwanda, Uganda and the Democratic Republic of the Congo – but has lost business to the nearby port of Mombasa in southern Kenya. Here, fees are, on average, approximately 70 per cent lower than those in the Tanzanian port.

The Bagamoyo port offers Tanzania a real prospect of improving its competitiveness

DING WEI/XINHUA PRESS/CORBIS

2013 soon after his inauguration, and his predecessor, Hu Jintao, visited the country in 2009. In 2013, President Xi and President Kikwete signed almost 20 agreements for projects that were reportedly worth more than $6 billion. According to Open Data for International Development (AidData), China has become Tanzania’s single largest trading partner. In 2013, it accounted for 15 per cent of Tanzania’s trade, valued at $2.47 billion, and provided its second largest source of investment. Furthermore, China is funding the construction of the $1.2 billion gas pipeline (see page 39), which will run from Mtwara in the south-east to Dar es Salaam, the commercial capital.

Improving infrastructure During the Chinese premier’s visit, an undertaking was made for the construction of a major port at Bagamoyo, approximately 65km north of Dar es Salaam, and associated road and rail infrastructure to link it to nearby markets (see page 76). The $10 billion project will be funded by China. Scheduled to be completed by 2017, the ‘mega port’ is designed to handle 40 times more cargo than the country’s existing main port in

The inefficiency of Dar es Salaam’s port is undermining the country’s potential to be a logistics and transit hub for the region, a role the president has frequently supported. The Bagamoyo port, although still a long way off becoming a reality, offers Tanzania a real prospect of developing the hub concept and improving Tanzania’s overall competitiveness. The government, with other international partners, is upgrading other infrastructure such as airports. For example, the Julius Nyerere International Airport in Dar es Salaam is being expanded with funding and expertise from a company in the Netherlands. The airport was built to handle 1.2 million passengers decades ago, but is effectively processing more than two million people now. The $164 million project includes building a new terminal, which is scheduled to be completed by the end of 2015 and will be undertaken in two phases – by increasing the facility’s capacity initially by 3.5 million passengers and then, later, by a further 2.5 million. Tanzania has already invested heavily in the modernisation of smaller airports, including Bukoba near Lake Victoria. Moreover, it is undertaking a multimillion-dollar upgrade of Kilimanjaro International Airport, which serves the region around Mount Kilimanjaro – one of Tanzania’s most popular tourist attractions. The government is not only targeting hard infrastructure; it is looking for ways to improve the business climate, which has been criticised by companies, donors and international organisations for being inefficient and expensive. Businesses have complained of difficulties in accessing officials, and delays in getting permits or decisions.

Big Results Now Tanzania has set its sights on becoming a middle-income country by 2025 and, to achieve this, key officials have accepted the need to address the issues raised by critics with regard to not just the business environment, but delivery in all priority areas. To this end, the government has adopted the Big Results Now

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initiative, which is based on a model of development that was successfully applied in Malaysia and adapted for the Tanzanian environment, following a visit by President Kikwete to Malaysia. Unveiled by the president in February 2013, it focuses on six priority areas that are contained in the Development Vision 2025: energy and natural gas, agriculture, education, water, resource mobilisation and transport. The initiative is designed to make a break with past practices by tackling challenges preventing delivery and poverty eradication. This includes changing the mindset of officials to enable them to become more transparent and efficient in their processes, working to targets and schedules. The initiative has given new impetus to the Development Vision 2025, which, although originally launched in 1999, has not gained much traction until now. With development partners behind it and the Malaysian Government assisting in its implementation, Big Results Now should have the desired continuity after a change of administration with the 2015 elections, when President Kikwete, who instigated the initiative, is constitutionally obliged to step down.

Macroeconomic indicators (%) 2012

2013 (e)

2014 (p)

2015 (p)

Real GDP per capita growth

3.9

4.2

4.1

CPI inflation

7.9

5.8

4.9

Budget balance as % of GDP

-4.6

-5.8

-5.2

-4.9

Current account balance as % of GDP

-14.2

-13.7

-15

-14.8

Source: African Economic Outlook; data from domestic authorities; estimates (e) and projections (p) based on authorsâ&#x20AC;&#x2122; calculations

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Dar es Salaam port is a major gateway for Tanzanian trade; however, the Chinese-funded port being constructed in Bagamoyo will handle 40 times more goods

The country, currently dependent on external aid for about a third of its budget and the bulk of its development funding, is working with its partners to improve the efficacy of aid spending and projects. It also aims to become more self-sufficient in terms of generating revenue for development. In this regard, it plans to establish a sovereign wealth fund with gas revenues in the future and has also been considering launching a Eurobond to raise hard currency funding for infrastructure projects. The countryâ&#x20AC;&#x2122;s offering of $600 million of seven-year securities to selected investors was recently four-times oversubscribed, increasing confidence that a bond issue would be successful in the future.

Financial-sector reforms The country has already improved its financial system. Economic reforms made in the late 1980s helped to make the financial services industry more supportive of the market as the country moved out of a long era of socialism and economic stagnation. The financial sector underwent further structural change after another raft of reforms was implemented in 2003, and there has since been rapid growth of assets. The growth of private credit has also been particularly strong, giving a boost to economic growth. In 2007, the Second Generation Financial Sector Reforms were introduced to consolidate gains made from previous policies, and have helped to address structural constraints on the sectorâ&#x20AC;&#x2122;s development. Initiatives that formed part of these reforms include the establishment of a credit information data bank, a framework for lease and mortgage financing, as well as a legal and regulatory framework for a credit information bureau. There have also been advancements in the creation of guidelines for regulating the pensions industry, while, in 2009, a regulatory body was introduced for the fast-growing insurance industry. There are more than 30 registered banks in Tanzania, including three large institutions. Although only one in six people

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REUTERS/JASON REED

‘The world is investing in Africa’: US-Tanzania trade in the spotlight

In July 2013, US president Barack Obama visited Tanzania as part of a threecountry trip to Africa. It was during a business leaders’ forum in Dar es Salaam that he announced the launch of a new initiative – Trade Africa – aimed at increasing internal and regional trade within Africa, and expanding trade and economic ties between Africa and the US. “Africa is home to many of the world’s fastest-growing economies,” Obama said at the forum. “Sectors like retail, telecom and manufacturing are gaining speed. And here in East Africa, over a decade, the region’s economy quadrupled. The world is investing in Africa like never before.” Trade Africa is initially focusing its efforts on the East African Community (EAC) – Burundi, Kenya, Rwanda, Tanzania and Uganda. The initiative intends to double intra-regional trade in East Africa; increase exports to the US by 40 per cent; reduce the average time needed to import or export containers from the port of Dar es Salaam to neighbouring landlocked countries Burundi and Rwanda by 15 per cent; as well as decrease the average time taken by trucks to transit selected borders by 30 per cent.

has access to formal banking, the country has in recent years seen the rapid growth of microfinance and mobile banking, which has brought considerably more people into the system. Mobile banking has been a particular success. According to the Bank of Tanzania, the number of registered e-money accounts has risen from just around 211,000 and 2,700 agents in 2008 to 31.8 million and an agent network of 153,000 at the end of 2013 – dwarfing the formal banking sector. This has not only boosted economic activity, but it has also provided a livelihood for many thousands of Tanzanians. This growth has been on the back of a thriving mobile phone industry. Tanzania has a total of eight mobile networks, mobile penetration approaching 70 per cent in 2014, as well as annual subscriber growth of more than 20 per cent. The government has

US president Barack Obama and First Lady Michelle Obama (above, with President Kikwete) are greeted by an official arrival ceremony at Julius Nyerere International Airport, Dar es Salaam, in July 2013

Under the framework of Trade Africa, the US will negotiate a regional investment treaty with the EAC, in order to create a more attractive investment environment. Negotiations on a Trade Facilitation Agreement and expansion of the US-EAC Trade and Investment Partnership will also take place, to discuss regulatory issues that affect the competitiveness of EAC regional and global trade. Furthermore, a new US-EAC Commercial Dialogue will be launched to bring the private sector together with policymakers and spur further investment. Trade between the US and Tanzania has significantly expanded over the past few years. In 2013, US goods exports to Tanzania reached $420 million, and US goods imports from Tanzania totalled $70 million. US foreign direct investment in Tanzania (stock) stood at $319 million in 2012.

invested heavily in national fibre-optic technology, with the completion of two phases of the National ICT Broadband Backbone helping to inflate internet users to nine million (see page 79). The backbone has reduced the cost of calls in Tanzania by 57 per cent and that of internet services by 75 per cent. As President Kikwete nears the end of his two-term rule, he is presiding over the revision of the constitution, which, if successfully concluded before the poll, will be seen as a key legacy of his time in power. This legacy should not just be about concluding projects, but should also be placing the building blocks for a modern Tanzania that will allow the country to address poverty and inclusion, while at the same time positioning it to enhance its attractiveness as an investment destination in an increasingly competitive world.

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WULKAN ENGINEERING LIMITED

Civil Engineering Building Contractors General Fabricators Mechanical & Electrical Engineering

In a nutshell, Wulkan Engineering Ltd was established in 1982 and has since become one of the fastest-growing construction companies in Tanzania aimed at building the future.

Guidance – In applying these principles, the guidance set out below should be followed by all employees:

1. Declaration of interest

4. Arrangement

Any person of interest, which may affect or be seen by others to affect the organizations impartiality in any matter relevant to his/her duties, should be declared

2. Confidentiality and accuracy of information The confidentiality of information received in the course of duty should be respected and shall never be used for personal gain. Information given in the course of duty should be honest and clear.

3. Competition The nature and length of contracts and business relationships with buyers and suppliers can vary according to circumstances. The company has constructed these to ensure deliverables and benefits.

What might in the long term prevent the effective operation of fair competition is strictly avoided.

5. Business gift Business gifts, other than items of very small intrinsic value such as business diaries or calendars, shall not be accepted

6. Hospitality The recipient should not allow himself or herself to be influenced or be perceived by others to have been influenced in – making a business decision as a consequence of accepting hospitality. The frequency and scale of hospitality accepted should be managed openly and with care and should not be greater than the member’s employer is able to reciprocate.

P.O Box 7323, Arusha-Tanzania +255 784 510 877 | +255 688 120 592 md@wulkan.co.tz | www.wulkan.co.tz

Wulkan Engineering’s vision is to become a reputable electrical, civil, mechanical and facilities management engineering consulting firm, which consistently delivers beyond the expected quality service to its customers while earning competitive returns. Our principal business is to provide project management, engineering consultancy and facilities management services to a wide range of customers. All our activities shall be consistent with our responsibilities to our shareholders, customers, employees and the public and our concern for the optimum development and utilization of resources.

KUMAR SRISKANDAN/ALAMY

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Strategy for growth The government is seeking to attract much-needed investment from Tanzanian nationals scattered around the world as part of an ambitious plan to lift the country to middle-income status by 2025, writes Dominic Dudley

he Tanzania economy came under close scrutiny from the International Monetary Fund (IMF) in the opening months of this year. Not only did a team from the Washington-based organisation conduct a regular annual review of the country’s economy, but it also assessed Tanzania’s performance under the terms of a $225 million standby credit facility set up in July 2012 with the aim of helping it weather uncertainties in the global economy. So it must have been doubly pleasing for the government to hear the broadly positive conclusions drawn by the IMF. “The Tanzanian authorities are to be commended,” said Min Zhu, deputy managing director of the IMF’s executive board, in a statement published in April. “Prudent macroeconomic policies have delivered buoyant economic growth and successful disinflation.” Certainly, some of the main macroeconomic indicators appear to be moving in the right direction. According to the IMF’s projections, annual economic growth will remain at a healthy seven per cent between now and 2017/18. Inflation is currently at around six per cent, but is heading towards the five per cent medium-term target set by the government, and the value of exports is again climbing after a few years of little or no growth. Even so, the government still faces a tricky balancing act when it comes to matching expenditure with revenue. The population is growing fast and investment is needed in infrastructure and social spending, but government revenues are not expected to increase in the next few years. The picture for international trade is no better. The current account deficit widened in 2013 as the price of gold and other traditional exports fell, and it is now among the largest in the region, at 14 per cent of gross domestic product (GDP). Improving the country’s balance of trade could play a key role in boosting its economic growth, along with attracting more inward investment. The long-term outlook for economic growth appears very positive, with significant finds of natural gas in the country’s offshore waters expected to provide a revenue windfall for Tanzania. It is, however, likely to be quite a few years before the money starts flowing in (see page 39). In the meantime, there are other improvements that have the potential to

High-flying ambition: Dar es Salaam seen from the air. Tanzania Development Vision 2025 sets out a plan to boost economic development in the country over the next decade

stimulate growth. In the World Bank’s Doing Business report for 2014, which measures the ease of conducting business in countries around the world, Tanzania was ranked 145 out of 189 countries. Within the sub-Saharan Africa region, it is ranked 19th among 47 countries – that puts it ahead of some far bigger economies such as Nigeria, but there is clearly plenty of room for improvement. Tanzania performs particularly badly when it comes to issues such as dealing with construction permits (for which it is ranked 177th in the world), registering property (146th) and paying taxes (141st). The government has set out a number of plans to boost economic development, which should help it to overcome some of these hurdles. The overarching plan, known as the Tanzania Development Vision 2025, was drawn up in the late 1990s with the goal of turning Tanzania into a middle-income country by 2025. That vision, which was reviewed between 2009 and 2011, forms the foundation for the government’s long-term economic strategy today.

Socio-economic transformation The review also made clear that becoming a middle-income country will entail a socio-economic transformation for Tanzanians. As the industrial and service sectors grow, they will replace traditional areas of employment, such as agriculture, which will decline in importance. Jakaya Mrisho Kikwete, president of Tanzania, set out some of the details of these anticipated changes in a speech to the Chatham House think tank in London on 31 March this year. “Tanzania holds enormous untapped natural resources and geographic advantages,” he said. “Our country is projected to have a population of 63.6 million by 2025… Then, Tanzania will be a country where abject poverty will have been eradicated, with improved social provisioning including housing and social security coverage; better education and health services in rural and urban areas; better urban settlements; and greatly improved distribution and quality of infrastructure.” According to President Kikwete, the agricultural sector’s contribution to GDP will have fallen to 20.7 per cent by 2025, from the 2010 level of 27.8 per cent. Over the same period, the industrial sector’s contribution is projected to rise from 24.4 per cent to 30.7 per cent, while the services sector’s input will grow from 47.8 per cent of GDP in 2010 to 48.6 per cent by 2025.

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Percentage share of GDP (2012)

Services 47.6% Fishing 1.6%

Industry and construction 24.0%

Agriculture, hunting and forestry 26.8%

Source: National Bureau of Statistics

If these goals are to be realised, it will require much planning and careful implementation. The government is following a series of five-year development plans between now and 2025 to try and ensure the strategy stays on track. The first of the five-year plans, which runs through the fiscal years 2011/12 to 2015/16, is based on the theme of ‘Unleashing Tanzania’s Latent Growth Potential’. It focuses on dealing with constraints on growth. The second will concentrate on developing the industrial sector, while the third is aimed at improving the country’s competitiveness. To achieve these objectives, some significant investments will be needed. The first five-year plan, for example, will require improvements to the country’s energy and transport infrastructure to deal with existing bottlenecks, as well as strategic investments in agriculture and manufacturing to increase productivity. Careful coordination is also essential and, to that end, the government has introduced the Big Results Now initiative, which is based on Malaysia’s Big Fast Results approach. The initiative aims to ensure that the relevant areas are prioritised, that effective implementation and monitoring tools are in place, and that there is proper accountability for the performance of government departments and the others involved.

A potent source of investment In terms of priorities, the government has identified six areas to focus on, namely: agriculture, transport, energy, water, education and resource mobilisation. One of the resources that Tanzania would do well to mobilise is the country’s diaspora. It is not clear just how many people make up the Tanzanian diaspora. Estimates range from a little over two million to as many as 3.7 million, with large populations in the United Kingdom, North America and neighbouring countries in Africa. But, wherever they live, these people potentially represent a potent source of investment and expertise. With that in mind, the government has been working with the International Organisation for Migration (IOM)

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The Global Africa Diaspora Summit under way in South Africa in 2012. Tanzania’s drive to strengthen bonds with its diaspora is part of a wider trend sweeping the continent

to provide it with technical and financial support. The Genevabased intergovernmental body launched an outreach programme in January to engage Tanzanians living overseas to boost the country’s economic fortunes, under the title ‘Enhancing the Migration Evidence Base for the Development of Tanzania’. Since the launch, the IOM has also run a workshop to explore the role of women in the diaspora and how to make the most of their contributions to Tanzania’s development. There are many ways in which the diaspora can help a country to develop, including remittances, the transfer of skills and expertise, and direct investment. At the moment, remittances play a relatively small role in the Tanzanian economy, compared with some other nearby countries. In Kenya and Uganda, for example, remittances accounted for three and 3.7 per cent of GDP respectively in 2012, according to the World Bank. In contrast, the figure for Tanzania was 0.2 per cent of GDP. Tanzania’s efforts to do more to strengthen the bonds with its diaspora are part of a wider trend across Africa. According to observers, the idea of tapping into the potential of their diasporas is a topic that is becoming increasingly important for many countries. “It’s definitely the case that encouraging diaspora investment is rising up the agenda for a lot of African countries,” says Rachel Speight, a partner at international law firm Mayer

JORDI MATAS/DEMOTIX/CORBIS

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The EU-Africa Summit held in Brussels this year discussed some of the issues also raised at a workshop hosted by the World Bank and the African Union in Washington in 2013

Brown, which has worked on a number of large deals involving inward investment into Africa, including in Tanzania. “You can see it happening across the board, including in places like Nigeria where people who were educated in the US or UK have gone back and set up businesses and been very successful.”

Enhancing diaspora engagement In May 2012, the Global African Diaspora Summit was held in South Africa, bringing together leaders from around the continent. From it emerged a declaration, signed by representatives of the African Union, governments of the Caribbean and Latin America and members of the African diaspora, to collaborate on five legacy projects: developing an African diaspora skills database; setting up a diaspora volunteer corps; establishing an African Diaspora Investment Fund; creating a diaspora development

GDP percentage annual growth rate

Developing countries

2012

2013 estimate

2014 forecast

2015 forecast

2016 forecast

4.8

5.4

5.5

Sub-Saharan Africa

3.7

4.7

5.1

Tanzania

6.9

7.0

7.2

7.1 Source: the World Bank

marketplace; and setting up the African Remittance Institute. A consultation workshop was then held by the World Bank and the African Union in Washington in March 2013 to advance these projects. Some of the same issues were also on the agenda at the fourth European Union-Africa Summit in Brussels in April this year. A joint declaration on migration and mobility agreed at that summit included a commitment to foster synergies between migration and development, and in particular to “significantly reduce the costs of remittances, consolidate the African Institute for Remittances and strengthen policy frameworks for enhancing diaspora engagement”. If these aims can be achieved, Tanzania should benefit as much as anywhere. Certainly, the government appears to recognise the potential and is keen to do more. “Engaging with the diaspora and creating opportunities for the transfer of human, social and financial capital could result in enhanced development, particularly in sectors such as education and health, but also in view of expanding private-sector investments in Tanzania, which would lead an increase in employment opportunities,” said Minister of Foreign Affairs Bernard Membe, at the launch of the IOM’s project in January. The long-term potential for Tanzania’s economy will clearly be improved if it can persuade more of its citizens who are dotted around the world to invest in their homeland. Indeed, it could form an important part of a wider trend for the country, which, as the IMF’s Zhu pointed out, is “becoming increasingly interconnected with the global economy”.

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CELEBRATING 50 YEARS OF TANZANIA

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CELEBRATING 50 YEARS OF TANZANIA

Tanzania’s half-century milestone It is 50 years since Tanganyika and Zanzibar unified to form Tanzania, and the union remains strong. Jasper Peters charts the transformation of the country’s political and economic outlook over that time

his year, Tanzania celebrates five decades since Tanganyika unified with the archipelago of Zanzibar. The union remains a rarity on the African continent. While several countries have attempted to join forces – from the Senegambia Confederation in the 1980s to the Ghana-Guinea-Mali project in the early 1960s – none have struck such an enduring union. While not without its challenges, the United Republic of Tanzania has lasted. In April, when marking the half century, world leaders complimented the country’s achievement, while Tanzanian president Jakaya Kikwete remarked that the union’s longevity provided a “model for collaboration” from which the rest of Africa could take heart. While pan-African unification has long been on the agenda of its leaders, from the dreams of Ghana’s Kwame Nkrumah to the formation of the Organisation for African Unity and its successor, the African Union – as well as various economic blocs from the Economic Community of West African States (ECOWAS) to the East African Community (EAC) – the continent has often struggled to achieve durable unity, in regions or as a whole.

A historic union Mainland Tanganyika, which fell under German control in the late 1800s, achieved independence in 1961. Zanzibar gained its freedom in 1963, having previously been a British protectorate, and prior to that a sultanate under the control of Oman. There followed a period of negotiation and a revolution in Zanzibar, culminating in the union of the two and the formation of modern

Commemorations for the 50th anniversary of the 1964 Zanzibar Revolution, which preceded the unification of Zanzibar and Tanganyika into modern Tanzania

Tanzania in 1964. The country – and the dynamics of the union – has since been through several political and economic cycles. The loose union was agreed back in 1964 between Abeid Amani Karume, chairman of the Revolutionary Council of Zanzibar, and Julius Nyerere, the first president of Tanganyika and one of the visionaries of post-colonial Africa. Zanzibar maintained political sovereignty during this period, but the assassination of Karume in 1972 led to a greater degree of independence for the islands. Two government parties merged in 1977 – Zanzibar’s Afro-Shirazi Party (ASP), and the Tanganyika African National Union (TANU) – and were proclaimed the only legal party: Chama Cha Mapinduzi (CCM), which has been in power ever since. National unity was a critical matter for Nyerere, who saw it as a step towards East African unity. In 1985, shortly before his retirement, he said: “One area to which I accorded the highest priority during the whole of my leadership period was the building of a nation which was truly united, and based on respect for human equality and dignity... Looking back now on my 25 years of leadership, I can say with great satisfaction that we have succeeded in achieving this basic and fundamental objective. We now have a Tanzanian nation that is united, and which respects the dignity of every human being.”

Political structure Today, the political structure of Tanzania comprises a National Assembly of 295 members, of which 232 are directly elected from the mainland, with five delegates from the Zanzibar parliament, and the rest appointed. The House of Representatives in Zanzibar has 59 members and legislates on ‘internal matters’, making it, in effect, a semi-autonomous government, with control over domestic issues such as health and education. The national union

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CELEBRATING 50 YEARS OF TANZANIA

government is in charge of fiscal policy, foreign affairs, defence and security, emergency powers, debt, trade and immigration. The union faces continual challenges, especially concerning the distribution of decision-making powers. How to coordinate jurisdiction and avoid potential overlaps or redundancies in governance functions are top of the agenda for policymakers. Other challenges include policy areas such as the role of religion in public life, and how to confront the distinct challenges faced by Zanzibar, such as unemployment and economic diversification. While there are separatist groups calling for the independence of Zanzibar from the union government, these are in the minority.

1962

Tanganyika becomes a republic; Nyerere becomes first president

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The opposition Civic United Front (CUF), for instance, does not appear to support dissolution of the union, but rather a review of its structures and conditions to deal with the challenges. Indeed, it formed a coalition with the CCM party in 2010. What remains unclear is the full extent of Zanzibar’s sovereignty. While its constitution specifies that it is a state, it does not exercise the whole gamut of decisions.

Zanzibar gains independence

Tanganyika gains independence, with Julius Nyerere as prime minister

1961

Zanzibar’s president, Dr Ali Mohammed Shein, talks with Tanzanian president Jakaya Kikwete at Amaan Stadium. Zanzibar has autonomy over domestic issues such as health

1963

Following a violent revolution, Zanzibar is declared a republic. The Afro-Shirazi Party (ASP) takes power

1964

With Nyerere as president, Tanganyika and Zanzibar form the United Republic of Tanganyika and Zanzibar, later the United Republic of Tanzania

Nyerere issues the Arusha Declaration, the principles of which constitute Ujamaa, a type of socialism that forms the basis for the government’s policies

1967

CELEBRATING 50 YEARS OF TANZANIA

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Over the past five decades, Tanzania has been through several cycles in both its politics and economic policy direction. It experimented with socialism, adopting a specific version called Ujaama in the 1960s, during which time the president placed a high value on education, collectivism and self-reliance. This was codified in the 1967 Arusha Declaration, which was created by Nyerere and called for, among other things, egalitarianism, the formation of cooperative farm villages and nationalisation. However, this system struggled, partly due to implementation problems, and also as a result of Tanzania’s costly involvement in neighbouring Uganda’s conflict. The broader debt crisis engulfing developing countries in the early 1980s added further pressure, and the model gave way. The ‘third wave’ of democratisation brought about the 1992 entry of multi-party democracy in the East African state, amending the constitution.

Change of direction As much as Nyerere remains an inspirational figure today for many Tanzanians, the country’s economic policies are now more market oriented. While the state continues to exercise its presence in certain sectors, including telecommunications, banking, energy and mining, the policy environment has shifted significantly since the socialist era. Zanzibar’s government has also changed its direction over this period, largely as a response to economic difficulties in the 1970s that were partially due to a drastic fall in the region’s terms of trade for key commodities. Widespread trade and industry liberalisation followed during the 1980s. Supporters of Tanzania’s current policy believe this political and economic liberalisation has helped drive one of the highest growth rates in Africa, averaging 6.7 per cent since 2006. In Zanzibar, market reforms are heralded by the government as enabling the GDP to double between 1986 and 1996. In the African Economic Outlook 2014 report, the African Development Bank projects seven per cent growth for Tanzania in 2014 and 2015, thanks to a combination of communications, transport agriculture and manufacturing development, as well as greater investment in infrastructure. Considering Tanzania’s population of just under 50 million, the strong performance of its

Ugandan dictator Idi Amin attempts to annex the province of Kagera

1977

The Tanzania African National Union (TANU) and ASP merge to form Chama Cha Mapinduzi (CCM) under the leadership of Nyerere. It has been the leading political party in Tanzania ever since

1978

Geita Gold Mine, an open-cast gold mine in the Lake Victoria goldfields of north-west Tanzania. Gold production has been rising sharply over the last few decades

economy is important for the wider region and has contributed to the broader optimism surrounding Africa’s economic outlook. However, one of the biggest economic game changers for the country has been natural resources. In March 2012, Statoil and ExxonMobil made a major discovery of gas reserves off the coast of Tanzania, near those deposits discovered in Mozambique, which are some of the largest charted in the world. Much attention is now on the Tanzanian regulatory regime, which will need to strike the right balance between investor incentives and state take. Gold and diamond production have also been climbing steeply

Tanzanian forces invade Uganda and take control of the capital Kampala, leading to the fall of Amin’s regime

1979

Zanzibar’s first post-revolution constitution establishes the House of Representatives, allowing the archipelago to create its own laws

A new constitution of Zanzibar comes into force, outlining rights and freedoms

1984

1985

Nyerere retires

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CELEBRATING 50 YEARS OF TANZANIA

since the 1990s, while uranium deposits have been uncovered near the Malawian border. Such potential was perhaps one reason that Tanzania was on the seven-country list of African states visited by the then Chinese premier, Wen Jiabao, in 2006. Tourism remains a big draw, of course, which is particularly beneficial from a development standpoint owing to the higher employment-to-investment ratio compared with the extractive industries, which tend to be more capital intensive. Zanzibar continues to be a popular destination, especially the Stone Town. The mainland boasts the highest mountain in Africa, Mount Kilimanjaro, while famous national parks, eco-tourism and safaris will continue to be revenue-earners. In total, Tanzania is home to 12 national parks and 15 game reserves. As with most African economies, agriculture remains both a historically dominant sector and a key future growth area for achieving broad-based growth, especially for poorer communities. Agriculture is the mainstay of the Tanzanian economy, providing 85 per cent of exports and employing 80 per cent of the workforce (see page 102). Nearby Ethiopia provides an interesting model of agricultural development – which the Tanzanians are watching keenly – including specialised government agencies to promote farmer skills and technologies, and commodity exchanges to improve the transparency of agricultural pricing. President Kikwete has shown interest in improving the sector’s efficiency and profitability, and is thought to be mulling the possibility of commodity exchange innovations. Tanzania’s agricultural growth is important not just for the country, but also, potentially, the East African region, which has faced severe food shortages and high inflation due to food-price spikes over the past three years. Finally, Tanzania’s financial sector is expanding. Around half of the industry’s total assets are foreign owned, with competition among commercial banks driving improved efficiency and quality of financial services – although challenges still exist, particularly high interest rates. Encouragingly, the services sector as a whole – which has a high employment-to-investment ratio – has been growing rapidly, recording the highest rate of annual growth in 2012, at eight per cent. Another encouraging dynamic is the increasing role of trade as a driver of growth. The trade-to-GDP

Tanzania formally adopts the Economic Recovery Programme to liberalise trade, following more than a decade of economic stagnation

1986

ratio increased from 13.5 per cent in 2000 to 30 per cent in 2011, at the time the highest rate in the East African Community. Spanning 945,000 square kilometres, and with deep-water harbours, Tanzania has the potential as a linkage point from Africa to the world, and from the world to Africa. Tanzania’s governance standards present a mixed picture. In 2006, the African Development Bank cancelled $645 million of debt thanks to the country’s higher level of accountability in public finance and economic record. The most recent report of the World Bank’s governance indicator, the Country Policy and Institutional Assessment (CPIA), notes improvements: it ranks Tanzania with a score of 3.8, in the top group for Africa. Over the period 2009-13, a troubled one for the global economy, Tanzania implemented fiscal stimulus and loosened monetary policy. It achieved a respectable seven per cent growth rate per year, in part as a result of high gold prices. Benno Ndulu, head of the Bank of Tanzania and one of the most respected central bank governors in Africa, is credited as a key architect of Tanzania’s economic reforms over the last two decades. The country still scores low on measures for transparency, as well as some poverty indicators. Donors have remained committed in spite of corruption scandals, with the view that the government can be seen to be taking sufficient measures to improve both governance and transparency.

