April 29, 2000

BAD ECONOMIC POLICIES HAMPER TANZANIA’S COMPETITIVENESS IN COMESA – NGWENYA

TANZANIA’s tax structure, unreliable and expensive energy and water supplies, generally bad policies, and the lack of competitiveness in the economy have led to the country’s commodities failing to compete in the Common Market for Eastern and Southern Africa (COMESA).

Sindiso Ngwenya, the assistant secretary – general of COMESA, said import duties imposed on capital goods, as well as inconsistent energy and water supplies whose tariffs are inordinately high, will always bring about poor competitiveness for Tanzanian products.

Ngwenya said this in Dar es Salaam recently during a brief ceremony at which he handed two computers worth USD 2,500 over to the Tanzania Revenue Authority.

Manufactures in Tanzania have for a long time now been complaining over the country’s numerous taxes which make locally manufactured goods expensive and cannot, as such, effectively compete with the products of other COMESA member countries.

The tax regime in Tanzania has always been a burden to its citizens and industrialist.  The case of electricity tariff rates in the country, which are the highest in the whole of east, central and southern Africa, is a good illustration of this.

Power tariffs in Tanzania stand at USD 0.12 per unit; this is double the rate payable in Kenya.  In Uganda, the rate is only USD 0.05 per unit; while most of the countries in central and southern Africa have electricity tariffs below USD 0.05 per unit.

“In all SADC Countries (Southern Africa Development Community), and the east African region, Tanzanian’s electricity tariffs are the highest, (thus) affecting production in our industries, the agricultural sector and water…”, said Dr Abdallah Kigoda, Tanzanian’s minister for energy and minerals in his 1999/2000 budget speech to Parliament.

In a sudden change of note, Ngwenya expressed appreciation for Tanzania’s track record in external trade which, he said, “is running in the line faster than other in other COMESA countries”.

Ngwenya said Tanzania is ahead of most African countries in publishing its trade statistics which indicate whether trade is worsening or improving.  According to the Tanzania Revenue Authority (TRA), the country’s trade statistics have been up-dated to February this year.  Commenting on Tanzania’s move to pull out of COMESA, Ngwenya said: “Tanzania is practicing its democratic right.  We are currently quantifying the revenue loss to each country so that when we go to zero tariffs by this October, countries which have incurred a loss would be compensated.”

CONFLICTING LAWS HINDER INVESTMENT INFLOWS – SITTA

ABOUT 600 statutory provisions that are to be found in myriad legislation in Tanzania, coupled with personal – rather than national – interests, are said discourage and otherwise impede investment inflows, and bring despondency upon existing investors.

Speaking to Business Times at the Sheraton Dar es Salaam Hotel in the city recently, the executive director of Tanzania Investment Centre (TIC) Samuel Sitta, said that the provisions have led to numerous conflicting and controversial decisions.

The provisions are entrenched in the country’s tax regime, immigration procedures, land tenure and ownership, corporate legislation and other areas related to investment in Tanzania.

“There are about 600 legal provisions related to investment in the country,” Sitta said; “and the provisions must be repealed – or amended – if at all we’re to succeed in our struggle for more investments.”

Sitta, however, said the Investment Centre, together with the Government of Tanzania, are working on the controversial provisions.  “Hopefully, most – if not all – of the provisions will be amended or repealed before the end of this year”.

He also blasted Government officials with ulterior motives, who impend investment by frustrating prospective investors in the country.

“In fact, there’s no conflict between one institution and another; or between an institution and the government.  But it is officials of the government and some of its institutions who are creating big problems for investors” he lamented.

Added he: “We always reach decisions and agreement as institutions; but, when it comes to implementation, the opposite is the case.  So our big problem is not conflicting institutions, but personal attitudes among Government officials.”

Sitta insisted that some of the decisions made by the officials are clearly not in the public interest and, as such, weaken Government efforts to bring about economic development.

He recommended that Tanzania’s tax regime should be reviewed, and tax evasion curbed, so as to protect investors who invest heavily in manufacturing and other vulnerable sectors.

“These investors create employment, generate Government revenue, and bring in foreign exchange.  Yet, they’re still treated unfairly.  Is this environment friendly to investors?”  he wondered aloud.

Sitta also said the country’s poor infrastructure, excessive bureaucracy, high power tariffs and rampant tax evasion are major investment snags in Tanzania.

