Thursday, August 16, 2018

Two regions prepare to implement ASDP II

 

Dar es Salaam. Kagera and Iringa regions have started preliminary activities to start the implementation of the second phase of the Agriculture Sector Development Programme (ASDP II) launched by President John Magufuli in June, this year.

Former Iringa Regional Administrative Secretary Wamoja Ayoub told BusinessWeek in an interview that the objective of the programme is to create a sustainable agricultural environment friendly for promoting food security and nutrition.

Iringa being one of the country’s food basket regions, Ms Wamoja said the aim of ASDP II activities is to improve agricultural productivity while boosting farmer incomes.

She said Iringa Region’s participation in implementing ASDP II will involve improvement of productivity; add value to agricultural produces and securing markets for livestock, crops and fish.

She said through Southern Africa Growth Corridor of Tanzania (SAGCOT), various activities have been going on including education to farmers on good farming methods and proper use of land.

According to her, irrigation farming is one of the top priorities in implementing ASDP II to boost yields, as those who are currently farming using seasonal rains realise lower harvests and are unable to ensure food security and income.

However, she said Climate Change had remained a major challenge in the development of agriculture as drought seemed to last longer than usual, a situation that was affecting crops.

However, she said low financial resources among farmers to improve their farming practices such as buying fertilisers and good seeds also affected the production of crops. Ms Wamoja said the regional authority was working with the Tanzania Agriculture Development Bank (TADB) to provide financial support to farmers’ groups in the region.

Kagera Regional Administrative Secretary (RAS) Diwani Athumani said the regional priorities on ASDP II were listed under national priorities.

“As you are aware the current government of President John Magufuli is committed to bringing development to its people,” he said.

‘As the regional government, we believe that the support from the government and development partners, including AGRA, will have a major impact on the people’s economy,” he said.

He said the regional authority had formed a special team of experts to make sure that they coordinated the implementation of the ASDP II at the regional level.

He mentioned challenges such as Climate Change, low budgets, the acceptance of the idea by farmers and lack of expertise.

ASDP coordinator at the ministry of Agriculture January Kayumbe told BusinessWeek that development partners were necessary in the journey to revolutionize agriculture, as part of the country’s path towards middle income status in less than a decade.

“Development partners are very crucial and they will help us to to get things moving,” he said. “With the scarce resources we have, we appreciate the efforts made by them including Alliance for Green Revolution in Africa (AGRA),” he said.

Mr Kayumbe said ASDP II was aimed at transforming crops, livestock and fishing to meet the objectives of Vision 2025 that will enable Tanzania to become a middle income country.

“We have prioritised agricultural commodities value chain, which covers a lot on production to marketing, and includes exports to neighbouring countries,” he told BusinessWeek in an interview at the ministry of Agriculture offices.

He said the role of development partners on ASDP II will be to share expertise, planning and policy review.

He said the programme covers six ministries, which will be responsible for policy support as well as creating a good business environment in agriculture, fishing and livestock.

He noted that the role of the government will be to improve infrastructure including communication, transport and energy.

advertisement

Thursday, August 16, 2018

How to make the tourism sector more competitive

 

Dar es Salaam. Tourism stakeholders remain optimistic about the future of the sector but want the government to harmonise regulatory issues and players to be more creative.

Tourism, which is Tanzania’s leading foreign exchange earner, has in recent times been facing challenges that might affect its growth.

Challenges

In 2016, the government introduced an 18 per cent value-added tax (VAT) on tourism services and increased the visa charge for business travel.

In July 2017, fixed-rate concession fees were introduced for hotels in the national parks – some as high as $59 per person per night.

Actors in the sector say these issues were impeding the sector’s growth.

In 2017, room revenue decreased by 5.5 per cent, according to PwC’s Hotels outlook: 2018–2022 report which covers Tanzania, Kenya, South Africa, Nigeria and Mauritius. The report shows that room revenue dwindled to $206 million (Sh463.5 billion) last year, compared to the previous year’s $218 million (about Sh545 billion).

The report associates the drop with the introduction of the VAT.

With the impact of the VAT amendment now having been more or less absorbed, some hotel properties are still trying to recover from the introduction of the fixed-rate concession fee.

“We look for the market to rebound beginning from mid-2018, though, as more flights, a strong economy and new hotels provide a boost to the market,” reads a report in part.

The report also reveals that hotels and tourism still show signs of continued growth over the forecast period.

According to the report, tourism remains an important part of each economy, with continued investment in each country seeing additional hotel rooms coming on line over the next five years.

But Tanzania Association of Tour Operators (Tato) chief executive officer Sirili Akko says cutting bottlenecks was inevitable if the potential of tourism was to be fully exploited.

“Tourism is overregulated. This is probably because it is one of the most cross-cutting sectors,” notes Mr Akko.

“As a result, the sector is affected by interdependent regulatory bodies which sometimes experience communication breakdown among themselves,” he says.

He says, this should be addressed if the government is to achieve its goal of attracting more tourists from 1.3 million last year to over 2 million in two years to come.

If high operational costs, which obviously add to the burden of visitors, remain there, the plan will end up in documents, according to Mr Akko.

“The key thing is that for every transaction done by tourists in Tanzania, government earns the lion’s share of the benefits before any other beneficiary,” notes Mr Akko.

“We hope that government is working around the clock to support full realisation of the sector’s potential,” he says.

Hyatt Regency Hotel sales and marketing director Denis Glibic was in puzzle on why the introduction of VAT to tourists and introduction of concessional fees to guests can be a threat to tourism industry.

He is optimistic that the future of tourism is bright on the condition that operators become more creative and explore new markets and retain the existing ones.

“Creativity and innovation are importance if tourism sector is to grow,” notes Mr Glibic.

Recently, Repoa strategic research director Abel Kinyondo suggests that tourism products be diversified, marketing be enhanced, infrastructure be improved and service costs be cut, to attract tourists repeatedly.

In 2016, the number of repeated tourists visiting Tanzanian sites declined to 45.3 per cent of the total arrivals from 47.4 per cent a year before.

In its totality, tourist arrivals in 2016 reached 1.28 million compared to the previous year’s 1.14 million.

“This implies that we have won promotion to get new visitors but failed to retain them,” notes Dr Kinyondo in the past interview with BusinessWeek.

Marketing

The government for its part is positive that the future is promising, banking its hopes on the ongoing campaigns of identifying and marketing tourist attractions located in the Southern circuit.

They include national parks (Katavi, Kitule, Mahale, Udzungwa mountains, Mikumi and Ruaha), Game reserves (with Selous being the largest), rift valley Lake Nyasa as well as areas of cultural interest.

Mr Deograsias Mdamu, the tourism department director, in the ministry of Natural Resources and Tourism said the government was now improving infrastructure in the said areas.

According to him, every September, the government has a tradition of conducting a promotion campaign dubbed ‘Karibu utalii kusini’ covering the regions of Mbeya, Songwe, Mpanda, Rukwa, Ruvuma and Iringa.

“Such initiatives which go hand in hand with improvement in infrastructure are geared towards promoting diverse attractions, to bring them to the global attention,” notes Mr Mdamu.

He his confident that the challenge of multi-regulatory bodies will soon be addressed, banking his hopes on the blueprint, the document which was prepared after thorough consultations with various private sector associations and World Bank officials before getting approval from the cabinet in May this year.

The document is expected to set a stage for a raft of amendments to laws and regulations governing the conduct of business in Tanzania in a view of improving business environment and attract more investors.

According to tourism players there are about 38 fees and charges in the sector.

However, according to PwC, tourism to the African continent has proven to be resilient in the face of economic and political uncertainty, impacts of droughts and other regulatory changes.

This is an industry that is reactive to the smallest change in political, regulatory, safety and sustainability matters, according to Pietro Calicchio, Hospitality Industry Leader, PwC Southern Africa.

advertisement

Thursday, August 16, 2018

Maize trading changes Iringa farmer’s fortunes

 

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

Iringa. If you ask successful businesspersons about their journey to success, everyone will give you his/her own interesting story.

Some will tell you about how they struggled through ups and downs for many years while others will tell you about their less stressful ascendancy in business.

Currently, for those who want to do business, capital is one of the major challenges. However, those who have already made it to the top say capital was not their biggest obstacle.

“Determination, hard work and trust are among the things that should be considered by whoever wants to venture into business. Whether it be small, medium or large,” says Mr Atanas Paulo Kipeto, who is one of the successful maize traders based in Iringa.

He shared his story to BusinessWeek recently on how he started his business with a small capital of Sh42,000 in 1995, before turning it into a multimillion shilling activity in just two decades.

Speaking to BusinessWeek in Iringa recently, Mr Kipeto, who in his mid-40s, said after his primary school education in the late 1980s, he was not selected to continue with secondary education.

“My plans were to start my own business and that is exactly what I did two years later,” simple-looking Mr Kipeto said at his office, which is located near Ipogolo Bus Terminal in Iringa Municipal.

He said after completion of his primary education, he started cultivating maize for two years. He retained part of the produce for food and sold the surplus to the local market.

Mr Kipeto said two years later, he managed to raise a Sh42,000 capital, which he used to buy maize from neighbouring villages and transported it to various semi-urban markets where he sold at a relatively higher price.

“I started by purchasing seven 100-kilo bags of maize at Sh6,000. I sold the maize at high retail and wholesale markets, where I generated a small profit,” he said.

He said he sold the bags of maize at Sh10,000, which generated a profit of Sh2,500.

“I used the small profit to expand my business until 2002 when I decided to add value into my maize business,” he explained.

Mr Kipeto said in 2002 he purchased a small milling machine and started milling his own maize as well as that purchased from the villagers.

“I started producing maize flour, which I sold in Iringa town and other markets in neighbouring villages,” he said. Six years later, in 2008, Mr Kipeto said he started building relations with maize farmers in Kilolo District, which made it easy to get sufficient maize to feed his milling machine.

He said during that year, he travelled to the Democratic Republic of Congo (DRC) to explore the market of his maize flour and managed to secure lucrative markets.

After securing the market, he came back to farmers and encouraged them to form a group, which started producing more maize for his milling machine in order to meet the demand of the new Congolese markets. “Sometimes, I used to run the milling machines for just half a day because of insufficient maize,” he said.

According to him, he continued with his maize and flour business for seven years until 2015 when the Alliance for Green Revolution in Africa (AGRA) through Tija Tanzania project came to Iringa to support the maize farmers and processors to boost productivity and incomes.

AGRA technical and financial supports guided him to expand his milling machine business as well as secure markets for his flour besides helping farmers to produce high quality maize for both domestic and international markets.

His milling machine now produces 1,100 tonnes of maize per year from 200 tonnes milled before improvements through the AGRA’s support.

AGRA, through different agencies also supports the farmers to access improved seeds, fertilisers as well as markets for maize. This has helped improve food security significantly and farmers’ income.

Currently, Mr Kipeto has built a multimillion shilling business, but he is not done just yet. He wants to build his own financial and technical capacities.

“My business is now valued at more than Sh600 million, but my plan is to make it grow more including buying modern milling equipment, packaging technology and opening shopping outlets for my products in different regions of Tanzania,” he said.

He said he is now building a Sh270 million warehouse for storing maize purchased from the farmers. The warehouse will have the capacity of storing at least 1.2 tonnes of maize.

His business is currently employing five permanent employees at both office administration and milling sites, but he said he wanted to create more direct and indirect job opportunities.

Currently, Mr Kipeto has a contract with 2,500 farmers, who supply maize to his fast-growing factory. The contract farming model has also enabled the farmers to access loans for inputs from commercial banks and other financial institutions.

He mentioned some of the challenges he is facing as higher taxes including income, service levy as well as high regulatory and licensing fees. “All these hurt my business because nearly 40 per cent of my income ends up in paying taxes. The net earning is just 18 per cent,” he said.

advertisement

Thursday, August 16, 2018

Seven traits shared by the world’s top entrepreneurs

 

It requires some luck to become a successful entrepreneur. But it also takes more than pure luck to hit it big: There’s a reason the top founders are as successful as they are. Even with fame and fortune, it takes much more to successfully start and maintain a business.

Those who have formed multiple companies or helped create the highest-impact and most profitable businesses have been successful because of the traits and habits they intentionally cultivated.

The qualities they have might seem intrinsic, but they’re by no means unlearnable. Successful entrepreneurs spend years refining and practicing their craft, meaning anybody has the potential to develop these abilities with the right focus and effort. Doing so not only helps you run a business, but it also improves your output in everyday life.

Here are seven traits the best founders have in common that can improve your communication, production and leadership -- and can be learned:

1. An unwillingness to give up.

Starting a business is one of the most challenging undertakings a person can accept. It requires an enormous variety of different energies and efforts, ranging from dealing with logistics to hiring to taking responsibility for others’ financial well-being.

Consequently, it takes grit and determination to start a business and deal with these ups and downs.

The best founders refuse to give up. When a situation gets tough, instead of looking for ways out, they embrace the challenge. It’s not any easier for them. They’re simply more willing to persevere through the stress and sleepless nights to meet their goal.

2. A deep desire to always question

There’s a reason few people start a business. Beyond the difficulty, it requires looking at the outside world to identify an opportunity. To do that, one has to question the world around her. She has to ask why things don’t exist and why reality functions the way it does. Then, she has to capitalize on the opportunities she’s surfaced.

The best entrepreneurs do this not only when getting their companies off the ground, but also while growing each day. They have to question their success, internal metrics and norms. This requires challenging fundamental beliefs. It’s easier to take things as a given -- we don’t need to always exert mental energy or effort to question things. Instead, we can let our automatic processes make decisions for us.

The best entrepreneurs push back on those widely held beliefs. Although it takes significantly more mental attention, they work toward identifying the primary issues of the problems they tackle. Then, they can develop solutions much more creatively and pragmatically.

3. Long-term vision

Starting a company that begins to succeed is one thing. Maintaining that success for years on end is entirely different. At a business’s founding, one is looking for market opportunities and areas for growth. Once it’s begun, though, it’s tough to continue looking toward the future.

There are always fires to put out and problems to solve in the present. Dealing with those can be all-consuming. Letting that happen is a common mistake, and it means leaders aren’t preparing for the changing world.

There’s a reason Amazon has been around and growing for more than 20 years. Jeff Bezos has had a long-term vision for the business since its inception. This vision has led to short-term losses, but it’s also sparked decisions that will enable the company to excel for years to come.

4. An ability to get others behind them

No matter how smart or capable you are, if nobody joins you, you can only accomplish so much. Therefore, getting other people on board is a critical step. The best entrepreneurs are able to effectively communicate their mission and ideas to others.

Running a business means convincing other people to spend their lives -- and, ideally, some of their best years -- working toward your dream. That’s a big undertaking. It requires immense skill to articulate a vision. More importantly, you have to be someone others want to work with. How you go after that vision means as much as the vision itself.

5. A deep passion for their work

Being an entrepreneur requires well-above-average amounts of work and mental energy. Therefore, without intense passion and energy for the work at hand, consistent effort isn’t sustainable over time. The best founders love their craft and the problems they’re solving. They don’t start a company for the fame or money. They do it because they deeply care about their work.

6. A deep understanding of themselves

In order to effectively manage others and handle the necessary work of an entrepreneur, one has to understand herself extremely well. Founders need to know what it will take to decompress so they can recharge in challenging times. The best know where they’re weak so those vulnerabilities don’t have a negative impact. They also play to their strengths so they can delegate work and utilize others’ skills.

An insecure entrepreneur will run into problems managing others and sacrificing control. The best have spent significant amounts of time inside their own minds; in doing so, they’re able to maximize their productivity, efficiency and energy.

7. They can always adapt

In a rapidly changing world, companies that don’t follow suit will fail. Those cultures of adaptation and flexibility tend to come from the top down. When CEOs are open to frontline employees’ ideas and willing to change business models when the time comes, their companies last much longer. (Entrepreneur)

The best entrepreneurs are constantly learning and adapting in order to maintain their ventures’ success. They also do so to become better people and leaders, making sure they grow as their companies do.

