Thursday, April 19, 2018

Should social media use be taxed?


By Shabu Maurus

Globally, the number of social media users is big and increasing fast.

Facebook, with 2 billion users leads the top five in terms of the number of users. It is followed by YouTube with 1.5 billion users, WhatsApp 1.2 billion users, Facebook Messenger 1.2 billion users and WeChat 1 billion users.

Users typically access social media services via web-based technologies on desktop and laptops or download services that offer social media functionality to their mobile devices such as smartphones and tablets.

By end of 2017, Tanzania had about 40 million mobile phone subscribers, and 23 million of which use the internet.

Tanzania has 50 online television sites and over 150 blogs. Uganda has 24 million mobile phone subscribers, and 17 million of which use the internet. These numbers, are likely to be very appealing to fiscal policymakers.

Over the past few weeks, Uganda and Tanzania have received mixed reactions from the mainstream media and social media users.

The two countries made decisions that may have varying ramifications to the social media owners, users, telecoms and other stakeholders.

Uganda announced its proposal to impose a daily tax of Ush100 (about Tsh60) on all social media users. The tax, if legislated, will be charged every day on each SIM card that connects to the internet for social media.

Tanzania, on its part, introduced regulations (The Electronic and Postal Communications (Online Content) Regulations, 2018). Under the regulations, to start running a blog or online TV, one will now need to pay Tsh2.1 million.

That is Tsh100,000 application fee, Tsh1 million initial license fee, and Tsh1 million annual license fee.

When contemplating policies on the use of social media, it might be a good idea to also consider the following possible implications:

Economic distortions: A good tax policy or system is one that creates minimum distortions to the economy.

A specific charge for accessing or running a social media is likely to reduce the number of social media and users. Taxing the use of social media is probably a ‘lose-lose’ as opposed to a ‘win-win’ game.

Tax burden: The use of social media goes hand in hand with the use of data services from telecom operators. Already, data is taxed.

In Tanzania, data is subjected to a whopping 38 percent taxes (i.e. 17 percent excise tax and an additional ‘tax-on-tax’ of 18 percent VAT). Luckily, for Uganda, there is no excise tax on data.

Tax cannibalisation

If users maintain the same amount of spending, an additional tax type on social media is more likely to cannibalize the existing taxes. So, tax on the use of social media may reduce other taxes from telecoms such as income tax, excise, and VAT.

Compliance cost

Most mobile phone users are under a “prepaid” arrangement and taxes are collected at the point when airtime is sold.

A specific tax per day per SIM may sound so attractive to policymakers. But looking closer, it is not difficult to foresee the administration and compliance nightmares.

How and when do you collect the tax? Do operators have the technical capacity to comply? Or they will need to invest in additional equipment or software?

“If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” This quote is credited to Ronald Reagan, the President of the United States from 1981 to 1989. He was refereeing to a government view of the economy.

But, obviously, policy-making takes into account several other factors. The same holds true for social media policies.


Thursday, April 19, 2018

Bitcoin’s diehards vow to ride out amid currency turbulence


New York. The crowds have thinned somewhat at Bitcoin Center, leaving just the true believers in the volatile cryptocurrency.

“Two months ago we couldn’t breathe here” due to the throngs, recalled Nick Spanos, founder of the trading and educational hub in lower Manhattan.

“People outside couldn’t get inside.”

The center, which was set up in December 2013, calls itself a one-of-a-kind epicenter for all things bitcoin. It is primarily frequented by technology and financial types, mostly male and mostly younger, although it aspires to go well beyond that core audience.

“The Bitcoin Center is open seven days a week to shed light on the world of bitcoin to whoever walks in our doors!,” proclaims its website. “Our staff can provide an overview of bitcoin on the spot or register guests for our comprehensive bitcoin courses.”

On a recent weekday evening, about 100 people gathered in the space, a parlor in a Ukrainian restaurant, to trade bitcoins on smartphone applications, nibble on complimentary snacks and take in the latest insights from Spanos.

He threw a few barbs at journalists who have cast a skeptical eye on the cryptocurrency’s rollercoaster performance.

But Spanos, who worked previously for former Republican and Libertarian presidential candidate Ron Paul, saved his sharpest words for Jamie Dimon, the JPMorgan Chase chief who last year said it was “stupid” to invest in bitcoin, which he has called a “fraud.”

The mention of Dimon drew boos from the crowd, who have seen bitcoin swoon from nearly $20,000 in mid-December to $7,895 on Tuesday, according to Bloomberg. Total trading volumes have fallen in half between mid-December and the start of April, according to

In another sign of faltering interest, the number of weekly searches on Google for bitcoin now stands at about one-fifth the peak level in December, when the cryptocurrency began trading on major exchanges. The price retreat comes as regulators adopt an increasingly skeptical stance towards the digital money.

On Tuesday, New York Attorney General Eric Schneiderman, citing reports of theft of vast sums of virtual currency from customer accounts, and sudden and poorly explained trading outages, sent queries to 13 major trading platforms on their operations, internal controls, and safeguards to protect customer assets

Twenty-four-year-old Zalman bought his first bitcoin a few months before the spike.

“I panicked at the end of December,” said the young man, who declined to give his last name.

“The slip was hard to digest even though I knew the price could not go up forever,” he said. “I did not sell because I believe in the technological revolution.”

Daniel, a fellow enthusiast, acknowledged selling a small number of his bitcoins amid the rout.

“It’s hard to wake up in the morning and realize that we’ve lost thousands of dollars in the night.”

Daniel said he first began buying the cryptocurrency eight years ago when it cost less than $1. (AFP)

He said he thinks back on the 2013 bubble “to convince me to keep my bet,” alluding to a seven-day stretch when bitcoin lost about half its value after hitting $1,137 in November of that year.

Some see a silver lining in bitcoin’s recent stumble.

“It’s probably a good thing that prices have fallen, we had gone up too fast,” said one member of the Bitcoin Center who declined to give his name.

“People who knew absolutely nothing came to us by saying they would withdraw all their savings to put them in virtual currencies!”

Longtime cryptocurrency watchers have learned to ride out the waves of volatility.

“Mum-and-dad investors who entered the market when Bitcoin was worth $19,000 can be disappointed,” said Michael Casey, chairman of the advisory board at CoinDesk, a digital media and information service for crypto assets.

“But the community, including those who invested not later than last May, did not lose money.”

Spanos cautioned that “bitcoin is not a ‘get rich quick’ scam.”

“The goal is to keep your bet and ultimately get monetary independence.” (AFP)


Thursday, April 19, 2018

Teaching child to manage cash


Life after college can be hard, especially when your child moves back home. High student loan debt and expensive rents, coupled with a low salary, can make living independently a challenge for someone just starting out. Parents can help their children get on their feet financially by teaching good money management skills.

“If someone needs to move back home and they’re not just using it as an easy way out -- because their parents will pay for everything, cook, clean and do laundry -- it’s a sign that your child is in financial trouble,” says Clare Levison, certified public accountant financial planner in Blacksburg, Virginia. “If they’re not able to live on their own, it’s an indicator that there are some financial issues.”

College grads frequently move back in with their parents, especially in metropolitan areas with a high cost of living. This living situation can help your child become independent, provided that he or she takes this time to build good money management skills. You have your own financial goals too, and supporting grown children when you can’t afford to may jeopardize your own plans, like retirement.

You may need to take a more hands-on approach with your child at first; here are steps to help do that.

Communicate expectations

You have every right to get involved when your child asks for financial help. “If they’re seeking assistance from you, it’s time to sit down and have a pretty detailed discussion,” says Levison.

Help your child outline future goals and set time frames for achieving them. Be clear about the rules of this arrangement, including what the child is expected to contribute to the household, when he or she should plan on moving out, steps the child should take to become financially independent and your own expectations as the parent. Also discuss whether you’ll provide any financial support.

“There’s a fine line between giving your child a leg up and enabling them from not having financial independence, because they believe there’s always a backup plan of their parents,” says certified financial planner Chantel Bonneau, wealth management advisor with Northwestern Mutual in Los Angeles.

Sometimes, however, living at home can be part of your child’s future goals. A son or daughter may want to take time to build a career before trying to live independently. Or he or she may want to save money to buy a home or attend graduate school.

Set up a budget

Creating a balanced budget means increasing income, decreasing expenses or aiming for a combination of both. Your child may not be able to do this on his or her own right away. So, as parent, know that your aim to build in your child the necessary good financial management skills may take time. And take steps, while your child is at home, to teach him or her to save money and pay off any debts.

“If your child lives at home and the point is to increase their financial position, they have to sit down and review their saving strategy, what their debt is and what they’re spending on a quarterly basis,” says Bonneau.

Get your child in the habit of reviewing his or her finances regularly, and encourage the use of online banking apps and budgeting tools to stay on track with spending.



Thursday, April 19, 2018

Kenyan companies to pay part of employees’ housing plans


By Neville Otuki @TheCitizenTZ

Nairobi. Formal sector workers will soon start contributing five per cent of their monthly income towards a proposed housing fund as part of a government plan to increase home ownership among the urban population.

The State Department for Housing and Urban Development said it was finalising a set of regulations to put into operation the Housing Fund, which will also require employers to match their employees’ contribution to the scheme.

The arrangement, which is provided for in the Housing Act, has been abeyance for years, reflecting the scanty attention that successive governments have given housing since independence. The statutory fund is a replica of the contributory pension scheme, and aims to encourage a savings culture, especially among low-income earners living in towns.

“As an employee, you’ll put money into the fund, and whatever you put into it, your employer is going to be required to match the same amount. It’s like a pension, but for housing,” Housing principal secretary Charles Mwaura said in an interview.

Mr Mwaura said the plan has been shared with the Treasury and that regulations governing it are expected to be published in the Kenya Gazette for rollout in June. Affordable and decent housing is one of the four pillars of President Uhuru Kenyatta’s second-term agenda that are meant to improve living conditions across the country.

Official data shows that about 70 per cent of urban residents live in rented housing units, the majority of them in slums, since most cannot afford to buy homes and expensive mortgages continue to lock them out of the home loans market.

The proposed home ownership scheme, however, means employers will carry additional burden of paying part of their workers’ home-buying plans.

Private sector workers and their employers currently contribute Sh200 every month for a total of Sh400 to the National Social Security Fund (NSSF) — a provident retirement fund.

If established, the Housing Fund will be the third statutory fund, after the NSSF and the National Hospital Insurance Fund (NHIF) in Kenya. (NMG)

The scheme is, however, expected to face stiff opposition from employers, including the Federation of Kenya Employers (FKE), who warned that workers might be hard pressed to raise the cash, deemed too high as a percentage of their income.

