Contents TANzANIA – COuNTRy PROFILE 1

Tanzania –
Country Profile
Contents
1
Background 2
7
Energy Provision
8
2Population
2
8
Doing Business in Tanzania
8
2.1
2
8.1
Registration requirements
9
9
Country Risk Summary
10
9.1
Sovereign risk
10
Population figures
2.2
Population growth rate
2
2.3
Age structure (2012 estimates)
2
2.4
Gender ratios (2012 estimates)
2
2.5
Life expectancy (2012 estimates)
2
2.6
Ethnic groups
2
2.7Religion
2
2.8Languages
2
2.9Education
3
2.10Health
3
3Economy
3
3.1Overview
3
3.2
Latest Economic indicators
4
3.3
Five-year forecast summary
4
3.3
Annual trends
5
3.5
Natural resources
5
4
Government and Politics
6
4.1
Political structure
6
5
International Relations and Defence
6
6
Transport and Communications
7
6.1Railways
7
6.2Roads
7
6.3Ports
7
6.4
7
Air transport
6.5Telecommunications
9.2
Currency risk
10
9.3
Banking sector risk
10
9.4
Political risk
10
9.5
Economic structure risk
10
10 Country Outlook: 2012 – 2016 10
10.1 Political stability
10
10.2 Election watch
10
10.3 International relations
10
10.4 Policy trends
11
10.5 Economic growth
11
10.6Inflation
11
10.7 Exchange rates 11
10.8 External sector
11
A
11
Appendix one
7
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
1
1Background
2.6 Ethnic groups
The African population consists of more than 120 ethnic groups,
of which the Sukuma, Haya, Nyakyusa, Nyamwezi, and Chagga
have more than one million members. The majority of Tanzanians,
including such communities as the Hehe, Sukuma and the
Nyamwezi, are Bantu speaking groups. Groups of Nilotic or related
origin include the nomadic Maasai and the Luo (Kenya), both of
which are found in greater numbers in neighbouring Kenya. Two
small groups speak languages of the Khoisan family peculiar to the
Bushman and Khoikhoi peoples. Cushitic-speaking peoples, originally
from the Ethiopian highlands, reside in a few areas of Tanzania. Other
Bantu speaking were refugees from Mozambique.
Shortly after achieving
independence from Britain in
the early 1960s, Tanganyika and
Zanzibar merged to form the
nation of Tanzania in 1964. Oneparty rule ended in 1995 with the
first democratic elections held in
the country since the 1970s.
Zanzibar’s semi-autonomous
status and popular opposition
have led to two contentious
elections since 1995, which
the ruling party won despite
international observers’ claims of voting irregularities. The formation
of a government of national unity between Zanzibar’s two leading
parties succeeded in minimizing electoral tension in 2010.
Although much of Zanzibar’s African population came from the
mainland, one group known as Shirazis traces its origins to the
island’s early Persian settlers. Non-Africans residing on the mainland
and Zanzibar account for 1% of the total population. The Asian
community, including Hindus, Sikhs, Shi’a and Sunni Muslims,
Parsis and Goans, has declined by 50% in the past decade to
50,000 on the mainland and 4,000 on Zanzibar. An estimated
70,000 Arabs and 10,000 Europeans (90% of which are AngloAfrican) reside in Tanzania.
2Population
2.7Religion
Tanzania’s population has been estimated to consist of roughly onethird each Muslims, Christians and followers of indigenous religious
groups. The national census, however, has not asked for religious
affiliation since 1967 as the religious balance is seen as a sensitive
topic. Thus all figures on religious statistics for Tanzania are at best
educated guesswork and differ widely on the question whether there
are more Christians or Muslims. Most assume that the share of
traditionalists has dwindled.
2.1 Population figures
Tanzania has a population of 46 912 768 (July 2012 est).
Estimates for Tanzania explicitly take into account the effects of
excess mortality due to AIDS. This can result in lower life expectancy,
higher infant mortality, higher death rates, lower population growth
rates, and changes in the distribution of population by age and sex
than would otherwise be expected.
Population distribution in Tanzania is extremely uneven. Density
varies from one person per square kilometer in arid regions to 51 per
square kilometer in the mainland’s well-watered highlands to 134 per
square kilometer on Zanzibar. More than 80% of the population is
rural.
2.2 Population growth rate
1.96% (2012 est.)
2.3 Age structure (2012 estimates)
Total percentage
0 – 14 years
Male
Female
42%
9,003,152
8,949,061
15 – 64 years
55.1%
11,633,721
11,913,951
65 years and
over
2.9%
538,290
708,445
Source: CIA World Factbook
2.4 Gender ratios (2012 estimates)
Total Population
0.98 male / female
Under 15 years
1.01 male / female
15 – 64 years
0.98 male / female
65 years and over
0.75 male / female
The Christian population is mostly composed of Roman Catholics,
Protestants, Pentecostals, Seventh-day Adventists, members of the
Church of Jesus Christ of Latter-day Saints (Mormons), and members
of Jehovah’s Witnesses. Among Protestants the strong numbers of
Lutherans and Moravians point to the German past of the country,
the numbers of Anglicans to the British history of Tanganyika. All of
them have had some influence in varying degress from the Walokole
movement (East African Revival) which has also been fertile ground
for the spread of charismatic and Pentecostal groups.
