Editorial
Analysis
Govt shying away from
responsibility
The Bank of Baroda (BoB), which was re-launched last week in Tanzania after
37years of absence, is a leading nationalised Bank in India. The government of
India has the highest share-holding of more than 66 per cent in BoB.
Despite the government of India owning majority stake in the institution, the
Bank has a highly international profile second to none — the government of India
has major stake in ten big banks in the country. BoB has 2,700 branches across
the nation, has presence in all five continents with 63 branches spread in 18
countries all over the world. BoB is the only bank in India which has highest
overseas network compared to any other Indian bank.
The Bank also has a good balance sheet, and hasn’t incurred any losses since its
inception in 1908 nor has it been involved in any financial scum ever since.
In March this year, BoB balance sheet showed a profit of US$ 200 million (Tsh.
215 billion) and assets totalling US$ 16 billion (Tsh.17 trillion).
This is the Bank of Baroda where the government of India has 66 per cent share
after nationalisation. The Indian government steered BoB to prosperity.
Let’s come to Tanzania. After over three decades of nationalisation, the leading
bank created by the then government National Bank of Commerce (NBC), was on the
verge of going under in late 1990s.
To rescue the Bank from bankruptcy, which technically it was, NBC was split into
two —NBC (1997) Ltd. and NMB. And NBC was sold at a throwaway price of Tsh. 15
billion for a 70 per cent stake. Plans are underway to sell the remaining shares
to the public.
With years of socialism behind them, Tanzanians on the whole have been hostile
to privatisation, which immediately invited problems with the unions angry over
the privatisation of such a key “family jewel”.
An early exercise carried out at the end of 1998 ahead of putting in a bid for
the majority stake, showed NBC to be technically insolvent.
As for NMB, some Tanzanias still think the government should not privatise the
bank and instead hire a management team, which could make the poor-man Bank
profitable. Majority fear the poor, who lack loan access, would be further
sidelined.
Last parliamentary session of November passed the Privatisation Bill, which was
a roadmap for the divestiture of the poor-man’s bank. Earlier the Parliament
opposed the mode of privatised NMB, and allowed the government to sell its 49
per cent stake to strategic investor — preferably a consortium.
Masses suggested that NMB should not be privatised to a foreign strategic
investor but sold to local investors or some shares floated on the Dar es Salaam
Stock Exchange (DSE) with the government retaining the management responsibility
by hiring a management team. But all in all, Tanzania wants to sell NBC and NMB
shares and remain with very little stake. At the same time it wants to create an
Agriculture Bank and Development Bank. Why not reform NMB to be the Agro-Bank
and TIB the development bank?
If Tanzania is serious about fighting poverty, it’s time to borrow a leaf from
India and the way its government managed to retain majority stake in BoB and
still made it one of the top international banks. With 80 per cent of Tanzanian
population depending on agriculture, this is the sector in high need of credit.
Right time to invest in aviation
sector
Tanzania is endowed with a variety of natural resources, hence there are vast
areas of investment. Among the areas that have not been fully exploited are
agriculture and the aviation or transport sub-sector.
Heavy investment in aviation and air transport would speed up the economic
development of the country two-fold: first it will facilitate easy
transportation of tourists from abroad and second it will facilitate the
transportation of exports.
According to Aircraft Maintenance Engineers Association of Tanzania (AMEAT),
Tanzania has the best and most qualified staff in the field of aircraft
maintenance. This is a result of training that started since the era of East
African Airways. Recently, the Tanzania Investment Centre (TIC) made initiative
to woo investors to enter into partnership with the Tanzania Airports Authority
(TAA), which has several infrastructure and commercial facilities.
The authority still looks for partners to carry out a number of projects as
Tanzania was a gateway to Eastern and Central Africa. More important, according
to TIC, is the US$ 162.2 million Salama Waterfront project, which would be
an attraction to investors.
