Thursday, November 16, 2017

Tanzania beats regional peers in value addition

Tanzania Tooku Garment workers sew clothes for

Tanzania Tooku Garment workers sew clothes for export at the Benjamin Mkapa Special Economic Zone in Dar es Salaam. PHOTO|FILE 

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

Dar es Salaam. Tanzania tops the list of East African (EAC) countries with the highest manufacturing value addition (MVA) growth rate at 7.7 per cent, a new report shows.

Rwanda, Uganda and Kenya came next after Tanzania by 6.9 per cent, 5.7 per cent and 3.4 per cent.

Things were not good to Burundi which saw a decline of 1.2 per cent.

The performance is good news for Tanzania, as the achievements came at a time when the country has set an ambitious industrialisation plan to transform the economy to attain a middle income status.

Some analysts say the trend indicates that Tanzania is on a sustained and sold path of structural change towards manufacturing.

The United Nations Industrial Development (Unido)-funded report dubbed ‘EAC Industrial Competitiveness Report 2017’, launched last week here in the city, to meet industrialisation target and undergo structural change, significantly higher MVA growth rate is required.

During the period under reference, Kenya had the highest MVA in the region at $5.4 billion (Sh12 trillion).

Tanzania, Uganda, Rwanda and Burundi followed at $3 billion (Sh6.7 trillion), $2.1 billion (Sh4.7 trillion), $402 million (Sh896.5 billion) and $204 million (Sh454.9 billion) respectively.

Tanzania, Uganda and Rwanda’s growth rates provided a room for them to bridge the gap with Kenya’s level of production, indicating some convergence in manufacturing performance between partner states.

Confederation of Tanzania Industries policy and advocacy acting director Akida Mnyenyelwa said the performance was attributed to tight control of dumping goods.

The government had in a recent past increased import duty to 25 per cent, well above the previous 10 per cent, to discourage imports.

“We convinced the government that we have sufficient goods to meet both local and international markets

“The improvement in Tanzania’s MVA growth rate is commendable as it results to increase in share of manufacturing sector in economic output.” “This indicates movement to the desired structural change towards manufacturing and may positively impact the overall economic growth of the country,”

He said it can also impact positively on employment in other sectors and contribute to boosting productivity.

In Tanzania, metal products, and food beverages top the list of manufactured top the list of the exported manufactured sectors, with textiles, petroleum and chemicals sector joining the list. The report suggests for the improvement of the Shares of the country’s manufacturing in total exports which dropped to 42 per cent in 2015.

“There is an urgent need to increase manufactured products in the export basket, the move of which will also boost MVA per capital, which measures the role of manufacturing in the economy,” said Mr Valency Mutakyamirwa, the head of industrial intelligency unit at the ministry of Industry, Trade and Investment.

Historically, industry and manufacturing have been pathways to economic development in several regions of the world, but, in East Africa, industry’s share of GDP has, on average, been small due to low level of exportation.

The manufactured export capacity of the region, whose growth significantly went down since over the past seven years, is half that of its production. This indicates that it is not sufficiently competitive on the international market, according to the report.

“With awareness of the country’s current industrial development trajectory, it is high time the government assessed which sector development strategies best suit its objective,” he opined.

The report was of the view that EAC countries should increase their industrial presence in domestic and international markets while developing industrial structures in sectors and activities with higher value added and technological content.

“We need to position Tanzania’s industry in the international scene by benchmarking its performance and capability against other competitors,” noted Mr Mutakyamirwa.

This can be influenced by providing a compass to policy makers, private sector, manufacturing association in particular, and other stakeholders interested or involved in industry on the broad direction of the industrial development trajectory.

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Thursday, November 16, 2017

MANAGING TAX RISKS: Will sugar escrow account work?

 

By Shabu Maurus

Sugar has over the years remained one of the topical areas in Tanzania. In 2014, Tanzania’s sugar industry was in a crisis of oversupply, specifically the supply of cheap and illegal sugar imports. The problem left local sugar producers holding tonnes of stock. In 2016, the situation reversed and sugar became scarce forcing the prices up.

This year, the minister for Finance and Planning amended the tax administration regulations (The Tax Administration (General) Regulations, 2016). The amendments came through the Tax Administration (General)(Amendment) Regulations, 2017 published on June 29, 2017 and became effective from 1st July 2017.

The new regulations require the Tanzania Revenue Authority (TRA) to establish and maintain an escrow account at the Bank of Tanzania (BoT). Under these new regulations, importers of industrial sugar which qualifies for import tax exemption (i.e. a duty remission) are required to deposit 15 per cent additional import tax upon the importation of industrial sugar.

Additional import tax

The import tariff book (The East African Community Common External Tariff) list sugar as one of the sensitive items. In Tanzania, importation of industrial sugar qualifies for a duty remission. However, to curb possible abuse of industrial sugar imports, an additional import tax of 15 per cent was introduced in the past. The additional import tax is refundable if the importer subsequently proves to TRA that the imported sugar was actually used for the intended industrial purpose.

One of the reasons for the duty remission for industrial sugar was to provide relief to manufacturers who use industrial sugar as part of their inputs. Logically, this augurs well with the industrialisation drive. The use of additional import tax as a control over exemption abuse negates the intended relief to the industrialists because tax refunds take time to get.

Can the new regulations speed up refunds?

Broadly, there are two reasons TRA may delay the refund to eligible importers. Firstly, the lengthy verification and approval process. And secondly, the unavailability of money for TRA to pay back the eligible importers. The establishment of the escrow account will only be able to address this second problem but not the first. The account will ensure money is always available for refund to importers.

To address the first problem, TRA needs to put in place an effective verification and approval strategy. The law requires TRA to make a refund decision within three months but practically, it takes significantly more time to get tax refunds in Tanzania. The recent tax collection statistics published in TRA website for the period July to September 2017 indicate that no tax refund has been paid. From a financing point of view, even this three-month statutory period is still painful to the taxpayers as they may have to bridge the gap with short-term finances which do not come for free.

Loopholes

What happened to the Tegeta Escrow Account and the famous EPA scandal should serve as good lessons to Tanzania. As per the regulations, the importers who paid additional import tax to the escrow account are entitled to refund only to the extent of the amount of industrial sugar actually used in manufacturing the intended finished product. This is fine. The regulations, however, fall short of prescribing modalities for TRA to deal with the unclaimed amounts or the amounts that for one reason or the other will never be refunded to the importers. When should TRA recognize the unclaimed amounts in the escrow account as tax revenue? What criteria will be used to determine the unclaimed amounts?

Mr Maurus is a Partner with Auditax International

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Thursday, November 16, 2017

YOUR BUSINESS IS OUR BUSINESS: Banning and burning chickens business

 

By Karl Lyimo, israellyimo@yahoo.com

Why’d a struggling, least-developed country like Tanzania incinerate 6,400 chicks worth Sh12.5 million imported by a budding entrepreneur?

Let me begin at the beginning…

About a month ago, I urged Tanzanian authorities to consider harnessing the huge poultry business potential to accelerate industrialization.

Despite the comparative advantages in poultry-farming – and the potential benefits for investors, including jobs-creation – the poultry industry is another little-thought-of opportunity that’s a sure-fire path to all-inclusive industrialization. [See ‘Tap into the huge poultry potential to industrialize.’ The Citizen: October 12, 2017].

Poultry-farming is generally done at two levels: small-scale ‘indigenous’ chicken-keeping (mostly by rustics), and ‘commercial’ farming on a larger-scale, involving breeder farms, hatcheries, layers-and-broilers farms, processors and traders.

This economic sub-sector is a good industry-based jobs-creator, with the competitive advantage as a proteins source compared with four-legged beasts like cattle, goats, sheep, pigs... Poultry meat production increased by 6.2 per cent in five years – from 93,534MT in 2010/11 to 99,540MT in 2014/2015 – while, say, ‘total meat production’ rose by 18.72 per cent, from 503,496MT to 597,757MT!

But, that growth rate isn’t commensurate with the poultry business potential, including comparative advantages! Indeed, poultry-farming isn’t ‘for the birds’ – pun unintended here. It must be promoted most vigorously for countrywide industrialization.

Unfortunately, that isn’t the case on the ground… Instead, some government authorities have been throwing spanners in the works – thereby impeding growth of the poultry business!

The latest such proverbial ‘spanner’ was thrown into Tanzania’s poultry business by regulatory authorities who, on October 31, 2017, (conspiratorially perhaps?) incinerated 6,400 hapless chicks worth Sh12.5 million at Namanga on the Kenya/Tanzania border!

Reportedly, the chicks were confiscated from a 23-year old entrepreneur-in-the-making, Ms Mary Matia – for allegedly being smuggled in from Kenya, and also as a precaution against possible avian diseases outbreak.

The destruction was done under cover of the TFDA and TRA statutes, as well as the Veterinary Act (2003) and the Animal Diseases Act (2003). [See ‘Public irked as Authorities burn chicks,’ The Citizen: Nov. 1, 2017].

Indeed, Tanzania did ban chicken imports on veterinary-cum-human health grounds – plus sheer protectionism in all its ramifications.

But, the chicks-burning raises questions that need answers. For example: were the chicks vetted to determine their ‘veterinary health’ status?

Why was the plea by the owner, Maria, to re-export them peremptorily denied? How’ll she repay the loan?

Why were 1,300 ‘Kenyan’ cattle ‘smuggled’ in to graze about the same time auctioned by Tanzania for Sh200m over fears they’d spread diseases – and NOT incinerated like the Matia chicks?

Why don’t the authorities also incinerate the million-plus wildebeeste when they return to Tanzania during their to-and-fro annual migration across Serengeti/Masai-Mara? In summary whereof: chicks are incinerated; cattle are auctioned; wildebeeste are given VIP treatment…!

Oh, Tanzania’s poultry sub-sector is a chaotic, crazy-quilt business.

While one school of thought ‘sees’ chicken imports as “killing Dar’s poultry farming” [See The Citizen, December 18, 2013], another sees “importation of chickens healthy for local (Tanzanian) poultry farming…” [Daily News-Dar es Salaam; December 31, 2014]!

Sheesh!

To efficaciously industrialize the poultry business, we really need to humbly go back to the drawing boards… Tears!

Mr Lyimo is a socioeconomic commentator based in Dar

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Thursday, November 16, 2017

FRANCHISE: Franchising as SME strategy in Africa

 

By Wambungu Wa Gichohi

Franchising nurtures and deFranchising nurtures and develops the entrepreneurial talent in a country. This is very prevalent in South Africa and other countries where franchising has taken root. It is for this reason that franchising has been acknowledged by the South African government as an important SME strategy to contribute to the economic development of the country. Other African governments, particularly our governments in East Africa can borrow a leaf from South Africa, and the reasons are clear as explained hereunder

Standards

The success of a franchised system is highly dependent on the standards of service, quality and efficiency that are established and maintained. This applies as much on the shop floor as on the value chain supporting the franchise system. Besides the desire of both the franchisor and franchisee that the standards of operation are maintained and external factors also have an influence in keeping standards high, namely; once a system is successful, competition will follow with improved offering thereby necessitating constant standards update (to the benefit of the consumer!). International brands also enter the market, raising the standards bar even higher!

Part of global network

There is a common saying in international business that if you want to attract the wrath of the USA government, try to mess around with Coca Cola, Ford and McDonalds. Through franchising a country becomes part of the global village. This is due to a local franchise system expanding internationally or an international franchise system entering the local market. The benefits are massive for the country as it attracts investments, skills transfer (sharing of expertise and knowledge e.g. technology) and the country earns foreign currency when local brands export to other franchise markets. In South Africa, 14 per cent of franchising systems are international brands whilst 56 per cent of South Africa’s indigenous concepts have expanded internationally. In contrast, although franchising records are not easily available in East Africa, it would be safe to say that 99 per cent of franchising systems in East Africa are international brands with no known records of local brands that have expanded their franchise systems to other parts of the world.

Innovation

Franchising is a unique source of innovation. It also stimulates the development of the entrepreneurial spirit. It is estimated that franchising currently covers more than 75 industries in the world with more than 10,000 different franchised concepts. The franchisee networks of each of these brands contribute to this development. Regrettably, Africa as the second largest continent with the most countries only contributes between 3-4 per cent of these franchise concepts with 98 per cent concentrated in South Africa, Egypt and Morocco.

Reduced risk

The risk of developing the franchise system is reduced. The concept is a proven system, ongoing advice and assistance is given by the franchisor as is initial and on-going training. The failure rate is lower than in the case of independent SMEs and makes it easier to obtain finance as discussed above.

The writer is a Franchise Consultant helping indigenous East African brands to franchise, multinational franchise brands to settle in East Africa and governments to create a franchise-friendly business environment.

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Thursday, November 16, 2017

Tanzania sees cashew production rise 50pc

 

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

Dar es Salaam. Production of cashew nuts is expected to increase by as much as 50 per cent in the current harvesting season after positive market responses that led to the doubling of prices last year.

Last season, Tanzania’s cashew nut production was 265,000 tonnes but the Cashewnut Board of Tanzania director general Mr Jarufu Mkuruge says it may rise to between 350,000 and 400,000 tonnes this season. “When the prices improved last season farmers increased production and the government supported them with farming inputs. We see production improvement as prices are also increasing,” says Mr Mkuruge in a telephone interview.

Cashew nut is one of the leading traditional exports but it’s mainly exported in raw form.

In the year ending May 2017, cashew nuts exports improved to $340.9 million from $186.3 million recorded in May 2016, according to the Bank of Tanzania. The improvement was due to increase in both volume and price.

In the last harvesting season, the price increased to Sh3,800 per raw kilogramme compared with Sh1,250 recorded during the 2015 harvesting season, thanks to improved markets and supervision.

In this season, the prices are rang ing between Sh3,800 and Sh4,065 per kilogramme, signaling yet another yielding bonanza for cashew nut farmers. “I wish every farmer could bring their stocks out for auction before December so that they enjoy good prices as most buyers are targeting Christmas and New Year festivals. In January, they may also shift to West African countries whose season starts in January,” added Mr Mkuruge.

International buyers include those from Vietnam and India.

Leaders of cooperative unions say it’s too early to assess the production potentials but generally they see a renewed awareness in farming cashew nuts.

“The market improvement has really increased the importance of cashew nut farming with many people participating now,” says the manager of Tandahimba and Newala Cooperative Union (Tanecu) Mr Mohamed Nassoro. According to him, the main challenge has been on the requirement for all payments to be made through banks.

The buyers pay to a collection account managed by cooperative union and the money is distributed to Agricultural Marketing Co-operative Societies (AMCOS) which provide cheques to individual farmers for payment through banks.

“This process delays payment for about two weeks to reach the individual farmers. Unfortunately, some farmers also do not have bank accounts and alternatively seek support even from their friends,” said Mr Nassoro.

Processing plants

Tanzania has the best cashew nut variety in the world which should be supported by processing factories but the main challenge with it it’s mostly exported in raw.

Mr Mkuruge says for instance, out of the 83 buyers licenced for this season, only seven of them will export the processed cashew.

Tanzania plans to build three cashew nut processing factories in Mtwara, Tunduru and Mkuranga through financing of Cashewnut Industry Development Trust Fund - CIDTF - an independent body incorporated under the provisions of Trustees’ Incorporation Act (2002).

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Thursday, November 16, 2017

Industry urges govt to expand export basket

President John Magufuli and Bakhresa Group

President John Magufuli and Bakhresa Group Chairman Said Salim Bakhresa (right) during the inauguration of a Bakhresa Food Products Ltd (BFPL) fruit and vegetable processing plant in Mkuranga District, Coast Region last year. PHOTO | FILE 

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

Dar es Salaam. The Confederation of Tanzania Industries (CTI) has called for the diversification of the country’s export basket in the early stages of industrial development.

Tanzania mainly exports metal products and food beverages, followed closely by textiles, petroleum and chemicas products, according to the East African Industrial Competitiveness Report 2017, which was launched last week.

But CTI policy and advocacy acting director Akida Mnyenyelwa said the majority of manufactured goods do not meet international standards, partly because of low level of technology. “Majority of industries are less competitive when it comes to international trade,” he said.

This, he said, narrows the export basket. He explained that this also causes export earnings to fluctuate, which eventually leads to the problem of balance of payments, budgets deficits and does not permit future systematic economic planning

To avoid this, Mr Mnyeyelwa called for the diversification of the export basket at early stages of industrial development.

His sentiment was echoed by the head of industrial intelligence unit at the ministry of Industry, Trade and Investment Mr Valency Mutakyamirwa.

He said it is imperative for policy makers to deal with the issue of diversification of the country’s exports.

“This will help cushion the country against shocks arising from the instability in the foreign exchange markets, especially for primary products,” noted Mr Mutakyamirwa.

This strategy, he said, will contribute to the development of new export markets for manufactured goods destined for the EAC and other markets.

The findings of the report indicate that trade policy captured by openness and nominal exchange has a large effect on export competitiveness, their coefficients are large.

United Nations Industrial Development Organisation (Unido) representative to Tanzania, Mauritius and EAC Stephen Kargbo was also reading from the same script, saying diversification would reduce vulnerability to domestic and external shocks like natural disasters and sudden fluctuations in demand or global prices. He said products and market diversification would provide a room for stabilisation of the export earnings as it enhances movement towards activities with greater potential for value addition as well as greater potential for skills development and innovation.

“Market diversification is equally important as over-reliance on a single market has greater potential to adversely affect the economy in the event of reduction of in demand than diluted and stable demand in other markets,” said Mr Karbo.

Chairperson of the EAC Council of ministers Maganda Wandera on the grounds that diversification of the country’s productive and export structure is an important element of industrial competitiveness and economic development more broadly.

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Thursday, November 16, 2017

Bourse shocks prompt TCCIA Investment to change tack

TCCIA Investment Plc shareholders follow

TCCIA Investment Plc shareholders follow proceedings during the 12th annual general meeting in Dar es Salaam last week. PHOTO|THE CITIZEN CORRESPONDENT 

By Gadiosa Lamtey @gadiosa2 glamtey@tz.nationmedia.com

Dar es Salaam. It was established in 2005 to specifically tap potentials of the stock market but TCCIA Investment PLC now seeks to diversify its portfolio following shocks in the stock exchange.

The company - owned by mostly old men and women - started with a capital of Sh1.9 in the year and bought shares in seven counters of the companies listed on the Dar es Salaam Stock Exchange.

By 2014, the capital had expanded to Sh34 billion following gaining of shares in the bourse.

However, some other counters depreciated in the recent years and reduce the company’s capital from the apex of Sh34 billion in 2014 to Sh27.8 billion in 2016.

In year 2016 the company’s performance decrease of 61 per cent below the net profit tax realized in 2015. The net profit before tax was Sh220 million compared to Sh564.2 million earned during the previous year.

And now, the company looks to diversify its investment into agriculture and create another subsidiary that will help in generating more revenue that revealed in the Company’s 12th Annual General Meeting by chairman of the board Mr Aloys Mwamanga Since the company commenced operations twelve years more than 95 per cent of the investment portfolio has been in the form of equities of listed companies.

However the board is targeting investment in fixed income financial instrument, government securities, corporate bonds and interest earning bank deposit.