“It’s a commendable idea as long as it is well received by employees and employers are not expected to chip in because the number and level of statutory contributions made by employers is already high,” FKE executive director Jacqueline Mugo said.

“Also the category of employees who stand to gain from such an arrangement (low-income earners) may find this difficult to accommodate if they are still to retain the threshold of take-home (at least one third) pay they are expected to keep.”

Mrs Mugo said that several employers already have in place their own schemes to address the issue of housing and that any new arrangement should take that into account.

“The creation of yet another fund when we have not yet fully sorted out existing ones like NSSF and NHIF will complicate matters,” she said.

But Mr Mwaura, the Housing PS, reckons that the effort is in line with the law that requires employers to ensure their workers have decent housing — a provision he says most companies have overlooked.

Section 31 of the Employment Act says “an employer shall at all times, at his own expense, provide reasonable housing accommodation for each of his employees either at or near to the place of employment, or shall pay to the employee such sufficient sum, as rent, in addition to the wages or salary of the employee, as will enable the employee to obtain reasonable accommodation.”

Mr Mwaura said the government is also exploring other avenues of home ownership, including joining hands with saccos to provide low-income earners with interest-free mortgages under Tenant Purchase Scheme (TPS).

The State-backed TPS will target workers with an income of less than Sh50,000 a month, a category where the majority of Kenyan workers fall.

Aspiring home owners with income in excess of Sh50,000 a month will be taken care of through a to-be formed Kenya Mortgage Refinance Company (KMRC).

The entity, with financial backing from the World Bank, will finance banks and saccos, enabling them to disburse affordable bigger home loans to the workers.

The government has set a target of setting up 500,000 “decent” homes for low-income earners in the next five years.

The decision to peg contributions to five per cent of workers’ monthly pay is derived from the Income Tax Act which provides that contributions can be deducted from gross income up to a maximum of Sh4,000 per month under the Home Ownership Savings Plan.

“We have made a proposal in terms of a Bill that we amend that to five per cent of your income to save for your home. Sh4,000 doesn’t matter how much you earn; it makes my househelp and I to contribute the same, “said Mr Mwaura. (NMG)


Thursday, April 12, 2018

Code of Ethics in franchising


By Wambugu Wa Gichohi

In the absence of active franchise associations in East Africa the Franchise Association of South Africa-FASA-is the closest we can explore provisions of the Code of Ethics-with due acknowledgement herewith- to understand ethics binding franchise industry players and save prospective franchisees from unethical franchise practices. While membership to an association is voluntary, association members are bound by the Code, hence are more ethical than those who are not members of any.

Clause 8 deals with the Franchise Agreement. Although detailed analysis will be unpacked later, the Code requires the franchisor-franchisee relationship to be reduced to written agreement(s) clearly stating terms and conditions of the relationship and each party’s legally-compliant obligations and rights. Following clause 7 on disclosure, no franchise agreement should be signed before expiry of the fourteen-days “cooling off” period, from the first day after receipt of the Disclosure Document and the Franchise Agreement by prospective franchisee.

Franchise Agreements must contain a clause referring to the Disclosure Document and statement that “the information contained in such Disclosure Document is to the best of the Franchisor’s knowledge and belief, true and accurate and that no material information has been withheld”.

The clause also allows signing of Non-Disclosure Agreements (NDAs) prior to franchisors furnishing prospective franchisees with a Disclosure Document.

Should any prospective franchisee refuse to sign an NDA, the Franchisor may refuse access to information regardless of other provisions of the Code.

A franchisor is not obliged to deliver its Franchise Operations Manual to a prospective franchisee prior to signing of a Franchise Agreement but must show the documents to the prospective franchisee.

The Code allows the franchisor to define a franchisee profile and to adhere to it at franchisee selection, as long as it is in line with other clauses of the Code. Franchisees are entitled to training from the franchisor. Communication between the two must be easy to improve mutual understanding and reaffirm mutuality of interest. Any incentives received by franchisors must be declared in writing to franchisees, indicating how these will be used.

Franchisors can only restrict franchisees buying of inputs from them or approved suppliers if convenience of such purchasing outweighs limitations of the franchisees’ right to choose; if there is an economic benefit to the franchisee in such purchases; or if the purchases are reasonably related to those that are the subject of the Franchise Agreement.

Monies received by franchisors from prospective franchisees before signing the Franchise Agreement must be deposited in an attorney’s trust account or a franchisor’s separate bank account opened for that purpose.

In the latter case, the franchisor must advise the prospective franchisee in writing that these monies do not constitute trust monies and shall not be protected against claims by the franchisor’s creditors in the event of its insolvency.

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

If no agreement is reached, the franchisor must refund forthwith (within 30 days of franchisee’s request), deducting only sums for reasonable (provable) out-of-pocket expenses incurred in contemplation of the conclusion of a Franchise Agreement.


Thursday, April 19, 2018

IMF forecasts solid near-term global growth but risks beyond

Washington. The global economy is expected to grow at a solid pace through next year, boosted by faster expansion in the United States and Europe, but after that risks will build, according to the International Monetary Fund.

In the latest update to its World Economic Outlook, the IMF still predicts world growth of 3.9 percent in 2018 and 2019, unchanged from January despite raised estimates for US and EU growth.

That is an improvement on the 3.8 percent global growth seen last year.

However, the Fund cautions that the growth “momentum is not assured,” given trade tensions between the United States and China and the expected reversal of the positive effects from the US tax cuts.

IMF Chief Economist Maurice Obstfeld stressed that the trade conflict could damage the global economy if it broadens to affect other countries, and said even the prospect of a trade war could do harm.

“There’s not going to be any winners coming out of a trade war,” he told reporters, noting that the uncertainty alone could put a damper on investment.

While it is difficult to predict how things will play out, “I suspect if you keep poking at economic expansion it could turn around and bite you,” Obstfeld warned.

The report notes that the sweeping US tax cuts approved in December will fuel higher growth only through next year, and after that will “subtract momentum.”

The IMF raised its US forecast by two tenths for both years, to 2.9 percent for 2018 and 2.7 percent for 2019, which follows big upward revisions in the October report, due to the tax impact. However, Obstfeld warned the stimulus was “largely temporary.” And because the US boost accounts for most of the higher world expansion, beyond 2019 “global growth is projected to gradually decline to 3.7 percent by the end of the forecast horizon,” the report said. The risks to the global economic outlook “clearly lean to the downside” beyond the next few quarters, the IMF warns.

Like other advanced economies, the United States will max out growth and return to a more sluggish pace, “held back by aging populations and lackluster productivity.” (AFP)

And despite the fact increasing world trade helped boost growth in recent years, there has been a rise in public skepticism about the benefits, leading to a renegotiation of trade deals and increasing friction.

US President Donald Trump last month imposed steep tariffs on steel and aluminum imports and threatened to impose more on tens of billions of Chinese goods, prompting Beijing to slap duties on US goods like pork and sorghum and threaten even more sensitive US exports like soy.

“That major economies are flirting with trade war at a time of widespread economic expansion may seem paradoxical -- especially when the expansion is so reliant on investment and trade,” Obstfeld said.

“Our strong message at this meeting is there is a multilateral system. Let’s use it and proceed in a collaborative way rather than conflictive way.”

IMF chief Christine Lagarde last week warned governments to “steer clear of protectionism in all its forms,” saying the trade frictions hurt poor consumers the most as costs increase, and that they also undermined a system that had broadened prosperity worldwide.

Instead, the IMF argues that the United States and others should respond to anxiety about globalization and technological advances by “strengthening growth, spreading its benefits more widely, (and) broadening economic opportunity through investments in people,” Obstfeld said.

Rather than lower the trade deficit, as Trump has called for, the US trade actions could expand it by another $150 billion by 2019, according to the report.

- Market disruption -

And the Fund warns that a worsening of trade conflict could have broader implications for global growth as well as market confidence.

The report cites the market turbulence in early February and into March amid the growing US-China trade dispute, when US stocks stumbled after surging to repeat records in the first weeks of 2018. The Dow had lost almost 10 percent of its value by the end of March, down from the record 26,616.71 reached on January 26.

The rapid decline should “serve as a cautionary reminder that asset prices can correct rapidly and trigger potentially disruptive portfolio adjustments.”

In other projections, the IMF upgraded the forecast for the euro area to 2.4 percent for 2018, an upward revision of two tenths compared to the January estimate, as it raised its estimates for key members, especially Spain. But the forecast for 2019 was unchanged at 2.0 percent.

Japan’s growth is still seen at a sluggish 1.2 percent this year, after a rare and large upgrade of five tenths in January, slowing to 0.9 percent in 2019.

The forecasts for China and India, key drivers of global growth, were unchanged from January. China is expected to expand 6.6 percent and 6.4 percent this year and next, while India should grow 7.4 percent and 7.8 percent. (AFP)


Thursday, April 19, 2018

How journey to KSh80m real estate enterprise started

By Pauline Ongaji @TheCitizenTZ

Nairobi. Cash is always in short supply for many university students and saving is the last thing on their minds. However, Moses Muriithi went against the grain and started saving to raise capital for a real estate business when he was a third-year student at Kenyatta University.

Mr Muriithi dreamt of going into business straight from campus and he was determined to raise capital at all costs. That he saved part of the Higher Education Loans Board (HELB) credit is a testimony to his burning desire to realise this ambition.

His target from the start was real estate business and immediately after stepping out of campus he set up his company known as Fanaka.

“While in the university I did online jobs such as data entry and website designs and get paid through PayPal. Whatever I earned I used to invest in land,” he says.

“By the time I started Fanaka in 2015 I already had several plots to start with. As a result of my small earnings together with some cash I had saved from HELB loans I had some Sh40,000 which I used as capital.”

He used part of this amount to acquire an online account which he used to source contracts from foreign organisations for IT-related tasks.

“Mostly I handled web designing and data entry where I could earn up to Sh100,000 a month,” he explains adding that after four years he had already accumulated five 50 by 100 plots valued up to Sh1.4 million.

His firm has now made great strides, handling a long list of customers. It focuses on low and average income earners who are looking to own land or house on the outskirts of Nairobi.

“Our projects mainly target people who under normal circumstances wouldn’t be considered wealthy. Our average price for land is Sh450,000,” he says.

“Most of the pieces of land we sell range from an eighth to a quarter of an acre.”

The company, which operates in Ruai area of Nairobi, has already completed six projects in the past 12 months.

“Already we’ve completed two projects in Kamulu and Joska, one in Ruiru East, another one in Kamakis, Ruiru and one in Malaa,” he reveals.

