Thursday, September 21, 2017

How the audit committee can help maximise the value of internal audit

 

By Jacqueline Abebe

As audit committees face a wider range of business risks and increased expectations from stakeholders, many audit committees are turning to a particular resource—the internal audit function.

Internal audit (IA) can be viewed by audit committee members as an objective insider—one that can serve as their eyes and ears.

According to PwC’s 2016 State of the Internal Audit Profession Study audit committees can get the most out of internal audit by empowering the role, having a team with the right structure and skills, making sure the mission is clear and is adhered to, supporting findings to drive organizational improvements, and assessing performance of the team to enhance talent development.

The Institute of Internal Auditors Tanzania (IIA) this week is hosting the 4th Board and Audit Committee Forum. The two day forum involves presentations and panel discussions with distinguished thought leaders who year over year have shared their valuable experience, knowledge and insights to re-energize participants with new perspectives, latest trends and best practice which they can immediately apply in their roles.

I have asked myself since the 3rd Board and Audit Committee Forum… what may be different? Has there been any change or do the issues of the prior year paint the same picture of an IA function today? Do audit committee members view their internal audit functions as their eyes and ears?

We all recognize that internal audit functions that possess strong capabilities and effective leadership can make significant strides towards becoming a highly valued and trusted advisor. The 2017 State of the Internal Audit Profession Study, PwC has identified a new factor contributing to a stronger perceived value: Internal Audit’s ability to help stakeholders navigate disruption.

While the concept of disruption isn’t new, I do feel like we’ve now hit more of a common realization, that it is not a blip or a few one off incidents affecting specific companies, but something that we all need to prepare for and expect going forward. Disruptions are affecting us all – whether they be internal as a result of changing technology or external resulting from new regulatory changes. Less of us are immune to some of these risks than were so in the past.

Therefore, more comfort is expected by boards and stakeholders around different types of assurances and they are all looking to Internal Audit to provide that.But frankly speaking, I doubt that many of us, whether as internal auditors or board and audit committees, have fundamentally changed how we operate in the face of these challenges. Looking forward, audit committees should reflect on their role in overseeing internal audit which is a cornerstone of their governance responsibilities. Helping maximize the value of the internal audit function is a critical factor in the audit committee’s effective oversight. High on the list should be the audit committee’s focus to empower and develop the Chief Audit Executive (being the head of internal audit).

Internal audit functions with effective leadership perform better and add greater value to their businesses. As the geopolitical landscape and global economy change, a high-performing internal audit function aligned to an organization’s strategy will be a trusted advisor to help the audit committee meet its objectives.

Jacqueline Abebe, Associate Director - Risk Assurance Services, PwC Tanzania The views expressed do not necessarily represent those of PwC

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Thursday, September 21, 2017

YOUR BUSINESS IS OUR BUSINESS: ‘To enjoy Mt Kilimanjaro, come to Tanzania...’

 

By Karl Lyimo

During a training course in Holland in 1968, I was staggered by the poor geographical knowledge among the natives. Telling them I was from ‘Tanzania,’ their response was almost invariably: ‘is that in Nairobi? Is that South Africa...?’

Clearly, it wasn’t (yet) etched on their minds that ‘Tanzaina’ was a nation-state recognised by notable international/multilateral institutions the likes of the UN, the World Bank, the International Monetary Fund, the Commonwealth of Nations, the European Union, etc, etc...

Sheesh!

Surprisingly, the locals knew of ‘Nayaerere’ (Nyerere) – but NOT of ‘Tanzania,’ the nation-state that Mwalimu Julius Nyerere had helped found and administer for nearly a generation, becoming an iconic, exemplary leader who today hovers on Canonization, so to speak...!

It gradually became clear that my Dutch/European hosts – and, indeed, foreigners in general – got to ‘know’ of Mwalimu Nyerere principally from his instant notoriety (for lack of a better word) as the force and brains behind the ‘Arusha Declaration & TANU Policy on Socialism & Self-reliance!’

Proclaimed by President Nyerere (1962-85) on February 5, 1967, the Arusha Declaration led to a Nationalisation Programme that transferred Land, Industry, Commerce, etc, from private to state control, ownership – thereby putting the so-called ‘Commanding Heights of the Economy’ under public (read ‘National Government’) control!

In due course of time and altercation here, there and over there, privately-held assets were by a stroke of the ‘nationalisation’ pen transformed into public assets!

Major assets – mostly foreign-owned: Land, Estates (Real and ‘Other’), Banks, Insurance, Manufactories, etc – were taken over virtually overnight... And, as the Sisters of Fate would’ve it, Nyerere acquired instant fame/popularity at home – and infamy abroad, especially among the foreign investors who were deprived under the Arusha Declaration and their associates, including their Governments!

So, was it any wonder that my Dutch hosts knew of ‘Nayaerere’ – but not of the United Republic of ‘Tanzania’ less than a year post-Arusha Declaration?

In like vein, ‘Nairobi’ became better-known in foreign lands on the back of the Mau-Mau Uprising (1952-1960) by Kenyans seeking freedom from British colonial domination. The Mau-Mau attrocities gained global publicity, no doubt fueled by foreign settlers and other stakeholders fleeing Kenya...

Ditto for ‘South Africa,’ which gained unwanted worldwide notoriety from its Apartheid System. Adopted in 1948 by the National Party, the Apartheid Regime entrenched an all-White Government that enforced racial segregation every which way in favour of Whites – and at tragic cost to other races, especially Blacks...

So, tragedies like the 1960 Sharpeville Massacre (67 Blacks shot dead by security forces, >180 injured) perforce etched an ‘Ugly South Africa’ on the minds of the likes of my 1968 Dutch hosts!

I’ve gone to great lengths here to dramatically demonstrate/illustrate the Power of Publicity– for better or for worse... If Mwalimu Nyerere first gained global publicity on the back of the ‘Arusha Declaration;’ Nairobi (Kenya) on the ‘Mau-Mau Uprising’ – and South Africa from ‘Apartheid’ – then Publicity (alternating, or in combination, with ‘Advertising’) is a most powerful tool, I say!

Just look at the way Kenya virtually next-door has been drawing tourist hordes by most-cleverly advertising: ‘Come to Kenya and SEE/CLIMB Mount Kilimanjaro!’ Mark you, no where do they aver that the world-famous Kilimanjaro – at 5,895m/19,341ft above sealevel: Africa’s Roof and the world’s highest stand-alone mountain – is in Kenya.

In fact, ‘Kilimanjaro’ is squarely in Tanzania, a goodly-20km from the common border. But, that’s never stopped tourists from seeing the Mountain by simply looking at it from Kenya – or ‘touring’ (climbing) it from there by travelling from (say) a Nairobi Hotel to the Climbers’ Gates in Tanzania across the common border!

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Thursday, September 21, 2017

MANAGING TAX RISKS: How do you pay your employees?

 

By Shabu Maurus

There are various ways employees can be remunerated for the employment services they offer to their employers.

The most common is a salary and allowances paid in monetary form. But it is also common for employers to provide some other non-monetary benefits to their employees in addition to the salaries.

It is also possible (particularly in the informal sector) for employees to be purely remunerated in non-monetary terms.

Where an employer makes payment for the personal needs of an employee through providing the employee with rights, goods or services (as opposed to money) these are called “benefits in kind”. Taxable benefits in kind typically include those benefits which are for the personal use or consumption needs of the employee.

The benefits in kind can take various forms including a housing, a company car for personal use by an employee, and an interest-free loan or a loan at an interest rate way below the market rates. It could also be airtime, data or cell phones for both business and personal use.

Most of this kind of benefits are taxable but because no money goes to the employee, it is an area that some employers can easily overlook and forget their obligation to account for the pay-as-you-earn (PAYE). Of course, some employers and employees may not aware that those benefits in kind are taxable.

Not accounting for PAYE on the benefits in kind presents a tax risk to the employer and to some extent the employee. If the non-compliance is subsequently uncovered by the tax authority, the employer is likely to be assessed on the unpaid tax plus interest and penalties. To the employee, the risk is that his employer may, later on, seek to recover the amount of tax that was previously not deducted (assuming the employee is still with the same employer). Depending on the amounts and the mode of recovery, this can be very frustrating to employee’s cash flow plans.

Quantification rules: If PAYE is to be accounted for on the benefits in kind given to employees, first, the benefits need to be quantified in monetary terms.In general, the value of a benefit in kind is quantified according to a market value of the benefit. The market value means the amount that an independent person would have to pay in the market to receive the same good or service that the employee receives from his employer.

If for example, a manufacturer ofplastic chairs decides to give each employeefive chairs in a particular year, the benefit in kind to each employee will be determined by the market value of the chairs received. If a plastic chair is sold at shillings 100,000 to independent customers, then that is the market value. Hence, in this example, the benefit in kind to the employees will be quantified as shillings 500,000 and this amount needs to be included as part of employee’s income and PAYE deducted accordingly.

However, some special quantification rules apply to the provision of motor vehicles, provision of subsidized loans and provision of housing to employees. I will discuss the special quantification rules in my next article.

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Thursday, September 21, 2017

CORPORATE SUFI: Understanding the magic of purpose



Azim Jamal

Azim Jamal 

By Azim Jamal

You were born into this world for a reason. You are here for a nobler purpose than just to eat, sleep, produce offspring, and die.

You are here to make a difference. You are here to shine your light and leave the world in better shape than you received it. You are here to display the gifts you have been blessed with. You are here to use those gifts to make a contribution and create significance.

There is no one like you in this world. No one in this world can match your smile, style, or DNA. No one in this world can speak like you or think like you. You are unique, gifted, and special. Your gifts are tied to your purpose. Discover them and use them fully. When you do things you were born to do, and use your innate gifts to make a difference, you are living and working with purpose.

When you live with purpose, you are energized and focused and have a sense of direction. Life Balance becomes easier because you are concentrating on things that are important to you and not wasting time on unimportant things. Your life has meaning, direction, and focus, and you are able to pay attention to your work, family, and spirituality.

“When love and skill work together, expect a masterpiece,” wrote John Ruskin, the Victorian artist, scientist, poet, environmentalist, and philosopher.

All of nature is on call, operating in silence and yet on purpose. The mighty oak was once a little nut that stood its ground. The acorn contains the design for the fully developed oak tree in all its mightiness. Where you find purpose and strong principles, there you find success and balance.

A ship would never sail without a destination. Similarly, you can’t find life balance without having a clear objective. In fact, when facing the storms of life it is our purpose which ferries us out of them.

When you have a purpose, you know where you are going, and you know why you want to go there. You are driven to get there. A sense of purpose creates energy, meaning, gumption, and love. You lose track of time doing things that have a solid purpose. You find enjoyment and make a difference to others.

Finding Life Balance starts with having clarity of purpose — knowing what you want and why you want it. This applies to your work and to your home. Without clarity, we are unable to focus.

When you do purposeful work, you feel guided by principles. Your principles are the anchor, providing a source of steadiness amid tumultuous circumstances. If your anchor is bendable, then it will not hold the boat in place properly. In the words of Abraham Lincoln, “Important principles may and must be inflexible.” If principles can be bent, they cannot serve as reliable guides to behavior.

Most successful initiatives in the world are born out of a strong and clear sense of purpose. Erin Ganju, the CEO and co-founder of Room to Read, one of the most successful nonprofits in the world, attributes the success of her venture to her life purpose of empowering others. Today, Room to Read builds libraries and educates girls in Asia and Africa and has now scaled to a team of 1,300 employees across ten countries serving 10 million children per year.

To conclude, the significance of purpose can be best summarized in a quote by American author Robert Byrne, “The purpose of life is to live a life of purpose.”

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Thursday, September 21, 2017

Bad debts pulling down lenders, economic growth in EA: bankers

 

By Alex Malanga @ChiefMalanga amalanga@tz.nationmedia.com

Dar es Salaam. Economic growth across member states of the East African Community (EAC) may be derailed by high levels of non-performing loans (NPLs) across the region as lenders concentrate on internal consolidations and reduce the amount of loans to the productive sector, bankers have said.

Regional economies are grappling with widening fiscal deficits and tightening of lending to the private sector which may ultimately reduce economic growth, bankers said at a recent East Africa Business Forum.

Swift, a global provider of financial messaging services, organised the forum in Dar es Salaam.

Data, produced at the forum by the Tanzania Bankers Association (TBA) show that in Kenya, the ratio of NPLs to total gross loans rose from an average of six per cent in 2016 to 12 per cent.

Data, presented by the TBA chairman, Dr Charles Kimei, also showed that in Rwanda, the NPL to total gross loans ratio jumped from 5 per cent to 7 [er cent between December 2016 and May 2017 while in Tanzania, it rose from 9.5 per cent as of December 2016 to10 per cent in May, 2017.

Similarly, in Uganda, it rose from seven per cent to 12 per cent in May, 2017.

“Growth momentum for 2017/18 remains quite fragile across the region….the region’s financial system is weak as it grapples with NPLs and insufficient capital across East Africa Community (EAC). This could undermine growth,” Dr Kimei said at a forum that brought together senior bankers, policymakers and representatives from the region’s corporate community to discuss economic trends, financial policy and opportunities for growth.

Last year, East Africa registered the fastest economic growth on the continent when it grew at an average of 5.5 per cent and is being projected to increase to 6.0 per cent in 2017 and 6.3 per cent in 2018, backed by a robust performance in Kenya, Rwanda and Tanzania.

According to Dr Kimei however, with retarded growth of credit to the private sector, the growth remains elusive.

“There is an issue to tackle here…without giving credit to private sector there is no way we can have stable economy,” noted Dr Kimei.

Commercial banks are currently lending to private sector at the lowest pace in the East African economies, leaving key economic and job growth drivers such as manufacturing and agriculture struggling for funding, newly released data shows.

Bank of Tanzania (BoT) figures show that credit to the private sector grew by a minimal Sh516.6 billion during the entire 2016. This translated into a measly 2.5 per cent growth rate as compared to growth of 26.8 per cent registered during the preceding year.

Similarly, the Central Bank of Kenya (CBK) reported recently that lending to the private sector expanded by a paltry 3.3 per cent in the year to March 2017, the lowest growth rate since January 2005.

Analysts attribute the trend of low lending pace to private sector to liquidity problems.

Extended broad money supply in Tanzania increased by Sh645.1 billion during the year ending December 2016 to Sh22.7 trillion.

The increase implies a twelve-month growth rate of 2.9 per cent, which constitutes a continuation of the general slowdown in the growth of money supply observed throughout the year.

In East Africa, the fiscal deficit widened from 4 per cent to 4.6 per cent in 2016.

Failure to narrow fiscal deficit, according to the International Monetary Fund (IMF), may push up the costs of tapping international credit markets.

“With high NPLs, it would be more difficult to approach creditors in global markets,” Dr Kimei said. “That doesn’t mean that we won’t have access, but that normally translates into more expensive financing.”

The sector is also facing a challenge of unpredictability with regard to regulation, bankers say, citing the example of how Kenya adopted an interest cap which abide commercial banks in the neighbouring country not to charge more than four percentage points above the Central Bank’s benchmark rate, which is currently 10.5 per cent.

According to a senior manager for financial institutions at the National Microfinance Bank (NMB), Mr Mohamedhussein Aldina, increasingly stringent banking regulations in the region were changing the way financial institutions conduct their businesses.

Tighter regulation, according to him, is designed to improve standards, but one unintended consequence is how the same disincentivizes talented investment bankers.

“The problem is that tightening the reins can also have the unintended consequence of forcing some bankers to move away from the positions where their expertise and experience is sorely required and instead go to where they are able to use such expertise in a more risk-friendly environment,” he said.

Stakeholders are of the view that regulators needed to ensure that changes are thought through with as much consideration of the effect on present and future effects of the same on businesses.

They must consider the longer-term effects of regulation, rather than just solving immediate problems and reacting to public anger in knee-jerk style.

The Swift head of Sub-Sahara Africa Denis Kruger said only big and profitable banks would be able to comply with tighten of capital requirements.

“Tighter monetary conditions and economic uncertainty cause lenders to remain relatively risk averse,” said Mr Krugger.

Tanzania Women’s Bank managing director Japhet Justine said regulations should be friendly so that operators can match with technological changes.

“Digital transformation in the banking industry moves very quickly…we need to cope with the changes,” said Mr Justine.

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Thursday, September 21, 2017

Tanzania, Kenya agree to increase production of wheat

 

By Aurea Simtowe @TheCitizenTz news@tz.nationmedia.com

Dar es Salaam. Tanzania and Kenya have agreed to boost wheat production as the two countries seek to find a lasting solution to recurrent trade wars between them.

The two countries have repeatedly found themselves in trade wars that have seen them exchanging trade bans on several occasions.

In April for instance, Kenya banned Tanzania’s wheat flour despite from accessing its market.

The country also banned cooking gas imports through the Kenya-Tanzania border on the disguise of safety and quality concerns.

Tanzania reiterated by prohibiting tyres, cigarettes, margarine and fermented milk imports from Kenya.

At the height of trade wars, Presidents John Magufuli and Uhuru Kenyatta met in July and agreed that the two countries should end the restrictions.