Entrepreneur

advertisement

Thursday, August 16, 2018

How to keep your very first million

 

The following excerpt is from Scott Duffy’s book Breakthrough which explains essential strategies that help you keep money you make in your new business. This is the first part of the piece which will run into two series.

Based on years of experience training and coaching, I know the number-one mistake entrepreneurs make is mismanaging their money from the start.

Part of the explanation is obvious. I know this sounds basic, but you’d be amazed how many entrepreneurs don’t go through the trouble of separating their business accounts from personal accounts. The result can lead to a significant amount of stress for any new business owner or even personal catastrophe.

This doesn’t have to happen to you. There are some basic strategies you can apply today to make sure of it.

Create a solid financial model for your business

Determine where your company’s cash will come from and what expenses will soak it up. Then estimate how much time the business will need to create enough profit and free cash flow to be self-supporting. Once the business generates enough cash to operate on its own, you can reduce your personal exposure.

Once you’ve estimated how much money you’ll need, cut your revenue projections in half. Then cut them in half again. Then do it one more time, to balance out your natural optimism. Now take the amount of time you think it will take to get started and double it. Building sales and free cash flow always takes longer than most entrepreneurs expect.

These numbers may be hard to digest, but this approach will give you a reasonable sense of what you’ll need and how long it will take to get to a place where you no longer have to contribute outside capital to make ends meet.

If you’re launching a business that involves personal financial risk, here are a few more things you need to do today.

Determine how much money you’re willing to risk

Odds are, much of your business’s funding will come from you. Unless you have a track record in business or some very deep-pocketed friends, raising money from investors could be difficult. Will the money on the line be your family’s entire nest egg, or just half? Are you going to bootstrap or borrow? Keep a photo of your family nearby when you start writing checks as a reminder that you may be risking their future as well as your own.

Talk everything through with your spouse or significant other

You must do this before jumping in. It’s essential that the two of you agree on how much to put on the line. If you don’t, that’ll create problems down the road that will distract you from your business (and potentially ruin the relationship). You’d do better to risk less and be on the same page than risk more and have your spouse be worried and resentful day after day. You should never go so far on the edge or put yourself at so much risk that if things don’t work out, it becomes hard to bounce back. (Continues next week)

Entrepreneur

advertisement

Thursday, August 16, 2018

Building, construction financing falls despite credit to private sector rising after slowdown

 

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

Dar es Salaam. The financing of building and construction has entered contraction in the wake of recovering banks’ credit to private sector.

The economic activity joins agriculture and trade which are also still recording negative growth.

Building and construction has been growing in the recent months and grew by 15 per cent in the year to March 2018 before slowing to five per cent during the year ending April.

The Bank of Tanzania’s monthly economic review for June indicates that the activity had contracted by 6.7 per cent this May compared to 5 per cent growth in the year to May 2017.

Some industry experts say the contraction reflects reluctance of developers to continue borrowing from the commercial banks after learning that there is fall of occupancy rate in the available buildings.

There have been reports that the number of unoccupied buildings, especially in the Tanzania’s commercial capital Dar es Salaam, is increasing as government functions are moved to the nation’s new capital Dodoma. There is also possibility that companies are looking for cheaper options or even closing shops in the current liquidity-tight business environment.

“Developers are basically the suppliers of the buildings and when they learn that there is fall in occupancy rate, they may use that info to make decision. Probably they are slowing down to balance supply and demand,” says Watumishi Housing Company chief executive officer Fred Msemwa.

Watumishi Housing Company is a property developer and the main implementer of the Tanzania Public Servant Housing Scheme tasked with building 50,000 housing units in five phases from 2014/2015.

Dr Msemwa was recently quoted as also saying that most customers in his company’s Gezaulole project had changed mind after they were transferred to Dodoma.

Credit recovering

According to the central bank report, credit to the private sector continued to recover after growing by 2.6 per cent in the year to May 2018 compared to an annual growth of 0.8 per cent in April 2018.

Personal loans are leading the banks’ credit to major economic activities. Personal and trade activities accounted for the largest share of outstanding credit to the private sector at 27.3 per cent and 20.6 per cent, respectively.

The personal loans also grew at 49.2 per cent while the growth of credit to trade was negative 3.2 per cent.

Credit to agriculture is also still registering negative growth since January this year and contracted by 5.6 per cent in the year to May 2018.

Mining and quarrying also registered a faster growth of 29.2 per cent during the period under review.

advertisement

Thursday, August 16, 2018

Investor’s take on plastics ban, fakes

 

Tanzania is currently weighing in on the impact of banning the use of polythene materials—a ubiquitous feature of Tanzanian market and life. Despite mounting environmental concerns, experts have cautioned that the banning of plastics could come with repercussions on businesses, consumers and even jobs.

As the country ponders the right move on plastics, another problem is being fought—presence of counterfeit chemical products on the local market, such as fake pesticides.

But, what do investors in chemical products say? In this interview, Dr Markus Kramer, president of BASF – a German producer and marketer of chemicals – speaks to BusinessWeek Reporter Syriacus Buguzi, uncovering what lies ahead as his company looks forward to investing in Tanzania. Excerpts:

Question: Dr Kramer, your company is investing in compostable plastics. Are you trying to leverage the local market in Tanzania where the government is now intending to ban the use of plastics?

Answer: Yes, absolutely, and we have developed a product […pulls out sample…]…to replace traditional plastic bags.

Before moving to that, what’s your experience in other countries on how plastics are handled?

The consumer in Asia and Africa is disposing plastics differently as compared to as we do in Germany or Switzerland. In our countries, plastics don’t end up in the environment. We take care of it. We collect it and at the end of the day it’s getting burnt because it has certain value. So, we burn it to produce heat or something else. But also, we must be careful about how we talk about plastics. There is nothing wrong about plastic bags. They only become a problem when people throw it away to the environment. Unfortunately, this [throwing into environment] is happening in Asia, China and Africa. It’s not an issue environmentally in Europe. This is because stuff don’t end up in the environment.

So, how can this product you are showing me work here in Tanzania?

We developed a plastic that is compostable. It is biodegradable. So, after like four to five weeks, depending on the atmosphere around and the conditions, it decomposes and disappears. It’s a chemistry product that is friendly to the environment. When you touch it, it feels like plastic but it’s biodegradable.

How optimistic are you that your innovation is going to work here in Tanzania?

We are working on it in Kenya. We are only waiting for approval from Tanzanian authorities. For it to work here in Tanzania, a standard has to be formulated. So, we need approval for it to be available in the market. We are hoping it’s going to be permitted. You see, innovations in chemistry, sometimes take long to technically be called innovations. An innovation can only be called innovation when it’s successful in the market. This, ours is still only partially an innovation. We have such plastic bags and other stuffs in Europe, so this product which hasn’t been successful in the market yet because of legislation is at a higher chance of being successful because users have no other choices in future.

How practical is it here?

Using this in Europe would be different because of differences in humidity conditions compared to Tanzania. For Tanzania, the most important aspect to look at would be how the technology works. When you have a colder climate, it takes longer time to degrade. In Asia, they began using polystyrene which does not degrade. This is a big issue in other countries. So, we do believe there are big opportunities for this new product in the Southern Hemisphere, especially around the Equator. In a country like Tanzania, it’s also about applying chemistry properly.

Let’s talk about counterfeits. We know it’s a global problem that may also be affecting your business. Do you have figures of how it costs you at group level?

The economic damage for the country is huge and this has to be addressed.

Is it possible to quantify that economic cost?

It’s very difficult. You need to first detect the counterfeit. Take an example. The impact is felt on farmers’ productivity when you talk of pesticides. The efficiency that a farmer is looking for is compromised. We don’t have specific data yet.

The worst case is when a farmer growing coffee beans for instance, uses pesticides to increase productivity or to save the coffee beans on the tree. Let’s say now a farmer uses counterfeit pesticides that do not have substance in it and the entire harvest is gone, nothing saved, only cost. This is the worst case that you can now see.

Do you see the need to invest more in tackling this problem?

Exactly, but what we can always do is invest in our product. This is one that we can track and trace such that we always know that at any given point in time, where our product is in the supply chain. This needs to be practised in a country like Tanzania. But regulation and importation are key. This is because most of the products used here in Tanzania are imported. In this case, I think Tanzania still has a long way to go in regulation.

advertisement

Thursday, August 16, 2018

GUEST COLUMNIST: Automation could steal my job, and that’s OK

By Baraka Cassian baraka@cassian.co.tz

As an accountant, it is fair to say that a big portion of my role is very process-driven and involves routine tasks including the collection, extraction and analysis of data as well as the subsequent posting of said data into the correct journals for month-end reporting or further analysis. It really is more exciting that it might sound!

In the pursuit of increasing efficiency and providing this service to my clients, particularly those in in remote locations, our firm made an executive decision to move our accounting to a cloud based accounting system.

Cloud based accounting refers to internet based accounting software that does not require any installation or setup on your computer, similar to accessing email from any browser or your smartphone.

Three months into using this system, we noticed something strange. Not only had the system studied our trends and historical behaviour, it had started to automatically extract all data from our input and proceeded to post the numbers into their respective journals - purely based on information it had gathered after studying work done in the previous months.

Upon further investigation, we learnt that the software used a form of artificial intelligence to learn our behavioural pattern and use the same findings to automate our processes and project future patterns for similar data. This is broadly similar to how predictive text works to complete your sentences when typing a text message. All we had to do was upload the excel data in the required format and let the system do all the grunt work.

As expected, this was a shock and immediately left us with more questions than answers. One does not have to go very far before they come across various reports of how software and automation will put a number of jobs at risk. Studies have shown that process-driven jobs, including packaging, assembly, bookkeeping, tax form preparation as well as filing clerks and even accounting clerks are at high risk of automation.

On the other hand, jobs with lower risk of automation include tasks that involve influencing people, teaching people, programming, real time discussions, advising people and those that involve negotiation.

History has shown that whenever machine and tools substituted one type of human capability, new human experiences and capabilities actually emerged. This happened when humans made the transformation from hunters and gatherers to farmers, and then to industrial forms of works.

Likewise, automation presents a similar shift and might now free us from mundane tasks of manual data entry, reconciliation, form filling and data extraction of receipts to pursue high value work that will provide more in-depth and timely financial expertise to our clients.

As noted in my previous articles, adoption of the internet has changed a number of things, including how we do business and how we communicate with each other. As time goes, we will slowly start to see the impact this will have on our day to day lives, including our workplaces, homes and communities. In my case, the internet has disrupted the notion of what it means to be an modern day accountant and has challenged me to consider other methods of providing value to clients.

Whilst this might bring additional challenges in respect to data security and integrity, we certainly need to prepare for the future workplace, in which the impact of digital disruption will be felt deeply. But rather than dwell on the fears of robots stealing jobs, professionals such as accountants should look instead at the opportunities afforded by the latest digital developments.

Baraka Cassian is a registered tax consultant and a Associate CPA in Public Practice.

advertisement

Thursday, August 16, 2018

MANAGING TAX RISK: Are directors liable for unpaid taxes?

 

By Shabu Maurus

Are you a director of a company in Tanzania? If yes, then this article may be very relevant to you. Among the major advantages of operating a business as a company is the limited liability feature. A company is a separate legal entity to its shareholders and directors. And as such, shareholders and directors have no personal liability for the debts of the company. This is often termed as a “corporate veil”. However, there are circumstances where the corporate veil can be lifted, and directors may become personally liable. One such circumstance is when a company fails to pay the tax on time.

The tax administration law (The Tax Administration Act, Cap 438) empowers the tax authority (TRA) to collect unpaid taxes from the directors of the company. This is so scaring, isn’t it? The corporate veil does not seem to help when it comes to tax liabilities.

Section 65 of the tax administration law deals liability of managers of entities. Most tax laws give the words “manager” and “entity” their broad meanings. For tax purposes, companies are entities and directors are managers. A manager of an entity is any person who participates alone or jointly with other persons in making senior management decisions on behalf of the entity. Essentially, any person whose directions and instructions affect the entity.

So, provided you fit the definition as a manager of the entity, the tax administration law (Section 65) empowers TRA to collect unpaid taxes of your company from you (regardless of your given title). In practice, it has been uncommon to see TRA exercising this power. But this may now change. Before the change, the director’s liability would fall on persons who were directors of the entity “within a period of twelve months prior to the entity default”. Recently, through the Finance Act, 2018 changes were made and now Section 65(1) of the tax administration law reads as follows:

“Where an entity fails to pay tax on time, a manager or a person who was the manager of that entity during the occurrence of default shall be jointly and severally liable with that entity for payment of the tax.”

One may ask, what was the mischief the change is set to cure? The “Objects and Reasons” part of the bill to the Finance Act, 2018 makes the intentions very clear. The bill states that “section 65 is amended to provide for liability and accountability on managers of entities. Under this amendment, managers of entities shall be held liable and accountable during the time of occurrence of the tax offense”.

The changes send a signal that TRA may start invoking their powers under this provision. But the good news is that the tax administration law prevents TRA from exercising their powers to collect unpaid taxes from a manager (director) if such a director “has exercised the degree of care, diligence, and skill that would have been exercised in preventing the failure to pay tax.” Whilst this is an important condition, it is very subjective. What sort of things would TRA consider as care, diligence, and skill exercised by a director in preventing a failure to pay tax?

The company law (The Companies Act, Cap 212) is a bit clearer on what is expected from directors. Section 185 it states that a “director owes the company a duty to exercise the care, skill and diligence which would be exercised in the same circumstances by a reasonable person having both the knowledge and experience that may reasonably be expected of a person in the same position as the director, and any special knowledge and experience which the director has.” Arguably, it also has elements of subjectivity.

advertisement

Thursday, August 16, 2018

DIGITAL MARKETING: Keeping pace with technological development

 

By Innocent Swai innocent.fulgence@gmail.com

In an imperfect world, regulations are always lagging behind the speed of innovation. In a perfect digital world, regulators must not only be on top of cybersecurity but also beyond the tech-enabled disruption while innovators are revolutionising industries forward.

However, there are plenty of enthusiast-experts who are immersed in the elegant ecosystem presiding over emerging internet-technologies.

Thus why in the digital economy, despite the lack of proper guidance, tech companies are taking Artificial intelligence (AI) to the next level hence making digital transformation an attainable and sustainable goal. Today, most tech companies are looking at digitisation holistically by applying digital thinking across all the digital platforms.

The revolution is happening at the blink of an eye, and it’s not initiated by regulators. As you know, digital brands are using big data to improve consumers’ engagement. As customer behaviour keeps evolving; even their preferences are changing due making of happenstance in scalable better digital branding choices. The number-one catalyst driving everything is innovation.

When Google was founded in the late 1998, it was serving ten thousand searches per day. By the end of 2006 that same amount was served in a second. As of now, there are over 3.5 billion searches per day worldwide. This implies the digital revolution has levelled the playing field. It took about 75 years for the telephone to have an audience of 50 million people. The same record was attained in 38, 35 and 3.5 years by Radio, Television and iPhone respectively. Moreover, Facebook and an App known as the “Pokémon Go” reached such a record respectively in 2 years and 19 days. On the contrary, the real revolution has achieved remarkable success with big data rather than internet search or media.

Today, we’re manipulating data and digitizing more of typical human experiences than ever thought possible in new dimensions. There are five known tech trends causing the most disruption in the digital economy. First, the human capital trend as consumers are neither after financial performance nor quality product(s). But rather are interested with positive maximum impact in the society. Hence, automatic transformation from business enterprise(s) into social enterprise(s).

Secondly, AI which tallies with machine learning has yet to master the art of dealing with ambivalence. With big data context is still an issue hence avoidance to incur extra costs in human capital in preparing data to be fed in the AI algorithms. Still a long way to go before automation and radical efficiency can become a reality. On the contrary, AI must provide a means to harvest knowledge from the big data era. Unfortunately, consumers are being addicted differently via manipulative schemes, hence a new world of darkness and craziness. Facebook’s old mantra used to be “move fast and break things.” Thirdly, the Internet of Things (IoT) is about technological revolution which invading everything with new capabilities from home appliances to traffic lights to security cameras to anything.