On the mainland, Muslim communities are concentrated in coastal
areas, with some large Muslim minorities also in inland urban areas
especially and along the former caravan routes. Between 80 and 90
percent of the Muslim population is Sunni. The remainder consists of
several Shi’a subgroups, mostly of Asian descent.
There are also active communities of other religious groups, primarily
on the mainland, such as Buddhists, Hindus, and Baha’is.
2.8Languages
Generally, each ethnic group has its own language, but the national
language is Swahili, a Bantu language with a strong Arabic influence,
and more recently a large number of English borrowings. The
other official language is English. Other spoken languages are
Indian languages and Portuguese (both spoken by Mozambicans
and Goans).
Source: CIA World Factbook
2.5 Life expectancy (2012 estimates)
Total Population
53.14 years
Male
51.62 years
Female
54.7 years
Source: CIA World Factbook
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
2
2.9Education
The philosophy of “socialism and self-reliance” adopted by the
Tanzanian government in the 1960s placed a high value on the
provision of high-quality education, but it suffered badly during the
poor economic years of the 1980s and early 1990s. Since then
the education system has benefited from a return to free primary
education and facilities made available by a range of providers,
including communities, religious organisations and the private sector.
However, according to the Human Development Report 2007, 31%
of Tanzanian adults were illiterate in 2005.
Enrolment at primary level has risen from 59% in 2000/01 to 84%
in 2007, according to the Household Budget Survey. However, the
government has struggled to boost the number of teachers, which
has been increasing at a much lower rate.
Secondary education has lagged behind the progress made in
primary, but numbers have still risen, with net enrolment going
from five percent in 2000/01 to 15% in 2007. The fact that secondary
education is in English, whereas primary education is in Swahili,
makes the transition more difficult.
Enrolment in rural areas is lower than in urban areas, especially for
secondary school. This confirms statistics showing that illiteracy is
higher in rural areas. This trend is particularly noticeable among rural
women. The future looks brighter, though, and as more children are
going to school the debate is increasingly shifting from quantity to
quality of education.
3Economy
3.1Overview
Tanzania is one of the world’s poorest economies in terms of per
capita income, however, Tanzania averaged 7% GDP growth per year
between 2000 and 2008 on strong gold production and tourism. The
economy depends heavily on agriculture, which accounts for more
than one-quarter of GDP, provides 85% of exports, and employs
about 80% of the work force.
The World Bank, the IMF, and bilateral donors have provided funds
to rehabilitate Tanzania’s aging economic infrastructure, including
rail and port infrastructure that are important trade links for inland
countries.
Recent banking reforms have helped increase private-sector growth
and investment, and the government has increased spending on
agriculture to 7% of its budget. Continued donor assistance and solid
macroeconomic policies supported a positive growth rate, despite
the world recession.
In 2008, Tanzania received the world’s largest Millennium Challenge
Compact grant, worth US$698 million. Dar es Salaam used fiscal
stimulus and loosened monetary policy to ease the impact of the
global recession. GDP growth in 2009-11 was a respectable 6% per
year due to high gold prices and increased production.
2.10Health
There are six levels of healthcare in Tanzania, from village health
posts through to district, regional and referral hospitals. Even in rural
areas, more than 90 per cent of people live within 10 kilometers of a
basic clinic. While access is not such a problem, waiting times, lack of
medicine and high costs are.
Approximately one in eight Tanzanian children die before their fifth
birthday. Inadequate immunisation, poor nutrition and unsafe drinking
water make children vulnerable to diseases such as measles,
dysentery, cholera and tuberculosis.
Malaria remains one of the nation’s biggest killers, however HIV
has spread rapidly, leaving a trail of people widowed and children
orphaned by AIDS. Among the poor, who cannot afford extra
healthcare or absorb income losses, the effects of the disease
are even greater.
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
3
3.2 Latest Economic indicators
2010
3 Qtr
Central government finance (TSh bn)
Revenue
Expenditure
Balance
Prices
Consumer prices (2000=100)
Consumer prices (% change, year on year)
Financial indicators
Exchange rate TSh:US$ (av)
Exchange rate TSh:US$ (end-period)
Deposit rate (av; %)
Discount rate (end-period; %)
Lending rate (av; %)
Treasury-bill rate (av; %)
M1 (end-period; TSh bn)
M1 (% change, year on year)
M2 (end-period; TSh bn)
M2 (% change, year on year)
Foreign trade (TSh bn)