The two countries also agreed to set up a joint technical committee chaired by the Foreign Affairs ministers and comprising the EAC Affairs, Trade, Finance, Interior, Energy, Agriculture, Transport and Tourism ministries and any other relevant government agency.

The committee, which met in Dar es Salaam recently thus agreed to come up with measures that would prevent the recurrent of other trade wars in the future, including the need to boost wheat production.

According to the Principal Secretary in Kenya’s Department of Trade, Ministry of Industry, Trade and Cooperatives, Dr Chris Kiptoo, apart from boosting wheat production, the two countries will also come up with policies that will compel businesspeople to trade in locally produced wheat before they think of going outside the country.

“Demand for wheat in Kenya currently stands at 1.5 million tonnes per year while the country is only capable of producing 300,000 tonnes. The country thus imports 1.2 million tonnes expensively,” he said.

The Permanent Secretary in the Ministry of Industry, Trade and Investment, Prof Adolf Mkenda shared similar sentiments, noting that boosting local wheat production will be the lasting to repeated trade wars, orchestrated by millers who import the product outside East Africa so it can be milled and sold across the region.

“Currently, Kenya produces 300,000 of wheat while Tanzania produces only75,000. I believe as Tanzania, we have the potential to produce more than that so deliberate efforts must be directed towards boosting local production,” he said.

By joining forces with Kenyan producers, Prof Mkenda is hopeful that things will improve.

“Luckily, millers have said they will buy all the locally-produced wheat first before they start importing the product. This will be good news to farmers, some of whom have not yet sold what they harvested,” he said.

According to the director for corporate relations from Bakhressa Group of Companies, Mr Hussein Sufiani, Tanzania’s locally produced wheat is less than 10 per cent of what the market demands, noting that increased production will be good for all parties.

“It has always been our policy that we will buy the locally produced wheat first before we set our eyes on importing….we are determined to buy all the locally produced one even with the planned production boost,” he said.

During the discussions, Tanzania presented a total of 15 grievances that it sees barriers to trading in Kenya while the latter tabled 16 issues that needs redress.

Tanzania’s demand for wheat is more than 700,000 tonnes per annum. To bridge the deficit, the grain is imported. Although the country has vast tracts of fertile land for crop cultivation, it is grown on only 96,000 hectares.

It is understood that Tanzania’s agriculture is mainly rain-fed and many of the growers are smallholders who are poorly equipped. Poor investment in rainwater harvesting, irrigation, fertiliser, infrastructure and technical support are constraining farmers.

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Thursday, September 14, 2017

Government: No ban yet on ‘mitumba’

 

By Alex Malanga @ChiefMalanga amalanga@tz.nationmedia.com

Dar es Salaam. The government has not yet officially banned importation of secondhand clothes (mitumba), a senior officer has said, reiterating that a recent import duty increase was merely a step towards nurturing the growth of the local textile industry.

Speaking to The Citizen on sidelines of last week’s breakfast meeting between the Confederation of Tanzania Industry (CTI) and Tanzania Revenue Authority (TRA), the Permanent Secretary in the Ministry of Industry, Trade and Investment, Dr Adelhelm Meru said though the policy to ban mitumba does exist, its implementation has not yet started.

“This is what we told them (United States trade bodies) when we met recently….We never said we are banning second-hand clothes….We only said that we are building the capacity for our local industries and that is what exactly what our team of experts said during a recent negotiation with the US trade bodies,” Dr Meru said.

In July, Tanzania, Rwanda and Uganda made submissions against their potential loss of benefits from the African Growth and Opportunity Act (Agoa) during an out-of-cycle review meeting called by the US Trade Representative’s office.

The review came after dealers of Secondary Materials and Recycled Textiles Association (Smart) in the US filed comments earlier this year requesting the Trade Policy Staff Committee in their country to launch a review of the Agoa benefits for Kenya, Tanzania, Rwanda and Uganda.

The US-based group, which represents US-based used-clothing companies, claims the East African Community (EAC) countries violated Agoa terms by their decision in February to phase out imports of used clothing beginning in 2019.

Smart believes the ban “directly contradicts requirements that Agoa beneficiaries work towards eliminating barriers to United States trade and investment and promote ‘economic policies to reduce poverty.”

In its petition, Smart complained that the ban “imposed significant hardship” on the U.S. used-clothing industry and violated Agoa rules.

The US has not yet replied to the submissions by Tanzania, Rwanda and Uganda but Dr Meru told The Citizen that the countries’ position has been clear and that it only seeks to boost domestic clothes manufacturing.

“Our position is very clear. We have continued to allow mitumba clothes to come into our countries. At present, we have no ban in place and that position is clear…claims that we have banned those products are totally untrue and our team clarified to US authorities over the matter,” said Dr Meru.

He said the ban was a long-term plan that could take five years or more before it gets implemented, pending the development of a strong industrial base to manufacture clothes locally.

“This is a decision that members of the East African countries reached with the hope that when we begin to implement it, we will have improved our local industries,” noted Dr Meru.

He said the government was striving to revisit the textile and clothing industry and the sector at large to ramp production so that it is able to produce quality products that could compete in global market.

“It is when such a strong capacity is built that is when you can talk of banning,” he insisted.

The government, he said, was still committed to Agoa.

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Thursday, September 14, 2017

Major Mlimani City expansion project to cost $100 million

Shoppers enter Mlimani City mall via the main

Shoppers enter Mlimani City mall via the main entrance. PHOTO | FILE 

By Rosemary Mirondo @mwaikama rmirondo@tz.nationmedia.com

Dar es Salaam. The ongoing expansion project for Mlimani City will cost a total of $100 million (about Sh224 billion on the prevailing exchange rate) as the investors seek to ensure that the facility meets international standards.

The ongoing expansion involves construction of villas, banking areas and kids’ corner among other facilities.

According to the supplement addendum between the government, the University of Dar es Salaam and the investors, construction and expansion of the facility is expected to be completed in December 2019.

In later stages, the expansion programme will also involve construction of a hotel and botanical garden.

The property was developed in 2004 by a Botswana-based investor Gulaam Husain Abdoola of GH Group that injected an $80-million investment after signing a 50-year contract with the University of Dar es Salaam to develop 40 hectares.

The mall was later sold to another Botswana firm Turnstar Holdings in 2011 at $77 million. It has a mall, apartments, conference hall and two office blocks.

Now the firm is implementing the second phase which will expand the facility to have another 8,500 square meters for the mall; a complete conference centre; and another two office blocks with over 5,000 square metres, The Citizen understands.

The Mlimani City general manager, Mr Pastory Mrosso told BusinessWeek last week that so far, the expansion has gone through phases one and two and that currently, it is in phase three.

“Phase three alone costs $27 million and extra funding will be required for phase four,” he said.

With the addition of two blocks, the overall appearance look of Mlimani City has changed.

The extension entails expanding the mall and adding a facelift to the existing frontage. It also entails additions to the Conference centre and the two additional office blocks as well as putting up a basement parking of 342 bays. Other ancillary works are a fenced and developed Botanical garden with walk ways, demarcated picnic areas and admin block with ablutions and a gym to the residential villas.

The plan envisages building a separate banking hall so that all banks can shift on one side to create comfort and security for customers who make use of using banking facilities at the place.

According to him, the food court area has also been revamped to have common shade and relaxed atmosphere.

He said the more facilities available at the mall will create more employment for Tanzania at both formal and informal levels.

It is estimated that between 10,000 and 15,000 people visit the shopping centre everyday

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Thursday, September 14, 2017

Private sector lauds efforts to enhance power production

Oxford Business Group country director for

Oxford Business Group country director for Tanzania Ivana Carapic and Tanzania Private Sector Foundation executive director Godfrey Simbeye display a report in Dar es Salaam recently. PHOTO | FILE 

The ease of market entry in sectors with high-growth potential and the challenges that businesses face in their operations were among the topics of conversation at the signing of a memorandum of understanding (MoU) between the Tanzania Private Sector Foundation (TPSF) and the global research and consultancy firm Oxford Business Group (OBG) on July 11.

Godfrey Simbeye, Executive Director, TPSF, who signed the MoU on behalf of the Foundation, said that access to affordable and reliable power remains the most critical challenge to the country’s industrial transformation ambitions.

However, Simbeye noted that as a result of the investments being made by President John Pombe Magufuli’s administration in key infrastructure projects – such as the 2100MW hydropower project at Stigler’s Gorge – the situation should improve dramatically in the coming years.

Simbeye also highlight the challenge companies face in accessing affordable debt financing, particularly for early and mid-stage funding from venture capital firms and private equity investors. “These two challenges will continue to deprive Tanzania from large industrial undertakings and deter participation of local investors in these projects,” he stated.

Following the signing, OBG’s country director, Ivana Carapic, said that the group would be exploring these and other topical issues in its forthcoming publication, The Report: Tanzania 2017. Tanzania’s industrialisation would be a key focus, she noted, alongside the government’s efforts to reduce the informal economy and the balancing act it faces in bridging a budget shortfall without further squeezing businesses.

“Notably, Tanzania has a number of large infrastructure projects in the pipeline that have the ability to change the course of the country,” she said. “On top of this, a national push targeting middle-income status is expected to produce a raft of new investment opportunities. I look forward to working with TPSF to highlight the issues that businesses would like to see addressed and the areas of the economy that are ripe for growth as we begin work on our landmark publication.”

Under the MoU, TPSF will contribute to OBG’s first-time report on Tanzania’s investment opportunities and economic activity.

The Report: Tanzania 2017 will be a vital guide to the many macroeconomic facets of the country, including its economy, banking, transport, infrastructure and other sectoral developments. The publication will also contain contributions from leading representatives, including: President John Magufuli; Philip Mpango, minister of finance and planning; Benno Ndulu, governor, Bank of Tanzania; and Stergomena Lawrence Tax, executive secretary, Southern African Development Community. It will be available in print and online.

About Oxford Business Group

Oxford Business Group is a global research and consultancy company with a presence in over 30 countries, from Africa, the Middle East and Asia to the Americas. A distinctive and respected provider of on-the-ground intelligence on many of the world’s fastest growing markets, OBG has offices in London, Berlin, Dubai, Istanbul and Manila, and a network of local bureaus across the countries in which we operate.

The Report: Tanzania 2017 will be produced with the Tanzania Investment Centre, Tanzania Private Sector Foundation and Ernst & Young.

Through its range of products, OBG offers comprehensive and accurate analysis of macroeconomic and sectoral developments, including banking, capital markets, tourism, energy, transport, industry and ICT. OBG provides business intelligence to its subscribers through multiple platforms: Economic News and Views, OBG Business Barometer - CEO Survey, Roundtables and conferences, Global Platform - exclusive video interviews, The Report publications and its Consultancy division.

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Thursday, September 14, 2017

Six soft-drink makers yet to get Sh25 billion in tax refunds

 

By Alex Malanga @ChiefMalanga amalanga@tz.nationmedia.com

Dar es Salaam. The government is yet to refund Sh25 billion in refundable additional import duty on sugar to six major soft-drink makers, The Citizen has learnt as manufacturers grapple with the implementation of recent tax laws.

During the 2015/16 financial year, the government increased the import duty for sugar to $460 per tonne of the CIF value of the imported product.

It said the aim was to protect local sugar manufacturers from imports.

Initially, importers of industrial sugar were being charged 10 per cent duty but the government – through the 2015/16 budget – raised it to 25 per cent.

The agreement was that 15 per cent would be refunded as soon as the government was convinced that the sugar was indeed imported for industrial production.

The move aimed at preventing people from importing industrial sugar and diverting it for domestic use.

Although the arrangement started well, things went awry during the past one year or so, with six major importers of the product, including Coca-Cola Kwanza, SBC Tanzania (Pepsi), Bakhresa Food Products, Nyanza Bottling Company and Bonite Bottlers Ltd, saying they are yet to be paid up to Sh25 billion in tax refunds.

“It is unfortunate that it is almost one year now since we started complaining about poor refunds and nothing seems to be moving,” the Confederation of Tanzania Industries (CTI) first vice chairman, Mr Jayesh Shah, told The Citizen on the sidelines of the group’s breakfast meeting together with the Tanzania Revenue Authority (TRA) commissioner general, Mr Charles Kichere.

Manufacturers believe that the move goes contrary to the government’s goal of promoting industrialisation.

“The government should speed up the process of refunding…it should at least take two months,” opined Mr Shah.

Manufacturers believe that the tax should be reduced to 10 per cent from the current 25 if the country is to walk the talk with regard to industrializing the country.

According to the director of corporate affairs at Bakhresa Group, Mr Hussein Sufian, the 15 per cent refundable import duty was constraining the company’s cash flow.

“This increases the cost of doing business. In manufacturing, we use borrowed funds and therefore, delays in refunds are disservice to us,” said Mr Sufian.

All East Africa beverage producers are against the policy, since it hurts industrial sugar users and benefit foreign sugar producers.

Mr Sufian alleged that the government was delaying to refund them due to some unscrupulous manufacturers who were using industrial sugar as final products and not raw materials.

“But why should we suffer because of a few people? Why don’t you select those who mess up and punish them,” he queried.

Reacting to the issue, Mr Kichere said the government’s audit on the amount of industrial sugar that actually went into manufacturing against the one that was diverted into normal consumption was in final stages.

He insisted that the manufacturers’ funds were safe in the escrow account pending completion of the auditing exercise.

He however called upon CTI to ensure that its members utilize industrial sugar for the intended purposes as a way of reducing the time that the taxman takes to audit the imports.

‘Finally, my team and I are more than willing to welcome you to our offices so we can talk on the best way to deal with your issues so we can jointly play our various roles in industrailising this nation…..we are also willing to come to your offices and see how you conduct your undertakings,” he said.

Experts believe that timely payment of refunds to companies is a legal obligation of the state. Thus, there is no excuse for delaying, according to him.

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Thursday, September 14, 2017

Tigo targets businesses with new product launch

 

By The Citizen Reporter @TheCitizenTz news@tz.nationmedia.com

Dar es Salaam. Tigo Tanzania has introduced a special data and voice product that specifically caters for the needs of businesses as it seeks to capitalise on presence of a fibre cable to attract an increased number of business clients.

Tanzania Communication Regulatory Authority (TCRA) figures show that the number of internet users – or at least internet-connected devices – has risen from 5.3 million in 2011 to 19.86 million in 2016.

With the internet penetration rate jumping from 12 per cent to 34 and 40 per cent in 2011, 2015 and 2016 respectively, telecommunication firms are now investing much of their resources in data.

But Tigo Tanzania, which is also of those that have rolled out the 4G-LTE technology, has gone a mile further by delivering more value-added services and business solutions such as cloud services and ICT managed services under a single portfolio, thanks to its multi-million dollar investment in network expansion and improvement during the past two years.

Known as Tigo Business, the service offers tailor-made solutions to a diverse range of sectors that vary from small, medium and large businesses and from government departments/agencies to development organisations. The service also targets financial institutions, the extractive industry, manufacturers, teh service sector and distributors among others.

“We have invested for the future,” the company’s acting managing director, Mr Simon Karikari said in Dar es Salaam last week when he officially introduced the Tigo Business service to business news editors.

Tigo’s fibre connectivity, said Mr Karikari, currently covers almost their entire country.

Tigo – which now commands a 28 per cent subscription in a competitive market of seven players – announced in 2015 that it would invest $120 million in rolling out 843 new mobile sites (including those to offer 3G and 4G LTE) across the country.

About three months ago, the company announced a further $75 million investment in upgrading its network. This is on top of another 75 million US dollars invested in the past year.

“At the moment we are the market leader in Dar es Salaam…we want to leverage our 4G service to corporate clients as well and this is what Tigo Business is also about,” Mr Karikari said.

With the investments, Tigo now has 1,500 towers that support 3G and 300 sites in major cities that support its 4G LTE.

According to the company’s acting chief business officer Mr Hugh Sonn, the business to business (B2B) would offer all inclusive tele-services including data storage.

“We put together bundled solutions that combine value added products alongside mobile, broadband and internet services at high speed connectivity” he said, noting that the products are tailor-made to support Small and Medium Enterprises, individual business operators and corporate bodies depending on need and preferences.

The company, he said, offers highly secured private internet service that is capable of protecting systems for corporate bodies. It also stores clients’ data.

The services are supported by the presence of a state-of-the-art data centre, according to the company’s chief technology information officer, Mr Jerome Albou.

Located at Salasala in the city’s outskirts, the centre is part of Tigo’s B2B service where customers are free to rent space or ask the telecom firm to host its data under a special Service Levy Agreement (SLA).

The company’s B2B provides storage businesses with one stop-shop for various communication and data requirements thus alleviating the need for them to source such services from different providers. In essence, this cuts on costs.

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Thursday, September 14, 2017

Workers ‘at the mercy of employers’

Employees carry placards bearing various

Employees carry placards bearing various messages during past May Day celebrations in Tanzania. PHOTO | FILE 

By Louis Kolumbia @Collouis1999 lkolumbia@tz.nationmedia.com

Dar es Salaam. Tanzania must address various challenges in the labour industry if its people are to benefit from the country’s industrialization strategy, a new report by Legal and Human Rights Centre (LHRC) suggests.