April 15, 2000

Bad policies Killing agriculture in Tanzania-EU

The lack of coherent and comprehensive agricultural policies, coupled with non- implementation of decisions arising out of at tempts to revamp agriculture in Tanzania, are said to greatly contribute to the poor performance of the sector in Tanzania.

The sudden shift from a socialist to a free market economy-, which, in turn, led to the withdrawal of subsidies in agriculture, is another reason behind the dwindling agricultural sector.

The Norwegian Minister for international development, Ann Kristin Sydnes, told Business Times in an interview that the country lacks good policies to make the agriculture sector perform better.

I don’t know about your agricultural; but you not performing better because good policies are not in place.  You must also have good governance of the sector-otherwise you won’t achieve much,” she added. 

Kristin Sydnes cited corruption as a major setback to development in all sectors, agriculture included.  “You’ve also to  strengthen your administrative machinery and physical infrastructures”.

Commenting on the same issue, the British Secretary of State for international development,  Clare Short, admitted that the lack of subsidies in agriculture contributes greatly to such poor performance.

“It’s true that we, in Europe, still offer massive subsidies to our farmers; but you can’t (do so here)  because you’ve not funds for that, Secretary short said, adding”. “You should develop your macro-economic policies so that you can pool funds for such (subsidies), and develop agriculture as a whole.”  Theo Robert van  Banning, Counselor Head of development cooperation in the Embassy of the Kingdom  of the Netherlands in Dar es Salaam, was of the opinion that the “monopolistic fiscal” policy approach adopted by Tanzania reduces the pace at which the agricultural sector should develop.

Said he: “Agriculture has to be dealt with in an inter-ministerial approach….you need the finance ministry for the financing process; industry and commerce for marketing strategies;  for logistics, etc.  Work strategically together-and not only the ministry responsible for agriculture going it alone.

Van Banning stressed the importance of good policy implementation, saying his country (smaller in size than Tanzania’s  Ruvuma region) has a coherent, unwieldy policy; and the commtment to its implementation has enabled his country to export foods worth USD 15 Billion (Tsh 12 trillion) each year.

For her part, Heidemarie Wieczorek-Zeul, the German Minister for economic cooperation and development, said effective social and structural services must be in place in order to support agriculture.

We currently support  such services (health,  water, structural and regulatory, because they will have a trickle – down effect upon agriculture in the near future, “she added.

The interim President of the Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA/), Elvis Musiba, noted that Tanzania’s existing land policy effects agriculture severely.

“The policy doesn’t attach monetary value to land and, as such, it is very difficult for farmers to secure loans using land as security.  So how can farmers invest in agriculture when they can not easily secure loans for it?  This effectively discourages private large scale farming,” remarked Musiba.  When giving a vote of thanks during an open forum involving international development ministers at the Karimjee Hall in the city last Monday, the minister for commerce and industry, Iddi Simba, admitted that the sudden  shift from a socialist economy to a free market one has had a severe impact on many intersectoral policies in Tanzania.

President Mkapa talks of ‘major tax changes’

The Government of Tanzania will rigorously review its tax structure, and scale down the numerous taxes burdening taxpayers in the next few months.

President Benjamin Mkapa told the confederation of Tanzania Industries (CTI) in Dar es Salaam last Friday that business licensing, the land laws, and complicated legal and regulatory bodies would be restructured to enable them to work well and speedily.  Deferred value-added tax on capital goods will also be examined in the coming budget.

The major changes in the tax system are aimed at deterring tax evasion.  The Government will also seriously deal with tax evasion regarding imported goods, and the dumping of sub-standard imports in Tanzania.

Saying that the Government would co-operate with business people to smoothen taxation, President Mkapa acknowledged that the business community has a big role to play in speeding up the country’s economic growth.  I need you to create jobs for our people; I need you to pay tax to the Government, and I need you to make our people prosperous, the president intoned.

The Government will continue to improve environment for free trade, while protecting the individual and national interests, he pledged.  He also said that unregulated free trade was worse than regulated controlled trade - as the country has experienced problems such as in crop marketing, agricultural input supplies and dumping.

The CTI chairman, Juma Mwapachu, praised the Government for striving to hasten the country’s economic growth through good policies.