Heavy investment in the aviation industry will also encourage investors in
horticulture and floriculture, whose products are mainly exported hence reliable
air transport will be vital. The government has also established a land bank for
farm development whereby 386 parcels of land or 1.1 million hectares have been
identified as suitable for agriculture.
We believe with heavy investment in air transport and airports in the country,
more investors would come and invest in the aviation sector.
Analysis
Oil tax cuts only way to
control inflation
By Abduel Kenge
Since the Third Phase government came to power in 1995, it has been wanting to
bring down the inflation rate to four percent. At the time when the Mkapa
administration was sworn in, inflation stood at over 30 per cent.
During the first few years, with sound policies, the government managed to lower
the inflation to around 10 per cent and set a target of four per cent before
2000 — within the very five years of taking Tanzania’s top office.
Somehow the government through the Bank of Tanzania (BoT) managed to lower the
inflation to single digit. In 2003, inflation was reduced to the 4.5 per cent on
a year-to-year basis. The last time Tanzania experienced such a low inflation
per cent was in 1965 during sisal heyday.
But it seems the country’s effort to attain the lowest inflation rate this year
is a distant dream.
In May this year, with drought causing food shortage, the country yet again
experienced the highest inflation in four years of 6.5 per cent. Annual food
inflation came downwards from the highest level of 8.8 per cent recorded in May
2004 to 8.3 per cent in July.
But why should there be food shortage when Tanzania ranks third in Africa in
water resources? But let’s dwell on the positive aspect. Food supply is very
encouraging. This year’s harvest is above the national food requirement of 8.6
million tonnes, by about 400,000 tonnes.
At least the inflation which was being pushed by food shortage started to
descend. In July, inflation went down to 6.2 per cent.
But while the food situation has improved, the headline inflation pressure
now turns to oil. With the price of crude oil in world market reaching US$ 54 a
barrel, surely inflation in Tanzania would jump higher than that caused by food.
It’s obvious the country can do very little to control the world oil market. But
it can control the prices locally by subsidies or removal of some tax (es) to
halt price rise — thus controlling inflation.
The primary objective of the Bank of Tanzania is price stability. The Bank,
therefore, has the responsibility of ensuring that it establishes monetary
conditions that are consistent with low and stable inflation.
BoT could advise the government to temporarily shelve some tax(es) at this
juncture, for the next six months and borrow from forex reserve or by floating a
treasury bill or bond.
As we understand, for BoT, inflation control is not an end in itself, but rather
the means by which monetary policy contributes to overall economic performance.
Low inflation allows the economy to function more efficiently, thereby
contributing to a better overall economic performance.
So, there is no point in taxing the oil sector heavily while we all know the
consequences of double-digit inflation rate. Currently, the annually consumption
of oil stands at 1.4 billion litres.
Every litre of oil is taxed Tsh.330 that includes sales tax, VAT Road Fund and a
commission for Tanzania Petroleum Development Corporation (TPDC) for oil
development and research, to mention a few taxes imposed on fuel.
These heavy taxes on litre of oil, plus world prices, currently at over a US$ 50
per barrel, will push the pump prices for gasoline in Dar to Tsh. 1000 mark
before the year end.
Tanzania has 45 oil marketing companies bringing in fuel worth more than US$ 600
million (approx Tsh.650 billion) annually, which they distributed through
250-plus filling stations across the country.
The problem is petroleum is the largest single activity in Tanzania, being the
largest contributor to government revenue at over US$200 million (approx Tsh.
215 billion) per annum.
Should the government want to attain the four per cent inflation rate, it must
start behaving like an entrepreneur and cut costs to decrease the deficit in the
long run.
The Central Banks normally control inflation by controlling the growth of money
supply. The Bank of Tanzania targets broad money, M2, which is defined as
currency in circulation outside banks, and total deposits held by commercial
banks, excluding foreign currency deposits.
M2 is chosen because it is the monetary aggregate that is estimated to have
closest relationship with the rate of inflation. But how about temporary removal
of taxes and lend from the country reserve’s to offset the inflation?