Fourth, digital transformation is often activated by serendipity from unlikely places, revolutionizing entire industries like online payments and transportation, to name a few.

Lastly, it’s cybersecurity, as AI and machine learning gathers pace. AI is advancing rapidly and it’s role will increase exponentially hence impacting IoT and all other industries. The fight for cyber criminals must be in offensive mode. Innovation and cybersecurity are two sides of the same coin.

Mr Swai is the content director for MobiAd Africa Tanzania Ltd

advertisement

Thursday, August 16, 2018

YOUR BUSINESS IS OUR BUSINESS: Of mining: the baby and the bathwater…

 

By Karl Lyimo israellyimo@gmail.com

The piece published in these columns on August 2 this year titled ‘Tanzanite woes: experts and politicians differ’ drew a couple of responses, one from a foreign investor in the country’s mining sector who emailed me on August 3.

In that article, I raised as issues the steep, drastic fall in public revenue collections from the tanzanite sub-sector.

I noted that, for example, “monthly government revenue collections (in the tanzanite business) plummeted from Sh444 million at the beginning of 2018 to a measly 40 million in April – despite the security wall around the tanzanite mines in Merelani, the only place in the world where the gemstone is found!

In the event, the investor – who shall remain unidentified in here – sought to answer that poser.

“Enjoyed your article in The Citizen… You posed the question about revenues falling from tanzanite royalties and in general…” the investor started.

Then he pointed out that, “while the new mining legislation introduced by the government in early July 2017 as the chosen path to deal with the tanzanite problem and the Acacia Mining issues, it is nonetheless highly debatable whether or not this was the best way to deal with any miscreants...”

In any case, the fellow agrees that, for Tanzania to seek “a greater share of the country’s mineral wealth – and ensure that actors in the industry play by ethical standards – are both very worthy endeavours…

“One could even successfully argue that the appointment of Ms Angellah Kairuki as Minerals Minister was extremely astute... Who better than an ethical lawyer to get the Ministry in tip-top shape – unintended consequences notwithstanding,” my respondent opined.

Then – noting that it took the authorities more than seven months to come up with the requisite regulations in January 2018 – the respondent laments that “more months and months of inaction followed, as there were no Commissioners to vet the industry vis-à-vis the new regulations…”

As if all the foregoing weren’t enough woes in Tanzania’s mining sector, the government just as suddenly unleashed some 7,000 new mining licences on the scene. Where does this leave extant miners who are for all practical purposes “at a standstill as, they cannot operate within the ambit of the new legislation without the Commission’s approval,” the fellow argued.

What happens to the mines that were ‘in development?’ the investor asks.

“After all, it takes years of hard work from the granting of a prospecting licence to establishing fully-developed mining operations... In the case of larger operations like iron ore, copper, lithium, etc., it takes years of prospecting, drilling, resource-mapping, feasibility studies, bankable feasibility studies, etc., to become mining-ready,” he notes.

When all is said and done, one is tempted to ask: is Tanzania’s mining sector as vibrant/buoyant as it could/should be? If not: how can public revenues from mining pick up pace? Investment inflows…? Jobs…? Corporate social responsibility for surrounding communities…?

Isn’t Tanzania throwing the baby out with the bathwater? Tears!

advertisement

Thursday, August 16, 2018

FRANCHISE: Managing a franchise system efficiently



Wambugu Wa Gichohi

Wambugu Wa Gichohi 

By Wambugu Wa Gichohi

Although it has barely taken root in East Africa, franchising, as a business model, is a world phenomenon. We continue discussing how franchisors and franchisees manage and contribute to the management of a franchise system.

Thirteenth, a robust communication system. The relationship between the franchisor and franchisee is always a delicate one. Just like in marriage relationships, a system that facilitates a continuing and open dialogue with the franchisees is the key and often the difference between success and failure. The franchisor must in the interest of the system, endeavour to strike a fair balance between policing a franchisee’s behavior to protect their own interest and partnering with a franchisee to improve the franchise-wide operation.

Open lines of communication, literally as well as figuratively, can help both the franchisor and franchisee to be aware of each other’s situations. The franchisor ensures the effectiveness of communication with the franchisee using methods such as newsletters, memos, emails, phone calls, personal visits by management and personal visits by a franchisor representative. A successful franchisor believes in recognition and in a strong personal rapport with each franchisee. The franchisor must also acknowledge that there is equity in the relationship. On this basis the franchisor must ensure a regular feedback from the franchisees concerning the franchise system’s products, innovations, marketing communications and trends, competitive activity etc.

Fourteenth, the Field Advisor. To strengthen regular, ongoing and informal communications with franchisees, the franchisor appoints field advisers to visit franchisees on a regular basis or when required to do so by the franchisor. Their role and interpersonal skills is the key element to the informal communications system in the franchise relationship. Their accurate and clear reporting is also essential to ensure the level of conflict between franchisor and franchisee remains healthy.

Five roles of field advisors include relating-being a “middleman” between franchisor and franchisee, communicating information back and forth. Advising-providing objective, expert advice on business, marketing or operational issues. Coaching-encouraging franchisees to achieve higher levels of performance and assisting them to get through motivational blocks. Training-upgrading the knowledge and skills of franchisees and inspecting-ensuring standards are maintained.

Knowing their importance, the selection criteria for Field advisers must be strict.

Fifteenth, the Franchisee Advisory Council. This is a franchisee representative body set up by the franchisor to promote communications and creativity with the franchisees. The council acts strictly in an advisory capacity and meets with the franchisor on a quarterly, six-monthly or more regularly to discuss matters affecting the franchise system. The major purpose of the franchisee advisory council is to ensure an effective interactive communication system between the franchisor and the franchisees.

Franchisees are in the front line of the franchise business and experience the effects of decisions made by the franchisor.

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.

advertisement

Thursday, August 16, 2018

On being a shareholder of a listed company (III)

 

By Moremi Marwa

Last week I was invited in a seminar for men, youth and adults in our church, I was requested to speak on matters of financial discipline – i.e. how to save and invest for members of the society as we prepare for enhancement of income, child education, retirement, emergences, etc.

Part of what we will cover in this article was my talking points in that seminar. Part of what I said is that the first step towards deciding to invest or whether you have any disposable income for you to consider investment (in any form of investment: acquiring shares, or investment in Fixed Deposits, investment in Treasury papers (bonds and bills), acquisition land – not for speculative purposes, etc) is to look at your current financial situation/position. Why? Because, without an understanding of where you stand financially it will be difficult for you to tell what to do.

Therefore, like the case in business entities, your financial position is understood from looking in one of the financial statements called Balance Sheet: this is a statement indicating assets, liabilities and worth of the business at a particular point in time, basically detailing income and expenditure over the preceding period. So, at the personal level, you need to have a personal balance sheet, and as we will see you also need to have your personal cash flow statement prepared. To start with, how do you prepare or analyze your personal balance sheet? This is how:

Step 1: Prepare Your Personal Balance Sheet, by listing all your assets, investments and liabilities. The framework below will assist you to determine your assets, liabilities, income and expenses and your ability to invest.

Determine your net worth or net asset value: Personal Net worth = Total Assets – Total Liabilities

Step 2: Analyze your Personal balance sheet

Once you have constructed your personal balance sheet, as above, then take a closer look at it and try to identify any changes you can make to increase your wealth. Sometimes reaching your financial goals can be as simple as refocusing the items on your personal balance sheet, in addition to the level of discipline that accompany such decision and process.

Here are some points to consider, as you carefully relook into your personal balance sheet:

• For the items that constitute your emergency, are they real immediate or emergence in nature?

• Is the money sitting in a safe account and still earning the highest interest available?

• Can you replace depreciating assets with appreciating assets? Say that you have two music systems. Why not sell one and invest the proceeds?

• Can you replace low-yield investments with high-yield investments? Maybe you have Tshs. 1,000,000 on deposit earning 5%. You can certainly shop around for a better rate at another bank, but you can also seek alternatives that can offer a higher yield, such as Treasury bills, etc.

• Can you pay off any high interest debt with funds from low-interest assets? If, for example, you have Tshs. 1,000,000 earning 10% in a taxable bank account and you maintain Tshs. 500,000 in a credit card account paying 20%, you may as well pay off the credit card balance and save on the interest.

What is important is that you can take control of your finances with discipline, considering the advice from a financial consultant from time to time, based on the circumstances.

Funding your share investment

If you’re going to invest money in shares, the first thing you need is, well -- money! Where is that money going to come from? For many investors, reallocating their investments and assets does the trick.

Reallocating simply means selling some investments or other assets and reinvesting that money into shares. It boils down to deciding what investment or asset you should sell. Generally you want to consider those investments and assets that give you a low return (we will discuss this in detail later on) on your money. Re-allocation is only part of the answer; your cash flow is the other part.

Your cash flow refers to what money is coming in (income) and what money is being spent (outflows). The result is either a positive cash flow or a negative cash flow, depending on your cash management skills. Maintaining positive cash flow helps to increase your net worth.

A basic cash flow statement can be constructed as follows:

Step 2: Cash Flow Statement

c) Constructing the net cash flow: Net Cash flow = Total income (a) – Total outflows (b)

The bottom line is that you need to have more cash coming in than cash going out in order to invest both in shares and other financial instruments. Doing a cash flow statement isn’t just about finding money to fund your share investments. First and foremost, it’s about your financial well-being. Once this part of the investing process is done, the next key elements to consider are: safety of the investment, risks accompanied with the investment and levels of returns expected from the investment. These will be covered in the next week’s article.

advertisement

Thursday, August 16, 2018

How to save money while in college



Kelvin Mkwawa

Kelvin Mkwawa 

By Kelvin Mkwawa

The College (University) years typically are a student’s first steps into adulthood so it is a perfect time to start establishing good money habits such as savings and how to create a budget.

College is supposed to be about learning and there are lots of things to learn about money management skills through different tools such as budgeting. Money is a subject that is unavoidable regardless of your current stage of life.

When you’re a college student living away from home, you try to make sure you don’t run out of money but unfortunately, it happens often. Therefore, most college students are tempted to do ungodly activities such as having sex for money, selling drugs and stealing because of running out of money or not having any money to meet their necessary needs. One way to avoid this situation is by creating a budget.

The basic principles of budgeting, like living below your means, still apply even when you are in college, hence the college budget should include the same things adults deal with after school – how much you spend on food, rent, clothes, entertainment, etc. Creating a budget and executing it are two different things and it’s important to execute the budget that you invested the time to create. And through the budgeting process, you will be able to save money and avoid wasting money on unnecessary expenses. Because of that, this week I will share the three ways to cut cost while in College:

Course materials

Textbooks could eat up a large chunk of your budget. It’s a common practice to purchase all your textbooks in college but this option is expensive. The best options are to rent the textbooks from friends/colleagues or buying used textbooks from used bookstores or college mates that are a year above you. There are different used bookstores in Tanzania that can help you on that as well as libraries that can guide you to find cheaper textbooks.

Housing

Housing cost cannot be avoidable but it can be controlled. Whether you live in dorms (at school campus) or in off-campus accommodations, housing is likely to be one of the largest expenses. The general rule of thumb is that, if your college is in a big city then it will probably be cheaper for you to live on campus but if you are attending a college in a small town, then it’s cheaper to live off campus. Another effective way to cut housing cost is by having roommates; living with roommates can save you money on rent.

Entertainment

It’s college, so I understand you need to have some fun, going out clubbing, eating out but make sure when you do that, you aren’t spending the money that you might need for important things (necessities). This is the area where more money gets mismanaged than any other area on your budget. The best way to ensure that you spend as much as you can afford on entertainment is to save money little by little as you can and put it aside in a piggybank for entertainment purpose.

In conclusion, the challenge is not making a budget; it’s sticking to it. Being responsible with your budget isn’t about not spending money, it’s about spending wisely. The basic principle of budgeting is to never spend more money than you make, otherwise you run the risk of getting into debt that might be difficult to get out of. This is important for any stage of life but more important while you are in college since it’s where the foundation of adulthood is made.

Therefore it’s worth it to invest your time to create a budget that works for you and once you have done that, you will be able to see clearly the areas where you can save as I’ve shared in this article.

Lastly, I want to remind the college students that it’s easy to forget about a budget when you can live freely off loan money but keep in mind, that education loan is not free money. It’s a debt. And you will have to pay it back so you will be miles better living within your budget throughout your college time.

Mr Mkwawa is a seasoned banker

advertisement

Thursday, August 16, 2018

Technology and the future of talent

 

By Michael Kihoko mkihoko@kpmg.co.tz

With advancement in technology, skills needed for tomorrow’s talent keep on changing and evolve. Businesses are in a free flow mode of transformation and advancement to meet the need of the new generation and high tech world. Globalisation has made sure that whatever happens in one part of the world affects the entire planet with internet particularly social media. Other mode of communication such as television and multinational corporations footprints playing key role of keeping the rest of the world abreast.

Business practice and strategies change to cope with the pace of technological change and as a result processes and skill required to effectively run the business keep on evolving. Management and employees need to stop dosing and engage in continuous learning to remain relevant. Skills acquired three years ago may not necessarily be relevant to solve business problem today. Effective ways of thinking, corporate culture and perceptions change at the same pace as the business.

The race for relevance

As businesses engage in a competitions and innovation to boost revenues in order to create returns to shareholders; process evolve, products change leading to new marketing strategies and enhanced distribution channels. Organisation culture, thinking processes and managerial structures should cope accordingly. Management and other employees of the company should strive to be aligned with changes, new skills should be sought and continue to adapt in order to remain relevant.

Routine activities are now being subject of replacement by Robotic processes and automation, it is inevitable that human workforce need to evolve beyond routine processing and box ticking to business leaders and game influencers through human touch and innovation.

The status quo should be challenged in a race to remain relevant and existing systems reviewed to make sure that they are not dragging the business backwards because of their past inherent limitations.

Challenges to finance team

Being the integral part of the organisation and focal point for accountability and performance evaluation, finance team should not be left behind if they are to remain relevant to the business. As businesses find new opportunities for connecting with customers and opening new channels to market, finance team should get prepared and be able to quickly adapt to changes so as to be a reliable business support and avoid being a stumbling block. Processes and controls should be subjected to constant reviews and rectification in order to smoothly support the business while ensuring compliance with laws, regulations and companies’ policies. Finance should avoid the temptation of being the hindrance for the entity to achieve its goals because of resistance to change.

Advancement in technology present significant opportunities for Chief Finance Officers (CFOs) and finance team that includes integrated reporting. If implemented, integrated reporting will cut across the enterprise and bring uniformity that will reduce anomalies and inconsistencies between various reporting segments. CFOs need to appraise trends in technology advancement, quickly learn and understand, react and innovate. Businesses expect CFOs to be able to tell how the entity can employ the new wealth of data presented by technology advancement and digitalisation to enhance business performance, improve sales and reduce costs. They need to understand how businesses can extract opportunities that were being overlooked due to lack of proper analysis.

Regardless the size of the business, technology advancement is shaping the norms with which businesses operate. Management and talents must evolve, adapt and stay ahead through continuous learning and innovation to remain relevant. Changes affecting the business should be viewed with an opportunity eye not threat and analyse possible benefits presented as a result.

Digital transformation if properly embraced will place CFOs at the centrepiece of organisation’s decision making, re-establishing their position and in the process affirming their role in business strategic direction.

CFOs should be able to ask themselves questions as to why the report that was being issued 3 years ago is still being issued now with no change in format and inputs, is the report still relevant. Should it be dropped? Should it be updated or changed entirely?

Mr Kihoko is the Audit Supervisor at KPMG in Tanzania. The views and opinions are those of the author and do not necessarily represent the views and opinions of KPMG

advertisement

Friday, August 10, 2018

BANKING TIPS: What are secured and unsecured loans?



Kelvin Mkwawa

Kelvin Mkwawa 

By Kelvin Mkwawa

Borrowing from a bank is not a bad idea but it has to be done wisely as borrowing can help reach your financial goals or destroy your life if being done reckless and excessively. It is crucial to think long and hard before making the decision to take a bank loan.