“We believes that investment income earning assets offers good trade off especially when the equity market is less attractive as is the case now,” he stressed

Although the board floated the company’s shares during the months of February and March this year the results were not encouraging.

As a results the board has decided to scale down implementation of the projects which had originally been identified for implementation during 2017. Due to that downfall the share company will focus on the implementation of constructing warehouses in Mikindani district, Mtwara where the land is located at a strategic areas has already secured.

However the management has already submitted the request proposal to Capital Markets Securities Authority (CMSA) to that can approval the company entered into the DSE.

Further he said the aim of listing shares in stock market as to enable shareholders to determine the true value of the shares and also offer opportunity to investors who wish to enter or exit to freely do so within minimum cost in terms of time.

The management also explore the possibility of applying for a brokerage license so as to diversify its source of revenue as well as minimize payment of commission to brokers who handle transactions from time to time.

Expounded further the Company’s CEO Donald Kamori current there are total of 3430 shareholders, adding only last year over 1000 members were joined.

“Despite the up and down we experienced last year but still the company is stable as the capital increased so we will go to other sector in order to extend our capital like in Mtwara,” he said

According to him, the Mtwara project the feasibility study already been conducted in near future the construction would kick start, adding the target to help the farmers within the area so that can benefit from their agriculture.

But also there are other real estate’s projects in Dodoma that would construct of a parking for trucks. The board will however continue with efforts for securing land in Tanga for the purpose of constructing warehouses.

However the directors emphasized that two projects will be implemented only after conducting detailed feasibility studies whose results show that the projects are viable on a sustainable basis.

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Thursday, November 9, 2017

Air transport feels the pinch of financial crunch: TAA

 

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

Dar es Salaam. Passenger and cargo traffic fell in the past two years despite a 1.5 per cent increase in aircraft movements to 145,619 in 2016, Tanzania Airports Authority (TAA) data show.

According to TAA, passenger traffic decreased by 1.7 per cent in 2016, falling to 3.4 million during the same year, while the total transported cargo volume declined by 18 per cent, to 20,634.7 tonnes.

The Julius Nyerere International Airport (JNIA) in Dar es Salaam accounted for 72.7 per cent of the total passenger traffic, and 84.3 per cent of the total cargo transported in year-2016.

TAA acting director general Richard Mayongela attributes the negative performance to the government’s directive to ban foreign trips by public officials that were considered really unnecessary.

‘There is no room for wasteful trips.”

When President John Magufuli formally assumed power on November 5, 2015, he restricted foreign trips for senior officials in an effort to curb misuse of public funds that was rampant in the past.

Officials wishing to travel abroad at government expense were required to seek prior approval from the office of the president, the vice-president or the chief secretary – always fully stating the necessity and benefit(s) of the trips.

The President told Parliament that Sh356.3 billion was spent on travels abroad by officials from government ministries, departments, agencies and parastatal institutions between the years 2013/14 and 2014/15.

Mr Mayongela also said that illiquidity was partly to blame for the aviation industry’s financial and other woes.

For example, PrecisionAir corporate affairs manager Hillary Mrema laments that the current economic hardships are adversely affecting air transport as a matter of course.

“Air transport suffered in 2016. The government’s cost-cutting measures led to turbulence not only for airlines, but also for the whole of the aviation industry.”

That, he noted, was partly because the government – the main spender – reduced its transactions with the private sector. “It is inevitable for us to feel the pinch due to the government’s decision to ban foreign trips by public servants.”

In the event, he appealed to TAA to lower the current airlines operational costs by decreasing charges for industry operators.

Tanzania Air Operators Association executive secretary Laurence Paul expressed a desire to see a safety and economic policy being formulated that would enable the aviation industry to prosper.

He also called on the government to tackle the challenge of multiple charges to reduce the burden for airlines.

Business expert Donath Olomi believes that the investment environment should generally be improved in all the sectors of the Tanzanian economy so as to attract more investors. This would speed up attainment of the middle-income economy envisaged in the National Development Vision-2025.

In the event, he called upon the government to create opportunities for more Tanzanians to get involved in large projects that create new jobs and fuel money circulation.

“Our customers are mainly those in the middle-income bracket. We need to strengthen this class to foster growth of the industry,” Dr Olomi stated.

Experts advised operators to stop cut-throat competition, saying it is harming them.

To increase efficiency, airports should be improved.

In a related development, passenger air travel at the global level is projected to maintain positive growth rates up to 2030, despite the number of challenges which the industry is facing.

According to the International Air Transport Association (IATA), airlines around the world are struggling with high jet fuel prices and sluggish economic growth.

However, it is predicted that these difficult economic conditions will be offset by an increase in passenger volume numbers – which is in turn projected to translate into improved financial performance of the airline transport business.

It is believed that the global aviation industry will reach close to $30 billion in profits in 2017, up from only $8.3 billion in 2011.

Between 2016 and 2035, the number of airline passengers is projected to grow at a compound annual growth rate of almost five per cent.

Recently, IATA announced full-year global passenger traffic results for 2016, which show that demand rose by 6.3 per cent, from six (6) per cent the previous year.

This strong performance was well ahead of the ten-year average annual growth rate of 5.5 per cent.

Capacity rose 6.2 per cent (unadjusted) compared to 2015, pushing the load factor up by 0.1 percentage point to a record full-year average high of 80.5 per cent.

A particularly strong performance was reported for last December with an 8.8 per cent rise in demand outstripping 6.6 per cent capacity growth.

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Thursday, November 9, 2017

YOUR BUSINESS IS OUR BUSINESS: Trade Cullinan diamonds on the world’s markets

 

By Karl Lyimo

Today, November 9, is ‘Inventors Day’ in Germany, Switzerland and Austria, designated to commemorate contributions by inventors to the national economy. Countries are free to designate a date of their own choice.

Unfortunately, Tanzania’s yet to designate ‘Inventors Day’ – although the President John Pombe Magufulu administration (Nov. 5, 2015—) has embarked upon ‘industrialization’ in noble efforts to propel Tanzania to a semi-industrialized, middle-income Economy – in tandem with the ‘National Development Vision-2025.’

Regarding inventions in general: was it sheer coincidence that, for example, Gail Borden – the ‘inventor’ of condensed milk – was born in USA, where ‘Inventors Day’ is February 11? Then again: what was an American surveyor-cum-publisher doing ‘inventing’ condensed milk, instead of surveying and publishing, pray?

Well, I honestly don’t know!

Could it also be said that the underground miner at the ‘Premier Diamond Mine’ in South Africa, Thomas Evan Powell, ‘invented’ the Cullinan diamond on January 26, 1905…? Or, perhaps more accurately:

did he ‘discover/stumble upon’ what later proved to be the largest gem-quality diamond ever discovered – weighing in at 3,106.75 carats (1⅓ pounds; 621.35g)?

Powell handed the stone to the surface manager, Frederick Wells who, at first, reportedly threw it away – not believing it could be the McCoy! Then, on second thoughts, he retrieved it and handed it to the mine’s owner, Sir Thomas Cullinan – after whom the stone was just as soon named! [See /www.heritagedaily.com/2014/02/where-are-they...cullinan-diamond.../73927>]

Perhaps as the divine Sisters of Fate would’ve it, Sir Thomas was visiting the mine that very psychological moment… And, as they say: the rest is History…

But, half-a-mo… Sages down History have yelled ‘finders keepers; losers weepers’ – virtually pontificating that ‘whoever finds something by chance is entitled to keep it…!’

Well, that never happened in the Cullinan diamond saga, where the ‘finders’ were instead given peanuts for their historic find!

While the Cullinan was estimated to be worth over $400 million, the slogging miner Powell, and the surface manager, Wells, were each awarded £3,500 ostensibly for their honesty in handing it over, instead of ‘pocketing’ it!

The stone was then ‘sold to the Transvaal government for 150,000 pounds.’ Transvaal promptly presented it to British King Edward-VII on his 66th birthday, November 9th, 1907: exactly 110 years ago to the day today… If nothing else, this makes The Cullinan significantly topical here today, November 9!

Insured for $1.25 million when it was posted as a parcel to England, the stone was just as soon entrusted by the King to the prestigious diamond cutter of the time, Amsterdam-based Asscher’s Diamond Co. The cutter, Joseph Asscher, reportedly fainted on seeing the inordinate stone! [Google for ‘HeritageDaily’].

It took eight long months to ‘cut’ the original Cullinan into nine prestigious diamond pieces, 96 smaller ‘brilliants’ and 9.50 carats of unpolished pieces.

All in all, the Mother-of-all-Diamonds ‘gave forth’ Cullinan-I (the ‘Star of Africa:’ 530.20-carats); Cullinan-II (317.40-carats); Cullinan-III (94.40-carats); Cullinan-IV (63.60-carats); Cullinan-V (18.80-carats); Cullinan-VI (11.50-carats); Cullinan-VII (8.80-carats); Cullinan-VIII (6.80-carats), and Cullinan-IX (4.39-carats). All these – totaling 1,055.69 carats (a carat is 200mg) – are worn as the British Crown jewels, or are on display in the Tower of London… For business-minded capitalists with the proverbial dollar-signs in their eyes – and a cold river stone where their God-given heart should be – the Cullinan was bad for business. Look at it this way… Why, for example, would such a high-value, unrivalled resource in historic and mercantile/commercial terms be a royal heirloom monopoly, or museum pieces at the Tower of London?

Shouldn’t the ‘Cullinans’ be part and parcel of the global diamond jewellery market, which hit the $80.1bn mark in year-2016? [© Statista 2017].

‘A diamond is forever,’ yes; but isn’t it past being just ‘a girl’s best friend’ – and into brokers’ hands? Cheers!

[israellyimo@gmail.com].

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Thursday, November 9, 2017

Franchising as SME strategy in Africa

 

By Wambugu Wa Gichohi

Africa probably presents the world’s last big business opportunity. The continent however, has been trivialized and more than marginalized by global businesses. But Africa desperately needs to achieve growth. The continent offers real opportunity and prospects that are truly exciting and rewarding. But optimism and hope does not produce results.

The question then begs why Africa has until recently been isolated. The reality checks for business and investors are, broadly speaking, the following which in essence are also Africa’s challenges for future development. Economics and Politics: Africa is the only continent that continues to grow poorer. Even Africans themselves seem to doubt their own economies. It is estimated that about 40 percent of African’s private wealth is held overseas. The GDP of a typical African country is barely that of sizable town in the developed world. In fact, in global terms African economic activities are almost completely insignificant. Governance and Democracy: The continent in general does not get good press. Warfare, diseases, corruption, famine and genocide have been the dominant features of international coverage. Terms like “a hotbed of terror” followed by crippling travel advisories are commonplace directed towards Africa.

Good governance in Africa has a long way to go but a strong start seems to have been made. The rules are surprisingly simple- allow people to do their own thing. Conflict and Strife: The active warfare that has existed until recently in many parts of Africa has caused enormous social upheaval and economic stagnation. But the wars have slowly been coming to an end and in less than 10 years almost all the conflicts have been more or less resolved. Displaced African refugees now populate many parts of Africa and Europe, their absorption and relocation remaining a major challenge. Business Sector: Africa did not appear on the global plans of many western corporations until recently because many people out there simply don’t know enough about Africa.

A Strong Private Sector Required

Much of Africa is characterized by a very strong entrepreneurial spirit. If this were not the case, chances are that many economies would have collapsed entirely as a result of corruption. It therefore seems obvious that a successful nation requires a vibrant business sector. It also seems equally clear that the business sector needs to be multifaceted, encompassing every area of opportunity and every form of corporate identity.

It is in this context that small and medium enterprises (SME’s) will play a vital role. The economies of some of the most successful countries in the world have been built on the contribution of SME’s in providing employment and sustained growth. About 70 per cent of the economic output of a country such as the Netherlands is contributed by SME’s. In the United Kingdom SME’s are constantly penetrating new markets to expand the economy and to absorb labor. In pursuit of economic participation, the development of small and medium enterprises has emerged as a ray of hope and is being acknowledged worldwide as an economic power-base to stimulate growth. It is also within the SME market that a new way of doing business started gaining momentum some 50 or so years ago. This global phenomenon is franchising and a way of doing business most suited to the African scenario. To achieve success however there are some major challenges, other than the above, that need to be addressed.

Franchising as an SME strategy

Franchising in its more than 50 years history, has shown remarkable resilience to weathering the political and economic ups and downs. The very root of the concept lies in melding together of a franchisor’s brand (intellectual property) and support systems with service delivery by self-motivated independent businesses as franchise holders. In markets where the model is successful, it is this high level of motivation, combined with a rigid business format, that has allowed franchising to thrive even in depressed times. Franchising as a business model has no boundaries and no impediments to success. It is ideally suited to the SME sector; it encourages small business development in every imaginable business sector and is a great catalyst for job creation, skills transfer and wealth creation.

Franchising nurtures and develops the entrepreneurial talent in a country. This is very prevalent in South Africa and other countries where franchising has taken root. It is for this reason that franchising has been acknowledged by the South African government as an important SME strategy to contribute to the economic development of the country. Other African governments, particularly our governments in East Africa can borrow a leaf from South Africa, and the reasons are clear as explained hereunder.

Success rate: The greatest strength of franchising as an SME strategy is its proven success worldwide when compared to independent businesses. In the Philippines: 95 per cent franchise systems compared to 25 per cent independent retailers survived the 1997 Asian Economic Crisis. In Australia: franchising has proven to be 2.5 times more successful than other small independent businesses and on average, in South Africa, franchisors closed no more than one outlet during 1994 despite major disruption as a result of political transformation from apartheid to the modern democracy the country is. The majority of franchisors (87.3 per cent) did not close any outlets. Studies by the Africa Development Bank in African markets where franchising is relatively successful (south Africa, Egypt, Morocco etc) indicate that only 15 per cent of businesses started within a franchise system are likely to fold up in the first five years compared to a mortality rate of 80 per cent for those started outside franchise systems. The reason for the success is that entrepreneurs (franchisees) do not in the strict sense of the word start a new enterprise from scratch, they enter the SME market by investing in a business that has proven the concept (tried, tested and proven franchise system) whilst enjoying support from the franchisor. Consequently, financiers tend to listen to them more favorably than their green field startup colleagues, thereby increasing the chances of success.

The writer is a franchise consultant helping indigenous East African brands to franchise, multinational franchise brands to settle in East Africa and governments to create a franchise-friendly business environment.

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Thursday, November 9, 2017

MANAGING TAX RISKS: How to deal with tax uncertainty

 

By Shabu Maurus

Adam Smith, the father of modem political economy, argued that “the tax which each individual is bound to pay ought to be certain and not arbitrary. The time of payment, the manner of payment, the quantity to be paid all ought to be clear and plain to the contributor and to every other person”. Uncertainty or an absence of certainty is an undesirable characteristic of a good tax system.

Sources of tax uncertainties

There are various sources of tax uncertainties. Some uncertainties stem from the practices of the tax authority, including their interpretations and applications of the tax laws. Some uncertainties may come for the dispute resolution processes, such as inconsistencies in decisions and also the length of time the courts take to decided tax cases.

Other uncertainties may emanate from international transactions and interactions of different tax jurisdictions with differing tax laws and principles. Legislative and tax policy design issues can also be a major source of tax uncertainty, mainly through complex and poorly drafted tax legislation and the frequency of legislative changes.

Dealing with tax uncertainties

It may be practically difficult to completely avoid tax uncertainties in the tax system. So, as a taxpayer, you will most likely have to deal with tax uncertainty. In Tanzania, there are various approaches, a taxpayer may deal with tax uncertainties. Of course, the approach will depend on the nature of the specific tax uncertainty that a taxpayer wants to address. One such approach is for the taxpayer to request a private ruling from Tanzania Revenue Authority (TRA).

Private ruling

In the context of tax administration in Tanzania, a private ruling is a decision of the Commissioner-General of TRA on tax issues raised by a person (normally a taxpayer or a potential tax).The conditions, modalities, and the legal statusof a private ruling are provided for under the tax administration legislation (The Tax Administration Act, Cap 438) and the accompanying regulations.

The objective of a private tax ruling system which is to provide certainty to taxpayers in connection with the application and interpretation of the tax laws in Tanzania.

A private ruling properly issued binds TRA. That is, TRA cannot make subsequent tax decisions that are inconsistent with the private ruling in respect of that taxpayer for an arrangement that is a subject of that ruling. For TRA to issue a binding private ruling, a taxpayer needs to apply in writing making full disclosure of all aspects of an arrangement and ensure that arrangement, materially, proceeds as described in the application.

The ruling will only be effective for the period stated in that ruling or shorter if TRA decides to revoke it. A private ruling has no binding effect to TRA with respect to other taxpayers other the one who applied for it.Most importantly, a private ruling does not have a binding effect to the taxpayer who requested it and hence that taxpayer is also restricted from challenging the ruling unless the challenge is made in respect of a tax decision made in relation to an arrangement which is the subject of the ruling.

Timely issuance of private rulings increases predictability and consistency of tax administration, which in turn provides tax certainty to taxpayers.Without certainty, neither governments nor taxpayers can effectively budget or plan for their future actions. The state benefits from tax certainty, because it will be able to know roughly in advance the total amount which it is going to obtain and the timing. If there is an element of arbitrariness in a tax, it tends to encourage misuse of power and corruption.

Mr Maurus is a Partner with Auditax International

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Thursday, November 9, 2017

CORPORATE SUFI: Give and have sense of contributing



Azim Jamal

Azim Jamal 

By Azim jamal

To give is to live; when you stop giving, you stop living. You give or contribute not just by what you do but also by who you are.

If you have sound character and display honesty, integrity, humility, and discipline, you contribute to others by your own example. Who you are and why and how you do things are just as important as what you do. Thus, by aligning your actions with your words, you become a person of influence and significance.

With our words we can only preach,” said St. Francis of Assisi. “In the end, it is our actions that teach.” When you contribute and serve, you tap into your genius and ignite your untapped potential.

Most people live and die leaving a huge portion of their potential untapped. This happens because they do not discover their true gifts and therefore never discern their callings in life. They fail to find worthwhile causes that are really meaningful to them and that could make a great difference in their lives.

Each of us is endowed with enormous gifts; most of us only scratch the surface of these gifts during our entire lifetimes. But when we give to others, or give of ourselves to meaningful causes, things change. We expect more of ourselves. We discover new feelings of self-worth. And when this happens, we tap into our potential and benefit not only ourselves, but others as well.

Some may define success as making a lot of money. Others may see it as building an empire. Some define it as beating a baseball record, and some as unraveling the secrets of the universe. Still others define it as feeding the hungry children. How do you define success? The happiest people are those who focus on purpose and giving. You must travel the journey from success to significance. This happens when you begin to give and make a difference.

During Expo a long time away in Vancouver, British Columbia, I decided to take Gale, a wheelchair-bound friend, to visit the Expo. I picked her up at her house, patiently seated her in my car, put the wheelchair in the trunk, and proceeded to Expo.

When we reached the Expo, we encountered a huge crowd with long lines everywhere. I felt that I had goofed badly by not thinking things through. How would we ever be able to wade through the crowd and negotiate the lines to see the shows. But since we had come all this way, I reasoned that we should take in at least a few shows. So we both waited in line.