A blueprint for development In terms of social indicators, metrics of life expectancy and infant mortality put Tanzania towards the bottom end of global league tables. Some social indicators are getting better. Enrolment at primary school level leapt from 59 per cent in 2002 all the way to 95.4 per cent in 2010 (see page 90). The challenge here, as elsewhere across Africa, is ensuring that the increased quantity of education is matched by an improvement in the quality of teaching and learning. Pass rates and concordance with regional or international reading and literacy standards are among the quality-related outcomes to monitor. Tanzania’s Development Vision 2025, published in the late 1990s, provides a blueprint for where the government wishes to

Development Vision 2025 is announced, replacing the Arusha Declaration as the basis for policymaking

1992

1995

First multi-party elections. Benjamin Mkapa is voted in as president The constitution is changed to allow for a multi-party democracy and a free market economy

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Launch of Development Vision 2025, outlining targets and plans for developing from a lowto middle-income country

1999

Nyerere, known as the founding father of Tanzania, dies at the age of 77 from leukaemia

The East African Community – encompassing Burundi, Kenya, Rwanda, Tanzania and Uganda – reforms, having previously collapsed in 1977

2000

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take the country. It lays particular emphasis on the importance of peace, stability and security, calling for the eschewing of anything that serves to divide Tanzanians on the basis of race, religion, tribe or place of origin. A dominant theme in the document is the desire for Tanzanians to own a shared vision for the country. In the economic sphere, it envisions a future in which Tanzania has moved from low-productivity agriculture towards modernised and productive agriculture, and industrial development and services. The five attributes of the country by 2025 are clearly outlined: high-quality livelihood, peace, good governance, a well-educated society and a competitive economy. Zanzibar has published its own vision looking ahead to 2020, by which time its government

CCM’s Jakaya Kikwete wins Tanzania’s presidential elections

2001

2005

Primary school enrolment, which has grown dramatically from 59 per cent in 2002 to 95.4 per cent in 2010, is among the social indicators in Tanzania that are improving

has pledged to eradicate absolute poverty and have developed a strong, diversified and competitive economy. To realise the vision for both Tanzania and Zanzibar, momentum will need to continue and increase – with the 2015 elections another key milestone in the country’s governance trajectory. Strengthening and nurturing the relationship between the union government and Zanzibar will be a key determinant of Tanzania’s overall success and stability in the years ahead.

Statoil makes a series of discoveries of natural gas off Tanzania’s coast. The World Bank describes this as the “most significant transformative factor on the economy”

Chinese Premier Wen Jiabao visits Tanzania as part of an African tour aiming to strengthen economic ties

2006

2010

2012

East Africa’s common market comes into force The Bulyanhulu gold mine opens, making Tanzania one of Africa’s leading producers of gold

The African Development Bank signs a debt cancellation agreement for $645 million

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Great expectations A series of natural gas finds has been made in Tanzania in recent years, raising hopes for an energy windfall, as Dominic Dudley explains

hese are exciting times for the oil and gas sector in East Africa. A string of sizeable discoveries has been made in Tanzania’s Indian Ocean waters since 2010, and there have been finds in Uganda, Kenya and Mozambique as well. While the exploration has yet to translate into significant new revenues for Tanzania, the prospects look bright. The good news has continued this year, with two large finds announced in

June alone. In the first week of June, United Kingdom-based exploration company Ophir Energy announced a discovery at Taachui in the offshore Block 1. Ophir estimates that the site holds around one trillion cubic feet (tcf) of recoverable gas, which brings the total discovered by Ophir and its partners –

BG Group and Pavilion Energy – on Blocks 1, 3 and 4 close to 17tcf. Two weeks later, Norwegian energy firm Statoil announced an even larger discovery of two to three tcf of natural gas at its Piri-1 well in Block 2. Statoil and its licence partner, United States energy major ExxonMobil, have now made six

A drilling vessel contracted by UK exploration firm Ophir Energy and partners BG Group and Pavilion Energy. Together, the companies have recently discovered almost 17 trillion cubic feet of recoverable gas in Tanzania

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Oman Oil Company expands operations in Tanzania, East Africa’s trading hub

Oman Oil Company (OOC) established its first representative overseas office in Dar es Salaam to support the advancement and further potential growth of the Tanzanian energy and energyrelated sectors. Operating under the name of Oman Energy Limited (OEL), OOC will work alongside its majorityowned Oman Trading International (OTI), to bring world-leading expertise and the latest technologies to maximise Tanzania’s natural resources and assist in the development of the national economy through competitive business propositions. “Our office in Tanzania supports partnerships that will maximise business opportunities offered by Tanzania’s fast-developing energy sector,” says Mulham Al Jarf, chairman of OEL. “In addition, we are reviewing a number of proposals in the petroleum retail, mining and infrastructure sectors as well. Our investment road map is in line with our strategy to explore various industries, building on our strengths and expertise in the energy sector. We look at our presence in Tanzania as an enabler for future growth into the African continent.” OOC’s portfolio consists of more than 40 assets in 15 countries and is diversified across seven sectors. The company’s structure is based on three strategic business units: upstream, downstream and emerging businesses. OOC uses Oman’s geostrategic location to broaden access to emerging markets in Asia and

Africa through established international trade lines. In addition, it invests in various sectors including exploration and production, refining and marketing, base petrochemicals, infrastructure, power and shipping, as well as metals and mining. With OOC commencing operations in Tanzania in early 2014, the company’s growth plan will provide a positive business climate for investors to utilise its expertise in developing upstream industries, expanding downstream developments and exploring prospects for other emerging businesses. Through OOC’s diversification strategy, the company aims to develop its business portfolio by identifying future investment opportunities within Tanzania. The agreed strategic reserve of petroleum products for import into Tanzania will be an initial focus of OEL and facilitated by OTI. OOC’s expertise lies in enhanced oil recovery (EOR) and, therefore, can offer Tanzania a more comprehensive and diverse range of import opportunities. The forthcoming construction of a new port at Bagamoyo, alongside the development of multiple port facilities across the country, will facilitate both imports and exports. OOC, in partnership with one of its companies, Oman Oil Marketing Company (OOMCO), will also develop the retail of the petroleum products sector. The continued success of OOMCO’s ‘one-stop-shop’ concept in Oman, which introduces

convenience as a main proposition, will offer Tanzanian customers an enhanced experience at forecourts, including a filling station and a convenience store. The significant growth of agriculture in Tanzania, which forms 80 per cent of current exports, has prompted OOC to explore the possibility of an ammoniaurea plant. The company will utilise the recently discovered natural gas reserves as a means of fuelling the sector’s growth. OOC’s investment in a similar platform in Sur, Oman, has yielded 1.7 million metric tons of urea per year since beginning operations in 2011. Natural gas feedstocks in southern Tanzania allow for the construction of a similar plant. With demand on power consumption significantly increasing in Tanzania, the proposition of building a power plant will gradually become an important factor in the holistic infrastructural developments of the energy industry. OOC’s investment in the development of a gas-fired independent water and power project (IWPP) in Musandam, Oman, will have its added value through sharing expertise. OOC’s long-term business growth and investment strategy could prove influential factors in driving Tanzania’s development programme, Vision 2025. With Tanzania hosting OEL and providing the necessary support for its activities, the country is a starting point for OOC’s expansion plans into East Africa and the wider continent. This is a key possibility and opportunity. Oman Energy Limited First Floor Kilwa House 369 Toure Drive, PO Box 23197 Dar es Salaam, Tanzania www.oman-oil.com

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discoveries in Block 2, adding up to a total of around 20tcf of gas. They appear optimistic that more gas will be found. “Additional prospectivity has been mapped and will be tested through 2014 and 2015,” says Nick Maden, senior vice president for Statoil’s exploration activities in the western hemisphere. “We expect to drill several additional exploration and appraisal wells and hope that the results from these wells will continue to add gas volumes for a future large-scale gas infrastructure development.” Perhaps the most important piece of infrastructure that could be developed is a liquefied natural gas (LNG) plant, which would allow Tanzania to export gas to markets around the world. Given the amount of gas that has been discovered in recent years, industry executives say such a project could make sense. “The Taachui 1 discovery… adds further

A Chinese pipe-laying ship at work 2km offshore Songo Songo island. Once completed, the gas pipeline will stretch 542km from Mtwara, close to Mnazi Bay, to Dar es Salaam, the commercial capital

resource to support the LNG development in Tanzania,” reported Nick Cooper, Ophir Energy’s CEO, at the time of the recent discovery. “The aggregate recoverable volumes of circa 16.7tcf are now approaching the threshold needed to underpin a potential third LNG train from Blocks 1, 3 and 4.”

Sizeable investment needed The development costs of an LNG plant will be high, however. If a decision is made to go ahead, the most likely scenario will be to develop a two-train facility, which could later be expanded into a four-train plant. The International Monetary Fund (IMF) has estimated the cost of developing a two-train plant to be $20 billion (in

2012 prices) over five years. According to the organisation, this means that, at the peak of development, the annual investment would be equal to around 19 per cent of the country’s gross domestic product (GDP). The revenues that could be earned are vulnerable to movements in international market prices, but should be substantial. The IMF’s projections indicate that the Tanzanian Government could collect revenues of between $3 billion and $6 billion a year from an LNG plant, depending on its size. However, it will take time for that to happen, as gas revenues will only materialise a decade or so after an LNG project is given the go-ahead.

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Ndovu Resources Ltd

In Tanzania for the long term Ndovu Resources Ltd has been prospecting for oil and gas longer than any other current holder of exploration acreage in Tanzania. Ndovu is a Tanzania-incorporated limited company, wholly owned by Aminex PLC, an international oil and gas company that is listed on the London Stock Exchange. It operates the Lindi and Mtwara licences in South-Eastern Tanzania, held under the Ruvuma Production Sharing Agreement (PSA); the Nyuni Area PSA, onshore and offshore close to the Rufiji Delta; and the Kiliwani North development licence, a gas field that offsets Songo-Songo – Tanzania’s only current source of significant natural gas production. In each concession, Ndovu operates on behalf of an industry consortium of international companies and has been responsible for more than $100 million of expenditure in Tanzania over the past 12 years. Ndovu has drilled six major exploration wells in Tanzania, acting as operator for five of them. Of these five, significant

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quantities of natural gas were discovered in two exploration wells. This success rate of 40 per cent is much higher than the international average. Ndovu’s first discovery, Kiliwani North-1, was drilled on the extreme southern tip of Songo-Songo Island and tested gas flowed at a rate of 40 million standard cubic feet per day (MMscfd). A major regional pipeline, currently under construction, will provide a route to market for Kiliwani North gas in the first quarter of 2015 and give a much-needed addition to Tanzania’s domestic energy requirements, available for either power generation or industrial use. To ensure effective drainage of the reservoir and maximum recovery, Kiliwani North production will commence production at a carefully managed rate of approximately 20 MMscfd. Further south, Ndovu has drilled two wells onshore in the Ruvuma PSA, the first of which, Likonde-1, had oil shows in addition to large influxes of gas. This greatly enhanced knowledge of the area. The second well, Ntorya-1, resulted in

a discovery and tested gas at a rate of 20 MMscfd, together with 139 barrels of liquid ‘condensates’, a light form of crude oil. Completing in May this year, Ndovu has conducted a new seismic survey over and around the two wells already drilled in the Ruvuma PSA, and initial results are highly encouraging for unlocking vast potential for both natural gas and liquid hydrocarbons in the onshore Ruvuma Basin. This area will be Ndovu’s main focus over the next two and a half years, during which it plans to drill a further four wells to appraise the potential. In recent years, public attention has been focused on the world-class gas discoveries made in Tanzania and neighbouring Mozambique by large international companies off the continental shelf in deep water. Onshore, where there is also considerable potential, discoveries can be brought to market much faster, thanks to the Tanzanian Government’s vision in financing and constructing major new pipeline infrastructure to serve the country’s domestic needs. Ndovu is

already a trailblazer and leader in this sector, and will continue to be so. Ndovu was originally created through the inspiration of a group of Australian businessmen and geologists trading under the name Tanzoil NL and led by Didier Murcia, a Perth lawyer who for many years now has been Tanzania’s honorary consul in Australia. Against all the perceived wisdom of the oil and gas industry at the time, Aminex PLC shared this vision of Tanzania, and in 2012 acquired all the share capital of Tanzoil, becoming the owner of Ndovu Resources

Ndovu has made a longterm commitment to Tanzania and uses its best efforts to support local communities Ltd while continuing to work with its original team. In addition to pursuing oil and gas exploration in the country, Murcia also formed the Rafiki Mission, a medical charity that has been actively involved in Tanzanian surgical projects for more than a decade, supported by

Ndovu and its parent company, Aminex PLC. Ndovu has made a long-term commitment to Tanzania and uses its best efforts to support the local communities in its areas of operation. Ndovu was the founder and instigator of OGAT, the Oil and Gas Association of Tanzania, a forum for government-industry dialogue, and provided its secretariat and administration during its early stages. The company is fortunate in having as its resident director Ambassador I Chialo, a distinguished former Tanzanian diplomat who latterly served as the country’s ambassador in Japan and the Far East. Ndovu’s expatriate country manager in charge of operations is Australia’s honorary consul in Tanzania. Other international companies, both large and small, have come and gone while Ndovu has remained consistently committed to Tanzania. Ndovu’s thinking was several years ahead of an industry trend that has seen Tanzania transformed from a largely unexplored region into one of the most exciting places for oil and gas development and exploration. In 2004, Ndovu became the first company for two decades to drill a new well in the offshore environment, on Nyuni Island; and in 2008 it made the first commercial discovery in the country for many years. In 2011, Ndovu was the first company in Tanzania’s history to complete the 11-year term of a

PSA, after fulfilling three phases of work obligation, and then successfully to apply for and be awarded a new PSA covering approximately the same area. In 2012, Ndovu made the first gas discovery in the onshore Ruvuma Basin and in that well encountered the country’s first measurable liquid hydrocarbons. Ndovu has held licences in Tanzania under two Presidents and three Ministers of Energy and Minerals. Ndovu has worked in harmonious and fruitful cooperation with the Tanzanian Petroleum Development Corporation for more than 15 years and plans to continue to do so. After many years of painstaking work, in 2015 Ndovu will become a commercial producer of Tanzanian natural gas. Ndovu is proud to be in the Tanzanian gas industry for the long term.

Ndovu Resources Limited PO Box 105589, Mahondo Road Msasani Peninsular Dar es Salaam, Tanzania

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The benefits that Tanzania is able to extract from its gas wealth should be more than merely fiscal. Gas production itself will not lead to many new jobs, as the energy industry is one that is capital intensive rather than job intensive. Nevertheless, there should be gains for other related industries, such as the power, fertiliser production and petrochemicals sectors, for example. Tanzania does have some experience of gas developments, which should help it to make the most of the opportunity. The country’s energy industry dates back to 1974, when Italy’s Agip discovered the offshore Songo Songo field, south of Dar es Salaam. In 1982, Agip made another offshore discovery, Mnazi Bay. However, it took a long time to commercialise the finds. Commercial production from Songo Songo only began in July 2004, and Mnazi Bay followed two years later. These days, the gas from the two fields is used to fuel power plants, with some delivered to local industry. Tanzania’s government is planning to raise the country’s power-generating capacity, but, despite the increase in demand for gas this will involve, it will still have a large surplus for export. “Domestic usage of gas and oil will be very small,” said Professor Sospeter Muhongo, minister for energy and minerals, in a speech at the Chatham House think tank in London in February 2013. “Tanzania will not be able to consume all the gas that is being found.” A lot of new infrastructure will need to be built over the coming years if Tanzania is to make the most of its newly discovered gas reserves. And, while the discussions on the potential for an LNG plant are ongoing, some projects are already under way. The most significant of these is a 542km gas pipeline from Mtwara to Dar es Salaam, which is being financed by the Chinese Government and project-managed by Australia’s WorleyParsons. The scheme, worth some $1.2 billion, also includes the construction of two gas-processing plants. Once completed, the pipeline will transport gas from Mtwara, which is close to Mnazi Bay, to the country’s economic capital. In the meantime, more wells are due to come on-stream in the near future. Canada’s Wentworth Resources and

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Workers on board a pipe-laying vessel. Tanzania’s $1.2 billion gas pipeline scheme includes construction of gas-processing plants at Madimba in Mtwara and Songo Songo island in Lindi

France’s Maurel & Prom have discovered some 667 billion cubic feet (bcf) through five wells on their Mnazi Bay concession. Four are to be brought on production at an expected rate of 20 million cubic feet a day (cf/d) per well. The first gas is scheduled to be delivered in early 2015.

Exploration focus Wentworth Resources expects more development and exploration wells to follow in time. That is also the case at other sites across the country, with most oil companies focusing on exploration rather than production for the moment. United Arab Emirates-based Dodsal Resources, for example, says it plans to drill exploratory wells this year on two prospects in its Ruvu concession to the

west of Dar es Salaam. A little further inland, Australia’s Swala Energy is assessing the seismic data on the Kilosa-Kilombero licence area, and surveys on the Pangani Basin are due to be completed this year. While all the successes to date have involved natural gas, some companies are hopeful that oil could be found too. UK-listed Afren says it is planning exploration drilling at the Chungwa-1 well in the offshore Tanga block in the second half of 2014. The area sits alongside the company’s Block L18 in southern Kenya, which it says is most likely to be oil-bearing. Afren is planning a drilling campaign in Kenya in 2015, to test assumptions that, if successful, would add to hopes for the Tanzanian concession.

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companies for the East Africa region, launching a fourth licensing round in October last year for seven deep offshore blocks, and another covering the northern half of Lake Tanganyika. The bidding round closed in May, with five bids having been received. These are now being evaluated, and those who are successful will then need to negotiate a production-sharing agreement with the government and the Tanzania Petroleum Development Corporation (TPDC).

Policy review

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A Deepsea Metro 1 drill ship, capable of drilling to depths of 3km, explores the seabed off Tanzania’s coast

Ophir, meanwhile, says that there is potential for oil discoveries in one of its blocks – East Pande – most of which lies relatively close to the shore. On the other side of the country, oil could be present under Lake Tanganyika. Beach Petroleum says 2D seismic data suggest the area has the potential to hold oil and gas. It points out there have been large oil discoveries in a similar geological environment in Lake Albert in Uganda. UK-based Heritage Oil says its two concessions, at Rukwa South and Kyela, are also geologically similar to the Lake Albert basin. Detailed mapping and evaluation on the Rukwa area is ongoing, while further seismic surveys are planned for the second half of 2014 at Kyela. A multi-well drilling programme across the two concessions is planned over the course of 2014 and 2015. The government has been trying to tap into the enthusiasm among oil

What all this activity means for Tanzania is still debatable. Most of the oil and gas exploration companies have yet to make a final investment decision on whether to develop their finds, but the level of expectation is clearly increasing. If the gas industry does take off as hoped, it could help to transform the country’s economy, but the IMF warns that a significant amount of work is needed to put in place the most appropriate policy and regulatory framework, not least in terms of how the revenues are spent. The government is in the process of developing its laws and policies in this area: a Petroleum Exploration & Production Act passed in 1980 is currently under review, while a new Gas Policy was issued in October last year, and the latest draft of the National Petroleum Policy was released in April 2014. Perhaps the biggest challenge facing the government in the coming years will be keeping expectations in check. There have already been protests during the construction of the pipeline from Mtwara to Dar es Salaam, and more could follow if local communities start to think they are not benefiting as much as they should. “This issue is the same in all countries,” said Muhongo in his talk at Chatham House. “Expectation from poor communities is always high. In Tanzania, a large part of the population is poor, and they assume that when oil and gas is discovered, they will quickly become rich. The government is duty-bound to manage these expectations.” If the government can succeed in doing this and taking the country to the point where LNG export revenues start to flow, then the potential for the economy and its citizens is considerable.

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JOERG BOETHLING/ALAMY

INVESTMENT OPPORTUNITIES: MINING AND MINERALS

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INVESTMENT OPPORTUNITIES: MINING AND MINERALS

Geological powerhouse A long-term view is essential if Tanzania’s rich natural resources are to continue to transform the country’s economy, writes Chris Cann

anzania has enjoyed a stellar period of mining development during the past 15 years. This is a combined result of improved mining policies that have attracted large amounts of foreign direct investment (FDI), and the onset of the mining boom. Over the years, the country has established solid legislative and physical infrastructure, particularly around its gold sector, to grow the mining sector into the driving force behind its economic advancement. While the geological and political potential exist to make Tanzanian mining a permanent powerhouse within the African continent, recent moves to raise taxes on miners could be perceived as detrimental to the country’s ability to make the most of its mineral resources.

rocks in granitic complexes, the Dodoman system, and greenstone belts. The latter underpin the Lake Victoria goldfield in the northern part of the country and are located east and south of Lake Victoria. Of all the gold produced in Tanzania, more than 90 per cent has been sourced from the greenstone belts that are found in the Lake Victoria goldfields.

Geology and production

Though Tanzania has shown itself to be prospective for a diverse range of mineral opportunities – with the most recent including rare earth elements and graphite – its gold endowment has been the mainstay of its mineral industry. According to Mining Business Media, Tanzania is currently the fourth-largest gold producer in Africa. The gold mining industry transformed the Tanzanian economy in the late 1990s. In the early 1990s, before significant gold production began, Tanzania was near

The geology of Tanzania is dominated by two distinct features: the Tanzania Craton in the centre and west of the country, and the East African Rift, which crosses the Kenyan border to the north and continues roughly down the east side of Tanzania. While there are a variety of mineral deposits found in many different regions, the craton covers over a third of the country and is especially significant from a mineral development perspective. The Tanzania craton consists of Archaean

Tanzania’s gold endowment has been the mainstay of its mineral industry

Geita Gold Mine is operated by AngloGold Ashanti. Now among the largest taxpayers in Tanzania, the companies involved in the joint venture have contributed significantly to the economy, despite what critics of the industry suggest

the bottom of African countries ranked by FDI. A report from the United Nations Conference on Trade and Development in 2013 shows that it moved into the upper-middle portion of this ranking. The mining reforms in 1998 spurred an increase in activity, with six major gold mines having begun operations since. A report by the International Council of Mining and Minerals (ICMM) states that “mining investments have been the dominant element” in the resulting FDI. Despite what critics of the mining industry might suggest, Barrick Gold Corporation (now called African Barrick Gold) and AngloGold Ashanti have been two of the largest taxpayers in Tanzania. Export earnings from the gold sector alone were $770 million in 2009 – and the World Gold Council expects that number to double by 2016. The Tanzania craton is also home to numerous kimberlite pipes, which, historically, have been found to be productive and have made Tanzania a significant diamond producer. Production rates have dropped in recent years, though, and, as of 2012, Tanzania had slipped down to 15th on the table of global diamond producers. Blue zoisite, or tanzanite as it is commercially known, is a precious gemstone identified at the base of Mount Kilimanjaro, which is mined by Richland Resources in a joint venture with the State Mining Corporation (STAMICO). It is the world’s only known source of tanzanite and, at current production rates,

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AFRICAN BARRICK GOLD

INVESTMENT OPPORTUNITIES: MINING AND MINERALS

African Barrick Gold’s Bulyanhulu mine in the Shinyanga region. Following the government’s review of contracts, African Barrick Gold has recently agreed to start paying higher royalities and a service levy equivalent to 0.3 per cent of turnover

has a 30-year mine life with an estimated annual production of 2.2 million carats. Other mineral deposits include tin and tungsten in Proterozoic rocks in the north-west and coal in the Karoo system

in the southern part of the country. Industrial minerals – such as kaolin, limestone and phosphates – are found in different areas around the country, too. The discovery of uranium deposits in

Tanzanian key mineral production (2012) Volume

World ranking

% Change on 2008

5,840t

+105%

Gold

39,012kg

+7%

Silver

11,227kg

+8%

Diamonds*

127,174cts

-46%

45,000t

+118%

78,672t

–**

+416%

Base metals Copper Precious metals

Bulks Bauxite Energy Coal (bituminous)

* Non-metals ** Coal is sub-categorised so a world ranking is not determinable Source: British Geological Survey

Malawi, which connects with Tanzania’s the south-west, makes the areas to the of Lake Nyasa located along the trend of Malawi’s uranium zones. Adjacent areas to the east of Lake Nyasa are prospective for uranium, too. Exploration remains relatively active at the moment, despite the depressed uranium price.

Mineral investment policy To ensure that it benefits from the industry, Tanzania has undergone several structural economic reforms since the 1980s, changing the government’s role from sole owner and operator of mines to regulator; formulator of policy, guidelines and regulations; and promoter and facilitator of private investments. The Mineral Policy of 1997 was followed by the passing of the Mining Act in 1998, which amended the financial laws that were designed to create an attractive environment for private investment. The Mineral Policy of 2009 and the 2010 Mining Act are two government mandates that currently control the mining industry. The Mineral Policy of 2009 outlines a number of ways in which the government would like to “maximise the benefits of mining” and states that it will: strengthen the integration of the mineral sector with other sectors; improve the economic environment for investment; improve the legal and regulatory framework to enhance

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WWW.SHANTAGOLD.COM

SHANTA GOLD IS DELIGHTED TO CONGRATULATE THE UNITED REPUBLIC OF TANZANIA AND ITS PEOPLE ON THE OCCASION OF ITS 50TH ANNIVERSARY OF THE UNION OF TANZANIA

Shanta Gold is incredibly proud of its association with this great country and we are wholly committed to continuing to develop our New Luika Gold Mine into a world class asset. Our ambition is to make a lasting and sustainable contribution to the social, environmental and economic wellbeing of our local communities, as well as supporting the wider development of Tanzania.