In two years the enterprise has grown rapidly, recording a Sh80 million turnover last year.

“Our profit margins are low but we strive to make a lot of sales to earn more,” he says.

He has eight people employees who are on permanent terms.

To attract customers, the firm ensures that the pieces of land it sells are in good locations with necessary amenities such as water, electricity and all weather roads.

“This makes it possible for clients to develop them. That these plots are not far from the city is also our high selling point,” Mr Muriithi says.

The firm also ensures it conducts due diligence on all transactions to ward off fraud.

The integrity of the deals, he says, has given his firm an edge in a sector swamped by con artists swindling unsuspecting victims.

“We ensure the plots have ready titles to facilitate the client’s in doing the search at the lands offices before they commit themselves. We also make sure the plots are affordable to even low income earners, with some of our plots going for as low as Sh300,000,” he says.

The entrepreneur credits his success to their flexible modes of payment where a client can pay 30 per cent deposit and the balance paid in one year. The firm is also tapping on social media, property sites and their website, as marketing and advertising tools.

But as any business, Mr Muriith’s venture is not short of challenges, the key of which is getting enough funds for expansion.

“Also land brokers who at times exaggerate land prices have proven to be a thorn in the flesh, but with time we have managed to deal with them,” he says.

His advice to those new business is to ensure integrity and transparency reigns adding that clients keep referring other people because of the trust created.

“They also need to be patient. It took me about 4 months in business to sell the first plot,” he adds as he challenges his fellow youth to create job opportunities instead of waiting to be employed. (NMG)


Thursday, April 19, 2018

New report cites ‘mitumba’ ban effects


By Alex Malanga @ChiefMalanga

Dar es Salaam. The phasing out of secondhand clothing (SHC) imports could have mixed effects on the Tanzanian economy, a new report shows.

“It may stimulate local production of new clothing and footwear, but it could also negatively affect consumers through higher prices and lower clothing availability,” the report notes.

It could also draw mixed effects on government revenues and employment and could stimulate additional imports of new clothing to meet the demand.

The report quoted data from exporters that show the net import of used clothing at over 540 million pieces annually.

The domestic production of new clothing stands at 20 million pieces while 177 million pieces of new clothing are imported.

“Depending on the substitutability between new and used clothing, the phase-out could prompt increased import of new clothing,” the report reads.

In the long-term, according to the report, the phase-out is unlikely to promote the development of the garment sector unless the existing constraints are properly addressed. “We suggest that, for these measures to actually prompt increased investment in manufacturing, they need to have a clear timeline and a performance-based system and must be enforced.”

It has stated that if the challenges are not addressed, it is unlikely that the phase-out will generate new investment to replace the imports of new and used clothing.

This, instead, might simply enable garment producers to appropriate the rent created by the phase-out at the expense of Tanzanian consumers.

The report has been prepared by researchers Linda Calabrese, Neil Balchin and Maximiliano Mendez-Parra and presented by the latter last week at Repoa’s 23rd Annual Research Workshop here.

In an attempt to revamp the domestic garment industry, in 2016 the East African countries heads of state vowed to phase out used clothing imports.

The main challenge in many African countries, according to the report, is their ability to effectively implement similar measures.

Borders are often porous and the informal trade thrives.

In 2003, Tanzania introduced legislation on national standards for used garments (TZS 758: 2003), which included a ban on imports of second-hand underwear -items generally categorised as ‘next-to-skin’ clothes, including vests, pants, brassieres, boxers and socks.

Despite the introduction of these national standards and the legislative ban on used underwear, Tanzania has found it difficult to eliminate these imports in practice.

Global exports of SHC have increased consistently in the past few years: both in value and quantity.

In 2003, according to the report, 1.9 million tonnes of SHC were exported globally.

This more than doubled in 2014, reaching 4.4 million tonnes.

In 2015, the main exporters (with their percentages of global export values in brackets) were the US (20), UK (13) and Germany (12).

Pakistan is the largest importer. Tanzania is No. 15 with imports in 2015 worth almost $63 million (about Sh140.9 billion).

The nominal value of Tanzania’s imports of SHC has increased sixfold from less than $10 million (Sh22.3 billion) in 1995 to more than $60 million (about Sh133.8 billion), three years back.

Tanzania has diversified its sources of imports of ‘mitumba’ in the past 23 years, with the US and the UK used to be major sources of imports, covering almost 60 per cent of Tanzania’s imports back then.

Together with the Netherlands – the third largest exporter to Tanzania – they covered 70 per cent of the market.

However, 2015 saw the United Arab Emirates (UAE) overtaking the US as the biggest exporter to Tanzania.

In the same year, the five largest exporters to Tanzania (Canada, Chine, South Korea, the UAE and the US) only covered 67 per cent of the Tanzanian demand for used clothing.

Going by the report, the production gap stands at 97 per cent.

“On average, domestic production, which is 20 million pieces per annum, accounts for just 3 per cent of the total Tanzanian consumption of clothing, which stands at 688 million pieces,” reads the report in part.

As the figures do not include garment production from these smaller establishments, it is likely that the production gap is overestimated.

The total production by these firms could range between 65-100 million pieces per year, mostly for domestic consumption.

But even this would not fill the large gap between domestic production and demand.

The phase-out of SHC imports is set to take place through a gradual increase in tariffs, as gazette in June 2016 (EAC, 2016a).

Tanzania adopted the change to the EAC common external tariffs, meaning that the specific duty rate imposed it imposed on imports of worn clothes and shoes increased from $0.2 (about Sh446) per Kg to $0.4 (about Sh892).

The ad valorem rate, which is levied on the imported ‘mitumba’ based on a percentage of its value, has remained flat at 35 per cent.

However, in February this year, Tanzania, Uganda and Burundi removed the charge of $0.4 per kilo and only remained with the ad valorem tariff.


Thursday, April 19, 2018

Factors affecting the banks’ lending rates

Kelvin Mkwawa

Kelvin Mkwawa 

By Kelvin Mkwawa

In last week’s article, we saw that the higher the lending rate, the more profits the banks get but policy makers prefer lower lending rates to improve the investment environment. We have seen that the lending rate is crucial for the progress and development of the country, so it is important to understand what factors are affecting the lending rate. This week we will discuss the remaining four factors affecting the lending rates:

Macroeconomic environment

Macroeconomic environment results from Government policies and decisions through fiscal and monetary policy tools. Through them, the Government can have a negative or positive impact on price indices, unemployment rate, taxes, GDP, and national incomes. A stable macroeconomic environment promotes lower lending rates and vice versa. For example, in an unstable macroeconomic environment, investors/business owners will face uncertainty about their investment returns which will affect their ability to pay back their debts and that will raise the lending rates as the level of nonperforming loans goes up. This domino effect caused by unstable macroeconomic environment, will reduce the businesses’ profitability while reduce their assets value and therefore their credit-worthiness hence the banks will charge high lending rates to cover their risk premium.

Risks – The other factor affecting the lending rate is risks

Banks are exposed to various risks such as credit risk, foreign exchange risk, legal risk, operational risk, and interest rate risk. For example, banks can be exposed to interest rate risk when they hold unmatched maturities of the loans and deposits. This happens when banks raise funds through short term deposits to finance long term loans. Also, banks can be exposed to credit risk as a result of uncertainty and information asymmetry in the industry. So to cover all the risks, the banks charge a premium rate which increase the lending rates paid by the borrowers.

Taxes influence the lending rate as they increase the intermediation costs such as withholding taxes, stamp duties, profit taxes, reserve requirements, value added taxes, and transaction taxes. The presence of these taxes can discourage the activity of banks in the inter-bank market which plays a major role in maintaining the reasonable discount rate hence improving the effectiveness of monetary policy. With heavy taxation, the banks will see the borrowing through inter-bank market uneconomical and increase their reliance of deposits on central banks hence creating a liquidity crunch among the banks. With liquidity problems, banks will be forced to offer attractive deposit interest rates to attract more deposits hence high cost of funds which translates into higher lending rates.

Regulatory and legal framework

Regulatory and legal framework influences the efficiency of the banking industry. To reach our potential as a country, it is imperative that we have stability in our banking industry. Without proper supervision of the banking industry, instability will increase, hence increasing the risk premium in the market which will force the banks to have higher lending rates. For example, we have weaknesses in our legal system when the banks want to enforce the lending contracts by selling the security when the customer defaults, which creates credit management for the banks therefore the banks charge higher lending rates to cover the credit risk.

As a whole, we have seen that the lending rates play a major role in the development of our economy as it is one of the main factor that determines the welfare of banks. More importantly, we have learned cost of funds, macroeconomic environment, taxes, risks, and regulatory and legal framework) affecting the banks’ lending rates. The current banks’ lending rates (average of 20 per cent per annum) are a barrier to our economic development. Let’s find a way to lower the lending rates to nurture our business environment.


Thursday, April 19, 2018

Simple tweaks to make office more productive


Thanks to the rise of mobility tools like Slack, Google Hangouts and the newly announced Facebook Workplace, fewer and fewer workers rely on an office to get work done every day. As a result, nearly 37 percent of the workforce elects to work remotely at least part of the time. And those who do say they are not only happier but more productive.

Still, not all companies embrace a flexible work-from-home policy. Marissa Mayer of Yahoo famously rolled back the company’s telecommuting allowance in 2013, citing that employees are more collaborative and innovative when working in proximity. Despite taking quite a bit of flack for the decision, Yahoo claimed it worked.

For companies committed to fostering both creativity and productivity in their office environment, leaders and office managers are faced with a challenge: How do you design an office where employees feel just as -- if not more -- productive as they do at home?

Optimizing your office layout and culture is a great place to start. These simple modifications can boost office productivity in most offices -- and can be set in place right away.

1. Carve out spaces that work for everyone

When it comes to designing an office layout, one size rarely fits all. According to a study by Steelcase, 88 per cent of employees will choose where to work in the office based on their task. Limiting employees to working only in an open office floor plan or only in a private, cubicle-style floor plan can squash productivity and lead to less overall happiness.

The solve for this isn’t to toss out the open office concept altogether, nor ditch every last cubicle. Rather, you can create task-specific workspaces within the office, designed for different workstyles. For example, the kitchen area will always be a magnet for discussion and collaboration. Rather than leaving this collaboration up to chance, encourage it by adding some bar-height tables and stools where employees can mingle.

For more heads-down work like coding or examining spreadsheets, do your best to create spaces for quiet focus. If you’ve got the resources available, consider converting an extra conference room into a silent workspace. You don’t need a big budget or major office updates to implement these changes -- start by communicating the new office functions to your team and back it up with some signage.