After a few minutes, a police officer passed by and saw Gale in the wheelchair. He asked Gale and me to follow him. He took us to the front of the line, and told us that we could do the same thing at the rest of the shows. We saw most of the shows in a fraction of the time it would have taken me to see the Expo on my own.

It doesn’t always work out that way. But had the officer not appeared, I would still have persevered to ensure that Gale was able to experience the Expo. It’s the intention that counts.

If you’re like most people, you’ve been through difficult times with a friend who has a serious illness, or is hurting from a divorce, or is coping with some other difficult event in life.

You have to balance the compassion, time, and energy you offer to such friends with your own ability to give. You want to empower as far as possible, not overpower!

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, November 9, 2017

How Tanzania can steer clear of economic downside risks

Finance and Planning minister Philip Mpango

Finance and Planning minister Philip Mpango speaks at a past event. PHOTO|FILE 

By BusinessWeek Reporter @TheCitizenTZ news@tz.nationmedia.com

Dar es Salaam. Tanzania’s economy is facing downside risks this year due to domestic challenges which can be controlled by the government to unlock the growth potential.

The economy is characterised by lower credit growth to the private sector, weak business environment, under-execution of development budget, high level of arrear as well as high levels of the nonperforming loans (NPLs) in the financial sector.

The World Bank in its recent Tanzania Economic Update lowered the growth forecast to 6.6 per cent against the government projection of 7.1 per cent in 2017 due to the challenges that may affect the performance of the economy.

The tight economy influenced the change in the way banks extend loans to private firms and individuals as they become cautious of the weakening quality of assets.

Statistics indicate that the lenders now prefer to invest in risk-free government securities – treasury bills and bonds – while shunning the private sector which is considered the engine of the economy.

According to the Bank of Tanzania (BoT), credit to the private sector increased by just 0.2 per cent in the year ending August 2017 compared with a growth of 13.8 per cent in the same period last year.

At the same time, commercial banks net claims on the central government increased to Sh4.8 trillion from Sh3.4 trillion a year earlier - reflecting the banks preference for the government securities.

The bank’s NPLs are said to be at an average of 11 per cent while the internationally acceptable threshold rate is 5 per cent.

The execution of the development budget was said to be at 62 per cent in 2016/17 while the domestic payment arrears stood at 6 per cent of the gross domestic product (GDP) which was estimated at Sh103 trillion in 2016.

The private sector concerns

The private sector has cited concerns about overzealousness in tax collection as a number of private sector operators have reported incidences of inflated tax bills, threats of business closure or imprisonment, and the solicitation of bribes by tax officials.

Delays in VAT refunds and payments to contractors and other suppliers is another challenge partly attributable to long verification process for refund claims, conducted as part of the anti-corruption drive.

And when VAT refunds and payments to contractors and suppliers are delayed, businesses suffer from cash flow shortages and are not incentivised to be compliant.

Another concern is on the proliferation of regulatory authorities, licences, taxes and charges. The World Bank’s document says Tanzania’s private sector activities are burdened by the need to comply with a multiplicity of laws and regulations, involving payments for licenses, taxes and other charges, with many regulatory bodies which have overlapping mandates.

“Many of the associated regulatory compliance procedures lack transparency and create excessive burdens for businesses. These burdens are disproportionately intense for MSMEs, which often lack the necessary resources to understand and comply with the cumbersome rules and procedures,” states the report.

Way out of downside risks

The World Bank proposed three measures for the government to improve budget implementation and the business environment – the aspects which could facilitate the achievement of the government’s growth targets.

First, it suggests clearing verified government payment arrears to private sector contractors and suppliers. The clearance of current arrears and the prevention of their future accumulation would directly improve the cash and borrowing positions of small- and medium-sized domestic firms and reduce the high level of non-performing loans in the financial sector.

“It could also improve the credibility of the budget and reduce the risk premium applied by contractors involved in government projects,” the report states.

Second, the government is supposed to speed up VAT refunds, a move that could further increase liquidity and directly improve the cash positions of private sector enterprises.

These measures are expected to support business investments, including by exporting firms.

Third, the government can secure external financing to fund ongoing and planned capital expenditures. While the government should continue to implement reforms to increase domestic resources, in the short term, it will need to mobilize additional external financing, particularly on concessional terms, to ensure debt sustainability.

Tanzania’s debt increased by 17 per cent to $26.1 billion in June 2017 from $22.3 billion in the same period last year, according to the Minister for Finance and Planning who presented the proposals for the national development pgrogramme for 2018/19 financial year.

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Thursday, November 9, 2017

OPINION: Can you deal with certainty of business life — TRA audit?

The TRA Commissioner General, Mr Charles

The TRA Commissioner General, Mr Charles Kichere speaks at a past event. PHOTO|FILE 

By Samwel Ndandala

If you are in business, you probably have experienced a TRA audit. If not, you need to remember that just like death and taxes, a TRA audit is a sure eventuality. Since the Biblical times, tax collectors have not had the warmest of public affection. I still remember reading of Jesus calling Matthew, a tax collector, to become his disciple, much to the disapproval of the public.

For my friends at TRA, it is just the nature of the job. But it is my hope that I can demystify tax audits, show some common grounds between taxpayers and the TRA and offer some tips on how taxpayers can best prepare for such interaction.

Naturally, no one running a business wants to spend any more time than is necessary dealing with a tax audit. But taxes have to be paid correctly, and timely - and whilst no one expects you to be enthusiastic about it, tax audits have to happen as a control to make sure that taxpayers are complying with their tax obligations.

Much as the process can be adversarial, in principle there should be some degree of common interest between the taxpayer and the TRA. One is that you want to pay your appropriate amount of tax.

Some use the term ‘fair share’, but the bottom line is you want to pay your legally required amount of taxes. If you are a responsible business or person, then you will want do so to enable government to continue provide public goods and invest in the country’s collective capital. TRA wants this too, they want you to pay the right amount of taxes (and hopefully no more).

The tension of course comes where differences arise whether in relation to technical interpretation or supporting documentation - also not helped, if the relationship is fraught with suspicion on both sides (from the side of the taxpayer that the TRA’s interpretations / approach are strongly driven by revenue targets, and from the side of the TRA as to the probity of the taxpayer).

The ultimate common interest is that both parties have a vested interest in the continuation of the business; the owners as they wish to generate profits, and the TRA because they will want you to continue to pay taxes. If taxpayers were poultry, TRA should be interested in the eggs, not the meat - certainly we do not want taxpayers to feel like chickens with their heads cut off - and to this end, the best approach has to be a collaborative one.

It is in the interest of all parties that the audit is run on an efficient basis so that it consumes the least amount of time possible. From the taxpayer’s perspective, the imperative is to maximise time running the business. Equally, the TRA auditors also want effective use of time as they have plenty of other taxpayers to visit, tons of administrative functions to attend to, and no interest in going through the slow process of dispute resolution.

When a tax dispute goes through the appellate process the cost both to the taxpayer and TRA is significant, whether in terms of time or money, and ideally disputes would be resolved wherever possible with the appellate process being a last resort. In addition, excessive delay in conclusion of an audit might risk punitive interest and penalty costs, which could cripple a business and even threaten its very survival.

Against this background, how do you manage the risks? The first imperative is to understand that preparation does not start when you get a notice from TRA saying they will be visiting next week. Instead, preparation means that you think of tax compliance as an integral part of the business.

Are you filing your VAT returns on time? Do you file your statement of estimated tax payable and revise if appropriately every quarter? Are you withholding tax appropriately? What about your payroll taxes, are you computing the taxes correctly and remitting these on time?

How about social security contributions and other payroll obligations? Any doctor (or vet, given our reference to chickens) will tell you that the most effective intervention happens before the symptoms of the disease surface.

Against this background, taxpayers would be well advised to engage their advisors to carry out a tax health checks or review. And, if such review does identify omissions, we recommend that you declare and rectify these upfront - an approach, that will not only reduce the penalties, but also create goodwill.

What you do not want to do is sit on the fence, as experience tells me that “the chickens will come home to roost”!

Samwel Ndandala (samwel.ndandala@pwc.com), Tax Manager – International Tax Services, PwC Tanzania.

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Thursday, November 9, 2017

Volatile global commodity prices threaten Tanzania

Gold is one of Tanzania’s major exports.

Gold is one of Tanzania’s major exports. PHOTO|FILE 

By Mnaku Mbani @mnaku28 mmbani@tz.nationmedia.com

Dar es Salaam. The Tanzanian economy will continue to remain volatile on account of global economic shocks – mainly in the commodity prices stakes. Indeed, Tanzania is listed among the countries in the world that are heavily dependent on commodity exports for their economic growth.

According to a report on the ‘State of Commodity Dependence’ published recently by the United Nations Conference on Trade and Development (UNCTAD), Tanzania’s share of commodity exports as a share of total merchandise exports increased to 85 per cent in 2014/2015, rising from 83 per cent in 2009/2010.

UNCTAD defines a country as being ‘dependent on commodities’ when its commodity exports account for more than 60 per cent of its total merchandise exports in value terms.

Tanzania’s total commodity export earnings during the 2014/15 financial year were $4,888 million (Sh8.8 trillion). This was higher than the $2,912 million (about Sh5 trillion) earned during the 2009/2010 financial year.

That rising trend started in 1995 – and there is no likelihood that it will be reversed any time soon.

Major destinations of Tanzania’s exports are India, the European Union, China, the United Arab Emirates – and its fellow member-states of the East African Community

Ore, metals, precious stones and non-monetary gold together account for 42 per cent of the export earnings. Exports of food items account 50 per cent, while agricultural raw materials and fuels account for five and three per cent of commodity exports respectively.

Mining, ore concentrate and tobacco were among of the listed commodities upon which Tanzania is highly-dependent.

All in all, however, volatility of prices in the world’s markets increases risks to the country’s economy.

Tanzania is also projected to become among the world’s major exporters of natural gas in a decade or so to come – and the impact of that on the economy is yet to be determined with any degree of certitude.

UNCTAD says in its report that commodity dependence can negatively affect human development indicators like life expectancy, education and per capita income.

“In the context of dramatic volatility in commodity prices, developing countries will struggle to achieve the Sustainable Development Goals –unless they break the chains of commodity dependence,” UNCTAD Secretary-General Mukhisa Kituyi said in Geneva ahead of the report’s release.

“Many developing countries have been commodity-dependent for the past three decades, and it is worrying to see that the numbers are going up,” Dr. Kituyi said.

Between 1990 and 2015, the United Republic of Tanzania’s Human Development Index (HDI) value increased from 0.370 to 0.531. This increase of 43.4 per cent ranked the country at the 151st position out of the 188 countries and territories surveyed.

Tanzania’s 2015 HDI was above the average of 0.497 for countries in the low human development group – but was above the average of 0.523 for countries in sub-Saharan Africa.

From sub-Saharan Africa, countries which were ranked close to Tanzania in the 2015 HDI – and, to some extent: in population size – were Côte d’Ivoire and Uganda, which were ranked at 171 and 163 respectively on the HDI listing.

According to the UNDP report, Tanzania’s life expectancy-at-birth increased by 15.5 years – to 65 years in 2015, up from 50 years in 1990.

Mean years of schooling increased by 2.2 years, while the expected years of schooling increased by 3.4 years.

Tanzania’s gross national income (GNI) per capita increased by about 74.1 per cent between the years 1990 and 2015.

“About two-thirds of commodity-dependent developing countries recorded a low or medium human development index in 2014-2015”, the report says – adding that the country’s commodity exports as share of gross domestic product (GDP) increased by 0.7 per cent in that half-decade, rising to 10.2 per cent in 2014/15 from 9.5 per cent in the year 2009/2010.

UNCTAD presented the report at the ninth session of the multi-year expert meeting on commodities and development, convened in Geneva in October 2017. The rise in commodity dependence was most noticeable in Africa, where seven new countries entered the category in 2014-2015, bringing the total to 46.

Over the same period, the number remained stable, at 17, in Latin America and the Caribbean, while the Asia and Oceania region saw its total go up by two, to 28 countries.

Regarding the type of exports, dependence was predominantly on agricultural products. This was the case for 41 per cent of the countries, while 30 per cent depended on fuel exports and 23 per cent on minerals, ores and metals.

More than a half of the countries depending on agricultural commodity exports – and two-thirds of the countries relying on minerals – are African.

Asia and Oceania were home to almost a half of the countries that are heavily dependent on fuel exports.

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Thursday, November 9, 2017

Businesses’ role in SDGs emphasized

Tigo Tanzania managing director Simon Karikari

Tigo Tanzania managing director Simon Karikari speaks during a Sustainable Development Goals forum in Arusha early this week. With him are UNDP’s Fitsum Abraha and National Bureau of Statistics senior official Ruth Minja. PHOTO|THE CITIZEN CORRESPONDENT 

By Musa Juma @TheCitizenTz news@tz.nationmedia.com

Arusha. The United Nations’ (UN) Sustainable Development Goals (SDGs) offer both business opportunities and responsibilities to members of the private sector, a meeting heard here early this week, calling upon businesses to play their roles effectively.

Adopted in September 2015 by 193 UN members, the SGDs contain a set of 17 global goals in the endeavor to end poverty, hunger, improve health and wellbeing and improve education by the year 2030.

They also seek to achieve gender equality; ensure availability of clean water and sanitation; ensure affordable and clean energy; promote decent work and economic growth as well as Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation.

With the SDGs, the UN members also pledged to reduce inequalities; promote sustainable cities and communities; ensure sustainable consumption and production patterns; take urgent action to combat climate change and to conserve and sustainably use the oceans, seas and marine resources.

The goals also include protecting, restoring and promoting sustainable use of terrestrial ecosystems, promoting peace, justice and strong institutions as well as strengthening the means of implementation and revitalizing the global partnership for sustainable development.

Speaking on sidelines of a forum on SGD here, the UN resident coordinator in Tanzania, Mr Alvaro Rodriguez, said the private sector is a key player in the implementation of the goals and must play their roles accordingly.

“Implementation of the 17 goals will be easy if the private sector is involved in Tanzania. The sector is a key partner,” he said.

The forum was titled: “Making Global Goals Local Business Tanzania” and went with the theme of: “Better Business Together for the Future Our Economy”.

The private sector, he said, is expected to be play an increasingly important role in the fight against corruption, a vital step towards the building of an inclusive economy.

“Corruption promotes poverty. It deprives people of quality health services. Corruption blocks the delivery of quality services in various sectors including education. If we can reduce corruption, it remains an open secret that the communities will develop,” he said.

Private sector’s role

Companies participating in the forum noted that they have noble roles to play in the realisation of SGDs, with the Tigo managing director, Mr Simon Karikari saying his company has been part of the goals since the mobile industry adopted them (SGDs) in 2016.

Under the sector’s ambrella goal of ‘Connecting Everyone and Everything to a Better Future’, said Mr Karikari, his company has always thrived to ensure that it connects an increasing number of Tanzanians so they can become part of the transformation agenda.

Quoting from estimates by the GSMA – a trade body that represents the interests of mobile network operators worldwide – he said the projections were that by the end of 2016, an estimated 4.7 billion men and women would have subscribed to a mobile phone service. It is also estimated that by 2020, upwards of 5.6 billion people will be connected to a mobile phone service.

“As Tigo Tanzania, we have been the market leader in digital lifestyle transformation since 1995. Currently, we cover 80 per cent of the population providing digital lifestyle services to 11.3 million customers through 3G and 4G technology,” he said, noting that his company was empowering communities and supporting achievement of the SDG’s through creating job opportunities and increasing financial inclusion and financial independence.

The telecommunication firm, he said, was also improving education, reducing the digital gender gap, advocating for the rights of children, promoting better health, empowering the youth and helping in governance.

The company was undertaking its financial inclusion role through the Tigo Pesa mobile financial service. The service, he said, was opening up new opportunities for millions of Tanzanians in remote areas and contributing to sustainable economic growth. Data, produced by Tanzania Communications Regulatory Authority (TCRA), show that at least 6 million of Tanzania’s 20 million mobile money accounts were held with Tigo Pesa as of June 2017.

With regard to digital inclusion, Mr Karikari said, Tigo has invested heavily on network expansion, modernization and optimization to increase rural and border area connectivity, increase the networks coverage footprint, capacity and also the quality of experience for mobile broadband service.

“With the help of fibre cable and investments in upgrading capacity of our sites, Tigo is now one of the leading operators in mobile broadband coverage in the country. Tigos 4G footprint has been upped to cover 22 major cities in Tanzania, enabling it to be the leading operator in ultra-fast mobile internet coverage,” he said.

The mobile operators in Tanzania are committed to connecting the 13 million people who remain unconnected – particularly those living in rural areas – and enabling them to gain access to essential internet services.

With the Rural Connectivity - first active infrastructure sharing initiative in East Africa between mobile network operators (MNOs) – Tigo, Airtel and Vodacom launched in 2016 to pilot sustainable commercial model of providing mobile broadband to rural areas.

“Three months after the first rural sites were activated 17,000 people were using the internet service with penetration rate of 78 per cent,” he said.

There were also a number of activities in areas of birth registration, connecting schools to the internet and on online child protection.

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Thursday, November 2, 2017

Secrets behind TahaFresh winning of honours

Taha Fresh Handling Ltd General Manager

Taha Fresh Handling Ltd General Manager (Centre) Mr Amani Temu together with his colleagues shortly after receiving an award from Mwananchi communications Executive Editor, Bakari Machumu during a gala dinner event that was held in Dar es Salaam at the weekend. PHOTO|THE CITIZEN CORRESPONDENT 

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

Arusha. Specialisation and tailored service provisions are the secrets behind the TahaFresh Handling Ltd (TFHL) to become one of Tanzania’s 100 fastest growing mid-sized companies in the country, the company has said.

During this year’s Tanzania Top 100 Mid-sized Companies Survey - which is a brainchild of KPMG and Mwananchi Communications Limited – TFHL came tenth out of 100 companies.

This was despite the fact that TFHL - a third party logistics company specializing on horticultural products - was participating for the first time in the event

As one of the fastest growing third party logistic company, TFHL prides itself on being able to provide customized solutions and rapid logistical services for their global customer-base. “We are very happy indeed for the recognition as among the top ten fastest growing companies out of top 100 midsized companies. Our specialty and customized services provision are the factors behind the success” said TFHL general manager Amani Temu, shortly after having received the award last week.

What started as a mere freight-forwarding firm to serve few horticultural growers in Arusha to export their perishable goods is now the reliable logistic firm attending the country’s horticultural industry.

The current award is the second in a row this year for TFHL after having recognized by the Global Airline, Royal Dutch Airline KLM in mid this year, as a top performer in Tanzania, providing comprehensive supply chain management services to its customers.

“TFHL is slowly, but surely becoming a leading horticulture logistics specialist, which understands and designs solutions for the country’s nearly $700million worth nascent industry” noted Mr Temu.

According to Mr Temu, THFL will commence airlifting avocado fruits from Tanzania through Royal Dutch airline, KLM, anytime soon.