JOERG BOETHLING/ALAMY

INVESTMENT OPPORTUNITIES: MINING AND MINERALS

monitoring; strengthen the capacity of government institutions responsible for administration of the mineral sector; help to develop small-scale miners; facilitate value addition to minerals; and ensure strong environmental management. As such, the government affirms that the mining sector is a key industry and will be given priority in the National Strategy for Growth and Reduction of Poverty (NSGRP), contributing to the achievement of the National Development Vision 2025. Mining is currently regulated under the 2010 legislation by the ministry of energy and minerals. The state owns all mineral rights – whether in, on or under land – and then provides trading licences to the mining companies. Mining licences must generally be obtained for all kinds of mining projects and are only granted to Tanzanian citizens

Workers search for gold in the open-cast gold mine in Geita. Export earnings from Tanzania’s gold sector were $770 million in 2009 – and the World Gold Council expects that number to double by 2016

and/or companies that are locally incorporated. There are also special mining licences available, which can be obtained for either superficial or non-superficial deposits. Plans in regard to environmental management, employment and training, and local procurement are also required as part of the submission, and, if granted a licence, companies must operate in accordance with these plans. In addition, the government may also introduce specific Mineral Development Agreements, mainly for achieving tax and fiscal stabilisation. Furthermore, the ministry of energy and minerals has the power to grant prospecting licences and retention

licences. The former provide exclusive rights for minerals in defined areas. Retention licences, meanwhile, protect an identified mineral deposit within licensed areas that is potentially of commercial significance, but cannot be immediately developed due to temporary technical constraints or market conditions. In the Fraser Institute’s Survey of Mining Companies 2013, Tanzania gained a higher score than in 2012 and improved its ratings for political stability, workable environmental regulations and clarity over disputed land claims. One of the greatest advantages of investing in the Tanzanian minerals sector is that it is a known quantity. The gold

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ZHANG PING/CORBIS

INVESTMENT OPPORTUNITIES: MINING AND MINERALS

sector, in particular, is well established, while the physical and legal infrastructure required for the delivery of long-term developments has been proven to work. Despite the mining industry’s prominent position in the Tanzanian economy, it is still in its infancy. Geologically, the gold industry is likely to continue to attract the lion’s share of investment; however, explorations for uranium, rare earth elements and graphite have also turned up encouraging results. Tanzania’s current review of contracts is seen by some as a potential threat to its mining sector. Mining and Energy Minister Sospeter Muhongo told parliament this year that the country’s 45 million people expected to see more benefit from the country’s natural resources. To this end, as part of the review, African Barrick Gold has agreed to start paying a service levy, equivalent to 0.3 per cent of turnover – significantly higher than the annual payment of $200,000 that was agreed in its mining contracts. The company will

Tanzanite was discovered in 1967 near Mount Kilimanjaro, the world’s only known source of this gem. Richland Resources has recently confirmed its tanzanite-mining licence for the next 10 years with the State Mining Corporation (STAMICO)

also pay higher royalties. Gold royalties are at four per cent – a competitive rate by current international standards. Any shift much higher could have a negative impact on investment. In a long-term industry such as mining, investors value stability, and any attempts to shift the goalposts are generally not well received. Another concern is the level of illegal mining in the country. Richland Resources’ tanzanite operations have been curtailed for over a year because of uncontrolled illegal mining and violence, including the fatal shooting in July 2013 of an employee by an illegal miner. Elsewhere, a number of locals attempting to mine illicitly on licensed areas have been shot dead or wounded by police. In a move to ease tensions, according to Tanzania Daily News, the government and the World Bank is now to allocate

more than TZS10 billion to small-scale miners, including the purchase of two drilling rigs and the creation of dedicated mining areas where they can work without interfering with large-scale operations. It is hoped that this initiative will encourage investors who might otherwise have been put off by news of the unrest. The rise of mining in Tanzania since 2000 could become a sustained influence on the economy, but ongoing investment will rely on the understanding that this is a long-term industry with projectdevelopment and operational timelines. Furthermore, local and regional improvements to living standards, health, education and infrastructure are achievable when mining companies work together with communities, as experience in various African countries, such as Botswana, has shown.

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BG GROUP

INVESTMENT OPPORTUNITIES: POWER AND RENEWABLE ENERGY

Energy boost Untapped energy sources have the potential to enhance Tanzania’s growing economy. Sarah Rundell examines the options

anzania’s power sector is going through a period of dramatic transformation. Huge natural gas discoveries off the south coast offer real potential to plug a power gap that consistently reins in the country’s economic growth. This amounts to tantalising investment opportunities in an underdeveloped power sector in one of the world’s fastest-growing economies. Despite East Africa’s second biggest economy enjoying abundant gas and

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hydropower, among other renewable reserves, Tanzania has chronic electricity shortages with just 1,041 megawatts (MW) of installed generating capacity. According to the World Bank, only 15 per cent of the population has access to electricity, and the rural areas are virtually disconnected, reliant on firewood for cooking.

Now, government estimates put recoverable natural gas reserves at 46.5 trillion cubic feet following new discoveries from resident oil and gas groups ExxonMobil, Statoil, BG Group and Ophir Energy. Given Tanzania’s own power constraints, the government wants to use some of this gas for generating

The drill floor of BG Group’s Deepsea Metro I drill ship located offshore Tanzania. This group is one of the companies that have recently made significant discoveries of natural gas in the region

INVESTMENT OPPORTUNITIES: POWER AND RENEWABLE ENERGY

Electricity peak demand and consumption forecast 8,000

60,000

Electricity demand

Coincident peak demand

7,000

50,000

40,000 5,000 4,000

30,000

3,000 20,000

Electricity demand (GWh)

Coincident peak demand (MW)

6,000

2,000 10,000

1,000

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

Source: ministry of energy and minerals, Power System Master Plan 2012 Update

electricity for domestic supply before exports. It is planning to boost gasbased power capacity to 900MW and take the country’s generation capacity to 2,400MW by 2015-16.

Building interest In an unprecedented opportunity for private power developers, Tanzania’s energy regulator is considering multiple bids to build and operate power plants. National governments are working overtime to help their own power sectors make the most of opportunities in Tanzania. Last year in Dar es Salaam, the United States president Barack Obama announced Power Africa, a US initiative to double the number of people with access to power in six focus countries across sub-Saharan Africa, including Tanzania. Some of the initiative’s offerings are financial support, advice and loan guarantees – easing US private-sector operators’ concerns around risk. Additionally, South Africa’s state-owned lender, the Development Bank of Southern Africa, recently announced plans to lend Tanzania $314 million for two power plants.

It has underwritten $227 million for the construction of the Kilwa power plant and another $87 million for a 240MW gas-fired plant at Kinyerezi. Tanzania is also working with Japan’s Sumitomo Corp to build a 240MW natural-gasfired power plant. Sumitomo will build the $413.4 million plant on the outskirts of Dar es Salaam, working with a Japanese consortium that includes Japan Bank for International Cooperation, Nippon Export and Investment Insurance, and Sumitomo Mitsui Banking Corp. Other proposed plants include a 200MW gas-fired power plant in Bagamoyo, which has interest from two companies: BS Group, based in India, and Tanzanian metal manufacturer Kamal Steel. “Generally, the Government of Tanzania recognises that there is a need to promote and enhance private investment in electricity generation, transmission and distribution projects, and Tanzania is taking proactive steps to encourage overseas investment,” said law firm Norton Rose Fulbright in a recent report. Tanzania has a precedent with independent power producers (IPPs), with power from private

operators accounting for approximately 300MW of capacity. This includes a 180MW gas-fired capacity at Ubungo, which is owned by Globeleq.

Overcoming the obstacles Among the biggest challenges for power plant investors are Tanzania’s electricity prices, which are the lowest in the region. Low tariffs create a problem for investors because they have to be at a sufficiently high level to ensure that developers can cover their costs. The country’s power supply is dominated by the state-run Tanzania Electric Supply Company (TANESCO), which carries out all generation, transmission and distribution. However, TANESCO’s poor credit rating means that investors must seek robust guarantees from the Tanzanian Government that they will fulfil their obligations under power purchase agreements (PPAs). Developers find securing these “a slow process”, according to Norton Rose Fulbright. In an effort to address low tariffs, and as a response to TANESCO’s deteriorating financial situation, the government raised power

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SNV SNV Netherlands Development Organisation isisaaanot-for-profit not-for-profit SNVNetherlands NetherlandsDevelopment DevelopmentOrganisation Organisationis not-for-profit international development organisation. We concentrate international development organisation. We concentrate on international development organisation. We concentrateon on issues issues related to food, energy and water since these pose issuesrelated relatedto tofood, food,energy energyand andwater watersince sincethese thesepose pose urgent urgent development challenges for people living ininpoverty. poverty. urgentdevelopment developmentchallenges challengesfor forpeople peopleliving livingin poverty. Founded in the Netherlands, we have a local presence Founded in the Netherlands, we have a local presence inin38 38 of Founded in the Netherlands, we have a local presencein 38of of the poorest countries in Asia, Africa and Latin America, the thepoorest poorestcountries countriesininAsia, Asia,Africa Africaand andLatin LatinAmerica, America, including including sub-Saharan Africa. includingsub-Saharan sub-SaharanAfrica. Africa. We We have had trusted presence ininTanzania Tanzania for over 40 years. Wehave havehad hadaaatrusted trustedpresence presencein Tanzaniafor forover over40 40years. years. Our Our global team of local and international advisors work with Ourglobal globalteam teamof oflocal localand andinternational internationaladvisors advisorswork workwith with local local organisations to provide advisory services for the creation localorganisations organisationsto toprovide provideadvisory advisoryservices servicesfor forthe thecreation creation of effective solutions with local impact to knowledge of effective solutions with local impact to knowledge of effective solutions with local impact to knowledge networking, networking, and evidence-based advocacy. networking,and andevidence-based evidence-basedadvocacy. advocacy. We We aim to drive inclusive growth and development both of Weaim aimto todrive driveinclusive inclusivegrowth growthand anddevelopment developmentboth bothof of which are essential for lasting development success. SNV which whichare areessential essentialfor forlasting lastingdevelopment developmentsuccess. success.SNV SNV focuses focuses on renewable energy, agriculture, and water, sanitation focuseson onrenewable renewableenergy, energy,agriculture, agriculture,and andwater, water,sanitation sanitation and and hygiene. andhygiene. hygiene.

For For more information, please contact: Formore moreinformation, information,please pleasecontact: contact: Niko Niko Pater, Tanzania Country Director, NikoPater, Pater,Tanzania TanzaniaCountry CountryDirector, Director, SNV SNV Netherlands Development Organisation SNVNetherlands NetherlandsDevelopment DevelopmentOrganisation Organisation Tel: Tel: +255 22 2600340/397/398 Tel:+255 +25522 222600340/397/398 2600340/397/398 Fax: Fax: +255 22 2600339 Fax:+255 +25522 222600339 2600339 tanzania@snvworld.org tanzania@snvworld.org www.snvworld.org tanzania@snvworld.org www.snvworld.org www.snvworld.org

Our Our Partners OurPartners Partners

Renewable Renewable Energy Energy More More than than 90% 90% of of households households in in Tanzania Tanzania rely rely on on biomass biomass fuels fuels like like firewood firewood and and charcoal, charcoal, to electricity in rural areas is as low as 6%, and people spend up to 45% of access access to electricity in rural areas is as low as 6%, and people spend up to 45% of their their resources resources to to meet meet domestic domestic energy energy needs. needs.

What What we we do: do: • Increase • Increase access access to to energy energy in in rural rural and and peri-urban peri-urban areas areas through through market market development development in in renewable energy products and services including biogas, improved cook renewable energy products and services including biogas, improved cook stoves stoves and and solar solar • • Strengthen Strengthen enterprises enterprises offering offering energy energy products products and and services, services, inclusive inclusive business business

development development and and capacity capacity development development along along the the value value chai chai n n • partnerships and multi-stakeholder sector development Public-private • Public-private partnerships and multi-stakeholder sector development

Agriculture Agriculture Agriculture Agriculture accounts accounts for for 80% 80% of of employment employment in in Tanzania. Tanzania. However, However, restricted restricted access access to to markets locks most farmers in subsistence activities where many earn less than markets locks most farmers in subsistence activities where many earn less than USD1 USD1 a a day. day. What What we we do: do: • Strengthen • Strengthen value value chain chain actors actors in in red red meat, meat, dairy, dairy, edible edible oilseeds oilseeds and and staple staple foods foods business arrangements between smallholders and larger • Promote inclusive • Promote inclusive business arrangements between smallholders and larger enterprises enterprises • • Provide Provide impact impact investment investment advisory advisory services, services, knowledge knowledge development development and and networking networking alliances for industry voice and evidence-based advocacy • Facilitate • Facilitate alliances for industry voice and evidence-based advocacy

Water, Water, Sanitation Sanitation and and Hygiene Hygiene In In 2010 2010 53% 53% of of people people in in Tanzania Tanzania accessed accessed improved improved water water sources sources (worldwide (worldwide 89%). 89%). Sanitation facilities often do not meet basic standards. Sanitation facilities often do not meet basic standards. What What we we do: do: • Create • Create market-led market-led solutions solutions for for sanitation sanitation by by facilitating facilitating hygiene hygiene and and encouraging encouraging through communication behavioural change behavioural change through communication

• • Strengthen Strengthen public, public, private private and and community community capacities capacities in in rural rural water water supply supply service service management management

• • Strengthen Strengthen capacity capacity to to maintain maintain existing existing structures structures in in small small towns, towns, ensuring ensuring technical technical and and financial sustainability financial sustainability • • Promote Promote community community and and local local government government collaborative collaborative action action in in the the management management of of school school water, water, sanitation sanitation and and hygiene hygiene services services

DING WEI/XINHUA PRESS/CORBIS

INVESTMENT OPPORTUNITIES: POWER AND RENEWABLE ENERGY

Primary energy supply in Tanzania (2013)

90% Biomass

Petroleum products

1.5% Electricity

0.5% Coal and renewable sources

Source : www.usea.org

tariffs for domestic and industrial users by an average of 40 per cent earlier this year. Meeting domestic electricity demand promises investment opportunities in new pipeline infrastructure, too. In 2012, the government entered into a $1.2 billion loan with Exim Bank of China for the construction of a natural gas pipeline to connect the offshore gas fields of Mnazi Bay in the Ruvuma Basin with large-scale electricity producers, industrial users and population centres in Tanzania. Tanzania’s Power System Master Plan recognises that new power generation will come from IPPs – drawing from coal, hydropower and gas. Tanzania’s reserves of coal are estimated at five billion tonnes and located mostly in the south and west of the country. Production has risen to more than 100,000 tonnes a year since 2001. Investors in this sector include Irish

Meeting domestic electricity demand promises investment opportunities in new pipeline infrastructure 58

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Workers constructing the natural gas pipeline that connects the offshore gas fields of Mnazi Bay with large-scale electricity producers and population centres

group Kibo Mining, which plans to develop a coal mine in south-west Tanzania, to feed a proposed power plant with the capacity to generate as much as 350MW. Other plans include a coal-fired 600MW facility in Mchuchuma, which is backed by China’s Sichuan Hongda.

Exploring renewable energy Abundant resources of hydropower, wind, solar, biomass and geothermal power are also attracting investors. The International Finance Corporation, African power specialist Aldwych International and local group Six Telecoms plan to develop a 100MW wind farm at Singida, costing $285 million. This seeks to be the country’s first successful independent wind-energy power project and is a direct effort to diversify the country’s energy sources. While Tanzania’s potential hydropower capacity is currently estimated at 4,700MW, only 561MW is developed.

INVESTMENT OPPORTUNITIES: POWER AND RENEWABLE ENERGY

Professor Sospeter Muhongo Minister for Energy and Minerals

The largest hydropower plants are the Mtera and Kidatu dams located on the Great Ruaha River. The Mtera Dam is the most important reservoir, with a storage capability of over a year. Hydropower projects in the pipeline include TANESCO’s Stiegler’s Gorge project and the 358MW Ruhudji hydropower project, which is under development by a consortium of investors led by Aldwych International. But unpredictable rainfall has affected investment in Tanzania’s hydropower sector. While it currently accounts for around 49.3 per cent of the country’s electricity generation, hydropower is frequently crippled by droughts that are caused by changing weather patterns. Faced with shortages, TANESCO has increasingly been forced to use costly emergency generation plants. Tanzania has the potential for 650MW of geothermal power; so far, 50 potential sites have been singled out as suitable for development. The government recently said that it might consider subsidising solar-power production after completing a policy paper on this alternative source. The government’s Tanzania Investment Centre offers many incentives. Within the power sector, it helps investors gain permits, licences and approvals, granting

Today, just 40 per cent of domestic power is generated from gas. With a capacity of 784 million cubic feet of gas per day, the pipeline project is expected to boost power generated from gas to 80 per cent, producing 3,900 megawatts of electricity. We are also constructing gas-processing plants in Madimba and Songo Songo island, which will have a daily capacity of 200 million cubic feet. In time, and in line with demand, the capacity can be upgraded to 600 million cubic feet. At a time when just 15 per cent of Tanzania’s population has access to electricity, resource discovery and investment in infrastructure is timely. As well as traditional sources of power, we are also exploring renewable options such as hydroelectric energy, which will benefit isolated villages. In mining, we are proud to have received commendation from small-scale miners for ending the conflicts that recently blighted the mining sector. We are also in the process of reviewing our mining contracts, to ensure that revenue gained from the sector brings benefits to Tanzanians.

UNIVERSAL IMAGES GROUP VIA GETTY IMAGES

Tanzania possesses both the resources and resolve to ensure that the energy and mining sector remain integral to economic growth, and we are striving towards providing safe, efficient and sustainable options in the sector. This is crucial for raising living standards for Tanzanians. The provision of domestic power in particular is crucial to ensuring that our country has the tools to operate seamlessly, pushing forward development and growth, and surpassing the hurdles associated with poor power infrastructure. In recent years, we have seen some exciting discoveries in the gas sphere. The offshore natural gas discoveries made by the BG Group and ExxonMobil in 2010, for example, have yielded trillions of cubic feet of recoverable gas for domestic consumption, and we are in the process of constructing a gas pipeline between Mnazi Bay and Dar es Salaam. Due for completion in December this year, the pipeline will transport gas to major population and industrial centres.

A hydroelectric dam in Tanzania. Hydropower already accounts for nearly half of the country’s electricity generation, but there is scope to develop significantly more capacity, with a number of hydropower projects in the pipeline

Strategic Investor Status to those in priority sectors. Incentives include a range of tax benefits, the right to repatriate profits and dividends, and protection against nationalisation. The ministry of energy and minerals oversees the energy sector, developing and reviewing government policy. It is also generally the principle negotiator for the government on all IPPs. The power sector is regulated by the Energy and Water Utility Regulatory Authority (EWURA), which awards

licences, approves tariffs and approves terms and conditions of electricity supply, including PPAs. TANESCO says it plans to extend the national grid, setting a target of 250,000 grid connections per annum and 30 per cent grid access by 2015. Tanzania’s untapped demand for electricity, plentiful supplies of natural gas and its efforts to create an investorfriendly environment will in the coming years draw more investors to what is one of the country’s most exciting sectors.

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CHRIS UPTON/GETTY IMAGES

INVESTMENT OPPORTUNITIES: MANUFACTURING

Made in Tanzania Government legislation and abundant raw materials provide the groundwork for investment in an industry showing potential for huge growth, writes Wendy Atkins

anufacturing is an extensive potential source of revenue, employment and partnership opportunities for Tanzania. The government has identified increased foreign direct investment (FDI) as a driver of growth and development, especially given Tanzania’s geologistical position as a major gateway to other African countries. The recent discovery of huge reserves of natural gas in the country should also help attract more investors to this sector.

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As the second largest economy in East Africa and a member of several regional and economic trade groupings, including the African Union, the Southern African Development Community (SADC) and the East African Community (EAC), Tanzania is an attractive investment prospect for manufacturers. According

to the European Union-Africa cotton partnership Coton ACP, the country’s exports qualify for duty-free access to the EU through the Everything but Arms initiative, and certain textile products have also been granted preferential access to the United States under the Africa Growth and Opportunity Act

A stack of colourful silks in Zanzibar. Tanzania is Africa’s fourth largest producer of cotton, producing 354,000 tons and planting 1.4 million hectares in 2012. Currently, it provides a base for more than 40 ginning companies

INVESTMENT OPPORTUNITIES: MANUFACTURING

(AGOA), and China under the Special Preferential Tariff agreement (SPT). Another bonus is the country’s long shoreline, which – combined with its strategic position as the gateway to the EAC – helps connect the Indian Ocean with the raw materials of central Africa. The manufacturing sector is still in its infancy in Tanzania, with many areas yet to be explored; unprocessed agricultural commodities are currently the mainstay of the country’s exports. Even though it contributes less than 10 per cent of gross domestic product (GDP), manufacturing has been growing at a steady rate of four per cent a year, according to government agency Tanzania Investment Centre (TIC). The sector employs around 140,000 people, mainly in urban areas, and boosts the nation’s coffers by means of numerous levies, including import and export sales and income taxes. In total, it contributes about 20 per cent in foreign exchange revenues to the government, which is the third largest after agriculture and tourism. Although Tanzania has a relatively small manufacturing sector, the authorities

Almasi group_placed.indd 1

have big ambitions to eventually make it a key element of the country’s economy. One part of their plans is the Sustainable Industrial Development Policy, which was developed in 1996 and outlines strategies and objectives for driving industrialisation of the country in the first 20 years of this century. It also provides a target for the manufacturing industry to contribute a 40 per cent share of the country’s GDP. Moreover, underpinning this policy is the government’s commitment to providing a welcoming, attractive and encouraging environment for investors. Manufacturing in Tanzania includes the production of simple consumer goods, such as food, beverages, textiles, tobacco, wood products, rubber products, cement and various metal products. All of these provide opportunities for local and foreign investors. The government’s main target markets for investors include textiles, leather and food processing. Major investments in the cement industry have been those in Tanga by Holcim, Mbeya by Lafarge and Tanzania Portland Cement Company by Heidelberg. There have also been investments in the

fast-moving consumer goods sector, for example in Tanzania Cigarette Company by JTI, in SABMiller by Tanzania Breweries and in Kilombero Sugar Company by Illovo.

Recent successes In 2011, Diageo subsidiary East Africa Breweries opened a $55 million brewery in Moshi with an initial annual production capacity of 500,000 hectolitres. The brewery employs 400 and produces Tusker and Premium Serengeti lager. Dangote Cement is another company making a major investment. The Nigerian firm is building an integrated cement plant in the port city of Mtwara, which is set to boost cement production considerably. It says: “Tanzania’s economy is expected to grow at an estimated seven per cent over the next five years, supported by the manufacturing, mining and tourism sectors. The improving performance of the economy has fuelled strong growth in cement demand, and the prospects remain favourable, given the linear relationship between economic growth and cement consumption… With good limestone and gypsum deposits, Tanzania attracts sound

24/06/2014 09:15

INVESTMENT OPPORTUNITIES: MANUFACTURING

investment opportunities in the sector and also offers an ideal opportunity for Dangote Cement to foray and consolidate its operations in Eastern Africa.”

The food industry Providing extensive opportunities for investors in the food-processing sector is a rich variety of vegetables and fruits in Tanzania. According to TIC, less than 10 per cent of the country’s fruits and vegetables are processed, so there is potential for the large-scale production of a range of temperate and tropical fruits and vegetables. Investment prospects range from regional processing and canning factories, to vegetable and fruit plantations for domestic and export markets. Possible locations for horticultural crops around the country include Arusha, Tanga, Morogoro, Dar es Salaam, Kilimanjaro, Dodoma, Iringa, Mbeya, Mwanza and Kagera. Although Tanzania is Africa’s largest grower of cashew nuts after Nigeria and Ivory Coast, only a small percentage of this harvest is processed locally. The country exported just 158,000 tons over the course of the 2011/12 season, which would suggest that there are clear opportunities for investors to support local processing. Tanzania also wants to grow its exports of processed cashews. The Cashew Nut Board of Tanzania (CBT) and the Cashew Nut Industry Development

is exported raw. There are concerns that more needs to be done to bolster and protect the leather sector. For example, insiders argue that the availability of raw materials for the domestic market is being limited owing to the fact that hides and skins are frequently smuggled or sold into neighbouring countries. The government is working to correct this and has introduced taxes on the export of hides and skins. This move should lead to opportunities for firms interested in establishing tanneries and leather-finishing production units.

Trust Fund (CIDF) have together set aside TZS10 billion ($6 million) to boost local processing, while opportunities for private investors to enter into partnerships and joint ventures also exist.

Textiles, clothing and leather Tanzania’s textile and clothing sector also provides a range of opportunities. The country is Africa’s fourth largest producer of cotton. In 2012, it produced 354,000 tons and planted 1.4 million hectares (ha). In addition, it is the base for more than 40 ginning companies,

Economic zones Tanzania has been opening up its economy to foreign investors. As well as implementing free-market-oriented reforms – which have encouraged private-sectorled growth – the government has established export processing zones (EPZs) and special economic zones (SEZs), which provide exemption from taxes and duties on machinery, heavyduty vehicles, building and construction materials, or any other capital goods used to develop SEZ infrastructure (see page 120). Companies operating in these zones are likewise exempt from corporate tax, withholding tax on rent, dividends and interest, as well as, for the first 10 years, property tax. For investment in EPZs, manufacturing is a priority area. Investors can establish manufacturing operations using either a

Tanzania’s reforms have opened up the economy to foreign investors such as SM Holdings, Alliance Ginneries, Birchand Oil Mill, Gaki Investment and Afrisian Ginning. Areas for investment exist in building fully integrated textile mills, as well as plants for ginning, cutting, making and trimming. According to TIC, Tanzania produces around 2.6 million raw hides and skins annually. Of these, only 10 per cent are processed locally, while a large proportion

Production index of the manufacturing industry (1985 = 100) Industrial group

2006

2007

2008

2009

2010

2011

2012

Percentage change 2011-12

Food, beverages and tobacco

314

324

351

375

386

392

458

16.8

Textiles and leather

271

268

286

229

244

226

186

-17.7

Wood products

256

331

263

246

244

373

374

0.3

Paper products

198

310

295

317

343

360

5.0

Chemical, petroleum and plastic products

107

125

137

140

129

-7.9

Pottery, ceramic, glass and non-metallic products

320

395

415

459

526

536

576

7.5

Basic metals

135

143

177

191

235

260

298

14.6

Fabricated metal products, machinery and equipment

11.0

Total manufacturing index

226

238

260

274

290

296

328

10.8

Overall percentage change

–

5.3

9.2

5.4

5.8

2.1

10.8

– Source: National Bureau of Statistics

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Pipe Industries Co. Limited (PICL) is a newly formed Company incorporated under the laws of Tanzania that is engaged in the business of manufacturing high-quality GRP, PVC and HDPE with a view to meeting the ever-increasing demand for these products in Tanzania, as well as in the East and Central Africa markets, especially in the agriculture, industrial, mining, construction and water supply sectors. The company is based in Dar es Salaam, which is the centre of its operations, and manufacturing of pipe products has already begun.

Pipe Industries Co. Ltd, P.O Box 16541, Dar es Salaam. Tel:+255 22 284 2838-9 Fax: 255 22 284 2840 Email: sales@pipecotz.com

INVESTMENT OPPORTUNITIES: MANUFACTURING

The EPZ policy puts an emphasis on manufacturing that uses local materials, such as textiles and garments, leather goods, agro-processing and lapidary. Activities in these zones are regulated by the Export Processing Zones Act 2002, while the 2006 Special Economic Zones Act defines which areas can be SEZs, for example: tourist parks, industrial parks, export-processing zones, free trade zones, free ports, and science and technological parks. This has since paved the way for the implementation of the EPZ model. The SEZs encourage light industry in certain regions, such as Dar es Salaam, Tanga, Kigoma and Mtwara. Companies working in the country’s EPZs, which are managed by the Tanzania Export Processing Zones Authority (EPZA), include Mazava, Tanzania Tooku Garments, Fresh Air and Power Flour. There are many benefits to investing in these zones, according to the deputy minister for industries and trade, Janeth

ANDREW MCCONNELL / ALAMY

SEZ user licence or an SEZ export user licence. Existing investors are involved in agro-processing, textile and garments, lapidary, leather processing, forest and forestry products, fish processing, ICT industries and assembly sub-sectors. EPZs and SEZs support investments either in specific zones or in stand-alone industrial parks. Manufacturers that choose this form of investment are issued with an operator’s licence and can start business immediately without needing any other permissions. In fact, a number of sub-sectors are taking advantage of these zones, including agriculture; electronics and electrical appliances; metals and machinery; chemical, paper and plastic; and mining, ceramics and gemstones. Investors need to meet the following criteria to invest under the SEZ scheme: • Their investment must be new; • Annual export turnover must be at least $5 million for foreign investors and $1 million for local investors; • They must put adequate environmental protection systems in place; • Their investment must involve modern production processes as well as new machinery; and • Their investment must be located in SEZ industrial parks only.