Exports fob
Imports cif
Trade balance
2011
4 Qtr
1 Qtr
2 Qtr
2012
3 Qtr
4 Qtr
1 Qtr
2 Qtr
1,512.5
1,980.7
-468.2
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
150.7
6
151.9
5.1
160.2
7.3
165.9
9.7
172.8
14.7
180.6
19
191.2
19.4
195.9
18.1
1,444.9
1,483.8
6.55
7.58
14.39
3.27
4,456.9
22.8
5,891.9
22.4
1,483.3
1,455.2
6.14
7.58
14.57
4.87
4,715.5
20.2
6,297.1
29.7
1,500.0
1,488.9
6.22
7.58
14.86
5.7
5,001.1
23.1
6,233.0
24.3
1,530.1
1,582.4
6.05
7.58
15.23
3.97
4,927.2
18.1
8,698.7
54.6
1,609.3
1,623.1
7.01
7.58
15.4
4.73
5,186.5
16.4
9,115.4
54.7
1,649.0
1,571.7
7.83
12
14.37
11.08
5,572.0
18.2
9,247.9
46.9
1,556.3
1,575.0
8.73
12
15.28
12.72
5,711.4
14.2
9,381.2
50.5
1,579.5
1,572.0
8.86
12
15.2
n/a
n/a
n/a
n/a
n/a
1,457.5
-2,842.7
-1,385.2
1,681.0
-3,207.5
-1,526.5
1,689.3
-3,171.1
-1,481.8
1,508.1
-3,890.0
-2,381.9
1,874.9
-4,791.2
-2,916.3
1,916.7
-5,207.0
-3,290.2
n/a
n/a
n/a
n/a
n/a
n/a
Source: Economist Intelligence Unit
3.3 Five-year forecast summary
(% unless otherwise indicated)
Real GDP growth
Consumer prices (av, 2000=100)
Consumer price inflation (end-period)
Lending interest rate (av)
Government balance (% of GDP)
Exports of goods fob (US$ m)
Imports of goods fob (US$ m)
Current-account balance (US$ m)
Current-account balance (% of GDP)
External debt (year-end; US$ bn)
Exchange rate TSh:US$ (av)
Exchange rate TSh:¥100 (av)
Exchange rate TSh:€ (end-period)
Exchange rate TSh:SDR (end-period)
2011 (a)
6.4
12.7
19.7
16.7
-6.9
5,433
-8,650
-2,297
-9
9.2
1,574
1,973
2,145
2,546
2012 (b)
6.9
12.2
9
15.7
-6.1
5,569
-8,851
-2,437
-8.1
10
1,612
2,086
2,026
2,484
2013 (b)
7.1
7.6
7.2
15.1
-5.5
4,678
-9,008
-3,227
-9.9
11.1
1,715
2,131
2,203
2,720
2014 (b)
7.3
7.2
7
14.2
-5.1
3,975
-9,441
-4,134
-11.6
12.3
1,803
2,226
2,247
2,747
2015 (b)
7.1
7.1
7.5
14.1
-4.8
4,077
-9,896
-4,231
-11
13.7
1,914
2,335
2,513
3,052
2016 (b)
7.2
6.6
6.5
13.6
-5.1
4,796
-10,374
-3,891
-9.3
15.1
2,009
2,421
2,536
3,063
a) Actual; b) Economist Intelligence Unit estimates
Source: Economist Intelligence Unit
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
4
3.3 Annual trends
Read GDP growth (% change)
Main destination of exports, 2011 (share of total)
Main origins of imports, 2011 (share of total)
Consumer price inflation (av %)
Source: Economist Intelligence Unit
Budget balance, % GDP
3.5 Natural resources
Tanzania has large commercially exploitable deposits of a range of
minerals including gold, diamonds and various gemstones, notably
tanzanite, a blue gemstone unique to the country.
Production of gold (which accounted for 44% of the value of exports
in 2007) and diamonds has been climbing steeply since the late
1990s. Uranium deposits were found near the Malawian border
in 2007, and some coal is already mined in this part of the country.
In recent years substantial nickel deposits have been found, and
exploratory drilling has indicated that platinum deposits may exist in
commercially exploitable quantities.
Trade balance, % GDP
There are large proven reserves of natural gas in Tanzania and
prospects for oil discovery are promising, with a number of searches
at advanced stages. The country’s 12 national parks and 15 game
reserves are heavily stocked with a wide range of flora and fauna.
However, with the exception of the “northern circuit” of game
parks near the Kenyan border, they remain underexploited. There is
considerable potential for development: the Ngorogoro Conservation
Area, the Serengeti National Park and the Selous Game Reserve are
designated UNESCO world heritage sites.
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
5
4Government and Politics
4.1 Political structure
Official name
United Republic of Tanzania.
Form of state
Republic, formed by the 1964 union of Tanganyika and Zanzibar.
• Labour, Employment and Youth Development: Gaudensia Kabaka
• Lands, Housing and Human Settlements Development:
Anna Tibaijuka
• Natural Resources and Tourism: Khamis Kagasheki
• Transport: Harrison Mwakyembe
• Without portfolio: Mark Mwandosya
• Central Bank Governor: Benno Ndulu
Legal system
Based on English common law, the 1977 union and 1985 Zanzibar
constitutions, as amended.
International organization participation
• ACP
• AfDB
• AU
• EAC
• EADB
• FAO
National legislature
National Assembly, comprising 295 members (232 directly elected
on the mainland; five delegates from the Zanzibar parliament; the
rest appointed); Zanzibar’s House of Representatives (59 members,
including nine women appointees) legislates on internal matters.
• IAEA
• IBRD
• ICAO
• ICRM
• IDA
• IFAD
• IFC
• IFRCS
• ILO
• IMF
• IMO
• IMSO
National elections
Mainland legislative and presidential elections were last held in
October 2010. Zanzibar presidency and House of Representatives
elections were last held in October 2010. The next elections
scheduled for October 2015.
• Interpol
• IOC
• IOM
• IPU
• ISO
• ITSO
• ITU
• ITUC
• MIGA
• MONUSCO
• NAM
• OPCW
• SADC
• UN
• UNAMID
• UNCTAD
• UNESCO
• UNHCR
National government
The President, Vice-President and Council of Ministers.