If all goes well, TFHL said that the first shipment would be 20 tonnes. Idea is to airlift all the 150 tonnes of Tanzania’s avocado production at the short season of November-December.

Tanzania usually produces avocado in two seasons per year. Peak season is from March-September, when TFHL exports 4,400 tonnes through sea.

During this season the demand for the avocado is rather modest. However, in November-December short season it’s an opportune moment for Tanzania’s growers because the European market is usually hungry for avocado, according to Mr Temu.

The airfreight model will save Tanzania’s avocado growers freight time as it will reduce from 40 days when use sea freight from farm to European markets to just three days.

“We want to make sure that our avocado reach the market at the most apt time when the market is extremely hungry for the fruit to maximize profits for our farmers” TFHL boss explains.

Available records indicate that TFHL handles at least 10 million kg of horticulture products from Tanzania per annum.

It offers a wide range of horticultural products export and import services including its flagship airfreight, clearing and forwarding, refrigerated trucking, perishable handling, sea freight from both Dar Es Salaam and Mombasa ports.

Taha chief executive Jacqueline Mkindi is proud of TahaFresh Handling Ltd.

, due to the company’s pivotal role in providing timely and reliable logistic services to the industry players which is also part of the Taha strategic pillars.

Ms Mkindi, narrated that the company’s services are improving tremendously, and that, its contribution in the industry transformation cannot be overemphasized. She commended the work done by the TFHL team particularly in addressing the cross border horticulture trade and other technical barriers to trade in close collaboration with the Taha advocacy team.

TahaFresh continues to operate, as an industry professional logistics business affiliated with the best international standard setters such as the International Air Transport Association (Iata) and the International Federation of Freight Forwarders Associations (Fiata).

TFHL is also now an official member of World Cargo Alliance (WCA) network. The WCA is the world’s most powerful grouping of independent freight forwarders with more than 6,473 members in 789 cities and ports worldwide.

TFHL is now part of the 6,473 freight forwarders who are present in over 190 countries worldwide.

This is yet another milestone to the horticultural farmers in Tanzania as they will enjoy reliable and competitive services from multiple global freight forwarders across the world

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Thursday, November 2, 2017

Food prices up 15pc, says BoT report

A trader arranges cereals for sale at the

A trader arranges cereals for sale at the Kisutu Market in Dar es Salaam. PHOTO|FILE 

By Mnaku Mbani @mnaku28 mmbani@tz.nationmedia.co.tz

Dar es Salaam. Consumers spent more cash to purchase staple food commodities in markets and shops in July this year, compared with the same month last year, the Bank of Tanzania (BoT) has said.

The most affected segment of the population are poor and low income earners, who are forced to squeeze their spending on other basic needs – doing so at the expense of rising food prices.

The central bank’s Monthly Economic Review for August showed that wholesale prices for three staple crops -- namely maize, rice and beans – increased by an average of 15 per cent during the year that ended on July 31, 2017, compared with the similar period last year.

The highest increases were recorded on the main staple maize, whose wholesale price increased by 25.8 per cent to Sh67,915 per 100 kilogrammes last July, compared with the Sh53,984 recorded in July last year.

Maize production for 2017 was earlier tentatively forecast at 5.5 million tonnes: three percent below the average production for the previous five years. The domestic maize demand in Tanzania is estimated at 5.2 million tonnes per annum.

Reduced production output was mainly on account of poor rains in some central and northern parts of the country, according to the Food and Agriculture Organisation (FAO) report for August this year.

“In the northern and eastern bi-modal rainfall areas, ‘Masika’ rain crops, planted between February and March were in the harvesting stage. In northern Tanzania, crop development was negatively affected by below-average rains, whereby the March-to-May seasonal rainfall was 20-35 per cent below average in the Arusha, Mwanza and Shinyanga regions,” says FAO.

In central and southern uni-modal rainfall areas, the major ‘Msimu’ maize harvesting started in June, after a delay of more than one month, as dry weather conditions between December 2016 and February 2017 hampered planting operations and early crop development.

Average-to-above-average rainfall from late February to May reduced soil moisture deficits and lifted production prospects in southern key-growing areas, including the Mbeya, Rukwa, Katavi and Iringa administrative regions.

For rice – which is also widely consumed in both urban and rural areas of Tanzania – increased by 15 per cent during the year to July 31 this year rising to Sh170,737 per 100 kilogramme, up from Sh148,128 in July last year.

The review further shows that the wholesale price for beans also increased by ten per cent during the period under review, rising to Sh165,056 per 100 kilogramme in July this year, up from the Sh149,124 recorded during similar period last year.

The National Bureau of Statistics (NBS) price statistics for last August indicated that the prices for food and non-alcoholic beverages increased by an average rate of 8.9 per cent in July, compared with July last year.

The food index – which account for 39 per cent of all people’s consumption – increased to 114.20 points in July this year, rising from the 105.00 points recorded during the same month last year.

This is happening at a time when consumers are facing cash shortages due to tight monetary policy. The situation has badly affected consumers’ ability to purchase both food and non-food commodities.

However, on a monthly basis, the report shows decreased prices for the same staple food commodities. Wholesale prices for maize went down by 17 per cent in July compared with the June prices.

The slight price reduction in July over June was the result of the May-to-July (Msimu) harvest in the main producing regions in southern Tanzania, which accounts for approximately 75 per cent of the total annual food production.

According to the report, rice prices slightly decreased by 1.1 per cent in July compared with June this year, while the wholesale price for beans went down by 3.9 per cent in July compared with June this year.

An official with the ministry of trade, industries and investments said the annual increases in food prices were the result of lower harvests caused by prolonged drought in key producing areas.

Reports say that, in many parts of the bimodal rainfall areas – including the administrative regions of Morogoro, Geita, Shinyanga and Tanga – maize experienced ‘watch conditions’ due to the poor distribution of rains.

In the unimodal areas, parts of Dodoma and Tabora experienced ‘watch conditions’ for maize due to delayed rainfall, and poor distribution of Msimu rainfall.

However, other parts of unimodal areas – such as Katavi, Rukwa, Ruvuma, Njombe, Mbeya and Kigoma – experienced favourable and exceptional conditions following good performance of the ‘Msimu’ rains. The Famine Early Warning System network of the USAID published in September indicated that maize supplies in East Africa were generally below average – thus causing a rise in average prices.

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Thursday, November 2, 2017

Why understanding franchise ecosystem is crucial

 

By Wambugu Wa Gichohi

The franchise ecosystem comprises of many key stakeholders as discussed here under in no specific order of importance.

First are the main players, the franchisors and the franchisees, with the franchisor owning the franchise system and the franchisee investing time and money to trade using the franchise system. Ideally, the strategic relationship created between the two works in harmony to build the franchisor’s brand while enabling the franchisee to meet own personal and financial goals.

Then the Franchise Associations. Membership categories are designed to accommodate major players in the franchising ecosystem, as described here, but the main categories are the Franchisor and the Franchisee categories.

Associations offer self-regulatory dispute resolution framework between franchisors and franchisees and in countries with no franchise-specific laws, associations are nearly the default authority in such matters, save for matters requiring litigation. The Franchise Association of Tanzania (Fata) exists only on record given the low franchising activity in Tanzania. With growth of a vibrant franchising sector, FATA will recruit and take its rightful place and ably represent Tanzania in the Pan African Franchise Federation (PAFF) and the World Franchise Council (WFC).

In comes suppliers to the franchise system, the individuals and businesses that keep the franchise networks alive. Such include not just those supplying physical goods but also suppliers of support services such as franchise consultants (provide franchise development services), tax consultants (tax matters), accountants (financials), attorneys (legal) and banks (funding). For physical goods, it is important that local suppliers meet the quality required by the franchise system and often, franchisors invest in training them to meet these standards, otherwise import from centralized supply chain bases.

Franchise consultants, franchise attorneys and banks deserve some louder mention-they are a rare commodity in East Africa. While there are many so-called business development service providers, franchise consultants are experts specifically trained to prepare businesses to franchise. They also advise potential franchisees on selecting the right franchises and the right finance sources to fund their franchises.

The writer is aware of only a handful of such in the region and maybe it is time we grow a new discipline just like accountancy, law, etc to help grow this sector. Franchise Attorneys are commercial attorneys with a specific bias in franchising, from intellectual property law, preparation of legal documents (not just the franchise agreement) all the way to litigation. In East Africa, most franchise engagements are arranged by commercial attorneys while in markets where franchising is well-rooted, franchise-specific (commercial attorneys trained in the whole franchising spectrum) are responsible to oversee franchising engagements.

Adequate money is required to roll out franchise networks. While the prospective franchisor can choose between debt and equity finance, equity financing is cheaper than debt financing but you have to cede ownership to the equity investor. Banks thus become very important stakeholders in franchising as most entrepreneurs do not like ceding ownership. Ideally, banks arrange franchisee financing more readily than other options since franchisees join a tried, tested and proven business and not starting a green field venture-hence lower risk.

This service has, understandably, not grown in East Africa, with only a handful of banks supporting foreign franchises owing to the small number of franchise transactions. As franchising grows more banks will develop dedicated franchise-specific finance products for indigenous franchise systems as is the case in other parts of the world, South Africa being a good example where most banks have a desk dedicated to franchise financing.

Apex private sector bodies such as Tanzania Private Sector Foundation (TPSF) offer a ready membership with franchisable businesses as do the individual association members. Besides, they have a direct interest in growing a sustainable franchising sector by tapping into the smaller businesses that are currently not their members but would grow to become future members.

As the apex body of private sector players, Fata, once active, would join TPSF membership. As the voice of the private sector, TPSF plays a major role in lobbying and advocacy and as a bridge to government, a bridge which is needed in developing a vibrant franchising sector.

The government is particularly key being the custodian of intellectual property (patents, trademarks etc) laws which are the basis of franchising. It also provides policy direction and minimum legal framework necessary for growth of a vibrant franchising sector, particularly for home-grown franchises which play a key role in addressing trade imbalance. In East Africa, the long period it takes to conclude commercial disputes has for long been cited top among reasons discouraging leading franchise brands from venturing here.

However, as legal reforms take root, strong multinational brands have entered the market, most notably Re/Max, Carrefour, Subway, Pizza Hut and KFC. The government can also use its tax policies to influence growth of a vibrant franchising sector (e.g. tax rebates when indigenous brands franchise) to secure job creation and higher GDP growth as discussed here-below.

Some development partners support private sector activities. In the context of franchising, it is high time they direct some resources to support development of franchising infrastructure in addition to supporting the scaling up of home-grown brands through franchising, which would contribute immensely to job and wealth creation in East Africa.

Using the example of South Africa where franchising contributes 11.67 per cent of the country’s GDP, (2016 franchise survey) the average direct jobs created per franchise outlet is 17. It is acknowledged that one direct job creates one indirect job. The average household in South Africa has 4 to 5 people. It is therefore fair to say that franchising impacts on the lives of between 68 and 136 people per franchise outlet.

With 757 franchised brands and 35,111 franchise outlets, franchising impacts between 2,387,548 to 4,775,096 people across the 17 franchise sectors. Based on this example and assuming we can quickly mobilize and create 400 franchise systems in East Africa in the next 5 years (Egypt achieved this within 4 years of embracing franchising) with an conservative average 50 outlets each, franchising could impact between 1,360,000 and 2,720,000 people in East Africa by 2022.

This might be the secret key to unlock exponential GDP growth, one which our governments have missed. The author has prepared a realistic-well structured route map that governments can use (in partnership with development partners and the private sector) to achieve this.

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Thursday, November 2, 2017

Charge Kenya royalty on Mt Kilimanjaro

 

By Karl Lyimo

Earlier this year, a local newspaper somewhat shocked half-the-world, reporting that Tanzania had‘overtaken Kenya to become the regional tourist hub after ‘far outpacing’ the neighbouring country in both tourist arrivals and earnings...!’

Citing figures presented to the National Assembly in Dodoma last April by Premier Kassim Majaliwa, the paper stated that ‘Tanzania hosted 1,284,279 tourists in Year-2016, a 12 per cent increase from the 1,137,182 tourist arrivals in 2015.’

In comparison, ‘Kenya received 874,385 tourists in 2016, a 16.7 per cent increase from 752,073 arrivals in 2015,’ the paper stated.

Turning to Bank of Tanzania statistics, the paper said Tanzania’s ‘earnings from tourism rose by 11 per cent last year – to US$2.23bn, up from $2.01bn in 2015 – as a direct result of the increase in tourist arrival numbers...’

Kenya’s tourism drops

Kenya’s tourism revenues dropped by 2.87 per cent in 2015, to around $837m!’ [See ‘Tanzania overtakes Kenya as regional tourism hotspot:’ The Guardian-Dar, April 10, 2017].

Oh, there were equally-juicy bits elsewhere on Tanzania’s tourism business…

On October 10, 2017, another paper revealed that tourisn arrivals in the EA Community member countries (Burundi, Kenya, Rwanda, South Sudan, Tanzania and Uganda, named here strictly in alphabetical order) were ‘expected to rise by some 5m by Year-2020 – thanks to a special programme, ‘East Africa Tourism and Hospitality Project-2017,’initiated by Mikono Speakers…’

According to figures released by Trade Mark-East Africa, the paper said,‘the east African region pulls in an estimated 5.4m visitors annually – out of whom around 1.3m come to Tanzania…’

Sounds fantastic? Then, just ‘Google’ for ‘New plan to boost tourist arrivals in EA in next two years,’ by Rosemary Mirondo; The Citizen: October 10, 2017].

Well… ‘Yours truly’ hadhis piece titled ‘To enjoy Mt Kilimanjaro, come to Tanzania...’ published in The Citizen on September 21, 2017.

That article sought to highlight the saga city that ‘the power of publicity can move mountains,’ and wreak untold havoc or blessed bliss, all depending!

In My Book of Things, publicity – alternating, or in combination, with ‘advertising’ – is a most powerful tool in ways more than one!

‘Just look at the way Kenya next-door drew in tourist hordes by subtle advertising, making use of clever and indirect methods to achieve their goal without havint to shout from the treetops!

[SAMPLES: 1): ‘Come to Kenya and SEE/CLIMB Mount Kilimanjaro!’ 2): ‘Kenya’s Tourism Minister Morris Dzoro told a travel agents conference that Mount Kilimanjaro was one of his country’s top tourist attractions. [See ‘Neighbours row over Kilimanjaro:’BBC News, June 8, 2005]].

Mark you: nowhere did the crafty Kenyan promoters aver in so many words 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!

Foraeons, foreigners – especially those who missed out much in their Geography classes – made a beeline for Kenya which, they (wrongly) believed, was the only place from where to view and climb up ‘The Kili!’

Tanzanians usually lamented the developments, whining that Kenya was playing dirty/rough – instead of vigorously countering with our own promotional publicity to demonstrate beyond doubt that ‘the Roof of Africa’ was in Tanzania, all of 20km from the common border with Kenya!

Oh, I don’t know… But, shouldn’t Tanzanians seriously consider charging ‘royalty’ on the use of ‘their Kilimanjaro’ – equating it to a wealth-generating resource/asset?

After all, the mountain is alsocallously exploited by Kenyans to grow rich – as their Tourism Minister Dzoroso blithely discombobulated the world, claiming that ‘Mount Kilimanjaro is one of his country’s top tourist attractions!’

By parity of reasoning,Kenyan sought a pay royalty or whatever to the real/sole owners of the world’s highest stand-alone mountain, Tanzanians, for gainfully exploiting their natural asset... Cheers!

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Thursday, November 2, 2017

Consumers cry hoarse as govt insists about being liquid



Stacks of Tanzanian Shilling notes. PHOTO|FILE

Stacks of Tanzanian Shilling notes. PHOTO|FILE 

By Mnaku Mbani @mnaku28 news@tz.nationmedia.com

Dar es Salaam. After recording an upward trend for the last four consecutive months, Tanzania’s extended broad money supply (M3) headed in the opposite direction in July this year.

This reverse trend is being experienced at a time when the government is said to be liquid – while the consumer market is facing a cash drought. This almost automatically impacts consumption trends.

Extended broad money – codenamed ‘M3’ – consists of currency in circulation outside banks; shilling demand-deposits among local Tanzanians- time-and-savings deposits, and foreign currency deposits by Tanzanian residents.

The monthly economic review for August this year published in Dar es Salaam last week by the Bank of Tanzania (BoT) states that the annual growth rate during July this year was 5.8 per cent, down from the six per cent which in June.

Whichever way you look at it, both rates are lower than the annual growth of 12 per cent that was recorded in June last year.

This relatively lowly pace of economic growth might be within the targets of the Monetary Policy Statement (MPS) for June expectations, which had it that the central Bank of Tanzania was targeting an annual M3 growth of not more than 12 per cent.

However, this has created liquidity stresses among Tanzanian consumers, as credit to the private sector remains the main source in stimulating consumptions among Tanzanians – which helps producers to sell more, and the government to generate tax revenues.

Analysts say the trend might derail the country’s economic growth progress, and may affect improvement of economic efficiency and stability in the coming years.

The BoT review says that the drop of money supply during July was a result of the low increase in credit to the private sector, compounded by the decline in net credit to government from the nation’s banking system.

The shrink of net credit to the government from the banking system was caused by strong deposits at the Bank of Tanzania by the government, following improvement in domestic revenue collections.

Net credit to the government from the banking system decreased by 23 per cent during the year that ended in July this year, compared to increase of 12.4 per cent recorded during the year ending in July 2016.

The review also shows that the government borrowed about Sh3.5 trillion from the banking system in July this year – lower than the Sh5 trillion it borrowed in May. In July last year, the government borrowed Sh4.5 trillion from the same source.

According to the central bank’s review, the growth of credit to government from the banking system has been in a negative trend since October last year – and started recording a negative growth since November that year.

Credit to private sector from the banking system also faced massive cuts, including the key economic sectors of agriculture, hotels and restaurants, transport and communication, as well as personal loans. All thes account for a large share of credits.

Furthermore, the review found that the annual growth of credit to the private sector shrunk to one per cent in July this year, down from 18 per cent in July last year – and more than 24 per cent in January last year.

The decline in credit to the private sector over the last six months reflects the cautious stance taken by most of the banks in extending credit – especially following weakening of the banks’ asset quality, coupled with slower growth of deposit liabilities and portfolio diversification in favour of low-risk assets, such as government securities.

Lending by the banks to the private sector was about Sh250 billion in July this year which was substantially lower than the Sh500 billion recorded in June. That amount was also lower than the more than Sh2 trillion borrowed by the private sector in July last year.

The slowdown in credit growth was also recorded in transport and communications, as well as in agriculture and personal loans. In fact, transport and communication recorded negative credit growth.

On the other hand, building and construction, as well as hotels and restaurants, recorded strong credit growth.

“The impact of the slowdown in the growth of domestic credit on money supply was toned down by an increase in Net Foreign Assets (NFA) of the banking system – ordinary banks and the central Bank of Tanzania – which rose by 30.4 per cent in the year to July 2017. (This is) compared to the decline of 9 per cent in the corresponding period in 2016,” the BoT review concludes.

The growth of NFA of the banking system was driven by an increase in holdings of foreign exchange by the Bank of Tanzania, which emanated from the disbursement of external non-concessional loans in favour of the government, as well as the purchase of foreign exchange from the inter-bank foreign exchange market, says the BoT.

