Tanzania is attempting to rebuild its transport infrastructure following a series of floods that washed out roads and railroad tracks across the country. Ephraim Mrema, CEO of the Tanzania National Roads Agency (TANROADS), came under fire in April for failing to visit badly affected regions. Fellow employees and various politicians have accused Mrema of corruption and poor judgment, and said he lacks the qualifications to lead the agency. Some of this may be true, however, much also points to typical political manoeuvring during an election year. Meanwhile, officials say washed out rail lines leading up country from Dar es Salaam will be back up and running by late May. And Canada’s Mercator Transport Group opened an office at the Dar es Salaam port this month from which it plans to launch marine, air and road transportation services.
The East African Submarine Cable System (EASSY) landed in Dar es Salaam in early April. The fibre optic internet connection is expected to greatly increase bandwidth speeds and availability. However, as has been the case in neighbouring Kenya, arrival of the cable will not ensure immediate cost reductions or access for inland customers. It is expected that as East Africa hooks into several new undersea fibre cable systems, costs will come down over the next several years as pricing competition rises.
320,000 government workers had threatened to go on strike beginning 5 May to demand higher wages and better benefits. The Trade Union Congress of Tanzania (TUCTA) initially rejected pleas to avoid the strike, saying government promises to address wage disputes have not been honoured in the past. After heated exchanges and caustic public threats made by President Kikwete himself, TUCTA finally called off the strike - just one day before the country began hosting the World Economic Forum (WEF). The union says it will continue to negotiate with the government, although Kikwete has said full wage raises are off the table due to high government spending on economic stimulus packages. Commentators have noted that the president’s harsh response might dent his popular appeal going in to the October 2010 election.
* Public borrowing is expected to rise in Tanzania this year, according to the Economist Intelligence Unit (EIU), as the government continues with attempts to stimulate the economy without cutting expenditures and while facing poor revenues from slow growth and less donor support due to corruption scandals and the global crisis. The fiscal deficit for 2009/10 has been revised to 5.3% of GDP, up from 4.4% in 2008/09, and with 5% forecast for 2010/11. EIU analysts say the state may have trouble raising the capital it needs to meet its medium-term commitments, which could reduce economic opportunities.
* Tanzania will follow Uganda and Kenya in May by switching from the arithmetic to geometric method of inflation calculation, which aligns with international standards. The National Bureau of Statistics says inflation could fall by as much as 6%, given that the old method tends to overstate rates. However, recent heavy rains and flooding that destroyed crops in Tanzania mean food prices may remain high this year and continue to push inflation rates up. Inflation did drop to 9.6% in February 2010, down from the double digit rates of 2009.
South Africa’s Ranger Production Company won a SAR24m (USD3m) tender this month to supply 430 motorbike ambulances to the Tanzanian Health Department. The unique ambulances are outfitted with sidecars and meant to reach patients – such as women giving birth – in remote areas.
REGULATORY AND LEGAL CHANGES
The Tanzanian Parliament passed the long-awaited Mining Act 2010 on 23 April, after years of debate over how to reform the sector and improve relations between mining companies and locals. If it receives presidential approval, the new act will raise royalty rates from 3% to 4% for precious and base metals, from 5% to 6% for diamonds and gemstones, and apply a flat 7% rate to uranium and standard 3% rate for other minerals. Royalties will be calculated based on gross revenue.
The act also requires mining companies to list on the Dar es Salaam Stock Exchange, and provides for a government stake in all future mining projects. Foreign firms would no longer be able to receive gemstone mining licenses without taking a minority stake partnership with Tanzanians. And the government will set aside specific areas for artisanal miners who have complained of being overrun by large mining operations.
The Tanzania Chamber of Minerals and Energy, a private industry body, came out strongly against the act, asking President Kikwete not to sign it because the provisions fail to clarify the fiscal and regulatory frameworks needed to attract investment. The chamber also warned that the country’s gemstone industry could be derailed if licenses are restricted to local investors. Barrick Gold and Anglogold Ashanti, two of the largest companies already operating mines in Tanzania, said the new law would not affect their current agreements with the government, which guarantee fiscal stability. Tanzania is Africa’s third largest gold producer, following South Africa and Ghana.