The issues include employment contracts, knowledge of labour rights and obligations and compliance with compensation demands, according to the Human Rights and Business Report 2016.

Other challenges are freedom of association and active engagement of registered trade unions, gender issues at workplaces as well as issues of discrimination in the labour and employment industry.

The fifth LHRC report – which was conducted in 14 regions across Mainland Tanzania - found out that 37.82 per cent of surveyed workers didn’t have employment contracts while 62.18 per cent had contracts.

Presenting the report findings, LHRC researcher from the unit of human rights and business, Mr Pasience Mlowe said while 61.60 per cent have written contracts, 38.40 per cent have oral contracts.

The findings further show that only 40.11 per cent said they had an opportunity to negotiate terms of contracts with employers while 59.89 per cent said they were denied the opportunity.

While the Employment and Labour Act 2004 requires employees to be given copies of contracts they have signed, some employers opted to remain with copies.

According to him, workers have been working under different job descriptions contrary to the one stipulated in contracts they have signed.

“Study has found some companies preferring short term contracts, normally three to six months. Such contracts enable the companies to recruit new employees upon their expiry, thus they are exploitative,” he said.

The trend, according to Mr Mlowe, is purposely done to avoid having workers who might demand rights that skilled workers are entitled to.

Furthermore, he said, the report also revealed poor engagement of employees in salary determinations, with 50.72 per cent of respondents saying salary was determined by employer while only 18.62 per cent said employer negotiated with trade union as 10.03 per cent did personally engage in negotiations with their employers.

Generally, employees were reported to have little knowledge of labour laws, putting them in doubt whether they could advocate their rights in the process of fulfilling their obligations.

“Analysis shows that 79.94 per cent of respondents have said they did not have the basic knowledge of labour laws governing the country and obligations stated therein,” he said.

However, the Trade Union Congress of Tanzania (Tucta) and the Association of Tanzania Employers (Ate) have started awareness campaigns through radio programmes and provision of flyers to workers in some areas.

Companies are also reported to poor working condition thereby threatening the health of workers in production lines.

In the same vein, a number of companies violated Article 2 of the International Labour Organization (ILO) Convention and section 19 (1), (2) of the Employment and Labour Relations Act (ELRA), 2004 requiring employees to work not more than eight hours a day and 45 hours a week.

Similarly, a number of employees are still not contributing to social security funds and Workers Compensation Fund (WCF).

This is despite the fact that employers do deduct such monies from employees’ monthly salaries.

Employees, the study shows, are generally ignorant of the presence of the WCF.

Enacted in 2008, the WCF seeks to compensate employees suffering occupational injuries or who have contracted occupational diseases through handsome compensation that would enable their rehabilitation to full recovery.

Trade unions

While 64 per cent of the respondents believe trade unions were doing a good job, the report found out that the idea had not been well entrenched in the employment system.

“The current challenge with trade unions is that they lacked enough personnel at regional and district level rendering them to be very weak instrument in advocating workers’ rights,” the report reads.

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Thursday, September 14, 2017

Boost for cultural tourism as lodge gets global recognition

A group of students from Europe and America who

A group of students from Europe and America who came to study the various species of butterflies pose for a group photograph at the gate of a South Pare Mountains based cultural mountain lodge - Tona Lodge – where they were accommodated during the trip. PHOTO|FILE 

By The Citizen Reporter @TheCitizenTz news@tz.nationmedia.com

Kilimanjaro. A South Pare Mountains based cultural mountain lodge has received global recognition, a boost to cultural tourism in Tanzania.

The World Quality Commitment Award (WQC) 2016/7 has been granted to Tona Lodge after reaching the set out criteria by the Madrid-based institution, named BID (Business Initiative Directions).

In a letter sent to the Tanzania Tourist Board (TTB) and copied to Tona Lodge by Tanzania Embassy in Paris, it is noted that the Award is given to companies, organisations, institutions and individuals in recognition for their quality of service, innovation, and improvement symbolising a success in the business.

The founder of the lodge, Mr Elly Kimbwereza, and the coordinator of South Pare Tourism Cultural Centre accepting the award noted that the potential of cultural tourism in Tanzania was so huge, and time has come for it to be embraced as a mainstream one instead of being sidelined.

He said it was gratifying to receive WQC, saying it was a testimony that cultural tourism was being taken seriously.

He said the award means that nature-based tourism could contribute to social, economic and environmental benefits.

“I have always insisted that cultural tourism is one of the alternatives to rapacious resource extraction. It could earn the desperately sought income and bring in revenues to properly managed villages and protected areas in the Southern Pare,” he said.

There are many hurdles to promotion of cultural tourism in Tanzania despite the abundance in cultural tourism, it is one of the most unheralded and untapped tourist destination, he noted.

To get the award Tona lodge has shown efforts to enhance better understanding among people in the Pare Mountains and directed more awareness on the great cultural heritage and civilisation that values traditions and cultures of the local people as a tool for fighting poverty and elevate the living standards of village people, noted Mr Kimbwereza.

“We started cultural tourism in Pare Mountains two decades ago, some people thought it was crazy,” he said.

The award goes a long way to vindicate those of us who have been advocating for this kind of tourism that is truly socially responsible, Mr Kimbwereza noted.

The goal of cultural tourism is not just to promote our villages to the rest of the world but also to promote the assets of the nation internally and create a consensus for national development.

Mr Kimbwereza also sees a successful cultural tourism sector as creating a positive image in broader terms,which in turn can stimulate investment in other sectors.

The Tanzania Embassy in Paris took the opportunity to congratulate Tona lodge for the Award as it is recognition of its commitment to the culture of quality.

MORE INFO: ABOUT WQC

WQC is an assurance of the support of a multinational team of professionals specialized in the communication, education and promotion of quality culture. The criteria for Award are :

(1)Excellence in Leadership

(2)Quality and Productivity

(3)Business Prestige, Brands and Technology

(4)Innovation and growth.

Tona lodge was voted in by companies, organisations from 119 countries in which leaders and experts in quality and excellence submitted their votes for Tona lodge to receive the Award in the Gold category.

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Thursday, September 14, 2017

‘Rethinking Socialism’: is author ‘miming’ JPM?

 

By Karl Lyimo

A new-found ‘online friend,’ Salim Msoma – whom I’m yet to have the warmly-coveted privilege of meeting face-to-face – emailed me an intellect-stimulating article which prompted this particular business palaver.

Published on August 30 this year, the piece – titled Rethinking Socialism in the Twenty-First Century: What do we want... And, where exactly are we? – was penned by Dan Corjescu, a Romanian-Brazilian ‘Business English Teacher and Poet’ living in Sofia, Bulgaria.

Some of the bits that had me sit up straight and start ‘rethinking’ read as follows: “... what should a Twenty-First century Socialist be fighting for in the America of today? “Keeping in line with a pro-technologist, rationalist Marxian viewpoint, we should:

• Work towards policies that encourage a return to Manufacturing – particularly high-tech Manufacturing.

• Endeavor to persuade Industry, Government and Educational institutions to build an educational infrastructure that’d create, at a young age, a class of highly-skilled workers – thus forming the basis for a strong tradition of economic and industrial apprenticeship.

• Powerfully advocate for a ‘Manhattan (nuclear) Project-like’ initiative for alternative energy. Incentives, bonuses, resources should be lavished on potential technologies that lower energy costs – and, as an extra benefit, help to heal the Environment.

• Agitate for the special needs of women NOT only to be taken into account in the workplace, but also encouraged. The special role/nature of motherhood should be supported and NOT frustrated by market exigencies. After all, the working mother is adding extra/special value to society through her dual roles as worker and mother!

The foregoing is in resonance with the Industrialization Goal of Dr John Pombe Magufuli, President of the Fifth-Phase Government of the United Republic of Tanzania from Nov. 5, 2015...!

Intended to propel and elevate Tanzania to a middle-income Economy and middle-class Society by the Year-2025 – as enshrined in the ‘National Development Vision-2025,’ the country’s ongoing ‘Mother of all

Socio-Econo-Political Development Frameworks,’ so to speak – the Magufuli Industrialisation Dream vis-a-vis writer Dan Corjescu’s views on Rethinking Socialism in the Twenty-First Century beautifully coalesce for a common end.

Never mind that Corjescu was writing that piece with specifically in mind the world’s economic and military powerhouse America, the self-styled ‘Land of the Free and Home of the Brave!’

In any case, he preceded his conclusions/recommendations by reviewing Capitalism vis-a-vis Socialism in all its forms that have been associated with the likes of Marxism; Leninism; Stalinism; Maoism; ‘Nyerereism/African Socialism;’ Revolution; Dictatorship of the Proletariat; the One-Party State; Centralised State Planning, etc...

“All these were tried, but didn’t work...! Furthermore, the Marxist heresies of Leninism, Stalinism and Maoism were outrageous – and, ultimately: deadly caricatures of Marxism...” Corjescu pontificates.

Whew!

According to the author, Capitalism has survived on Planet Earth for roughly six centuries – and “its imminent demise” premature fantasies!

“I think that, once we give up premature fantasies of Capitalism’s imminent demise, we can fruitfully pick up the work of the reformist Social Democratic parties of the late 19th-early 20th centuries – but, now (doing so) within the context of 21st century material possibilities and current social needs!”

So: “what should a 21st century Socialist be fighting for?” The writer rhetorizes – arguably subconsciously speaking for the world, not just for the US alone!

“Keeping in line with a pro-technologist, rationalist Marxian viewpoint, we should work towards policies that encourage a return to Manufacturing – particularly high-tech Manufacturing.

“We should advocate a return to a high-level and well-funded Industrial/Scientific policy...” he lays it on thick!

Sounds too comfortably familiar with Tanzania President Magufuli’s Industrialisation goals? You can say that again!

Oh... Happy birthday today, Tanzanian politician Freeman Mbowe (born September 14, 1961) – and cheers!

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Thursday, September 14, 2017

Is your rental agreement stamped?

 

By Shabu Maurus

Stamp duty is one of few taxes that you may not encounter as often in Tanzania. It is a tax that can easily be overlooked. Not surprising, the penalty regime for non-compliance with stamp duty is one of the fiercest in monetary terms.

The penalty can go up to ten times the principal amount of stamp duty that was due but not paid on time!

Stamp duty applies to instruments specified in the stamp duty law (The Stamp Duty Act, Cap 189). The stamp duty law defines an “instrument” to include every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded. The law requires the specified instruments to be stamped within 30 days from the date of signing (execution).

Lease or rental agreements for residential or commercial buildings are probably the most common type of instruments that are subject to stamp duty. However, it is not uncommon to find most of these agreements are not stamped. From my experience, in most cases, the parties to those agreements are not aware of the stamp duty requirements. Even in cases where the parties are aware of the requirements, there is a problem of procrastination.

Who should pay stamp duty?

A rental agreement would normally have two parties, the landlord, and the tenant. The question is who, between the two, should pay the stamp duty? The stamp duty law provides a flexibility on the two parties to decide who should pay. For parties that are aware of the stamp duty requirement, normally they would put a clause in the agreement to specifically assign the obligation to pay stamp duty. If the rental agreement does not specify who should pay, the stamp duty law places that obligation to the tenant.

The process

For rental agreements, the stamp duty is 1 percent of the annual rental amount. In practice, before stamp duty is paid, TRA requires a copy of a rental agreement to be sent to the TRA offices so that they can assess the tax. TRA also requires the rental agreements to be signed and certified by an advocate or a similar legal officer (notaries). Once the assessed stamp duty has been paid, relevant copies of the rental agreement are sent to TRA for stamping. This process needs to happen with 30 days from the date the rental agreement was signed.

As a tenant of the building, you need to ensure that the rental agreement is stamped. The risk of not stamping the rental agreement is more on the tenant than the landlord, as in most cases rental agreements do not specifically assign the responsibility to the landlord.

Mr Maurus is a Partner with Auditax International

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Thursday, September 14, 2017

Understanding the ego in depth



Azim Jamal

Azim Jamal 

By Azim jamal

The Prime Minister of the Tang Dynasty was a national hero for his success as both a statesman and military leader. Despite his fame, he often visited his favorite Zen master to study under him.

One day, during his usual visit, the Prime Minister asked the master, “Your Reverence, what is egotism according to Buddhism?” The master’s face turned red, and in a very condescending and insulting tone of voice, he shot back, “What kind of stupid question is that!?” This unexpected response so shocked the Prime Minister that he became sullen and angry. The Zen master then smiled and said, “THIS, Your Excellency, is egotism.” (Source: Spiritual Inquiry)

The word “Ego” is from Latin, and it means “the self.” To be egotistical is to be self-centered. Far from enhancing a person’s stature, egotism diminishes it. As American statesman Benjamin Franklin put it, “A man wrapped up in himself makes a very small bundle.”

To the egotist, everything revolves around the self. That’s why an egotist often becomes defensive and judgmental, taking things personally.

People with big egos are socially difficult, and their self-centered nature makes them hard to co-operate with. Ironically, their “me-first” arrogance seems to arise from a sense of inadequacy and inferiority. Their exaggerated sense of personal superiority is actually a front to mask their deeply felt sense of inferiority. They are really in denial.

Unfortunately, this results in their inability to be objective or open-minded in dealing with life’s problems. Since they judge success in a very self-centered way, their victories and successes hold meaning only for themselves. They may have intelligence in abundance, but their thinking is distorted. They use a number of justifications and rationalizations to make them appear right, without allowing for any other opinion.

As we take a closer look at egocentricity, we learn that:

• Egocentricity edges out our innate gifts.

• Either introvert or extrovert egos lead to imbalance.

• Defensiveness is an energy drainer that leads to imbalance.

• Both inferiority complexes and superiority complexes are driven by the ego, and always prove to be energy wasters.

• When ego enters, love exits.

If you are alert to life, you will see that you are a microcosm of the universe.

You do not live alone on an island; therefore Life Balance must be cultivated in the midst of others. Some people let their egos take over, and they forget about other people or look upon them as burdens or competitors, creating imbalance and unhappiness in relationships.

“We compete with others only in those situations in which we are afraid and defective in the initiative,” observed William and Marguerite Beacher.

You can turn EGO into an acronym for Edging Gifts Out. When you’re full of ego, you let it edge out gifts such as creativity, innovation, intuition, positive energy, objectiveness, and happiness.

Here are some strategies for avoiding egocentricity:

• Be non-judgmental.

• Cultivate emotional maturity.

• Cultivate objectivity to remain focused and clear about goals.

• Invite love into your life.

When there is love, there is God, and with love your life becomes a work of art, a piece of poetry. Love drives home the realization that you have been created and are not the creator. You no longer take things personally or become defensive or suspicious. You can say good bye to complexes – inferior or superior. You’ll find no more boundaries and fight no more turf wars. No more edging gifts out! You become a person who is confident of his place in the universe, and you become full of gratitude towards life.

Condensed message from “Life Balance the Sufi Way” by Azim Jamal and Dr. Nido Qubein. For feedback email info@corporatesufi.com

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Thursday, August 24, 2017

CORPORATE SUFI: Power of questions key in civilisation



Azim Jamal

Azim Jamal 

By Azim Jamal

The success of every civilisation, whether in terms of spirituality, humanity, inventions and discoveries can be mapped out by the quality of the questions asked.

Every transformational leader uses questions to drive the strategic dialog with his teams.

Let’s explore how we can create the right questions: “What are we doing today and why now?”

Often organisations get too involved in charting out new strategies and initiatives without questioning the legacy work that’s still being done.

No strategic way forward can be defined unless we first establish the current status.

“How does that align with our goal or big picture?” Every activity defined in our scope of work should bring us closer to the organisational goal -- whether it’s about bringing value to your customers or streamlining a process or raising team morale. The nature and priority of each role should be defined in the context of the organizational goal. This question will also help you determine the importance and immediacy of each issue. “What has changed in the last few months/weeks?”

This question is a powerful investigative tool and will force your team to re-assess the situation at hand, uncover changes, and make the necessary course adjustments to respond to the changing environment.

“What do the responses reflect?”

Listen carefully to not only the content but also the specific choice and intonation of the words your team uses to describe the situation or challenge. Taking notes is a good idea, for they can play a crucial role in revealing hidden insights and defining your future strategy. Refrain from immediate judgment or reaction.

Your role while asking questions is only todispassionately gather as much information as possible.

“What would an ideal solution look like to you?” “What does success look like for our team?

Every organisation has criteria to measure success. Success is defined by not just meeting the objective but is also defined by the processes, actions, behaviors, relationships, and outcomesachieved to reach the objective. This question creates a conduit from your present situation to your desired future state.

“What can we do? What are our options?

Every solution offered by your team, however seemingly insignificant, can play a critical part in adding another facet to the situation or prompt another set of solutions.

Some solutions will be feasible, while others will be a stretch, but theycan lead you to another idea. As such, do not reject any solution for now.

“What else can we do to achieve more, better, faster?”

The term ‘what else’ challenges your team to think more, do more, and do it more efficiently and effectively.