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Thursday, November 2, 2017

Why public-private partnerships are not flourishing in TZ

Finance and Planning minister Philip Mpango

Finance and Planning minister Philip Mpango speaks during a past Parliamentary session. PHOTO|FILE 

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

Dar es Salaam. Capital crunch and lack of fiscal imperatives hamper public-private partnerships (PPPs), the executive director of the Tanzania Private Sector Foundation (TPSF), Godfrey Simbeye, told Business Week.

Noting that big projects invariably need huge sums of money which is hard to source from local banks, Mr Simbeye said a bankable feasibility study for a project worth $300 million (about Sh669 billion) would cost Sh2-to-5 billion to finance – a sum which cannot be easily sourced.

The government itself had fewer incentives to use PPP to finance infrastructure because the country’s Treasury coffers are out of cash.

Mr Simbeye was reacting to proposed plans by the acting director-general of the Tanzania Airports Authority (TAA), Richard Mayongela, to use the PPP approach in undertaking various projects. The projects include a Sh15 billion four-star hotel and a special economic zone at the Julius Nyerere International Airport in Dar es Salaam, as well as convention centres and a hotel at the Arusha and Mwanza airports.

Other projects-in-the-making are the construction of a $200 million airport at Msalato in Dodoma; a $1 billion airport for Bagamoyo in the Coast Region, as well as three-star hotels at Songwe and Mtwara airports.

“There is not enough money for long-term private infrastructure investment. However, I see this as a temporary setback, as the rationale for PPPs remains ‘best practice’ globally,” noted Mr Simbeye.

To overcome financing shortfalls, he called on the government to turn to international development institutions that would guarantee private sector loans for PPP projects.

He suggested that, for example, the TIB Development Bank could raise money from foreign sources – including the African Development Bank (AfDB) and the European Investment Bank (EIB) – to on-lend to companies involved in PPPs at a relatively low interest rates of 2-4 per cent.

“If we are to boost infrastructure financing, bank loans for earnings-based PPP infrastructure projects under concession agreements should be treated as ‘secured advances.’”

Mr Simbeye cautioned that high costs of borrowing would scare away private investors in PPP projects.

He also proposed that the procurement processes for PPP projects – which, according to him, take up to three years – be streamlined.

That can be done by reducing bureaucracy, he volunteered.

“PPPs in countries such as China and Turkey have proved successful, partly because they don’t feel the pinch of sharing the risks with the government. The private sector in those countries has matured.”

In that regard, he called upon the government to take a leaf from out of China’s book, wherein the China-Africa Development Fund has supported Chinese investors in Africa.

“Our hopes remain on venture capital and private equity to enable (the implementation of) big projects to gather speed.”

The ‘361 Degree Africa’ managing director, Mustafa Hassanali, has a similar view.

His creative agency provides a one-stop shop as an event, media, public relations, marketing and advertising organisation that caters for them all.

Mr Hassanali attributes the credit crunch to untruthfulness of Tanzanian businesses, stating this in a panel discussion on how small- and medium-size enterprises feature in the local content policy and Tanzania’s industrialization journey.

“Banks (have lost) confidence in businesses because the majority of them are dishonest,” Mr Hassanali argued during an event to release the findings of a survey into the ‘Tanzania Top 100 Mid-Sized Companies,’ the brainchild of Mwananchi Communications Limited (MCL) and KPMG.

Noting that “the situation was hindering the promotion of local content in big projects such as those in oil and natural gas,” Mr Hassanali said “contributions of multilateral agencies play a key role in improving the investment climate, and fostering private sector participation. It’s high time we made them have confidence in us.”

Last week – just before he was shifted to the Foreign Affairs Ministry – the-then permanent secretary in the Ministry of Industry, Investment and Trade, Prof Adolf Mkenda, spoke about the government’s efforts to address challenges that confound the private sector, including especially illiquidity and the tax burden.

He said illiquidity challenges emerged after the government launched a campaign against grand corruption and rampant tax evasion.

“This is just a transition period,” Prof Mkenda said, adding that “you need to change your mindset and pay taxes accordingly.”

He also took the opportunity to assure one and all that the government would soon streamline charges levied by regulatory bodies in an effort to ease the tax burden on businesses.

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Thursday, November 2, 2017

Learning from the best to become excellent



Azim Jamal

Azim Jamal 

By Azim Jamal

“It’s always inspiring to me to meet people who feel that they can make a difference in the world. That’s their motive, that’s their passion... I think that’s what makes your life meaningful, that’s what fills your own heart and that’s what gives you purpose.” Maria Shriver

Heroes, models, and mentors can help you become excellent. They have already arrived there and can show you the path. In a commencement speech, my friend and co-author, Nido Qubien recently gave at a U.S university, he made three important points:

• Who you spend time with is who you become.

• What you choose is what you get.

• How you succeed is where you end up.

To be great you must first walk with great people. If you want to fly with the eagles you have to stop scratching with the turkeys. It’s the choices you make, not the circumstances you find yourself in, that define the person you become. The type of success that you pursue in life will determine the kind of destination and legacy you will enjoy.

Heroes are people to look up to. Models are people you learn from. Mentors are those who hold your hand while you walk to success, showing you the pitfalls so that you can avoid them. Find heroes who can guide you to Life Balance and success. Akber Ladha was a mystic whom I really admired. He was a wise man who gave freely of his wisdom and insights. He was the one who ignited the spark in me to write two of my book, The One-Minute Sufi. He was not alive to see the birth of these books, but he has certainly left a legacy through the inspiration he gave to me.

“Christ gave us the goals and Mahatma Gandhi the tactics,” said Martin Luther King Jr., the cherished civil rights leader in the United States of America, who embraced non-violence as the weapon of choice to help millions of African Americans fight for their rights. The inspiration we impart to others can go a long way. Shams Tabriz, a wandering mystic of the 13th century, inspired Rumi. Shams wrote no books. Rumi ended up writing 26,000 couplets and became the Shakespeare of the Persian world. Rumi gave Shams credit for all his works.

Learning from the best is great. It is also great to serve and teach others. There are times when serving others and volunteering can be difficult. Your family might be upset with you for spending too much time away from home and not shouldering your share of the domestic load. You may end up in a place where people get rude, or do not appreciate your efforts. A volunteer’s life is not always rosy. Sometimes things backfire.

Having said this, no matter what price you pay, when you give wholeheartedly and with good intentions, you set power in motion – the ripple effect. And if nothing else, there is an internal instant satisfaction you feel deep within you, which is hard to measure or buy with money or physical possessions. In that regard, it is priceless.

So rise above the hindrances that come your way. Of course, please first ensure that you always balance your life with your family commitments, or involve your family in your service.

Learning from the best leads to excellence. Your parents, teachers, peers, and mentors, as well as the environment, all play important roles in your achieving this skill. The good news is that it is never too late to achieve excellence, as long as you are committed enough to exercise the discipline and action required.

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, November 2, 2017

YOUR BUSINESS IS OUR BUSINESS: Why should you demand a receipt?

 

By Shabu Maurus

The move by tax authority and the government to press petroleum retailers to use electronic fiscal devices (EFDs) appears to have been very successful, at least in the major towns in Tanzania. However, it appears that only a few drivers bother to pick up the EFD receipts (“receipts”) after refilling their cars. This is despite the law requiring customers to demand receipts whenever they purchase goods and services.

If you have been driving in Tanzania for the past two years, you may have noticed that the introduction of EFDsto the fuel stations also came with an additional container - a dustbin! The attendants dump the uncollected receipts into the dustbins. In most of the fuel stations that I frequently refill, it is normal to find the dustbins are full. The fuel attendants struggling to push in some more uncollected receipts into those bins.

Does it matter?

To persons in business, apart from demanding receipts being a legal obligation, they also have a business interest. The receipts are necessary for them to be able to support their claim for fuel expenses. However, individuals not in business may perceive the receipts just be like any other worthless piece of paper to be dumped or burnt.

Thismay, partly, make sense because once the EFD receipt has been issued, the details of that transaction are already sent to the tax authority via the EFD management system. And so, whether an individual picks up the receipt or not, it doesn’t matter as far as fuel retailers possible tax evasion is concerned. But this argument may not be entirely true especially if one considers this in the context of the weaknesses of the EFDs implementation in Tanzania.

In one of my previous articles on EFDs in this column, I highlighted, as one of the EFDs weaknesses, the lack of customer details on receipts issued by most of the businesses.So, even if one is to pick up a receipt after refilling, the receipt bears absolutely no connection with that person or his car.

Lack of customer details on a receipt presents a big risk for tax leakage through fraudulent use of the receipts.The risk is higher when genuine customers do not demand and pick their receipts. So, the question may be how do the fuel retailers or their attendants dispose of the receipts from those dustbins?They probably burn them. But burning may not happen if they have someone who can buy the receipts!

Possible frauds and tax leakage

It is possible for a receipt from a fuel retailer without any customer details on it, to be used by any person as an evidence for fuel purchase. This makes it possible for unfaithful taxpayers to collude with fuel retailers or their attendants to buy the uncollected receipts from the bins and use them to claim fuel expenses andhence reduce their income tax. Businesses are also at risk as unfaithful employees can easily use the receipts from these dustbins tosupport fuel purchases they never made.

What needs to be done?

As customers, we can help mitigate the risksby building a culture of demanding receipt after refilling or indeed after any other purchase. This, however, may take time despite all the possible penalties. In my previous articles, I also pointed out the practical difficulties for retailers like fuel stations and supermarkets to input customer details as currently required by the tax law without compromising the flow of business. The tax authority and suppliers or manufacturers of EFD machines should find a more efficient way to input customer identifier into the receipts.

Mr Maurus is a partner with Auditax International

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Thursday, November 2, 2017

BoT: Taxes on tourism boost Z’bar revenues

Zanzibar Association of Tourism Investors

Zanzibar Association of Tourism Investors chairman Seif Masoud Miskiry speaks to journalists in the Isles last week. PHOTO| THE CITIZEN CORRESPONDENT 

By Mnaku Mbani @mnaku28 mmani@tz.nationmedia.co.tz

Dar es Salaam. The August Monthly Economic Review published by the central Bank of Tanzania (BoT) has shown that the isles revenue collections during July were lower than Sh57.5 billion monthly expenditures.

The BoT review has quoted the Zanzibar Ministry of finance reports showing that the major boost to tax revenues was caused by increasing tax collections from tourism activities, as well as taxes on imports.

Tax collections from tourism and its related activities – including hotels, restaurants, tour operator activities, stamp duty, airport and sea ports – grew by almost 100 per cent, to Sh15.2 billion in July this year, higher than the Sh7.9 collected in July last year.

Data from the Zanzibar Commission for Tourism (ZCT) show that the tourism sector contributes 30 per cent of the isles’ economy. About 375,000 tourists visited the isles during the year 2016/17, up from the 162,242 tourists who did so in 2015/16.

According to the isles ministry of tourism, the plan is to increase the number to 500,000 tourist arrivals by the year-2020.

The sector is also leading in many projects, accounting for 60 per cent of all investments projects that generated 220,000 direct jobs.

The sector is seeking to grow by ten per cent by 2020, which will make Zanzibar and Pemba one of the top tourism destinations off the Indian Ocean coast.

The government of Zanzibar has put in place programs that provide proper participation of local community on tourism sectors at several villages. The programs include development and delivery of community-based training in tourism-related skills, and Small and Medium Enterprises (SMEs) program for the respective target groups to create greater economic opportunities within the local tourism industry.

According to a 2016 research on the role and impact of tourism on socio-economic development for Zanzibar published by Issa Shaban Mohammed, a Master’s program student at Mzumbe University, the major challenge for the tourism industry in Zanzibar is that it has been ‘invaded by foreigners.’

This is in the sense that the gains from Zanzibar tourism are taken by people from abroad who decide the manner in which the tourism business is to be conducted...

The research further revealed that most of the foreign tourism companies operating in Zanzibar advise the government on tourism issues but mostly doing so for their interest, with locals manipulated to implement the decisions of the investors.

According to the research, there is a high level of bureaucracy, with the tourism industry in Zanzibar being controlled by too many organizations.

“The organizations have different objectives, so much so that the tourism business is inefficiently operated because every operator has different, private interests,” the author said.

Moreover, many of the tourist attractions in Zanzibar are weak, and no longer attract tourists. Consequently, there has been a considerable decrease in the number of tourists coming to the Space Islands.

Some of the tourist attractions in Zanzibar are aged, and seem to be neglected. For example, the ‘House of Wonders,’ a.k.a as ‘Beiti-ljaibu,’ was for long a prime tourist attraction site. Alas, that is no longer the case nowadays, as it is slowly but steadily going to pieces – thus presenting a danger to visitors.

The second largest tax contributor to government coffers during the month under review was income tax which increased to Sh9.3 billion last July, up from the Sh7.5 billion recorded in July last year.

Income tax revenues were also boosted by increased employees in tourism and related activities.

Value-added tax (VAT) and excise duty generated Sh8.7 billion in July this year, rising from the Sh7.5 billion recorded in July 2016. Non-tax revenues nearly doubled, rising to Sh5.3 billion in July this year, up from the Sh2.9 recorded in July last year.

On the other hand, grants-in-aid shrunk to Sh700 million, down from the Sh3.7 billion recorded last year.

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Thursday, October 26, 2017

Franchising can be traced from medieval period

 

By Wambugu Wa Gichohi

The term franchising has its roots in the middle ages where it was used to describe granting of rights by a monarch to an individual to develop (howsoever they wished) and govern over an area of land owned by the state. In the early nineteenth century it was used to define the act of voting local members of parliament in modern day Europe where at the same time it was used in the beer industry by many brewers allowing certain pubs to obtain leaseholds and sell the brewers’ beer.

However legislation was passed in the nineteenth century to control widespread alcohol abuse by imposing rules on where alcohol could be sold. Resulting from the strict compliance requirements (which meant loss of many pubs as distribution points), the richer brewers started offering special rights (franchises) to selected pub owners, paying a lease on the property and working closely with the owners at local and national level (the Tied System-see definition in a different article).

As a business concept close to what we know it today, the growth of franchising is attributed to the US inventor, Isaac Merritt Singer who invented a sewing machine (yes, you know the Singer sewing machine) in 1851 which was easily mass-produced and as many people countrywide become owners of the machine due to its affordable price, The Singer Sewing Machine Company set up nationwide service and maintenance network by granting special rights (licenses- see definition in a separate article) to selected individuals to use the Singer name in specified localities to service and maintain the machines using spare parts supplied by the Singer Sewing Machine Company. Soon these licensees started selling new Singer sewing machines. This model was followed by many others including General Motors who set up a nationwide network of dealers with rights granted to sell and service General Motors vehicles in specific areas of the USA.

However, the birth of modern-day Business Format Franchising (see definition in a different article) is traced back to 1954 when Ray Kroc, a 52-year-old retired multi-mixer machine salesman walked into a hamburger stand in San Bernardino, California to sell the multi-mixer to Mac & Dick MacDonald’s and what he did next would transform the franchising world.

It is recorded that at the brothers’ stand he saw the most efficient business method, producing hamburgers, fries and beverages quickly, efficiently, inexpensively and identically and best of all, school children could do it for themselves, hence anyone could do it! He successfully pitched to the MacDonald’s brothers his vision of creating MacDonald’s restaurants across the US, bought exclusive rights to the MacDonald’s name and later bought out the MacDonald’s brothers to form modern day McDonald’s Corporation.

With over 36,000 outlets (80 per cent franchised) each producing an average of $1.8 million in annual sales in over 100 countries and creating about 1.9 million direct jobs worldwide, McDonald’s Corporation is today not only more profitable than most retail businesses but also one of the largest retail prepared food distribution system in the world, competing mainly with Subway for honors. Moreover, their business model places them among the largest landlords in the world since they own real estate on which most of the 36,000 outlets operate, which include excess office space on upper floors of the buildings they buy for ground floor shops!

Rapid growth: The development of franchising as a business concept was further inspired by the deep inroads made by chain stores in certain fields of retailing and the need to become better operators in different areas. Franchising is sometimes referred to as the “best ambassador of free enterprise in the world” and as a business strategy has become a global phenomenon by highlighting the value of entrepreneurship and the importance of the Small and Medium Enterprise (SME) market in the development of countries. In the developed world, franchising has changed the lives of people, created wealth and revived the spirit of hope for many through jobs creation and skills development.

According to the World Franchise Council, Asia (particularly China, South Korea and Japan) today is the leading franchise continent followed by North America, Europe and Australia.

Unfortunately much of Africa and most of the developing world has not embraced franchising and the concept is yet to take root and yield its enormous benefits. Most franchising activities are concentrated in South Africa where about 90 per cent of franchise opportunities are based on locally developed concepts, thanks to the economic embargo of the apartheid era among other factors.

Some pockets of franchising activity are also found in West Africa (Nigeria) and in North Africa (Egypt, Tunisia and Morocco). In East Africa, locally developed franchises are very rare and the franchising sector is driven by a handful of foreign franchises which dominate their individual market segments to the detriment of local brands. This offers a challenge to local businesses to explore the possibilities availed by franchising as a viable growth model.

Embracing franchising is a good step towards guarding against business failures and offering a solution to poorly trained entrepreneurs and burgeoning demand for everyday goods and services. According to the Africa Investor magazine, research into wider business failures from the African Development Bank found only 15 per cent of franchised SMEs folded in the first five years compared to an 80 per cent failure rate among independent businesses.

This is because in a franchise system, franchisees do not really start new businesses, they plug and play into an already tried, tested and trusted business, and although franchising offers no guarantees to success, chances of failure are lower. And there lies the hidden jewel for indigenous brands, and the BIG reason for governments in East Africa to support the growth of a vibrant franchising sector as a way to generate stable jobs, skills transfer and create wealth!

The writer is a franchise consultant helping indigenous East African brands to franchise, multinational franchise brands to settle in East Africa and governments to create a franchise-friendly business environment.

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Thursday, October 26, 2017

Reduced imports, unpredictable aid hamper budget execution

 

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

Dar es Salaam. Reduced imports, falling tax revenue collections and unpredictable donor funding adversely affected implementation of the Government budget for the 2016/17 financial year, data show.

The Tanzania Revenue Authority (TRA) had to grapple with a steep decline in imports at the nation’s largest port Dar es Salaam last year, latest data show.

This happened at a time when employers were cutting costs every which way – including laying off some of their workers – in efforts to realign their operations with the prevailing business and other economic conditions.

The situation could also have been made more complex by the ever-increasing unpredictability of aid disbursements from Tanzania’s development partners, both bilateral and multilateral.

Combined in an unholy alliance, these factors resulted in a 37 per cent shortfall in the country’s development budget estimates, recent Bank of Tanzania (BoT) figures show.

Only Sh7.39 trillion was actually availed for development expenditure during the 2016/17 financial year, out of the Sh11.8 trillion that was budgeted and duly approved, the central bank notes in its Monthly Economic Review for July 2017.

With disbursements of pledged donor funding being so unpredictable lately, Tanzania this time round received only Sh912 billion out of the Sh1.4 trillion that was earmarked to be sourced in the forms of grants-in-aid and loans on relatively easy terms!