There are different loan options offered by banks and if you are considering taking out a personal loan, it’s important to understand the different types of loans that are available to you.

This week I will talk about the difference between two common types of personal loans; unsecured personal loans and secured personal loans.

Anytime you borrow from a bank, a bank may allow you to borrow the money with only your promise to pay it back or the bank may require you to use an asset as a security for the loan. Any loan that is backed with security is called a secured loan while an unsecured loan is not tied to any kind of asset.

Let me start off with secured loans. Common types of secured loans are mortgages, car loans, and equity release loans in which items financed become the collateral for the financing. The bank maintains an equity (financial interest) in that collateral until the loan is paid in full.

This means that you agree that the bank can take the collateral if you don’t repay the loan as agreed.

Therefore, if the borrower defaults on the payments, the bank can seize the collateral and sell it to recoup the funds it had loaned out to the borrower. If the collateral doesn’t sell for enough money to completely cover the loan, you will be responsible for paying the remaining amount of the loan.

With the risk of having your collateral seized if the loan is not paid, you might wonder why anyone would choose a secured loan.

The reasons why people are choosing secured loans include: their credit history does not allow them to get approved for an unsecured loan, secured loans allow a borrower to get approved for higher loan limits (amount) based on your affordability, longer repayment period, and they have lower interest rates. From a bank’s view, the risk of default on secured loan tends to be relatively low since the borrower has so much to lose (i.e. the collateral) by neglecting his/her financial obligation.

Meanwhile, an unsecured loan is not tied to any of asset so the bank has no collateral to fall back on incase a borrower defaults. Common types of unsecured personal loans are salary loans, personal lines of credit, and student loans.

You typically need to have a good credit history and solid and constant income (salary) to be approved for an unsecured personal loan.

The main reason people choose unsecured loan is because they involve lesser paper work and its approval process is shorter.

Banks take a bigger risk by giving out loans with no collateral to recover in case of a default, which is why the interest rates for unsecured loans are considerably higher.

In addition, loan amounts may be smaller since the bank doesn’t have any collateral to seize if you default on payments. Since there is no security required, the bank will decide to give an unsecured personal loan using the five C’s of credit to assess a borrower’s creditworthiness; character, capacity, capital, collateral, and conditions.

Furthermore, credit-to income ratio is a very important deciding factor used by banks for unsecured personal loans to ensure the risk of default is as minimal as possible.

To summarize, there are two main types of personal loans; secured and unsecured personal loans. Any loan that is backed with security is called a secured loan while an unsecured loan is not tied to any asset. Secured loans usually have higher amounts, longer repayment period, and lower interest rate. While unsecured personal loans have shorter repayment period, lower loan limit, and higher interest rate.

Mr Mkwawa is a seasoned banker

advertisement

Friday, August 10, 2018

FRANCHISE: Managing a franchise system efficiently



Wambugu Wa Gichohi

Wambugu Wa Gichohi 

By Wambugu Wa Gichohi

Although it has barely taken root in East Africa, franchising, as a business model, is a world phenomenon. In some countries, such as America and Australia where a new franchise opens every eight minutes, franchising is so big that it is possible to be born and educated and to work and die in a franchise. We continue discussing how franchisors and franchisees manage and contribute to the management of a franchise system.

Sixth, a comprehensive franchisee training programme. Besides the initial training that must be comprehensive there must also be ongoing training when necessary. Initial fees charged on granting the franchise should include fees for the initial training programme. Any additional training required is chargeable to the franchisee.

Seventh, site selection is key for most businesses. A set of carefully developed site selection criteria and architectural standards are needed to assist franchisees in achieving success.

Eighth, a genuine understanding of the competition. This includes both direct and indirect competitors that the franchisor and franchisees will face in marketing the brand. While the franchisor should focus on understanding competition at the national level and the franchisee at the local-territory level, a point of intersection is needed for them to work as a team to ward off competition.

Ninth, external relationships. Good relationships are needed with suppliers, financial institutions, real estate developers, shopping centre management and key resources that will benefit the franchisee and the system that must be maintained.

Tenth, a franchisee profile and screening system. Just like in hiring own staff where getting the correct staff is a gamble, the recruitment of the right franchisee is vital for the system. A franchisee profile and screening system is needed in order to identify the minimum financial qualifications, attitude, business acumen and understanding of the industry that will be required to be a successful franchisee. A carefully crafted and well-thought out franchisee recruitment plan is a prerequisite to successful franchising.

Eleventh, an effective reporting and record-keeping system. Management needs to be aware of the performance of the franchisee and ensure royalties (management services fees) and sales are reported accurately and paid promptly. A robust Information Management system is a prerequisite for success.

To understand how the franchise system is performing, the franchisor will need timely and detailed reports from each franchisee on the key performance indicators. By analyzing these reports, market information can be deduced for possible improvements and/or changes to the system. The reporting system is a vital administrative procedure for the franchisor for reasons already explained. In addition, reporting also serves to determine whether franchisees are in compliance with their agreement, to control under-reporting of turnover (on which royalties are based), to review the purchase and use of unauthorized products and to gain insight into a franchisee’s marketing communications activity.

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.

E-mail: info@worldaheadafrica.com or

franchising@eabc-online.com

advertisement

Thursday, August 2, 2018

FRANCHISE: Managing a franchise system effectively



Wambugu Wa Gichohi

Wambugu Wa Gichohi 

By Wambugu Wa Gichohi

Although it has barely taken root in East Africa, franchising, as a business model, is a world phenomenon. We continue discussing how franchisors and franchisees manage and contribute to the management of a franchise system.

Second, a strong management team. Both staff and directors must understand the particular industry in which the franchise operates. It also includes the legal and business aspects of franchising as a method of branding and expansion.

The franchisor is the senior more-experienced partner here. Franchisor’s management team must therefore understand franchising and be ready to change their corporate culture from an owner-managed system to embrace a franchising culture. The management team must have interpersonal skills and ability to work with other people (franchisees). They must be competent in what their responsibilities are, trustworthy and committed to providing support when needed.

The task of the management team is also to monitor the environment within which the franchise operates and to provide leadership. They also control the franchise system through for instance, reporting and reviews. Management must also ensure franchisees have the skills to manage their franchise outlet.

Third, sufficient capitalization to launch and sustain the franchising programme is needed.

It is important that the franchisor ensures that capital is available to provide both initial and ongoing support and assistance to franchisees.

For the first year of franchising, it is advisable not to include in your capital expenditure projections income you receive from franchisees when you grant them franchises. That means you need alternative means to finance the entire franchise roll out in year one which will ensure that you have enough capital to finance the roll out in subsequent years.

It is for this reason that at the East African Business Council Franchising Project, we have put in place a pool of equity funds where local brands seeking to franchise can access equity investments from over twenty large equity funds in Europe and North America. The funds are also availed to franchisees to acquire your franchises.

The investors exit after five years-typically through the stock exchange-leaving your business to grow further using cheap capital from the public. More details are available on request.

Fourth, a distinctive and protected trade identity. This includes amongst others a registered trademark and/or business identity/name, uniform signage, slogan, trade dress and overall image. For restaurants, overall image extends to include menus, infrastructure designs and table layouts.

Fifth, proven methods of operation and management. This is usually reduced to writing in a comprehensive Franchise Operations Procedures and Training Manual which will maintain their value to the franchisee over an extended period of time, and which can be enforced through clearly drafted and objective quality control standards. Since the market is dynamic, your business operating systems and the manual need constant upgrades.

======================================

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.

E-mail: info@worldaheadafrica.com or franchising@eabc-online.com

advertisement

Monday, August 13, 2018

BANKING TIPS: Divorce and avoidance of financial nightmare



Kelvin Mkwawa

Kelvin Mkwawa 

By Kelvin Mkwawa

Sadly, many people in our society nowadays find themselves the victims of divorce, faced with the harsh realities of a broken marriage.

The rising number of divorces in our country in recent years is alarming; The National Panel Survey of 2014/15 carried out on Tanzania’s households by the National Bureau of Statistics (NBS) shows that the rate of divorce has doubled within the last six years.

This means that currently, for every 100 people who have reached the age of marriage, two have been divorced.

The survey further reveals that four couples out of 100 have separated, meaning that their chances of divorcing are high.

Going through a divorce is never fun. Not for you, and definitely not for your soon to be ex-wife/husband and definitely not for your kids (if you have them).

Divorce is an unfortunate time for all those involved and it affects not only a person’s emotional well-being but their finances as well.

The divorce proceedings can be a big challenge on many different levels and the biggest mistake you can make while going through a divorce is making decisions based on emotions.

When you are emotional, you don’t think logically and usually make irrational decisions so the best thing you can do throughout the divorce process is to manage your emotions and keep your focus towards achieving your personal and financial goals.

This week, I will share a few tips on how to avoid a financial nightmare during divorce which will help you rebuild your life again:

Create a new budget

A divorce is a major lifestyle change as for a while you lived on two incomes but now you are down to one.

Therefore, if you had a budget, it is time to create a new one and if you didn’t have a budget, it is important to have one as it is the only way to survive the transition and to thrive in your new life.

You need to re-evaluate your expenses as your past expenditures cannot fit into your new life of a single income. As a starting point, downsize your expenditures temporarily, stash away any extra money you can and live on a minimum budget to ensure you are setting a strong budget base for your new life.

Separate your finances

This part can be irritating if you have been married for a long time since you will need to reorganize your finances. Your finances include everything from all investments, debts, and liabilities; if you were not involved in your family finances, now is the time to immerse yourself in the details.

The first and important step is to cancel and remove yourself from all joint properties, bank accounts, insurance policies, and loans; anything that has both your names on it needs to be addressed.

This will help you to have a clear picture of your financial situation and help you strategize towards your new financial goals.

Get financial advice

During a divorce, your partner can engage in dubious activities that will hurt you financially such as moving the funds or selling off assets without your consent.

Furthermore, in most marriages, it is a common practice that one spouse tends to manage the majority of finances and this can lead to all sorts of problems during the divorce if you were not the party that managed the shared finances.

If that is the case, you will need to step up and educate yourself about managing the finances, which may very likely require you to seek financial advice.

You can hire a financial advisor or have someone who can help you understand your investments, assets and how to manage your liabilities to ensure a smooth transition to your new life.

To summarise, divorce is one of the most stressful life events a person can through. So surround yourself with people you trust that can help you get through personally and financially. Through this article, I have shared three tips that will help you regain control of your financials during a divorce: create a new budget, separate your finances and get financial advice.

Mr Mkwawa is seasoned banker

E-mail: kelvin.e.mkwawa@gmail.com

advertisement

Thursday, August 2, 2018

Made in Fukushima: Japanese farmers struggle to win trust

Onahama Port employees preparing seafood for

Onahama Port employees preparing seafood for radiation tests in Iwaki on July 27, 2018. PHOTO | COURTESY 

Koriyama, Japan. The pumpkin is diced, the chicken carved and the eggs beaten into an omelette, but the people preparing the food are not chefs -- they are scientists testing produce from Japan’s Fukushima region.

Seven years after the March 2011 nuclear disaster caused by a devastating tsunami, rigorous testing shows no radioactive threat from Fukushima’s produce, officials and experts say.

But local producers say they still face crippling suspicion from consumers.

More than 205,000 food items have been tested at the Fukushima Agricultural Technology Centre since March 2011, with Japan setting a standard of no more than 100 becquerels of radioactivity per kilogramme (Bq/kg).

The European Union, by comparison, sets that level at 1,250 Bq/kg and the US at 1,200.

In the last year, the centre says no cultivated produce or farm-reared livestock has exceeded the government’s limit.

In all just nine samples out of tens of thousands were over the limit: eight from fish bred in inland ponds, and one a sample of wild mushrooms.

Each day, more than 150 samples are prepared, coded, weighed, and then passed through a “germanium semiconductor detector”. Rice undergoes screening elsewhere.

While radiation affected several regions which have their own testing processes, Fukushima’s programme is the most systematic, testament to the particularly severe reputational damage it suffered.

In the wake of the nuclear disaster, a wide-scale decontamination programme has been carried out in Fukushima.

It can’t be done in forests, where thick tree growth makes it impractical. But elsewhere topsoil has been removed, trees washed down and potassium sprinkled to reduce caesium uptake.

But the testing process is the cornerstone of efforts to win consumer trust.

‘Our products are safe’

“Some people are still worried, in Japan and abroad, so we want to continue to explain to people in other prefectures and in foreign countries that our products are safe,” said Kenji Kusano, an official at the testing centre.

And occasionally radioactivity is detected, for example in wild plants and mushrooms, which are destroyed if they exceed the government standard.

Kusano said testing will remain important as residents gradually return.

“When residents come back to areas that are off-limits at the moment and start producing their own fruit and vegetables, they must be tested,” he said.

The Fukushima disaster devastated a previously flourishing local agricultural sector.

“Profits have not yet reached pre-2011 levels and prices remain below the national average,” said Fukushima representative Nobuhide Takahashi.

The situation is even worse for fisherman, many of whom have survived only on compensation paid by Fukushima operator TEPCO. The tsunami destroyed ports across the region and demand is low despite an even stricter testing standard of 50Bq/kg for Fukushima’s seafood.

“When we catch fish and send it to market in Tokyo, some people don’t want to buy it,” said Kazunori Yoshida, director of Iwaki’s fishing cooperative.

As a result, fishermen brought in just 3,200 tonnes of seafood in the area last year, down from 24,700 in 2010. (AFP)

advertisement

Thursday, August 2, 2018

MANAGING TAX RISKS: Beware of slippery paths in tax amnesty



Shabu Maurus

Shabu Maurus 

By Shabu Maurus

This article is a continuation of my earlier few articles on tax amnesty. Following amendments of the tax administration law (through the Finance Act, 2018), the Minister of Finance and Planning issued the Tax Administration (Remission of Interest and Penalty) Order, 2018 (“Tax Amnesty Order”). The Tax Amnesty Order is effective from 1st July 2018 and expires on 31st December 2018.” TRA also issued a public notice explaining the scope of the tax amnesty, eligibility criteria and how one can apply for the tax amnesty.

Enrolling in the tax amnesty has several potential advantages to the taxpayer. My article last week discoursed some of the advantages. The biggest is the waiver of interest and penalties but there are several others which are equally important to the taxpayer. The tax amnesty sounds so good. But what are the risks of enrolling in the tax amnesty, if any? What can go wrong?

Before you proceed here are my few caveats:

I personally believe that the tax amnesty is a good thing in Tanzania for now. I also believe that taxpayers ought to pay to the government the right amount of tax as per the prevailing tax laws. Not more, not less. This is regardless of the existence or applicability of the tax amnesty. What I consider below as risks are my personal views and should not, in any way, derail you as a taxpayer from your decision to enroll in the tax amnesty.

My intention, in this article, is to point out some few things that taxpayers should consider when deciding to enroll in the tax amnesty.

1. Spillover effect

The tax amnesty does not apply to each kind of tax in Tanzania. For example, the amnesty does not apply to the gaming tax, service levy, customs taxes, skills and development levy (SDL), social security contributions and the VAT in Zanzibar. There is a possibility that seeking a tax amnesty on eligible taxes may also reveal non-compliance with other non-eligible taxes. For example, non-compliance with PAYE (eligible tax) may also be an indicator of non-compliance with SDL (non-eligible tax).

2. The remission can be reversed

The Tax Amnesty Order empowers TRA to reverse the remission granted on interest and penalties if the taxpayer fails to implement the terms of a settlement agreement. One such term is for a taxpayer to commit to paying the principal tax amount on specified dates. If TRA rescinds the settlement agreement, the principal tax, interest, and penalty become payable as if there was no remission. The settlement is also voidable if the taxpayer gives false or fraudulently misrepresents facts.

3. TRA discretional powers

Enrolling to the tax amnesty is purely voluntary. Enrolment involves a declaration of tax liability by the taxpayer. But TRA still has powers to assess the amount of tax that is deemed reasonable given the available information. The Tax Amnesty Order requires TRA to decide on an application for tax amnesty within 30 days. There is no compulsion for TRA to accept your application.