• UNIDO
• UNIFIL
• UNMIS
• UNOCI
• UNWTO
• UPU
Main political parties
• Chama Cha Mapinduzi (CCM)
• WCO
• WFTU
• WHO
• WIPO
• WMO
• WTO
Head of State
The Head of State is the President, elected by universal adult
suffrage every five years.
• Civic United Front (CUF)
• National Convention for Construction and Reform
(NCCR-Mageuzi)
• United Democratic Party (UDP)
• Chama Cha Demokrasia na Maendeleo (Chadema)
• Tanzania Labour Party (TLP)
Key ministers
• President: Jakaya Kikwete
• Vice-President: Mohamed Ghalib Bilal
• President of Zanzibar: Ali Mohamed Shein
• Prime Minister: Mizengo Pinda
• Agriculture, Food Security and Co-operatives:
Jumanne Maghembe
• Community Development, Gender and Children: Sophia Simba
• Defence and National Service: Shamsi Vuai Nahodha
• East African Co-operation Affairs: Samuel Sitta
• Education: Shukuru Kawambwa
• Energy and Mineral Resources: Sospeter Muhongo
• Finance: William Mgimwa
• Foreign Affairs and International Co-operation: Bernard Membe
• Health and Social Welfare: Hussein Mwinyi
5International Relations
and Defence
Donors’ warmth towards Tanzania is cooling. Traditionally, Tanzania
has had especially warm relations with the Scandinavian countries
and China, all of which gave considerable economic assistance in the
1960s and 1970s. The former colonial powers, the UK and Germany,
also maintain high diplomatic profiles in Tanzania.
Since it enacted tough economic reforms in the 1990s, Tanzania
has become a favourite of a wider range of donors including Japan
and the US, and donors have contributed between 40-50% of the
government budget annually. However, the high-profile corruption
scandals in 2008 led to a wavering of donor support. For the moment,
it appears that donors remain committed to the country owing to
Tanzania’s political stability and the action the government has taken
against corruption, which has placated donor concerns so far.
East African regional integration is progressing slowly. Tanzania’s
principal regional partners are Kenya and Uganda, although
relations with these two countries have not always been easy.
Ties have steadily improved since the early 1990s and the three
countries revived the East African Community (EAC), leading to the
establishment of a customs union in 2005. Under this a common
external tariff has been established, and trade between the three
countries will be progressively liberalised over six years. Rwanda and
Burundi officially became members in June 2007, expanding the bloc.
• Home Affairs including Public Safety: Emmanuel Nchimbi
• Industry, Trade and Marketing: Abdallah Kigoda
• Justice and Constitutional Affairs: Celina Kombani
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
6
In Tanzania there is some scepticism around the EAC customs union,
and Mr. Kikwete’s administration has sometimes adopted policies
that appeal to economic nationalists, for instance making it harder for
foreigners to get work permits, which appeals to Tanzanians fearful
of Kenya’s economic power. In October 2008, representatives from
three trading blocks – the EAC, the Common Market for East and
Southern Africa (Comesa), and the Southern Africa Development
Community (SADC) – agreed to work towards the formation of a
single trade group. However this is a distant prospect and the focus
remains on improving the efficiency of the EAC.
Armed forces help Mr. Kikwete’s growing international profile. The
Tanzania People’s Defence Force has been formally depoliticised
since the end of single-party rule. However, it still remains a major
political force, albeit with a low profile, with strong links between
senior officers and the ruling CCM.
As a former foreign minister, Mr. Kikwete has been keen to adopt
a higher international profile than previous Tanzanian presidents.
Following his assumption of the presidency of the African Union
(AU), the Tanzanian government led the AU force that invaded the
Comoros island of Anjouan. This high international profile is not
without problems, as it has led to claims that Mr. Kikwete is not
focusing sufficiently on Tanzania’s domestic problems. The president
has argued that foreign visits are instrumental in attracting crucial
foreign direct investment and aid.
6Transport and
Communications
The concentration of the population along the east coast and
northern border, in such a vast country, poses enormous problems
in terms of communications and transport, and such difficulties
have been exacerbated by chronic underinvestment in the country’s
infrastructure.
The poor transport and energy infrastructure are key constraints on
higher economic growth; hindering companies operating in Tanzania
and discouraging others from investing. This has been recognised
and, with the help of donor funds, the government has sharply
increased expenditure on the country’s infrastructure in recent years.
The government is also looking into the possibility of issuing
a sovereign bond to fund infrastructure projects, which looks
increasingly unlikely to take place in the current tight financial
climate. Results from increased investment will only be visible in the
medium term, and in the meantime the dilapidated infrastructure
continues to limit economic activity. Estimates suggest that it is
currently twice as expensive to move materials from Dar es Salaam
to Mwanza as it is to move materials from China to Dar es Salaam.
6.1Railways
Tanzania’s railways are in poor condition, with cancellations common,
minimal safety, and slow journey times. The country has two railway
systems. First, there is a 2,600-km line linking Dar es Salaam with
the central and northern regions, which is operated by the Tanzania
Railways Corporation (TRC). Rites Consortium, an Indian firm,
won the concession to operate TRC (now to be known as Tanzania
Railways) in 2007, with the government keeping a 49% stake.
The second railway system is 1,860-km of Chinese-built track linking
Dar es Salaam with the copper belt of Kapiri Mposhi in Zambia. This
is operated by a joint Tanzanian and Zambian company, Tazara. The
unreliability and resultant high cost of transporting goods by railway
is highlighted by the decision of most companies to move goods by
road.