Indeed, the Government-in-Dodoma was able to lay its budgetary hands on only Sh2 trillion out of the Sh3.3 trillion that was planned to be collected as net foreign financing for the government’s revenue and expenditure budget proposals.

Significantly enough, the TRA met its tax revenue collection targets in in terms of value-added tax (VAT) and excise duty on local goods, collecting Sh109.827 billion in total.

However, it underperformed in the import duty and income tax categories by wide margins, BoT figures show.

At the end of the day, TRA collected Sh14.055 trillion out of the targeted Sh15.079 trillion for the last financial year.

While the set target for import duty was to collect Sh5.773 trillion, only Sh5.093 trillion was eventually raised. In like manner, only Sh4.83 trillion was collected in income tax out of the original target of Sh5.316 trillion for Government coffers.

The TRA director of tax payer services and education, Mr. Richard Kayombo, attributed the drop in import duty collections to the new ‘Single Customs Territory’ system adopted recently by member countries of the East African Community (EAC).

Under this system, goods from fellow EAC member nations are no longer regarded as ‘foreign imports’ and, “as such, they do not attract import duty.”

Unfortunately, details on the performance of the Income Tax category were not immediately available, and Mr Kayombo promised to provide same to BusinessWeek in due course of time and events.

However, when all is said and done, The Citizen has been made to understand that a number of companies have been laying off workers lately. This is in efforts to realign their operations with the prevailing economic conditions, which are not exactly conducive to increased operational costs.

On the other hand, Acacia Mining PLC announced a few months ago that it would retrench about 100 workers this year, as the company prepares to close down its Buzwagi Gold Mine.

Similarly, Tanzania Distilleries Limited – a subsidiary of the Tanzania Breweries Limited (TBL) Group – laid off 50 workers from its various departments. This was in reaction to the ban on alcoholic beverages packaged in sachets.

With the takeover of TBL’s management from SABMiller by Belgium’s Anheuser-Busch InBev (AB InBev), the biggest brewer in Tanzania is also reported to have laid off more employees in the past few months for assorted reasons.

As if that were not enough of retrogression, some classy hotels have been turned into mere hostels.

The mass media industry has not been spared either – with reports that workers in the industry go for months without pay, while plans for retrenchments remain on the cards.

In January this year, at least three major mobile telephony firms in Tanzania announced that they would retrench their manpower establishments. This was to realign their operations with a government directive requiring the companies to float 25 per cent of their shares on the local bourse, the Dar es Salaam Stock Exchange (DSE).

That came hard on the heels of a government directive to the effect that the companies should separate their telecommunications businesses from their ‘mobile’ financial products and services – such as money transfers, bills payment.

A changing business and economic environment also forced low-cost airline Fastjet to redesign its operations late last year – including retrenching at least 41 of its employees.

Whichever way you look at things, jobs cuts would no doubt have an adverse impact on the pay-as-you-earn (PAYE) system: a withholding tax on the income of salaried employees.

Additional reporting Rosemary Mirondo.

educed imports, falling income taxes and unpredictable donor funding affected the 2016/17 budget execution, data shows.

The Tanzania Revenue Authority (TRA) had to grapple with a decline in goods at the Dar es Salaam Port, latest data show.

That happened at a time when employers were cutting costs – including laying off some of their employees - to align their operations with business and economic conditions.

The situation might have been made complex with the ever-increasing unpredictability of funds from development partners.

The factors resulted in a 37 per cent shortfall in the development budget, latest Bank of Tanzania (BoT) figures show.

Sh7.39 trillion in development expenditure was spent during the financial year 2016/, low than an approved budget of Sh11.8 trillion, BoT noted in its July 2017 economic review, which covered the entire 2016/17 financial year.

With unpredictable donor funding, the country sourced only Sh912 billion out of the Sh1.4 trillion that was earmarked to be sourced in form of grants from aid.

Of Sh3.3 trillion that was planned to be collected as net foreign financing for the revenue and expenditure plan, the government got only Sh2 trillion.

However, TRA met its collection target in the category of sales/VAT and excise duty on local goods by Sh109.827 billion while it underperformed in import and income taxes by wide margins.

As a result, TRA collected Sh14.055 trillion out of a target of collecting Sh15.079 trillion during the entire financial year, BoT figures show.

While the budget was to collect Sh5.773 trillion as import tax, only Sh5.093 trillion was garnered.

Similarly, of the Sh5.316 trillion that was meant to be collected as income tax, only Sh4.83 trillion was obtained.

The TRA director for tax payer services and education, Mr Richard Kayombo, attributed the drop in import duty collection to the fact that under the East African Community (EAC) implementation of a single custom territory, goods from other member states of the bloc are no longer regarded as imports. “As such, they do not attract import duty.”

Mr Kayombo promised to furnish BusinessWeek with details on the performance in the Income tax category after a thorough check.

However, The Citizen understands that during the past months, a number of companies laid off workers to align their operations with the prevailing economic conditions.

A few months ago, Acacia Mining announced it would retrench about 100 people before the end of the year as the company plans to close down its Buzwagi Gold Mine.

Similarly, Tanzania Distilleries Limited – a subsidiary of Tanzania Breweries Limited (TBL) Group – laid off 50 of its staff from across its various departments in reaction to the ban on alcohol sold in sachets.

With the takeover of TBL’s management from SABMiller to Belgium’s Anheuser-Busch InBev (AB InBev), the company is also reported to have laid off more employees during the past few months.

Some hotels have been turned into hostels. The media industry has not been spared either with reports that workers in the industry go for months without pay while plans for retrenchments remain on their cards.

In January this year, at least three major mobile phone firms announced that they would retrench shed their manpower to align their operations with a directive to float 25 per cent of their shares to the public.

That came hard on the heels a government directive to the effect that they should separate their telecommunications businesses from their financial services (money transfer and bill payment) products.

Late last year, a changing business and economic environment also forced low-cost airline Fastjet to redesign its operations, including retrenching at its least 41employees.

The job cuts could have an impact on the Pay As You Earn – a withholding tax on taxable incomes of employees.

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Thursday, October 26, 2017

Tanzania’s share of global GDP improves

Finance and Planning minister Philip Mpango

Finance and Planning minister Philip Mpango speaks at a past event. PHOTO|FILE 

By Mnaku Mbani @mnaku28 news@tz.nationmedia.com

Dar es Salaam. Tanzania’s share of the Gross Domestic Product (GDP) vis-à-vis the total world GDP will reach 0.1 per cent by the end of this year, rising from the 0.08 per cent that was recorded in 2010.

According to the ‘World Economic Outlook-2016’ of the International Monetary Fund (IMF), Tanzania’s share of the global economy remained unchanged at 0.06 per cent for three decades from 1980 to 2010, when it gained to 0.08 per cent.

The global economy was estimated at $75.5 trillion in 2016, according to World Bank.

Tanzania’s GDP averaged $18.26 billion from 1988 until 2016 – reaching an all-time high of $48.20 billion in 2014, after a record low of $4.26 billion in 1990!

The increased GDP share was a result of expansion of all major key economic indicators, including personal consumption, investments (private and public), government expenditure and exports of goods and services.

Also, the country’s consumption increased from $11 billion in 1980 to $163 billion by 2017, with the rate projected to reach $250 billion by the year-2022.

Currently, Tanzania is the twelfth largest economy in Africa, and the GDP is projected to be $54.36 billion by the end of this quarter – roughly equivalent to the current economies of Belarus and Libya, according to Trading Economics global macro models and analysts expectations.

In the long-term, the Tanzania GDP is projected to trend around $61.23 billion in 2020, according to econometric models. That is equivalent to the current GDPs of Luxemburg, Costa Rica, Panama and Uruguay.

Since 1980 to-date, significant measures have been taken by Tanzania to liberalize the national economy along free market lines, as well as encourage both foreign and domestic private investments.

According to the IMF, Tanzania’s GDP – which is estimated to reach Sh110 trillion (about $50.7 billion) this year – has continued to expand for years, thereby possibly becoming East Africa economic giant by 2025.

However, this trend can only be reached through a sustained annual economic growth of not less than seven per cent over the next five-to-ten years – and if the Kenyan economy will grow at a slower pace, according to analysts.

Tanzania is now ranked the 82nd largest economy in the world, out of 211 countries surveyed, according to the World Bank Report-2016.

However, the IMF ranked Tanzania at 84th place in 2016, while the United Nations ranked it as the 87th largest economy in the world in 2015!

The smallest economy in the world is Tuvalu with $38 million.

As of the year-2015 estimates, Kenya had a GDP of $69.977 billion making it the 72nd largest economy in the world. Its per capita GDP was estimated at $1,587 that year.

The Bank of Tanzania’s 2015 Financial Stability Report indicated that drivers of GDP growth include ‘continuous investment in infrastructure, expansion in private and public sector construction activities, and improvement in the external sector.’

A new report by Global Finance has it that the country’s GDP per capita is also expected to jump to $1,017 by the end of this year – up from $897.19 last year.

Thus, it is a long way to go for the country to reach an average annual income of $4500 (about Sh10.3 million), so as to become the middle income country that the National Development Vision-2025 envisages.

The World Bank’s World Economic Outlook database for October 2017 shows that Tanzania’s GDP is expected to hit the $51.6 billion mark this year, up from $47.7 billion last year. That is still lower than Kenya’s projected GDP of $55 billion.

With an improved income and share of GDP to the global economy, Tanzania still has 12 million people who currently live on less than a dollar a day. This is roughly 25 per cent of the total population.

The United States is the world’s leading economy, with a $19 trillion GDP – which is 24.9 per cent of the global GDP. China is next, with a GDP of $11 trillion: about 14.7 per cent of the global economy.

Japan is in third place, with $4.8 trillion.

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Thursday, October 26, 2017

This is why shilling remains stable

Outgoing Bank of Tanzania (BoT) Governor,

Outgoing Bank of Tanzania (BoT) Governor, Professor Benno Ndulu 

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

Dar es Salaam. The local currency has exhibited profound resilience against the United States dollar during the past two years, thanks to a drop in imports.

The local currency has been relatively stable against the greenback since it fell to a record level of Sh2,400 towards the end of June 2015.

But since the Bank of Tanzania (BoT) intervened and brought it down to manageable levels, it has remained quite stable, reaching Sh2213/2231 against the greenback in October 2015 when to the polls.

Two years later (October 2017), it remains with the Sh2240/2253 range. This suggests that on average, the Tanzania Shilling has fallen by a measly one per cent in two years, a very rare occurrence in a period of not less than ten years.

Analysts say the value has little for the country to celebrate at, considering that it comes as a result of a drop in economic activities by the private sector.

“Nothing explains this than the fact that there is a drop in economic activities across the country. Importers have cut on imports. With a drop in imports, demand for the greenback has gone down and that is what you see in the market,”

BoT explains

According to the BoT’s manager for research department, Dr Wilfred Mbowe, the drop in imports is basically a result of a shift from the use of oil in electricity production to one whereby the country now uses natural gas in power production.

This is also supported by the fact that major imports also on the decline.

“Demand for the dollar to import oil has gone down…similarly, demand for the dollar to be used in payment of certain services has also gone down while earning from tourism are on the increase,” Dr Mbowe told The Citizen on Friday.

BoT data show that major imports – including capital goods - have gone down during the past two years or so.

For instance, the value of capital goods importation dropped by 23.1 per cent during the year ending May 2017, with decreases being registered across all the three main categories, statistics show. A total of capital goods worth $2.886 billion was imported into the country during the year ending May 2017, down from $3.7 billion during the year ending May 2016.

The country registered decreases in all major categories of capital goods’ importation including transport equipment, building and construction materials and machineries.

Similarly, the value of imported intermediary good (oil, fertilizer and industrial raw materials) fell to $2.763 billion during the year ending May 2017 from $3.2 billion during the preceding year.

According to Dr Mbowe, a reduction in foreign trips by senior government officials has also reduced the demand for the vehicle currency.

As a result of the cost-cutting measures, coupled with an overall drop in various imports at a time when tourism earnings have been rising, the BoT held $5.021 billion in gross official reserves as of June 2017, a massive leap from the $3.87 billion at the end of June 2016.

Basically, BoT’s position has been that of intervening in the money market through tightening the monetary policy.

Analysts are of the view that a consistent drop in imports of goods that are used in industrial production locally may not help the country to attain its industrialisation goals.

“That may indicate a slowdown of investment especially in the industries,” Prof Honest Ngowi of Mzumbe University’s School of Business told The Citizen earlier this year.

“And if the trend is sustained, it raises a concern on the dream of industrialization which Tanzania has,” he said.

Tanzania eyes becoming a middle income country come 2025 but the fifth phase government wants to make it industrial economy by 2020.

Economist Prof Samuel Wangwe shared similar sentiments when he discussed the topic with The Citizen early this year. He said if declining imports of capital goods became a trend, then it could affect the economic growth.

“What the government can do now is to come out clearly and create confidence to the investors who might have been holding investment since the general election,” Prof Wangwe told The Citizen early this year.

Reported by Rosemary Mirondo and Tumsifu Sanga

WHY CAPITAL GOODS MATTER

Capital goods are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses. Manufacturers of automobiles, aircraft, and machinery fall within the capital goods sector because their products are used by companies involved in manufacturing, shipping and providing other services. An increase in capital goods imports suggest that the economy is attracting more and more new investments that create jobs for its people. Conversely, a drop in importation of capital goods, in an economy that is not yet industrialised, means that the country is not attracting new investment project, suggesting that it (the economy) does not create new jobs.

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Thursday, October 26, 2017

CORPORATE SUFI: Be centred to navigate through changes



Azim Jamal

Azim Jamal 

By Azim Jamal

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 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.

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 recognising 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 centred. Being centred allows you to find equilibrium amid flux and change.

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

When you’re centred, 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 synchronised 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, October 26, 2017

YOUR BUSINESS IS OUR BUSINESS: Revamp leather business set-up for econo-growth

 

By Karl Lyimo

Today, October 26, is an intriguing date in History. For example, Kenya’s President Uhuru Kenyatta was born on October 26, 1961!

Was it mere coincidence that Kenya’s Independent Elections & Boundaries Commission (IEBC) set October 26 for a repeat of the August 8 presidential poll whose result was annulled by the Supreme Court on September 1 – ordering fresh polling within 60 days?

That highest Court in the land didn’t specify a date. So, IEBC set October 19 for the repeat… Then – perhaps out of the workings of the Sisters of Fate, sheer coincidence, calculated machinations or a combination thereof – it switched to October 26, President Uhuru’s 56 birthday!

Oh, never mind Kenya’s travails here – or that English King Alfred the Great (born 849AD, reigned 871-899) died October 26, 899…

Also, pooh-pooh the fact that the vivacious Hillary Clinton – America’s 44th First Lady, 67th State-Secretary and 2016-US presidential aspirant) – was born on October 26, 1947!

The story here today ISN’T about October 26 births, deaths – or whatever! It’s about efficaciously exploiting Tanzania’s ‘porous’ leather sub-sector for substantial econo-growth. Doing so when the 5th Phase Government of President John Pombe Magufuli is hell-bent for leather (no pun intended here!) on Industrialization would expedite meaningful and sustainable socio-economic development. ‘Leather’ is animal hide or skin dressed ready for use; hide is the covering of big animals like cattle, while skin is that of smaller ones, like goats…

Tanzania’s potential for a vibrant leather industry is huge, being home to the second-largest livestock herds in Africa – after Ethiopia – with 25.8m head of cattle, 16.7m goats and 8.7m sheep (Year-2015 data).

This locally-available resource is potential raw material for tanneries and leather factories manufacturing goods for domestic and export markets, including upholstery, footwear, bags and belts.

Tanzania has eight leather-related SMEs operating below 30 per cent capacity – and may close shop for lack of enough inputs, 70 per cent of which are smuggled out, mostly raw. [EastAfrican, February 17, 2017].

No-doubt nobly acting to improve the quality and quantity of hides and skins, as well as increase domestic value-addition and reduce exporting hides and skins, Tanzania formulated the ‘National Leather Sector Development Strategy (2016-2020)’ – parallel with the

‘Integrated Hides, Skins-and-Leather Sector Development Strategy’ – to improve animal husbandry and enhance leather industry productivity!

The government also established a ‘Livestock Development Fund’ to “have a competitive, coordinated leather industry built on modern technology, best practices – and responsive to the market!”

Surprisingly, the government hiked tax on hides and skins exports from 40-to-90 per cent in FY-2012/13! [See ‘Leather sector limps despite State bid to make it vibrant,’ The Citizen: June 6, 2013].

But, all that hasn’t improved matters! The situation’s still bleak, with Tanzania continuing to import leather products – and plastic goods that are invariably inferior to their leather cousins!

Oh well, I don’t know…

But, as the Confederation of Tanzania Industries’ Policy-and-Advocacy Director Hussein Kamote reportedly said, “… Tanzania has failed to tap the huge-income potential in the leather sector which guarantees new jobs if well-coordinated!”

Tanzania Tanneries Association Chairman Onorato Garavagli was more pessimistic, saying the situation worsened after the government hiked the levy.“It’s no longer good business; tanneries are experiencing hard times for lack of raw materials – and may close down anytime!” [The Citizen-BusinessWeek, June 6, 2013]

Ah, well… The government needs to revisit, review and revamp its leather business set-up to efficiently fuel its ambitious industrialization drive.

If necessary (oh, really!), we should seek help from the martyrs Crispin and Crispinian who were beheaded on October 26 in Year-285CE (or was it 286?) for preaching Christianity to the Gauls!

The two made shoes at night for a living and philanthropy – and became Patron Saints of cobblers, curriers, tanners and other leather workersfor their noble efforts! Cheers!

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Thursday, October 26, 2017

MANAGING TASK RISK: Are clubs exempt from tax?

 

By Shabu Maurus

There are a number of clubs and trade associations in Tanzania. Sports clubs are, perhaps, the most prominent. But there are a number of other clubs established for purposes other than sports. Trade associations are also very common in Tanzania, mostly established to safeguard or promote business interests of its members.

There appears to be a common misconception that clubs, trade associations and similar organizations operating in Tanzania are exempt from tax, particularly the income tax. We will see in this article, that there is no blanket income tax exemption for these organizations. For the purpose of this article, I will use the name ‘club’ to represent all the other similar institutions.

Normally, for one to become a member of a club he is required to pay a fee. A member may also be required to pay some other fees on a periodic basis, say annually, to maintain his membership or as a subscription to a particular product or service obtained from his club. Apart from fees and other incomes derived from their members, these clubs or trade associations, in most cases also derive income from selling products and services to both its members and the public. Clubs may also derive income from investment.

Whether the income of a club comes solely from its members (as fees or payment for products and services) or from the public, the income tax law (The Income Tax Act, Cap. 332) treats all the activities of a club as ‘business’ activities for the purpose of determining taxable income of the club.For organizations resident in Tanzania, income tax generally applies to income derived from business or investment activities. The rate is 30 percent of profit for a year of income.