Traders selling sugar cane on Lake Tanganyika. This is one of Tanzania’s raw materials that could be used by the agro-processing industry, a type of manufacturing on which the export processing zones policy places emphasis

Mbene. In an interview with Tanzania’s Daily News, Mbene said: “EPZA offers investment land and [the authority] operates as a one-stop service centre – this is a big advantage to any investor who intends to invest in manufacturing.” EPZA director general Adelhelm Meru also told local reporters that, out of all the companies producing under EPZA licences, around 44 per cent were local and 16 per cent were joint ventures with foreign investors – which leaves

40 per cent as foreign companies. In April 2014, the EPZA announced that it had registered 113 companies so far, which have set up factories at various locations across the country. They have invested more than $1.12 billion and produced a total export value of $70,000, while creating more than 27,000 direct and 100,000 indirect jobs. The authority has now earmarked EPZ/SEZ sites in 19 regions, with each site measuring between 500 and 9,000ha.

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SMEC International (Pty) Ltd Plot 191, Uganda Ave/Mzinga Way Road Oyster Bay, Dar es Salaam, Tanzania P.O. Box, 105866, Dar es Salaam, Tanzania T: +255 22 260 1596/7 | F: +255 22 260 1590 E: tanzania@smec.com | W: www.smec.com

SMEC is a professional services firm with Australian origins and a global footprint that provides high-quality consultancy services on major infrastructure projects. SMEC has over 5,000 employees and an established network of more than 70 offices in Australia, Asia, the Middle East, Africa, and North and South America. SMEC provides consultancy services for the lifecycle of a project, to a broad range of sectors including: Transport; Water; Geotechnics and Tunnels; Environment; Urban Development; Hydropower and Energy; Government and Advisory Services; Social Development; and Mining, Oil and Gas. SMEC has operated in Tanzania since 1974. SMECâ&#x20AC;&#x2122;s first project in Tanzania was the Singida Region Water Supply and Groundwater Development Project. The project objective was to develop village water supplies from groundwater services in a semi-arid district. SMEC provided hydrogeological technical assistance to locate promising sites. SMEC opened a permanent office in Dar es Salaam in 2001. Since then, SMEC has worked on a variety of projects, including an Environmental Management Plan for Lake Victoria, the central transport corridor project, a road inventory survey for the whole of Tanzania, a major gas and power generation project, change management for Tanzania Railways Corporation, technical advisory services for Dar es Salaam Water and Sewerage Authority and a water supply and sanitation project for Dar es Salaam. SMEC has been involved in the Dar es Salaam, Bus Rapid Transit project in its design review and construction supervision. With experience in the Transport, Water and Hydropower and Energy sectors in Tanzania, SMEC is currently involved in several road upgrade projects. SMEC is preparing preliminary designs and studies for investment in sub-projects in the cities of Dodoma, Mbeya and Mtwara. These sub-projects are part of the Tanzania Strategic Cities Project, which aims to improve basic urban infrastructure and services in local government areas.

DANIEL HAYDUK/AFP/GETTY IMAGES

INVESTMENT OPPORTUNITIES: CONSTRUCTION AND INFRASTRUCTURE

Building on keen demand As the country’s construction industry stands to benefit from the urgent need for housing and hotels, the cement sector is enjoying a growth spurt as investors pile in, writes David Rogers

anzania’s economic history tracks the path followed by most of sub-Saharan Africa in the post-independence period – although perhaps it would be more accurate to say it suffered the same fate. According to William Easterly, a professor of economics at New York University, median per capita income in developing countries recorded zero per cent growth between 1980 and 1998.

However, the lost decades are now over, and Tanzania, like much of the East African region, is experiencing rapid economic growth – albeit off low base levels. That said, Tanzania has to deal with the legacies of the past in the form of poor infrastructure, which will

require large injections of capital investments to resolve. In this regard, the government’s priority, as spelt out in the State of the Economy report published in June, is infrastructure development, which is receiving 32.8 per cent of the 2014/15

A worker at a construction site for a high-rise building in Dar es Salaam. Tanzania’s construction sector is faced with huge demand for new housing, which is likely to become the dominant force in the industry in the future

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INVESTMENT OPPORTUNITIES: CONSTRUCTION AND INFRASTRUCTURE

DPA PICTURE ALLIANCE/ALAMY

national budget. Of that, roughly a third goes on road and rail development, while the energy sector is next in line, with 18 per cent. These new budget allocations reflect a recognition that improvements in the country’s transport and power supply are essential if its economy is to continue growing. Per capita electricity consumption in Tanzania is 92kWh, whereas, by comparison, a typical middle-income country such as Thailand consumes 2,316. (These 2011 figures are the latest published by the World Bank). Around 13 per cent of spending by the state in 2014/15 will be on the construction sector, which requires the completion of a range of civil engineering projects before it really starts performing. Construction is currently growing at eight per cent – a rate that, although respectable, does not do justice to the demands for residential, healthcare and education facilities that exist in Tanzanian society. Therefore, in order to reflect the true state of events, this A construction site in Dar es Salaam. The construction sector is currently growing at a rate of eight per cent

IT’S NOT THE WEALTH OF A NATION THAT BUILDS THE ROADS BUT THE ROADS THAT BUILD THE WEALTH OF A NATION Mwanza P.O.Box 64/2038 Tel: (255 28) 2540500/2562152; Fax: (255 28) 2500350

NYANZA ROAD WORKS LTD Nyanza Road Works_Placed_sml.indd 1

Dar es Salaam P.O.Box 4477 Tel: (255 28) 2863499/ 2866412; Fax: (255 22) 2863500 Email info@nyanzaroad.com Website www.nyanzaroad.com

04/07/2014 13:03

INVESTMENT OPPORTUNITIES: CONSTRUCTION AND INFRASTRUCTURE

article will examine the housing market; one of its key clients; and an element in the supply chain that is becoming a major industry in its own right.

Housing Historically, neither the public nor the private sectors have provided enough housing to match Tanzania’s high birth rate and rapid urbanisation – a defect that is reflected in the serious shortfall in the quantity and the quality of urban accommodation. A 2011 report for the non-governmental organisation Shelter Afrique estimated that three million extra housing units would be needed to meet current demand. More than 70 per cent of the country’s urban population live in unplanned settlements, while only 45 per cent of urban households have electricity (three per cent in rural areas). Two in three households live in dwellings with sand or dung flooring. More houses have to be built, but urban dwellers will also need to have access to finance if they are to purchase homes. Efforts are being made to clear

banking sector to offer more mortgages. Its Housing Finance Project for Tanzania offers refinancing and long-term credit to banks that provide mortgage loans. The programme pegged its interest rate at 18 per cent, and commercial lenders have followed suit. The result has been that, as of 31 December 2013, total lending by the entire Tanzanian finance sector was $96.8 million – admittedly small, but it represents year-on-year growth of 46 per cent. Another piece of good news is that Kenya’s Housing Finance, a corporation with a 30 per cent share of the Kenyan mortgage market, is planning to have opened a branch in Tanzania by 2016, which will bring some badly needed competition and liquidity into the market. On 25 March, the National Housing Corporation (NHC) hosted a conference to announce the sale of 214 homes in the Dar es Salaam suburb of Kigamboni. David Shambwe, the director of NHC Business Development, outlined plans to build 15,000 houses in Tanzania by 2015. The NHC is the self-financing house-building

The $20 million Huafu project is being assisted by tax policies that favour foreign investors these hurdles. The Chinese property development company DongXing International has proved that speculative residential developments are financially feasible, provided the location is suitable. It is constructing a 98-unit apartment block, called Huafu, along Msasani Beach, one of the wealthiest areas of Dar es Salaam. The $20 million project is being assisted by tax policies that favour foreign investors. DongXing has been operating in Tanzania for two years, and although this development is aimed at the top end of the market, Liu Yupeng, the company’s deputy manager, is planning a joint venture with a local firm designed to develop affordable housing. At a recent press conference, he said: “Our motive is to provide quality and standard homes for local Tanzanians to own.” Meanwhile, the World Bank is seeking to persuade Tanzania’s “very conservative”

agency of the ministry of lands, housing and settlements development. While a step in the right direction, the relatively modest target is indicative of the difficulty of making affordable housebuilding pay. In the future, housing is likely to become the dominant force in the Tanzanian construction industry, and a key driver of the economy as a whole – but to successfully ride this wave, companies will need to cherry-pick developments or be prepared to play a long game.

Housing: in figures

The current housing deficit in Tanzania is estimated at

3 million

units and is growing at a rate of 200,000 units per annum. It is more pronounced in urban areas

The current housing sector contribution to GDP is less than 1%, which the government intends to increase to

4% in five years’ time

This would potentially create

200,000

direct and 500,000 indirect jobs for unskilled, semi-skilled and skilled labour

Tourism The tourist industry, which generates 25 per cent of Tanzania’s foreign-exchange earnings, is a mainstay of the economy. Some form of conservation regulation governs more than 44 per cent of the land area. Besides Mount Kilimanjaro, there are 16 national parks, 29 game reserves and 40 controlled areas and marine parks. The industry is growing at an annual rate of

The urban population increased from 14.8% in 1980 to 37.5% in 2002 and is expected to reach

46.8%

by 2015

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BUILDING CIVIL ENGINEERING ELECTRICAL INSTRUMENTATION & MECHANICAL CONTRACTORS

2013 Overall Winner for Safety in Construction - OSHA

2014 Overall Winner for Safety in Construction - OSHA

BQ Contractors_placed.indd 1

FINE ART/ALAMY

10 per cent. There is, however, a battle being waged within Tanzania over the extent to which the country should be exploiting its game reserves for commercial purposes. The East African Court of Justice recently prevented the government from constructing a paved road across the Serengeti. Potential investors may wish to tread carefully when

09/06/2014 15:39

it comes to building resorts in sensitive areas, until a consensus is reached. One area where there is a clear need for investment is the hotel sector. A 2012 article on eTurboNews found that Tanzania had 174 registered and licensed touristclass hotels, offering 11,568 rooms (see page 112). While most of the country’s hotels are located in Dar es Salaam, the northern tourist city of Arusha is home to 91, including the leading Impala Group and the prestigious Ngurdoto Mountain Lodge, one of 38 hotels on Kilimanjaro. However, the rest of Tanzania, excluding Zanzibar, has little or no hotel investments.

Cement

An abundance of cheap raw material has put Tanzania on the road to becoming a key African exporter of cement

One of the sub-sectors of the construction industry that is attracting a lot of attention from international and regional investors is cement. The growth is being driven by the abundance and cheapness of raw material such as limestone, sand, shale, clay and iron ore. There are presently four producers with another five plants in the wings. When these open, Tanzania is set to become the biggest producer in Africa. Mizengo Pinda, the prime minister of Dodoma province, told his national

assembly at the end of June that the country’s annual cement production of 3.8 million tonnes was expected to rise to 8.3 million tonnes in the near future, which would elevate Tanzania to the status of an important exporter of cement to neighbouring countries. New players expected to enter the Tanzanian market include Dangote Cement of Nigeria, which is planning a two-million-tonne gas-fired cement plant as part of owner Aliko Dangote’s panAfrican strategy. This plant, which is tipped to be the biggest in the east and central regions of the continent, signals a faith in the eventual take-off of demand when Tanzania’s economy emerges from its remedial phase. ARM (formerly Athi River Mining), intends to commission its Tanga plant, which is capable of producing 1.2 million tonnes a year, towards the end of 2014. Lake Cement, a joint venture between local investors and Banco India, is to open a 500,000-tonne plant by year end. Meanwhile, Chinese firm Lee Building Materials has started to build a factory in Lindi with an annual capacity of 300,000 tonnes of cement per annum.

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INVESTMENT OPPORTUNITIES: TRANSPORT AND LOGISTICS

Bridging the gaps in road and rail Establishing a modern transport infrastructure is critical if Tanzania is to become the regional hub that it aspires to be, explains David Rogers

anzania’s transport industry is a priority for the government and for international funders, partly because it is integral to future development in the region and partly because it is inadequate. To some extent, these two things are connected: it is urgent that transport be fixed because it is not functioning properly, which has a knock-on effect on Tanzania’s national economy. Indeed, the region as a whole cannot function as an integrated unit without Tanzania’s highway and rail links. The country borders eight others, so it is on the way to almost everywhere in Southern and East Africa. Were the situation to be turned around, those negative factors would be positives. Given its geographical location, the country has the potential to become the hub and interchange of a whole section of the African continent, from Mozambique to the lake countries and north to the Rift Valley. In the words of Philippe Dongier, the World Bank’s country director for Tanzania, “the location and the size of Tanzania, its mineral and agricultural resources, its tourism potential and its critical role as a transport hub for

its landlocked neighbours, provide unrivalled opportunities for the development of modern transport infrastructure and services”. All things being equal, the economic outlook for Tanzania is improving. The World Bank’s Economic Prospects report in June 2014 predicts strong growth in East Africa. The region is “increasingly supported by foreign direct investment flows into offshore natural gas resources in Tanzania and the onset of oil production in Kenya and Uganda”. Tanzania is forecast to grow at a rate of above seven per cent for the next three years, making it one of the strongest economies in the world. Internal trade within sub-Saharan Africa doubled to $3.5 billion in the six years to 2010. The outlook would be brighter still if it were easier, quicker and cheaper to move commodities to the main ports at Dar es Salaam, up the coast to Mombasa in Kenya or to markets in neighbouring countries, but, at the moment, it isn’t. The World Bank’s 2014 Connecting to Compete report, which ranks countries according to how well their logistic systems perform, placed Tanzania at 138 out of 160. The essential problem is that there isn’t enough

Transport and utilities infrastructure projects in the pipeline are worth

Rail projects with an estimated value of more than

$19 billion

$14 billion are currently in various stages of development

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transport infrastructure, and what is there is poor quality. This is exacerbated by what the African Development Bank calls “inordinate delays” at ports, airports and customs queues. And, as explained in PwC’s Africa Gearing Up report, exports make up 31 per cent of the country’s GDP.

The rail system The rail system in Tanzania has two roles: connecting national and international urban centres, and providing a means for mines to move bulky products to market. At present, its total track length is 3,676km, none of which is electrified. This is divided into two networks with different gauge tracks run by separate organisations. The Tanzania-Zambia Railway Authority (TAZARA) runs a single line between Dar es Salaam and Zambia in the south-west, while Tanzania Railways Limited (TRL) runs the rest of the network, which covers the north and links Dar es Salaam to Kenya and the Great Lakes. By comparison, France – with approximately a third more people and a third less land – has a track length of about 30,000km, of which half is electrified and about nine per cent is high Tanzania, Rwanda and Burundi have initiated plans to seek financing for a 1,651km railway linking the three countries, at an estimated cost of

$4.13 billion

speed. The potential prizes for bridging the chasm between a system the Lonely Planet travel guide describes as “beset by delays and breakdowns” and a modern railway are huge. Tanzania is rich in resources – it is thought to have Africa’s largest deposits of gold after South Africa and a huge amount of unexploited ferrous and non-ferrous metal, precious stones, uranium, coal, and minerals such as kaolin and phosphate. As well as natural gas, Tanzania has sufficient mineral wealth to create an Australian-style resourceextraction and processing economy. Other bits of the jigsaw need to be assembled as well. One element is greater economic integration with the East African Community (EAC); another is completion of the first phase of the multibillion-pound Chinese-funded Bagamoyo port in 2017, which will have a capacity of 20 million

ALEXEY ZARUBIN/ALAMY

INVESTMENT OPPORTUNITIES: TRANSPORT AND LOGISTICS

A 2011 report found that only 60-70 per cent of Tanzania’s road system was paved, making it a development priority. Particular emphasis is on the ‘central corridor’ that connects the Indian Ocean with the Democratic Republic of Congo

container units a year (compared with Dar es Salaam’s 500,000); and a third is the need to find an effective regulatory and enabling role for the state. At the moment, much of the work happening on the rail network is remedial: in April 2014, the World Bank approved a $300 million loan to tackle the abovementioned delays and breakdowns. As well as improving intermodal cranes, which get containers off trains and onto ships, and trains onto different-gauge tracks, the money will be spent on repairing bridges and relaying track. Meanwhile, the Government of Tanzania is planning to spend $85 million on general repairs and on importing 13

locomotives from the United States, along with other rolling stock. TRL officials say their long-term plans include upgrades and the purchase of 58 locomotives, 1,960 freight wagons and 44 passenger wagons at a projected cost of $680 million. For a number of years, the big idea in East African rail transport has been for a railway to link the EAC countries to each other, giving landlocked nations access to the sea, and Tanzania’s Bagamoyo ‘mega port’ in particular. Back in 2012, the Canadian rail consultant Canarail began looking into the possibility of a link between Rwanda and Tanzania. However, it was reported in 2013 that the likely cost would be $5.1 billion and

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TANZANIA AIRPORTS AUTHORITY We strongly encourage private investors to participate in the development and expansion of our airports.

Image: Ram Horizonte Betancourt

About TAA Since its establishment in 1999, Tanzania Airports Authority (TAA) has concentrated on improving air-related infrastructures in several airports, such as the Julius Nyerere International Airport, Mwanza, Kigoma, Tabora, Arusha, Mpanda, Mafia, and Songwe.

Upcoming airport projects that may need private sector investments include: - Improvement and upgrading of Mtwara Airport - Construction of a new airport in Msalato Dodoma - Construction of new airport in Umukajunguti, Bukoba - Construction of a new airport in Bagamoyo, Coast Region - Upgrading of 11 regional airports that are due for feasibility studies

The objective is to make sure that aircrafts l a n d a n d t a k e o ff s a f e l y. We are now focusing on improving the landing facilities for passengers by constructing modern terminal buildings, commercial centers, airport hotels, and parking lots.

For further details contact the Director General

T +255 22 2842402-3 F +255 22 2844495 info@airports.go.tz

Tanzania Airports Authority, Head Office Julius Nyerere International Airports, Terminal I P.O.Box 18000, Dar es Salaam

www.tanzania-airports.aero

INVESTMENT OPPORTUNITIES: TRANSPORT AND LOGISTICS

Dr Harrison Mwakyembe Minister for Transport In the age of globalisation, transport is ever more crucial to overall development. With this in mind, the ministry of transport is working to improve transport infrastructure and services in order to expand the accessibility of jobs, education and health facilities, as well as to strengthen regional integration through the facilitation of trade. We also hope to attract increased foreign direct investment to the sector. The efficiency and affordability of transport are fundamental requirements of both economic development and poverty reduction, and we will continue to design policies and strategies to meet these requirements – not only for the benefit of Tanzania, but across the wider region, too. Currently, our transport system consists of an 85,517km road network, a 3,676km railway, four international airports and three major seaports, but we have in place expansion

that work would not begin until 2017. This allowed Kenya to get ahead of its southern neighbour, with an exclusive deal signed in May this year between the Chinese and Kenyan governments. The plan is for a standard-gauge track – incompatible with both current Tanzanian systems – to run between Mombasa and Nairobi before taking the northern route around Lake Victoria to Uganda, Rwanda and Burundi, bypassing Tanzania. This would then tie in with Uganda’s plans, announced in June, to spend $8 billion on a rail scheme, which would also be standard gauge and would be restricted to Chinese bidders. The pressure is therefore on Tanzania to construct an alternative route to back up its hopes of becoming a regional hub. Jakaya Kikwete, the Tanzanian president, announced in April that Tanzania would look to do something of the sort. Presently, it has formed an alliance with Rwanda and Burundi and is seeking an adviser to help it secure financing for a $4.13 billion railway scheme, which is significantly less than the cost Canarail arrived at two years ago.

The road system A World Bank policy paper from 2011, East Africa’s Infrastructure, noted that only 60-70 per cent of Tanzania’s roads were paved, and that this was a development priority as it was one end of the ‘central corridor’ that connected

plans that will see these networks undergo significant growth in the coming years. One ongoing project is our 10-Year Transport Sector Investment Programme (TSIP), which has received three-year financing from the World Bank. The TSIP aims to implement development projects, maintain existing infrastructure and provide institutional support. The first phase of TSIP elapsed in 2012; we are currently in the second phase, due to end in 2017. Although there have been financial and planning limitations to the implementation of some transport projects, we are confident that we will soon see the benefits of private-sector participation in transport investment, particularly in road networks. Improving conditions in the sector will facilitate broad-based growth, and see Tanzania move closer to achieving the goals of Development Vision 2025.

the Indian Ocean with the Great Lakes and the Democratic Republic of Congo. Furthermore, the US embassy in Dar es Salaam offered advice to travellers that included the following passage: “Travel by land within Tanzania is very difficult due to

President Kikwete called for investment of $4.1 billion in the central corridor poor road conditions, frequent shortages of spare parts, and dangerous driving practices. During the rainy seasons (February-April and October-November), many... roads are impassable.” Embassies err on the side of caution perhaps, but it is evident that, as in the case of the rail system, there is a great deal of remedial work to be done to bring the existing network up to a good state of repair, quite apart from the new highways that will be needed for the country to move forward. Stephen Wasira, a minister in the President’s Office, reported to the Tanzanian parliament in June 2014 that 10.6 per cent of the national budget would go on transport – a high proportion

in relation to international norms. Wasira added that road projects would favour larger highways linking Tanzania and its neighbours, helping to increase trade and ease congestion. Among the projects lined up for execution is the delayed expansion of a four-lane highway that leads through the northern city of Arusha on the way to Kilimanjaro International Airport and Kenya; a 200km highway between Dar es Salaam and Morogoro at the eastern end of the central corridor; and the 100km road between Chalinze and Dar es Salaam, which will be developed into a six-lane expressway to reduce the traffic congestion that remain a fact of life in the capital. However, as with the rail network, the main aim is to develop the central corridor to the economically vibrant states of the Great Lakes. This point was made by President Kikwete in his address to the World Economic Forum in April, when he called for investment of $4.1 billion in the central corridor. With funding from the World Bank and the Japan International Co-operation Agency, about 600km of roads have been upgraded. Furthermore, events such the discovery of nickel in Burundi are expected to create huge extra loads – it is estimated that this venture alone will add up to three million tons of freight to the roads in the next few years. Investors are definitely welcome.

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INVESTMENT OPPORTUNITIES: PORTS

Opening the gateway Hundreds of millions of dollars are to be invested to enable Tanzanian ports to capitalise fully on the natural advantage of the country’s coastline, writes Sarah Rundell

anzania has the potential to become East Africa’s trade hub, boasting as it does a 1,424km coastline. The port of Dar es Salaam already handles about 90 per cent of Tanzania’s international trade, clearing $15 billion of merchandise each year. Bagamoyo, a new port 75km north of Dar es Salaam, is under development with the backing of Chinese investors, and trade at the port of Mtwara in the south is growing after years in decline, on the

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back of offshore gas discoveries. But it is Tanzania’s ability to be a gateway for its six landlocked neighbours that makes the growth of its port sector most exciting. Its ports are destined to benefit as exports from the expanding economies of Burundi, the Democratic Republic of Congo, Malawi, Rwanda, Uganda and Zambia grow, along with imports – everything from cars to mobile phones and medicines. The World Bank report Opening Gates: How the Port of Dar es Salaam can

Transform Tanzania said that Tanzania and its East African neighbours could boost their annual gross domestic product (GDP) by up to $1.8 billion and $830 million respectively by taking steps to improve Dar es Salaam. Overhauling the port to meet demand and compete with rival regional hub Mombasa, where reforms and investment have seen trade volumes jump, has now become a central government policy. According to the International Association of Ports and Harbours,

INVESTMENT OPPORTUNITIES: PORTS

DEMELZA CLOKE / ALAMY

New and improved berths, modernised cranes and a new conveyor belt are all part of a $211 million overhaul intended to help Tanzania’s busy port of Dar es Salaam meet demand and compete with rivals in the region

Dar es Salaam is the fourth largest container port on Africa’s eastern seaboard after Durban, Mombasa and Djibouti. Tanzania has its sights set on pushing its ports up the rankings.

Infrastructure upgrades Over the next year, the government has earmarked $211 million to streamline operations at Dar es Salaam. Improvements in the port’s hard infrastructure will include strengthening and deepening berths, as well as building new ones. It plans to modernise its cranes and add a new conveyor belt and storage silos. Soft infrastructure changes will comprise simplifying customs procedures and better organisation of vessels waiting to dock. The port is to concession out services to private investors to encourage competition,

and the government is determined to increase the accountability of port policymakers. This appetite for reform is backed by a new management board at the state-run Tanzania Ports Authority (TPA). Private investment is already beginning to transform operations. Belgium’s Phaeros, the software provider for ports and cargo terminals, recently signed a TZS11 billion ($6.7 million) deal to provide clearance software at Dar es Salaam via its Electronic Single Window System. ESWS is the centre point of all communications regarding cargo entering and leaving a country. One of its functions is tracking the entire process – from the announcement by the skipper to receipt of the cargo at the final destination. “Not only will the capacity be increased, but the idle time of cargo

will be decreased to less than five days, compared to the current nine to 11 days to clear cargo in our ports,” said Phares Magesa, information and communications technology director at the TPA. Private-equity firm Jacana Partners and Soros Economic Development Fund (SEDF), a non-profit private foundation, have invested in a bulk-cargo-handling business in the city, their first investment in Tanzania. The DSM Corridor Group (DCG) is the leading dry bulk-cargohandling company in Dar es Salaam. Jacana and SEDF’s investment will finance the expansion of DCG’s storage capacity with respect to both volumes and the range of commodities. “DCG is facing a number of new opportunities thanks to the rising regional importance of the Port of Dar es Salaam, which not only serves Tanzania but is a gateway for exports and imports for several landlocked African countries,” said Cedric de Beer, director of African operations for SEDF.

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INVESTMENT OPPORTUNITIES: PORTS

New targets at the port in Dar es Salaam are also enshrined in the government’s Big Results Now initiative, a strategy to move Tanzania from a lowto a middle-income country based on Malaysia’s development model. The port has pledged to increase cargo volumes to 18 million by 2015. Under the same development drive, the government will include port upgrades in its public-private partnership (PPP) strategy. It plans to set up a PPP Facilitation Fund, which will assist the TPA in preparing a feasibility study to help PPP investors.

New mega port Tanzania is also determined to develop other ports along its extensive coastline. Last year, it signed a framework deal with China Merchants Holdings (International) to build a new ‘mega port’, a special economic zone and new transport networks. The new port at Bagamoyo will relieve the pressure on Dar es Salaam, but will ultimately be able to handle 40 times

as much cargo. An agreement for the development, which will take seven to 10 years to complete and cost an estimated $10 billion, was signed in March 2013. Ultimately, the Chinese company hopes the port will have berths large enough to hold a cargo ship of as much as 100,000 tonnes, making it the biggest port in the East African region. The project includes the construction of a new 34km road linking Bagamoyo to Mlandizi on the main corridor to the east from Dar es Salaam, and a 65km railway connecting Bagamoyo to the TAZARA Tanzania-Zambia railway, running east towards Dodoma. The first phase of port development is scheduled for completion by 2017. However, critics have warned that the government-backed project could upset plans for expansion and development at Tanzania’s three other ports – Dar es Salaam, Mtwara and Tanga – since bidders to develop one of these port concessions could worry that volumes may be redirected to the mega port.