6.2Roads
Tanzania’s roads are in a similarly poor state to the rest of the
transport infrastructure but suffer even more from overuse.
Investment is required for both upgrading and maintenance of
existing roads, and an integrated roads programme, which aims to
upgrade 70% of the country’s 10,300 km of main roads and build
around 3,000 km of new main roads, is under way.
Connections between Namanga, Arusha, Moshi and Himo, and
between Dar es Salaam and Morogoro, are relatively reasonable but
require improvements to accommodate the large increases in traffic
in recent years. Among the larger projects currently under way is the
US$10m expansion of the Kilwa road that is expected to significantly
improve transport services in the south of the country.
6.3Ports
Tanzania relies on an overburdened, inefficient port in Dar es Salaam
for around 75% of its overseas trade, and has other large harbours at
Mtwara, Tanga and Zanzibar.
Some efforts have been made to relieve the chronic congestion
at the Dar es Salaam port, but it remains clogged following much
higher than planned for increases in activity in recent years. In 2008
it took an average of 23 days to transit goods through the port, not
including the amount of time that ships spend queuing to enter. The
government has set a target of reducing this to ten days (compared
with a current turnaround time of three and a half days in India and
ten hours in Hong Kong), but has given no timeframe within which it
hopes to achieve this.
It is estimated that Dar es Salaam loses 30% of its transit cargo
business from Rwanda, Burundi, the Democratic Republic of Congo
(DRC) and Zambia to other ports in the region, particularly Mombasa
in Kenya. Finding a solution to the overburdened port will be crucial
if Tanzania is to compete as a hub serving the 250m consumers that
the East African Community will contain by 2025.
6.4 Air transport
Tanzania has three international airports – Dar es Salaam, Kilimanjaro
and Zanzibar – and 21 main aerodromes.
Following the removal of the monopoly held by the national airline,
Air Tanzania Corporation (ATC), on domestic flights in 1992, the
number of carriers has grown in recent years. The leading privatesector airlines include Precision Air (part-owned by Kenya Airways),
Coastal, ZanAir and Regional Air Services. ATC is still the biggest
carrier of passengers but has suffered persistent financial difficulties
and was re-launched in 2007 with a plan to comply with International
Air Transport Association (IATA) regulations, including e-ticketing.
International traffic has further diversified in recent years, with new
international flights to Lusaka, Doha, and Johannesburg.
However, despite these developments the total number of
international flights landing and leaving from Dar es Salaam and
Kilimanjaro airports fell in 2006, after both Oman Air and Yemenia
ceased operations.
6.5Telecommunications
Tanzania’s economy has been showing solid growth rates of
between 5% and 8% every year since 2000 which remained virtually
unharmed by the global economic crisis. For the period 2012-2016,
the International Monetary Fund predicts GDP growth at between
6% and 8% per annum.
Mining and tourism are main industry sectors. However, the country
continues to suffer from underdeveloped infrastructure, including
roads, railways, electricity and telecommunications.
The government has actively embraced the principles of competition
and a private sector including foreign participation as a means of
rapidly advancing economic and social development. Policy reforms
have led to the telecom sector becoming one of the more liberal
ones in Africa. However, high import tariffs on telecoms equipment
and taxes on telephone facilities by various authorities are still placing
a burden on investors and operators.
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entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
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7
Tanzania has two fixed-line operators (TTCL and Zantel) and eight
operational mobile networks, with four additional players licensed
under a new converged regulatory regime. With four major operators
– Vodacom, Bharti Airtel (formerly Zain), Tigo and Zantel – the mobile
market broke the 50% penetration barrier at the end of 2010, but
subscriber growth slowed to 20%. The year was characterised by
a price war which inflicted heavy subscriber losses on the smaller
operators in 2011.
The new converged licensing regime has brought a large number
of new players into the market. The liberalisation of voice over
internet protocol (VoIP) telephony as well as the introduction of third
generation (3G) mobile services and wireless broadband networks
is boosting the internet sector which has been hampered by the low
level of development of the traditional fixed-line network.
Following the launch of 3G mobile broadband services, the mobile
networks are becoming the country’s leading internet service
providers on the back of their extensive national infrastructure and
existing subscriber bases in the voice market. The additional revenue
from data services is badly needed in an almost entirely prepaid
environment with rapidly falling voice ARPU. Another new income
source is mobile money transfer and m-banking.
The landing of the first fibre optic international submarine cables
in the country in 2009 and 2010 has revolutionised the market
which up to that point completely depended on expensive satellite
connections. In parallel, the government has switched on the first
phase of a national fibre backbone network to connect population
centres around the country. However, the cost of international
internet bandwidth has so far not come down by as much and not as
quickly as expected.
7Energy Provision
Around 90% of Tanzania’s energy needs are met by biomass,
particularly woodfuel. Petroleum and electricity account for nine
percent of energy consumption, and coal and other sources for less
than one percent.
The low use of commercial energy sources indicates that many
economic activities are carried out using traditional, low-energy
technologies. This is particularly the case in rural areas, where
transport difficulties and inefficient agricultural methods are the
norm. Tanzania’s coal reserves are estimated at 1.2bn tonnes, located
mainly in the southern and western parts of the country. Production
at the Kiwira and Ilima coal mines in Mbeya. Production has risen to
over 100,000 tonnes/year since 2001, but varies from year to year.