4. No more dispute?

The tax amnesty extends to tax objections pending with TRA and tax appeals pending at the tax courts. But only if the applicant agreed to “finally conclude his tax liability without further grievance or dispute”. This is fine provided the settlement agreement is reached and fully implemented by both parties. But what if the settlement agreement is, for some reasons, not fully implemented? Assume the taxpayer is unhappy with the TRA decision to rescind the agreement.

Mr Maurus is a Partner with Auditax International

advertisement

Thursday, August 2, 2018

YOUR BUSINESS IS OUR BUSINESS: Experts, politicians differ on tanzanite woes



Karl Lyimo

Karl Lyimo 

By Karl Lyimo israellyimo@yahoo.com

Exactly what’s going on in Tanzania’s tanzanite sub-sector, pray? There’s so much doublespeak, confusion, discrepancies, inaccuracies, recriminations and disarray involving miners, regulators and quasi-stakeholders.

This mishmash cannot be a good thing. Is it true, for example, that the Merelani tanzanite miners collectively paid Sh714.6 million in royalty (‘mrahaba’) for the three months of January, February and March this year?

Put in perspective, the miners paid measly sums in royalty for the past three years: Sh166.8 million in 2015; Sh71.8 million in 2016, and Sh147.1 million in 2017 – totaling Sh385.7 million in three ‘long’ years …

That sum is Sh328.9 million LESS than the Sh714.6 million collected over three ‘short’ months this year…

Then, they rather too suddenly pay an astounding Sh714.6 million in three months… Holy Moses!

That’s where and when the doublespeak begun in earnest…

We’re told this steep rise in royalties is the direct result of the 3-metre-high, 24km-long, single-gate fence wall constructed around the tanzanite mines as directed by President John Magufuli in late September 2017.

While the wall was constructed in record time by the military, it’s yet to be fitted with appropriate security appliances such as CCTV cameras and other sensors as directed.

Construction of the wall begun in November 2017. It was completed two months ahead of schedule – in February 2018 – and was officially inaugurated by President Magufuli on April 6th, 2018. [See ‘Ukuta wa Merelani wamg’oa kigogo;’ MTANZANIA: July 22, 2018].

So: did the ‘Great Wall of Merelani’ really play a tangible role in boosting the royalty collections skywards? Did it…?

If yes, then why have the royalties (and other public revenues) been melodramatically dwindling since then – despite the wall firmly remaining in place?

For instance, we’re told monthly government revenue collections plummeted from Sh444 million at the beginning of 2018 to a measly 40 million in April – the security wall notwithstanding!

But, even before this had sunk in, the Manyara Regional Commissioner (RC), Mr Alexander Mnyeti, dived headlong into the fray, attributing the drop in public revenues to falling tanzanite production beginning in April – not due to smuggling, cheating or any other malfeasance…

Agreeing with the RC, the Manyara Regional Miners Association (Marema) chairman, Sadiki Mneney, plunged deeper, attributing the production drop to hard economic times: reduced money circulation, etc., etc. [See ‘MWANANCHI: July 23, 2018].

Well, this never happened in years past. Besides, the RC and Marema directly contradict findings of the Presidential Tanzania Mining Commission (TMC) whose chairman, Prof Idris Kikula, squarely attributes the drop in public revenues to rampant smuggling, rife false production declarations and suchlike malfeasance.

Who’s right here: TMC or the politicians?

To help you answer that: a woman was intercepted carrying 7.53kg of tanzanite in a bucketful of maize flour out of the fenced mining area and through the single in/out gate on July 22 this year! [See MTANANIA, July 24, 2018].

Now, if that’s not smuggling, I don’t know what is!

This is to say nothing of… Sorry, I’ve run out of editorial space here… Cheers!

advertisement

Thursday, July 26, 2018

Managing franchise system effectively



Wambugu Wa Gichohi

Wambugu Wa Gichohi 

By Wambugu Wa Gichohi

Although it has barely taken root in East Africa, franchising, as a business model, is a world phenomenon. In some countries, such as America and Australia where a new franchise opens every eight minutes, franchising is so big that it is possible to be born and educated and to work and die in a franchise. In Africa, South Africa already qualifies in all these counts with the exception that they don’t have a maternity home franchise. Egypt is soon catching up after serious investment in franchise development over the last ten years.

But franchising is encouraged by a changing market place as a new customer and consumer society is continuously being developed. In East Africa, a new and rapidly-growing middle class (although still nascent and not yet large enough to support rapid development) can be expected to impact on our economies in the near future. It is therefore not surprising that major changes in consumer actions and attitudes are also taking place in these economies.

Any business hoping to grow on the franchise model needs to appeal to this market to influence and retain their business support. But this has become more difficult than ever before. The franchisor as the “leader”, with his/her team will therefore need to invest time and energy to manage the franchise network. Some of the changes that are having a major influence on the market place include the following.

First, there is no longer a mass market. It was long-replaced by the market segment, the niche market and the one-to-one market. For example, Coca-Cola has at least nine different versions of their beverage; Holiday Inn has five different versions of their hotel, meant to appeal to different market niches.

Second, companies have realized that profit is not only derived from the transaction but also from the relationship. Today, books are being written on “Customer Relationship Marketing” (CRM). Relationship entails more than encouraging repeat business. It means investing in a customer and keeping in touch with the customer’s needs. For example, in addition to always having the Big Mac Burger on their menu, McDonald’s always localizes menus wherever they go to appeal to and keep their local customers.

Third, the marketing trend of major consideration is entrepreneurial marketing. Marketers are learning that they must lead customers. It is said that if Thomas Edison had relied on conventional market research, he would have invented a better light bulb.

Fourth, technology continues to impact on all spheres of business and to contribute to the global village effectiveness already created by franchising. Current trends in artificial intelligence will impact on franchise businesses in future.

It is within this context that this new culture of business, the SME market and franchising, is developing. The question then is how do franchisors and franchisees manage and contribute to the management of the franchise system? The key components in the operation of an effective management system are here-below discussed.

First, a proven concept/pilot store to serve as the basis for the franchising programme. As discussed in previous articles, you cannot franchise an idea.

advertisement

Thursday, July 26, 2018

Farmers now assured of crop markets

 

By Halili Letea @hletea news@tz.nationmedia.com

Dar es Salaam. Farmers of some crops have a reason to concentrate on production and value addition as the commodity exchange seeks to solve the challenge of markets.

The platform, which will start trading of strategic crops such as cashew nuts, sesame, tea, coffee, cotton and maize, is supervised by the Warehouse Receipts Regulatory Body (WRRB) in association with the Tanzania Mercantile Exchange (TMX).

It is expected to bring markets closer to farmers, increase transparency, reduce transportation costs and time, according to TMX chief executive officer Godfrey Malekano who spoke last week during a seminar on the new system for agriculture stakeholders.

“We are starting with spot exchange for now and because this system will depend much on information and communication technology system, it will reach buyers within and outside the country. We are working on it and we will soon implement it,” he said, adding that they will be working with Tanzanian embassies of Tanzania in finding markets by using ICT.

The ICT system will connect farmers, buyers and regulators. They will be able to access and see market situation from where they are.

According to WRRB managing director Augustino Mbulumi, the big role will now be to collect crops, grade them and ensure their quality so that they will be used by TMX for exchange.

“After storing and grading and adding value to them we will tell TMX through ICT so they can have this in their system” he said.

To ensure value maintenance, WRRB uses quality packages known as hermetic bags so that no insects penetrate. The crops will be stored in silos.

Farmers must store their crops in the Warehouse Receipt System (WRS) and receive receipts.

The process involves undergoing commodity verification and grading before the receipt is issued.

To reduce storage costs to farmers, WRRB is working with the Tanzania Cooperative Development Commission (TCDC) to collect produce for storage in bulk as it is easy to find markets for them.

Farmers will wait for their crops to be sold. TMX agents will look for markets using their local agencies which will be dealing with local markets and information from foreign countries will be provided by respective embassies.

To avoid risk of money loss or counterfeits by conmen after transaction, the produce owners will receive their payments directly into their bank accounts, one day after trading.

The TCDC registrar of cooperatives, Mr Tito Haule, hopes the system will ensure farmers and buyers get what they deserve in such a way that farmers will have full follow up of their produce until they are sold and they will get paid once the transaction is completed while buyers will get produce of the quality they want.

He said that the role of TCDC is to collect farm produce from farmers and educate them on the importance of WRS and how they will access market through the new established commodity exchange.

Depending on the time commodities stay in the warehouse, farmers will pay only the same price for storage and the owner of the produce will have access to loan by up to 60 per cent of their produce value only by showing the receipt.

Mr Mbulumi said the system will also minimise risk and transaction costs, quality assurance and encourage the farmers to produce more.

Mr Malekano said farmers will now, have no need to search for markets for their produce as TMX will be dealing with that and buyers will have easy access to large quantity and quality crops as they will have reliable data and information about the market.

“Farmers should now concentrate on production and it will enable crop boards to focus on supporting farmers to increase production while buyers will use ICT system to access the commodities they want,” he said.

Mr Malekano said the commodity exchange would help farmers to make decision on the price of the crops they sell and they can now deal with commercial farming.

The permanent secretary in the Prime Minister’s Office, (Policy and Coordination), Prof Faustine Kamuzora, said the commodity exchange would increase opportunities.

He said the value chain system from farmer to seller set to remove all leakages, so that ever participant would get what he/she deserves.

“To make farmers confident financial institutions must connect them to their mobile money so that they can have easy access to their bank accounts,” he said.

advertisement

Thursday, July 26, 2018

Commodity exchange is expected to improve farmers’ well-being

 

By Hellen Nachilongo @musanachi60 hnachilongo@tz.nationmedia.com

Dar es Salaam. The commodity exchange is expected to increase the bargaining power of farmers and maintain price stability of produce.

The market, which will involve electronic operations in passing information, is also expected to help farmers access markets countrywide and abroad. Chato District agriculture, irrigation and cooperative officer Mwiza Waryuba is optimistic that price stability of most crops will be standardised because the warehouse receipt system will add value to crops.

“Even if supply of crops is huge, farmers will still benefit from them as prices will be stable,” he said.

“In previous years, we had a business market where you could find us lined up with our crops selling them and when buyers come, each farmer will sell his/her crops at his own price….it was really a challenge to sell grains at the similar price. Now the bargaining power will increase because every crop would have its own value,” said Mr Waryuba, who is also a farmer.

He cited cashew nuts whose prices ranged from Sh100 to Sh300 a kilo before the warehouse receipt system was introduced. After introducing the system, the price rose to Sh3,000 a kilo. Cotton is being sold at Sh700-800 a kilo, but Mr Waryuba hopes the price will increase.

Shinyanga assistant crop registrar Shose Monyo is optimistic that farmers’ earnings will improve.

She said 180 associations had been revived for collecting crops from farmers.

According to her, farmers are convinced that once the system starts they will be “price-setters” unlike in the past when they used to be “price-takers”.

Warehouse Receipts Regulatory Body managing director Augustino Mbulumi said farmers should not be worried when harvests were bumper as crops would be sold in the next season.

“There is no need of reducing prices when harvests are bumper as farmers would have collateral with financial institutions to access loans using crops in warehouses and continue selling other crops,” he said.

advertisement

Thursday, July 26, 2018

What Tanzania is doing to make air transport safer

 

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

Dar es Salaam. There about 100,000 flights globally every day, according to the International Air Transport Association (Iata).

Aircraft take to the skies and land safely, thanks to stakeholders’ push in improving aviation safety.

Swissport Tanzania saw fatalities, permanent disability or time lost from work falling to eight last year compared to 13 a year before, according to quality and compliance manager Daniel Simkanga.

The company handled 14,792 aircraft last year. It also saw a significant decrease in the number of aircraft damage.

Since January, no aircraft was damaged, said the company’s chief executive officer, Mr Mrisho Yassin.

According to a recent Tanzania Civil Aviation Authority (TCAA) report, the number of air traffic grew by 2.1 per cent to 4.95 million in 2016 compared with the previous year.

Cargo volume dropped by 20 per cent, to 24,030 tonnes between 2015 and 2016.

The construction of the Sh560 billion terminal three at Julius Nyerere International Airport (JNIA) is at final stages and the passenger capacity will rise by more than twofold to nine million. The airport will eventually be decongested.

Upon its completion, terminal three alone, will 6.5 million passengers annually, more than twice the capacity of terminal two’s 2.5 million passengers. However, challenges facing the air transport are not about congestion and service quality.

This has placed pressure on both local and international stakeholders to put in place a number of safety efficiency initiatives.

Safely handling for aircraft continues to be Swissport Tanzania’s top priority, with the company used Sh58.5 million for safety-related programmes last year, according to Mr Yassin.

To ensure safety is enhanced, campaigns have been carried out.

Safety alerts and posters are issued to sensitise staff.

Also, safety inspections and audits are done and incidents are collected and analysed to assess the effectiveness.

Other initiatives are near-miss reporting and safety, health improvement programme (Ship) and safety campaign.

Near-miss reporting is an unplanned event that has the potential to cause, but does not actually result in human injury, environmental or equipment damage or an interruption to normal operation but has to be reported to prevent future incidents. Ship is run in a form of workshops and is geared towards training employees about safety issues.

“We continue taking steps in raising standards and implementing best practices,” noted Mr Yassin.

The safety officers deployed recently have proved to be efficient function as they keep monitoring safety and security aspects in all areas of the company’s operations.

Swissport was audited by Iata whose mission is to represent, lead and serve the airline industry, and subsequently was approved as Iata Safety Audit for Ground Operations compliant and received accredited certificates for JNIA and Kilimanjaro International Airport (Kia) to June 17, 2017.

Reports from the International Civil Aviation Organisation (Icao) indicate that the average worldwide level of implementation of international safety standards in civil aviation in 2016 were estimated at only 63 per cent.

To improve safety of Tanzania’s airspace, the regulator last year signed an agreement with the France-based Company Thales Air System to install four radars in four airports in 18 months.

With the acquisition of the state-of-the-art surveillance radars worth $28 million (about Sh63 billion at the prevailing exchange rate), now the country will be able to monitor its entire aviation airspace.

Tanzania uses aviation radar installed at the JNIA in 2002, monitoring only 25 per cent of its aviation airspace. TCAA director general Hamza Johari said: “Safety of our skies is of paramount importance. With the four radars we will be able to monitor our entire airspace and beyond.”

Early this year, TCAA installed a high frequency radio station in Tanga to oversee the airspace for the safety to airline operators.

The Tanzania Airports Authority (TAA) ensures passenger screening is done for travellers for safety and security as they leave the airport.

It is conducted at different points starting with the entrance area into the departure terminal and ending with one last screening point before passengers go through the boarding gates. Safety data management and analyses are a part of Iata’s safety strategy and are available via the Global Aviation Data Management programme.

The programme provides Iata members and other eligible industry members with a wealth of information and acts as a gateway to the multiple sources and areas of aircraft operations.

The programme has information from over 470 organisations.

Over 90 per cent of Iata members are contributing to at least one of its databases.

The EU considers safety to be the joint responsibility of the global aviation community to support states that have difficulties or are unable to establish sustainable safety oversight systems in compliance with international standards.

The EU is actively engaged in a number of technical assistance and cooperation initiatives aimed at promoting aviation safety globally and regionally, particularly in areas with high accident rates.

To meet these challenges, government agencies and industry will have to invest in new and upgraded infrastructure and equipment.

Another cornerstone of the approach to enhancing aviation safety is the Iata Operational Safety Audit, an internationally recognised programme that is implemented consistently throughout the industry.

On top of that is Integrated Management Solutions - a tool that provides an efficient and cost-effective solution to manage the collection and processing of your quality and safety data and information as part of your safety data collection and processing system.

Furthermore is supporting consistent implementation of the Safety Management System in ensuring safety performance monitoring, analysis and dissemination of information safety promotion and facilitation.

advertisement

Thursday, July 26, 2018

On being shareholder of publicly listed company

 

By Moremi Marwa

In the last two articles we share some of the factors that one needs to consider when investing. We particularly focused on shares investment. I got the feedback from some of our readers who wanted me to elaborate a bit on the concept of shares and how it relates to business ownership and business management. In today’s article, I will do just that.