Major ports serving Tanzania

KENYA

Mombasa Tanga TANZANIA Dar es Salaam

Mtwara

MOZAMBIQUE

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Revitalising Dar es Salaam involves tackling complex problems. At present, ships can be anchored at sea for up to 10 days while waiting for a berth. Further delays in cargo being unloaded and clearing customs add thousands of dollars to merchants’ costs. Extensive dredging is also needed to ensure that the port can attract the world’s biggest container ships, including the 50,000-tonne Maersk Cubango, which docked at Dar es Salaam for the first time last October.

Drive to improve efficiency According to the World Bank, delays and additional costs at Dar es Salaam are equivalent to a tariff of 22 per cent on container imports and about five per cent on bulk imports compared with Kenyan rival Mombasa. Dar es Salaam’s efficiency is also hampered by poor inland modes of transport, particularly rail networks in need of updating and a shortage of wagons and locomotives. Railways transport only one per cent of Tanzania’s container traffic, with the remainder going via roads. As part of its push to correct this imbalance, the government is to procure more than 900 new cargo wagons and 50 locomotives. Tanzania must work quickly to compete with Mombasa. Both ports serve the same landlocked region, so traders choose whichever facility is the most efficient. The Dar es Salaam port handled 12.1 million tonnes of cargo last year, compared with the 21.9 million tonnes handled by Mombasa. Although Dar es Salaam is closer by road to Rwanda’s capital, Kigali, most Rwandan traders opt for the longer route to Mombasa through Uganda because it is cheaper overall. Tanzania is addressing the issue by cutting the number of weighbridges and planning a clearing facility at the town of Isaka on the Mwanza railway line, which will comprise a container depot and storage facilities, to ease congestion at the port itself. Tanzania’s geographical advantage in possessing a coastline that can support other ports, and its proximity to Africa’s landlocked economies single out its port sector for potential rapid growth. A root-and-branch reform process to improve efficiency at Dar es Salaam promises to put Tanzania on an equal footing with Mombasa in coming years.

JAMIE MARSHALL/GETTY IMAGES

INVESTMENT OPPORTUNITIES: ICT

The transformative power of ICT Pamela Whitby examines the impact of improved infrastructure and growing access to technology, which is helping to transform business while enhancing social initiatives

t the turn of this century, few Tanzanians could have imagined owning a mobile phone, let alone opening a mobile bank account or collaboratively learning a new skill online. But, with the recent explosion of mobile technologies and the development of a $200 million fibre-optic cable network known as the National Information and Communications Technology Broadband Backbone (NICTBB), things are changing, and they are changing fast. Today, there are more than 27 million mobile subscribers in Tanzania and that number is forecast to

rise to nearly 37 million by 2015. There has also been huge uptake, and growing investment in, mobile money applications. The GSM Association (GSMA) reports that 11 million people in Tanzania today have an active mobile bank account. There is still some catching up to do in broadband penetration, which has just five million sign-ups, but telecoms operators are increasingly offering competitive bundles, so that is expected to change rapidly.

These developments have produced a positive impact on businesses. â&#x20AC;&#x153;Prior to the arrival of NICTBB, telecom companies relied on microwave and satellite channels to provide services across the country,â&#x20AC;? says James Yonazi, director of computer services and coordinator at the Centre for ICT Research and Innovations (CiRI) in Dar es Salaam. Some companies such as Vodacom invested in building network capacity, but

Maasai men talking on their mobile phones at a market in Stone Town, Zanzibar. Mobile technology has connected rural populations across Tanzania with services including bank accounts and e-learning initiatives

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RANDY PLETT/GETTY IMAGES

INVESTMENT OPPORTUNITIES: ICT

costs remained prohibitively high. “At CiRI, for example, we were paying about $790/mbps, but after the arrival of the NICTBB, this fell to $80/mbps – that’s a significant decrease,” he says. Against this backdrop, opportunities are emerging in ICT-related projects that touch all sectors, particularly those with the power to transform. “We are more than ready and open to innovation and new ICT services which have an impact on peoples’ lives,” says Dr Ally Simba, director general in Tanzania’s ministry of communication, science and technology.

Changing lives One such multi-stakeholder initiative proposes to launch a mobile-optimised online platform for healthcare by the end of the year. The Benjamin William Mkapa HIV/Aids Foundation is coordinating an initiative that aims to ensure that the systems managing human resources in healthcare are better understood and implemented. The platform will provide a new virtual infrastructure capable of delivering learning opportunities for health workers. Talks about the feasibility of such an initiative began in 2012, when Linda Hegarty, an independent healthcare worker and m-learning specialist, first

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Watching educational videos provided by mobile medical service the Foundation for African Medicine & Education (FAME). The development of Tanzania’s broadband network presents learning opportunities in the healthcare arena

came to the country. She says: “It was very obvious that there was huge energy and enthusiasm among organisations to align and coordinate.” However, there were numerous challenges to address, not least that Tanzania’s workforce is only meeting around 52 per cent of the country’s present healthcare needs. And, as Hegarty explains, such shortages are just one part of the problem. “Very often, difficult working conditions and perceived lack of ongoing training and career development opportunities provide a setting for low morale and poor motivation, which very often impacts performance,” she says. While policies have been developed in this area, they do not always filter through to where the information is needed, which can result in poor buy-in. “Because of the size of the country and the scale of the challenges, a communications channel facilitating easy exchange of information and experience will benefit everyone and avoid the need to reinvent the wheel – this is now possible with mobile technologies,” says Hegarty.

While few Tanzanians as yet own a smartphone, given the rapid pace of change, it is advisable to look to the future. As a first step, a global site is being developed to host a repository of mobile-optimised e-learning resources in English that can be dubbed, translated and supplemented for local use. Eventually, the aim is to have these localised courses available on PCs, phones and tablets. Discussions are under way with an organisation that can save video content to SD cards for basic phones. According to the Benjamin William Mkapa HIV/Aids Foundation, approximately 10,000 enrolled nurses cannot progress to become registered nurses because of the gap in their education. E-learning company ALISON is one private-sector company that could help to address this. The advertising-funded firm, established to help people gain basic education and workplace skills, is witnessing significant growth in Africa. “Year on year, our visitor traffic from Tanzania is up 100 per cent and is 30 per cent ahead of the strong growth we are seeing from across Africa,

INVESTMENT OPPORTUNITIES: ICT

Professor Makame Mbarawa Minister of Communication, Science and Technology As we pursue improvements and innovations in communication services and technology, infrastructure is central to further development. This generation has seen unprecedented expansion of the capacity, mobility, affordability and accessibility of information and communication technology (ICT). In Tanzania, we have invested a lot in building new ICT networks and enhancing existing facilities. The focus is to make ICT services accessible and affordable to all citizens so that ICT is leveraged as a tool for social economic development. In order to achieve this, the National ICT Broadband Backbone (NICTBB) infrastructure programme was developed with the primary objective of providing broadband ICT connectivity to Tanzanians at all levels. The NICTBB is being implemented in five phases; phases I and II have been completed, with 7,560km of live backbone in operation. Currently, backbone covers 24 regions of mainland Tanzania, and has connectivity to submarine cables and also cross-border connectivity with neighbouring countries, namely Kenya, Uganda, Rwanda, Malawi, Burundi and Zambia.

where we have nearly a million users, so there seems to be a bit of extra impetus there,” says Mike Feerick, the company’s founder and chief executive.

Emerging opportunities The ministry of communication, science and technology wants to see ICT’s two per cent contribution to GDP increase in 2014 to 3.2 per cent. So, aside from addressing skills shortages, it has been identifying emerging ICTrelated investment opportunities. The country is still heavily dependent on digital content from beyond its borders; having a high-speed broadband network is one thing, but it is less likely to be used if there is insufficient cross-platform local content. Simba explains: “There is a huge and urgent requirement of local content development that exposes demand/ opportunities for content-developing companies, content-development individual experts and also contentdevelopment training institutions.” A bonus for potential investors is that the country, with its 49 millionstrong population, has English as one of its official languages – which is generally used for business – alongside Kiswahili, an indigenous language. This makes it easier for companies to develop content

Such development would be impossible without high-quality education, and we have identified science and technology as a crucial pillar of the Development Vision 2025. With $30 million, we established the Nelson Mandela African Institute of Science and Technology, dedicated to postgraduate studies, and we have also sponsored a great number of students embarking on Master’s and PhD programmes, and established collaborative links with ICT institutions at regional and international levels. Nevertheless, there remain issues to tackle – security being a particular concern – but the government is looking to overcome these with proposed acts on cybersecurity, data protection and e-commerce. From a macroeconomic perspective, the main aim of our ICT policies is to ensure that the Tanzanian economy functions well in terms of strategy, security, infrastructure and human resources. Along those lines, the government needs to continue strengthening the ICT infrastructure, stable tax regime, and incentives for ICT SMEs and start-ups that will make Tanzania a preferred destination for establishing ICT enterprises.

and reach large audiences, particularly in rural areas. It could also make it easier for business process outsourcing (BPO) operations, which are increasingly being used by larger institutions, for example telecoms firms, in order to flourish. Mobile money is another opportunity. According to the GSMA, Tanzania is one of the fastest-growing mobile markets, with mobile money providers processing more than 99 million transactions each month with a total value over $1.8 billion. In both these respects, transactions are growing every month, helped on their way by a progressive approach to regulation from the banking sector. Establishing smart cities is another initiative. The government, through the Commission of Science and Technology, has created a business incubation centre in Dar es Salaam to promote innovative ideas, using ICT and mentoring services to facilitate entrepreneurial growth. “These provide the inputs for smart cities, which are perceived as a necessary ingredient to socio-economic development,” says Simba. The government is funding these initiatives, and a regional hub is planned in the coastal area of Bagamoyo. There are a number of ICT successes in Tanzania: Maxcom Africa, UhuruOne, Selcom and Push Mobile. “These are

just a few ventures that have made a difference to our lives, mainly in deploying transactions, and they have already generated a lot of revenue for themselves and for our government,” says Simba.

Public-private collaboration So, with phases one and two of the NICTBB complete, things are looking up for potential investors, but there is still work to do. To this end, Simba says the government is cooperating with the private sector in order to construct fibre-optic metro networks and deliver last-mile connectivity. As an example of how public-private partnerships can work, Simba says the government benefits by owning the built infrastructure. The private sector, on the other hand, gets to use the broadband network free of charge for an agreed period. Both have the option to sell on excess capacity to other customers. While public-private collaboration is key, Hegarty advises firms that they cannot go it alone: “You need to inform and work with relevant parties to ensure that everyone is aware of your movements so that there is no sense that you are just coming in with a project that will just fix everything.” However, with Tanzania being among the world’s poorest countries, there is still plenty to fix.

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JAKE LYELL/ALAMY

INVESTMENT OPPORTUNITIES: BANKING

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INVESTMENT OPPORTUNITIES: BANKING

On the move Tanzania’s banks are turning mobile technology to their advantage in developments that will help speed up growth, as Nigel Gibson explains

anzania’s banks have come a long way in a relatively short time. Pinch yourself to remember that, as recently as the early 1990s, the industry was still effectively nationalised and struggling. Now, thanks to mobile banking and the growing use of agency agreements with the postal authority and others, the country is among those in East Africa leading the way towards inclusive and broader banking. Still only about 17 per cent of the adult population in Tanzania has an account with a formal financial institution. Yet these days, that is not always what counts. Thanks to the popularity of mobile telephony and to non-banks acting as agents, around 90 per cent of the country’s adult population now has access to mobile money of one sort or another. Of these, says Benno Ndulu, governor of the Bank of Tanzania – the central bank – no fewer than 43 per cent (or 9.8 million) are active users. And most of these people, of course, are still technically unbanked.

A platform for products True, mobile telephony is used mainly for making payments. Yet the industry is fast coming up with ways to turn itself into a platform to deliver financial products on behalf of mainstream banks. Already, users can obtain, say, a modest overdraft, or contribute to a savings account. And if Ndulu has his way, by next year, at least half of Tanzania’s population will have access to services of this kind.

This, of course, will not just help the country’s economy grow more quickly; it will also enable banks to broaden their domains. Consider CRDB Bank, the country’s largest by assets and one of the most widespread in the country. Last year, it was among the first to benefit from new legislation enabling banks to do business through designated agents.

Agent banking So, for example, a branch of Tanzania Posts Corporation is linked to CRDB via a telephone set that enables the agent to act on its behalf. All the agent needs to do is open and fund a float account with the bank. Once this is done, customers can pay into or withdraw cash from their accounts, pay utility bills, transfer funds within the bank’s network, access their pensions, generate statements and even drop off or collect documents. As one would expect, the regulations imposed on agents to identify customers and avoid the dangers of money laundering are no less rigorous than those affecting mainstream banks or other financial institutions. Importantly, too, the bank remains liable for any action by the agent, even if it was unauthorised. So financial institutions must be careful to police themselves and their agents as well as adhere to the law. To make the regulator’s role more explicit, a new payments act has also been drafted. Together with the National Microfinance Bank (NMB), Tanzania’s other leading financial institution, CRDB

The most efficient of Tanzania’s banks – and their shareholders – can expect to see higher profits as a result of such developments as the introduction of agent banking, which enables banks to do business through designated agents

has led the charge towards a better standard of banking across the country. The two have long vied for the top spot. Though NMB may have the largest network of branches, CRDB has led in terms of the size of its loans, assets and customer deposits. And both banks have produced healthy profits, leading to average returns for shareholders of around 25 per cent. Those institutions with a strong record in commercial lending in Tanzania also include Exim Bank and National Bank of Commerce (NBC). Like

Around 90 per cent of adults now have access to mobile money of some sort others in the industry, NBC has chosen to offer Islamic banking to those who want it. If Kenya is anything to go by, the increasing use of agents across Tanzania should help to control costs while growing the banks’ bottom lines. Despite being of a similar size to those in Tanzania, Kenyan banks have reported higher profits of late. This would suggest that the most efficient of Tanzania’s banks (and their shareholders) can expect to reap similar rewards as the industry develops with the use of agent banking. Technology will also lend a helping hand. Bankers used to think that markets were ready to take off once a country’s gross domestic product (GDP) per person had reached a level of $10,000 or so. No

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The People’s Bank Of Zanzibar Ltd: providing high-quality banking solutions

The People’s Bank of Zanzibar Limited (PBZ) was established on the 30 June 1966, in accordance with the Zanzibar Companies Decree. PBZ is wholly owned by the government of Zanzibar. The bank’s primary function is to carry out the business of commercial banking. PBZ offers both Islamic and conventional banking services in its banking proposition.

Branch network

PBZ’s branch network covers the islands of Zanzibar and Dar es Salaam, and its ATM services are available countrywide through the Umoja Switch Network. In addition, the introduction of internet and mobile banking services has extended our services beyond these borders. The bank provides services to both corporate and retail customers. The bank has been growing rapidly – at a rate of 40 per cent over the past

PBZ VISION Our vision is to be a leading provider of innovative and high-quality financial services to our retail and corporate customers in Tanzania and beyond.

PBZ MISSION Our mission is to provide banking solutions to our retail and corporate customers. PBZ will do so by providing innovative and high-quality products and services at competitive and affordable prices through its network in Tanzania.

three years – and its profit tripled for the year ended 2013. Return on average total assets reached 3.18 per cent and the return on shareholders fund was 18.6 per cent for the year ended 2013. This growth is expected to continue due to a number of reasons, which include plans to extend PBZ’s branch network, the introduction of new products and delivery channels, and enhanced strength. It is also supported by the country’s economic growth and prospects of newly discovered natural resources.

Islamic banking products

Services range from money transfers to all kinds of Shariah-compliant trade financing. In brief, Islamic banking products are mainly divided into deposit mobilisation contracts and fund utilisation (financing) products. Under deposit mobilisation, our products are Al Wadia (saving and current), Al Mudharabah (saving and current) and General Investment Account, traditionally known as Fixed Deposit in conventional banking. Under financing products we have Bai Muajjal (sale on differed payments) and Murabaha (sale on cost plus mark up). Other products such as ljarah (lease), Bai Salam (financing of agricultural products) and Bai Al Istisna (financing of manufactured goods) are offered on customer request.

Conventional banking products

PBZ offers traditional banking products, such as current accounts, time deposit

and saving accounts. It also provides modern banking services, such as mobile banking and internet banking. The available deposit accounts are denominated in Tanzania Shillings and three major foreign currencies, USD, GBP and Euro. Moreover, PBZ offers commercial loans in the form of overdrafts, term loans and personal or consumption loans. The bank is well known for its expertise in import and export trade dealings through the establishment of letters of credit and bills for collection. Other facilities include bid bonds, performance bonds, guarantees and many more. Head Office Contact Darajani, Zanzibar, Tanzania P. O. Box 1173 T: +255 24 2231118/9/20 F: +255 24 2231121 E: info@pbzltd.com customerfeedback@pbzltd.com www.pbzltd.com www.facebook.com/pbzbank www.twitter.com/pbzbank

‘The People’s Bank, The People’s Choice’

INVESTMENT OPPORTUNITIES: BANKING

Weekly banking channel usage in Tanzania

62% ATM

33% Branch

Mobile payments

38.6% 24.3%

Turnaround time for requests and enquiries

12.9% Interest rates and fees

11.4% Proximity of branches

Access to credit

4.3% Financial stability

With the rate of inflation in Tanzania less than half that of its recent peak of 20 per cent at the end of 2011, banks and businesses are looking forward to the ‘second generation’ of reform in the country’s financial system. This is expected to make it easier, among

Banks are looking forward to further reform in the financial system

Top customer reasons for changing banks

1.4%

Benefits of reform

Mobile banking

Point of sale

Service quality

longer. The use of mobile banking and such things as prepaid cards have long since reduced the hurdle rate. Indeed, like others in Africa, banks in Tanzania have discovered that it can pay to start from scratch, as they roll out new products in relatively new markets. Retail banks in parts of Africa have managed to cut costs to as little as 30 per cent of their income. That compares with a figure of around 50 per cent in developed economies, where much of the banks’ expenditure goes on patching up computer systems that have struggled for years.

7.1%

Innovative products and services

Note: Based on a KPMG perception study with 557 respondents Source: KPMG Africa Banking Industry Customer Satisfaction Survey, April 2013

other things, to discern the central bank’s approach to monetary policy, and, in the process, should lead to less volatility in short-term interest rates – something that the International Monetary Fund (IMF) has urged. This, in turn, should help businesses as well as banks to plan ahead. Efforts by the Tanzanian Government to improve access to credit have had an effect, but more remains to be done. The administration modified the land act to encourage banks to lend against the value of property. Yet lenders remain concerned by the time it takes to pursue claims through the courts in the event of a disagreement. Even so, the number of non-performing loans held by the country’s banks fell to 6.5 per cent at the end of 2013, according to the IMF, and is likely to edge closer to the target of five per cent in 2014. With Tanzania’s GDP expanding by more than seven per cent in 2013 and

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INVESTMENT OPPORTUNITIES: BANKING

Monetary union in the East African Community In November 2013, at the 15th Ordinary Summit of the East African Community (EAC) Heads of State in Kampala, Uganda, the leaders of the five countries – Tanzania, Burundi, Kenya, Rwanda and Uganda – signed a protocol outlining a 10-year road map towards monetary union. With a common market already established and a customs union in the process of being implemented, it is hoped that greater economic integration in the form of a monetary union will expand regional trade, boost economic efficiency and draw foreign investment, thereby reducing dependency on external aid to mitigate fiscal imbalances. “Businesses will find more freedom to trade and invest more widely, and foreign investors will find additional, irresistible reasons to pitch tent in our region,” said Uhuru Kenyatta, president of Kenya. Achieving a successful monetary union will require strong cooperation. The EAC Monetary Union Protocol lays out a road map, as well as a legal and institutional framework, for the establishment of a common currency, including macroeconomic convergence criteria. The EAC countries will need to comply with the following criteria for at least three consecutive years: • A ceiling of eight per cent on headline inflation; • A maximum fiscal deficit, including grants, of three per cent of gross domestic product (GDP); • A ceiling on gross public debt of 50 per cent of GDP in net present value terms; and • A reserve cover of four and a half months of imports.

It is hoped that greater economic integration will draw foreign investment Establishing a successful monetary union is an ambitious task – many financiers, including IMF managing director Christine Lagarde, have advised the EAC to exercise caution and to use the pitfalls of other monetary unions to mitigate the challenges that the EAC is likely to encounter. Adjusting to a single currency will take time, but deepening market integration and boosting trade in this way should ultimately drive sustainable socio-economic development in the region. Left to right: presidents Pierre Nkurunziza of Burundi, Jakaya Kikwete of Tanzania, Uhuru Kenyatta of Kenya, Yoweri Museveni of Uganda and Paul Kagame of Rwanda at the 2013 summit when the EAC Monetary Union Protocol was signed

STR/AP/PA IMAGES

Three further indicative criteria have also been identified: a five per cent cap on core inflation, a ceiling on fiscal deficit excluding grants of six per cent of GDP, and a tax-to-GDP ratio of 25 per cent. Joint monetary policy in the EAC will be governed by an independent EAC central bank, with a system of national central banks acting as its operational arms. Its chief role will be price stability, but it will also manage financial

stability and contribute to the overall economic health and development of the region. The single exchange rate will be free floating. An East African Payment System (EAPS) is currently operational in Kenya, Tanzania and Uganda, allowing for real-time cross-border transfers. Burundi and Rwanda are expected to adopt the EAPS once the relevant systems are in place. In addition, the EAC plans to establish an EAC Monetary Institute in 2015 to help with preparations for the monetary union. Finally, an East African Surveillance, Compliance and Enforcement Commission will be created by 2018 to monitor and enforce convergence, at which point the countries’ monetary and exchange rate policies will be harmonised.

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PTA Bank: an active lending policy sheet has almost doubled in the past two years alone, while its non-performing loans have continued to decline to low levels, giving the Bank added confidence.

Admassu Tadesse, President and CEO of PTA Bank – Eastern and Southern African Trade and Development Bank

Given PTA Bank’s active policy of lending to projects in Tanzania, what are the priorities for the economy over the next few years? PTA Bank has approved and committed funding worth approximately $405 million to various sectors of the Tanzanian economy. Infrastructure is key to the growth and economic development of Tanzania, as it is for most countries within the region. One area of emphasis is the energy sector, in particular renewable energy. For example, PTA Bank cofinanced the Kilwa Independent Power Producer, a natural-gas-fired thermal facility, which is expected to produce 343 megawatts (MW) of energy. PTA Bank’s capacity to fund such projects has grown rapidly in recent years, given its growing equity base and expanding funding partnerships. PTA Bank’s core capital and balance

How crucial are plans to invest in a transport hub in and around Dar es Salam? Is this something that interests PTA Bank? PTA Bank is committed to responding to the infrastructure development imperative, including the transport sector, which is central to the growth and efficiency of intra-regional trade. So helping to develop ports and surrounding road and rail links, such as in Dar es Salaam, is very important to us. PTA Bank’s approach is to work through strong partnerships, locally, regionally and globally. In Tanzania, we have worked very well with the CRDB Bank, the Ministry of Finance, and parastatals such as Tanzania Electric Supply Company (TANESCO) to expand the country’s infrastructure. One example of this is when the Bank co-financed the replacement of the single-point mooring and pipeline system at Tanzania Ports Authority, which supports the movement of essential and other goods to and from Burundi, the Democratic Republic of the Congo, Zambia and Rwanda, in addition to Tanzania. Furthermore, PTA Bank has facilitated financing for, among others, telecommunications and tourism projects in Arusha and Zanzibar. How important to the economy is the Tanzanian Government’s plan to raise money through a Eurobond? A Eurobond issue is an important way to diversify Tanzania’s access to international capital and help finance infrastructure and other high-impact economic sectors, while at the same time easing short-term foreign exchange constraints. In recent years, more than 10 African countries have successfully tapped international capital markets at good

rates, notably Zambia and Rwanda, and, most recently, Kenya. A Eurobond issue is also helpful to market the improving creditworthiness of the sovereign in the context of the economy’s growth trajectory and improved fundamentals. PTA Bank itself is a successful and now regular issuer of Eurobonds. Our experience has been a very good one, given the improved fundamentals of the Bank, upgrades in our credit rating and increased demand for our credit. Be this as it may, Eurobonds are not a source of low-cost funding for projects, so project-level funding from bilateral and multilateral partners remains very valuable. It is also at project level that PTA Bank most typically provides financing for viable economic development projects, working with project sponsors and various co-financiers, such as the African Development Bank – a strategic partner to PTA Bank. We also place strong emphasis on co-financing with various international, regional and local financial institutions. For instance, the Bank took part in a $350 million syndicated loan facility to the Government of Tanzania to support various infrastructure projects across the country, as well as a $200 million syndicated facility to TANESCO for the supply of power expansion equipment.

INTEGRATING & ADVANCING THE REGION’S ECONOMIES official@ptabank.org www.ptabank.org

INVESTMENT OPPORTUNITIES: BANKING

Saada Mkuya Salum Minister of Finance Over the past few years, Tanzania has demonstrated a steady pattern of economic growth. In an environment of political stability, we have observed a growth rate ranging between six and seven per cent over the past four years, as well as a decline in both fiscal deficit and the inflation rate. So far, our economic performance has largely been driven by capitalintensive sectors, but we hope to see a greater boost in the coming years as we diversify our trade sectors and take advantage of the natural resources we have to hand. The banking sector is performing well. Four of our banks – National Microfinance Bank, CRDB, Bank M Tanzania and DCB Commercial Bank – reported an increase in their profits across 2013, driven by steady economic growth and higher profit margins. There has also been an increase in the number of citizens opening bank accounts – an indicator not only of higher living standards, but also of the ongoing formalisation of our economy. To support small businesses and help them to overcome credit constraints, we have been delighted to secure a $75 million loan from the International Finance Corporation.

We hope that this push will support the domestic private sector, and encourage innovation in the economy. We continue to employ fiscal policy to promote economic growth. Our vision is that by shifting government expenditure towards infrastructural investments, we will see growth that is sustainable in the long term, and everyone – from those living in urban centres to more rural locations – will benefit from these investments. In June, we unveiled our budget for the coming fiscal year. Within this, we have made pledges to rein in tax exemptions – not counting those that support Tanzania in its economic development – and tighten financial discipline. The budget will focus on infrastructure, education, energy, agriculture and water resources, underpinning these sectors as we strive towards our targeted economic growth of 7.7 per cent for 2014/15. At the same time, we are aiming for a budget deficit below 4.9 per cent of GDP. By keeping a tighter hold on public expenditure, I am confident that Tanzania will move forwards more openly and transparently.

THOMAS COCKREM/ALAMY

Steps to create a customs union and a common market are already in train

The proportion of adult Tanzanians with formal bank accounts remains relatively low, at around 17 per cent

likely to be even higher this year, investors have turned their gaze to the prospects for natural gas. There is talk of investment during the development phase alone of as much as $40 billion. Yet with oil

companies unlikely to make a final decision until 2016 and production due to begin no sooner than 2020, investors will have to bide their time. What is certain, though, is that the next few years will see even greater expenditure on infrastructure across Tanzania. The government’s Big Results Now strategy has already stoked the

market and raised banks’ expectations that more finance will be required. Financiers are also pondering the prospects for monetary union within the East African Community, of which Tanzania is a member. In November 2013, the heads of state of all five countries in the group vowed to introduce a common currency by 2024. Steps to create a customs union to boost trade, as well as a common market, are already in train. For bankers, such developments introduce the prospect not just of wider markets and economies of scale, but also of greater competition. In other words, there will doubtless be risks as well as rewards. Yet, with regulators stepping up their oversight of credit risk and other such dangers, there is every likelihood that the industry will be safer and better managed as it enters the next decade.