In recent years, Tanzania’s electricity supply has been erratic for two
reasons: the reliance on hydroelectric power, which is dependent on
rainfall; and increased demand, which has been rising much faster
than expected.
Poor rainfall lowers water levels in dams that generate
hydroelectricity, lowering electricity output. There were power
cuts 12 hours per day, six days per week for a few months in 2006
following a drought in 2005. The second main factor behind power
shortages is high economic growth, which has increased demand for
electricity faster than previously forecast. At the same time, energy
infrastructure has deteriorated and been subject to vandalism.
Moreover, recent projects have had heavy cost implications for the
Tanzania Electric Supply Company (Tanesco), limiting the company’s
ability to invest to meet further demand, unless it can increase its
own revenue streams.
8Doing Business in
Tanzania
The Government of Tanzania (GOT) generally has a favourable attitude
toward foreign direct investment (FDI) and has had considerable
success in attracting FDI. However, the legacy of statism has not
yet been overcome and some officials remain suspicious of foreign
investors and free competition. After several years of growing FDI,
new FDI in 2009 declined modestly due to the global economic crisis
to US$ 650 million from 2008’s record US$ 744 million.
Tanzania’s Capital Account regime restricts the free flow of
investment in and out of the country. Non-citizens cannot buy
bonds and other debt securities in the domestic market. In addition,
Tanzanians cannot sell or issue securities abroad, unless approved
by the Capital Markets and Securities Authority (CMSA). The Dar Es
Salaam Stock Exchange (DSE) forbids companies with more than
60 percent foreign ownership from listing. Under the terms of the
planned East African Community (EAC) monetary union, all EAC
residents are expected to receive national treatment by 2012, though
this deadline will likely be pushed back.
There are no laws or regulations that limit or prohibit foreign
investment, participation, or control, and firms generally do not
restrict foreign participation in practice. In 2010, new legislation
required foreign-owned telecommunications firms to list on the
DSE within three years and gave the Minister of Energy and
Minerals discretion to require foreign mining companies to give the
government a free carried share of ownership in order to receive a
Mining Development Agreement. Foreign investors generally receive
national treatment; however, the Tourism Act of 2008 bars foreign
companies from engaging in mountain guiding activities. According
to the legislation, only Tanzanian citizens can operate travel agencies
and car rental services and engage in tour guiding.
The Tanzanian Investment Centre (TIC), established by the Tanzanian
Investment Act of 1997, is the focal point for all investors’ inquiries,
screens foreign investments, and facilitates project start-ups. TIC has
been given authority to manage Public Private Partnerships (PPPs)
for foreign companies under the 2010 PPP legislation that sets a
framework for Build-Operate-Transfer arrangements with private
companies. Filing with TIC is not mandatory, but offers incentives
for joint ventures with Tanzanians and wholly owned foreign projects
above US$ 300,000. The review process takes up to 10 days and
involves multiple GOT agencies, which are required by law to
cooperate fully with TIC in facilitating foreign investment, but in
practice can create bureaucratic delays.
Projects are not currently reviewed for anti-competition concerns.
Companies are not required to disclose proprietary information as
part of the approval process. TIC continues to improve investment
facilitation services, provide joint venture opportunities between local
and foreign investors, and disseminate investment information. TIC
does not have specific criteria for screening or approving projects,
but considers factors such as: foreign exchange generation, import
substitution, employment creation, linkages to the local economy,
technology transfer, and expansion of production of goods and
services. Very few projects that submit all required documents are
rejected. Approved projects receive TIC certificates of incentive
and are allowed 100% foreign ownership; VAT and import duty
exemptions; and repatriation of 100% of profits, dividends, and
capital after tax and other obligations. Similar incentives are offered
to investors in semi-autonomous Zanzibar through the Zanzibar
Investment Promotion Agency (ZIPA).
The immediate focus is to make Tanesco a viable entity, which will
involve tariff increases. A power system master plan sets out the
strategic direction of the sector for the next 25 years and has warned
of electricity shortages until 2012.
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
8
Among investment and trade opportunities promoted by the TIC are
agriculture, mining, tourism, telecommunications, financial services,
and energy and transportation infrastructure. Investment tax
incentives can be unpredictable; in 2010 an export tax on air freight
was imposed and then rescinded, capital goods tax exemptions
were reinstated, and agricultural equipment imports were given
generous exemptions.
8.1 Registration requirements
The table below outlines the procedures involved in setting up
a business in Tanzania. It also details the time involved and the
associated costs:
Procedure
Time to
complete
Cost to complete
Land ownership remains restrictive in Tanzania; under the Land Act
of 1999, all land in Tanzania belongs to the state. Procedures for
obtaining a lease or certificate of occupancy can be complex and
lengthy, both for citizens and foreign investors. Less than 10% of land
has been surveyed, and registration of title deeds is currently manual
and mainly handled at the local level. Non-citizen investors may
occupy land for investment purposes through a government-granted
right of occupancy (“derivative rights” facilitated by TIC), or through
sub-leases through a granted right of occupancy. Foreign investors
can also partner with Tanzanian leaseholders. Rights of occupancy
and derivative rights may be granted for periods up to 99 years and
are renewable.
1.
Apply for clearance
of the proposed
company name
at the Business
Registration and
Licensing Authority
"BRELA"
1 day
2.