So, what is a share?

Plain and simple, shares represent ownership of a company – a company which is in the business of profit making. A share represents a claim on the company’s assets and earnings. As you acquire more shares, your ownership stake in the company becomes bigger. Whether you say shares, stocks, equity, they all mean the same thing and they are used interchangeably.

By buying a share, money, which could have been idle or otherwise, held in low interest earning savings in banks or other financial instruments moves to a more productive economic activity. How, because by acquiring shares you provide money (called capital) to the business, the money which is used to buy plants, equipment, furniture, inventory, pay wages for workers, pay rent, etc – these acquired assets are then used to produce goods or services which are sold to users and consumers, in the process the business generates revenues and profits.

Being an owner

Holding a company’s shares means that you are one of the many owners (shareholders) of the company, and, as such, you have a part claim to everything the company owns. Yes, this means that technically you own a relative part of every piece of furniture, every machinery and equipment, every trademark, and every contract of the company. As an owner, you are entitled to your share of the company’s earnings as well as any voting rights attached to the shares.

A share to the company is represented by a share certificate, (or a CDS Receipt for shares listed in the Dar es Salaam Stock Exchange - DSE), which an evidence for a piece of ownership of a company. When you buy a share, you become an investor (or a shareholder) and thereby an owner of a piece of the company’s assets, debts, profits or even losses.

One thing to note -- being a shareholder of a public company (a company listed in the stock market, such as the DSE) does not mean you have a say in the day-to-day running of the business, this is different from a business ownership arrangement where you are a sole proprietorship, or a partner to a partnership or even a shareholder to a private company. Instead, for a publicly listed company, the rule is one vote per share when it comes to matters of decision making, whether to elect the members of board of directors, or to approve appointment of auditors or to approve audited accounts at annual meetings. Basically, your shareholding status determines the extent to which you have a say in the decision making of a company.

For instance, being a DSE PLC shareholder doesn’t mean you can call up the DSE’s Chief Executive Officer and tell him how you think the company should be run. In the same line of thinking, being a shareholder of TBL doesn’t mean you can walk into the factory and grab a free case of beer or grab a packet of cigarettes from the production plant in the case of TCC!

The governance system via the board of directors and management of the company is supposed to enhance the value of the firm for its shareholders. If this doesn’t happen, shareholders can vote to have the Board, and in some cases, management be removed. For a shareholder in the listed company you don’t have to work to make money, management works for you and the board looks after your interest as a principal.

What is important for you to note is that the importance of share ownership is your claim on assets and earnings. Without these two, the shares wouldn’t be worth the paper it’s printed on.

Another extremely important feature of shares is its limited liability, which means that, as an owner of a share to the company, you are not personally liable if the company is not able to pay its debts and other obligations. Other business arrangements such as partnerships or sole proprietorship are set up so that if the partnership goes bankrupt the creditors can come after the partners (shareholders) personally and sell off their personal assets – i.e. houses, cars, furniture, etc. Owning shares means that, no matter what, the maximum value you can lose is the value of your investment. Even if a company of which you are a shareholder goes bankrupt, you can never lose your personal assets.

Owning shares

So, if you love continuing with your day job, or being a business owner without ever having to show up at work, or entertaining the idea of becoming a retiree who has ownership to businesses -- you could just seat back, watch your company grow, and collect dividend cheques as the money rolls by becoming a shareholder! and in case of liquidity challenges and you real need the money, you can just watch the TV or read a newspaper, get the price of your investment, call a broker, place a sale order and there you are – you have the money you needed.

advertisement

Thursday, July 26, 2018

Sido: Every district should grow one commercial crop

By Hellen Nachilongo @musanachi60 hnachilongo@tz.nationmedia.com

Dar es Salaam. Small Industries Development Organisation (Sido) proposes that every district should grow one cash crop.

‘One District One Crop Product (ODCP)’ is said to be right approach for the country to have bumper harvests for commercial purposes.

The Sido director of technology development and industrialisation, Mr Emanuel Saiguran, told The Citizen recently that such initiative would help farmers grow crops on large scales and promote industrialisation using the Cluster Development Approach (CDA).

“CDA is a way to realise competitive advantage of industries by promoting the strengthening of linkages among various stakeholders across and beyond value chains,” he said.

He explained that in the past years, farmers in most regions used to grow crops without knowing their competitive advantage. Sometimes farmers grew crops that were not even suitable for their respective areas.

“Cashew nuts are potentially grown in Mtwara... you cannot grow rice in Mtwara as a commercial crop. What we are trying to do is to promote crops found in various areas to be improved for commercial use and to feed the nation at large.

“By collaborating with several development partners, the ODOCP initiative is currently being implemented in some regions, “he said.

Explaining on CDA, he said it was a geographically proximate group of interconnected companies and associated institution in particular field, linked by commonalities.

According to him, with support from Sida, Costech and Jica in some regions, cluster projects were being implemented.

“In Dodoma we have a grape cluster that produces juice. In Kilimanjaro there is a leather cluster to produce leather products. In Singida, there is a sunflower oil processing and refinery cluster for sunflower oil that would soon be launched, “he said. Mr Saiguran said that was an industrialisation strategy.

He noted that its success will depend on stakeholders working jointly together in developing the chosen product.

“Key players would include various firms, people along vertical and horizontal value chain. Others would include raw material producers, suppliers, traders and buyers.”

He explained that Tanzania had diverse resources. People’s culture, nature and commodities and therefore, such sources could be of sustainable social and economic development of the country if utilised well to capture opportunities.

As Tanzania is pursuing industrialisation, CDA has come into existence with the objective to realise the competitive advantage of industries by promoting and strengthening linkages and collaboration among various players in and around the selected commodity value chain.

Arusha resident Julius Ngalawa, who is a CDA beneficiary, told The Citizen that most people think working together would make their businesses collapse and lose customers.

“The cluster approach is very beneficial. It unites us,” he said.

advertisement

Thursday, July 26, 2018

Why insurers find rain-fed agriculture risky to cover

 

Dar es Salaam. Insurers believe agriculture is too risky to cover.

They say that is because the sector is dominated by smallholder farmers who are often surrounded by many challenges such as vagaries of weather, insecure land ownership, difficulties in accessing to capital and farm inputs, unfavorable trade policies and price fluctuations.

Many of those constraints are beyond the farmers’ control.

“Agriculture insurance is tricky because the sector is still unstable,” said Zanzibar Insurance Corporation’s planning investment officer, Mr Rahim Hamza.

The corporation has no plans of starting such a product. It will wait until irrigation systems are improved.

According to Annual Agriculture Sample Survey published by National Bureau of Statistics, 8,763,267 operators were engaged in agriculture in 2017 but only 437,112 farmers were using irrigation.

“How can I insure a person who cultivates only two hectares and has no guarantee of securing enough water and fertilisers?” said Mr Hamza.

Every insurance company needs to make profits, so when the sector guarantees profit to operators, the product will be started, according to him.

He insisted that neither insurance companies nor farmers seem to be interested in the concept, implying that it will take time for such insurance product to be a reality.

Metropolitan Tanzania Insurance Ltd assistant marketing officer Bruno Moyo is not even aware with the agriculture insurance concept.

He has been just hearing about it but he cannot even tell how it can be operating.

“I am still out of the blue, and I am certain that there are so many others in the field who know nothing about it. I think even farmers still know nothing about it,” he said.

“We always come up with insurance products after either finding out that the product is currently necessary to people’s lives or from strong demand from our customers. But for agriculture insurance none of the two is coming to us.”

Training programmes for insurance operators and public awareness to farmers are highly needed, according to him.

However, Strategis Insurance Ltd and MGen Tanzania Insurance Company operate agriculture insurance product.

They too acknowledge that that running the product is risky.

Strategis has started operating agriculture insurance product in 2018, targeting medium-sized and large-scale farmers, according to Mr Emmanuel Jimmy, planning and marketing officer.

The product covers disasters such as insects’ detriment, drought, floods, fire and theft before harvesting as well as when particular agricultural product lacks a market, according to him.

Before deciding a price for the insurance product the company measures operational costs the farmer incurs and the profits expected after harvest. The value of the farm determines the price of the insurance product which a farmer should pay to the company.

“We have a limited number of customers because the insurance product is not popular to farmers,” he noted.

He also admitted that it was still difficult to run the business since the farmers were not aware. But some liked the idea.

“Some say we are stealing and some claim that we exploit them.”

MGen Tanzania Insurance Company is somehow different. It has been practicing agriculture insurance since 2013, serving the farmers in groups.

The company’s marketing supervisor, Mr Derrick Sebastian, says visits had been made to unite medium and large-scale farmers in a single group, educating them on agriculture and insurance services before they join the product.

So far, the company is capable of reaching 1,000 groups annually, according to him.

“After the evaluation, we charge at least Sh25,000 per hectare. We offer the service to the group with at least Tanzania Insurance Regulatory Authority public relations officer Mr Oyuke Phostine once told The Citizen that the plan was to make sure that until the end of 2028, every Tanzanian adult uses at least one or two insurance products.

Insurance contributes about 0.7 per cent of the GDP.

The agriculture insurance remains their hope as the sector covers the large population, according to him.

advertisement

Thursday, July 26, 2018

Key questions before getting personal loan



Kelvin Mkwawa

Kelvin Mkwawa 

By Kelvin Mkwawa

In an ideal world, everyone would have enough money for his/her needs but that is not the case so some of us will need to borrow money to cater to our needs. Once you decide to borrow money, it is crucial to think long and hard before you take that route. There are so many places where you can borrow money from: friends, families, micro and macro lenders, and banks. One of the options for borrowing money is through a personal loan from the bank. There are two types of personal loans – secured personal loans and unsecured personal loans. The most common type of personal loan is an unsecured loan which is borrowed in a lump sum without collateral.

It is important that you consider whether a personal loan is the best option for your financial needs so don’t hesitate to seek professional advice if you’re unsure about whether a personal loan is right for the goal you’re trying to achieve. Used wisely, a personal loan can help individuals achieve a number of financial goals.

People decide to get loans for many reasons so it’s very important to know which questions to ask yourself before seeking personal loans. Today I will share the key questions that you should ask yourself before getting a personal loan from a bank;

Will it help me achieve my financial goal(s)?

This is the most important question you need to ask yourself before you borrow a single cent from a bank.

To be able to ask yourself that question, take a look at your financial picture and develop your financial goals. For example, your goal can be buying a house, funding an education, looking for capital to invest in your business, or financing an emergency family situation.

Regardless of the goals, it is important to know whether the personal loan will help you achieve those goals and equally important to be clear on the purpose of the personal loan you want to get.

This is a very key step towards making meaningful decisions such as how much you need and for how long.

Can I afford it?

The first rule of smart borrowing is this: do not borrow money that you cannot repay back. One of the easiest traps to fall into is taking out a larger loan amount than you need.

Before getting a loan, you must review your monthly budget and cash flow to figure out if you usually have money left to cover extra obligations after your necessity needs.

In case there is no money left for additional obligations, look for areas where you can cut your costs to have more room in your monthly budget before thinking about taking a personal loan. Furthermore, always make sure you read and understand the bank’s loan fees and charges before you sing up to take the loan.

To read the fine print of conditions and terms that go with your bank’s loan is crucial: this will enable you to find the bank that charges you less than the rest. Your primary concern should be keeping the cost of obtaining a loan as low as possible, hence shop for banks that offer competitive interest rates and fees to ensure your monthly repayment cost is affordable.

Is it convenient?

When shopping for your personal loan, it is important that you assess your needs as a customer to make sure the bank that you will take the loan from offers you other services that are convenient for you.

You should always look for a bank partner that really sees the world from your point of view and understands your journey.

Therefore, it is very important to ask yourself which bank understand your needs, has convenient products, and a customer-centric culture before you decide to take a personal loan.

Let me wind up by stating that at the end of the day, think twice before you borrow. Do your homework and ask yourself these key questions that will help you steer you into making a right financial decision. After that, move forward with confidence, get a sensible loan, and commit to paying it off.

Mr Mkwawa is a seasoned banker

advertisement

Thursday, July 19, 2018

Review investment pacts for your benefit, EAC states told

 

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

Dar es Salaam. Many investment agreements are not in favour of Tanzania, stakeholders say.

That is why foreign direct investment (FDI) inflows into Tanzania have dropped for the third year running, they stress.

They were speaking in separate interviews on the sidelines of a workshop for development stakeholders in the East African Community (EAC) here.

They called on Tanzania to review investment treaties to have a win-win situation.

Laws and policies should bear in mind what Tanzania wants to achieve.

FDI inflows dipped by 24.4 per cent last year to $1.18 billion (about Sh2.6 trillion), down from the 2015 level, according to United Nations Conference on Trade and Development.

The Southern and Eastern African Trade Information and Negotiations Institute (Seatini) country director, Ms Jane Nalunga, said foreign investors enjoyed numerous legal rights without needing to worry about corresponding responsibilities.

Way back in 1959, Germany and Pakistan signed the first bilateral investment treaty (BIT) in the world without knowing they marked a new era as many countries have followed the example since then. Currently, the international legal system that governs international investment flows is shaped by a network of about 3,000 BITs and other international investment agreements (IIAs), according to the Netherlands-based organisation Both Ends that focuses on international trade and investment issues.

“This system no longer serves its purpose and needs to be changed profoundly,” opined Ms Nalunga.

“Not only is it questionable whether IIAs at all encourage international investment flows in support of sustainable development, but its current generation has also failed to address the uneven balance of rights and responsibilities between foreign investors and the host countries.”

In recent years, a large number of countries have faced costly international investment treaty claims on matters of economic policy, financial stability, and environmental and health regulations, according to Both Ends senior policy officer Burghard Ilge.

This reality, and especially the fact that 60 per cent of all investor-to-state-dispute settlement claims are brought against developing countries, has serious repercussions for poverty reduction, inclusive growth and sustainable development. This has in turn, he said, sparked many governments to rethink and revisit their current BITs regime.

Serious questions, according to him, are being raised by citizens and their representatives about the legitimacy and effectiveness of the BITs regime.

Reforming the multi-layered investment treaty regime calls for collective thinking and constructive engagement by all stakeholders: governments, inter-governmental organisations, the private sector, civil society, think-tanks and academia.

“Rethinking, reforming, and where necessary, terminating bilateral investment treaties is imperative because of superior treaty obligations under the UN charter and human rights convention,” suggested Mr Ilge.

Already the government has started reviewing treaties with some of investors.

In May, Attorney General Adelardus Kilangi told Parliament that his office had started reviewing contracts signed by Tanesco and Songas.

Last year, President John Magufuli assented to bills which require the government to own at least a 16 per cent stake in mining projects.

Dr Magufuli reiterated that no new mining licences would be issued until Tanzania put things in order and that the government would review all mining licences with foreign investors.

However, according to private sector development specialist Solomon Baregu, changing BITs is not enough as a sound legal and regulatory framework is needed.

“When signing agreements, the government should understand that it is entering into a deal. It should be strong in negation by providing investors with conditions on what we need, for national interests,” opined Mr Baregu.

“Let’s increase transparency in our treaties. There should be monitoring mechanisms for the treaties to be fruitful to the public.”

Investors, according to Mr Baregu, should have a deeper economic impact to the country and above all to everyone in terms of employment creation and technology transfer.

The Tax Justice Network -- Africa policy lead in charge of the tax and investments programme, Mr Jared Maranga, was of the view that the government should use its power to ensure that the country benefits from an investment.

“The government has the right to get what it negotiates and not what it deserves. We need to be strong but not ridiculous,” said Mr Maranga. For that to work, Kigali, Rwanda-based international trade negations independent consultant John Kanyangoga called for a friendly tax system.

“Taxes should be well calculated.”

Seatini executive director Nathan Irumba suggested for adoption and implementation of policies and rules that are friendly to multinational companies.