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MATTHEW OLDFIELD /ALAMY

INVESTMENT OPPORTUNITIES: EDUCATION

INVEST IN TANZANIA 2014

INVESTMENT OPPORTUNITIES: EDUCATION

School report: raising standards The growth in school enrolment is a positive step, but if Tanzania is to realise its educational ambitions, private-sector input is needed, writes Emily Eastman

ducation in Tanzania has come a long way over the past 50 years, playing a fundamental role in human, social and economic development, and with the government having identified it as a priority sector. The country has made major gains in school enrolment, but there remains room for improvement in the quality and the delivery of education, and there are gaps in literacy rates and expenditure on education between regions. In 2002, Tanzania eliminated tuition fees and made school compulsory for all seven to 13 year olds, and, on paper, the results are impressive. Between 2000 and 2010, nationwide enrolment leapt from 59 to 95.4 per cent, setting Tanzania on course to achieve the United Nations’ second Millennium Development Goal of universal primary education by 2015. Yet, beneath the surface, there are a number of obstacles to attaining broad, high-quality education for all. In 2012, the majority of regions in Tanzania achieved primary school pass rates of 40 per cent and under. Of the country’s 30 regions, only a handful achieved a pass rate of over 40 per cent. The examination pass rates for secondary schools in 2012 were an improvement on those of earlier years, but a stark number

of regions are still underachieving. Out of every 10 students, six failed the national secondary-level exam. While the focus on promoting and improving access to education has yielded significant results in terms of the increased number of students enrolled, in some cases this has come at the expense of quality, particularly in public schools. Reports analysing exam results indicate that private schools dominate the ranks of Tanzania’s best performers, with just two public schools making the top 20 in 2012.

Delivering on quality In July 2014, the World Bank announced that the country’s Big Results Now in Education programme is set to receive $122 million in credit over the next four years. The programme aims to raise the quality of education in Tanzania’s public primary and secondary schools, and is designed in response to public concern over the standard of education in the country, according to Arun Joshi, World Bank lead education specialist and task team leader for the project. The bank’s board of executive directors also approved further support for the ongoing Science and Technology Higher Education project, which works to train more highly skilled workers in the

Teaching in Meserani, Tanzania. The government recently announced measures designed to raise the quality of education in primary and secondary schools across the country, in response to public concern

field. Philippe Dongier, World Bank country director for Tanzania, said recently: “Education can be absolutely transformational in Tanzania if every child can acquire the kind of learning that can open new doors to a brighter future... skilled, talented young people are going to be Tanzania’s true wealth as the economy grows, diversifies and moves from low-income to middle-income status.” Other agendas being pursued are the Education for All programme and the UN Decade of Education for Sustainable Development, which concludes this year. So what are the barriers to delivering broad, equitable opportunities for all in Tanzania, and what is the country doing to overcome them? One issue is a lack of access, in particular for those living in rural areas. According to the most recent Tanzania Education Sector Analysis (2011), which was prepared by the Government of Tanzania and supported by UNESCO and the World Bank, the gap in the probability of access for children from rural areas is 23 percentage points for ordinary, secondary-level examinations (O-levels), and gender gaps are significant. At the O-level stage, there are 95 girls enrolled for every 100 boys, and this figure drops to 83 girls for every 100 boys at A-level. In higher education, there are just 65 women for every 100 men. Yet the biggest inequality exists not in gender, but in wealth – the effects of which can be seen from primary school,

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INVESTMENT OPPORTUNITIES: EDUCATION

Total enrolment in primary schools (2000-12) 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000

8,292,172 8,363,386 8,419,305 8,441,553 8,410,094 8,316,925 7,959,884 7,476,650 7,041,829 6,531,769 5,960,368 4,875,764 4,370,500 0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

Source: National Bureau of Statistics

MARK TIPPLE/GETTY IMAGES

despite the countryâ&#x20AC;&#x2122;s fee-free policy. For every 100 students enrolled in schools from the wealthiest quintile, there are 95 students from the poorest. Thereafter, as we progress in seniority, the report shows a steep decline in enrolment, with 30 of the poorest students enrolled for every 100 of the wealthiest at O-level; six for every 100 at A-level; and zero for every 100 at tertiary level. Factors contributing to this trend include cultural norms, such as keeping girls at home to fulfil traditional gender roles, and a lack of jobs in rural areas that require an educated workforce, leading parents to question the value of sending their children to school.

Girls most disadvantaged

A pupil at the Kigamboni Community Centre near Dar es Salaam. In 2012, there was just one teacher for every 46 primary school pupils in the country, but action is being taken to improve this ratio and reduce class sizes

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Evidently, poor rural girls are the most disadvantaged when it comes to education. The Tanzania Education Sector Analysis shows that, while 92.5 per cent of them have access to primary school, a mere 50 per cent complete primary education. Indications suggest that seven per cent have O-level access, but just one per cent finish, and none have A-level access. Suggestions to improve the participation of girls in the education system, especially post primary school, include awareness campaigns of the long-term value of education. Female students are at risk of leaving education

INVESTMENT OPPORTUNITIES: EDUCATION

Dr Shukuru Kawambwa Minister of Education and Vocational Training As Tanzania strives towards achieving the goals outlined in Vision 2025, we envisage a literate society with strong scientific and technical knowledge, as well as employable skills. We proudly support UNESCO’s science programmes in Tanzania, which underpin our efforts to reach international-quality standards in education. Progress has enabled us to reach children across Tanzania, and the first decade of the new millennium signalled a landmark achievement for our country. Universal primary education reached over 90 per cent, and the number of students in primary education increased to over 8.4 million. Meanwhile, the number of students in secondary education rose considerably, from 383,000 in 2002 to over 1.6 million in 2010. The following year marked the introduction of free primary education in the country. These numbers are encouraging, and we aim to continue observing this upward trend in education enrolment in the coming years. Education is a fundamental right, and a crucial marker of the progress of any society. The upfront cost of education is low, but we are aware of the opportunity costs it presents when families are provided with quality and relevant education. We need to emphasise the long-term returns that education brings, and heighten awareness of the benefits of education versus keeping children at home. We need to break down the barriers to education, especially those that prevent girls from learning.

due to marriage and pregnancy, and students from rural areas often have long walks to school, during which girls in particular are at risk of physical and sexual attack. In some rural areas, 22 per cent of students live more than five kilometres away from a school. Yet despite these risks, school remains the best means of protecting children in the long term. For example, education reduces poverty: UNESCO estimates that 171 million people could be lifted out of poverty if all students in low-income countries left school with basic reading skills. In February 2014, the Tanzania Education Authority announced plans to build hostels for girls in eight regions so that they would have somewhere safe to stay during term time.

Issues of overcrowding Overcrowding in classrooms is another challenge. In 2012, there was just one teacher for every 46 primary school students in the country, but efforts are under way to improve the situation and enhance the quality of teaching. In January

We have already eased access to education for disadvantaged children. The Inclusive Education System supports disabled students, and we have district-level programmes in place that identify students in financial need so as to assist parents to cover these students’ school and examination fees. The coming years will see the improved implementation of these programmes so as to reach our educational targets. The expected returns of education are inextricably linked to the quality of teaching. An increase in students must be met by an increase in the number of qualified teachers, who not only have the skills required, but who have a passion for educating Tanzania’s next generation. Our aim is to develop and implement programmes that expand enrolment in vocational, technical and higher education institutions for teacher training to address the current shortage of teachers, and we are committed to improving the classroom environment. We also aim at more utilisation of technology to empower learning. This will go hand in hand with improvement in the area of textbooks for all levels of schooling so that students and teachers have access to the approved textbooks at the ratio of 1:1. The future of Tanzania rests in high-quality education that removes barriers to knowledge and supports individuals, and investing in education will carry us forward, bringing opportunities and benefits with it.

2014, the government introduced new exams for teacher-training colleges, which test academic competence and demand a 40 per cent pass mark before would-be teachers advance to the second year. The government also allocates a substantial 20 per cent of its budget to education, which is largely directed towards building schools and recruiting teachers. It is hoped that this will help to reduce class sizes and deliver positive results. According to the Tanzania Education Sector Analysis, “the expansion of the teacher training and higher education sub-sectors increasingly relies on costsharing, favouring the development of private-sector contributions. In 2009, 39 per cent of students were enrolled in private teacher-training colleges, against five per cent in 2004.” Private-sector participation is key to development plans in the sector, and the government is encouraging investors to set up specialist schools of excellence. The areas targeted include engineering, finance, marketing and ICT. Partnering

with an existing institution is a favoured market-entry strategy for foreign investors. Opportunities also exist in a number of education-related areas, including: the construction and operation of private schools and colleges at all levels; the establishment of industrial, vocational and technical training facilities; investing in learning resources for schools; expanding the underdeveloped special-needs sector, and training professionals and developing the curriculum to suit individuals’ needs; creating opportunities for ongoing professional development; and the establishment of more corporate training in fields ranging from banking and the legal sector to mining and oil and gas. Education in Tanzania is on the right track, and it is hoped that, by providing students with the support they need to achieve, attracting greater private-sector investment, and sensitising both parents and children to the long-term social and economic benefits of education, the upward trend in enrolment numbers will be supported by positive outcomes.

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INVESTMENT OPPORTUNITIES: HEALTHCARE

Right medicine for healthcare ills Tanzania has won World Bank praise for encouraging the private sector to play a greater role in the health sector – but there is still a long way to go, writes Keyur Patel

he challenges facing Tanzania’s healthcare system are in many respects typical of those facing poor but fast-developing economies, especially in Africa, that aspire towards middle-income status. Infant and maternal mortality rates are high. Life expectancy – at 59 for men and 63 for women – is well below the global average. Rates of infectious disease such as HIV, malaria and tuberculosis are falling but remain endemic: over one in 20 adults are infected with HIV. Malaria – a leading cause of illness and death – costs an estimated $240 million every year in lost gross domestic product (GDP). On a more positive note, Tanzania’s impressive growth rate – which averaged seven per cent over the past decade – on the face of it puts the country in a strong position to effectively tackle these myriad

problems. Yet it must deal with challenges most other nations do not have to endure. According to 2010 figures by the World Health Organization (WHO), Tanzania has just one physician per 100,000 people – along with Liberia, the lowest ratio in the world. To put that into perspective, its neighbour to the north, Kenya – which has a similar GDP and population – has 18 physicians per 100,000 people, while the corresponding median figure in 193 countries across the world is 122. The proportion of Tanzanians with health insurance coverage is low. The National Health Insurance Fund – the country’s largest scheme, established in 2001 – is mandatory for public servants and also reaches out to members of the formal private sector. Yet more than 90 per cent of the population is employed outside the formal sector. In the informal

Number of health facilities in Tanzania 2005

2006

2007

2008

2009

2010

2011

2012

Hospitals

219

230

232

240

236

241

Health centres

481

565

594

578

687

684

742

Dispensaries

4,552

5,679

4,930

4,984

5,394

5,132

5,680

Total

5,252

5,369

5,725

5,810

6,112

6,321

6,052

6,663

Source: ministry of health and social welfare

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(not taxed or monitored) private sector, the main scheme is the Community Health Fund, a voluntary prepayment programme operating in rural areas. It was introduced in 2001 with the support of the World Bank. More recently, the parallel Tiba Kwa Kadi programme has been rolled out across certain urban councils, with the intention of going nationwide. The ministry of health and social welfare estimated in 2011 that around 17 per cent of Tanzania’s population was insured by one of these three schemes (with perhaps a further one per cent covered elsewhere). Significant efforts are being made to extend insurance coverage. According to WHO data for 2012, the proportion of government expenditure on health is 10.3 per cent, while total expenditure on health as a proportion of GDP is seven per cent – both higher figures than the average in Africa. Yet, when measured against Tanzania’s economic growth – and its ambitions to become a middle-income country by 2025 – it is clear that the health system still has a very long way to go.

Public-sector initiatives One vital step in this process is to empower women by expanding access to contraceptives and education about family planning. At the current growth rate, Tanzania’s population is expected to increase by around 15 million over the next decade, putting further strain on its already overstretched health

HUGH SITTON/CORBIS

INVESTMENT OPPORTUNITIES: HEALTHCARE

services. Effective family planning has been shown to have a significant impact on infant and maternal mortality, while also helping to curtail the spread of HIV. In 2009, the Tanzanian Government introduced the National Family Planning Costed Implementation Programme (NFPCIP), an initiative to reinvigorate the country’s stuttering progress towards its target of achieving a contraceptive prevalence rate (CPR) of 60 per cent by 2015, which would bring it in line with the current global average. At the start of this decade, Tanzania’s CPR stood at just 27 per cent. Now, the intention is to spend almost $100 million over six years to ensure the sufficient and timely supply of contraceptives, equip healthcare providers with the necessary skills to provide family planning services,

More than a third of general healthcare in Tanzania can now be accessed through private-sector facilities, faith-based groups and not-for-profit organisations – key players in the state’s push to extend health services into rural areas

and improve the monitoring and evaluation of contraceptive uptake. The 60 per cent target is a daunting one. Last year, the government expressed confidence that progress was on track, but Health and Development Tanzania, a non-governmental organisation, warned that, at current rates, a best-case CPR by 2015 would be 47 per cent. In rural areas especially, there is still some concern that traditional attitudes foster hostility towards the use of contraceptives. To help counter this, the ministry of health and social welfare has relaunched the Green Star campaign, first introduced in the early 1990s to encourage family

planning. The idea is to bring events such as theatre and musical performances to regions with the country’s lowest contraception usage rates, in order to spread knowledge and dispel common myths about family planning. The government also has targets to reduce HIV prevalence, which, though still at endemic levels, is at least showing positive signs. Rates among young people aged 15-24 – an indicator of future trends – fell by a sixth in the five years to 2012. In the decade to 2012, prevalence among adults aged 15-49 declined from seven per cent to 5.3 per cent – though the drop was only statistically significant in men.

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Creating the Future of Healthcare, Saving Lives. Philips Healthcare with Mokasi Medical Systems

Mokasi Medical Systems and Electronics Services Ltd 45/46 Chimara Street, (Opp. Ocean Road Cancer Institute) Palm Residency Building Ground Floor P. O. Box 1778, Dar es Salaam. TEL: +255 22 2924103, +255 784 665274 E-mail: mokasi@pmstz.com

INVESTMENT OPPORTUNITIES: HEALTHCARE

Dr Seif Rashidi Minister of Health and Social Welfare A healthy society is a prerequisite to social well-being and a foundation of sustainable national development, and Tanzania has made considerable progress in this area. This year, we were honoured to receive the Global Leaders Council for Reproductive Health’s 2014 Resolve Award for innovations in reproductive health service delivery. This recognition indicates the success of our reproductive health programmes, which recognise the fact that family planning policies are most effective when directed towards women. This is particularly true in rural areas, where 75 per cent of Tanzania’s population lives, and where awareness surrounding family planning remains an issue. Shining the spotlight on women was the idea behind the EngenderHealth programme, which reaches out to women and families in underserved areas. Not only have we provided information and services in reproductive health, family planning, and maternal and child health, but we have also sought to engage community leaders in supporting our efforts. Since 2007, we have observed a 79 per cent increase in contraceptive use. This year also saw the establishment of the Public Private Health Forum (PPHF) in April, which brings together public,

In November 2013, the government released its third strategic framework for tackling the HIV and AIDS epidemic, over the next five years. It says that from 2001-12, the annual budget for tackling the diseases rose from TZS17 billion ($10 million) to TZS500 billion ($300 million), comprising donor and domestic funds. The latest framework details plans to eliminate mother-tochild and blood-borne HIV transmission, invest in antiretroviral therapy and counselling services, and reduce the stigma and discrimination associated with HIV and AIDS – with the ultimate goal of halving the HIV incidence rate by 2018.

Private-sector potential The contribution of the private sector to Tanzania’s healthcare sector is showing burgeoning promise – but much of this potential still remains untapped. Until recently, there had been uncertainty about the government’s capacity to engage in public-private partnerships (PPPs), as well as unclear guidelines around their creation. A historical climate of distrust between public and private healthcare providers had also stilted progress.

private, self-financing and not-for-profit healthcare providers, as well as professional associations and development partners. The dialogue platform will strengthen our ministry’s efforts through collaboration with the private sector – a key move, as 27 per cent of Tanzanian healthcare is provided by the private sector. The PPHF will facilitate the exchange of existing knowledge and new partnerships, as well as strengthening existing ties. We hope that the private sector will be leveraged, while gaps in financing will be minimised. Tanzania has made significant progress in healthcare availability, accessibility, and delivery. Nonetheless, we realise that a number of serious issues remain. These include the shortage of qualified healthcare professionals, poverty-related diseases, financial difficulties, and a high rate of maternal mortality. Understanding the necessity of social health for sustaining economic and social development, we are steadfast in our resolve to deliver further improvements in these areas. Recalling the trend of progress that we have demonstrated in former problematic areas, we are confident that we will see progress in today’s pervasive health challenges.

This is changing fast. The key PPP question is no longer ‘why?’, but ‘how?’. Over a third of the general health services in the country can now be accessed through private-sector facilities, faithbased groups and other not-for-profits – vital players for extending services into rural and other hard-to-reach areas. A recent World Bank study noted: “As one

Tanzania has shown political commitment to public-private partnerships of the first governments in the region to create a comprehensive policy framework encouraging a greater role for the private sector in health, Tanzania is a pioneer in working with the private health sector.” One example is the Abbott Fund, the philanthropic arm of Abbott Laboratories, the United States pharmaceutical and healthcare products company. The fund says that, since 2001, it has invested more

than $100 million as part of a PPP with the Tanzanian Government – in modernising hospital facilities, building new regional laboratories, and training healthcare workers in HIV care and treatment. There are still big challenges in this sphere to be overcome. The World Bank study found that Tanzania’s PPP unit was under-resourced for its mandate. Limited access to financing has created market barriers, which can constrain private health services. Furthermore, inconsistent communication between the private and public sectors, along with inadequate training opportunities for healthcare workers, mean that the private healthcare infrastructure currently in place is not being fully harnessed. But Tanzania has shown political commitment to PPPs, as well as benefiting from a comprehensive legal and regulatory environment supporting the private health sector. “By seizing existing partnership opportunities and fostering a health system that leverages the skills, resources, and talents of all health actors,” said the World Bank, “the goal of delivering accessible and high-quality health care to all Tanzanians is achievable”.

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RANDY PLETT/GETTY IMAGES

INVESTMENT OPPORTUNITIES: WATER AND SANITATION

The watersupply challenge Government initiatives and international aid are helping to address Tanzania’s problems of poor sanitation and water scarcity, writes Emily Eastman

anzania’s water problems are well documented; despite the country’s large lakes, over a third of the land remains semi-arid, and 48 per cent of its 49 million citizens do not have access to safe water. Some 41.9 million are unable to access adequate sanitation facilities, which means that large swathes of the population still dispose of their waste in the country’s rivers. The wider impact of water scarcity on the health and productivity of the country is vast: every year, 10,000 children under

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five die from diarrhoeal diseases, and poor sanitation costs Tanzania $206 million, equivalent to one per cent of national GDP. Water scarcity is especially problematic for women and girls, as they are often sent to collect water from the nearest water point, which can be several hours’ walk away. And time spent walking to collect water is time not spent in school. Many teenage

girls skip school or drop out altogether owing to a lack of washing facilities, or because those that are there are neither private nor safe to use. While the situation remains severe, efforts to combat Tanzania’s water shortage have long been under way, and over the years a number of programmes have been launched to boost water supply.

An East African mother and her children gather around a water pipe supplied from a tank. Women and girls are affected by water scarcity disproportionately, as they are usually the ones sent to collect water, often from miles away

INVESTMENT OPPORTUNITIES: WATER AND SANITATION

The United Nations WASH action plan Key results – the United Nations will help build capacity for:

Budget ($)

Relevant ministries, departments and agencies to provide a coordinated, harmonised response for increased coverage and improved quality of child- and girl-friendly, accessible school water, sanitation and hygiene (WASH)

5.435 million

The Government of Tanzania and the Revolutionary Government of Zanzibar to implement a coordinated, scaled-up national response for improved sanitation and hygiene

7.870 million

The Government of Tanzania and the Revolutionary Government of Zanzibar to adopt evidence-based measures to enhance decision-making, equity and inclusion of women, children and vulnerable populations in water, sanitation and hygiene

2.490 million

Zanzibar Water Authority (ZAWA) and WASH pilot project in Dar es Salaam to improve sustainability of their services

1.980 million

Relevant ministries, departments, agencies and local government authorities to improve coordination and to integrate Integrated Water Resource Management (IWRM) into their sector plans and have strengthened environmental-health-related policies, strategies and capacities to undertake environmental-health impact assessments

1.700 million

Total four-year budget

19.475 million Source: United Nations in Tanzania

Back in 2002, the Tanzanian Government adopted the National Water Policy, laying the foundations for comprehensive reform. As part of this policy, the government has decentralised water and sanitation management, devolving it to approximately 20 urban and 100 district utilities. Supported by the Government of Tanzania, development partners and other stakeholders, the Water Sector Development Programme (WSDP) comprises three components: the Water Resources Management Programme; the National Rural Water Supply and Sanitation Programme; and the Urban Water and Sewerage Programme. In phase one, the government and its development partners invested around $1.3 billion, which led to the completion of, among others, sub-projects in 918 villages. These projects have delivered 26,468 new or rehabilitated water points to the benefit of 6.7 million rural people, and access to water to 2.8 million urban dwellers.

Improving access and awareness Tanzania has also recently launched a national campaign. Increasing access to sanitation facilities and awareness of the benefits of basic sanitation practices will significantly reduce the risk of contracting

diseases such as diarrhoea and cholera. Improving access to latrines and water in schools will create a better learning environment and reduce the rate of children suffering from stunted growth. With support from UNICEF, four Tanzanian ministries are ensuring the delivery of pilot Water, Sanitation and Hygiene (WASH) programmes in over 100 schools. Furthermore, a number of initiatives have been proposed, or are ongoing, to increase the country’s infrastructure for water storage. These include the Kidunda dam, which will increase water availability in Dar es Salaam; the Ndembera dam, devised to restore dry season flows in the Great Ruaha River, and increase power supply and irrigation in the Great Ruaha sub-basin; and the Farkwa dam for the water supply of capital city Dodoma. Reducing waste-water pollution and improving water quality are also on the agenda. In 2010, the ministry of water launched the Water Quality Management and Pollution Control Strategy, prepared under the WSDP, to manage all aspects of water and waste-water quality monitoring. However, progress in this area has been limited, owing to a number of factors, including inadequacies in funding, capacity, and data and information, and variable awareness at different levels.

Innovative technology could provide a solution to these hindrances. In Mwanza city, a smartphone application called mWater is helping Mwanza Urban Water and Sewerage Authority (MWAUWASA) map the quality of waterways online and monitor drinking water for contamination. Funded by the Development Innovation Ventures initiative of the United States Agency for International Development (USAID), the application uses a mobile camera to detect colonies of coliform and E.coli bacteria that have grown on test plates from the water samples. The data is then shared on a global, open-source water-monitoring database. USAID’s stage funding of $100,000 will allow mWater and MWAUWASA to establish a supply chain for the test equipment used with the application. The kit has been priced at $5 and the application is free to download. It is intended that this project will allow automated texts to be sent to water users, suggesting safe water sources nearby and instructions for disinfecting drinking water. It is also hoped that this initiative will eventually extend across the entire country. “We want this to be a market-based solution, whereby this can exist without us as an aid organisation,” explained

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Proudly supporting the provision of clean water History

Incorporated in 2000, JUNACO opened its doors for business at its corporate headquarters in Dar es Salaam, Tanzania. The company is among the largest importers and distributors of watertreatment chemicals, basic industrial and agricultural chemicals, all types of water meters, flow meters, pipes, fittings and valves. Since its inception, the company has grown from strength to strength, distributing products in the domestic market and re-exporting to neighbouring countries.

Our vision

To be the leading importer and distributor of chemicals, water metres, pipes, fittings and valves in Africa

Our mission

We intend to provide our clients with the best quality experience from beginning to end, with secure payment methods and delivery on time

Our success story

Our primary goal is to strive to meet the demands and requirements of our clientele. Over the years, we have succeeded in crossing national boundaries and are now re-exporting across East Africa. We have also further extended to Zambia. After 14 years of operating in the water industry, our foundation has been built. Our vision is to expand and ensure full market coverage across Africa We have earned the respect of and have been recognised by multiple water authorities in East Africa. JUNACO also has ties with several reputed manufacturers and service providers, who are ISO certified and whose quality has been accepted worldwide. Today, we owe our success to a well-qualified and dedicated team of professionals who have extensive experience in this area of operation

Our contribution

JUNACO contributes almost 80 per cent of water-treatment chemicals to various water authorities in East Africa, particularly in Uganda and Tanzania. Our chemicals are cost-effective, user and eco-friendly and easy to handle during application. With the supportof our suppliers, we aim to excel in the distribution of chemicals, thereby playing a vital role in the provision of safe and clean water.

territory. We are diversifying into chlorinefree pool chemicals, a business that is currently being developed. Market response has been pleasing and we look forward to doing well in this business too. Moreover, JUNACO plans to establish its own manufacturing factory in East Africa, Tanzania. Having our chemicals manufactured locally will play a key role in enhancing deliveries and making chemicals readily available to end users.

Why JUNACO (T) Ltd

The company has adequate resources and experience in running big scale capital business, eligible to tender and qualified to perform the contract if the tender is accepted. The transport network is at its best links in every eastern Africa country, good shades, security, reliable personnel and financial management is guaranteed. I n short, the company has the capacity to operate throughout Africa.

Our long-term goals

JUNACOâ&#x20AC;&#x2122;s intent is to thrive and become the best in the business. We intend to expand and conquer the whole African

Samora / Azikiwe Street IPS Building, 10th Floor P.O Box 77756 Dar es Salaam, Tanzania T: +255 22 21 33591/28524/10309/33592 F: +255 222 121067 E: sales@junaco.co.tz/info@junaco.co.tz www.junaco.co.tz Contact Person Lilian Mangaru Business Development Manager T: +255 22 2110309 M: +255 789 161390 E: lily@junaco.co.tz

INVESTMENT OPPORTUNITIES: WATER AND SANITATION

Professor Jumanne Maghembe Minister of Water and Irrigation The long-term vision of the ministry of water is for a Tanzania in which clean and safe water and sanitation is accessible for everyone. A lack of access to safe water manifests itself in problems linked to sanitation, and can have far-reaching effects on health, but also on education and agriculture. While half of our population does not have access to safe water, women’s and children’s efforts in collecting water range from two to seven hours a day, yielding a high opportunity cost with regard to time and preventing children from educational attainment. The lives of 10,000 children under the age of five are lost every year due to diarrhoeal diseases that are easily preventable where safe water is available, and the lack of safe water and its improper use threaten our future food supply. The issue of water availability and its use is absolutely central to the dialogue on the future of Tanzania, which lies with our policies shaped around the equitable distribution of resources. As part of our commitment to easing water stress, we are dedicated to the Nile Basin Initiative (NBI), for which we signed the Cooperative Framework Agreement in May 2010. The agreement has marked a remarkable step forward from the regional disputes and instability that hindered growth, bringing together all potential beneficiaries to address a common agenda. The newly established Nile River Basin Commission

Annie Feighery, the cofounder of mWater, during an interview with SciDev.net. A number of innovative public-private partnerships are emerging, providing support to the country’s water sector development efforts. German utility provider Hamburg Wasser is working with Dar es Salaam Water and Sewerage Authority (DAWASA), Dar es Salaam Water and Sewerage Corporation (DAWASCO), the ministry of water, and local capacitybuilding organisations to improve water infrastructure in Dar es Salaam. Under the umbrella of the Water Futures Partnership – which is composed of SABMiller, global conservation organisation WWF and German federal enterprise Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) – WWF Tanzania, South African bottling company Sabco-Tanzania, Tanzanian Breweries and GIZ joined forces to develop action-oriented solutions for the better management of water in the WamiRuvu River basin and Dar es Salaam.

aims to ensure equitable utilisation, management and the sustainable development of resources. Last year, we observed the Moshi Urban Water Services Authority (MUWSA) exceed government targets for 2015 in supplying clean and safe water. We sincerely hope that other water authorities follow this example. For this, the burden falls on the board members of authorities, as their contributions are the main drivers of successful policy implementation. Their input will be central to our aims in achieving the Millennium Development Goals [MDGs] for 2015. This June, our MPs approved a proposal to establish an agency that will increase the efficiency of our governmental water-supplying processes in rural areas. We hope that the agency will be able to generate sustainable solutions to our water-supply challenges by addressing the credit shortages we have faced in addressing them. Our aim is for the agency to obtain funds from independent sources, towards which our ministry will act as guarantor. The bill establishing the agency will be tabled before our government completes its term in 2015. As we reflect on the progress made so far, we can use lessons learnt to deliver even better services to Tanzanians. We are committed to achieving sustainable water security and protecting the environment, and I am confident that we will fulfil our mandate of delivering safe water and sanitation nationally.