You might be tempted to jumpdirectly to this question. But if you haven’t asked the preceding set of questions, you might come up with an incoherent stream of ideas that might not reveal any true way forward.

“If we can resolve this, how would that impact our outcome?” “How would this solution change us?”

Once we have defined the desired state, this question further clarifies the impact of that state in terms of benefits and outcomes for each team member.

The more proficient you get in asking the right questions, the better placed you are to drive success for your team and your organisation.

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Thursday, August 24, 2017

YOUR BUSINESS IS OUR BUSINESS: Massive creation of jobs in industrialisation debatable

 

By Karl Lyimo

If there’s a thread that consistently runs through the national fabric of the Fifth-Phase Government of President John Magufuli, it’s the call for Industrialisation.

Sworn into the highest Office in the land on November 5, 2015, Dr Magufuli inaugurated the 11th Parliament on November 20 that year.

In the event, he proclaimed industrialisation a key priority – and he’d focus on electricity development, considered pivotal to achieving meaningful and sustainable industrialisation!

The Magufuli Administration’d actively support industrialisation processes through an Industrial Development Bank (there’s already an

Agriculture Development Bank), as well as the reduction of taxes on locally-produced goods, largely including mass consumption goods such as textiles/clothes and edibles...

The objective’s to ensure Tanzania becomes a semi-industrialised country by Year-2025, with the manufacturing contribution to the GDP reaching 40 per cent! This’d be in accord with the National Development Vision-2025 which – among other things – would’ve ‘created’ a middle-income citizenry 12-13 years hence!

It’d also transform the Economy from currently being dominated by extractives (Mining, etc), erratic Tourism and Agriculture that’s threatened by rapidly-evolving Climate Change negatives! Today, Tanzania’s industrial sector comprises ‘simple manufacturing’ (53 per cent); ‘processing’ (43 per cent) and ‘assembling activities’ (4 per cent). Manufacturing consists of food-processing (24 per cent); textiles (10 per cent); chemicals (8.5 per cent), and ‘others.’ Since agriculture has traditionally been the mainstay of the economy, manufacturing generally involves processing local agricultural produce. But, many crops are still marketed in their raw form, with relatively little value-addition to them done on small-scale... Hence locally value-added products like yarn (cotton; sisal), twine (sisal), leather (‘Bora’ shoes, etc), blended coffee, tobacco products, wheat flour…

In the event, we’re told, “Tanzania’s agriculture-based value-added net output rose from $8.6 billion in 2009-to-13.8 billion in 2014!” [ July 4, and July 10, 2017].

That’s a 61 percent rise in five years: ample testimony to Tanzania’s great potential in the industrial value-addition stakes. No wonder the government is hell-bent for leather on expedited industrialisation, initially resulting in an economy that’s broadly- and diversely-based on manufacturing, processing and packaging industries for the domestic and export markets.

That’s indeed NOT an impossible dream – as already demonstrated by the likes of China, Japan, India, Malaysia, Korea-Seoul, Indonesia, Singapore, Brazil, Thailand, Vietnam and Taiwan, whose industrialisation efforts since the 1950s have made them ‘Economic Tigers’ to reckon with! All adopted manufacturing that led to meaningful and sustainable economic growth – an ongoing feature! [World Bank-2008: The Growth Report Strategies for Sustained Growth & Inclusive Development].

So, without prejudice, President Magufuli is ‘taking a leaf out of those countries’ book’ on Socio-Economic Development. That’s basically why and how Tanzania established some 1,423 industries in Magufuli’s first year as President – with another 19 ongoing projects!

This comes well after the government of Mwalimu Nyerere (1961-85) that saw to some industrialisation on the back of the February 5, 1967 Arusha Declaration & Tanu Policy on Socialism & Self-Reliance.

However, that dream was shattered to smithereens by the helter-skelter privatisation programme that raged under the 2nd-and-3rd-phase governments of President Ali Hassan Mwinyi (1985-95) and Benjamin Mkapa (1995-2005).

What a pity that it took half-a-century post-the Arusha Declaration for Tanzania under President Magufuli to salvage the industrialisation dream for 54 million Tanzanians whose working force of about 25 million is jobless – or underemployed, underpaid – and under-every-other-negative! While industrialisation may bring about increased volumes and varieties of manufactured goods – as well as an improved standard of living for some – it also may result in widespread unemployment and grim living conditions for the poor and working classes!

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Thursday, August 24, 2017

MANAGING TAX RISK: Challenges of EFD receipts

 

By Shabu Maurus

Electronic Fiscal Devices (EFDs) have been in Tanzania for about seven years. EFDstrace back its history to James Ritty, a saloon business owner in Dayton, Ohio, USA in the 1870s. Ritty realized that some of his employees stole money from his business.

In 1878, while on a ship to Europe, Ritty saw a machine that counted the number of times that the ship’s propeller completed a revolution. Using the same logic, he invented a cash register he named “Incorruptible Cashier”. The employee was required to ring up every transaction on the register, and when the total key was pushed, the drawer opened and a bell would ring, alerting the manager to a sale taking place.EFDs, essentially, use a similar logic but electronically.

Tanzania Revenue Authority (TRA) describes an EFD as a machine designed for use in business for efficient management controls in areas of sales analysis and stock control system and which conforms to the requirements specified by the laws.Generally, there are three kinds of EFDs current in use in Tanzania. The Electronic Tax Register (ETR), which is standalone EFD for issuing fiscal receipts. The Electronic Fiscal Printer (EFP), is a printer connected to a point of sale (POS) system and it also produces receipts. The third kind is Electronic Signature Device (ESD) which is intended for use by business issuing tax invoices from a computerized system. ESDs donot produce receipts but put a string of alphanumeric characters (a signature) on an invoice.

Despite some success stories for the period spanning seven years of EFDs use in Tanzania, there are still some practical problems that need to be resolved. The tax administration law criminalizes a failure to issue a fiscal receipt by the seller and also a failure to demand a fiscal receipt by the buyer in business transactions.

Electronic transactions

Both the internet and mobile telephony technologies have brought about new forms of business as well as new ways of doing business. This brings both tax opportunities but also challenges. Imagine the internet banking, mobile banking, and mobile money services.We purchase things like electricity (LUKU), airtime or pay for water bills through the mobile money, mobile banking or internet banking platforms.How could a taxpayer purchasing these kinds of services demand a fiscal receipt? How should a taxpayer support his expenses or VAT claims?Currently, the tax laws provide very little guidance, if any, on these and other similar questions. One solution would be for the tax authority to issue practice notes or guidelines. Can the SMS received when paying for these services be acceptable by the tax authority for tax purposes?

Validity questions

Even for transactions where fiscal receipts are issued, most of them tend to lack some or all of the buyer details prescribed by the law. The law requires receipts to have various buyer details including the name, address, tax identification number (TIN) and also VAT registration number (VRN) if the buyer is VAT registered. Lack of these details creates a fertile ground for tax disputes between the taxpayer who may such receipts to support their expenses or VAT claims and the tax authority who may deny claims of such expenses or VAT claims on the basis that the receipts are invalid.

But is it practical for the sellers to enter buyer’s details in retail transactions?Can the buyers correctly remember their TINs and VRNs? Imagine you are at a petrol station or a super market. Are the ETRs and EFPs designed to capture all those details? Could the EFDsbe made to retrievebuyer’s details from the database of taxpayers at TRA?

Mr Maurus is a partner with Auditax International

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Thursday, August 24, 2017

Swala eyes pension funds for capital

Former President Ali Hassan Mwinyi rings the

Former President Ali Hassan Mwinyi rings the bell to launch Swala Oil & Gas Tanzania Plc trading on the Dar es Salaam Stock Exchange (DSE) on August 12, 2014. With him are DSE’s Emmanuel Nyalali (left), Swala CEO David Mestres Ridge (second left) and Swala chairman Ernest Massawe (right). PHOTO|FILE 

By Alawi Masare @AMasare malawi@tz.nationmedia.com

Dar es Salaam. Swala Oil and Gas Tanzania Plc is engaging pension funds in both Tanzania and Uganda to raise money for buying equity in gas producing PanAfrican Energy.

If all goes well, the oil prospecting company which is listed on the Dar es Salaam Stock Exchange (DSE) will diversify from pure exploration into a more balanced portfolio.

Swala is actively exploring for oil in the East African Rift System with a 25 per cent equity interest in, and is the operator of, the Kilosa-Kilombero and Pangani licences.

The firm started discussions with Orca Exploration Group Inc. regarding an investment of up to $130 million in PanAfrican Energy, a Mauritius-registered company that is a wholly-owned subsidiary of Orca.

PanAfrican Energy is Tanzania’s first natural gas producer – supplying gas for power generation at the Ubungo Power Plant in Dar es Salaam. The company also supplies natural gas to 38 industrial and commercial customers in the city as well as Compressed Natural Gas (CNG) for use in vehicles.

Gas from the Songo Songo island plant is transported by a 25 km 12-inch marine pipeline and a 207 km 16-inch land pipeline that extends north along the coast to Dar es Salaam.

The company started investor meetings in Dar es Salaam and Kampala early this month to offer seven-year retail bonds with a coupon of 12-16 per cent payable in either available funds or Swala shares at a 12.5 per cent discount.

“We got really good reception in both Tanzania funds and now in Uganda,” said Swala Oil and Gas Tanzania chief executive officer Dr David Mestres Ridge.

“This is a strategic investment for us because it allows us to diversify from pure exploration into a more balanced portfolio,” he added.

The investment is envisaged as being structured in several tranches and the company’s ability to complete such an investment will depend on securing the necessary finance in each tranche.

Tranche 1 has committed funding from internationally recognized global institutional investors subject to the completion of legal due diligence that is currently ongoing.

The second tranche has been designed to encourage the participation of Tanzanian corporate bond investors in a manner that aims to maximize their participation alongside that of sophisticated international institutions, in line with the company’s demonstrated commitment to local involvement in the natural resources sector.

“Orca and Swala have been discussing an investment by Swala for some time, and both were determined to structure the investment to encourage the participation of Tanzanian bond investors who are normally not able to participate in these transactions.

Our intention is to construct an approach that could lead to a significant interest in the investment being indirectly held by Tanzanian investors through their ownership in Swala, an efficient alternative to stock exchange listings that we believe creates a win-win situation for the government of Tanzania and local and foreign investors alike.” The company said in a statement earlier.

Orca Exploration Group Inc confirmed recently that it was in discussions with Swala regarding a possible minority investment in PanAfrican Energy but said “there are no assurances that these discussions will lead to a definitive agreement and any such agreement is expected to be subject to Swala securing necessary financing as well as a number of other conditions.”

According to the recent statement, Swala has secured, subject to ongoing legal due diligence, funding for its first investment tranche from a major US investor, along with a seven-year CAPEX draw-down facility from a major South African investment fund. This facility will be used by Swala to optimise its forecast cashflow profile and ensure that it can meet any project development obligations.

Tanzania’s state-owned environmental watchdog said in July that it had given tough conditions to Swala before it started drilling at a game protected area in the Kilombero valley in Morogoro region to protect the environment.

Swala intends to drill oil in the game protected area but the National Environment Management Council said the drilling will be done after it meets stringent conditions aimed at safeguarding the environment of the area.

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Thursday, August 24, 2017

Industrialisation path bumpy as imports of capital goods decline

 

By Alex Malanga @ChiefMalanga

Dar es Salaam. The current account deficit narrowed significantly during the past three years as the country cuts imports.

This comes amid the government’s efforts to curb what it terms as wasteful expenditure.

However, economists are of the view that improving current account deficit by reducing importation of capital goods is bad for Tanzania’s industrialisation agenda.

Capital goods worth $2.63 billion were imported in 2016, down from $3.813 billion the previous year.

Capital goods include building and construction materials, transport equipment and machinery. Importation of building and construction materials, transport equipment and machinery fell by 27.2 per cent, 29.3 and 34.2 per cent respectively, according to Bank of Tanzania (BoT) figures.

The current account measures money flows to the country in terms of goods and services.

A deficit shows that more funds went out than came in over a specific period.

This forms part of the country’s balance of payments position, which captures the country’s total transactions with the rest of the world.

The Bank of Tanzania (BoT)’s latest data revealed that the current deficit account fell to $2.054 billion (Sh4.5 trillion) last year from $3.543 billion (Sh7.9 trillion) in 2014.

This, according to BoT, was attributed to the decline in imports particularly services and increase in exports of both goods and services.

Last year, the value of imports of goods and services stood at $10.7 billion (Sh23.8 trillion), down from $13.6 billion posted in 2014 (Sh30.3 trillion). However, according to an economist from the Policy Research for Development (Repoa), Dr Abel Kinyondo, the fact that much of the decline has been in the area of importation of machinery, transport equipment as well as building and construction materials means that the country’s industrialisation goal may take much more time to be achieved.

“We would expect that importation of capital goods should be increasing as the country promotes industrialisation….the decline in capital goods is a reason to worry, taking into consideration the fact that we do not have the capacity to produce them locally,” said Dr Kinyondo.

He said a drop in importation of capital goods is in fact a sign of retardation in investment which should give the country enough reasons to worry.

“The government needs to come out clearly and rekindle investors’ confidence,” he said.

Prof Haji Semboja from the University of Dar es Salaam shared similar sentiments, noting that improvement in the current account deficit, driven by decline in imports of capital goods, is not healthy for the economy.

The solution to the challenge, he said, lies in making the local market more predictable to producers.

“The market for industrial goods is repeatedly disturbed by competition from unknown sources and illegal imports…this must be dealt with,” said Prof Semboja, noting that failure to deal with issues that affect importation of capital goods jeopardises the industrialisation dream.According to Prof Semboja, the government should also formalise small-scale trading.

“The government should rethink on how to help hawkers so that they can be included in books of accounts and graduate to the next stage that will leverage on development of industrial sector,” Prof Semboja opined.

Tanzania’s industrial sector experienced an average annual growth of eight per cent over the past five years. In July this year, Industry, Trade and Investment minister Charles Mwijage, unveiled measures aimed at preventing the collapse of local industries.

Measures announced by the Minister include controlling sub-standard and counterfeit products and curbing under valuation and under declaration of goods.

This is aimed at enhancing fair competition in the market.

“A team comprising officials from my ministry, Home Affairs, and Finance and Planning ministries have been formed to ensure the initiatives were implemented as planned,” noted Mr Mwijage.

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Thursday, August 24, 2017

Aid to TZ down in 5 years: report

 

By Alex Malanga @ChiefMalanga amalanga@tz.nationmedia.com

Dar es Salaam. Foreign aid in Tanzania is falling while revenue from domestic sources is increasing.

The government revenue from external sources which include loans, grants and aid decreased to Sh2.1 trillion from Sh3.6 trillion in the last five years, a National Bureau of Statistics report shows.

However, revenue from domestic sources jumped to Sh13.6 trillion from Sh7 trillion.

“The decline is good only if we don’t need loans, grants and aid from developed countries because we have more in our basket and not because of donor hesitancy of fatigue,” Repoa strategic research director Abel Kinyondo said.

Dr Kinyondo remembers how a number of Western countries spoke harshly about Zanzibar’s last polls and threatened to suspend aid to Tanzania. They said democratic principles were violated.

He also links donor reluctance to support Tanzania on government refusal to allow same-sex marriage.

“It’s high time we stood on our own feet…it is possible to change the flow of trade by reducing trade costs and improving the business environment. We should make tax rates reasonable and policies predictable to attract more investors and collect more revenue.”

“Aid plays a significant role but, generally, there is a price which a country has to pay…I’m not undermining the role of aid, but my take on this is to encourage trade and investment.”

He thinks too much economic reliance on foreigners may delay the implementation of some development plans.

That could be different if the government had ample funds.

He also spoke of global economic uncertainties.

“Worldwide economy is not stable. Donors look for excuses not to offer aid. What we should do is to find different sources of funding. We should expand the tax base.”

A University of Dar es Salaam (UDSM) senior economics, Dr Jehovaness Aikaeli, told BusinessWeek that the decline in aid occurred either because domestic tax collection improved and/ or development partners reduced their assistance.

“We appreciate the support we get from our partners, but it isn’t sustainable in the long term.”

Dr Aikaeli also urged the government to attract Tanzanians in the diaspora to invest.

“People in the diaspora have a sense of empathy and want to invest back home. If you take the power of remittance and apply it to investment, the diaspora could be a force to be reckoned with. We have the capabilities, intelligence and the competence as well as the desire to make our country a better place to live in.”

However, UDSM’s economics professor Haji Semboja believes economic dependency is not bad if the funds are used as planned. “If we don’t get funds from abroad that’s a bad indicator to the economy. It shows we are not creditworthy.”

He maintains that aid is bad if it is used improperly.

Dar es Salaam resident Emily Nyoni is happy that foreign aid to Tanzania is falling while revenue from domestic sources is increasing, saying it will reach a point when the country will be able to stand on its own feet.

“Relying on funds from development donors is neocolonialism…it’ high time we rationally used the available scarce resources to meet all of our needs.”