2. Make breaks a priority

You’re probably thinking, “Yeah, yeah, yeah; I know it’s important to take breaks, but that doesn’t mean I have the time.” It’s true; taking a break can seem completely antithetical to tackling an endless to-do list, but if productivity is the goal, then breaks are essential.

Studies show that we should be breaking once every hour at least. And while that might not be realistic for everyone, it’s important to keep in mind that after much more than an hour of focus, our brains simply cannot continue to treat the task at hand as important, meaning work quality goes down.

As a business leader, it’s your job to make sure your team knows it’s not only acceptable to break from work from time to time, but expected. At TheSquareFoot, we make taking breaks from the grind a routine by holding in-office meditation sessions. Making it a group activity means we completely remove the stigma of stepping away from your desk. The stigma goes the other way now. If someone misses too many meditation sessions, we start to wonder if they’re struggling with prioritization.

3. Implement a conference room scheduling system...and stick to it

We’ve all experienced what I like to call the “conference room shuffle” at some point or another. Your Skype call goes over by five minutes, the next group is chomping at the bit trying to get into the room for their meeting, awkwardness ensues.

The matter gets even worse when the next team is delayed further by trying to figure out how to display their project on the big screen. There are tools like YArooms designed specifically for keeping the conference room shuffle organized, but if your team is ignoring these systems, it might be time for an intervention.

Consider drafting a conference room protocol sheet for every meeting room in your office.

This should lay out exact rules for scheduling and passing off conference rooms, as well as how to utilize and leave the room itself once a meeting is finished. The benefits of codifying a system are twofold:

1. There will be less indecision when it comes to passing off conference rooms, and those who need to kick out the previous occupant will feel less awkward.

2. Meetings will start more efficiently if there’s one easy place to find information such as how to connect to the TV and how to dial out for conference calls.

While these tweaks might sound small, investing some time in organization up front can pay out massively in the long run.



4. Optimize the office climate for comfort.

Although you’ll likely never please everyone, making small tweaks to the environment of your office can have dramatic effects on productivity. Making sure the temperature, light, sound and yes, even smell of your office are tailored to suit the greatest number of people is an easy way to make work feel less like work for your team.

Let’s break it down:

Temperature: Most experts agree that the optimal temperature for workplace productivity is between 70 and 73 degrees. Fans, space heaters and blankets can be supplemented for outliers.

Light: Sunlight can dramatically improve workers’ health and productivity. It is one of the most in-demand amenities tenants look for, yet too much light is a problem when it adds a glare to computer screens. Finding the right amount of light has been a problem plaguing the office world for years. Companies 3M and Alcoa are on a mission to redirect plentiful office light. For offices that are just too dark, look into installing some LED lights, which mimic the effects of sunlight on the body.

Sound: You’ll probably never find a playlist to suit everyone’s taste, but studies have found compelling data to support that music helps us work faster and more efficiently by creating a more positive affect, so it may be worth it to keep the tunes going.

Smell: Aromatherapy enthusiasts have been saying this for years. Smell can have a dramatic effect on our moods and energy levels, so why not harness that knowledge to make your workspace more productive? Entrepreneur has a guide on the smells most likely to liven up your workplace.

5. Think outside the conference room

Did you know that employees who take meetings on the go are 8.5 percent more likely to be engaged at work than those that don’t? Walking meetings or “walk and talks” have become so popular among Silicon Valley tech companies that Facebook has a gravel path on its campus designed for that exact purpose.

Yet despite the trendiness and numerous health benefits of getting out of the office from time to time, most employees still spend way too much time planted in front of their computers. This may be because though many businesses are switching to a “results-only work environment” in recent years, some still prefer face time to flexibility. So, rather than simply encouraging team members to get out of the office for meetings and private conversations, lead by example. Executive leadership should take team members on walks instead of just booking a room. Often, these trends are implemented best when embraced from the top down.

Small updates to your workplace’s systems and environment can go a long way in boosting employee satisfaction and productivity. Taking these steps will ensure your team has a haven of productivity to come to each day.




Thursday, April 19, 2018

Produce more power from gas, say experts


By Gadiosa Lamtey @gadiosa2

Dar es Salaam. Out of 1,458MW generated in Tanzania, 735MW are from natural gas, 13 years since the resource discovery.

The country has a gas reserve of 57.54 trillion cubic feet (TCF).

But experts caution that unless gas is harnessed to generate power, its positive impact on the economy will not be felt.

Thirteen years since gas was discovered in Tanzania, the country is still a lightweight in East Africa in the use of natural gas to generate electricity.

That is the case despite the fact that between 2004 and 2017 the country saved $9.7 billion that was to be used to import fuel, according to the Tanzania Petroleum Development Corporation (TPDC).

The industrial sector saved $0.913 billion by using natural gas for heating instead of heavy fuel oil and diesel. Institutions, households and vehicles saved $401,176 by using natural gas instead of liquefied petroleum gas.

President John Magufuli recently launched the Kinyerezi II power generation plant to produce 240MW from natural gas.

He advised the Tanzania Electric Supply Company to lower power tariffs.

Fifteen per cent of the cost of undertaking the Sh798 billion projects came from the government and the rest was borrowed from Japan.

“Electricity is important for economic growth. It stimulates production, creates jobs and improves living standards,” said President Magufuli. “Our industrialisation plan cannot be realised without having adequate and reliable power.” Repoa strategic research director Abel Kinyondo said: “At present there is no impact since electricity costs are still high. During the opening of Kinyerezi II, President Magufuli spoke well and wants Tanesco to look into possibility of lowering the prices.”

According to Dr Kinyondo, the full use of natural gas to generate power can lower production costs, catalysing the economic growth, industrialisation and environmental conservation.

The College of Engineering and Technology’s Richard Kimwaga, said for number of years the country had been depending on hydropower.

Dr Kimwaga, who is a water engineer, said due to climate change, population increases and drought in those sources were under pressure. He believes the exploitation of natural gas is apt in industrialisation. “What is important is for TPDC to continue attracting more investors.”

Energy minister Medard Kalemani said two other projects would be undertaken at Kinyerezi to produce 600MW from natural gas.

Similar projects with their megawatts in brackets will be carried out at Somangafungu (320) and Mtwara (300MW).

TPDC acting CEO Kapuulya Musomba said: “Natural gas will continue to be exploited to generate power for use in many sectors.”


Thursday, April 19, 2018

Build your knowledge of investing in shares


By Moremi Marwa

In the last week’s piece, whose intent was to educate ourselves about how old and evolutionary the concept/idea of stock markets has been and how impactful it can be; basing our analogue from the history of human kind, especially in the past 300 years. We noted that as one of the financial markets platforms, stock markets facilitate growth of economic enterprises, the democratising of wealth, facilitating preservation and distribution of wealth in the forms of ownership, facilitating wealth management, facilitating business and financial risk management, etc.

Thus, the concept of stock market and what it is capable of to private individuals, to companies, institutions, ideologies, values, economies is as big and old as history tells us. Admittedly, for us, we have generally not given this idea/concept the necessary focus and attention that it requires. Because of our slow pace in embracing it, most of our economic institutions are not as robust and not inclusive. For instance, our GDP growth of 7 percent each year for the past twenty years does not correlated with poverty reduction — economists would say this better, but for me and for the purpose of this article — lack of inclusive ownership in companies and key factors of production that contribute largely into the GDP growth can be one of the factors. There are many lost opportunities related the ability to learn to unleash the power of collective ownership through shares ownership and tradability. As a result, we have an economically weak exchange without adequate supply of securities and investors who could otherwise leverage on the existence of the exchange, resulting in capital deficit and weak economic institutions and cycle of poverty.

So, what are the opportunities for us and what is the role of the stock exchange (and instruments traded into it) in any society that embraces the market economy model?

Promotes capital formation: The stock exchange provides companies with the facility to raise capital for growth and expansion through selling shares to the investing public. Besides the borrowing capacity provided to an individual or firm by the banking system, in the form of credit, stock exchange is the other common form of capital raising used by companies and entrepreneurs. Thus, the stock exchange plays an important role in capital formation in the country.

Mobilises savings for investment: When people draw their savings and invest in shares (through an IPO or the issuance of new company shares of an already listed company), it usually leads to rational allocation of resources, because funds which could have been consumed, or kept idle in the form of savings are mobilized and redirected to help companies finance their operations. This promotes businesses with benefits to other economic sectors, resulting in stronger economic growth and higher productivity levels of firms.

Facilitates companies growth: Companies view mergers or acquisitions as opportunity to expand product lines, increase distribution channels, hedge against price volatility, increase market share, or acquire other business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition. Apart from acquisition mode of growth, even in organic growth, companies use the Exchange to raise capital through IPOs and listing of the same.

Increases government funds for development projects: The government can undertake projects of national importance and social value by raising funds through sale of its securities via stock exchange. At various stages the Government may decide to borrow money to finance infrastructure projects such as sewage and water treatment works or housing estates or building bridges, roads, health facilities, education facilities, etc by selling bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus lending money to the government.

Profit sharing and capital gain to investors: Both casual and professional stock investors, as large as institutional investors or as small as an ordinary middle-class family, through dividends and stock price increases that may result in capital gains, share in the wealth of profitable businesses and use stocks to preserve values of their assets..

Promotes the habit of saving and investment opportunity for small servers: Stock exchange provides a place for saving to general public. Thus it creates the habit of saving and investment among the public. The funds placed at the disposal of companies are used for productive purposes. Investing in shares is open to both large and small investors because investors buys the number of shares they can afford. Therefore the stock exchange provides the opportunity for small investors to own shares of the same companies as large investors owns.

Corporate governance and safeguarding activities for investors: The stock exchange renders safeguarding activities for investors, which enable them to make a fair judgment of their securities. Directors of listed companies are required to disclose all material facts to their respective shareholders, thus innocent investors may be safeguard from “clever advisors”.

By having a wide and varied scope of owners, companies generally tend to improve management standards and efficiency to satisfy the demands of these shareholders, and the rules for public companies imposed by the stock exchange and the capital markets regulator. Consequently, public companies tend to have better management records.


Thursday, April 19, 2018

Changes of mining rules will continue to fuel fears in sub-Saharan Africa


Johannesburg. Changes to the mining regulations in various markets across sub-Saharan Africa will continue to fuel uncertainty among investors and pose downside risks to forecasts in the region, says market researcher BMI Research.

Internal political and economic considerations, as well as a more favourable commodity price environment, will be the key drivers behind more restrictive mining policies in the Democratic Republic of Congo (DRC), Zambia and Tanzania and may lead to more countries following suit in the coming months, it adds.