Criterion for income tax exemption

The income tax law prescribes a criterion if income from club’s business is to be exempted from income tax.The rule is at least 75 percent of club’s annual business income needs to be derived solely from members of that club. Thisrule is particularly relevant to clubs that derive their incomes from persons other than its members, say from selling products and services to the general public.

The limitation of exemption to clubs, in my opinion, serves two purposes. Tax exemptions generally provide a good recipe for tax planning and avoidance.

The rule, therefore, acts to deter those who might have abused a blanket exemption and use the club as a device to avoid or evade tax. Another purpose, which strictly is just an extension of the first, it to make the income tax system economically efficient. Whether one derives income through a club or another business vehicle, the income tax burden should ultimately be similar.

What about other taxes?

It is important to also note that the exemption from income tax does not automatically extend to other types of taxes. In the absence of a specific exemption in the relevant tax statutes, clubs may be subject to other taxes such as value added tax, withholding tax, payroll taxes if the club has employees, stamp duty, customs duty, and excise duty.If a club or similar institution is unsure of its exemption status, it is always a good policy to engage an advisor or directly contact the tax authority for clarification.

Non-compliance with taxes, especially if such non-compliance is not detected early, may attract heavy penalties and high interest.

Mr Maurus is a Partner with Auditax International

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Thursday, October 19, 2017

Why investors shun equities to pour money into govt securities

The Bank of Tanzania headquarters in Dar es

The Bank of Tanzania headquarters in Dar es Salaam. 

By Mnaku Mbani @mnaku28 news@tz.nationmedia.com

Dar es Salaam. Prospective investors are increasingly shifting their attention to government securities as stock market prices remain volatile, capital market reports by the Bank of Tanzania (BoT) and the Dar es Salaam Stock Exchange (DSE) show.

Despite decreasing yields in the debt market, investors continue to pour their money in there– resulting in massive oversubscriptions to the bonds and bills issued at any given time!

Auction summaries of Treasury bills and bonds issued by the central bank from September 13 to October 4 this year show that the issues were oversubscribed by anything between 150 and 300 per cent!

BoT auction results show that the 15-day Treasury bond floated on September 13 seeking to raise Sh97.8 billion received bids to the tune of Sh126.5 billion – while the Treasury bills floated a week later seeking Sh169 billion received a whopping Sh519 billion in bids!

On September 27, the Central Bank floated a 2-year Treasury bond with an offer of Sh84 billion. In the event, a total ofSh258 billion was received in bids. Similarly, the T-bills floated on October 4 seeking Sh169 billion received Sh407 billion in bids!

While interest rates have been dropping, the Government was nonetheless able to ‘borrow’ Sh531 billion from the market on the back of the four auctions, leaving billions of Shillings idle, as no other investment opportunities were immediately available.

Analysts say that the funds which remain following oversubscriptions to Government securities – as well as the funds that are obtained after maturity of previous bonds and bills – all end up ‘gunning’ for new bill-and-bond issues. The reports by the Stock Exchange (DSE) indicate that there have been more shares on offer than bids, causing the equity market to perform at a low pace.

DSE also reports that the equity market recorded a total turnover of Sh129.2 billion during the period from July to September this year – which is equivalent to the bids for the Treasury bonds floated in the single day of September 13.

According to the DSE reports, the equity market during the third quarter of this year (Q-3/2017) recorded a total turnover of Sh1.5 billion, largely on the back ofa few local companies!

Indeed, Sh1.19 billion out of the turnover recorded during the first week of October was from foreign investors.

DSE’s daily market reports show that investors offering their shares for sale are mainly from CRDB, DCB, DSE, MCB, MKCB, MBP, TOL, MUCOBA, PA, TPCC, TTP, TCCL, TBL, TCC and Vodacom Tanzania Plc (VODA), the latest addition to DSE.

However, most of the existing investors have been more selective, as they are targeting only a few companies, including especially TBL, TCC, CRDB, VODA and Swissport.

Analysts’ views

Commenting on this trend, financial markets analysts say the volatility of the share prices should be the result of the shrinking numbers of prospective investors in the equity markets.

At different times last week, analysts who spoke to The Citizen said investors are currently opting for Government debt instruments because they still are the most secure.

Juvenary Simon – the Chief Executive Officer of Orbit Securities Limited, Brokers & Investment Advisors – said the market is currently liquid, and billions of Shillings might very well lie idle.

“In the case of Government debt instruments, investors are assured of fixed income – and the returns are more favourable compared to other investment options,” Simon told The Citizen.

Noting that the market has been liquid over the last six months, Simon said“that is why there have been massive oversubscriptions to Government securities, both Treasury bills and bonds,”

He further said that investors have continued to invest in that area because it is virtually risk-free compared to the equity market, where investors tend to lose when share prices go down. The volatility in the equity market is caused by weak demand and falling share prices, basically due to the economic turbulence caused by increasingly tight fiscal and monetary policies.

However, most of the investors in the Tanzanian equity markets are foreign, with many of them targeting TCC, TBL, VODA, Swissport and CRDB because their relatively good performance and bright prospects – all of which are stated in their financial statements.

The trend

Companies whose share prices were ‘green’ last week as compared with the situation in the first week of June were TCC (Sh14,600 a share, up from Sh11,500 in June); TBL (from Sh11,000 in June to Sh13,300); EABL (rom Sh5,210 to Sh5,400), and KCB, up from Sh860 last June to Sh970.

On the other hand, companies which recorded a drop in share prices during the same period were Acacia (down from Sh8,970 a share in June to Sh5,230 last week); TPCC (from Sh2,000 to Sh1,520); MKCB (from Sh1,000 to Sh890); DCB (from Sh400 to Sh395), and CRDB: down from Sh190 to Sh175!

All in all, this has caused DSE’s market capitalization to shrink to Sh18.5 trillion as of the last session, down from the Sh20.8 trillion recorded during the first week of June this year.

In any case, the market is currently dominated by foreign investors who account together for more than 80 per cent of the total value of all shares transactions.

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Thursday, October 19, 2017

Singida youth group plans to invest Sh300m in beekeeping

Lake Zone beekeeping officer Samuel Magire

Lake Zone beekeeping officer Samuel Magire (left) briefs then-Natural Resources and Tourism deputy minister Ramo Makani (right) on how modern beehives have increased honey production during the World Honey Bee Day in Itilima District, Simiyu Region early this month. PHOTO | THE CITIZEN CORRESPONDENT 

By Gadiosa Lamtey @gadiosa2 glamtey@tz.nationmedia.com

Dar es Salaam. Singida youth beekeepers are planning invest Sh300 million to beehives and trading in honey as they seek raise their annual production by over 100 per cent by January next year.

Currently, the group produces 25 tonnes per year but with the investment, they envisage to raise it by over 100 per cent.

Part of the money will also be spent on buying of the products from small-scale producers so they can satisfy demand from local and foreign markets.

“Currently, we get several orders for honey from foreign companies but the we face a challenge of limited production and that is why we have decided to invest so we can increase the number of beehives,” the President for Singida Youth Entrepreneurs and Consultants Cooperative Society (SYECCOS) Philemon Kiemi told The Citizen.

Currently, the group owns a total of 6000 beehives with capacity of producing 25 tons per year.

The group took part in the Apimondia International Apicultural Congress between September 29th and October 4th 2017 in Istanbul, Turkey.

The meeting attracted thousands of beekeeping stakeholders across the World and according to Mr Kiemi, the group managed to strike a number of deals at the event, necessitating it to increase production.

“We met companies from Nigeria, Egypt, Kuwait, Israel and Slovakia who have shown interest in our products….To meet their demand, we have initiated discussions with other producers in Singida so we can buy from them as well,” he said.

Statistic from the ministry of Natural Resources and Tourism show that Tanzania is Africa’s second largest honey producer after Ethiopia.

Currently, the country produces 38,000 tonnes per year.

There are about 1,000 beekeepers in Singida and about 90 per cent of the hives are traditional ones while approximately 10 per cent are improved ones.

Singida region produces about 21 per cent of Tanzania’s honey annually.

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Thursday, October 19, 2017

Build skills to transform economy, Africa urged

African leaders pose for a group photo during

African leaders pose for a group photo during the 28th Summit of the Heads of State and Government of the African Union in Addis Ababa in January this year. PHOTO|FILE 

By Mnaku Mbani @mnaku28 news@tz.nationmedia.com

Dar es Salaam. The global development landscape is rapidly shifting. The inventions in science and technology have automatically changed the way people live or do their things.

This trend does not come overnight, but through different transformations of human history. For developed countries, many are always preparing to adapt the new development landscape through skills development.

Building skills is one of the major tools that enable each community or country to adapt the rapid changing global socio-economic landscape. Skills are built to children, youths and adult in different forms of formal and informal educational systems. From the economic point of view, in order to achieve stronger economic growth, investing in foundation skills means simultaneously addressing stunting and building literacy, numeracy, and socio-emotional skills of children, youth and adult.

It is also recommended that countries should continue investing heavily in labour market training for disadvantaged youths, workers in low productivity areas, workers in farms and non-farms rural activities, and the urban self-employment.

While other continents such as Asia, Europe, Australia and America transformed their economies through human skills development, Africa is said to still lagging behind others.

According to the 16th edition of recent World Bank’s published Africa’s Purse, the bi-annual analysis of the state of African economies, Africa is lacking adaptable skills and there is a learning crisis.

The Purse has revealed that far too many youths across Africa emerge in school without basic skills to advance their lives.

The analysis which published last week has shown that despite of African investment on education and skills development over the last two and half decades, fewer than half of adults can read and write. According to David Evans, Lead economist of the World Bank in Washington DC and an author of the analysis on skills development in Africa, the problem starts at the early stages of learning, mainly the primary education.

Speaking during the launch of the 16th Africa Purse through Video Conference, Evans said; “sustained economic growth is unattainable if the population does not have fundamental literacy and numeracy skills that allow them to function as citizen and work to towards their dreams.” The World Bank’s economist said that investing in fundamental skills for all is a win-win approach that would allow African governments to enhance productivity growth, promote greater inclusion and ensure adaptability of the workforce to the market of the future.

“Special attention should be paid in science, technology, engineering and Mathematics skills in addition to creating the right policy environment to allow investments in technological and innovations,” he said.

The experiences have shown that, despite of enrolling millions of Africans children into primary education, some do not make it as they finish their seven year without knowing how to write, read or counting.

For example in Tanzania, reports have shown that there are number of children in primary and secondary schools who complete their studies without knowing how to write or read.

According to the learning assessment reports by Twaweza, it is estimates that half of the students who complete their primary schools, do not know to read English.

As sub-Saharan Africa seeks to boost innovations, adopt new technologies, and disrupt ‘business as usual’ practice, it will be critical that African government continues to tackle the skill gap that span all demographics, says World Bank. “Most of the children are in schools today than ever and over the past fifty years, primary completion rates have more doubled while completion of lower secondary schools has increased five folds,” it says.

And yet, the World Bank says, big challenge still remains as almost one in every three children fail to complete primary schools. In most countries, less than half complete secondary education while only ten percent makes it to higher education.

“When you compare the levels of the public spending on education to the fact that millions of African children are not acquiring basic skills for productive participation in labour force, you realize that the root course lie on the quality of education,” said Punam Chuhan-Pole, World Bank lead economist and author of the report.

Sub Saharan African governments, including Tanzania, will therefore needs to strike the right balance between investing in overall productivity growth and inclusion and investing in the skills of today’s and tomorrow’s workforce.

Therefore, in order to achieve strong growth, African government has been called to evaluate the quality of education investment and strive to build foundation skills, for entire population, not just upcoming generations.

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Thursday, October 19, 2017

FRANCHISE: Differentiate franchising from other growth/distribution models

 

By Wambugu Wa Gichohi

Franchising is both a distribution and a growth model. Though many people meeting the concept for the first time may confuse it with other models, it differs substantially. Franchising consists of two independent parties running independent businesses under the trademarks of one party (franchisor) which supports the other (franchisee) on an ongoing basis for an agreed period, in exchange for initial (franchise rights grant-not sale) fees and other regular ongoing payments. Decisions are guided by the franchise agreement, liabilities of the two parties may be the same in the public eye but are legally independent of each other as per the franchise agreement- though recent developments in the US are putting this time-tested and agreed position to test!

First the distribution models:

Agency: An agent maintains a Principal-Agent contractual relationship with the appointing authority (they are considered as one legally), a franchisee doesn’t. E.g. Equity Bank pioneered agency banking model which has been adopted by other banks. This is not franchising.

Distributorship/Dealer: In most cases a distributor/ dealer stocks goods from different manufacturers and sells them in their locality. Some manufactures attach sales representatives to distributors to exclusively develop the market for the manufacturer’s products. A franchisee stocks goods from only the franchisor and is responsible for developing the market for the specific goods in their assigned territories on behalf of the franchisor. Cases exist where manufacturers appoint dedicated distributors for their products but unless the relationship is guided by a franchise agreement (not a general distribution contract), this is not franchising. Most motor vehicle and fuel companies are confused to be distributorships while in fact they are franchises, eg Total is a franchisor distributing fuel through fuel stations franchised to independent businesses who, instead of paying ongoing monthly royalties to Total, get discounts on purchase of fuels! On the other hand, the Coca Cola or TBL/ Serengeti Breweries depot from which refreshments reach the bars is a dedicated distributor, not a franchise, unless a franchise agreement is in place!

Joint Ventures/ Consortia: These are arrangements made to deliver specific results within a specified period, after which they are dissolved. Parties thereto are guided by JV or Consortium agreements as opposed to franchising where the franchise agreement guides the engagement. Parties in a JV/ Consortium exist independently of each other but their liability is joint and several. In franchising parties exist independently of each other and some liabilities lie squarely on each party (e.g. liabilities to staff, suppliers and injury to customers visiting the store are carried by the franchisee alone) while others are joint (e.g. brand representations)

Cooperative buying: These are arrangements where like-minded individuals or businesses approach sources of inputs as one to enjoy bulk discounts. Though franchisees under the same franchisor normally use this model, it is not, in itself, franchising! However, it would become franchising if, for example, owners of the many independent fuel stations secure bulk fuels jointly then retail under one brand either franchised or operated by the cooperative!

Licensing: A manufacturer may decide not to enter a market directly but to look for someone with similar capacity to produce and market their goods. The manufacturer first protects their intellectual property then licenses the other manufacturer to use them. Though it very closely sounds like franchising, it differs in that the guiding document is a manufacturing license whose terms are substantially different from a franchise agreement. This arrangement was witnessed around 2004 at the height of beer wars when East Africa Breweries shut down its Kibo Brewery in Tanzania while South African Breweries shut Castle brewery in Kenya under an agreement that the former would henceforth manufacture and market flagship SAB brands under license in Kenya while SAB did the same for EABL brands in Tanzania for an agreed period.

Multi-level marketing: Normally attractive to manufacturers and owners of services keen to shorten the route to market to save on advertising and shelve-related costs. It involves rewards at each level of recruitment into a system with various levels. Heavy recruiting earns heavily as every recruit cedes a percentage of their sales to their recruiter. A rule of thumb is unless there is a physical product, keep off. They are clearly not franchising, which operates well for both goods and services under strict guidance of a franchise agreement.

Pyramid Schemes: These are simply con schemes organized on similar lines as multi-level marketing though different. Recruits are hoodwinked with promises of handsome returns on invested cash (normally they have no physical product on sale) and even as the early recruits earn handsomely, when the bubble bursts, the big losers are the late recruits who will not have made any returns and are the majority. These schemes are illegal in most countries and therefore bear no semblance with franchising!

Growth models include:

Direct Selling: The manufacturer goes directly to the consumer, using various avenues, particularly the internet and mobile apps. Certainly this is not franchising, though it may be applied by franchisors.

Company-owned branches: This is the most popular growth model in East Africa where a business opens and runs company-owned units across the market. While this looks attractive initially (you keep all the money you make in), it limits growth mainly through operational inefficiencies and investment considerations. Even where finance is not an issue, operational difficulties and the superficial nature of branches (you do not know the local environment better than the locals) soon kick in to stifle growth. In franchising, you align with locals who invest time and money to grow your brand in their locality, which they know better than you do, giving your business a better chance of success.

Mergers: These occur when two or more brands in the same or different lines of business shed individual identities to trade as one (normally with names of both appearing in the new trade name) under terms agreeable to their equity holders and to the state (where competition laws exist). Certainly this is not franchising.

Acquisitions: These occur when one business buys out another in the same or in different lines of business under terms negotiated and agreed by boards of both. Usually, the acquirer goes for a majority stake and imposes their brand as the new trade name- though some let the acquired name stay for a while before removing it altogether- e.g. KK Security ceded ownership to Canada’s GardaWorld, but is to retain the KK identity for the foreseeable future unlike Britam Insurance which acquired majority stake of Real Insurance, the latter whose name has ceased to exist in the industry. This is clearly not franchising!

Some of the distribution models discussed above may also be deployed to scale up a business. The bottom-line is that all differ from franchising and none comes near in securing and sustaining growth. Finally, an idea can’t be franchised. So if you have a fabulous business idea, run a proof of concept before considering franchising!

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Thursday, October 12, 2017

YOUR BUSINESS IS OUR BUSINESS: Tap into the huge poultry potential to industrialise

 

By Karl Lyimo

When Tanzania banned commercial imports of chicken and poultry products from the US in 2006, it shouldn’t have come as a surprise for a country hankering after meaningful, sustainable Industrialisation on the ground!

Perhaps what should be surprising is that the ‘Mighty US’ was seeking to have the ban lifted a decade later – to no avail!

Indeed, the Tanzania Govt. had seen it fit to ban poultry imports to protect domestic poultry farmers against unfair competition from cheap, Government-subsidised‘American’ poultry! [See ‘US urges Tanzania to lift ban on chicken imports.’; July 4, 2017].

Talk of a modern-day ‘Econo-Military Goliath’(read ‘President Donald Trump’s America’) having to plead with Tanzania to resume thepoultry business that’s calculatingly-lopsized in US favour!It’s a case of the puny‘David of the Econo-Military Slingshot-calibre’ thumbing up his nose (for lack of better phraseology) at the self-styled ‘Land of the Free and Home of the Brave!’

Indeed, I’d never given much thought to the Tanzanian poultry business, which includes chickens, ducks and turkeys!But then, the Poultry business deserves better today... After all, it’s a potentially-prospective Industry with considerable beneficial developmental opportunities.

For an establishment to deserve the adjective ‘Industrial,’it must be characterised by highly-developed qualities of systematic labour, skills and technologies – or suitable combinations thereof – in the creation of value in a given craft,art, manufacturing or business in general. All this is, of course, in terms of the production of valuable goods and/or services provision.

Although ‘Poultry-farming’ – the sub-sub-Sector of the Livestock sub-Sectorof the ‘mother’ Agriculture Sectorof the larger Economy– is still in its nascent stages, it’s nonetheless a relatively major source of family/household food and income in Tanzania!

The country currently boasts 69m domisticated birds, 37m of them in household backyards, and 32m in commercial farming: 24m broilers; 8m layers! [; December 16, 2016].