ICT: A crosscutting tool for
development
By Timothy Kitundu
Tanzania, like any other developing country, urgently needs the utilisation of
Information and Communication Technology (ICT) as an important tool to attain
development, economic, social and political achievement.
The issue of ICT has not been restricted to e-Governance, democracy, higher
learning institutions but has penetrated to almost all sectors, not leaving
behind Non-governmental Organisations (NGOs) and Civil Society Organisations
(CBOs).
The role played by the government, NGOs, CBOs, as well as the private sector and
higher learning institutions is commendable. However, the process is sometimes
slowed down as most of the projects in ICT development rely on donor funding.
The government, CBOs and NGOs have been making concerted efforts towards the
development of this important tool. Development partners for their part have
also offered support in various areas to ensure this important tool is at least
utilised.
The whole initiative may have its roots from the African Information Society
Initiative (AISI). In pursuit of the overall objective of AISI, a workshop was
held in Dar es Salaam a few years back aimed at elaborating on the Information
and Communication Policy and plan for Tanzania.
The workshop brought together IC experts, senior government officials and the
private sector leaders. One of the objectives of the workshop was to secure
commitment of the government of Tanzania to the process of formulating a
national information and communication policy and plan.
Other objectives included setting up national mechanisms to assist in the
development, coordination and implementation of the plan, and to develop
strategies to resource mobilisation. All these were aimed at ensuring that
Tanzania embarks on the utilisation of ICT for its development.
Another equally important aspect is that in order to assist developing countries
in articulating their demands for ICT applications, the International Institute
for Communication and Development (IICD) facilitated national ICT Roundtables.
The roundtables focus on the identification, development and implementation of
an ICT policy and pilot projects. In Tanzania, the first National Roundtable was
held in the late 90s organised by the Tanzania Chamber of Commerce Industry and
Agriculture (TCCIA) with support from the Ministry of Communications and
transport.
So far, Tanzania has made considerable progress in ICT. The first Tanzanian
National ICT Policy was approved by the Cabinet in March last year. The putting
in place of the policy was a result of assistance provided by the IICD and the
economic commission for Africa. Also, Tanzania has taken a step to engender
public-private partnership through a group known as e-Think Tank which is an
informal association of people interested in ICT for Tanzania’s development.
The mission of the e-Think Tank is to offer ICT leadership by catalysing policy
changes and by supporting related developments aimed in enabling Tanzanians to
participate effectively in the modern based Internet-based global economy.
NGOs have not been left behind as they have also contributed to the development
of ICT in the country. Efforts to share knowledge on the applications of ICTs to
development in Tanzania have been boosted with the establishment of a local
networking initiative.
Following a retreat in 2003, steering committee members agreed to form a
non-governmental organisation called “Sharing With Other People Network” in
short SWOPNet. The activities of SWOPNet are not restricted in Dar es Salaam but
also embrace the Mwanza region.
Another important contribution in this regard is by AITEC Africa, the
continent’s leading organiser of ICT exhibitions and conferences have already
signed a partnership agreement with UK-based Charity computer Aid, to provide a
framework for cooperation between the two organisations.
Among others, the agreement covers the assistance through the donation of
low-cost refurbished PCs which are sourced in Europe through donations from
large companies upgrading to the very latest and most expensive PCs and who want
to make their older PCs available for re-use in schools and non-profits in
Africa.
According to AITEC, the low cost PCs included in the agreement do not undermine
the branded new PC market. On the contrary, stimulates the market by spreading
computer usage wider than would otherwise be the case.
These efforts are a good indication of how the various sectors in Tanzania have
recognised the importance of ICT use for development. However, most of the
projects initiated by the government, NGOs, CBOs, and the private sector rely on
donations. There are a number of examples that can be cited. One is the one that
Computer Aid has earmarked a total of between 15,000 to 20,000 refurbished PCs
to Africa as a means of spreading the use of ICT.
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