Apply for a certificate
of incorporation and
of commencement
to Registrar of
Companies
7 days
TZS 206,200
The Economic Processing Zones Act 2006 authorised the
establishment of Special Economic Zones (SEZs) to encourage
greenfield investments in the light industry, agro-processing
industry and agriculture sectors. The GOT’s Export Processing Zones
Authority (EPZA) continues to promote Export Processing Zones
(EPZ) to attract investments in agricultural value added processing,
textiles and electronics. EPZA has earmarked 4000 hectares for
export clusters, though on-site infrastructure and facilities are
lacking. Six zones have already been developed; one is owned by
the GOT and the rest by the private sector. (40 companies in total,
mostly foreign textile exporters.) In early 2011 EPZ-A announced the
Tanzania Revenue Authority had opened an office in its Mabibo EPZ,
streamlining seamless tax and revenue procedures for participants.
Investors in EPZs are eligible for various incentives including prime
locations near ports and main roads, 10 year tax holidays, exemption
on interest and dividend taxes for 10 years, duty free importation of
capital goods, exemption on VAT for utilities and exemption of local
tax levies.
3.
2 days
Apply for taxpayer
identification number
(TIN) with the
Tanzania Revenue
Authority
No charge
4.
Income tax officials
1 day,
inspect the office site simultaneous
of the new company with procedure
3
No charge
5.
Apply for PAYE with
1 day,
the Tanzania Revenue simultaneous
Authority
with procedure
4
No charge
6.
Apply for business
license from the
regional trade officer
(depending on the
nature of business)
6 days
7.
Receive a land and
town inspection of
the premises
1 day
Transport cost,
trivial
8.
Have the health
officer inspect the
premises and obtain
his signature
1 day,
simultaneous
with procedure
6
Transport cost,
trivial
9.
Apply for VAT
certificate with the
Tanzania Revenue
Authority
4 days
No charge
10.
Receive VAT/stamp
duty inspection
1 day,
simultaneous
with procedure
9
No charge
11.
Register for
the workmen’s
compensation
insurance at the
National Insurance
Corporation or other
alternative insurance
policy
1 day
No charge
12.
7 days
Obtain registration
number at the
National Social
Security Fund (NSSF)
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
No charge
TZS 1,000
No charge
9
9Country Risk Summary
Sovereign Currency Banking Political Economic Country
risk
risk
sector
risk
structure risk
risk
risk
Sept
2012
B
BB
B
BB
CCC
B
(AAA=least risky, D=most risky)
9.1 Sovereign risk
Stable. Tanzania’s external debt stock, which consists mainly of
public debt, has risen sharply since write-offs were secured in 2005.
However, strong economic growth means that the debt-servicing
requirement remains manageable, and any significant risk to Tanzania
meeting its debt obligations is unlikely.
9.2 Currency risk
Stable. The Tanzanian shilling will remain relatively stable over the
rest of 2012, underpinned by slowing inflation and tight monetary
policy. However, the sizeable current-account and fiscal deficits
will continue to weigh on it. In addition, the predominance of
commodities in the export basket means that it will remain prone to
bouts of volatility.
9.3 Banking sector risk
Stable. Barring an unexpected deterioration in sovereign
creditworthiness (which would hit banks’ returns on government
securities), systemic banking difficulties are unlikely and the risk
outlook is stable.
9.4 Political risk
The ruling party, Chama Cha Mapinduzi, suffers from internal
divisions but remains the dominant political force. Demands for
greater autonomy are leading to tensions on Zanzibar, but broad
political stability will be maintained.
9.5 Economic structure risk
Tanzania’s dependence on outside markets for investment, exports
and aid exposes it to external risk, while its continued reliance on
rain-fed agriculture and hydroelectric power has perpetuated its
vulnerability to poor weather.
10 Country Outlook: 2012 –
2016
10.1Political stability
Tanzania is unlikely to face significant threats to its stability during
the run-up to the next elections, due in October 2015, owing to the
dominance of the president, Jakaya Kikwete, and the ruling party,
Chama Cha Mapinduzi (CCM). Since the 2010 election Chama Cha
Demokrasia na Maendeleo (Chadema), which emerged as the main
opposition party at the polls, has maintained a much higher public
profile than any previous opposition party, and has secured some
important political victories over the CCM, both in by-elections and
in parliament.
With an increasingly confident Chadema, high inflation stoking
public discontent and dissatisfaction with wages in the public sector
(doctors have been on strike twice and teachers once so far this
year), the CCM has been on the back foot, stumbling from crisis to
crisis and responding to events rather than shaping the agenda. In
part, this reflects its internal divisions. A key factor will be whether it
is able to resolve these issues, allowing it to take the lead on political
issues, including the drafting of a new constitution.
10.2Election watch
The government has agreed to a formal review of the constitution
to address some of the complaints raised by the opposition and civil
society about the current version, such as the excessive powers that
it gives to the executive. The review will also try to avoid a repeat of
the problems experienced during the 2010 elections, including an
opaque vote-counting process.
The constitutional reform process is contentious, with Chadema
and other opposition parties unhappy at its apparent domination by
the CCM. The opposition’s desire for a constitution that affords less
power to the presidency and a more level electoral playing field is
unlikely to be realised fully, but should see the 2015 poll conducted
under at least a slightly fairer constitution. The CCM, assuming that
it remains united, is likely to remain on top at the elections, with its
candidate installed as president. However, the opposition is likely
to continue to make gains, and there is the prospect that a genuine
multiparty democracy will start to emerge, ending the domination
enjoyed by the CCM since independence.