It’s estimated that Agriculture contributes around 30 per cent of Tanzania’s GDP – with 18 per cent of that coming from Livestock, 3 per cent of which is from the Poultry sub-sub-Sector. Therefore, poultry contributes something like 1 per cent of the total GDP! [index.php/focus-area/poultry>].

By way of elaboration, ‘indigenous chicken farming’ in Tanzania – call it ‘chicken-keeping,’ really, not ‘state-of-the-art farming’ – is largely done by rustics, whereby 3.7m out of the 4.7m agricultural households routinely rear chickens! But, while the meat is almost exclusively for rural consumption, only a measly 20 per cent of the eggs find their way into urban markets.

On the other hand, commercial poultry-farming includes breeder farms, hatcheries, poultry farms (for both layers and broilers), processors and traders. This way, the sub-sub-Sector is a good jobs-creater, with a competitive advantage as a proteins source compared with four-legged livestock: cattle, goats, sheep, pigs...

Clearly, then, Poultry-farming has a huge potential in Tanzania– what with considerable land availability to grow grain and soya for poultry-feeding. In fact poultry meat production rose from 93,534 tonnes in Year-2010/11 to 99,540 tonnes in 2014/2015. [c.f. ‘Total Meat Production,’ which rose from 503,496-to-597,757 tonnes in those five years!

But, that growth rate isn’t commensurate with the poultry industry potential, including comparative advantages! Put another way: Poultry-farming isn’t really ‘for the birds’ – pun unintended here! – and, as such, must be promoted more vigorously in this day and age of industrialisation.

So, establishing the Tanzania Poultry Breeders Association in 2011 was a step in the right direction, aimed at promoting, developing and safeguarding poultry industry stakeholder interests every which way. But, it’ll take more than that to develop the country’s Poultry industry on a meaningful and sustainable basis....

Perhaps we should sooner than later call in PPPs (Public/Private Partnerships), BRN (Big Results Now Initiative), etc?Thie is a wake-up call to exercise the Industrialisation options options... Cheers!

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Thursday, October 12, 2017

CORPORATE SUFI: The value of lifelong learning



Azim Jamal

Azim Jamal 

By Azim Jamal

The whole of life, from the moment you are born to the moment you die, is a process of learning.” – Jiddu Krishnamurti, Indian Philosopher

Lifelong learning is a key to success, because it’s about the development of human potential. Lifelong learning encompasses the complete range of human experience.

Learning is cumulative. It accelerates; it brings change; it pays. Learning is earning. It civilizes and empowers. It not only teaches but also stimulates. It often is informal.

Keeping an open mind and embracing lifelong learning are stepping-stones to excellence. So learn from every person and experience. You’ll discover that instead of being frustrated over differences, you’ll be enriched and enlightened by them. As you learn, you keep on growing. And as you keep on growing and learning, you embrace excellence in your life.

When Nido Qubein, my friend and co-author of the book, ‘Life Balance the Sufi Way’, moved to America at the age of 17, he didn’t know much English.

He taught himself the language by learning the spelling and meaning of 10 words daily. He wrote them on 3-by-5-inch cards. He learned 10 new words every day and reviewed the 10 from the previous day. He did this five days a week and learned the language in one year.

Mastering English is a monumental job. But Nido knew how to cover a mile an inch at a time. He learned the language 10 words a day, five days a week. By the end of the year, Nido had learned 3,120 words. The typical American has about a 5,000-word vocabulary, so one might say that he was still disadvantaged. But he went on to write several dozen books, more than 100 audiocassette programs, and several hundred videos. They have been translated into 19 languages and sold in more than 70 countries around the world.

Emma Watson, the well-known British actress and star of the Harry Potter movies, didn’t allow her success as an actor get in the way of her education. While continuing to act, she also attended both Brown and Oxford University to achieve her Bachelor’s in English Literature, making her an official Ivy League graduate. An inspiration to all young women her age, she is now also serving as an ambassador for Camfed International, a movement to educate girls in rural Africa, and has been appointed a UN Women Goodwill Ambassador to promote gender equality.

The modern household today is awash in data pouring in from the internet, print, radio and television. But raw data don’t lead to Life Balance. They make up only the first rung of a ladder that leads to wisdom. That ladder looks something like this:

Data means raw data, which may be worthless. Information is the basic news or facts. Knowledge is the application of the information that creates some kind of coherence. Understanding is something you have paid the price to master, either through reading, experience, or mentorship. Insight is the rare understanding that very few people have acquired. You receive this insight through exceptional clarity, intuition, gift, or blessing. Wisdom is acquired through coherent understanding and application of insight. Excellent people gravitate toward insight and wisdom.

If all you have is information, people will use you. If what you have is knowledge, people will need you. If what you can offer is wisdom, people will respect you. Wisdom leads to impact, which is what counts.

Learning encompasses much more than taking in information. It includes the whole area of character, open-mindedness, and universal encompassment. Open-mindedness comes from showing respect toward others and from the humility that acknowledges that you don’t know everything.

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Thursday, October 12, 2017

MANAGING TAX RISK: Why record keeping is important

 

By Shabu Maurus

The tax administration law in Tanzania (The Tax Administration Act, Cap. 438), requires taxpayers to keep records and accounts pertaining to their businesses in accordance with the generally accepted accounting principles and the requirement of a particular tax law. Broadly, the law also requires taxpayers to maintain documents, either in paper or electronic form which contain information that enables an accurate determination of tax liability under any tax law. Taxpayers are also obliged to retain such information for a period of at least five years.

Lack ofproper business records is one of the major hindrances to a successful tax administration in Tanzania. This problem is acute in the informal sector, but it is also a common occurrence in the formal sector. Lack of proper business records may be inadvertent or deliberate. But in some cases, it is both.

In this brief discussion, I will only focus on income tax in Tanzania. The normal rules for determination of income tax liability are reliant on proper accounting records of a taxpayer. In the absence of taxpayer’s proper accounting records, an accurate determination of the income tax liability using the normal tax rules becomes a nightmare. However, the tax laws give Tanzania Revenue Authority (TRA) extensive powers to determine and collect tax on a presumptive basis. TRA may also penalize taxpayers who fail to keep proper documents.

Presumptive taxation

Presumptive taxation involves the use of indirect means to ascertain tax liability, which differ from the usual rules based on the taxpayer’s accounting records. The term “presumptive” is used to indicate that there is a legal presumption that the taxpayer’s income is no less than the amount resulting from an application of the indirect method. There are various reasons a presumptive tax approach can be adopted. One is a simplification of both tax compliance and tax administration. A presumptive approach can also be used to curb tax evasion.

Presumptive income tax

Resident individualsearning their incomes solely from business in Tanzania are, by default, taxed on their income under a presumptive income tax scheme provided their annual turnover is 20 million shillings or less. Presumptive income tax rates are based on a level of turnover and also whether the individual keeps proper records or not. The tax rates for individuals not keeping proper records are specific (i.e. the amount of tax is specified) whilst those keeping proper records the rates are ad valorem (a percentage of the turnover amount).The tax rates, whether proper records are kept or not, increases with turnover (progressive). But, generally, the income tax tends to be higher for those not keeping proper records.

Jeopardy assessment

In the absence of proper records, apart from the presumptive income tax which may onlyapply to individuals with an annual turnover not exceeding 20 million shillings, the tax administration law empowers TRA to make “jeopardyassessments” on the basis of the available informationand “best judgment”. Conceptually, this is another form of presumption except that the tax base is not prescribed which effectively gives TRA a wider scope to determine tax liability as long as it is based on the best judgment.

Once TRA issue a tax assessment to a taxpayer, the burden of proof as to the incorrectness of theassessment lies with the taxpayer. In the absence of proper records, a taxpayer may not be able to, successfully, challenge any tax assessment including the jeopardy assessments. Therefore, hiding of information that may assist TRA to determine proper tax liability may not be the best strategy to reduce income tax liability especially if the chances of a tax audit are higher.

Mr Maurus is a Partner with Auditax International

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Thursday, October 12, 2017

FRANCHISE: Dissecting and broadly understanding franchising

 

By Wambugu Wa Gichohi , info@worldaheadafrica.com

The development of franchising has resulted in terminologies and phrases unique only to it being used globally. We hereby explore the most important.

Franchising is a strategic partnership where a business with a tried, tested and trusted brand allows another, normally without any experience in the field, to use the former’s wealth of intellectual property (trademarks, patents, copyrights, business model) and its entire business systems to selectively distribute particular goods or services for a specified period on pre-agreed terms in consideration for payment of initial fees and ongoing royalties and fees.

The Franchisor is the party owning/controlling the intellectual property and the franchise systems and grants the franchisee the right to operate the franchise using the trade-marks, know-how and business systems. The Franchisee is the party granted by the franchisor the right to operate the franchise in return for payment of an initial fee and/or ongoing royalties and management fees. In Business Format Franchising the franchisor provides specific method/system for running the franchised business. Product/Trade Name Franchising is a form of a corporate identity package with limited operational support.

A Trade Mark is a name, symbol or other device identifying a product or service of the franchisor which distinguishes them from similar products and services supplied by third parties. Intellectual Property Rights are trademarks, service marks (names and logo combinations), know-how and copyright which form the basis of the franchise system.

An Ethical Franchise conforms to international best practice franchise business standards regarding facts disclosed at the outset to potential franchisees. In Unit Franchising, a franchisor licenses a franchisee to operate a single franchise while Multiple Unit Franchising covers more than one unit, including area franchising- the franchisee is granted the right to open a designated number of franchises within a defined area over a specified time period and usually loses these rights should he/she fail to meet the development schedule, and master/sub franchising- franchisor grants a franchisee the right to grant unit franchises to sub-franchises within a defined area.

Company-Owned Units are outlets owned/operated by the franchisor to gain continual on-the-ground experience of the franchise and a practical launching platform for new systems and products. A Pilot or Prototype Unit is used by the franchisor to demonstrate the viability of the concept. A Fractional Franchise is a franchised unit set up inside the premises of a larger business, instead of being a stand-alone unit. In a Turnkey Operation the franchised unit is completely fitted out, equipped and stocked for the franchisee, ready for opening day.

Conversion Franchising involves the conversion of independent dealers or unaffiliated businesses into franchisees. The conversion of a non-selective distribution system (i.e., the manufacturer initially sold to a wide variety of distributors or dealers) into a selective distribution system (i.e., sales are made only to franchised distributors or dealers that agree to deal exclusively or to concentrate their sales efforts in the manufacturer’s products and to perform specified presale and post-sale services and marketing activities) is a conversion franchising program in the context of product franchising. It differs from conversion franchising in a business format franchise context primarily by the significant role of the franchisor as a supplier of products for resale by franchised dealers. In a conversion franchise network, the franchisor gains the expertise of an experienced, established businessperson, and though the former independent business owner surrenders a degree of its independence, it gains a stronger trade identity and system of doing business, as well as training, advertising, marketing, purchasing, research and development and other services. Conversion franchising speeds expansion since there is little or no start-up time or expense. The franchisee usually must adopt the trademark of the franchisor as its principal trade identity, though the franchisee may retain its original trade name as a secondary trade identity. The franchisee agrees to conduct its business in accordance with the franchisor’s specifications, standards and operating procedures and to pay fees to the franchisor. In Conversion Franchising an established, independent business becomes part of a national or regional franchise system involved in similar type of operations. It is most commonly found in industries requiring extensive training or professional degrees.

Conversion franchisees may be more resistant to franchisor control than are traditional franchisees in the early phase of their relationship.

An Area Developer acquires the right to establish one franchise within a specified territory, operate it and subsequently sell sub-franchises or others within the same territory. He/she assumes the right and obligations of the franchisor and fees paid by the sub-franchisees are shared between him and the franchisor.

To Disenfranchise is to withdraw the franchisor’s rights from the franchisee who is in breach of contract and does not respond to warnings.

For the franchisor’s rights, a franchisee pays a one-time Initial/up-front/franchise/license fee and pays ongoing payments (calculated as a percentage of turnover or as a fixed fee) called Management services fee/royalty. The franchisor collects from the franchisees and exclusively spends on marketing/brand promotion advertising/marketing fee and is accountable to his/her franchisees on how he/she spends these funds. Total Investment is the sum of the upfront fee, the capital required to establish the franchise, the required working capital and any other cost relevant to the granting of the franchise.

The document presented to the franchisees, prior to investment, presenting financial, operational and legal information about the franchise system and detailing aspects of the franchise, explaining the concept and giving information on the business system is the Franchise Disclosure Document. The contract binding the franchisee and franchisor in a specific relationship for a specific period of time is the Franchise Agreement. A Franchise Operations Procedures and Training Manual, (copyright of the franchisor) is supplied by the franchisor to his/her franchisees as part of the franchise package to provide franchisees with step-by-step instructions on how to set up and operate a franchised unit to the required specifications and standards.

Micro Franchising is a scaled-down commercial franchise with a low enough price that low income people can afford. It is the systemization and replication of micro-enterprises, whereby small businesses are replicated by following proven marketing and operational concepts. It follows in the footsteps of micro financing, micro insurance, micro leasing and micro credit.

Social Franchising is the application of the commercial franchise concept to not-for-profit sectors, usually coupled with subsidization of the goods or services on offer so that they are affordable to the target users.

The writer is a Franchise Consultant helping indigenous East African brands to franchise, multinational franchise brands to settle in East Africa and governments to create a franchise-friendly business environment.

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Thursday, October 5, 2017

Aviation players upbeat despite tough task ahead

 

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

Dar es Salaam. A new plan is in place to turn Tanzania into a hub of air transport in the region, dislodging giants that own respected fleet sizes and with some of the best infrastructure on the continent.

Aviation players are optimistic that the plan is feasible and that efforts to that goal were already in various stages of implementation.

“We have what it takes to transform Tanzania into an air transport in the region….doing so will have multiplier benefits on other sectors like tourism, agriculture, manufacturing and the economy as a whole,” the Tanzania Civil Aviation Authority (TCAA) director general Hamza Johari told participants to an aviation stakeholders’ forum in Dar es Salaam recently.

They bank their hopes on the expansion works currently being undertaken at the country’s airports – including construction of Terminal 3 at Julius Nyerere International Airport (JNIA), revival of Air Tanzania Company Limited (ATCL) and expansion of aviation training capacity locally at the National Institute of Transport (NIT) and at the Civil Aviation Training College (CATC).

Mr Johari said the ongoing ATCL restructuring and re-equipment exercise was meant to restore and raise the status of the airline to fill the locally-based inter-continental carrier gap.

However, to meet the goal, Tanzania will have to dislodge Kenya, South Africa and Ethiopia which are enjoying a number of advantages in air transport.

Kenya’s Jomo Kenyatta International Airport has the capacity of handling 7.5 million travelers annually. It is also well served with a number of international flights, including the country’s own Kenya Airways which has a total of 34 operating jet aircraft and flying to over 60 destinations locally and internationally.

Similarly, South Africa’s OR Tambo International Airport on Johannesburg – currently the busiest airport on the African continent – has the capacity of handling 28 million passengers annually.

Apart from tens of international air transport operators, the airport is also well served by the country’s own South African Airways, complete with its 57 jet aircraft, travelling to 59 destinations across the world.

In the same vein, Addis Ababa’s Bole International is well served by a number of international operators and the country’s own Ethiopian Airlines which flies passengers and cargo to a total of 113 and 35 destinations respectively, using its fleet of 92 aircraft.

Ethiopia is currently injecting $345 million – funded by Exim Bank of China – to expand the Bole International Airport so it can handle 22 million passengers annually from the current seven million.

The figures compares poorly to JNIA which currently has the capacity to handle about 1.2 million passengers per year. The completion of Terminal 3 will however bring the capacity up by 6.4 million to make a total of 7.6 million, largely dependent on foreign-owned air operators (Kenya Airways, South African Airways and Ethiopian Airlines among others) for international destinations.

But aviation players in the country are optimistic with a total investment of Sh3.9 trillion (to be sourced from the government, development partners and members of the private sector) in improving the country’s airports in the coming few years, Tanzania may surely shine.

The former Tanzania Airports Authority (TAA) acting director general, Mr Salim Msangi, said at the forum that the money would cater for rehabilitation and upgrading of airside pavements and facilities at JNIA and Mpanda airports, resurfacing of runway, taxiway and apron at Arusha, Tabora and Mafia airports.

Other completed projects include, upgrading of Kigoma airport’s runway and upgrading of Bukoba’s runway, taxiway, Apron and construction of terminal building. Ongoing airports projects include Songwe airport, Mwanza airport, Kilimanjaro International Airport and JNIA (terminal three).

Besides, the aim is to upgrade airports in border regions so they can handle neighbouring land-locked countries whose goods pass via the Port of Dar es Salaam and JNIA.

“Currently, out of 50 per cent of international traffic, Kenya is the destination for 30 per cent of them and Johannesburg is the destination for 20 per cent them to have connections to other countries…..Although landlocked countries depend on Dar es Salaam Port, Tanzania handles 20 per cent of their imports and exports…This is what we want to change,” Mr Msangi’s predecessor, Mr George Sambali once told The Citizen.

And, speaking at a forum in Dar es Salaam a fortnight ago, a member of the board of directors for the TCAA Consumer Consultative Council, Mr Juma Fimbo said with much of the training in aviation related aspects including pilots, maintenance engineers, air traffic controllers and air transport managers now being conducted locally at NIT and CATC, the future looks bright.

Tax burden

However, operators are of the view that existing high and multiple taxes that they are subjected to, may hinder the country’s aspirations.

“Such charges as landing, parking, passenger services, departure and navigation fees, insurance costs and an 18-per cent value-added tax (VAT) on leasing of aircraft and spare parts, fuel and experts training costs add to the cost of doing business and turn us into an expensive destination,” said the fastjet Tanzania head of government and regulatory affairs, Mr August Kowero.

The Precision Air chief executive officer, Ms Sauda Rajab echoed similar sentiments, noting that it was becoming increasingly difficult to convince the government that the taxes were doing much harm than good on the airline industry and the economy as a whole.

“It’s an easy win for government, a quick money grab. The number of taxes levied on airlines and their customers is so high and the government fails to see the negative impact that these taxes will have on the economy in the long term,” explains Ms Rajab.

Partnerships

According to Ms Rajab, the only way to form a strong national airline for Tanzania – that can be able to compete globally - was through partnerships among the existing operators.

“We should move away from the thoughts that each airline can do everything on its own, or, we will be shooting ourselves in our own feet,” she warned. Her views were seconded by an aviation expert Misha Hango, suggesting for joint ventures and code shares among airlines. This, he said, was meant to seek ways to improve connectivity between international and regional flights to serve the needs of customers.

Alliances enable the participating airlines to strengthen their competitive positions and to improve their access to existing and emerging markets, according to him.

“In a quest to be adaptable to changing business conditions, you need to develop your networks and enhance connectivity by working with various partner airlines on several fronts, including partners’ joint ventures, code-sharing and even revenue sharing arrangements to reduce costs and ensure continued earnings,” noted Mr Hango.

Through these arrangements, according to him, carriers are able to partly avoid the high costs of serving many foreign cities with their own aircraft and to overcome some of the restrictions under bilateral agreements which often limit the number of cities that a carrier can serve with its own aircraft.

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Thursday, October 5, 2017

New plan to attract airport cargo