BMI explains that global miners are witnessing increasing regulatory pressure from governments demanding a larger share of mineral resource wealth as commodity prices continue to increase.

“Nowhere is this trend more evident than in sub-Saharan Africa, where so far, this year, up to four mining markets in the region – the DRC, Tanzania, Zambia and Mali – have either changed or are in the process of changing their mining codes,” the market researcher noted.

Macroeconomic imbalances across the African continent will continue to push governments to raise additional revenue by targeting at the lucrative mining sector.

BMI continues to see regulatory uncertainty as one of the key downside risks to an otherwise positive growth outlook for the region’s mining sector.

Meanwhile, of all the changes to mining regulations recently enacted across the region, the new mining code introduced in the DRC last month, will reverberate the most globally, says BMI, owing to the country’s significant copper, gold and cobalt reserves.

The new code was introduced at a politically sensitive time for President Joseph Kabila, as he tries to raise funds and shore up popular support in the midst of rising social and political tensions in the country.

In particular, the new regulations will aim to help the DRC benefit from its dominant position in highly in-demand metals, such as cobalt, which are crucial in the manufacturing process of lithium-ion batteries used in electric vehicles.

While the motivations behind the DRC’s recent regulatory changes combine political and economic considerations, in addition to considerations relating to rising internal unrest, the source of changes introduced in Tanzania is more straightforward, BMI notes.

In Tanzania, President John Magufuli’s aggressive policy-making in relation to the mining industry since becoming President in 2016, is largely driven by protectionist and populist political convictions that view the mining industry as not sufficiently involved in local beneficiation.

As an example, BMI highlights that, in February, the government announced that it will restrict foreign banks, insurance companies and law firms working or financing the mining sector, in an attempt to boost the local industry.

The new restrictions follow on from laws passed last year that ban the exports of gold/copper concentrate and allow the renegotiation of contracts with mining companies and will likely lead to asset sales or a reconsideration of planned investments into the country’s mining sector in the coming quarters.

As a result, BMI has recently downgraded the country’s gold production forecast, which it now expects to average zero per cent growth between 2018 and 2027.

Despite recent developments, BMI’s Africa Country Risk team believes the recent upsurge in populist rhetoric across sub-Saharan Africa has now peaked.

While a number of aforementioned countries have introduced higher taxes or generally more restrictive regulations, other major markets will witness improvements, the market researcher enthused.

In South Africa, the election of President Cyril Ramaphosa in February marked a stark change in policy direction.

So far, the new government has agreed to enter into negotiations with stakeholders on amendments to a controversial mining charter that was introduced in June 2017.

“We expect negotiations will lead to a more accommodating mining charter, through a reconsideration of controversial and legally questioned elements such as the requirement that a 30% black ownership participation rate must be maintained throughout the life of operating mines,” BMI notes.

Further, the Namibian government earlier this month decided to scrap an empowerment clause that requires companies to sell a 25% shareholding to “racially disadvantaged people” under the country’s New Equitable Economic Empowerment Framework Bill. (


Thursday, April 19, 2018

Parents went into debt to build firm for seaweed snacks


Jin Jun says her daughter, who was three years old at the time in 2009, “started devouring seaweed like it was candy.” But she says that all the packaged seaweed brands available were high in sodium and included unhealthy corn oil.

“I decided that I wanted to create a seaweed snack with less salt and something that I felt good about feeding her every day,” she says. “It was born out of love for our daughter.”

After some tinkering in the kitchen, Jun’s daughter approved of the combination of seaweed and olive oil. Jun moved quickly on the creation. The first-time entrepreneur, who had just gotten licensed in Chinese medicine that year, found a manufacturing facility that could make seaweed snacks and had to “twist their arms” to make it the way she wanted, with olive oil and minimal sea salt.

“They really thought we were crazy and that we were wasting our time and money,” Jun says, adding that she and her husband maxed out their credit card to pay for those first orders.

The bet paid off: About four months later, their crispy seaweed snack, SeaSnax, was sold at the local Whole Foods after Jun showed up without an appointment. She continued to sell door to door, and during SeaSnax’s first year in business, it got into 600 stores nationwide, according to Jun. Now it’s in 6,000 stores around the world, including Sprouts, Albertsons and Fairway, and has expanded to include flavors like chipotle, toasty onion, wasabi and lime. SeaSnax has also introduced seaweed flakes and a salad mix, along with Chomperz, crunchy seaweed chips similar to potato chips. The company is on track to do $10 million in sales this year, a year-over-year growth rate of 45 percent.

“We started the business with no money, no business plan, at the height of the recession,” Jun says. “We actually started the business in debt, and after two years it became profitable.”

Seaweed has been part of the diets of Asian peoples, including Japanese, Koreans and Chinese, for thousands of years. Many see a lot of growth potential in this market, considering the steady rise of consumer interest in seaweed -- mostly due to the health benefits. (It is high in protein, fiber and vitamins.)

Entrepreneur spoke with Jun about building the brand, staying true to yourself and her favorite marketing tactic.

When did you know SeaSnax was actually a business?

It was our first year in business; my husband and I were at our headquarters in Los Angeles and saw a ridiculous rise of online orders coming in, around 790. We thought that our computer malfunctioned. A friend called us later that evening and told us that we were on the front page of Yahoo and listed as one of the 10 healthiest snacks. That’s when we knew we had a business, because my husband and I spent three days in the warehouse packing and shipping orders ourselves.

Why do you think you got into Whole Foods so quickly?

We were rejected from all the farmers’ markets in Los Angeles. They said there was a two-to-three-year waiting list. We thought we were going to have to peddle this on the street and sell it until one day perhaps three to 10 years later a supermarket chain would actually consider bringing us into their store. We had no ambition, no vision, to have this go out into the mainstream United States. But it was because we were rejected that I went door to door to stores.

I literally was on the phone for six hours a day and only sleeping three hours a day for the past eight years, while being a mom. It was totally guerrilla marketing -- no budget for marketing or sales. It was just out of my desire to share something with the Western world that has always been sacred to our Korean culture. Seaweed has a deep and profound connection to life. It’s a sacred food.

We won stores over with our story, ingredients and the authenticity of our brand and mission.

What marketing tactic has been the most effective for the brand?

I don’t really know if I would call it a marketing tactic, but what has worked for our brand is our sincerity and our willingness to share and give. We don’t spend a whole lot of money on fancy shows or websites or paying for Facebook likes. Everything we’ve ever done is not advertised, it’s done quietly and humbly.

We’ve donated to schools; I don’t think we’ve ever said no to a school donation. People have told us that we have the most earned media of any brand. Our second year of business, the producers of Dr. Oz contacted us, and on that segment before talking about SeaSnax, he said it’s “my absolute favorite.” Sarah Jessica Parker told US Weekly she carries it in her bag.

We’re just sticking to our guns and being sincere. One of my most highly regarded role models is the founder of Patagonia, Yvon Chouinard. He talks about how he built his company from the ground up without compromise with sincerity.

Is there a story behind your packaging?

We had two options that were designed by my husband and an art student. One was this beautiful aesthetic, perfectly designed seaweed strands, and it was like the color of mint green and pistachio and the ocean. Then we had this quirky shark in a tiki hut. We asked my daughter and friends, and everyone liked the shark. His name is Socrates, and he’s a vegan shark that believes in peaceful coexistence. We’ve been approached by so many people who want to work on our packaging, but we just kept it that way. Maybe it is time for packaging research.

What’s the most unusual thing about working in food niche?

In the beginning, I thought that it was the best, most wonderful place to be. We’re all about improving the food system. That is still true, but things are changing.



Thursday, April 19, 2018

Earnings for companies operating in EPZs surge


By Alex Malanga @ChiefMalanga

Dar es Salaam. Earnings for companies operating in the Export Processing Zones have risen amid increasing investment.

The earnings increased by 12.6 per cent during the year ending July 2017 from the previous year, BusinessWeek has learnt.

Export Processing Zones Authority (EPZA) director for investment, promotion and facilitation Mr James Maziku said the earnings jumped to $1.34 billion (about Sh3.02 trillion at the prevailing exchange rate), up from the previous year’s $1.19 billion (Sh2.68 trillion).

EPZA has licensed 160 companies to operate at EPZA since the authority was launched, with more than 120 of them being operational.

Forty five per cent of those companies are local, 43 per cent foreign and 12 per cent joint ventures, according to Mr Maziku.

According to him, investors are confident about markets in the East African Community, Southern African Development Community and the African Growth and Opportunity Act.

A new report ranked Tanzania as among highly attractive investment destinations in 2017.

That was attributed to an anti-corruption campaign, which raised the country’s status two places last year to number seven, compared with its record in the previous two years, according to Rand Merchant Bank.

As of July last year, companies operating under EPZA invested a total of $1.73 billion (Sh3.9 trillion), up from $1.46 billion recorded in 2016.

The factories had created 52,395 job opportunities by last July compared with 37,730 registered in 2016.

Agro-processing accounted for 39 per cent of the investments, assembly (31 per cent) engineering (21) and textiles (9).

EPZA is responsible for steering and implementing government policy on promotion of Economic Zones which are in two schemes namely Export Processing Zones (EPZs) and Special Economic Zones (SEZs) in Tanzania.

EPZA investment promotion manager Grace Lemunge said 22,0000 hectares had been aside in Bagamoyo for a special economic zone. Last week EPZA also declared 110 hectares as a free port zone in Mtwara and earmarked 2,600 hectares for developing a special economic zone.

EPZA has earmarked 700 hectares for developing a trade and industrial hub in Kigoma.

The aim is to capture cross-border trade. Incentives to be give to investors, according to Ms Lemunge, include exemption of VAT and withholding tax for 10 years.

Investors will also be exempted from import duty of raw materials.

“This is meant to cut operational costs to make investors operating under EPZA competitive enough to compete globally,” she explained.

For the company to be under EPZA, it must have a start-up capital of at least $100,000 (about Sh226 million) for Tanzanians and $500,000 (Sh1.13 billion) for foreigners.

According to EPZA public relations head Nyanda Shuli, agriculture, agri-business, infrastructure, mining and fishing are priority areas on investing.


Thursday, April 19, 2018

FDI woes and tax rises ad infinitum


By Karl Lyimo

If I say so myself, I was somewhat flabbergasted to the point of being flummoxed by two recent press reports on taxation and foreign direct investments (FDIs). Keep your shirt on, unclench your fists – and I’ll explain anon…

A news report by the African Press Organization [APO ] titled ‘Morocco top-ranked investment destination in Africa for 2017’ stated that “ Morocco, Egypt, Algeria, Botswana and Ivory Coast were the Top-Five investment destinations” in Africa.