10.3International relations
The government will continue publicly to support the development
of the East African Community (EAC), although further integration –
including full monetary union – will be contentious. The government
appears to be aware that the development of the EAC will underpin
its longer-term economic ambitions, but it will need to accommodate
nationalistic concerns over land and immigration. Tanzania will
therefore continue to act as a brake on closer EAC integration.
This will periodically strain its relations with other member states,
especially Kenya and Uganda.
Bilateral relations with Malawi have deteriorated as the potential
for hydrocarbons discoveries in Lake Nyasa (known in Malawi as
Lake Malawi) has raised the stakes in the long-dormant border
demarcation dispute between the two countries. However, despite
the threat of military action by Tanzania, the Economist Intelligence
Unit expects that the dispute will be resolved diplomatically.
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entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
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10
10.4Policy trends
The main goal of economic policy – to push up the growth rate
in order to lower poverty – will remain firmly in the spotlight. The
government will have to balance the need for fiscal consolidation
with increasing capital spending, which has continually been
held back by capacity constraints. A key objective will be to boost
spending on infrastructure, financed by raising new funds and by
public-private partnerships. Further reform in the agricultural sector
is needed to boost the fortunes of the two-thirds of Tanzanians who
earn a living from the land. However, the government is likely to shy
away from the fundamental changes needed to increase sectoral
growth, particularly in the area of land rights.
A new law to regulate the gas sector is due by the end of 2012,
although minor delays are likely. More generally, any move away
from Tanzania’s long history of slow policy reform will be difficult
to achieve.
10.5Economic growth
A sustained improvement in growth in the agricultural sector – the
country’s largest employer – would be required to drive Tanzania’s
development forward. There are some provisional signs that this is
possible, with ongoing commercial investment into the sector, but
the dependence on smallholder farmers and rain-fed irrigation will
remain a problem (as will low levels of fertiliser application). Growth
will also be helped by some alleviation of the electricity constraint
from 2013, as new power projects come on stream, allowing more
sustained expansion in the manufacturing sector. The other main
trend will be in the mining sector, where gold will begin to lose its
place as the driver of growth to oil and gas towards the end of the
forecast period.
10.6Inflation
The sharp rise in inflation in 2011, driven largely by food and fuel
prices, will set a high benchmark in the early part of the forecast
period. Given reasonably robust growth against the background of
the economy’s structural rigidities and the limited efforts to tighten
fiscal policy, inflation will decline only modestly as 2012 progresses.
It is, however, forecast to reach single digits by the end of the year
owing to higher food output, slower growth in global oil prices and
tighter monetary policy.
10.8External sector
Trends in global commodity prices will continue to have a large
bearing on the current account. Further increases in gold prices in
2012 will be partly offset by declines in the prices of Tanzania’s other
commodity exports, slowing export growth. This slowdown will be
mirrored in the import bill: although capital imports will continue to
grow, prices for many key imports, including food, will fall.
In 2013 the trade deficit is forecast to decline marginally as gold
prices stay high while global oil prices moderate. In 2014 exports are
forecast to decline – despite the onset of uranium mining – as gold
prices plummet.
Modest export growth is expected in 2015-16 as gold prices continue
to fall but hydrocarbons exports begin on a small scale. Meanwhile,
import growth will pick up on the back of strong domestic demand
and infrastructure development, causing a significant deterioration in
the trade account.
AAppendix one
Sources of Information
• Economist Intelligence Unit
• Wikipedia
• World Bank
• Doingbusiness.org
• Infoplease.com
• Tanzania Investment Centre
• The US Department of State
Inflation is forecast to average 13.6% for the year. Assuming a
reasonable harvest in 2012, combined with tighter fiscal policy,
lower international fuel prices and greater shilling stability, inflation
is forecast to ease to 7.6% in 2013. This moderate downward trend
is expected to continue, with inflation reaching 6.6% in 2016. There
is one large caveat to this forecast; it is reasonably likely that at
some point in the next five years there will be another drought and
a consequent increase in food prices, although it is impossible to
predict when this might happen.
10.7Exchange rates
The Tanzanian shilling has been remarkably stable so far in 2012,
fluctuating within a small band of TSh1,570-1,601:US$1. This is in
contrast to the first nine months of 2011, when all three East African
shillings weakened sharply against the backdrop of rapid inflation,
large fiscal deficits and high global economic uncertainty. All three
then staged a partial recovery in the last quarter as central banks
tightened monetary policy. The Tanzanian shilling’s recent stability
is not expected to be sustained, as it has been underpinned almost
entirely by monetary policy measures, while macroeconomic
fundamentals – notably inflation and the fiscal and current-account
deficits – remain unfavourable. Nevertheless, the currency will be
less volatile than in 2011 as inflation moderates over the rest of the
year and liquidity stays tight. Slightly faster depreciation is expected
thereafter as the current-account deficit stays wide and monetary
policy is gradually loosened to promote economic growth, with the
shilling weakening from TSh1,587:US$1 in 2012 to TSh1,974:US$1
in 2016.
© 2012 KPMG Services Proprietary Limited, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity. All rights reserved. MC7204 KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. The foregoing information is for general use only. NKC does
not guarantee its accuracy or completeness nor does NKC assume any liability for any loss which may result from the reliance by any person upon such information or opinions.
11