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Thursday, August 17, 2017

Cellphones now overtake beer in tax contribution

 

By Nuzulack Dausen @nuzulack ndausen@thecitizen.co.tz

Dar es Salaam. It is official: mobile phones are now leading generators of excise tax, overtaking beer.

A National Bureau of Statistics (NBS) report shows that since 2004/05 beer was the largest contributor of revenue from excise but things changed in 2013/14 when mobile phones took the lead.

This came after the tremendous growth of mobile phone usage in the country that has been prompted by ever increasing demand in communication especially in voice, internet and mobile money services.

Tax Statistics Report 2015/16 shows that since in 2013/14 mobile phones have been accounting for more than 28 per cent of total domestic excise tax, leaving beer at an average of 25 per cent.

The report reveals that the revenue from the electronic gadgets has grown tremendously by more than 25 times from Sh9.7 billion in 2004/05 to Sh246.6 billion in 2015/16. Beer domestic excise duty has risen from Sh52.1 billion to Sh216.6 billion in 2015/16.

Analysts say this shows the contribution of mobile phones to the national economic growth can be higher if excise duty is reduced to increase communication.

“Tanzania has the highest excise rate in the East African Community. It’s 17 per cent while Rwanda’s is eight per cent and Kenya’s is 10-12 per cent,” said Auditax International expert Shabu Maurus.

He said telecom companies had been urging the government to reduce the rate to make communication inexpensive, to no avail. Mr Maurus suggests that it is important for the government and mobile phone companies to agree on win-win model for rural areas to enjoy reliable communication.

“Most studies done in the past including that of 2015 by GSMA -- a trade body that represents the interests of mobile operators worldwide -- shows that a reduction in excise tax rates will increase communication, which will in turn, boost the government revenues.”

However, the taxman says it is the growth in the use of communication services that made mobile phones raise their share of revenue from domestic excise taxes.

“People nowadays use mobile phones not only for voice call alone but for more uses such as mobile money services and social networks like WhatsApp,” said the Tanzania Revenue Authority (TRA) director of information and tax education, Mr Richard Kayombo. “That’s why mobile phones have contributed more than other products in the tax category.” He said excise tax rates in telecommunication sector “are the same across the region”.

In 2013/14 financial year the government introduced a 14.5 percent excise duty in all mobile phones instead of taxing airtime alone. Excise duty of Sh1,000 was slapped on each Sim card, but the public protested. The 2.5 per cent of the revenue from mobile phones excise duty was to fund the education sector.

The government then increased excise tax to wired and wireless telephones. Unlike in mobile phones, beer excise tax has been increasing almost every financial year, sometimes adjusted to fit with inflation.

For example, the excise duty for all beer, except that from locally unmalted cereals jumped from Sh382 per litre in 2010/11 to Sh765 per litre this financial year.

According to the report, total revenue from total domestic excise revenue in 2015/16 was Sh868.6 billion almost two times of what was collected in 2011/12.

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Thursday, August 17, 2017

Global body doubts benefits of sharing telco infrastructure

A telecommunication tower.  Inset is GMSA

A telecommunication tower.  Inset is GMSA director general Mats Granryd.  PHOTOS|FILE 

By Brian Ngugi @TheCitizenTz news@tz.nationmedia.com

Nairobi. A global association of mobile operators has cast doubt on the benefits of sharing infrastructure among telecoms players.

Kenya’s telecoms regulator has been pushing for shared infrastructure among the local players arguing this would heighten competition by reducing costs of deploying new network and see more frontier areas covered.

But the GSM Association — a global lobby for mobile operators — says in a new report that compelling telecom players inhibits effective competition.

“Policymakers in countries considering a move to a wholesale open access network for 4G services may believe they can achieve greater network coverage compared with models that rely on network competition. However, the research published demonstrates that this is not the case,” said John Giusti, chief regulatory officer, GSMA.

“We have found that network competition produces faster and more extensive network coverage, and the examples highlighted in the report indicate little evidence that a (shared infrastructure) is likely to achieve this.”

GSMA’s report examines the performance of the model (also known as single wholesale network or SWN) in five markets around the world including Kenya, Mexico, Russia, Rwanda and South Africa.

The Communications Authority of Kenya last year published guidelines that would see telcos compelled to share up to 30 per cent of new ICT infrastructure.

It argued then that a shared infrastructure policy would eliminate duplication of telco facilities.

The Kenya Information and Communications Regulations 2016 further sought to restrict the deployment of passive infrastructure unless there is no feasible option of co-location or where there is no option of infrastructure sharing with an existing infrastructure provider.

Under the model providers seeking to venture into frontier markets in the country would have to invest jointly in laying infrastructure like telecommunication masts, ducts and physical sites, among others.

The push by CA appears however to have fell through.

“The SWN push in Kenya has stalled due to a complicated negotiation process with a number of stakeholders,” said GSMA in its report.

“These struggles highlight how complicated the SWN model is.”

Under the framework the government would provide spectrum and private companies would roll out and operate the wholesale network.

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Thursday, August 17, 2017

Cellphone firms’ battle for market share intensifies

Tigo acting managing director Simon Karikari

Tigo acting managing director Simon Karikari speaks at a past event.  PHOTO | FILE 

Dar es Salaam. Competition in the telecommunication sector was largely slanted towards mobile money once again during the second quarter of 2017 amid a vigilant growth of voice subscriptions, a new study shows.

The Tanzania Communications Regulatory Authority (TCRA) Quarterly Communications Statistics Report for the second quarter of 2017 shows that the sector registered only 501,819 new subscriber identification module (Sim) cards during the second quarter.

That brought the total number of voice subscribers to 40,358,031 slightly above 39,856,212 registered at the end of March 2017.

However, five of the seven operators also registered a total of 1,059,163 million new mobile money clients during the same period in what analysts believe is a sign that market sentiments were changing.

Apparently, emphasis on mobile money is based on reports that over Sh50 trillion is currently being transacted across mobile money platforms in a year.

The Bank of Tanzania said in its May 2017 Monthly Economic Review that between July 2016 and April 2017, a total of 1.445 billion transactions - valued at Sh49.997 trillion were transacted in mobile money transfer across the country.

The money was 13.9 per cent more than Sh43.86 trillion that were transacted via 1.218 billion transactions during the similar period of the preceding year

Voice

Tigo, Airtel, Halotel and TTCL gained more voice subscribers during the period under review to send Vodacom, Smart and Zantel on the losing end.

Tigo gained 132,826 new Sim cards during the second half of 2017 to record a total of 11.37 million subscribers with the management attributing the performance to its ongoing network expansion and modernisation.

“We have seen a steady growth in voice subscribers mainly attributed to the $75 million investment in expansion and modernization of our network coverage,” acting managing director, Mr Simon Karikari said in a statement.

He said his company’s growth is also anchored on the attractiveness of its voice and data bundles to clients.

“Tigo continues to offer attractive data and voice bundles like Halichachi & Jaza Ujazwe which respond to customers’ needs.  We have also invested in expansion of our sales and distribution network including increasing the number of Tigo Pesa agents and merchants to ensure our products and services are available across the country,” he said. 

There was no immediate reaction from Halotel but the company’s managing director, Le Van Dai told The Citizen in June that its growth in two years is anchored in our strategy of focusing on poor rural communities.

Mobile Money

Airtel Tanzania - which registered 132,826 new Sim cards during the second half to bring the number number of its subscribers to 10.349 million - also stole the show on the mobile money front.

The company – which remained on position three in terms of voice subscriptions behind Vodacom and Tigo – registered a total of 1,038,193 new Airtel Money subscribers during the second half.

This means that the company accounted for 98 per cent of all the new mobile money clients during the period registered with Airtel Tanzania.

According to the company’s regulatory and communication director, Ms Beatrice Singano – Mallya, the growth was mainly a result of its diversified financial services which are offered through the Airtel Money platform in the form of ‘Timiza Loans’.

Launched in 2014, Airtel’s Timiza service offers instant unsecured loans to customers and Airtel Money agents across the country. 

With 1.038 million additions, Airtel Tanzania now has a total of 5.9 million Airtel Money subscribers behind 7.966 million and 6.07 million for Vodacom’s M-Pesa and Tigo Pesa.

Vodacom Tanzania Public Limited Company – which listed on the Dar es Salaam Stock Exchange (DSE) on Tuesday this week after successfully raising Sh476 billion in an Initial Public Offering (IPO) – surpassed its profit projections for the year ending March 31, 2017, largely due a swell in revenues from its mobile phone money platform, (M-Pesa) proceedings.

It registered a net profit of Sh47.554 billion during the year under review, against a projection of Sh47.28 billion as presented in its Prospectus.

Revenue from M-Pesa grew by a cool 11.2 per cent to reach Sh249.6 billion during the year ending March 31, 2017 from Sh224.394 billion during the year ending March 31, 2016.

Mobile phone companies are also moving their competition to data as TCRA figures show that the number of internet users – or at least internet-connected devices – has risen from 5.3 million in 2011 to 19.86 million in 2016.

With the internet penetration rate jumping from 12 per cent to 34 and 40 per cent in 2011, 2015 and 2016 respectively, telecommunication firms are now investing much of their resources in data.

Five of the seven telecommunication companies are currently promoting their 4th Generation Long Term Evolution (4G-LTE) internet in the market as they seek to capitalise on speed to net more subscribers and remain relevant.

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Thursday, August 17, 2017

MANAGING TAX RISKS: Additional cost of disputing a tax assessment

 

By Shabu Maurus

In exercising its statutory powers to administer tax laws in Tanzania, the tax authority (TRA) makes various decisions including decisions over the amount of tax that should be paid by a taxpayer. If a taxpayer, for any reason, disagrees with a tax decision made by TRA, a tax dispute arises.

Generally, if a taxpayer disagrees with the TRA’s decision he is entitled, as a first step, to object against the decision to TRA. If the tax dispute is not fully resolved at TRA level, the tax administration laws provide for a three-tiered appeal system -the Tax Revenue Appeals Board (‘Board’), the Tax Revenue Appeals Tribunal and the Court of Appeal.

The Finance Act, 2017 has made two fundamental changes to the tax dispute resolution process that, in my opinion, will significantly impact the administration of justice in the tax space.  First, is the requirement for a taxpayer to be issued with “a notice of final determination of objection” by the tax authority before the taxpayer can appeal against any tax decision. Whilst the amendment may be well intentioned, it falls short of prescribing time frame within which the tax authority should issue such a notice to the taxpayer to allow him to exercise his right of appeal. A fairer alternative would be to prescribe time frame within which a tax authority must determine the filed objection beyond which a taxpayer becomes entitled to file an appeal to the Board. 

The second change is that the interest will now continue to accrue on the amount of tax assessed by TRA but remains unpaid due to delays in “court proceedings or any other dispute resolution”.

This will apply if the tax dispute is finally decided in favour of TRA. The amendment also precludes a delay due to a “court proceedings or any other dispute resolution” as a reason for a taxpayer to request a waiver of interest.Whilst this will deter frivolous disputes by some dishonest taxpayers, it also inhibits access to justice. It, effectively, penalizes genuine taxpayers who for good reasons opt to exercise their right of appeal.

There are various good reasons as to why a particular taxpayer may disagree with a decision or decisions made by the tax authority against that taxpayer. It could be because the taxpayer believes that TRA’s interpretation of the tax law flawed. It could be a dispute on facts or the accuracy of TRA’s tax calculation. It could be an incorrect application of the law or even in some cases, a wrong tax law has been applied.

Of course, there are also “bad” reasons a taxpayer may disagree with TRA’s decision. A taxpayer may not fully understand the tax law or he may not have money to pay the demanded tax. Other taxpayers may not fully comprehend why the government should take away from them their hard-labored money.

Tax disputes can take years to resolve at each level and the tax administration laws, unfortunately, do not prescribe a specific time for resolution or decision at any level. I know some few unresolved tax disputes going back as far as 2007. Interest accrued on a monthly compounding basis at statutory rates over a period of the dispute may become unbearably massive. Once a taxpayer has filed an objection or appeal within the prescribed time, there is so little that taxpayer can do to speed up a tax dispute resolution process.

To taxpayers, if these changes are here to stay, it means that decisions whether or not to challenge TRA’s assessment of tax should be well thought through taking into account the potential interest.

Mr Maurus is a partner with Auditax International

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Thursday, August 17, 2017

Govt widens scope of trade centre project

Export Processing Zones Authority director

Export Processing Zones Authority director general Joseph Simbakalia speaks to Chinese diplomat Li Xuhang two years ago. The discussed how the two countries could ooperate in promoting investments in Tanzania’s special economic zones. PHOTO|FILE 

Dar es Salaam. The government is looking for a developer of Dar es Salaam’s Kurasini Trade and Logistic Centre at Shimo la Udongo who will also build its infrastructure.

Initially, the focus was only on developing the centre.

According to the Export Processing Zone Authority (EPZA) director general Joseph Simbakalia, unlike the current EPZA process whose infrastructure that was developed by the government, now only land will be provided by the government and investors develop infrastructure and develop core projects.

He told The Citizen that EPZA was seeking a competent partner to develop 248,000sq metres at Kurasini in Temeke.

He noted the process started after the government completed compensated Kurasini residents Sh53 billion ($31.8 million) last year.

The government has invited local and foreign investors to invest in the project and received several responses.

He declined to mention companies that had shown interest in the project on grounds that the process was still in its early stages.

“At least six companies have shown interest and the process of identifying the developer has started.” The tender was opened last month.

According to him, the project will entail constructing assembly plants, warehouses and distribution facilities as well as provision of commercial and logistic support services to facilitate trade.

A one-stop-service centre will constructed to house its own staff and those of other institutions such as the Tanzania Revenue Authority, Immigration Department, Labour, Tanzania Bureau of Standards, Tanzania Food and Drug

Authority and Tanzania Trade Development Authority.

The private developer would also be required to assume primary responsibility for marketing and searching for investors who would set up factory warehouses, assembly plants for Completely

Knocked Down and Semi-Knocked Down kits.

It would also set up processing and packaging facilities, production facilities for jewellery, pharmaceutical, garments, leather products and other items of apparel, assembly facilities for electronic goods, machinery, vehicles, equipment and other consumer durables.

It is expected that the plants will produce high-quality goods for sale Eastern, Central and Southern Africa.

Talks about the project began when China expressed a desire to start trade hubs in four African countries during the Sino‐African Cooperation meeting held in Cairo in 2009. Eventually, Tanzania was chosen for a start.

The completion of the project will add tremendous value to Tanzania, creating more than 125,000 jobs – 25,000 of them direct.

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Thursday, August 17, 2017

YOUR BUSINESS IS OUR BUSINESS: Why’d Tanzania shoot itself in the foot?

 

By Karl Lyimo israellyimo@yahoo.com

Not many people know much, or at all, about Tanzania’s butterfly export business, mostly from Tanga, Kilimanjaro and Njombe Regions...

And that the authorities have formulated a Butterfly Breeding Programme to increase the country’s butterfly exports –  usually to France, Germany, the UK and the US – named strictly in alphabetical order!

Admittedly, ‘butterfly farming’ is currently done by small-scale breeders, each of whom earns an average Tsh600,000 (roughly US$270) from the ‘harvest’ that’s done every two months! So, in (say) four annual harvests, that’s $1080 in forex from export sales: decidedly more than the US$900-plus gross domestic product (GDP) per capita which Tanzanians are ‘credited’ with in Statisticians’ papers, ‘Makaratasi!’

Again: how many people know that Zanzibar – the Isles part of the United Republic – established the Zanzibar Butterfly Centre in Year-2008. ZBC has become “one of Africa’s largest butterfly exhibits facility, housing more than 50 species of native butterflies – including creatures like the hard-to-catch ‘flying handkerchief:’ a black-and-white African swallowtail!”

Accredited as “an interactive butterfly exhibit,” the Centre’s a major tourist attraction, consisting of “a netted tropical garden with usually hundreds of butterflies, all of which are native species to Zanzibar.”

Not only does ZBC “provide residents and tourists alike an interactive and visual environment to learn about butterflies; it also sells butterfly pupae for export.” [Global Trade Magazine/©2015 Global Trade].

But, that’s a tale fit to be narrated more fully another day...

Today’s story’s about the ban on Tanzania’s butterfly exports by the Ministry of Tourism&Natural Resources. [See ‘Zuio usafirishaji nje Vipepeo lawatesa wafugaji Muheza;’ MWANANCHI: July 31, 2017]. The ban’s already playing havoc with Tanzania’s butterfly business.

Indeed, it’d seriously hurting roughly 400 local butterfly farmers, including especially the 156 (43% women) operating from the Amani Nature Reserve in the Eastern Usambara Mountains, “a biodiverse area where forests are wantonly being cleared for farmland and charcoal production!”

Reportedly, the ban doesn’t specify ‘butterflies’ as such; it simply alludes to exports of endangered wildlife species. Yet, it’s rigorously enforced against butterfly exports as if they’re an endangered species!