Released in Abidjan, Ivory Coast, on March 26, 2018 by the Quantum Global Research Lab, the ‘2018 Africa Investment Index’ states that the “Top-Five investment destinations attracted a combined net FDI of $12.8 billion in 2016…”

Noting that “Morocco’s the most attractive economy for investments flowing into Africa,” the Index states that this is “based on its increasing solid economic growth, strategic geographic position, increased foreign direct investment, external debt levels, social capital factors and overall favorable business environment.”

According to the Quantum Global Research Lab managing director, Prof MthuliNcube, “African economies are turning their attention towards diversification to stimulate industrial development, and to attract investments in non-oil strategic sectors.

Morocco has been consistent in attracting an inward flow of foreign capital, specifically in banking, tourism and energy sectors – and through the development of industry.”

There’s the magic formula: ‘the development of industry.’ This is exactly what the firth-phase Tanzania government of President John Magufuli is hell-bent for leather doing today: pursuing a development agenda that’d see to Tanzania becoming a semi-industrialized, middle-income Economy by year-2025 under its ongoing Five-Year Development Plans and the overall National Development Vision-2025.

But, as it so happens, Tanzania isn’t one of the Top-Ten ranked investment destinations – the other ‘Top-Five’ being South Africa; Ethiopia; Zambia; Kenya and Senegal.

Nor is Tanzania among the ‘Bottom-Ten’ in terms of favored investment decisions. The bottom-ten are the Central African Republic; Liberia; Somalia; Eritrea; Equatorial Guinea; The Gambia; Sierra Leone; Guinea; Sao Tome-&-Principe, and Zimbabwe at the tail-end!

So: where’s Tanzania lurking in the FDI stakes here, pray?

That was one of the two issues which had me more than worried…

The other was the ‘brief’ on page 8 of The Citizen edition of April 9 this year frighteningly titled ‘Uganda Government proposes fresh taxes.’

Reportedly, the Government of veteran President Yoweri Museveni “proposes to increase taxes on wines, spirits, beers, airtime and money transfers to widen the revenue envelope and fix the ailing Economy,” the Nation Media Group reports.

Bills tabled in the ongoing Parliamentary budget session in Kampala also aim to tax ‘Savings and Credit Cooperative Societies’ (SaCCoS) “just a year after (the Museveni government) exempted them from paying taxes for the next ten years…” Sheesh!

The Museveni Regime has been in place since 1986, and if it still has to keep hiking taxes on mundane consumer items like beverages for more than 32 years, this can only cast doubt on Officialdom’s thinking capacity: thinking out of the box, around corners/bends and through the darkest of tunnels.

Unfortunately, this incapacity isn’t confined to Uganda. If you don’t believe this, let’s just bide time till Budget Day for the East African Community member-nations next June… Tears, I say!


Thursday, April 19, 2018

Easy ways to publicise your business

Whatever your line of work, I’m sure a family member, friend or neighbor has asked you for some professional advice. I can’t tell you how many times someone has asked me for advice related to marketing and public relations. “How do I get the word out about my business? How do I promote it without spending a lot of money?” I often get this question from small-business owners who typically have just a few employees -- the kind of entrepreneurs who wear many hats.

Delivering a great product or service is the best PR strategy

Before I share a few of the DIY PR tactics I would implement, I’d be remiss by not saying that all the publicity in the world will be useless if your business doesn’t deliver on its value and promise to its customers. If you do not believe you are providing an exceptional product or service, stop reading this article and fix that first. A parade of happy customers spreading the word about your business is the most effective public relations strategy any company could ever have. Your message is only as good as your products.

The last time I got the “How do I spread the word out about my business?” question, I was at the local gym watching my son’s basketball game. I was sitting next to a local accountant whose son was also on the team. I initially pointed out to him that there is a ton of useful how-to information online about doing your own public relations for your small business. But, of course, he pressed on with, “C’mon, I’m just looking for a few tips.”

So, here are a few bits of advice I offered to the accountant while we watched the last five minutes of the basketball game. I put myself in his shoes and thought, if I didn’t know anything about public relations, what would I do to generate some publicity for my small business?

The free weekly newspaper in your driveway is read by your customers

When people mention the word “publicity,” they’re usually referring to press coverage. If you’re a small-business owner, a positive mention of your business on a national TV program would be amazing, but let’s face it: Your customers are probably reading the free local newspaper that gets thrown onto your driveway each week. You know the one. I read it. You read it. We all read it.

Before you pitch your favorite national publication a story idea about why your business should be on the cover, make a connection with the reporters at the local newspaper your potential customers are most likely reading. At the end of the day, public relations is about reaching the public, and even just a mention in the free weekly newspaper that can be found in most communities will guarantee visibility with an audience of potential customers.

The next step is identifying the PR value of your business that your local reporters will find interesting and newsworthy. Is there a seasonal event (“tax season”) that is related to your particular business? Are there topics and trends being covered where your expert commentary would be useful (“new tax rules”)? Contact the appropriate reporter, introduce yourself and share your idea. Don’t be discouraged if you don’t land a mention in a story overnight. Developing a PR platform is a process of building and growing relationships. If one pitch doesn’t work, stop, hit the reset button and try another story angle.



Thursday, April 12, 2018

Generating money from social media


Many experts say that social media is for connecting with people, and not for selling, but at some point, you’re going to want to leverage the connections you create. If you’ve built up enough trust with your followers, they’ll be more inclined to check out your recommendations and the links you share.

Here are six ways you can make money on social media.

1. Promote affiliate products

No matter what industry you’re in, you can find great products to promote on ClickBank. And if that doesn’t quite jive with you, you can also become an Amazon Associate, promote products of your choosing and earn commissions on them -- Amazon has no shortage of products.

Next, instead of spamming links on Twitter and hoping for the best, keep in mind that the most honest and effective way of promoting affiliate products is through reviews.

2. Create and promote your own information products

If you already have a blog, and you’ve demonstrated your expertise on a specific subject over a period of time, there may be an opportunity to create an ebook, audio program or video course and sell it to your audience. Social media is the perfect place to promote such a product.

As with anything, quality is key to creating something people not only want to read, but will pay to read. If you take extra care in creating great information, designing and promoting it well, you will definitely see more sales.

3. Promote products and services

There are many opportunities for you to share sponsored posts that promote the products and services of other businesses. This is a very direct way of earning money from social media.

But, if you don’t have a sizable following, this may not be much of an opportunity. You also have to beware of over-promoting products for want of money, because if your followers see that you’re constantly tweeting about one product or another, not only will they not click on the links, they will also un-follow you.

4. Use visual media to promote your crafts

If you tend to create handmade crafts, art pieces, or even articles of clothing and knitting, there may be an opportunity to showcase your products on social media. Instagram and Pinterest may seem like obvious places to hit, but Facebook, Twitter and Google+ are also great channels for sharing visual media.

If you have an Etsy account, you can direct your followers to check out your products there, and between the different channels, you have the potential to make a good living.

5. Promote your coaching or consulting services

Social media is a great place to generate leads for your consulting business. Whether you’re a guitar teacher or a life coach, if you have demonstrated expertise in a specific area, you can create more interest for your services by connecting with your target customer on social media.

Coaching sessions can be conducted over Skype, so this is definitely an opportunity to make money without leaving home. Consulting can be lucrative, so remember not to undercut yourself -- charge a fair price for your time and effort.

6. Join the YouTube Partner Program

Building a popular YouTube channel can be a lot of work. But if you already have a following, or you’re determined to build your audience, joining the YouTube Partner Program to make money on advertising might be a path worth exploring.

There are prominent YouTube content creators who have made substantial amounts of money with this program, but they are the exception rather than the rule. It would take a lot of time, strategy and sheer luck to make money on YouTube.

These are just some of the many ways you can make money with social media; there are plenty of other money-making websites for you to explore.


Thursday, April 12, 2018

TZ ranked highly in investment report


By Gladys Mbwiga @gladysmbwiga

Dar es Salaam. A new report has ranked Tanzania as among highly attractive investment destinations in Africa.

This is because an anti-corruption campaign raised its status two places in 2017 from number seven in the previous two years ago, Africa’s Rand Merchant Bank (RMB) has reported.

The 2017 ranking shows top ten countries for investing in Africa being Egypt, South Africa, Morocco, Ethiopia, Ghana, Kenya, Tanzania, Rwanda, Tunisia and Ivory Coast, in descending order.

“Our performance has largely beend contributed by the fifth regime’s corruption crackdown efforts and facilitating corporate registrations and licensing, thanks to President John Magufuli,” reads the report in part.

“Recent reforms on corruption have made the investment environment favourable,” economics professor Samuel Wangwe said.

“Public servants now serve businesses equally, attracting further investment considering that before the private sector had little backing from the government. This will increase foreign direct investment inflows.”

“The government is fixated on boosting domestic productivity and actively reducing Tanzania’s import dependence to attain middle income status, which would further enhance its investment appeal,” the report explains.

Meanwhile, the continued opening up of Tanzania’s capital market (debt and equity) has paved the way for portfolio investment, particularly for East Africa Community investors.

In addition, the new laws that have been enacted to increase the state’s share of mining profits are likely to cap future capital flows into Tanzania’s mining sector, according to report.

The new mining laws, which were fast-tracked through parliament, raise royalties’ tax for gold, copper, silver and platinum exports to six percent from four percent.

They also give the government the right to tear up and renegotiate contracts for natural resources and remove the right to international arbitration.

However, Repoa strategic research director Abel Kinyondo is cautious.

He suggests that the tax burden to investors be reduced, regulatory bodies harmonised and public-private partnerships (PPPs) strengthened.

“The tax burden scares away investors because they spend a lot on tax compared to their returns on investments.”

Dr Kinyondo called for the creation of a one stop shopping centre to avoid investors moving to more than 10 regulatory bodies for service.

Meanwhile, PPP needs to be worked on because right now its effect has not been fully reflected in the country, said Dr Kinyondo.

“Still, PPP is not fully working. Most of tenders are carried out by government bodies than the private sector.”

He cited construction tenders, saying they were mostly being carried out by the Tanzania Building Agency.

Recently, President John Magufuli reassured businesses that PPPs would be promoted.

“We are also willing to continue providing a conducive environment for investment to make Tanzania the best place to invest in Africa.”


Thursday, April 12, 2018

Young man keen to carve out a niche in challenging world


By Alex Malanga @ChiefMalanga

Dar es Salaam. Jumanne Mtambalike dreamt of making an impact on the entire community.