“If we are to record sustainable development, legal system should be friendly. It should be working properly,” explained Mr Irumba.

advertisement

Thursday, July 26, 2018

Farmers now assured of crop markets

 

By Halili Letea @hletea news@tz.nationmedia.com

Dar es Salaam. Farmers of some crops have a reason to concentrate on production and value addition as the commodity exchange seeks to solve the challenge of markets.

The platform, which will start trading of strategic crops such as cashew nuts, sesame, tea, coffee, cotton and maize, is supervised by the Warehouse Receipts Regulatory Body (WRRB) in association with the Tanzania Mercantile Exchange (TMX).

It is expected to bring markets closer to farmers, increase transparency, reduce transportation costs and time, according to TMX chief executive officer Godfrey Malekano who spoke last week during a seminar on the new system for agriculture stakeholders.

“We are starting with spot exchange for now and because this system will depend much on information and communication technology system, it will reach buyers within and outside the country. We are working on it and we will soon implement it,” he said, adding that they will be working with Tanzanian embassies of Tanzania in finding markets by using ICT.

The ICT system will connect farmers, buyers and regulators. They will be able to access and see market situation from where they are.

According to WRRB managing director Augustino Mbulumi, the big role will now be to collect crops, grade them and ensure their quality so that they will be used by TMX for exchange.

“After storing and grading and adding value to them we will tell TMX through ICT so they can have this in their system” he said.

To ensure value maintenance, WRRB uses quality packages known as hermetic bags so that no insects penetrate. The crops will be stored in silos.

Farmers must store their crops in the Warehouse Receipt System (WRS) and receive receipts.

The process involves undergoing commodity verification and grading before the receipt is issued.

To reduce storage costs to farmers, WRRB is working with the Tanzania Cooperative Development Commission (TCDC) to collect produce for storage in bulk as it is easy to find markets for them.

Farmers will wait for their crops to be sold. TMX agents will look for markets using their local agencies which will be dealing with local markets and information from foreign countries will be provided by respective embassies.

To avoid risk of money loss or counterfeits by conmen after transaction, the produce owners will receive their payments directly into their bank accounts, one day after trading.

The TCDC registrar of cooperatives, Mr Tito Haule, hopes the system will ensure farmers and buyers get what they deserve in such a way that farmers will have full follow up of their produce until they are sold and they will get paid once the transaction is completed while buyers will get produce of the quality they want.

He said that the role of TCDC is to collect farm produce from farmers and educate them on the importance of WRS and how they will access market through the new established commodity exchange.

Depending on the time commodities stay in the warehouse, farmers will pay only the same price for storage and the owner of the produce will have access to loan by up to 60 per cent of their produce value only by showing the receipt.

Mr Mbulumi said the system will also minimise risk and transaction costs, quality assurance and encourage the farmers to produce more.

Mr Malekano said farmers will now, have no need to search for markets for their produce as TMX will be dealing with that and buyers will have easy access to large quantity and quality crops as they will have reliable data and information about the market.

“Farmers should now concentrate on production and it will enable crop boards to focus on supporting farmers to increase production while buyers will use ICT system to access the commodities they want,” he said.

Mr Malekano said the commodity exchange would help farmers to make decision on the price of the crops they sell and they can now deal with commercial farming.

The permanent secretary in the Prime Minister’s Office, (Policy and Coordination), Prof Faustine Kamuzora, said the commodity exchange would increase opportunities.

He said the value chain system from farmer to seller set to remove all leakages, so that ever participant would get what he/she deserves.

“To make farmers confident financial institutions must connect them to their mobile money so that they can have easy access to their bank accounts,” he said.

advertisement

Thursday, July 19, 2018

BANKING TIPS: Customer-centric services needed



Kelvin Mkwawa

Kelvin Mkwawa 

It has been argued that when customers encounter a poor customer service, the majority of them will not complain but rather will simply take their business somewhere else. Customer service is very critical for the survival of the organization and one that cannot be ignored.

That is why I have written several times about the subject. A few weeks ago, I shared the importance of offering excellent customer service; it builds awareness and trust, improves customer retention, improves employee turnover, and improves brand image.

And last week, I shared three impacts of poor customer service; it damages the brand’s reputation, it kills potential sales deals, and it causes your top performers to leave your organization.

It is for the best interest of your organization to offer customer-centric services otherwise you can’t compete effectively. So, how can your organization ensure it offers customer-centric service? This week I will share some of the steps your bank can take to ensure it offers customer-centric services:

Educate and train your employees

Customer service is a very important tool to recruit and retain your customers. Make sure your employees are trained to ensure they have the knowledge, skills, and ability to make each interaction with the customer memorable by providing a convenient and positive experience which is above the customer’s expectations. In addition, you need to educate your employees on what impact customer service has on your bottom line (profits/loss line) and the role they need to play to ensure the positive impact.

Advocate simplicity

Customers want to deal with banks that value their business by fulfilling their demands faster and efficiently. Internal policies and procedures are designed to protect the bank’s interests but they can make it difficult for the customers to do business with you. Therefore, evaluate your process flows, systems, policies, and procedures from the customer’s point of view and make the necessary changes if needed to ensure customers’ requests are processed simpler, faster and accurately.

Promote customer service all around

Customer service should not be seen as a sole responsibility of customer-contact staff (i.e. tellers, salespersons, and relationship managers). Create a culture that everyone in your organization has a role to contribute to the success of each customer experience because it has been proved that the main reason for most customer service failure is due to a breakdown in an effective partnership between different teams in an organization. Hence train and educate your staff to understand how their work impacts the customer service experience and how they can contribute to the positive outcome of every customer interaction.

Encourage feedback from your customers

As I stated earlier, most customers will not complain when they encounter a poor customer service but will do so only if they feel like their feedback will be acted upon. This can only happen if you make listening to the voice of your customers as part of your staff’s daily responsibility. This can be done by training the staff in how to encourage feedback from the customers and use the information to make necessary changes which will have a positive impact on customer experience.

Customer- focused leaders

Most service initiatives fail because the leaders of the organization are not customer-focused. Traditional and usual ways of management need to be replaced with new styles that promote customer-focused service to ensure all leaders in your organization receive the required training in customer-focused leadership to implement the same in all levels of the organization.

In summary, for achieving excellence in customer service, banks need to clearly understand the needs of their customers and expectations.

Mr Kelvin Mkwawa is a seasoned banker

advertisement

Thursday, July 19, 2018

What to consider when investing in shares

 

By Moremi Marwa

The capital market is a crucial component of the economy, putting savings and investments in the hands of those in need of capital.

The capital which is then used to generate economic output ultimately supports development and creating wealth.

A humming capital market can elevate a country’s socioeconomic conditions, as it has done in many economies where financial infrastructure and its supporting institutions are fundamental to economic development agenda.

When correctly harnessed and channeled, capital markets can prove to be transformative: not just for the economy, but for society too -- by unlocking opportunity and giving citizens a greater stake in their nation’s success (in the democratization of finance and wealth), capital markets can strengthen both individual prospects and the bonds of community, when many people are engaged in financing their economic development and are economically empowered.

For this to happen, there must be financing tools and products that may be used to mobilize savings for productive investments.

The economy needs a sizable investor base, made of by both individual households and institutions, not only by the quantity of their participation but also by the quality of their investment strategy and decisions based on the understanding and appreciation the fundamental workings of the capital markets.

In the last week’s article I shared some of the factors, approaches and activities for one to undertake during the process of saving and investing in financial instruments that are issued by participants in the capital markets.

I said, anyone who is keen on investing in the capital markets should have a clearly informed personal investment plan, followed by an evaluation of his or her risk tolerance level for various asset class (or securities within the asset class).

While on this, it is important for one to understand and appreciate a principle of investment that says: the higher the risk, the higher the return. I discourage the speculative mentality and “quick money” motives – it is not good for an investor, especially on value-based investments.

The element I emphasize on is for one to determine where he/she want to end up financially. In the thinking process towards achieving the outcome to such a determination, questions such as at what age one wants to retire, how much money s/he need in order to retire comfortably, how much time one have between retiring, how much money he/she need to work with and how much risks are comfortable and willing to take on – needs to be responded into in a careful manner.

Once you know the answers to these questions you will have a good idea of how much you need to invest to reach your goal.

Remember the wise saying which says: “if you do not care where you end up, any road will get you there”.

So, do not choose to take any road – because any road will not help you to get where you want, you need to be specific, for example, if you are 45 years old and you intend to retire at age 60 and your net income (after deducting your expenses and liability obligations, and without consideration for inflation and time value of value) is Tsh. 1 million a month.

This means that for you to achieve the Financial Freedom during your retirement, your Financial Freedom Fund Target should be to generate about Sh180 million by the year 2033. With careful planning, financial literacy, good investment selection and financial discipline – this can be achieved.

If you do not have necessary competences and skills for financial planning, or you are not as savvy and disciplined, how can you go about this? You need to start by a bit of researching on the idea, which should be followed by opening an investment account at the stock exchange via a stock brokerage firm.

As it with the bank accounts, which you use for your savings and investment purposes relating to financial products and services provided by banks, for investing in shares and bonds which are listed on the stock market, requires you to open an investment account. In our local environment, there are two primary routes you can take when it comes to investing in the stock market, you may have to use the services of the stock broker who will make investment recommendations based on your needs, desires and risk appetite; or the other option is for use to invest via a unit trust/mutual funds, i.e. the Unit Trust of Tanzania, which provides both diversification and professional management, coupled with researches and analysis.

Once you have opened an investment account, either with the stock broker or a mutual fund, develop the discipline to invest a certain amount, like the Sh1 million as above, on a constant/regular basis – this approach will give you the benefit of averaging, the average cost per unit share will be lower relatively. Along the lines of discipline on investing, you may need to note that stock have a tendency to go up and down, for you to create wealth in the stock market, do not be emotionally attached to a certain stock. Develop the discipline to always setting a stop-loss price – this being the amount you are willing to lose, but not beyond, and once reached get rid of the stock.

We talked about the need for diversification in order to manage your investment risk, I would like to end up by re-emphasizing on it, remember that the bedrock of all the investment advice in large part of human history has been: “don’t put all your eggs in one basket”. There is not better long-term risk management strategy than the diversification of investments.

advertisement

Thursday, July 19, 2018

Techie helps firms know how clients perceive services



Akshay Shah. Photo File

Akshay Shah. Photo File 

By James Kariuki @TheCitizenTZ news@tz.nationmedia.com

Nairobi. Akshay Shah’s unique experience both in Kenya and abroad led to the development of the Ratemyservice technology.

Mr Shah studied at Warwick University in the UK and briefly worked in the country before moving to South Africa as a corporate management and board advisor.

After a decade, he returned to Kenya to work at a corporate management consultancy which enabled him to travel across East Africa, interacting with board members of corporate firms and major shareholders.

“I realised that most directors, company owners and top management teams hardly understood what their customers needed and I looked forward to improving their experience within the firms,” Mr Shah recalls.

The 37-year-old spent some time shopping for a favourable online bank but details available lacked essential input from bank customers. This ignited the Ratemyservice web application idea which he developed and tested at two local firms. He quit employment to concentrate on his IT startup.

“Today’s customer is highly fluid, seeks bargains, special treatment and is always shopping for innovative services that define how they transact their business on-the-go using mobile gadgets,” he says.

Mr Shah says he refined his mobile app enabling customers to give feedback on what they felt about bank services. They were also given an opportunity to suggest changes to enhance their experience.

He invested about Sh1 million to enhance his platform’s interactiveness. The new portal also gives companies access to a private interface where they view comments about their business as well as engage ardent customers keen on seeking responses on certain product issues.

“One of my clients sells electronics and has created a nationwide contacts database for all those using its products which it uses as an after-sales platform. It has helped to build loyal customers who have become oral ambassadors,” he said.

While he has earned Sh1.3 million from his venture, Mr Shah says he has kept his operational costs low by outsourcing services but plans to establish an internal product development team as his clients grows.

The technology provides a customer with an online “suggestion” platform to rate a company’s quality of service, staff, communication, and value for money. Customers have an opportunity to give a score for their satisfaction or dissatisfaction with any department including accolades for select officers.

Mr Shah says that some firms needed their IT systems customised where customer feedback is noted and unsavoury comments acted upon thereby helping restore the dissatisfied client’s trust.

He said that ratemyservice.co.ke is registered and mans customer feedback services for 10 firms dealing in takeaway meals, auto-services, electronic after-sales and a retirement benefits management firm.

“A restaurant client of mine planned to stop making coconut rice with curry since they were unsure of the recipe and the cooking process. But clients protested and it was retained. This earned them new clients and higher sales,” he said. The service also gives firms a chance to engage customers on online platforms where feedback on products and services dispensed is monitored.

The site was this year’s overall winner in the e-commerce and business services category during the Nairobi Innovation Week, an event organised by the University of Nairobi for business startups. (NMG)

advertisement

Thursday, July 19, 2018

MANAGING TAX RISKS: Does the tax amnesty apply to you?

 

In his 2018/19 Budget Speech, by the Minister of Finance and Planning announced a tax amnesty. The tax amnesty will involve remission of up to 100 percent of interest and penalties.

Last week, TRA issued a public notice explaining the scope of the tax amnesty, eligibility criteria and how one can apply for the tax amnesty. Knowing whether the tax amnesty applies to you or not is an important first step in the whole process of tax amnesty.

And if it does apply, to what extent? In this article, I highlight some circumstances the tax amnesty may not apply to you.

1. Are you compliant?

If you owed TRA tax but have already paid it in full, obviously, this amnesty does not apply to you. The intention of the tax amnesty “is to give relief to taxpayers with debts by waiving 100 percent of interest and penalties to motivate them to pay principle tax liabilities voluntarily and in installments, within the financial year 2018/2019” reads part of the TRA public notice.

2. Which tax?

The tax amnesty only applies for eligible types of taxes. Main those administered by TRA on behalf of the central government such as VAT, Income tax, Excise Duty, Stamp Duty, PAYE and Withholding tax. The tax amnesty will not apply to you if the non-compliance is in respect of tax not administered by TRA.

A service levy, for example, is administered by local government authorities. Non-union taxes applicable only in Zanzibar (such as VAT in Zanzibar) are administered by the Zanzibar Revenue Board (ZRB).

The tax amnesty will also not apply to you if the non-compliance is in respect of customs duties administered by TRA under the East African Community Customs Management Act, 2004. Also, the amnesty will not apply if the non-compliance is in respect of non-tax laws administered by TRA. This includes taxes such as gaming tax, skills and development levy, property tax, advertising fees.

3. Can you settle the tax debt in a year?

One of the conditions for the remission of interest and penalties is for you to commit (“confirm”) in writing to pay the principal tax amount within the financial year 2018/19 (latest 30th June 2019) excluding penalties and interest. If you think you are not able to make and fulfill this commitment, then the tax amnesty is not meant for you.

4. Are you ready to drop your tax objection or appeal?

The tax amnesty extends to tax objections pending with TRA and tax appeals pending at the tax courts. But, obviously, this will involve the aggrieved taxpayer who wants to enroll for tax amnesty to withdraw/drop his objection or the appeal and commit not to proceed with the same.

5. Are you under audit or investigation?

If you are under an audit or investigation by TRA, then the amnesty will not apply to you for the period and taxes being audited or investigated. If, for example, TRA is auditing your VAT affairs for the year of income 2016, then you will not be eligible for tax amnesty for VAT related to 2016.

But you will be eligible for tax amnesty for VAT matters related to years of income other than 2016 and all other eligible taxes.

6. Is the unpaid tax related to crimes?

The tax amnesty will not apply to you if the unpaid taxes related to tax crimes, human trafficking, money laundering and other crimes. You have determined that the tax amnesty may apply to you. Your next question is whether you should enroll for the tax amnesty or not. My next few articles I will continue focusing on the tax amnesty.

Mr Maurus is a partner with Auditax International

advertisement

Thursday, July 19, 2018

DIGITAL TRENDS: Secret to understanding artificial intelligence



Innocent Swai

Innocent Swai 

Have you ever heard about the current hype on AI? Has your attention been grabbed by the screen (smartphone, Computers, etc.). Sometimes it seems like every other digital gadget or app is citing AI as it’s secret ingredient recipe for success.