According to the Project Manager of the 156 local Butterfly Farmers Group in Muheza, Amiri Sheghembe: before the ban was imposed some three years ago, farmers from six villages earned about Tsh500m in forex during Years-2004-2015 from the 31 butterfly varieties they breed and export! [‘Tusiporuhusu uuzaji vipepeo, Msitu wa Amani utatoweka;’ JAMHURI: Aug. 8, 2017].

Butterflies have no local market to speak of!

Considering that Tanzanians are more than willing, able and ready to breed butterflies which are in great demand abroad – and, considering further that butterflies’ lifespan’s only around six weeks – the butterfly business’s one of the very few economic activities that have relatively early/fast returns on investment! Besides, it’s an activity that doesn’t need a huge investment or complex/intricate/prohibitive start-up – thus providing ordinary Tanzanians with opportunities to effectively participarte in the country’s economic development, even as they honestly make ends meet!

Therefore, it’s most consternating that the farmers weren’t consulted – or otherwise ‘taken into account,’ so to speak – when the authorities were contemplating the embargo. I hope the Natural Resources&Tourism Minister, Jumanne Maghembe – or, if it must come to that.

Butterflies are generally harmless creatures with ecological, aesthetic, educational and economic values.

Indeed, butterfly-farming easily generates forex income for Economies starved of hard currency. For example, the Amani Butterly Project sells pupae for US$1-$2.50 apiece to Live Butterfly Exhibits in the US and Europe throughout the year! [CNN; allAfrica].

Why’d Tanzania ban the butterfly business – thus shooting itself in the (economic) foot – when Kenya, Malaysia, Philippines, Thailand, El Salvador, Surinam, Ecuador, Costa Rica, and even the mighty US, continue to exploit the trade? Come-on, Tanzania...!

[israellyimo@gmail.com].

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Thursday, August 17, 2017

CORPORATE SUFI: Choosing balance to create your destiny



Azim Jamal

Azim Jamal 

By Azim Jamal azim@corporatesufi.com

You are the master of your destiny.  Your life, your freedom, your choices, are all in your hands.  You become the master when you believe in yourself.  Belief in self, gives you power over your fate, and only you can bestow that belief.  If you don’t believe in yourself, no one else will. Acting on that belief brings your dreams to your doorstep.  

Do you feel overworked and under-utilized?  Maybe it’s because you have not discovered your purpose or calling in life.  You have not found a cause larger than yourself to become involved in. 

 You have not understood the magic of Life Balance – the synergy of your body, mind, and soul.  Life Balance encapsulates purposeful living and the bounty of giving.

What does Life Balance mean?  Why do we need it?  And how can we find it?  Let’s look for some answers.

The meaning of life balance

Achieving a balanced life means setting priorities: understanding what is important and making time for it.  It means being in control of your choices rather than feeling controlled.  It means realizing that the shape and structure of your life is ultimately in your hands, and does not depend on circumstances.  It means knowing that you have a body, a mind and a soul, and thus that you have physical, mental, emotional, and spiritual needs.  It begins by recognizing the areas in your life that have been neglected and need attention.

Life Balance can be viewed in many ways.  It can be a balance between home and work.  It can be a state of balance in one’s physical, mental, emotional, financial, and spiritual health.

When you are in Life Balance, you are able to spend sufficient time, both qualitatively and quantitatively, in areas that you have defined as important to you. Life Balance is a state of feeling and being.  You know intuitively that you are doing the right things, and you’re able to navigate through the many opportunities and challenges.  You know what is important to you and you are able to choose appropriately.

Speaking on the topic, Richard Branson, Virgin Group founder, says, “Looking back over my 50 years as an entrepreneur one of the major keys to my success has been my ability to maintain a healthy balance between work and play.”

 Life Balance is not a static condition.  It is a dynamic and evolving blend of the body, mind, and spirit.

 To know what Life Balance means to you, it’s essential to know what areas of your life are the most important to you.

Your life is balanced when you are centered.  Being centered allows you to find equilibrium amid flux and change.

You are centered when you have a set of principles that are well grounded.

When you’re centered, you know what you want and why you want it.  This comes from clarity of purpose.  This clarity allows you to navigate through changes without compromising your core values and principles.  You become like an orchestra. 

It has diverse players and different instruments, yet all are synchronized to produce a beautiful symphony.  This is how you synchronize your body, mind, and spirit to your purpose. You are able to make life decisions from your core values and principles, rather than succumbing to a reactive, “firefighting” mode.

Being balanced also means catering to your own needs as well as those of your family and the society you live in.  You become an asset to the world you live in.

Extract from “Life Balance the Sufi Way” by Azim Jamal and Dr Nido Qubein

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Thursday, August 3, 2017

MANAGING TAX RISKS: Value-added tax cash flow glitch

 

By By Shabu Maurus

Value-added tax (VAT) has become a major source of revenue for governments around the world.

Over 150 countries around the world operate a VAT.

VAT has been in Tanzania since 1998 and has been making up 30 per cent of gross tax revenue on average.

Tanzania and most countries with a VAT employ the credit-invoice method. Under this method, traders are taxed on their sales at each stage of production but obtain credits for the taxes they incurred on their inputs. Only VAT on sales to final consumers cannot be reclaimed. VAT, therefore, taxes only final consumption and leaves production decisions undistorted. Sadly, it does not always operate smoothly in practice.

Once a trader issues a fiscal invoice or receipt with VAT, the VAT becomes payable (within 20 days after the month end) to the TRA regardless of whether the trader has collected the VAT from the customer or not. Therefore, if by the due date, customers have not paid the trader, then the trader is left with two options – to default the VAT payment or find some other means to fund the VAT payment like overdraft or similar short-term facilities. Either way, there is a cost - a penalty for non-compliance or finance cost.

In a short term, to remain VAT compliant, effectively some traders often end up providing credit to the state – the effect called “pre-financing”. This introduces economic distortions as borrowed funds to finance VAT could have been used to expand the economic activity of the trader. Pre-financing is one of the flaws of the current VAT system in Tanzania and also one of the reasons some VAT registered traders may be reluctant to use EFDs in cases of sales on credit basis.

Question of fairness

The problem is trickier if the trader is supplying to the government or its institutions.It is a question fairness. Should a trader be penalized for late payment of VAT occasioned by a government’s delay in honoring tax invoices? In the 2017/18 budget speech, the Minister of Finance stated that the government arrears reached shillings 2.1 trillion by December 2016 and out of this, Sh910 billion (44 per cent) related to construction activities and Sh 890 billion (43 per cent) in respect of suppliers of goods and services. Due to the huge amount per a single supplier, the impact is likely to be more severe for those in construction than in other sectors.

There are various approaches to unlock this. Rwanda adopted a VAT withholding in which the purchasing government institutions are obliged to withhold VAT charged by traders. VAT withholding also mitigates VAT leakage under the normalcredit-invoice method. But the approach may lead some traders into VAT refund position they are entitled to more input tax credit than the VAT withheld. Handling tax refunds has never been smooth. Therefore, VAT withholding will reduce but not clear the glitch.

Scheme that is prone to abuse

Another approach is VAT cash accounting scheme in which VAT on sales is accounted for when cash is received and input tax claimed only when VAT on purchases has been paid by the trader. But the cash scheme is prone to abuse by associated traders deliberately delaying cash payments. Zero rating of supplies to government institutions is another option but it poses similar VAT refund consequences like VAT withholding. An administrative approach on a case by case basis could also be considered where the tax authority could allow late payment of VAT without interest or penalty if a trader can demonstrate not to have been paid by a government institution. But such discretionary powers can easily be abused.

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Thursday, August 3, 2017

YOUR BUSINESS IS OUR BUSINESS: In commendation of Dar International Trade Fair

 

By Karl Lyimo

The forty-first annual Dar International Trade Fair (41st DITF) this year that begun in the nation’s commercial capital and port city of Dar es Salaam on June 28 was officially closed on July 13, 2017.

The event was slated to wind up on July 8 – but was extended for five days, courtesy of administrative fiat by President John Pombe Joseph Magufuli.

Sworn into the Highest Office in the Land only on November 5, 2015, a clearly-confident Magufuli surmised that the Trade Fair – which caters for national, regional and international interests – should go the proverbial extra mile so as to give exhibitors, show-goers, administrators and other stakeholders that much more time to more fully pursue their interests every which way.

That’s what largely happened. According to a Principal Official of the Ministry of Industry, Trade & Investment (MITI), Professor Adolf Mkenda, no less than 405 local and foreign companies expressed intention to enter into assorted commercial agreements with each other – and with other entrpreneurs as well!

Also on record were 17,273 transactions by local and foreign commercial operators that involved outright trade – selling and buying of ‘Made-in-Tanzania’ goods and services – as well as possible investments in the country! The event attracted some 3,015 companies, out of which 515 were from 30 foreign countries.This year’s Fair saw to consumation of business deals on the ground valued as Tsh15bn, with Tsh1.95bn exchanging hands in 16 days of direct trading all round – and the creation of 11,000 temporary jobs!

[See ‘Make DITF a 16-day Event,’ Exhibitors tell TanTrade; TheCitizen: July 20, 2017; and also: ‘Kampuni 405 kuingia mikataba ya Biashara;’

MWANANCHI: July 15, 2017]. Success of this year’s DITF was summed up by the Zanzibar Minister for Industry, Commerce & Marketing, Ambassador Amina Salum-Ali, when closing the Trade Fair at the Mwalimu Nyerere ‘SabaSaba’ Grounds on July 13. The Minister showered praise on the organisers – the Tanzania Trade Development Authority (TanTrade) – and the exhibitors for demonstrating managerial astuteness and quality products...

But, all that praise notwithstanding, small-scale exhibitors who usually take advantage of the Show to sell lots of their wares – including poultry, dairy and horticultural products – expressed regret that this wasn’t the case this year! They invariably blamed budgeoning financial constraints – basically on the back of socio-economic hardships born of austerity measures by the Magufuli Regime – compounded by inordinately-high entrance fees into the Show Grounds:

Tsh3,000 per person, and Tsh10,000 car-parking fees daily! [See ‘Walia hali ngumu Saba-Saba;’ MWANANCHI: July 14, 2017].

There, indeed, were praiseworthy innovations at this year’s event – popularly known as ‘SabaSaba’ in memory of the Seventh-Day of the Seventh-Month (July) of the Year-1954 (7-7-1954) when the country’s ‘Independence’ political party TANU (Tanganyika African National Union) was formally launched. For example, ordinary Tanzanians were able to purchase products and services that aren’t always so readily accessible downtown or upcountry! These included – but weren’t limited to – paying taxes to the nation’s premier tax administrator, the Tanzania Revenue Authority (especially Buildings Tax), and obtaining identity cards from the National Identity ‘ID’ Authority (NIDA)! [See ‘Wananchi wafurika kupata huduma NIDA, TRA;’ MWANANCHI: July 14, 2017].

Such ‘innovations’ are positive moves, and must be encouraged and nurtured well into the future. After all, the Fair has for all practical purposes become an annual ‘ritual’ that showcases Tanzania’s phenomenally-endowed potential to grow in the socio-econo-geophysical development stakes!

DITF has become One Great Big showcase in the Region with phenomenal growth potential: an exchange forum for domestic products and services. Show participants – exhibitors and show-goers, including sellers, buyers and mere gawpers — frequently patronize it to tap the myriad business opportunities the Fair routinely creates... thus providing the chance for prospective investors to explore and identify investment and trading opportunities in Tanzania.

For that, Tanzanians must be eternally grateful to all those squarely behind DITF in one way or another, including the Govt., Private Sector Institutions (TPSF; CTI; TCCIA, etc) – as well as the EAC, SADC, and the country’s other development partners... Cheers!

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Thursday, August 3, 2017

CORPORATE SUFI: Role of balance for greater clarity



Azim Jamal

Azim Jamal 

By By Azim jamal

Balance can bring about greater clarity and fulfillment in life while bringing us closer to unleashing our potential.

1. Life Balance will enable you to avoid burn-out, and it can sustain your success.

Real success is long-term, and you can sustain it without sacrificing your health, your relationships, and other important things in your life. If your efforts to succeed have left you burned out or have destroyed your physical health, you’ve paid a heavy price, and you really haven’t achieved success.

Og Mandino put it aptly: “When all is said and done, success without happiness is the worst kind of failure.”

You don’t want to be alone when you get to the top of the mountain. Life Balance enables you to share your successes with your loved ones.

If your financial ambition causes you to lose connection with your spirituality, any success will come at the sacrifice of Life Balance. When your life is in balance, you treat home and work as friends, not enemies. You realize that work is a noble thing and provides the financial stability your home needs.

2. Life Balance creates synergy.

An active and healthy body helps the mind as well as the spirit. When your mind is active and positive, it helps your body and your spirit. And when your soul is nourished, it helps your body and your mind. The synergistic effect that occurs through balance results in all-round productivity.

3. Life Balance enables you to move from success to significance.

If success is your only aim, it is limited and does not create significance. You move toward significance when you use your success to make a difference and contribute to worthwhile causes.

Balanced living allows you to be selfish and selfless – selfish in the sense of catering to your own needs first; selfless in the sense that by catering to your own needs, you can be of help to others. When you use your life to serve others and contribute to good causes, you move from success to significance.

4. Life Balance enables you to find meaning and fulfillment.

When you spend enough time, and spend it well, in areas that are important to you, and when you contribute your talents and resources toward the good of humankind, the result is immense satisfaction with your life. You will find meaning, fulfillment and happiness.

5. Life Balance enables you to unleash your potential.

When your life is balanced, you have a far greater chance to live up to your potential. Through synergy, significance and sustainability, you tap into your reserve and go farther and longer.

6. Life Balance enables you to have impact on the world.

The world is made up of more than 200 countries and dependent territories. These in turn are divided into states, provinces and other political subdivisions. But the basic unit for all of human society is the family. And families are made up of individuals. So every individual who is balanced and is making a contribution toward others is making a difference in his country and, eventually, the world.

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Thursday, August 3, 2017

Njombe gets lucrative cash crop

Hass avocado seedlings in a Tanzania

Hass avocado seedlings in a Tanzania Horticultural Association nursery in Njombe. PHOTO | THE CORRESPONDENT 

By The Citizen Reporter @TheCitizenTz news@tz.nationmedia.com

Arusha. When Rudolf Hass was breeding an avocado variety at La Habra Heights in California 91 years ago, he did not know that almost a century to come his efforts would contribute immensely to fight against poverty somewhere in Africa, Njombe to be precise.

The Hass avocado or persea Americana, as scientists call it, is slowly but surely substituting the traditional pine trees, maize and Irish potatoes to become the major cash crop in Njombe.

“Farmers’ earnings are rising given attractive Hass avocado prices,” Njombe Regional Commissioner Christopher ole Sendeka says.

Thanks to the then amateur horticulturalist for making the emerging lucrative cash crop compatible with the climate of

Hass avocados thrive in Njombe, which is 1,200-2,200 metres above sea level.

Temperature of Njombe -- the headquarters of the newly region -- declines up to minus degrees Celsius at night towards the end of July.

The climate and soil give Njombe an added advantage over other areas globally, as its avocados delay to mature and reach the market when Mexico and other major producers elsewhere are out of stock.

“Before I embarked on avocado farming, I owned a bicycle. Now I have a motorcycle, a pickup truck for carrying inputs to the farm and a Toyota RAV4, which I call Shikamoo Parachichi in respect of the crop,” says Mr Erasto Ngole, 45, a resident of Itulike Village.

The former village executive officer and Makambako Weighbridge revenue collector had never seen any promising opportunity in the civil service and resigned to grow avocados.

But Mr Ngole unknowingly attempted to produce other varieties of avocado when he turned down he resigned in 2008.

He raised 114 seedlings of the crop in June, grafted them in November before he planted them in March the following year, as Enterprise Works and Techno Save closely guided him one after the other.

Despite the 2.5-year technical support he got from both US non-governmental organisations, he could not make his dream profit from the crop, as he harvested barely three tonnes a season.“My fellow villagers nearly ostracised me; they thought I was crazy to grow fruit trees instead of traditional food and cash crops,” he recalls.

However, the Tanzania Horticultural Association (Taha) rescued him in 2016 when it went to Njombe to proceed from where the US NGO had left.

Taha imparted skills on avodaco management to Mr Ngole and his fellow villagers and introduced the Hass variety.

Much as he realised where he went wrong, he harvested 11.7 tonnes worth Sh10.4 million last year, up from about Sh3 million he used to earn seasonally.

“I have already harvested 13 tonnes from 302 avocado trees and earned Sh16.8 million. I’ll harvest five more tonnes before the season elapses. Avocados have completely changed my life; had Taha arrived four years back, I would be damn rich. Actually, I beat some civil servants in our ward as they still ride motorcycles.”

He pays college fees for some of his children, has transferred others from ordinary primary schools to English medium ones and accomplished building his third house within the farm last year.

“My children would be pickpockets if I did not engage in avocado farming,” he quips. He pleads with Taha to consider deploying more agronomists.

“One agronomist cannot effectively serve the entire region. Moreover, his assistants should be provided with motorcycles and handsome perks to motivate them to visit as many groups of avocado growers as possible.” Njombe avocado growers also urged the government to improve irrigation schemes and roads to boost production.Mr Damas Kisalala, who is a Taha agronomist for Njombe, says the organisation carried out research on marketing, production and expertise before it engaged in promoting avocado farming in 2016.