* Canada’s Orca Exploration announced plans this month to raise natural gas production at Tanzania’s Songo Songo fields by 60% by 2012. The company is targeting 144m cubic feet per day in order to meet growing domestic demand for power as the country continues to suffer from chronic electricity shortages. Projects such as Artumas Group’s planned300 MW gas-to-power plant would require far more natural gas than is currently produced in Tanzania. Meanwhile, exploration company Aminex said this month that it should soon be able to go ahead with commercial gas development and expansion of its gas handling plant at Songo Songo.
* Norway’s Statoil transferred a 35% stake in its Tanzanian deep water exploration block to a local subsidiary of Exxon Mobile this month. Statoil says it is optimistic about developing the offshore acreage.
* Tullow Oil announced in early April that its drilling activities in Tanzania’s Ruvuma delta region have returned encouraging signs of oil and gas deposits. The Likonde-1 well encountered thick sands with hydrocarbon shows, although it had to be abandoned due to the presence of high pressured gas. The company plans to drill a second well after further tests.
* America’s Solar Energy Limited announced intentions this month to buy Peloton Mining, whose main asset is exploration and mining rights to an alluvial property in southeast Tanzania. The company has completed its due diligence and is in the process of raising USD3m in debt and equity to finance the site’s first alluvial production plant.
* Mantra Resources Ltd reported in late April the encouraging presence of multiple thick, high grade zones of sandstone-hosted uranium mineralisation at shallow depths at its Mkuju River Project in southern Tanzania. Mantra says it is aggressively pursuing its exploration activities in the country.
* Barrick Gold also announced this month that reverse circulation drilling at its Tulawaka gold mine in Tanzania has identified a new zone of gold mineralisation. Underground exploration has also identified extensions to high grad shoots that could point to further reserves and extend the life of Tulawaka beyond 2010. That would be relatively good news for Tanzanian gold production, which faces a steady decline in coming years from current mines and a lack of new investment commitments due to an unfavourable regulatory environment.
* Tanzania is one of several emerging market countries in which Vodafone will now roll out an Opera mini internet browser for low cost handsets on second generation – 2G – networks. Opera brings mobile data to basic handsets by compressing data to save bandwidth and processing power.
* And the Tanzanian government says it will pay USD6.8m in outstanding invoices and provide a guarantee to back loans as it moves to reclaim a 100% stake in the Tanzania Telecommunications Company Ltd, which has had trouble in recent years accessing credit and capital. The company is in the process of acquiring a 35% stake in Zain Tanzania, and is also one of two investors in the EASSY fibre optic cable and the only licensed operator connected to the SEACOM fibre cable in Tanzania.
* Tanzania’s Exim Bank has announced plans to open subsidiaries in Zambia and Djibouti in June 2010 as part of its regional expansion plan. Exim already operates in the Comoros. The bank posted a 20% increase in total assets and a pre-tax profit increase of 13% for 2009.
* Diamond Trust Bank also reported a rise in net profits for 2009, which hit USD2.8m up from USD2m in 2008.
* The Mwanga Rural Community Bank announced at its AGM in April projections for a 35% rise in customer deposits and a 16% increase in profits for 2010.
The African Development Bank (AfDB) signed two loan agreements with Tanzania in April, worth TZS322.5bn (USD230m). Most of the money will go toward constructing the Iringa to Dodoma and Tunduru to Namtumbo roads through the Road Sector Support Project over the next five years. The Mtwara port, Ministry of Communications and Transport, and the Dar-Kigali railway project will also get a small share. AfDB officials say the Tanzanian government must open a special compensation account to refund locals affected by these projects before the money can be disbursed. No other conditions were reported, despite Tanzania’s increasingly soured reputation for corrupt use of donor funds.
The third East African Community Investment Conference was held in Kampala in late April in hopes of promoting the EAC market as a single destination. A USD74bn joint investment programme to upgrade transport systems and boost power generation was presented at the conference. It remains unclear as to where the funding will come from to diffuse these infrastructural bottlenecks, although EAC officials continue to promote public-private partnerships. Other efforts are underway to increase regional integration as the full launch of the common market approaches in July 2010.
The EAC Secretariat commissioned a study this month on how to facilitate sharing of customs duties and other public revenues such as visa fees once goods and people entering the region will only have to pay at one entry point. This has been regarded warily by most members. However, the East African Business Council recently lauded efforts by member state revenue authorities to implement best practice customs union policies and improve border clearance times.
The executive director of Rwanda's Capital Markets Advisory Council also spoke in April about the need to harmonise the region’s stock exchanges, although this advancement remains a long way off.