GIZ is now running the International Water Stewardship Programme, which has brought together the public and private sectors for the restoration of the Mlalakua River. The group of stakeholders, which includes Coca-Cola, the Wami Ruvu Basin Water Board and Nabaki Afrika – a local building-material supply company – are working together to clean the river and establish systems that will ensure the sustainable management of municipal and industrial liquid and solid waste. “More and more enterprises recognise the water-related business risks they are facing – be it rising water costs, reputational risk or hampered operations,” says Sophie Müller, GIZ’s adviser on water stewardship and sanitation. “GIZ brings together private sector, public authorities and civil society to tackle shared water risks in local partnerships through collective action.” To encourage further private-sector participation, the ministry of water has established a public-private-partnership

(PPP) desk, which, with support from GIZ and the Energy and Water Utilities Regulatory Authority, is assessing the scope for private involvement in the sector. “It is important that the government has adequate structures in place to handle the cooperation with the private sector,” continues Müller. “That is why GIZ supported the development of the PPP desk with capacity development for the staff and with advice on the development of framework documents for PPPs in the water sector.” Attracting investment into the water and sanitation sector is urgent. Existing infrastructure is not keeping pace with demand from a growing population, and rising temperatures are exacerbating extreme conditions, such as droughts and floods. Furthermore, expanding access to water and sanitation services will be crucial if Tanzania is to realise its Development Vision 2025, which aims to eliminate abject poverty and ensure a high quality of life for all citizens by 2025.

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Planting seeds of hope for farmers Tanzania’s government, leading economies and more than 40 multinational corporates have pledged millions of dollars to help the country’s agricultural sector realise its full potential, writes Caroline Stocks

ith the largest area of arable land and the best water availability in East Africa, the potential for Tanzania to produce food for the continent is significant. From the highlands in the north and south to its coastal plains in the east, the country’s mixed terrain is matched by an equally varied climate that supports crops ranging from tea, rice and cotton to drought-resistant millet and sorghum. Maize is considered the country’s most important food crop, with around 2.5 million hectares (ha) grown each year, representing about 45 per cent of its total arable area. Its arid climate and natural resources also make Tanzania a strong base for livestock production, with 24 million of a total 94 million hectares of available land used for grazing. More than 21 million cattle are reared in the country, along with about 15 million goats and over six million sheep. Poultry represents the highest livestock numbers, with 35 million chickens being reared, mainly by smallholdings. With agriculture carried out across 355,000 square kilometres, it is a significant part of the country’s landscape and economy. Farmers make up as much as 80 per cent of Tanzania’s workforce, with agriculture accounting for 70 per cent

of rural household incomes (of which 53 per cent comes from crop production, 13 per cent from livestock and four per cent from agricultural wages). In total, the sector accounts for around a quarter of the country’s gross domestic product (GDP) and 85 per cent of its exports. But despite this – and the vast areas of land available for agriculture – Tanzania still struggles to feed its 49 million people. Unless things change, by 2025, when the country’s population is predicted to have reached 70 million, it will not be able to meet the nation’s food demands through internal production. The agricultural sector is suffering a number of difficulties: the population ballooned by 30 per cent between 2002 and 2012, putting huge pressure on its land and resources; and its infrastructure (roads, water supply and power generation) remains poor.

Subsistence farming According to the World Bank, the country would need to invest $2.4 billion each year for the next decade – a little over 20 per cent of its GDP – in order to meet its infrastructure targets. Inefficiencies mean the country loses $0.5 billion every year, leaving 12.9 million people in poverty, 85 per cent of whom live in rural areas. Meanwhile, its agricultural industry

A Tanzanian farmer in a field of maize, Arusha region. In total, maize production is given over to around 2.5 million hectares each year. The country’s mixed terrain and varied climate also support tea, rice, cotton, millet and sorghum

is characterised by subsistence farming, with most farmers only producing enough food for their families on farms that average around 1.6ha. In 2012, only 20 commercial farms existed in the country’s southern corridor, where the potential for viable agriculture is thought to be at its strongest. Production is traditional, with most farmers having little understanding of the modern practices that could improve yields without increasing inputs. Only 30 per cent of households use fertilisers, with pesticides employed by a mere 15 per cent. No more than 12 per cent of crop-growing households take advantage of improved seed varieties. Land ownership is also traditional: while modern land titling was introduced in 2001, few people know who actually owns the land that their families may have farmed for centuries. Less than 10 per cent of the population has formal certification of ownership for the land they farm, while 80 per cent of Tanzania is classified as ‘village land’, which means that it cannot be sold to outsiders. Only 70 per cent of communities on that land have official plans related to its use. This uncertainty over ownership means farmers are worried about land grabs when private investors show an interest. On top of this, farmers are having to deal with the effects of climate change. According to a government-commissioned study in 2013, both the minimum and

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Application submission deadline is 23rd October 2014

STEVE PARSONS/PA IMAGES

INVESTMENT OPPORTUNITIES: AGRICULTURE

Agriculture: a key role in Tanzania’s economy The economy depends on agriculture, which accounts for more than a quarter of GDP, provides

85% of exports

and employs about

80% maximum temperatures in Tanzania have increased over the past 30 years. Rainfall has also become more erratic, with most areas receiving less than 500mm per annum today compared with 1,000mm previously. This has had a huge impact on farmers, as they largely depend on rainfed agriculture. If the climate continues to change, the government estimates that, by 2030, average maize yields could have fallen by 16 per cent – a loss of about one million tonnes per year. By 2050, yields could be as much as 35 per cent lower. The challenges have not gone unnoticed by either the national or international community. Over the years, the Tanzanian Government has adopted various policies aimed at transforming the country’s agriculture and bringing in more private business. In 2006, it introduced a national livestock policy, in an effort to increase production by 4.5 per cent a year by 2016 through improving disease control, developing livestock markets and providing farmers with the tools to lift productivity. A national irrigation plan and agriculture

President Jakaya Kikwete (seated, right) at the G8 Open for Growth conference in London last year

policy has also been introduced in a bid to develop sustainable irrigation systems that would boost crop yields. However, the legacy of Tanzania’s socialist past persists, and, despite efforts to increase agricultural output, yields remain at levels of a decade ago. Overseas governments have stepped in to help encourage private-sector investment in the farming industry. In 2012, the G8 launched the New Alliance for Food Security and Nutrition initiative. More than 40 multinationals, including Unilever, Diageo and SABMiller, have pledged to invest millions of dollars in the nine African countries that have joined the

of the workforce

The government has recently increased spending on agriculture to

7% of its budget

Source: Central Intelligence Agency, World Factbook: Tanzania

The alliance is supporting the government in implementing its agriculture and food security policy, sparking a wave of investment INVEST IN TANZANIA 2014

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KAGERA SUGAR LIMITED P.O Box 815 , Bukoba, Tanzania.

Tel: +255 28 2222203, Fax : +255 28 2222231, Email: ksl@kagera-sugar.co.tz

Kagera Sugar Limited congratulates His Excellency The President and the People of the United Republic of Tanzania on 50 Years of Independence. Kagera Sugar Limited is:

• • • • • • •

A Major Investor in Tanzania Utilizing the Latest Technologies in Agriculture Utilizing state-of-the-art Irrigation Infrastructure Producing High-Quality Sugar for Local and Regional Markets Enhancing Food Security and Contributing to the Economy Creating Wealth and Employment Training and Developing Local Skills

INVESTMENT OPPORTUNITIES: AGRICULTURE

Christopher Chiza Minister of Agriculture, Food Security and Cooperatives which works to provide information and apply scientific expertise to tackle agricultural and environmental problems. Notably, CABI is a key driver in improving food security, supporting smallholder farmers as they work to increase incomes, and preserving the environment and its biodiversity, and the organisation continues to support our agricultural development. With aims to increase our output of maize, rice and sugar, we recognise the importance of private-sector participation. As part of plans to boost food security, we aim to implement a ‘hub and spoke’ model, in which large-scale commercial farmers are positioned at the centre of production, surrounded by groups of smallholder farmers. This model should lift smallholders out of subsistence farming, as advanced marketing skills and technology will filter down the chain from larger commercial farmers. Tanzania boasts considerable resources, and we intend to utilise these to the benefit of the agriculture sector. There are considerable opportunities for us to grow the sector and support domestic development, and, working alongside our country’s farmers and the private sector, I am confident that we will soon observe the positive results that come from collaboration.

TRAVEL INK/GETTY IMAGES

Agriculture, and the provision of farming techniques that alleviate the effects of climate change, is central to Tanzania’s future growth prospects. The sector is fundamental to countrywide ambitions to tackle poverty. The contribution of domestic agriculture to the Tanzanian food basket is 95 per cent, and the sector accounts for 75 per cent of rural employment. In 2012, 26.8 per cent of GDP was attributable to agriculture, and the sector is growing at a rate of four per cent. Although this is below the six per cent targeted by the Comprehensive Africa Agricultural Development Program (CAADP), we are committed to reaching this figure and driving the sector forwards. To do this, we are working to challenge constraints to the sector and deliver integrated solutions in a cost-effective way. Implementing the appropriate use of technology; reducing dependence on rain-fed agriculture; improving sector-wide research and development; better utilising crops; and improving rural infrastructure and market networks will all underpin the prosperity of the sector. I am confident that the appropriate policies will yield considerable benefits. Tanzania is one of the founding members of the Commonwealth Agricultural Bureaux International (CABI),

Tea is one of Tanzania’s main exports. In early 2014, Unilever announced plans to triple tea production in the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) as part of its efforts to help reinvigorate the agricultural sector

alliance. In return for corporate investment and aid, Tanzania is reforming policies to make it easier for corporations to operate in the farming sector. The alliance is also supporting the government in implementing its agriculture and food security policy, helping to spark a wave of investment in the agriculture sector. A key focus is a 7.5 million hectare area known as the Southern Agricultural Growth Corridor of Tanzania (SAGCOT), which the government earmarked in 2010 for significant growth. As well as investment from international businesses and the local private sector, alliance members are providing aid to invest in the region’s infrastructure. The United Kingdom, for example, has pledged £36.4 million ($62.08 million) over five years to 2017 to support two SAGCOT institutions that will promote investment, address obstacles faced by companies and assist start-up farm businesses. Direct support will also be provided to increase the incomes of smallholders operating in forestry, maize, horticulture and tea. Tea remains a significant export. In early 2014, Unilever announced plans to triple

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i te d m i L y n ompa

Kagera Tea Our History

Kagera Tea Company Limited (hereinafter called KTCL) is a limited liability Company incorporated in Tanzania in 9/03/2000 with registration number 38944. It was bought from Tanzania Tea Authority, a parastatal, following privatization of state firms. Its Head Office is located at Maruku Estate, 12km south of Bukoba town, along Bukoba – Biharamulo road, in Bukoba, Kagera region.

KTCL has expanded its tea-growing area from 230Ha both at Maruku and Katoke Estates at take over, to 210Ha at Maruku and 150Ha at Katoke Estates. To meet food industry certification, the Company heavily invested in infrastructure and for continuity it retained existing staff and recruited new ones to bolster its management. Today the company boasts over 80% of tea exports, and KTCL’s net worth has grown from Tsh.700 million in 2000 to over Tsh.19.97 billion, employing 215 permanent employees and 300 seasonal workers. It partners and supports over 250 smallholder farmers. KTCL has a subsidiary company BK Tea Blenders Company Ltd, which deals in blending and packing of value added teas.

Vision: To produce high quality teas that pay return on investment to the satisfaction of the company and other stakeholders through harnessing resources across the value chain.

Mission: Apply quality management across the tea business value chain while embracing corporate social responsibility, environment conservation and enhancing food security.

Our Growth Despite business vagaries KTCL has led initiatives and invested heavily in new plantings, machinery, buildings and human resources. These moves have paid off. In 2000, export was 14,981kg while local sales were 234,704kg. Today export is 449,165kg and local is 196,514kg. Exported prices have increased from USD 0.81 per kg to USD 1.8 in Mombasa auction. High production is also due an increase in green leaf supply from smallholder farmers who enjoy better prices from Tsh. 65 to current Tsh. 225. The company sells tea to local blenders and packers eg. Afritea and Coffee, Chai Bora Ltd, Zatepa Food Company and BK Tea Blenders Co. Ltd. The subsidiary company BK Tea Blender has quickly identified a niche in the market due to its superior blends. By the trademark “Yetu”, it has three brands; Yetu Bukoba, Yetu Camellia and Yetu Victoria. It has packages ranging from sachets of 5g, 10g to boxes and tea bags of up to 250g. It has the capacity to produce 2000 – 5000kg per day. While it currently sells locally, plans are underway to venture into the export market.

Our Future KTCL is among leading quality tea producers in Tanzania. It wishes to exploit its resources to fulfill its vision and mission. In partnership with smallholder farmers and other government institutions eg prisons and army farms, the company aims to increase production from current 645,679kg to over 710,000kg in 2015. True to its conservation policy, the company owns and maintains over 300Ha of eucalyptus trees forest which are used in steam boilers. It maintains an indigenous trees nursery and trees along water catchment areas. Aware of food safety, the company is in the process of getting a 22000 certification and Rainforest Alliance. It’s currently certified by Tanzania Bureau of Standards, Tanzania Food and Drug Authority, Occupational Safety and Health Authority. KTCL is an active member of the Tea Association of Tanzania (TAT), the Agriculture Council of Tanzania (ACT), and the Tanzania Chamber of Commerce, Industry and Agriculture – Kagera region branch. It has certificate of incentives from Tanzania Investment Center which can leverage on its expansion programme. As part of growth, KTCL welcomes both local and international partners. We are open for discussion to invest across the tea business value chain.

KAGERA TEA COMPANY LIMITED • P.O. Box 462 Bukoba, Tanzania, East Africa • Cell: +255 754 596 342, 784 870 668, 713 404 452 • E-mail: kageratea@kageratea.co.tz

INVESTMENT OPPORTUNITIES: AGRICULTURE

The New Alliance for Food Security and Nutrition: a closer look

G8 and African leaders meet for a working lunch at the 2012 G8 summit in Camp David, Maryland, US, to discuss issues surrounding food security

The countries involved sought to align the financial and technical support they provide to agriculture with the priorities of the CAADP National Investment Plan for Agriculture and Food Security, known as the Tanzania Agriculture and Food Security Investment Plan in Tanzania (TAFSIP). This meant that, with this support, TAFSIP would be implemented much faster and in line with commitments made by the Government of Tanzania.

Greater engagement with the private sector is key These countries and Tanzania, under the umbrella of the New Alliance for Food Security and Nutrition, have come together to show a solid commitment to eradicate poverty and end hunger. The Tanzanian Government plans to improve incentives for the private sector; develop and implement domestic seed policies with the goal of attracting increased private-sector involvement in agriculture; and increase stability and transparency in trade policy. Greater engagement with the private sector is key to success in the agriculture sector, and a number of private-sector representatives have already expressed their intentions to invest in Tanzania’s agriculture sector in support of TAFSIP and the alliance.

POOL/ABACA/PA IMAGES

At the 38th G8 summit in May 2012, held in Camp David, Maryland, United States, the G8 members committed to a New Alliance for Food Security and Nutrition with African leaders and the private sector, with the objective of lifting 50 million people out of poverty within a decade. In Tanzania, the alliance is working to help 6.7 million people emerge from poverty. The alliance was launched to reaffirm the group’s commitment to supporting Africa’s development through agriculture, and was announced as the G8 members’ “next phase of our shared commitment to achieving global food”. This followed the commitment the group made in 2009 at the L’Aquila Summit in Italy, where it promised to “act with the scale and urgency needed to achieve sustainable global food security”. Since then, the countries have expanded their bilateral and multilateral investments in food security, and revised their approach to business, to ensure that aid delivers the maximum positive impact. The conception of the alliance also followed the successful implementation of the New Partnership for Africa’s Development’s (NEPAD) Comprehensive Africa Agriculture Development Programme (CAADP). NEPAD, an economic development programme of the African Union, developed CAADP as part of a drive to launch a ‘green revolution’ in Africa, and in recognition of the central role that agriculture plays in achieving broader, sustainable development.

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Building a stronger community Olam Tanzania began in 1994, as part of Olam International. Since then, we have established a significant presence in the country. Today, we manage an integrated supply chain for six key products – namely cotton, cashew, coffee, sesame and cocoa – and run a very large manual cashew-processing factory in Tanzania. In overseeing every stage of the supply chain from origination right to distribution, we are able to add value and manage risk across our operations, effectively delivering quality products to our customers worldwide.

Cashew business

Olam’s cashew-processing factory in Mtwara was set up in 2003, South Tanzania, and is currently into its 11th year of operations. Over the last decade, more than 100,000 MT of raw cashews have been processed locally and exported as ‘Produce of Tanzania’ to markets including the United States, the European Union, Australia and the Middle East. Olam in the Mtwara and Lindi region and its satellite units have nearly 3,500 workers – mostly daily workers who cut up to 72 MT of cashew nuts per day. Rural women make up 98 per cent of the total workforce. Their employment has led to a higher family income, thereby enabling them to support the education and primary healthcare of their children. This is an example of several small-scale processors making inroads into cashew processing, with entrepreneurs joining hands with Olam to expand the business. Workplace programmes have been put in place for factory workers and their families to give them improved access to

basic education and health services, as well as prevention, testing, treatment and care facilities related to HIV/AIDS, sexual and reproductive health, malaria and tuberculosis. Through the districtbased Community Health Funds, a basic health insurance is also offered to the workers, which has been put in place to build a stronger community.

More than 100,000 MT of raw cashews have been processed locally and exported as ‘Produce of Tanzania’ Various government dignitaries, private and non-profit organisations have hailed the investment Olam has made in processing in Tanzania.

AVIV arabica coffee farming

AVIV TZ Ltd is a subsidiary company of Olam, established in 2011 in Lepokela village, Songea district, Ruvuma region. In 2010, Olam identified 2000 ha of suitable agro-climatic land in Lipokela Village, Ruvuma Region, south-west Tanzania, where the business strategy has been to develop a green coffee project of arabica coffee for exportation. AVIV is developing its green coffee project to meet world-class standards by implementing global environmental and social standards. As per international standards, the environment around the project is being protected through the designation of 60 metres for a river buffer zone and 30 metres for the valleys, and

by maintaining the hills for biodiversity, such as flora and fauna. The project has made great socioeconomic changes in the neighbouring villages. Hundreds of people can now enjoy the benefits of a steady income thanks to the employment opportunities that have arisen in the area. In addition to job creation, the residents have also learnt a variety of new skills, which they have been utilising in their own farms. Improved surrounding infrastructure has made transportation more convenient, and a network of roads running through and around the farm now exists, thereby increasing accessibility and opening the area up for further settlement and development. The Right Honourable Prime Minister Peter Pinda inaugurated the coffee plant – the largest coffee project in Tanzania – on 8 August 2012. The Regional Commissioner of Ruvuma honoured the project head with the national flag badge for opening the large agricultural project with the involvement of locals.

Olam Tanzania Limited Plot 420, UN Road, Upanga, PO Box 71062, Dar es Salaam, Tanzania T: +255 22 215 3180 F: +255 22 215 3178 E: tanzania@olamnet.com W: olamonline.com

DOELAN YANN/GETTY IMAGES

INVESTMENT OPPORTUNITIES: AGRICULTURE

tea production in the SAGCOT as part of its efforts to work with the country’s government to reinvigorate the sector. It is hoped the investment will generate about £90 million ($153.49 million) in revenue for the country.

The alliance will provide support to increase the incomes of smallholders Other international developments include projects to introduce climatesmart agricultural techniques. The Food and Agriculture Organization of the United Nations is working with universities on cultivation techniques to reduce water usage and increase yields. It is hoped

Tending some of the more than 21 million cattle reared in the country, which is also home to around 15 million goats, six million sheep and 35 million chickens. Agriculture accounts for 70 per cent of rural household incomes

that, as well as being able to produce more food for themselves, farmers will then be able to sell the surplus. This series of developments aimed at driving up yields and productivity has, however, run into criticism, with some African civil society groups describing it as a “new wave of colonialism”. The critics claim that, in return for aid and investment, the Tanzanian Government has been pressurised to reform laws that will result in small-scale farmers being adversely affected while big business gains control of land and crops. There are also concerns that farmers in the SAGCOT region risk losing land to corporations, or that those contracted to produce for big companies will receive low profits. These groups believe that aid should support

local, sustainable food systems, as well as the sovereignty of African communities. Despite these concerns, the government says it is committed to implementing transparent policies that will increase stability and trade, as well as improve nutrition and food security. The New Alliance for Food Security and Nutrition has also pledged to review the performance of the sector annually to ensure that all public, private and international investment is contributing to a reduction in poverty and an increase in productivity. The Tanzanian Government and the alliance are hoping that the increased focus on agriculture will not only benefit the country in terms of GDP, but also provide it with the food it needs to support its population.

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Buried treasure: travels in Tanzania Stefanie Durbin examines what makes Tanzania a remarkable travel destination and the opportunities it brings for investors in the tourism industry

he tourism sector in Tanzania bears resemblance to buried treasure. The country has such a diverse and spectacular range of tourist offerings that reason argues it should be swamped with visitors, but many of the country’s tourism riches remain undiscovered by the general travelling public – not to mention foreign investors. This presents a unique opportunity for investors willing to make a medium-tolong-term commitment to the country’s tourism sector – one with a low-risk profile. The comparison to treasure is not entirely fanciful. Despite Tanzania’s relatively low ranking on world travellers’ itineraries, tourism is one of its fastestgrowing sectors. It is also one of the country’s principal collectors of foreign exchange, exceeding export of gold in this respect. Tourism’s contribution to GDP in 2011 was approximately 13 per cent, providing the second largest share. According to government figures, the sector is responsible for 32 per cent of all exports. It may as well be bullion.

Diverse attractions Although relatively unvisited, Tanzania is not uncharted territory by any means. In 2012, the New York Times placed it seventh out of 45 top global destinations.

Its wildlife alone attracts a niche group of adventure tourists to places including the Selous Game Reserve, Serengeti National Park and Ngorongoro Conservation Area. Indeed, in a contest sponsored by industry group SafariBookings in 2013, Tanzania was named Africa’s best safari country by tourists and experts. But the country has much more to offer tourists than the opportunity for a rendezvous in the savannah with zebras, wildebeest and elephants. A journey to Kilimanjaro National Park takes visitors to the highest peak in Africa – and just one of the country’s seven UNESCO World Heritage sites – while a trip to Ngorongoro Crater affords a glimpse of life on the world’s largest unbroken dry caldera. Diving and game fishing are popular and plentiful in Zanzibar, Mafia and Pemba, while opportunities to experience the country’s unique cultural heritage are on hand in visits to the Maasai boma and Hadzabe bushmen settlements. Those whose interests run to geology and archaeology will be richly rewarded by excursions to Kondoa’s Irangi Rock Paintings, Zanzibar’s Stone Town, and the ruins of Kilwa Kisiwani and Songo Mnara. For water lovers, the country’s Indian Ocean beaches are known for their unspoilt sand and pristine shores.

Tourists on safari in the Ngorongoro Conservation Area, a UNESCO World Heritage Site, which is home not just to lions and other animals, but also to the world’s largest volcanic crater and a high level of biodiversity

With such a guidebook-bursting array of attractions, the government has astutely designated tourism as a priority area for investment. To entice potential foreign investors into the sector, it has created a collection of tax incentives (see page 125). These include an exemption on duty for all capital goods and VAT. Imported four-wheel drive vehicles designed for tourist purposes are also exempt from import duty, as are engraved or imprinted and imported hotel equipment. Corporate tax is 30 per cent, with a 50 per cent capital allowance and 10 per cent withholding tax on interest and dividends. A final sweetener is that investors may carry losses forward indefinitely.

Investor friendly Yet a patient approach to investment in this sector is necessary, because prospects for long-term growth are probably stronger than those for the near term. In 2013, the travel and tourism sector was expected to garner capital investment worth TZS1.6 trillion ($981 million), with analysts from the World Travel and Tourism Council (WTTC) expecting investments to increase by 2.4 per cent in 2014, and thereafter until 2024 by 6.7 per cent each year, ultimately attaining TZS3.1 trillion ($1.9 billion). Most of this investment will come from the private sector; the organisation forecasts national investment in the sector to barely change at all over the period,

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INVESTMENT OPPORTUNITIES: TOURISM

Kilasiya Waterfall at Mount Kilimanjaro. The surrounding area has a cluster of international-standard hotels

The Ras Nungwi Lighthouse in Zanzibar is an example of Tanzaniaâ&#x20AC;&#x2122;s beautiful and secluded landscapes

Travel and Tourism Competitiveness Index 2013 Category

Rank (out of 140)

Score (out of 7)

Overall global ranking

109

3.46

Ranking in sub-Saharan Africa (out of 31)

3.46

Human, cultural and natural resources

4.0

Natural resources

5.9

Number of world heritage sites

4**

Total known species

1,590**

Purchasing power parity

0.3

Price competitiveness in the travel and tourism industry

4.8

Prevalence of foreign ownership

4.3

Business impact of rules on FDI

4.8

Improved visa procedures from 2010-12

126**

* Taking into account several World Heritage natural sites, protected land, rich fauna and a large number of species ** The number of sites/species/number of improvements Source: World Economic Forum

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increasing only slightly from 9.1 per cent in 2014 to 9.6 per cent in 2024. Tanzania expects to attract over one million international tourists this year, with that figure rising to 1.6 million by 2024. In addition, the WTTC forecasts these visitors to generate TZS5.1 trillion ($3.1 billion), representing growth of 6.2 per cent each year. The United Kingdom, United States, Italy and Germany make up Tanzaniaâ&#x20AC;&#x2122;s largest international source markets. To bolster the sector, government initiatives are focusing on attracting more visitors from these and other developed countries. The government has identified specific areas for investment and development, including the building and running of international-standard facilities such as hotels, lodges and guest houses; creating entertainment venues and camping areas; and encouraging tour operators to expand their operations. To give an indication of the potential for development in the country, Tanzania is more than twice the size of California yet has no more than 174 tourist-class hotels offering a little over 11,500 rooms.

INVESTMENT OPPORTUNITIES: TOURISM

Lazaro Nyalandu Minister for Natural Resources and Tourism Tourism is a key driver of growth in any economy, and in Tanzania we are keen to expand our tourism sector in a sustainable way, thereby ensuring long-term conservation of natural and cultural resources, and developing a culture of responsible tourism. To achieve this, we are working to develop appropriate policies. Tanzania has unparalleled experiences on offer. From Mount Kilimanjaro, the highest mountain in Africa – and a UNESCO World Heritage site – and the Ngorongoro crater to the Serengeti ecosystem, there is a wealth of tourist attractions. To better showcase Tanzania, ‘cultural excursions’ are being incorporated into traditional safaris, allowing tourists to experience Maasai, Hadzabe and Barabaig culture and ancient traditions. For the long term, we are focused on establishing Tanzania as a competitive tourism market. Over the past decade, we have witnessed a surge in tourist arrivals, and we are committed to building on this growth. In June, Tanzania signed an aviation pact with the Netherlands, which will increase the frequency of

Of all the country’s cities, Dar es Salaam is among the most saturated. There are only about 40 international-standard hotels here and these comprise mostly mid-range franchises such as the DoubleTree by Hilton, the Best Western Coral Beach and the JB Belmont – with the exception of the five-star Hyatt Regency Kilimanjaro Hotel. The tourist areas of Arusha and Kilimanjaro also have clusters of hotels. The Tanzanian Impala Group takes a large share of the Arusha market with a chain of four mostly business-oriented hotels and tourist-focused sister companies. The Kilimanjaro region’s 38 hotels and lodges cater mainly to tourist groups scaling or otherwise appreciating the iconic massif. Aside from these, the rest of the country is lacking international-standard hotels.