However, that was not a bed of roses. He had ups and downs.

“After a lot of trials to start my own company, finally, in 2011, I set up an event management company called Sahara Parks,” Mtambalike, 30, recalls.

His company, whose mission is to build stable innovation ecosystem to encourage growth of technology and innovations that matters, is a platform for discussing innovation and technology entrepreneurship matters.

It annually runs its flagship event, which links startups to potential investors: local, regional and global.

“From Sahara Sparks, with a partnership with my colleagues, we started an accelerator called Sahara Accelerator where we work with post-revenue startup companies offering them technical support and chance to grow,” Mtambalike, a software engineer, tells BusinessWeek.

Mtambalike is a native of Morogoro Region, but was raised in Ilala District, Dar es Salaam. He spent much of his childhood life at West Gerezani, Kariakoo.

He says their group of companies -- Sahara Ventures -- was founded in March 2016.

It is a parent company of Sahara Sparks, Sahara Accelerator and Sahara Consulting.

“We are working with eight full-time employees, four business partners and 30 other people working under a retainer agreement consultancy.”

Mtambalike graduated with a Bachelor of Computer Science and Electronics from Bangalore University, India, in 2011.

Upon coming back to Tanzania, he went straight to Dodoma with his closest friend to start an IT consulting company.

“Unfortunately, the company collapsed. It was closed down by the Tanzania Revenue Authority after 18 months,” he recalls.

“However, it was a great experience as we learnt a lot about entrepreneurship and building businesses from the scratch.”

In December 2012, he joined the Tanzania Ports Authority. He worked there for two months as a data analyst consultant before moving to the Commission for Science and Technology Tanzania, where he worked for three years -- from February 2013 -- as the first hub manager of the local innovation space called Buni Innovation Hub. “Buni Hub was a game changer; I met with a lot of exciting people who in one way or the other, are the reason of where I am today.”

At Buni Hub, the former Coalition on Election Monitoring and Observation Consultant for three months from September 2015, was working with startup companies, early stage Technology Companies, helping them to build their business models and accelerate their growth.

Earlier, between May and August 2015, he was a consultant at the World Bank’s ReFAB Dar Project.

In the following month he also worked with the Energy Safari, Hivos-International Institute for Environmental Development, as consultant up to December 2015.

He also worked as a consulting project manager with Universal Communication Service Access Fund for three months: from February 2016. Mtambalike believes technology is great in solving community problems. “I know there is a lot I can still do to make impact on the community.”

He says sometimes it is challenging to strike a balance between professional and social life.

This has made him lose some of his friends.

But the biggest challenge is convincing older potential customers that Mtambalike and colleagues have the ability to do the work well.

“Some of them doubt our commitment and ability simply because we are relatively young,” he says. “So we now have to work round the clock to learn skills on managing people of diverse backgrounds and personalities.” However, he believes they are able to deliver the goods. With his Master in IT and Management from India’s Avinashilingam University, he has got the required knowledge.

He is busy, with little time of relaxing. Mtambalike is the father of a beautiful daughter

He is the fourth born in a family of six.


Thursday, April 12, 2018

Tanzania-Turkey ties grow fast: envoy


QUESTION: Why do you think your government has chosen you to come back to the country for the second time since it’s rare for the ambassador to finish his term and then be re-appointed to the same country?

ANSWER: Turkish Minister of Foreign Affairs Mevlut Cavusogu had told me that, my first term of duty in Tanzania was successful and proposed me to be appointed again to Tanzania to further develop relations between the two countries. I accepted with pleasure. I like Tanzania and Tanzanian people.

How do you compare this term and the previous one? Have you observed changes since you came the second time?

I have observed great changes in Tanzania since I came for the second time. I congratulate President Magufuli on his determination and perseverance in his struggle against corruption. There is a strong control of government expenditures and an increase of productivity in public services.

It is evident that dependency on donors has been reduced. Now Tanzania is strong enough to finance not only the construction of the first phase of SGR but also other development projects without appealing to donors to pool money.”

What are the export and import trends between Turkey and Tanzania?

In the field of commercial relations, last year the exports of Tanzania to Turkey were $51 million and imports of Tanzania from Turkey was $122 million. The exports of Turkey are mainly iron and steel bars, construction materials, tanker trailers and the imports from Turkey are mainly tobacco, cotton, sesame seeds and coffee.

İn the near future the export and import expected to reach $500 million. Tanzania exports to Turkey increased by 110 per cent in a period of nine months in 2017 compared to 27.7 per cent a similar last year that was due to increasing bilateral trade delegations, raising awareness in business circles of both countries about each other.

Tanzania is heading to industrial economy, from your experience, what should Tanzania do to achieve its desired industrial economy?

There are challenges as Tanzania moves towards industrialisation. Industrialisation brings an upsurge in demand for energy. It is obvious that effective solutions are urgently needed. This is the massive challenge Tanzania faces now.

Fortunately, practical alternatives are available. Liquid Natural Gas (LNG), for example, is a superior energy option. However, implementation of planned liquefied natural gas (LNG) plant and distribution of LNG all over the country will take too long time.

In the short run, in order to provide reliable, affordable and sustainable energy, the Stigler’s Gorge dam has to be built as soon as possible. When it is constructed and hyropower energy is obtained, Tanzania will have the great potential for cheap and reliable power.

The current production of electricity is 1,500 megawatt. The Stigler’s Gorge dam will have 2,100 megawatt hydro-power plant which will almost double the total production of electricity.

Wildlife conservation experts claim that mega power generation plant at Stiegler’s Gorge in the Selous Game Reserve will have negative impacts on tourism development. On the contrary, the dams are constructed for the control and management of the water in the best possible way and to hinder environmental and ecological disasters. The livelihoods of people living in this reserve will be much better through farming. They will have the electricity and the forests will not be destroyed for firewood and charcoal.

In respect of industrialisation, Tanzania has also some major advantages. The first one is relatively cheap labour. That reduces the cost of products. The second is the huge market. Tanzania with about 53 million people provides an adequate industrial market. The third is the vast agricultural potential which has not been fully exploited. The crops are the major inputs into agroindustry for processing and making finished products.

What do you think about the key priority areas that you will undertake in Tanzania as a part of promoting bilateral relations?

Turkish company Yapı Merkezi has already undertaken the construction of the first and second phases of Central Corridor SGR Project. In respect of the construction of railways, Yapı Merkezi is within the biggest 10 companies in the World. I believe that Central Railway Project is exactly a landmark or turning point in over relations leading to wide ranging commercial and economic exchanges and joint ventures in construction.

The government under President Magufuli is open to host new investors in various investment destinations, which areas will you persuade Turkish investors to inject capital?

Tanzania with its political and economic stability and with its natural resources is a country of prime importance in East Africa. Tanzanian government has a goal to become a middle-income country by the year 2025.

Turkey wants to share its knowledge and knowhow with Tanzania to make contribution to the efforts of Tanzanian people for economic development and industrialization on the basis of win and win and for the benefit of both countries. I would like to express the readiness of Turkish businessmen in this context.

Turkish companies want to make joint investments in the fields construction, health and pharmaceuticals, energy, minerals, agriculture, textile.


Thursday, April 12, 2018

Experts cite four major challenges to startups


As speakers, advisers, and trainers in the entrepreneurial space, we’ve been particularly excited by our December survey of the principles of 14 international accelerators. We wanted to know, from their point of view, what were the key factors in startup success …and failure.

This is the most recent study conducted on this subject. Although these folks are from all over the world, it’s amazing how much they agree when it comes to why startups fail.

Inadequate testing

Inadequate Testing was by far the most mentioned reason for startup failure. This factor is identified by several other terms like not getting started, not understanding how to access the market, and not understanding the barriers to entry.

But Greg Wright, founder of HATCH pitch put it quite succinctly, “failure to test and validate hypotheses and assumptions,” and its corollary, “premature scaling (seeking/obtaining funding too early, ramping production/team/advertising before achieving product-market-fit).”

Keith Hopper, CEO of Danger Fort Labs adds, “Not addressing an important enough need that customers are willing to pay for.”

Ben Hsieh, program manager of Nest and Jason Cole, CEO, of Da Primus Consulting both agree that “not finding product market fit” is a main cause of failure.

Eric Mathews, founder and CEO, of Start Co, says, a big cause of failure is “building something nobody wants. This accounts for about 50 per cent of failures. (This) is mitigated by doing thorough market and customer discovery. Before building anything, we tell our founders to go talk to 50 of their real customers.”

Ashish Bhatia, founder/MD, of India Accelerator points out, “Delaying the launch (is) one of the cardinal sins. (Success is achieved) only by bouncing your idea off users. Excessive perfectionism never works. Go out and meet the customer. Get your hands dirty.”

Team incompatibility

Team Incompatibility was the second most mentioned cause of start-up failure. We were surprised at how often this roadblock to success was mentioned. It’s about how the members of the founding team work together and whether they have the proper skill sets to overcome the challenges ahead.

Elza Seregelyi, director of L-SPARK points out that a “fatal flaw in (a) founding team (is when) founders who are self-aware may successfully get help to overcome a gap or conflict in a certain area, but those who are blindly one-sided (e.g., too technical or lacking domain expertise) or dysfunctional as a team will be unable to execute.”

Joseph Bush, executive director, of Worcester CleanTech Incubator thinks “inability to recruit, build and manage a team of people smarter than oneself” is a big factor in start-up failure.

Lauren Tiffan, director of Ocean Accelerator adds simply, “Lack of business acumen.” Or as Ben Hsieh, program manager of Nest, bottom lines, start-ups fail when “(the) team lacked skills to execute.”

Eric Mathews, founder and CEO, of Start Co expands on this common theme. “It is important that the founding team have complimentary skills, not be too large, be sacrificing equally to build the dream, be flexible and coachable, and finally have bias towards action.” But he warns, “misalignment of stakeholders …accounts for 20 per cent of failures and occurs after product launch. When the investors, founders, employees, board members, and other stakeholders are not rowing in the same direction the company gets ripped apart as various parties try to pull the business in different directions.”

Lack of Persistence

Lack of Persistence was the third most commonly mentioned reason for startup failure. As Jason Cole, CEO, of Da Primus Consulting puts it, “The leadership is unable to set a clear strategy for the company and stick with it long enough to succeed, resulting in a lot of wasted money and energy from constant changes in direction.”

Or as Keith Hopper, CEO of Danger Fort Labs puts it, “A lack of creativity and persistence in working through the inevitable challenges of launching a new venture.”