AI is contributing to humanity a better future of leisure and creativity as machines are taking care of most dull routines. Conversely, it’s claimed that AI leads to rising unemployment rates, causing more civil unrest.

AI is creativity in the form of algorithms. Consider these the numbers 1 and 0 as arranged to create different perceptions like poverty, wealth, laughter, etc. When rearranged as ones, tens, hundreds, etc. they can go all the way to trillions in countless ways depending on where the zero (0) is positioned.

It could be termed as rearranging unknown patterns in order to have different alternatives. The rearrangement of these two digital numbers (1,0) is usually what offers countless possibilities for digital brands.

Every storey building has an elevator ride with two states; namely go (1) and stop (0). When the elevator is operating, it goes and stops at any floor several times even when there’s nobody. This could be time wasting, hence the necessity for AI automation to simplify Elevator routines.

A team of Engineers at one Company came up with a better arrangement. When people are approaching the lobby waiting for elevators; they have to press a button number on the centralized control panel; within a second, the panel responds by showing which elevator is at your service.

Such arrangements are replacing the human mechanical skills with algorithms. That’s Artificial Intelligence at its best. AI designed elevators have become an overnight success.

In other words elevators take people to their desired floors and then returns to the lobby to service others swiftly; hence the need for few elevators in storey buildings. Money is saved, wait time is minimised and a precious space for gardening rather than elevator infrastructure.

The race of technological advancement is increasing daily, but we don’t know how to get to the endpoint, or how far we have to go.

However, AI is creating easier ways to live and lengthening life. In this digital era, it’s not about transferring of labor from rural to urban areas as it used to be in the industrial age.

AI is augmenting our mental functions particularly our ability to make predictions and decisions. In the developed world, AI is already creating jobs as people are learning how to collaborate with robots.

The big task at hand is making our leaders (political& religious) to become like cats rather than dogs.

Why am I bringing these pets when we are talking about serious issues?

For an observant person, you might have noted that Cats are much more preferred than dogs to make meme and cute viral internet sensation videos.

While people domesticated dogs; cats smartly domesticated themselves to people’s homes. Other major differences; while dogs are bred to be obedient, trainable, dependable and predictable; cats are weird, surprising and magical.

However, there are more popular dog training videos; most captured cat videos have unpredictable behaviors when they are in their 9th life.

advertisement

Thursday, July 19, 2018

YOUR BUSINESS IS OUR BUSINESS: Mengi and Roosevelt could, did – and WON

 

The tittle-tattle here today is about two very successful persons who were nonetheless born and lived/still live in different countries and times.

These are the 26th US President (1901-09) Teddy Roosevelt Jr. (1858-1919); and Reginald ‘Tough Reggie’ Abraham Mengi (born in 1949? /radaris.com/p/Reginald/Abraham/>)…

Starting with the latter – call it favouritism or whatever; but I must confess the two of us were briefly classmates at Old Moshi Secondary School where he was popularly known as ‘Tough Reggie’ – Mr Mengi started off his career in Tanzania as a Managing Partner and, later, Chairman of Coopers & Lybrand-Tanzania.

Today, he owns IPP Ltd (Industrial Products Promotion), and is its executive chairman. IPP is a holding company with a bazillion subsidiaries engaged in manufacturing (bottled soft beverages, etc.) mass media ‘products/services’ (TV, radio and newspapers), mining, etc.The holder of an honorary Doctorate - and a Chartered Accountant (UK) and Certified Accountant (Tanzania) by training - Mr Mengi is listed on the as chairman of the Handeni Gold, Inc., IPP Gold Ltd.; the Confederation of Tanzania Industries (CTI); the Media Owners Association of Tanzania (Moat), the Economic Empowerment Committee at the Tanzania National Business Council (TNBC); a Member of the Institutional Investors Roundtable...

Furthermore, Mengi is also on the Board of the Commonwealth Business Council; chairman of the People with Disabilities Trust Fund-Tanzania; a member of the International Investors Round Table-Tanzania; and chairman, East African Business Council (EABC). Before all that stifling complexity, in the past Mr Mengi also held top positions at the National Board of Accountants and Auditors-Tanzania (NBAA); the National Environment Management Council-Tanzania (Nemc); the Leadership for Environment and Development International Board (Lead), and the Tanzania HIV/Aids Commission, Tacaids…

The other fellow – Teddy Roosevelt Jr. – was never really a businessman along the ‘Tough Reggie’ lines. He mainly dabbled (or specialized) in the military, politics, outdoorsmanship, pacifying warring nations (hence becoming the first American to win the Nobel Peace Prize in 1906) – and the US Presidency (26th US President, in office September 14, 1901-March 4, 1909). Oh, I shouldn’t forget that Roosevelt was also a good writer of books: 38 books in his lifetime, starting with ‘The Naval War of 1812,’ written at age-23. Others were Oliver Cromwell’s biography; a History of New York City; an autobiography and ‘writings on his hunting and frontier exploits.’

So, it can safely be said that the only possible link between these two historical heavyweights is in book-writing. But, even that link is gossamer, tenuous. Remember that Mr Mengi launched his autobiography on July 2 this year, titled ‘I can, I must, I will’ – while Roosevelt authored 38 books – and hundreds of magazine and newspaper articles.

But then, while Mengi ‘Can, Must and Will’ today, Roosevelt had already told his countrymen (and countrywomen): ‘Believe you CAN – and you are half-the-way there!’ “Our aim is to promote prosperity – and then to see that prosperity is passed around; that there’s a proper division of prosperity….” President Roosevelt stated.

“We won’t submit to prosperity that’s obtained by lowering the wages of the working class, and charging excessive prices to consumers; nor prosperity that’s obtained by swindling investors or getting unfair advantages over business rivals...”

Oh, there’s more of that juicy stuff, which our leaders should access and implement; just google ‘The Farmer and the Business Man;’ Roosevelt; August 1912… Cheers!

advertisement

Thursday, July 19, 2018

Meeting discusses investments in EAC

The East African Community headquarters in

The East African Community headquarters in Arusha. Regional investment policies should be people-centred. PHOTO|FILE 

By Halili Letea @hletea news@tz.nationmedia.com

Dar es Salaam. Regional investment policies should be people-centered, representatives of civil society organisations (CSOs) have urged.

They should protect human rights and promote the environment of attaining sustainable development to have a win-win investment setting in the East African Community (EAC), they stressed.

They were speaking during their meeting here recently.

The meeting was run under the theme ‘Understanding the Changing Global Investment Policy Landscape and its Implications on the EAC’.

It also discussed the importance of conducting productive research and assessing financing from global systems before embarking on projects. Mr Burghard Ilge, a senior policy officer from a Dutch environmental organisation, Both Ends, argue that “the current generation of IISs [international investment agreements] has also failed to address the uneven balance of rights and responsibilities between foreign investors and host governments”.

He clarified that foreign investors enjoyed numerous legal rights without needing to worry about corresponding responsibilities.

“This fact is explained by the reality that 60 per cent of all investors to State Dispute Settlement claims are brought against developing countries and the situation has serious repercussions for poverty reduction, inclusive growth and sustainable development” he said Mr Ilge.

The executive director of the Southern and East Africa Trade Information and Negotiations Institute, Mr Nathan Irumba, spoke about unequal treaties which only consider rights and no obligations for investors and ignoring national legal system.

“Most treaties are unfair as they do not take into consideration local residents’ rights,” he argued.

Mr Arnold Kwesi from Uganda Consortium on Cooperate Accountability said most of bilateral investment treaties (BITs) and IIAs did not consider human rights in such a way that there were no social impact assessment, human rights impact assessment and environmental impact assessment and the fact that people’s welfare was not a centre for them.“How do you negotiate with the community that you don’t have information about it or when the information is only on one side, especially investors? Will the treaty be sustainable if you will spend much money when you haven’t involved communities?”

The executive director of Haki Madini Tanzania, Mr Amani Mhinda, said communities should be educated on how to benefit from projects.

Mr John Bosco Kanyangoga, a consultant from Rwanda, said Africans need foreign direct investment inflows, but that should be achieved in a healthy and sustainable way.

“Issues like technology transfer and tax mechanisms must be implemented in win-win situations for both parties,” he said.

Mr Jared Maranga, of Tax Justice Network Africa in Burundi, stressed that community consultations were a must.

“Respective governments must come up with strategies which will be beneficial to both sides -- investors and locals. Government agencies must connect people with investors. Policies and legislation should be amended to protect investors and people where projects are undertaken. Issues of land are extremely critical in many areas. Land is not just a commodity that an investor can buy as it has a different meaning in African societies like cultural and social heritage.”

Mr Ilge said the first obvious option was to simply let parties determine for themselves during treaty negotiations, which of the many fundamental human rights, labour rights, environmental rights and anti-corruption obligations they want to include in the BIT.

“Every single obligation to be imposed upon corporations would have to be the object of negotiation between the parties. This is not the most well suited approach as such negotiations would likely take a considerable amount of time and raise numerous controversial issues” he said.

Also, negotiation inevitably involves compromises, which may not result in an effective reinforcement of human rights obligations. For all these reasons, countries will likely be reluctant to embark on such an uncertain journey.

The treaty’s section on investor state dispute resolution must also contain a provision indicating specifically how human rights obligations imposed upon corporations can actually be enforced before an arbitral tribunal.

The provision must make it clear that an arbitral tribunal has jurisdiction over allegations of human rights violations committed by corporations.

Setting up a regime of direct obligations under a BIT without any enforcement mechanism will not only render these rights totally ineffective, it would in fact, as one author puts it, “not enhance human rights, but trivialise international law”.

An option on a case of human rights violations, respondent state should be allowed to raise any such allegations during the arbitral proceedings. This is the offsetting of damages or mitigation option. A tribunal would thus take into account such allegations when making its determination on the merits of the dispute.

Under ‘counterclaim’ option, a claimant investor would be permitted to file a claim, even in the face of human rights violations, but the host country would be allowed to raise human rights allegations in a counterclaim.

Mr Irumba stressed on a need of international debate on how to reshape the international policy framework and rules for investment in order to ensure that these indeed support the globally agreed ambition of inclusive and sustainable development for all by 2030.

advertisement

Thursday, July 19, 2018

Will low rate of corporate income tax encourage investment?



Stivin Bonde

Stivin Bonde 

By Stivin Bonde

To achieve Tanzania’s vision of transformation into a semi-industrialized middle-income country by 2025, as articulated in the 2016/17 to 2020/21 National Five Year Development Plan, it is necessary to have a conducive environment for investors in the industrial sector.

Certainly, the government has started to take initiatives to support the industrial sector. For example, last year the Finance Act 2017 reduced the corporate income tax rate from 30 per cent to 20 per cent to industries which are dealing with assembling of vehicles, tractors and fishing boats for the first five years of operation.

Again, this year the Finance Act 2018 has reduced the corporate income tax rate from 30 per cent to 20 per cent for five consecutive years for a newly established entity dealing in manufacture of pharmaceutical and leather industries.

These measures aim to promote investment in manufacturing of pharmaceutical and leather products, create employment opportunities, increase government revenue and save foreign exchange.

But how much will an investor benefit from this reduced corporate income tax rate? I pose this question as for large manufacturing investments tax losses are usually generated in the early years of operations as a consequence of initial operating losses as well significant tax depreciation on initial capital expenditure.

Therefore, there is a risk that the benefit from such an incentive may not be so significant.

As an alternative, I would propose the reduced rate should apply to the first five years in which the company has made the taxable profit or alternatively should apply for a longer term period.

Currently I am working in Lusaka, where I am on secondment with PwC Zambia, and it is interesting to compare the journey taken by Zambia with regard to tax incentives for the industrial sector.

By way of background, Zambia also had a five year tax holiday which was introduced in 2007 for the investors who invested at least $500,000 in a priority sector (e.g. manufacturing sector) declared under the Zambia Development Agency (ZDA).

At that time the tax incentive was a corporate income tax at 0 per cent for a period of five years starting from the first year profits are returned; then, for years 6 to 8, the tax rate was applied to only 50 per cent of the profits; then 75 per cent of the profits in years 9 to 10; and thereafter 100 per cent of profits.

However, from 2012 the commencement basis was changed to refer to the commencement of operation – so a similar basis for Tanzania, and ultimately in 2017 the tax holiday incentive was repealed.

Nevertheless, Zambia still continues to provide certain targeted income tax incentives to the manufacturing sector – for example, a long term reduced corporate income tax rate of 15% on income received from the production of organic fertilizer and the chemical manufacture of fertilizer.

Taxation is a major factor that is considered by a potential investor in the decision-making process in relation to the optimal structure and investment return.

The investors are looking at tax-related risks as well as the opportunities before any potential investment in the particular country. Zambia’s experiment with corporate income tax holidays appears to have been short lived.

Such incentives may nevertheless have a place even if only for a short time so as to catalyse initial investment. My own experience however that what is more important are the tax costs that directly impact profitability by way of labour taxes or indirect taxes borne by the investor, rather than tax on the profits themselves.

Stivin Bonde is a Senior Associate at PwC – Tax Services, currently on secondment in Zambia. The views expressed do not necessarily represent those of PwC.

advertisement

Thursday, July 19, 2018

Subsidise improved seeds, sunflower farmers plead

A butterfly and bees sit on a sunflower. PHOTO

A butterfly and bees sit on a sunflower. PHOTO | FILE 

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

Dar es Salaam. Sunflower farmers complain about high prices of improved seeds.

To tackle the situation and improve productivity, they call for government subsidy.

The farmers also want agriculture research institutes to produce large quantities of high-yielding seeds.

Currently, a kilo of improved sunflower seeds is sold at Sh35,000 and mostly are imported from India.

Sunflower is grown in more than 10 regions, but farmers still use old ways that do not improve productivity.

As a result, the ratio between production and processing varies. Open-pollinated varieties are estimated to have an oil content of 15-20 per cent while the modern seeds have between 35-42 per cent oil content.

Tanzania imports 60 per cent of cooking oils despite having huge potential of sunflower seeds, according to a Bank of Tanzania report in 2017. The country spends annually $120 million on importing cooking oils.

Agriculture Development Trust has established a facility to tackle such hurdles.

According to National Sunflower Farmers Association chairman Samba Pununta, large-scale farmers have begun using modern seeds.

“The largest share of sunflower farmers is made up of small-scale farmers who cannot afford the current prices. If these seeds are produced locally they can be sold at Sh10,000 a kilo. The government should use local institutions to produce high-yielding seeds.”

He was speaking during Sunflower Day held alongside the 42nd Dar es Salaam International Trade Fair.

The event brought together farmers, processors and other stakeholders.

“We are very grateful for the government for increasing tax on imported crude palm oil, but agriculture will not be improved if modern seeds are not distributed to all small-scale farmers who are the majority of growers…. They can’t afford modern seeds as prices are high.”

A study by the Agriculture Council of Tanzania (ACT) has revealed that poor quality of seeds was a major challenge in sunflower production. The ACT director for policy and planning, Mr Timothy Mmbaga, said the research established that farmers needed 3,000 tonnes of quality sunflower seeds annually.

To ensure that the majority of farmers get the seeds, the government should give a subsidy of Sh23 billion annually.

“After the government imposed tax on crude palm oil imports there must be an impact. So we must prepare strategies that will enhance the sector and the outcome should be seen,” he said.

“We must have our local source of modern seeds whereby it will be available all the time.”

According to Tanzania Trade Development Authority director general Edwin Rutageruka, the sunflower cooking oil has large market in Southern and Eastern Africa as well as Europe and Asia.

The chairman of the Tanzania Sunflower Oil Processors Association, Mr Ringo Iringo, pointed out that technology hindered processing.

That was why in 2016, Tanzania produced more than one million tonnes of sunflower seeds, but only 180,000 tonnes were processed.

That was in sharp contrast with South Africa where 970,000 tonnes of sunflower seeds were produced in the same year and 600,000 tonnes were processed.

“Ours is a big challenge,” he said.

advertisement