Potential locations The government is encouraging joint ventures in almost all areas of the country: Zanzibar, Dar es Salaam, Arusha, Mafia Island, Kilimanjaro, Selous and Serengeti, alongside many others, make the list of potential tourism-related investment locations. In some towns, the government is even offering to lease historical buildings to private operators. Hotel investment and development is being encouraged in

flights between our two countries, and we have identified China as a key emerging market for tourists and investors in the sector. With newly discovered oil resources, we expect a notable increase in the number of business travellers arriving in Tanzania in the coming years. In order to make use of this opportunity, as well as further our tourism innovations, we will be hosting the Africa Hotel Investment Forum in 2015. The forum is a remarkable opportunity for Tanzania to demonstrate its capabilities and attract significant tourism investment. In order for participants to experience Tanzanian tourism for themselves, we are organising at least one national park excursion during the forum. To build on our success so far, future years will see a focus on presenting a story of Tanzania that captures the unique appeal of our lands. It is my belief that we will move up international tourism rankings as we work to ensure that our burgeoning tourism sector becomes and remains globally competitive.

historical, cultural and archaeological sites, as well as at beaches and lakes. Despite the wealth of Tanzania’s natural offerings, most visitors appreciate and expect to be able to enjoy some form of entertainment besides safari trips, so investment in theme parks and casinos is also being encouraged. These niche areas are practically untapped in the country, so,

Tanzania expects to attract over one million international tourists this year in theory, the opportunity exists to open a Tanzanian version of Disneyland or Las Vegas – although most likely not on the same scale as the originals. Another type of investment is just as likely to be successful with the kind of tourists Tanzania attracts. The country’s extensive natural landscapes offer plenty of scope for adventure and sports tourism – for instance, deep-sea fishing and sailing – and extreme sports such as rock climbing and windsurfing.

Golf is another area that is particularly ripe for development. Tanzania only has two courses: the 18-hole Dar es Salaam Gymkhana Golf Club, and the Kilimanjaro Golf and Wildlife Estate, which opened in July this year. Tour operators for all sorts of activities are needed in the sector. According to the Tanzania Association of Tour Operators (TATO), of the 633 licensed tour operators registered with the association, 63 per cent are located in Kilimanjaro, Arusha and Manyara, while 30 per cent are located in Dar es Salaam – leaving the rest of the country wide open for investment and development.

Focus on sustainability It is clear that Tanzania’s tourism sector is fully open for business and development – providing it is sustainable. Although the government’s intent is to develop the tourism sector, it means to do so while preserving the natural areas that are at the heart of the industry’s potential. The terms ‘sustainable’ and ‘eco’ top the list of adjectives used by the government when it describes its approach to the development of the sector. Prospective investors would be wise to follow suit and make sustainability a key word in their approach and their business plans.

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INVESTMENT OPPORTUNITIES: RETAIL

Arriving next season Tanzania’s growing middle class is heightening demand throughout the retail sector, writes Stefanie Durbin

he demography of the retail sector in Tanzania is, in many respects, a microcosm of the larger picture beginning to unfold across most of sub-Saharan Africa: an emerging, youthful middle class of brand- and qualityconscious shoppers, displaying a pent-up demand for the kinds of consumer goods widely available in the developed world. But fruition is still a few years down the line. Right now, most consumers in Tanzania – with a population of more than 49 million – spend what disposable income they have on necessary items such as food and personal-hygiene products. Choice is limited, too, as the brands on offer are mostly local or African. While Tanzania’s shoppers are loyal to the known and trusted brands, they are also on the lookout for bargains, and these products must meet certain standards. Today, the vast majority of purchases are made at traditional, family-owned shops called dukas, as well as kiosks and outdoor markets. This is a country not yet engaged in the culture of the mall: there is only one large shopping centre in all of Tanzania – the Mlimani City in Dar es Salaam, which opened its doors in 2006. Therefore, investors in the country’s retail sector have the opportunity to get in early, making consumers aware of their products and winning loyalty for the future. And it is all about the future in Tanzania, given the median age is 17. Obstacles to bringing goods into the market do exist. Setting up supply chains

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can prove to be a struggle, owing to East Africa’s varying terrain, and successfully interpreting consumer preferences from what is essentially a blank sheet could be a game of try and try again. Helping matters somewhat is the fact that market saturation is low to non-existent. This makes up for a lot. As many retailers in Europe and the United States have discovered – to the detriment of their balance sheets – a mature and heavily saturated market can prove to be more difficult to navigate than an immature one, despite the numerous challenges, for example, managing logistics, and localising marketing and product design.

Intensifying growth A better understanding of Tanzanian consumers can be gained from a review of African consumer behaviour as a whole. Although current gross domestic product (GDP) per capita is low, at approximately $1,400, Africa’s middle and upper classes are growing quickly. A recent study by Deloitte showed that, during the past 30 years, Africa’s middle class tripled, with forecasts indicating that, by 2060, it will have ballooned to 1.1 billion. According to Deloitte’s findings, Africa now has the fastest-growing middle class in the world. The International Monetary Fund (IMF) has forecast GDP growth this year of six per cent for the continent – growth that is likely to intensify both consumers’ demand and their purchasing power. McKinsey & Company estimates that the

largest 18 cities in Africa will have total purchasing power of $1.3 trillion by 2030. And, in particular, East Africa’s population is expected to reach around 240 million by 2020, according to a report by the Society for International Development.

Logistical advantages This combination of background conditions – not just the swelling middle class and rising GDP, but also a trend towards urbanisation and a spike in population numbers – is a recipe to support rapid retail-sector growth. In this context, consultancy AT Kearney ranked Tanzania number four out of Africa’s top 10 sub-Saharan countries for retail development in its 2014 African Retail Development Index. The report highlights Tanzania’s size and its setting by the Indian Ocean coastline as logistical advantages for international retailers in search of a regional base.Indeed, the Port of Dar es Salaam processes 95 per cent of the country’s international sea trade, with most imports arriving by ship. However, the country’s deficient transport infrastructure has proven a stumbling block in the establishment of well-organised supply chains outside urban areas. According to the World Bank, the main drivers of Tanzania’s economy are financial services, manufacturing, construction, communications and retail. In 2012, the services sector logged annual growth of eight per cent, the highest rate of all the sectors.

INVESTMENT OPPORTUNITIES: RETAIL

A model presents a creation by Tanzanian fashion designer Mustafa Hassanali at Dakar Fashion Week. Designers are eager to make their mark in a fast-growing fashion industry that is facilitated by the world’s fastest-growing middle class

In a similar vein, analysts at Business Monitor International (BMI) make an optimistic assessment of growth in the country’s consumer sector. In a report on the food and drink industry, they point to Tanzania’s large population and positive economic outlook as factors that promise to make it one of the most auspicious opportunities for consumer companies in East Africa in the coming years. The analysis of the microeconomic picture in Tanzania supports this assertion. BMI found that, in local currency terms, per capita food consumption should increase by 9.6 per cent and overall food consumption by 13 per cent this year. Compound annual growth will reach 9.6 per cent and 12.8 per cent respectively between 2013 and 2018. The analyst also forecast an increase of 13.3 per cent for mass grocery retail sales in 2014, with compound annual growth of

13.1 per cent between 2013 and 2018. This certainly provides fertile ground for the arrival of new grocery retailers; currently, most are local players.

Making inroads A handful of multinational corporations (MNCs) have already taken the plunge into Tanzania’s retail sector, no doubt with their eyes on the prize awaiting them in about 10 years’ time. One of the first Western MNCs to invest in Tanzania/sub-Saharan Africa was US retail colossus Walmart. In 2011, it acquired a 51 per cent stake in South African wholesaler Massmart Holdings, and used it as a launching pad for its expansion into the sub-Saharan market. Massmart is a major retailer of general merchandise, food products, and home-improvement equipment and supplies, operating in 12 countries in sub-Saharan Africa. Massmart’s nine

wholesale and retail chains, along with its buying group, operate through four divisions: Masswarehouse, Massbuild, Massdiscounters and Masscash. Game FoodCo is located in the Mlimani City shopping centre and is Massmart’s Tanzanian retail outlet. Meanwhile, there are retailers based in South Africa and Kenya that are already doing business in Tanzania, including Shoprite, with three stores; Woolworths, which has one store; and Nakumatt supermarket chain, with four stores. These foreign retailers import most of their wares from countries such as Kenya, South Africa and Dubai, but there are some domestic consumer goods manufacturers and retailers operating from within Tanzania. These include ChemiCotex, which received investment from HSBC, Satya Capital and Satya Principal in 2011 in order to extend its reach into East Africa’s markets. ChemiCotex manufactures and retails brands such as Whitedent toothpaste – the market leader in Tanzania – as well as skin and haircare products such as Bannister’s glycerine and Bodyline Afro Gel. In addition, it has a food division that sells and markets Chemi-Cola and the Simba Chef range of cooking ingredients, and a stand-alone business-to-business division that focuses on the speciality metals and plastics market. Another Tanzanian company, Bakhresa Group, operates in Zanzibar, Rwanda, Burundi, Uganda, Kenya, Zambia, Malawi and Mozambique. Its Azam and UHAI brands include soft drinks, fruit juices, ice cream, bottled water, biscuits and dairy products. Bakhresa has plans to expand to even more countries in the near future. In the near future, a highly soughtafter segment of consumers will start to evolve throughout Tanzania: young shoppers, with increasing disposable income, who are looking for branded, high-quality products. Not only will they demand more variety, international brands and acculturated marketing, but they will also be willing to pay for the right products. At that point, it is likely the international retailers who got into the marketplace first, and understood it correctly, will be established and have the field more or less to themselves.

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HOW TO INVEST IN TANZANIA

Setting the foundation Emily Eastman explores the processes and incentives for investing in Tanzania

anzania is an emerging economy with high growth potential. In order to encourage further economic growth, create more employment opportunities and expand the countryâ&#x20AC;&#x2122;s export capacity, the Government of Tanzania has put in place a stable and predictable fiscal investment regime, and has developed a well-balanced and competitive package of incentives. Established under the Tanzania Investment Act, No 26 of 1997, Tanzania Investment Centre (TIC) is a government agency with a mandate to promote, coordinate and facilitate investment into Tanzania. Moreover, all government departments and agencies are legally required to cooperate fully with TIC in facilitating investment, while specialist advisors from a number of key government departments are available to provide technical advice. These include the Housing and Human Settlement Development; the Ministry of Lands; the Ministry of Labour and Employment; Tanzania Revenue Authority; the Ministry of Industries and Trade; the Business Registration and Licensing Authority; and the Immigration Department. TIC also offers a range of competitive fiscal and non-fiscal incentives for the investment community. As a signatory to several multilateral and bilateral

agreements, Tanzania guarantees foreign investments against nationalisation and expropriation. Tanzania is a member of both the Africa Trade Insurance Agency and the Multilateral Investment Guarantee Agency, which offer political risk insurance and credit enhancement guarantees.

Starting a business To register and benefit from TIC services, the intended project must have a capital value of at least $100,000 or $300,000 for local and foreign investors respectively. The investor also must have registered and incorporated a company in the country, and provide confirmation that the investor has opened a bank account in the country. A multitude of banks operate in Tanzania, including Standard Chartered, Barclays, Citibank and Standard Bank. The other documents that are required include a memorandum of association, proof of land to set the project, and board resolution. In order to start up a foreign company in Tanzania, firms must register with the Business Registrations and Licensing Agency, which issues certificates of compliance for foreign companies, certificates of incorporation for local companies, as well as certificates of registration for single proprietorship. Following this, firms must register their businesses with the Tanzania Revenue

Two women walk past the Bank of Tanzaniaâ&#x20AC;&#x2122;s head office in Dar es Salaam. In order to benefit from Tanzania Investment Centre services, investors must be able to show they have opened a bank account in the country

Authority, the National Social Security Fund, and, depending on the nature of their business, with the Ministry of Industry and Trade or the municipality.

Taxes and allowances TIC has designated certain sectors as lead and priority areas for investment. These include aviation; agriculture and livestock development; natural resources; tourism; manufacturing; petroleum and mining; real estate; transportation; services; information and communications technology (ICT); financial institutions; telecommunications; energy; human resources; economic infrastructure; microfinance; and broadcasting. Investors in these sectors are allowed import duty and VAT exemptions on their capital and deemed capital goods. All investors, regardless of nationality, must pay corporate income tax and submit Pay As You Earn (PAYE) returns to the government for the companyâ&#x20AC;&#x2122;s employees. The income tax rate for both resident and non-resident companies is 30 per cent. A reduced rate of 25 per cent is charged for three consecutive years to companies newly registered with the Dar es Salaam Stock Exchange when at least 30 per cent of equity is issued to the public. Tanzania is a member of the Southern African Development Community and the East African Community. Movement of goods within each trading bloc is duty free. Tanzania is also a beneficiary country under the trade enhancement schemes

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offered by the African Growth and Opportunity Act, which provides 6,500 products with duty- and quota-free access to the US market. Furthermore, import duty charged on imported inputs used for producing goods for foreign institutions, such as the UN, is refunded. Tanzania has signed double taxation treaties with Denmark, Finland, India, Italy, Canada, Norway, Sweden, South Africa, Uganda and Zambia.

Economic zones There are two schemes available for those wishing to invest in Tanzania’s economic zones: export processing zones (EPZs) and special economic zones (SEZs), both kinds being run by the Export Processing Zones Authority. To qualify for these schemes, the investment in question must be new. SEZs permit selling in the local market without restriction, and offer more liberal economic laws and fiscal incentives than anywhere else in Tanzania. EPZs facilitate the establishment of export-oriented investments within designated zones.

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Embarking goods and passengers in Kigoma. Government schemes such as export processing zones have been implemented in Tanzania, offering various incentives for investors geared towards export-focused industries

At least 80 per cent of goods produced in EPZs must be exported. Benefits available to enterprises operating in EPZs include: • exemption from exchange control; • corporation tax exemption for 10 years and a standard 30 per cent tax rate thereafter; • exemption from withholding tax on rent, dividends and interest for 10 years; • remission of customs duty, VAT and any other tax for goods used as raw material, equipment and machinery, or purchased in the EPZ; • exemption from paying all taxes and levies imposed by local government authorities for goods and services produced or purchased in the EPZ; • exemption from pre-shipment inspection requirements; • easing of temporary visa and work permit requirements;

• entitlement to an initial automatic immigration quota of up to five persons during the start-up period; • accessibility to high-quality infrastructure; and • on-site customs inspection of goods in lieu of off-port inspection. Investments into SEZs receive similar incentives, including exemption from certain taxes and relaxed visa rules.

Investment incentives Energy – Tanzania aims to retain a reasonable share of its natural gas resources for domestic application. Consequently, investment projects are selected based on whether they address the mutual interest of investors and the nation. Successful companies are then invited to negotiate a Production Sharing Agreement. Equipment and materials used

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HOW TO INVEST IN TANZANIA

for exploration are exempted from tax. Other costs concerning the exploration, development and production of oil and gas can be negotiated. Mining – Investments in this industry receive special treatment under the Tanzanian tax system, for example the entire expenditure incurred for the year, which includes both capital and revenue expenditure, is deducted when calculating taxable income and fuel, and all capital goods are relieved from VAT. Royalties are charged on a selection of products, including gold and diamonds. Agriculture – Investors are relieved from all capital goods, and enjoy 100 per cent capital allowance on any expenditure incurred on plant and machinery, which includes distribution equipment used solely for agriculture. Manufacturing – Factories that are registered to manufacture goods under bond for export purposes are exempted

A cheetah runs past a safari jeep in the Ngorongoro Conservation Area. Investments in four-wheel-drive vehicles destined for use in the tourism industry are among a number of items exempt from import tax

from import duty, as well as other taxes on inputs used to manufacture goods. Tourism – Investments on imported four-wheel-drive vehicles designed for tourist purposes are exempted from import duty, as are investments in any hotel equipment, as long as it is for use in the hotel and is engraved with the hotel’s logo.

Visa requirements There are currently five categories of visas granted to foreigners for entering Tanzania: • ordinary single-entry visas are granted upon application if the reason for travelling is legally recognised, and the period does not exceed three months; • transit visas are granted to foreigners intending to travel through Tanzania on the way to other destinations for a period

of less than 14 days, provided they hold an exit ticket and have sufficient funds for subsistence and an entry visa to the next country; • multiple entry visas are granted to those who seek to enter Tanzania and require frequent visits to the country. These may be issued for a period of three, six or 12 months, provided that a single stay does not exceed three months; • gratis visas are granted to holders of diplomatic or official-service passports when travelling to Tanzania on official business; and • referral visas are granted to nationals of countries that require special clearance and approval. Those wishing to reside in Tanzania for investment, business, employment or leisure may obtain a residence permit.

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INVESTMENT CASE STUDIES

Success stories Emily Eastman offers some examples of international companies that have had success investing in Tanzania

ISTOCK

Sichuan Hongda

In September 2011, Sichuan Hongda, a subsidiary of Hanlong Group – a Chinese conglomerate with holdings in industries that include solar energy, chemicals and mineral exploration – announced an agreement worth $3 billion with the Tanzanian Government to jointly develop coal and iron mining in the country. Sichuan Hongda holds an 80 per cent stake in joint venture company Tanzania China International Mineral Resources, with the government holding the balance.

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Sichuan Hongda’s Mchuchuma coal project in southwest Tanzania will help fuel a new steel mill

Sichuan Hongda’s technological advantage and financial capacity saw it secure the tender against 48 international competitors, according to NDC managing director Gideon Nasari. The tender comprises two projects: the Liganga project will be the secondlargest iron mining and smelting project in

Africa, while the Mchuchuma coal project will see coal dug from the Mchuchuma mine in south-western Tanzania that will fuel a 600 megawatts (MW) electricity plant to power a new steel mill, according to the NDC. Exploration works indicate that the two projects have coal and iron ore deposits that could be mined for more than 100 years. Located more than 900km from Dar es Salaam, the projects will rely on a railway line to reach the market, and will necessitate the strengthening of current power transmission lines, as well as the construction of new ones. After completion of an environmental impact assessment this year, the projects are expected to commence production in 2017-19. To minimise the disruption to local communities, the joint venture will design underground operations, and is working on compensation schemes for those affected during the start-up process. Lin Conglong, chairperson of Sichuan Hongda, expressed his pleasure at winning the trust of Tanzanians, and pledged to make the most of this opportunity in delivering benefits to Tanzania. The investment forms part of a growing trend that has seen Chinese investment into Tanzania increase significantly in recent years. In 2012, China replaced the United States as the fourth-largest investor in Tanzania, as total direct investment leapt from $700 million in 2011 to $2.1 billion in 2013. Now, China is the biggest foreign investor in Tanzania, and its interest in partnering with business in Africa endures.

INVESTMENT CASE STUDIES

AURECON GROUP

Aurecon

Engineering consultancy company Aurecon formed in 2009, when Africon, Connell Wagner and Ninham Shand announced the creation of a new global group driven by the companies’ combined experience across four continents. In Tanzania, Aurecon provides in-country design capacity via its head office in Dar es Salaam and its project offices located across the country. Aurecon’s headquarters are based in Australia, and it has 80 offices in 26 countries employing around 7,500 people across 11 industry groups. The company has been involved in a range of ventures in Tanzania, including civil, structural engineering and road projects. Its recent undertakings include improving the Singida-Katesh road, which was upgraded from gravel to bitumen standards to cope with the increased traffic flow and to plug the rising cost of routine maintenance. Chinese contractor Synohydro undertook the construction work, while the overall project was funded by the Government of Tanzania through a

Upgrading the Singida-Katesh road. Aurecon partnered with Chinese contractor Synohydro on the improvement works

loan from the African Development Bank. Aurecon provided supervision covering 65km of the road between the northern zone and the central Dodoma corridor. In addition, Aurecon was involved in developing the East African Community Transport Strategy and Regional Road Sector Development Programme, which guides regional policies and investments. Aurecon facilitated meetings, workshops and stakeholder consultations, and also undertook road condition surveys, policy and institutional review and assessed key transport performance areas. The results shaped the comprehensive programme. In the case of the Tuduma-LaelaSumbawanga road, Aurecon was the lead consultant for the design, and the environmental and social impact assessments, as well as preparing tender documents for upgrading the 230km stretch of road. Completed in 2009, the upgrade has since enabled the

more efficient transport of products, and helped to promote regional integration. Other areas in Tanzania the company has been involved in include providing technical assistance to the Road Fund Board; completing a number of road feasibility studies for the Tanzania National Roads Agency; upgrading SABMiller breweries; and completing civil and structural projects for AngloGold Ashanti and African Barrick Gold. Given its track record of work in Tanzania, Aurecon is well acquainted with local conditions in the country – knowledge that enables it to resolve country-specific issues and deliver a quality service to its clients. The company is committed to investing in the communities where it works, contributing to community development and implementing and upgrading infrastructure effectively to ensure connectivity in isolated areas.

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INVESTMENT CASE STUDIES

BART VAN WIJNGAARDEN

Bharti Airtel

Headquartered in New Delhi, India, Bharti Airtel – commonly known as Airtel – entered the Tanzanian market in October 2001, when it established its subsidiary company Airtel Tanzania to cater for the 27 million mobile phone subscribers in the country. The multinational telecoms services company now holds a 33 per cent share of the Tanzanian telecoms market. Working with the government through the Ministry of Education and Vocational Training, the company, as part of its corporate social responsibility programme, has launched a nationwide book campaign aiming to improve educational facilities and ensure that today’s youth become a well-equipped workforce. It has also partnered with non-profit organisation the Earth Institute. In efforts to meet targets of the United Nations’ Millenium Development Goals, the pair worked to provide telecoms services to remote villages in six countries, including Tanzania.

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As part of its corporate responsibility programme, telecoms services company Bharti Airtel has launched a book campaign in Tanzania aiming to improve educational facilities, equipping today’s youth as the workforce of the future

Tanzania has seen demand for mobile and data services steadily increase, and Airtel is working to meet these growing telecoms needs in the country. In October of last year, the company partnered with Tanzania Postal Bank to enable customers to access financial services through their mobile phones, while, in May this year, it aligned its business interests with Precision Air, allowing customers to purchase flight tickets using the Airtel Money service. In June, the company announced that it had entered into a partnership with Apple to make the iPhone 5s available to customers with a series of special bundle offers. The move makes Airtel the first telecoms company in Tanzania to officially clinch a deal with Apple on iPhones.

Further developments came in July, when the Tanzania Football Federation invited Airtel to support the U-20 national football team, which is mainly comprised of players drawn from the company’s Rising Stars programme. Open to girls and boys aged between 13 and 17 years old, the initiative provides a platform for young footballers to showcase their skills, and has enjoyed huge success across the 17 countries where it is established. A number of players have been chosen to play for local teams, and some have also made their national teams. Also in July, Airtel Tanzania launched a tourist pack enabling visitors to the country to make international calls at reduced rates – a move that has been welcomed by the Tourism Confederation of Tanzania.

INVESTMENT CASE STUDIES

PUMA ENERGY

Puma Energy

Puma Energy Tanzania employs 154 people directly, most of them Tanzanian, and a further 405 indirectly

Puma Energy Tanzania was established in September 2011 and is a subsidiary of global oil company Puma Energy International. The business, which is 50 per cent owned by the Tanzanian Government, took over BP’s 50 per cent interest that year, and has worked to improve the standard of lubricants and oil distribution in the country. Since 2011, Puma Energy Tanzania has grown its service network to a total of 31 retail sites throughout the country, providing fuels, lubricants and other oil products to key clients, particularly in the mining and transportation sectors. The company has increased bunkering services for oil and gas companies that operate offshore Tanzania, and the recent construction of two additional fuel-storage tanks at the Puma Energy Terminal in Dar es Salaam has increased storage capacity to well over 122,000 cubic metres. “We see Tanzania as a market with excellent growth potential,” says Philippe Corsaletti, general manager of Puma Energy Tanzania. “We aim to support the country’s economic development by providing world-class infrastructure, employment and a secure supply of affordable fuel.” Directly employing 154 people – most of whom are Tanzanian – Puma Energy

Fuel storage is among the services Puma Energy Tanzania offers its clients, and the company has recently added to its fuel-storage tanks at the Puma Energy Terminal in Dar es Salaam, increasing capacity to 122,000 cubic metres

Tanzania also employs a further 405 people indirectly. Its lubricant distributor is 100 per cent owned by Tanzania, and the company prides itself on local beneficiation, procuring services from local enterprises. It also supports the development of burgeoning industries, including tourism – the second highest earner of foreign exchange behind agriculture – by supplying seven of the country’s airports with fuel services. Puma Energy Tanzania has partnered with the Tanzanian Government and other stakeholders to improve road safety

standards in the country. In 2012, the company promoted the National Road Safety Week, targeted at increasing public awareness on road safety, and, in 2013, implemented the School Area Road Safety Assessments and Improvements initiative at primary schools in and around Dar es Salaam, reaching 3,000 students. Puma Energy Tanzania has also sponsored the Puma Energy Rally of Tanzania over the past three years, an event, organised by the Automobile Association of Tanzania, that attracts racing drivers from across Africa.

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Index of advertisers AECF – Africa Enterprise Challenge Fund................................................................ 104 African Barrick Gold ............................................................................................... 52 BMTL – Business Machines Tanzania Limited.............................................................10 BQ Contractors Limited........................................................................................... 71 CHAI BORA........................................................................................................... 63 DB Shapriya........................................................................................................... 70 DCB Commercial Bank Plc...................................................................................... 88 Dodsal Resources................................................................................................... 38 G4S........................................................................................................................ 2 GIZ .......................................................................................................................17 JUNACO (T) Ltd................................................................................................... 100 Kagera Sugar Limited.............................................................................................106 Kagera Tea Company Limited................................................................................. 108 Mokasi Medical Systems and Electronics Services Ltd with Philips.............................. 96 Mollel Electrical Contractors Limited........................................................................ 18 Motisun Group...................................................................................................... 128 Multi Cable Limited.................................................................................................61 Ndovu Resources Limited........................................................................................ 42 Nyanza Road Works Ltd........................................................................................... 68 Olam Tanzania Limited...........................................................................................110 Oman Oil Company S.A.O.C..................................................................................... 40 The People’s Bank of Zanzibar Limited...................................................................... 84 Pipe Industries Company Ltd................................................................................... 64 PTA Bank......................................................................................................... 8 & 87 Puma Energy.......................................................................................................... 48 PwC – PricewaterhouseCoopers Limited...................................................................... 6 SGS Tanzania Superintendence Co Ltd..................................................................... 12 Shanta Gold........................................................................................................... 50 SMEC International (Pty) Ltd................................................................................... 66 SNV Netherlands Development Organisation.............................................................. 56 Statoil....................................................................................................................15 Tanzanian Airports Authority.....................................................................................74 Vita Foam ............................................................................................................127 Wulkan Engineering Limited..................................................................................... 26

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An ISO 9001:2008 certified company Our brands

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Vita Supreme: a 28-density foam mattress with high resilience for comfort and durability.

Vita Spring: our Everflex (pocket springs) and Duraflex (bonnell springs) luxurious spring mattresses are available in all standard and customised sizes.

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HEAD OFFICE: 111B, Mwakalinga Road, Chanâ&#x20AC;&#x2122;gombe, behind Konyagi, P.O. Box 5686, Dar es Salaam, Tanzania. Tel: +255 222 865957/860955 Mob: +255 784 800610 Fax: +255 222 865231 Email: info@vitafoamtz.com Website: www.vitafoamtz.com

MWANZA FACTORY: Plot No. 45/46, Nyakato, Mwanza Mob: +225 784 800920 Email: info@vitafoamtz.com