April 8, 2000

Numerous taxes send fuel prices soaring

ALTHOUGH Petroleum producer prices have gone up lately – leading to price hikes for petrol, diesel, paraffin, industrial oil, etc, worldwide-it has nevertheless been learned that a rather high tax component in Tanzania’s price structure is largely responsible for the inordinately high fuel prices in the country.

Importers of petroleum in Tanzania have to pay 55 per cent of the FOB price as taxes imposed on the commodity.

By way of comparison, Kenyan importers pay only 30 per cent of FOB price as taxes imposed on the commodity.

By way of comparison,  Kenya importers pay only 30 per cent of FOB as taxes, thus  making fuel in that country cheaper.

When contacted on the matter, the Governor of the Bank of Uganda, Charles Nyonyintono Kikonyogo, was unwilling or unable to disclose the tax component on petroleum imports into  Uganda, saying only:  “Price hikes on fuel are a worldwide issue and, therefore, are beyond individual controls;  however, tax is a good source of government revenue!”

Fuel and oil dealers in Tanzania pay about half-a-dozen types of levies, including margins due to the Tanzania Petroleum Development Corporation (TPDC) and Tanzanian-Italian Petroleum Refinery (TIPER), energy and road tolls, import and excise duty and a windfall profit.

The taxes are the highest in East Africa and, more than anything else, increase the tax/prices burden upon consumers in Tanzania.

Asked by Business Times why Tanzania’s fuel prices are so much higher, Tanzania’s minister for energy and minerals, Dr. Abdullah Kigoda, had this to say:  “The difference between   us (Tanzania) and the other East African countries is basically due to the tax component.”

The tax regime in Tanzania has always been a burden to its citizens.  The case of electricity tariff rates in the country, which are the highest in the whole of East, Central and Southern Africa, are a good illustration of this. 

Tariffs in Tanzania stand at USD  0.12 per unit-which is double the rate payable in Kenya.  In Uganda, the rate is only USD  0.05 per unit.

Most of the countries in central and southern Africa have electricity tariff rates ranging below USD  0.05 per unit.

Dr Kigoda added that, al-though the price of oil has gone up worldwide, “in Kenya and Uganda the impact is not that much- as I said, it’s mainly due to the tax component”.

For what it is worth, the Tanzania Revenue Authority (TRA) was quoted as denying the fact that the  hiking of prices on petroleum products was due to taxes, saying that there  has been  no tax increase since last December!

Astonishingly, however, statistics given to a local ki-Swahili daily by Mugisha Kamugisha, TRA’s  research and policy director, recently  indicate that (for imported petrol and diesel respectively) 19 and 23 per cent is tax; 10 and 17 per cent is paid to Tanzania  Petroleum Development Corporation; while 17 and 16 percent is a tax approved by the National Assembly for Songo Songo  Gas Fund.  This makes a total of 46 and 56 per cent tax respectively on a litre of Petrol and diesel.

Local transporters have called for immediate Government intervention before things get out of hand. Saisal  Edha  of Edha Awadh and Company (who are fuel transporters) says that their  business  has started to decline because they are forced to increase transportation charges to cover price increases.

Upcountry bus fares have already shot up.

Between 1999 and March 2000 fuel prices in Tanzania  have been hiked eight times.  At the moment, a litre of petrol and diesel in Dar es Salaam (with Previous prices shown in brackets) sells at Tsh 565 (545) and Tsh 515 (495) respectively.

Dr.  Kigoda said although OPEC  countries have agreed to increase their  production quotas-thus leading to reduced producer prices-the adverse impact of prices will  still be  felt by Tanzanians because “the  consignment had already arrived”.

Jomy Jomallema, manager of external affairs for BP- Tanzania told Business Times that tax alone takes a large chunk of money from his company. “We are paying five types of fees, “he said.

On whether closure of the TIPER  (refinery) plant contributed to the price hikes, Dr. Kigoda said locally refined fuel was much more expensive then imported clean products.  “…therefore under a liberalized situation, locally refined products would have no competitive edge.”

On the issue of monitoring the petroleum sub-sector, the minister said interim regulations regarding the petroleum sub-sector give the minister power to monitor it; and give suggestions recommendations on it.

In this, he said, he is closely assisted by the fair trade practices commissioner even in controlling uncalled-for price tampering!

April 1, 2000

Few Tanzanians can yet access ‘phones