The research found out that an avocado tree in Njombe produced 10-30 kilos of the fruit instead of the required average of 80 kilos a season.

Taha resolved to improve the production of the existing avocado trees to between 50-80 kilos of the fruit each and increased production of Hass avocados.

“Even if we produce millions of tonnes of avocados, we’re assured of selling all the fruit during the off seasons,” Mr Kisalala says.

Eight foreign firms have separately ordered 800,000 tonnes of avocados, more than 600 tonnes produced in 2016 and 800 produced tonnes by June this year in Njombe.

Taha intends to increase Njombe’s production of Hass avocados to 1 million tonnes annually to satisfy demand.

According to Njombe Town Council agricultural officer Nolasco Kilumile, the government is working on numerous challenges facing the new cash crop.

“Most avocado farms are in remote areas where roads and bridges ought to be built,” he says.

The council planned to build a park house back in 2013, but owing to financial constraints, the project was stalled. “The central government finally linked us up with Taha which agreed to construct the building,” he says.

While Nundu Village offered Sh15 million worth of a plot, the town council surveyed the site and constructed the water, road and electricity infrastructure for the centre.

The town council is currently mulling over constructing a plant for processing rejected avocados into cosmetics and cooking oil. “We assure the farmers that no avocado will be thrown away,” says Kilumile.

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Thursday, August 3, 2017

Investors in only two local firms profit at Dar bourse

 

By Alawi Masare @AMasare malawi@tz.nationmedia.com

Dar es Salaam. Only two out of the 18 local companies trading on the Dar es Salaam Stock Exchange (DSE) have gained in their share prices since the beginning of the year, indicating a tough experience for investors to increase wealth through the bourse.

TBL Group (TBL) and the self-listed DSE Plc are the only counters which gained during the period if their prices while majority of the listed firms either decreased or remained unchanged, data show.

TBL gained by 12.6 per cent from Sh11,100 per share on January 2 – the first trading day of 2017 - to Sh12,500 on June 30 meaning that the wealth of an investor improved by that rate during the six months.

In simple language, if one bought TBL shares worth Sh10 million on January 2, 2017, their wealth could have increased to Sh12.6 million on June 30.

The brewer’s market capitalisation improved from Sh3.54 trillion to Sh3.95 trillion at the end of the first half of the year.

TBL gained by 11.7 per cent from Sh12,000 per share on January 2 – the first trading day of 2017 - to Sh13,400 on June 30 meaning that the wealth of an investor improved by that rate during the six months.

In simple language, if one bought TBL shares worth Sh10 million on January 2, 2017, their wealth could have increased to Sh11.17 million on June 30.

The brewer’s market capitalisation improved from Sh3.54 trillion to Sh3.95 trillion at the end of the first half of the year.

DSE Plc also gained by 11.6 per cent from Sh1,000 per share to Sh1,160 while the company’s market capitalisation jumped from Sh20.25 billion to Sh27.64 billion.

On the other hand, five counters depreciated with others dipping as much as 30 per cent while the remaining 11 of the local listed firms remained unchanged.

CRDB Bank (CRDB) depreciated by about 30 per cent. The bank’s share started the year at a price of Sh250 but it dropped to Sh180 on June 30. However, the counter has improved significantly and has been attracting buyers for a good part of July due to what analysts called price convenience. As of Friday last week, a CRDB share was trading at Sh210.

Ground and air cargo service provider Swissport also lost value by 30.3 per cent while Tanzania Portland Cement Company Ltd depreciated by 21.4 per cent during the period.

Mkombozi Commercial Bank (MKCB) and Tanzania Cigarette Company (TCC) dropped by 10 per cent and 3.9 per cent respectively in the trading which experts say was mainly overshadowed by the anticipated telecoms listing.

Optimism ahead

“December and January are normally low in trading of the stock markets but this was maintained by the shift of investor focus to telecoms’ initial public offerings especially that of Vodacom which has not completed,” says Zan Securities chief executive officer Mr Raphael Masumbuko.

The Vodacom IPO which seeks to raise Sh476 billion through the sale of 560 million shares was recently extended to July 28 to accommodate foreign investors following the amendment of the law which allowed them to participate in the local IPOs. The Electronic and Postal Communications Act (Epoca) 2010 requires telecommunications firms to offload 25 per cent of their stake through the IPOs but the foreign investors were not allowed in order to enhance local participation in the telecommunication industry.

However, amendment made through the Finance Act 2017 - after the Vodacom IPO reportedly flopped - allows foreign investors to take part in the local IPOs.

“I hope the market will return into normal trading once Vodacom shares are listed. Investors are now delaying to see what will happen in this biggest-ever IPO. I also believe that listing of mobile phone operators will bring in more foreign investors as well as increase public awareness on capital markets in the country,” says Mr Masumbuko.

Despite the depreciation of many counters, the domestic market capitalisation increased from Sh7.73 trillion to Sh7.76 trillion.

The domestic market capitalisation is so heavily exposed to TBL which accounts for about a half of it that any significant price change results into the change of market cap or indices.

Globally, the increasing nationalistic trend especially in the US and an economic slowdown experienced by China – the second largest economy – are reducing demand as well as appetite for investment hence affecting African capital markets.

Tanzania’s change of rules for foreign participation in the local IPOs was also another factor that shaped the DSE performance.

“All these factors are leading to a wait-and-see among investors especially on the secondary market,” says DSE chief executive officer Mr Moremi Marwa. The volatility in the counters is seen by other experts as an opportunity for investment.

“Up and down in share trading is actually good for a dynamic market. All this is influenced by market forces and I see a better future considering that there was no any company dropped due to a horrible financial performance or any other poor prospects,” says Mr Juventus Simon, general manager at Orbit Securities Ltd.

The DSE also trades government and corporate bonds. Efforts are underway to start trading government retail bonds after successfully starting corporate retail bonds done by Exim Bank and NMB bank.

“A consultant has already submitted the report on the government retail bond for comment and before the end of August this year, there will be stakeholders workshop for comments and later come up with the final report,” says spokesperson of the Capital Markets and Securities Authority (CMSA) Mr Charles Shirima.

“The start of government retail bond will pave the way for infrastructure bond and M-Akiba,” he adds.

Kenya has a similar product which started recently but Mr Shirima says it was originally developed in Tanzania and Kenya was fast to implement the idea.

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Thursday, July 27, 2017

$30bn natural gas plan enters important stage

A liquefied natural gas  plant. The government

A liquefied natural gas  plant. The government and international oil companies are currently at a crucial stage of negotiations to set up a similar plant in Tanzania. PHOTO|FILE 

By Rosemary Mirondo @mwaikama rmirondo@tz.nationmedia.com

Dar es Salaam. International oil companies engaged in the construction of a Sh67-trillion) $30-billion liquefied natural gas (LNG) project are establishing a commercial framework for the scheme, BusinessWeek has learnt.

The framework will define and compare alternative commercial and financial arrangements involving government and the private sector in a way that addresses the unique attributes of the project.

It basically outlines the rights and obligations of each party (between the government and the investors) in the process of executing major projects such as the LNG one.

BG Tanzania external relations manager Patricia Mhondo told BusinessWeek that the companies have done groundwork to establish the LNG commercial framework.

“The report has been submitted to the government and we are awaiting response,” she said.

The Statoil senior vice president and country manager for Tanzania, Mr Oystein Michelson, shared similar sentiments.

He noted that the job of bringing the gas onshore was difficult but noted that the companies were optimistic it could be done.

Reports show that the government announced it will conduct an environmental impact assessment (EIA) at Likong’o Village in Lindi Region where LNG Plant is to be built. Tanzania has found at least 55 trillion cubic feet of natural gas reserves.

BG Group - which was last year acquired by Royal Dutch Shell - along with Statoil, Exxon Mobil and Ophir Energy plan to build the onshore LNG export terminal in partnership with the Tanzania Petroleum Development Corporation (TPDC).

TPDC owns a title deed for the 2,071.705 hectares where the plant will be built while a further 17,000 hectares is set aside for construction of an industrial park.

Analysts are hopeful that the project is viable and that it will result into a number of opportunities for opportunities to Tanzanians and investors alike.

“The project only requires transparency and accountability…. people’s expectations should be checked and allowed at realistic level…. the government should fast track the construction of the project to ensure we enjoy the opportunities available,” said University of Dar es Salaam economics professor  Haji Semboja.

Until 2014, it was estimated that the development of the LNG plant would create over 10,000 new direct jobs and thousands more indirectly.

It would also enable the country to collect billions in taxes which will help among other things, to service the national debt and fund healthcare and education.

Repoa strategic research director Abel Kinyondo was recently quoted as saying that when the gas is fully exploited it will contribute to only six per cent to the gross domestic product, suggesting that its impact would largely depend on its connectedness to other sectors.

“It will have to support other sectors that employ a majority of the country’s population like the manufacturing and agriculture for the impact to be huge,” he said.

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Thursday, July 27, 2017

Plans underway to extend gas pipeline

Technicians undertake the Mtwara-Dar gas

Technicians undertake the Mtwara-Dar gas pipeline project. PHOTO|FILE 

By Rosemary Mirondo @mwaikama rmirondo@tz.nationmedia.com

 Dar es Salaam.  The Tanzania Petroleum Development Corporation (TPDC) is conducting a study with a view to extending the Mtwara-Dar es Salaam natural gas pipeline to other regions.

The study – to be conducted within the current financial year – targets to establish the feasibility of extending the pipeline to Morogoro, Mwanza, Mbeya and Arusha, the TPDC acting director general, Mr Kapuulya Musomba told BusinessWeek last week.

The study will be conducted in cooperation with the Ministry of Energy and Minerals and Japan International Cooperation Agency (Jica).

“The ultimate goal is to ensure that the pipeline serves other regions as well but we will start with the four regions first,” he said, declining to reveal the actual amount to be spent on the study.

TPDC, the Ministry of Energy and Minerals and Jica are currently preparing groundwork that will help them in identifying the right people to undertake the job (the study).

The study seeks to establish how the pipeline can be utilised to extend electricity networks across the country to stimulate industrialisation.

The construction of the $1.22 billion pipeline began in 2012 from Mtwara and Songo Songo to Dar es Salaam and was completed last year.

Its construction, together with gas processing plants at Madimba and Songo Songo Islands, are part of a plan to add about 2,000 megawatts of new gas-fired electricity generating power.

Currently, the 542-km gas pipeline is managed by Gas Supply Company Limited (Gasco) and benefits Mtwara, Lindi and Dar es Salaam regions only.

Its full capacity will however be reached by 2022 where most of the gas-fired plants will have been completed.

Currently, the gas pipeline is underutilised due to delays in the implementation of the gas-fired power plants.

Last year, the government launched a project to construct a plant that will generate 240 MW of power in what is commonly known as Kinyerezi II. The project – which will cost $432 million – is part of the several ventures in the endeavour to ensure that the gas pipeline is utilised.

Other gas-fired power projects include Kinyerezi III and IV. Upon completion of the projects, Tanzania will save up to $1 billion annually on oil imports for electricity generation.

TPDC is also planning to set up a $150 million to 200 million mega plant to enable the transportation of the natural gas to large-scale industries and households.

Mr Musomba said the completion of the pipeline will open opportunities of encouraging economic growth by connecting industries with reliable energy.

The African Development Bank (AfDB) will finance the project.

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Thursday, July 27, 2017

Govt to purchase trawler

Two of 35 trawlers – owned by private companies

Two of 35 trawlers – owned by private companies - that ply in the Exclusive Economic Zone of the Mozambique coast of the Indian Ocean. The Tanzania government will buy its own trawler for hire. PHOTO|FILE 

By Alfred Zacharia @TheCitizenTz azacharia@tz.nationmedia.com

Dar es Salaam. The government will buy a trawler for hire, Deep Sea Fishing Authority (DSFA) fisheries inspector Mary Nkomola told the BusinessWeek.

According to her, that is in line with the National Fisheries Policy of 2015 aims at developing a competitive and efficient fisheries sector that contributes to food security and the national economy.

Experts say small-scale fishermen catch around 55,000 tonnes of fish annually.

Ms Nkomola said the problem was due to lack of equipment to fish in the deep sea and exclusive economic zone.

According to her, most fishing in the deep sea and exclusive economic zone is done by Japanese, Indian, French and Chinese companies.

DSFA licensing official Peter Shumula said the plans are in initial stages as discussions were going on with responsible institutions.

He also said the government would also enhance security.

“The plan to purchase the ship is expected to be tabled in Parliament soon by the minister of Agriculture, Livestock and Fisheries,” he said.

Dar es Salaam Maritime Institute lecturer Akida Abdu hailed the move to improve fishing. “We need ships because our waters have a high potential, which needs full and judicious exploitation.”

 He said Tanzania had never benefited accordingly economically, in employment creation and security from the use of foreign ships.

He believes that with opportunities offered by the Indian Ocean and other water resources, the future of the blue economy -- a label now commonly used in the contexts of economics, agriculture, and conservation – is bright.

According to a 2016 survey, the number of fishermen rose from 36,321 in 2009 to 54,511 in 2016.

Mr Shumula is optimistic that the number of fishermen will increase further as fishing gear is improved and more capital is obtained to buy modern vessels.

However, the number of ill-equipped fishermen will drop.

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Thursday, July 27, 2017

Experts wary of uncertainty in energy sector

By Ludger Kasumuni @TheCitizenTz Lkasumuni@tz.nationmedia.com

Dar es Salaam. Business analysts have cautioned the government over unpredictable energy investment climate.

They called on it to improve the situation to attract more investors in oil and gas.

They were reacting to a 2017 Statoil report on Global Energy Perspectives, which predicted that by 2040 the global demand for gas will rise to 1.7 trillion cubic metres, up from 1.5 trillion cubic metres in 2013.

One of them, Dr Donath Olomi, told The Citizen that the environment on investing in oil and gas industry is unpredictable as it is driven by individuals and cannot be sustainable to cushion possible market risks.

“Even the new law has not ensured long-term sustainability of mining investments. Investors can easily behave like wild animals,”Dr Olomi, who is the executive director of Entrepreneurship Development Centre, said. He also spoke of the need to amend the constitution to empower Parliament to monitor mining development agreements, rather leaving individuals to do so without a clear system of watchdog.

Under the new mining law still Parliament has no power to make final decision on the execution of those agreements, according to him.

Prof Honest Ngowi, of Mzumbe University Dar es Salaam Campus, said the regulatory environment on minerals, oil and gas is not conducive for attracting more investments and retaining the existing ones.

“The investment climate is unfriendly to investors. It has high level of unpredictability. It won’t be surprising if investors pull out,” he warned.

According to Statoil report, gas demand in 2040 will be 3,500-4,740 billion cubic metres (bcm), compared with 3,507 bcm in 2013.

 “There is significant need for new investments in both oil and gas in all scenarios, since production from existing reserves is not even close to keeping up with demand development. New renewable sources of electricity, in particular solar and wind are expected to grow significantly in importance,” reads part of the report.

Mozambique with natural gas reserve of 100 trillion cubic feet also has a liquefied natural gas plant. Tanzania has gas reserves of 57 trillion cubic feet and is in process of seeing whether Statoil and Shell can construct a similar plant.

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Thursday, July 27, 2017

CORPORATE SUFI: Belief in self determines your fate



Azim Jamal

Azim Jamal 

By Azim Jamal; azim@corporatesufi.com

You are the master of your destiny.  Your lives, your freedom, your choices, are all in your hands.  You become the master when you believe in yourself.  Belief in self, gives you power over your fate and only you can bestow that belief.  If you don’t believe in yourself, no one else will.

Acting on that belief brings your dreams to your doorstep. 

Do you feel overworked and underutilized?  Maybe it’s because you have not discovered your purpose or calling in life.  You have not found a cause larger than yourself to become involved in. 

You have not understood the magic of Life Balance – the synergy of your body, mind, and soul.  Life Balance encapsulates purposeful living and the bounty of giving.

What does Life Balance mean?  Why do we need it?  And how can we find it?  Let’s look for some answers.

The Meaning of Life Balance

Achieving a balanced life means setting priorities: understanding what is important and making time for it.  It means being in control of your choices rather than feeling controlled.

 It means realizing that the shape and structure of your life is ultimately in your hands, and does not depend on circumstances.  It means knowing that you have a body, a mind and a soul, and thus that you have physical, mental, emotional, and spiritual needs.  It begins by recognizing the areas in your life that have been neglected and need attention.

Life Balance can be viewed in many ways.  It can be a balance between home and work.  It can be a state of balance in one’s physical, mental, emotional, financial, and spiritual health.

When you are in Life Balance, you are able to spend sufficient time, both qualitatively and quantitatively, in areas that you have defined as important to you. Life Balance is a state of feeling and being.  You know intuitively that you are doing the right things, and you’re able to navigate through the many opportunities and challenges.  You know what is important to you and you are able to choose appropriately.

Speaking on the topic, Richard Branson, Virgin Group founder, says, “Looking back over my 50 years as an entrepreneur one of the major keys to my success has been my ability to maintain a healthy balance between work and play.”

Life Balance is not a static condition.  It is a dynamic and evolving blend of the body, mind, and spirit.

To know what Life Balance means to you, it’s essential to know what areas of your life are the most important to you.

Your life is balanced when you are centered.  Being centered allows you to find equilibrium amid flux and change.

You are centered when you have a set of principles that are well grounded.

When you’re centered, you know what you want and why you want it.  This comes from clarity of purpose.  This clarity allows you to navigate through changes without compromising your core values and principles.  You become like an orchestra. 

It has diverse players and different instruments, yet all are synchronized to produce a beautiful symphony.  This is how you synchronize your body, mind, and spirit to your purpose. You are able to make life decisions from your core values and principles, rather than succumbing to a reactive, “firefighting” mode.

Extract from “Life Balance the Sufi Way” by Azim Jamal and Dr. Nido Qubein

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Thursday, July 27, 2017

Why sustainable energy matters

We use and need energy every day in practically everything. Without energy, we cannot cultivate, travel, eat, wear and attend our everyday duties.

Country growth and development can be measured by looking on the amount of energy used.

African countries use less energy compared to Asian or European countries that is why Africa’s economy is reflected as less matured.

Energy sources are plentiful; there are those which are not sustainable like coal, oil, charcoal, firewood and gas.  These sources usually cause environment degradation like pollution, loss of forest cover and biodiversity. Likewise, they tend to be more expensive overtime as they cannot be replenished.

On the other hand, sustainable energy is the one which puts more emphasis on availability and affordability, targeting advancement of people’s level of development and does not cause environmental degradation. Hydropower, biogas, solar power, wind, geothermal and sustainable charcoal are some of the examples of sustainable energy. Tanzania is blessed with numerous sources of sustainable energy.

Tanzania has every reason to embrace renewable sources which have many benefits to poor people, especially those in rural areas.

Statistics shows that in 2012, 20.7 per cent of Tanzanians were connected to the power grid. Tanzania Electric Supply Company (Tanesco) reported the increase in power availability to 41 per cent in 2015. Despite all these successes, Tanzania is still facing the challenge of energy availability, especially cooking energy.

This problem is more prevalent in rural areas where there is a high dependence of biomass energy (firewood) for cooking. Household energy consumption takes about 72 per cent of all the energy which is produced in the country.

This means that, all efforts towards advancing and modernising the energy sector in Tanzania will affect household energy users more than any other sector. Sustainable energy is friendly to the enviroment. It also helps to mitigate the adverse effects of climate change. It is also available in various forms across the country and therefore, it is easy to harness by using appropriate technology. Likewise, renewable energy does not run out, thus there are no worries about its long-term availability and its effects on price.  When solar power project under JUMEME started, people in various villages were able to get electricity and opened up to many opportunities. Men and women were able to engage themselves in economic activities like small enterprises and manufacturing.

Cooking is normally in hands of women, and as statistics shows, 90 per cent of energy used in rural areas for cooking is sourced from firewood. This is because in rural areas, women have to walk long distances to collect firewood, thus putting them in a risk of attack from wild animals, or even sexual harassment and rape. Likewise, there are many health risks resulting from use of firewood, including indoor air pollution which lead to an array of respiratory diseases.  The energy sector has a nexus with many other major sectors, that is, if we have better energy access, also other sectors will be better.

For example, availability of electric energy in the village will result into the creation of deep wells which use electric motors to pump water. This will help women to access water near their households.

Availability of clean water in the village will elevate hygiene level of people and thus reduce risk of water-borne diseases, thus help the health sector. Moreover, energy will enable men and women to engage in economic activities like irrigation, agriculture and food processing.

The government can contribute highly in ensuring sustainable energy is available especially in rural areas and there is equality in terms of its access and use. This would require a review of the existing policies and strategies to see if the most affected groups are given priority in policy implementation. Through partnership with the private sector, development partners and CSOs, the government can implement energy projects that will potentially elevate masses from poverty.

Attracting foreign investors to establish factories that will manufacture solar equipment domestically, prices of such products will go down and solar energy equipment like panels, lamps, batteries will become affordable.

Benefits of sustainable energy are wide and they will help people to overcome poverty and low standard of living through increase in productivity, income, and reduction of multiple health and social problems resulted from lack of energy.

Sustainable energy will contribute in mitigating climate change through reduction of carbon emissions resulting from use of coal, charcoal, firewood and diesel in energy production. It will also reduce forest degradation, resulting from improper harvesting to produce charcoal and firewood.

This is a call to all people and stakeholders to look at sustainable energy as a saviour who came to help country development and move people from darkness to light.

Mr Mikidadi works at the National Gender and Sustainable Energy Network. 

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Thursday, July 27, 2017

OPINION: No longer business as usual as govt bolsters transfer pricing enforcement

By Paul Kibuuka; paul.kibuuka@isidoralaw.co.tz Twitter: @isidoralaw

In the wake of budgetary constraints, the Government of Tanzania is bolstering its transfer pricing enforcement actions in order to create raise revenues and meet the 2017/18 Budget targets; and in doing so, has increased the administrative compliance cost and burden formulti-national companies and other taxpayers.

Indeed, the government’s apex body charged with the administration of taxes, the Tanzania Revenue Authority (TRA), is continuing to build the capacity of its International Taxation Unit to deal with multinational companies and to monitor the key tourism, banking, telecoms, mining, oil and gas and construction sectors in all enforcement matters involving international taxation, including transfer pricing.

The International Taxation Unit has been viewed by the Government as being very important in addressing the transfer pricing challenges that Tanzania faces; to wit, inadequate transfer pricing rules, limited knowledge and skills to enforce the rules, limited information on comparables, and the tightening of penalties for non-compliance. 

It should be remembered that two years ago, today, the TRAexpressed commitment to provide clarity in the application of the Income Tax (Transfer Pricing) Regulations, 2014, which were issued by way of a gazette notice published on 7 February 2014. The TRA also called upon stakeholders to collectively support the effort to administer transfer pricing aspects of cross-border transactions.

While a correct transfer pricing practice can save companies big tax dollars, an erroneous practice can lead to the imposition of heavier penalties than the original tax. Evidently, this risk is increasing with the unparalleled level of regulatory reform currently taking place in Tanzania under the presidency of Dr John Pombe Magufuli. As a consequence, it’s no wonder that transfer pricing compliance has become a major concern for companies and other taxpayers operating in the country.

So then what could companies do to develop a complete transfer pricing practice that will cut their tax bills ethically and; at the same time, minimize the risk of a TRA audit?

In simple terms, transfer pricing involves the pricing of transactions between related parties to be conducted at a market rate, often referred to as an “arm’s length price”. From the perspective of the TRA, the overarching objective here is to prevent companies from using intercompany pricing as a means of evading taxes by inflating or deflating the profits of a particular entity.

However, arriving at the most precise approximation of an arm’s length transfer price acceptable by the TRA remains a challenge. Yet, if executed accurately, transfer pricing can save companies millions of dollars; on the other hand, if implemented incorrectly, companies increase their exposure for TRA audits, interest, and pecuniary (and imprisonment) penalties.

Tanzania’s international tax policy for cross-border transactions was originally provided for under Section 33 of the Income Tax Act, 2004. Earlier, in 1979, the Organization for Economic Co-operation and Development (OECD) developed transfer pricing guidelines. Andthirty five years later, in 2014, the TRA issued regulations governing the procedures for applying the arm’s length principle and specified the appropriate transfer pricing methodologies, documentation requirements, deadlines and penalties.

But, what do Tanzania’s transfer pricing regulations mean for businesses? Do the regulations take into account existing economic conditions? And, what about today’s world-wide internet business model that has rendered conventional geographical and governmental boundaries almost meaningless? These questions are tied to many other issues that have established a sense of urgency to tackle economic policy, including taxation.

At present, the Government is targeting transfer pricing. By tightening up transfer pricing regulations, Tanzania has discovered that it can collect significant additional revenues every year. Addressing Parliament recently, Finance minister  Philip Mpango unveiled the 2017/18 National Budget, which included proposals to boost tax compliance to deal with the “tax gap” i.e. the difference between the taxes owed and the taxes paid on time.

To put it briefly, the Government aims to eliminate tax loopholes and raise revenue for the unprecedented budget deficits.

The bottom line, however, is that Tanzania is adding more resources to collection and enforcement, and the TRA is auditing regularly and imposing stringent penalties. There’s general feeling amongst finance, tax and legal executives in Tanzania that tax audits are becoming more systematic. Hence, companies’ tax practices are coming under tighter scrutiny and a heavier burden of tax compliance.

Non-compliance by companies can lead to transfer pricing adjustments with huge tax bills, and that’s why companies are keen to efficiently mitigate potential transfer pricing risks. It is widely believed that there’s too much scrutiny by the TRA. The truth is that the Tanzanian Government needs revenue and one of the targets for generating that revenue are multinational companies with branch or subsidiary operations in the country.

In that regard, the TRA will look for obvious ‘red flags’ in assessing transfer pricing risks. Such red flags include, but are not limited to, unreasonable or unexplainable losses or low profitability, cross-border restructurings which shift profits outside Tanzania, poorly documented big year-end transfer pricing entries, and transactions with low-tax jurisdictions like Singapore, British Virgin, Bermuda, Cayman Islands, Mauritius, Netherlands, and Monaco.

As a country seeking to enhance tax yields, Tanzania is paying special attention to transfer pricing. To ensure that a fair share of tax on any international business conducted by related parties is collected, the TRA is increasing its audit teams; and because of this, companies of almost any size should be ready for a review and defense of their related party transactions. 

Beyond the shadow of a doubt, Tanzania is systematically enforcing its transfer pricing regulations, which have a direct impact on the resources needed for companies to remain in compliance. By ensuring that operations are conducted in step with proper transfer pricing policies (and agreements) and assiduously meeting contemporaneous documentation requirements to confirm the same, companies will not only save a lot of money by implementing a proactive approach to transfer pricing, but will also protect themselves against potential tax audit troubles.

Paul Kibuuka is the managing partner of Isidora & Company Advocates. Email: paul.kibuuka@isidoralaw.co.tz Twitter: @isidoralaw

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Friday, July 21, 2017

Concern as manufacturing exports fall to five-year low

 

By Alex Malanga @ChiefMalanga Amalanga@tz.nationmedia.com

Dar es Salaam. Manufacturing exports dropped to a five year-low during the year ending May 2017.

Industrialists attribute the trend to low production caused by financial crunch as illiqudity bit lenders.

The value of exports of manufactured goods reached $1.037 billion from $861 million in 2011.

It rose to $1.23 billion and $1.36 billion in 2014 and 2015 respectively before dropping to $1.09 billion in 2016, according to Bank of Tanzania (BoT) figures.

BoT says in its June 2017 economic review that the value of exported manufactured goods dropped by a cool 46.5 per cent to $811.4 million (about Sh1.8 trillion on the prevailing exchange rate) during the year ending May 2017 from $1.516 billion (about Sh3.3 trillion) recorded during a similar period last year.

Earnings from total exports fell by six per cent during the same period.

“Earnings from export of goods and services amounted to $8,774.9 million in the year ending May 2017 compared with $9,357.0 million in the year ending May 2016. The decline was on account of lower export value of manufactured goods, which outweighed the improvement in earnings from exports of traditional goods, gold, and travel,” the BoT says. Manufacturers say credit woes hit them.

They also pile the blame on what they term as ‘unfavorable tax regimes’ and, high numerous fees and charges levied by regulatory bodies among others.

“This could be a result of a lack of funds among manufacturers as they grapple with tight liquidity in commercial banks…with tight liquidity, manufacturers cannot increase production,” said the Confederation of Tanzania Industries (CTI) chairman, Dr Samuel Nyantahe.

The Tanzania Private Sector Foundation (TPSF) executive director, Mr Godfrey Simbeye, shared similar sentiments. “Low money circulation in the economy forced some manufacturers to reduce production and hence exportation,” he told BusinessWeek. The Industry, Trade and Investment minister, Mr Charles Mwijage asked for time to comment on the issue.

“I am in my constituency right now and I can only explain extensively on the issue if I get back to my office,” he said over the phone.

However, Mr Mwijage told The Citizen in February - when such the BoT also reported a massive drop on exports of manufactured goods - that the situation displays a global trend whereby various countries are reporting decreases in exports of their various products.

“Data on exports are always changing. They depend on the global situation whereby at times, they go up and sometimes, they go down,” he said in February, assuring the public that the government’s industrialization agenda remained intact.

Country on transition

However, there could be new hope, with the BoT showing that during May 2017, credit to manufacturing activities grew at a relatively higher rate than in the year ending May 2016.

And, Dr Nyantahe sees the move as welcoming move, saying it only shows that the country is on transition

“The drop does not send a poor signal to the implementation of the industrialization agenda as outlined in the Second Five-Year Development Plan (FYDP2) which runs from financial year 2016/17 to 2020/21…It only shows what happens when the country undergoes a transition period…It will take three to five years before we start enjoying the fruits of the ongoing industrialization drive,” he said.

What the government was doing, he said, was creating a more solid economic base. Dr Nyantahe banks his arguments on the ongoing ‘war’ on wasteful spending and corrupt public officials.

Indeed, the BoT shows that the liquidity situation is now improving, with figures showing that extended broad money supply increased by Sh1.1 trillion to Sh23.4 trillion during the year ending May 2017.

“The increase is equivalent to an annual growth of 5.2 per cent, which is higher than 3.8 per cent in April 2017. Nonetheless, the growth rate was still far below the 12.0 per cent realized in May 2016,” the BoT says.

In economics, broad money is a measure of the money supply that includes more than just physical money such as currency and coins (also known as narrow money). It generally includes demand deposits at commercial banks, and any monies held in easily accessible accounts.

Like Dr Nyantahe, Mr Simbeye also sees the future as promising in the hope that commercial banks’ credit to the productive sector will soon increase.

“In my recent meeting with bankers, I was told that the problem will become a thing of the past by October this year,” said Mr Simbeye.

Taxes

A CTI expert in business environment, Akida Mnyenyelwa says to attract new investors, the government will have to revisit its tax rates so they can be friendly to investors.

“There are numerous tax and charges, emanating from the presence of multiple regulatory bodies like Tanzania Bureau of Standards (TBS) and Tanzania Food and Drugs Authority (TFDA),” noted Mr Myenyelwa.

He said the 10 per cent import duty on crude palm oil imposed during the 2017/18 budget is also bad, saying it would make edible oil too expensive for local consumers.

But the Finance and Planning Minister, Dr Philip Mpango said in June that the tax seeks to protect local edible oil manufacturers from imports and simultaneously motivate local farmers to produce more oil seeds.

However, industry players say the new tariff arrangement will hurt refineries, which have invested billions of money to modernise their factories and increase their refining capacity.

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Friday, July 21, 2017

Join associations registered by Brela to access loans, soy farmers urged

 

By Rosemary Mirondo @mwaikama rmirondo@tz.nationmedia.com

Morogoro. Small-scale farmers should use modern technologies to improve production.

It is possible to acquire them by joining associations and registering them with either the Business Registrations or Licensing Agency (Brela) or the Registrar of Cooperatives to enable them to access loans for buying appropriate implements to increase production, said Kilosa district agriculture officer Meshack Mkonde.

He was speaking during a soy demonstration plot in Peapea Village in Kilosa, Morogoro Region, recently.

The district and the African Fertiliser and Agribusiness Partnership (AFAP) are implementing a programme to sensitise farmers to grow soybeans, which are highly demanded.

However, to meet the market standards, farmers are encouraged to join associations that are registered by either Brela or the Registrar of Cooperatives.

He said although the majority of farmers had joined groups registered by districts those were not fully empowered to enable them to tap farming potential.

He said for growers to borrow funds from the Tanzania Agriculture Development Bank (TADB) they need to register their groups with either cooperatives or Brela.

“Kilosa District has 200 farmers groups, but only 20 among them are registered either by Brela or cooperatives.”

January 2016, TADB lent Sh1 billion to Iringa small-scale farmers. Last month, the government injected Sh200 billion into the bank to increase lending to smallholder farmers.

According to Mr Mkonde, Kilosa farmers have been complaining about poor funding.

One of them, Grace John, affirms that it has been difficult for farmers to increase crop quality and quantity due to the unavailability of proper inputs.

“We have been trained on how to grow soybeans, which are highly demanded, but inputs are poor.” AFAP’s senior director for public private partnerships and investments, Dr Mbette Msolla, advises farmers to work in groups to identify markets. He said although soya protein was highly demanded, businesspeople could not identify farmers if they work individually and produce small quantities of soybeans.

Demand for soybeans is 20,000 tonnes annually while production is 3,000-4,000 tonnes.

The crop is grown in Njombe, Mbeya, Iringa and Morogoro while farmers in Ruvuma, Arusha, Kilimanjaro Manyara are being sensitised to grow it.

To bridge the deficit, the crop is imported from Malawi and Uganda.

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