Alyse Daunis, Program Manager, of Launch Alaska, adds “Lack of grit. We all know startups are hard. They take a tremendous amount of time and often require sacrifice. Founders need to have grit to overcome obstacles and burnout.”

But as Elza Seregelyi, director of L-SPARK warns, “Inability or unwillingness to adapt or pivot quickly when there is lack of product-market fit. There is a fine line between persistence and stubbornness and sticking with a product or business model that is not gaining traction is just wasting resources.”

Everything else

Other reasons for startup failure are included in thoughtful comments from:

Nobu Kumagai, founder and managing partner of Wildcard Incubator who points out that greed can be a cause of failure. “This is the opposite of compassion (which is) the key element for success. Internal greed will end up with a breakup of talented co-founders. External greed will force you to lose customers and community (pricing, extra services, economic impact, etc.). It used to be a Wall Street norm, nowadays it seems to become the norm for Silicon Valley techies.”

Thanks to all the international accelerators for participating in this timely survey. Be sure to check out their answers to why startups succeed, published last month in And stay tuned for more insights from these folks whose business it is to know about why startups succeed and fail.



Thursday, April 12, 2018

Does the Taxpayer’s Charter work?


By Shabu Maurus

What sort of excellence, response time, accessibility, delivery time and commitment should you, as a taxpayer, expect from the Tanzania Revenue Authority (TRA)?

TRA adopted the Taxpayer’s Charter (now in its 8th Edition). “TRA operates on the fundamental belief that taxpayers and stakeholders are more likely to comply with the laws if they have information and other services they need to meet their obligations” reads the Charter in its preface.

Apart from setting out the rights and obligations of the taxpayer, it also sets out the service standards that TRA shall observe when dealing with its stakeholders.

These service standards are important for both TRA and its stakeholders (including taxpayers).

The service standards serve to define what a taxpayer can expect from TRA and also remind TRA of their obligations. It also plays a yardstick for TRA to gauge its performance.

The main effect of the Charter is, supposedly, to prohibit arbitrary practices by TRA against taxpayers.

But the key question, I think, is to what extent does TRA abide by the service standards stipulated in the Charter?

Probably you know several examples where TRA fully abides by the Charter. But, you may also be aware of several examples of service areas where TRA can improve.

Cognizant that possible challenges may come up, the Charter calls for feedback. Both positive and negative.

Feedback geared towards establishing service gaps so that improvement strategies can be made. I will highlight, in general terms, some few examples.

In the Charter, TRA commits to respond to a written correspondence within five working days from the date of receiving such correspondence. This is an attractive promise.

Although in practice it is not uncommon for some letters to TRA to be responded in months. And some not all.

TRA promises to renew a driving license within two working days from the date of receipt of the applications. But, if your driving license expired with the last six months or so you might have a bad experience on this.

Recently, renewal of driving licenses has taken months. I know a couple of colleagues with expired driving licenses who still drive with ‘payslip’ for renewal fee in place of a license.

Similar sort of delays can be experienced in the registration of tax consultants and registrations for value-added tax (VAT).

As per the Charter, tax consultants should be registered with fifteen days and VAT registration should take no more than two days for regional TRA offices and ten days for district TRA offices.

The Charter states that TRA shall conduct tax audits on taxpayer’s business records and finalize the audit within three months for complex cases and six months for very complex cases.

But the big problem with tax audits is not how long they take.

An audit that goes back five years tends to be so punitive to a taxpayer. The Charter does not provide a standard on this aspect.

The Charter requires that simple objections to tax decisionsto be settled within three months, and for complex ones, within six months.

There are examples where some objections have taken more than six months to resolve.

Unfortunately, this is an area that the tax laws do not prescribe time.

Taxpayers cannot, legally, compel TRA to determine objection. Customs law is an exception. The customs law requires TRA to respond within 30 days.

Despite being a very good document, the Charter it is not a legally binding instrument.

The taxpayer or TRA must ultimately invoke the relevant laws in acting on or seeking to prevent action, which is inconsistent with the Charter. This, significantly, limits its usefulness.


Thursday, April 12, 2018

New maize seeds impress farmers as yields improve


By Elias Msuya @TheCitizenTZ

Geita. A new maize variety is expected to combat food scarcity in Geita where pests and drought ravage crops.

Geita District Agriculture officer John Kengele says the plan in 2016/17 was to cultivate 91,045 hectares of cereal crops and 38,500 hectares of leguminous plants.

But only 83,862 hectares of cereal crops were grown and 162, 626 tonnes were harvested.

According to Mr Kengele, 31,088 hectares of leguminous plants were cultivated and 63,826 tonnes.

“The demand for cereals is 167,153 tonnes while that of legumes is 64,285tonnes annually, but in the 2016/17 harvest season we had a shortfall of 4,497tonnes cereals and 459 tonnes of legumes,” he says.

That was because an outbreak of fall armyworms and poor rain cut production.

The Ministry of Agriculture has been informed so as to tackle pests.

“The district council has called on farmers to use pesticides and burn crop residues after harvesting in an effort to wipe out pests. If favourable rain comes bumper harvests will be guaranteed,” he hopes.

The Commission for Science and Technology (Costech) in cooperation with Ilonga Agricultural Research Institute have produced water-efficient maize seeds under the Water Efficient Maize for Africa (Wema) project.

Trials have been made and Isamilo villagers at Kamwanga Ward in Geita District are happy with results.

Their Muungano Group was given Wema 2109 maize seeds, which were sowed on November 30, 2017 in one acre.

Group member Khamisi Kingi says: “We followed instructions including using fertilisers during sowing and for growth periods. Seeds germinated completely, but we had to spray pests until the plants survived. We expect to harvest between 15 and 17 bags in an acre.

“The crops were attacked by fall armyworms because we sowed the seeds in November and December, the time when most pests emerge. Maize seeds planted before November were not affected.”

According to Mr Kingi, Wema seeds are resistant to diseases and drought.

“Local seeds are more vulnerable to attacks than Wema seeds. We also faced drought but we expect to harvest more than 15 bags from every acre, while previously we harvested three to five bags.”

Another group member Francis Mwahekela believes Wema seeds can avert famine.

“The new maize variety is resistant to diseases and drought unlike the traditional maize. Had we planted traditional maize seeds, fall armyworms would have gobbled up all of them.”

According to group secretary Methusela Linti, Muungano started in June 20, 2017 with 30 members: 13 of them being women and 17 men.

Their aim is to cooperate in improving farming.

“Our intention is acquire agricultural knowledge to increase production.”

He speaks of challenges such as poor weather, pests and the scarcity of farm inputs.

Costech social science director Joyce Nyoni says the aim of the institution is to disseminate research findings for the community.

“Since maize is the staple, we have funded the research to improve its production,” says Dr Nyoni.

“Whatever positive it is obtained from this field trial, villagers are going to share for the whole region and finally the whole country to increase maize production.”

Geita assistant administrative secretary Emil Kasagala hopes the new maize variety will make the region great: food shortages will end and surplus will be sold to other regions.

“Our yields have been low; you produce two or three bags in an acre. Now we expect to produce more within small areas.”

Wema project was formed in response to a growing call by African farmers, leaders, and scientists to address the effects of drought and insect-pest pressure in a cost effective way for smallholder farmers in Africa.

Wema uses three breeding approaches: conventional; marker assisted; and genetic modification.

The project focuses on developing, field testing and deploying new maize hybrids in Kenya, Mozambique, South Africa, Tanzania and Uganda.

In Tanzania already seeds have produced through conventional method, while the genetic modification is underway at ARI Makutupora in Dodoma.


Thursday, April 12, 2018

Metrics to observe on return on investment

Digital marketing takes on a different dimension compared to traditional ad mediums like radio, television and newspapers. And here, the advent of digital marketing gives you an advantage, because it allows for greater insights and reach than what you’ve probably seen in traditional marketing models.

Here are three important metrics you should be measuring in 2018.

1. Measure CPM for lead-generation campaigns. CPM, or “cost per 1,000 impressions,” is an important advertising metric you should be measuring in order to track your online business’s ROI. According to Facebook, this metric is commonly used in the online advertising industry to gauge the cost-effectiveness of an ad campaign. In most cases, it’s used to compare performance among a company’s different ad publishers and campaigns.

To measure CPM, you’ll need to divide the impressions gained from a campaign by the total amount spent, then multiply the result by 1,000. Depending on your campaign goals, such as brand awareness vs. lead generation, the raw CPM will differ.

For businesses looking to expand their brand and overall online awareness, lowering their overall CPM will help them scale up overall reach.

2. Measure the aquisition costs of your brand awareness campaigns. Another metric that can be used to understand and measure a business’s ROI is acquisition costs, which should be compared against revenue generation.

By implementing conversion tracking, you can track the cost of each consumer touchpoint, including: new user signups, phone calls, customer inquiries and ecommerce sales. By assigning a value to each, and understanding the revenue implications, you can scale those areas of your marketing campaign that are maximizing your targeted objectives.

3. Measure your traffic and engagement costs. Depending on your ultimate business goals, which could entail selling a product or signing on a new client, it’s important to understand how much you’re paying to drive a user to, or interact with, your brand.

With the numbers that result, you can measure the impact of your spending on your ads, and also determine the areas you need to focus more on. Measuring your website traffic is an important step in this regard.

Tools such as Alexa can help you measure the number of visitors to your website. They can help you determine how those visitors discovered your site and the specific actions they took before and after their visit.

Similarly, your cost per click (CPC) and click-through rate (CTR) can greatly help in measuring how much you spend online, too.

With CPC ads, you’ll be able to know the exact amount you pay for each click in your advertising campaign. While many businesses focus on CPC, understanding this number in the context of overall conversions or acquisitions is an advantage.

Also, the CTR helps you to measure the number of clicks you’ll receive on your ads per number of impressions. A low CTR may require additional tweaking to your advertising creative.

With these, you can gauge how well your keywords and ads are performing.

A final note

As a business, one of the most important activities you can pursue is the measurement of your ROI. With it, you’ll know what areas require more spending for your ad dollars and have a competitive advantage over your competition.

Similarly, you’ll be able to measure how clients engage with your business and use that information to implement new marketing and operational strategies.



Thursday, April 12, 2018

Coffin exports to China: fact or just spamming?


By Karl Lyimo

At 9PM on March 29 this year, I received the following email message – quoted here verbatim:

“Dear Madam/Sir, We are a trading company located in Shaanxi, China. Now we need to purchase High grade coffin produced by you according to domestic demand. Please send us the material, specification, FOB price for our confirmation and further cooperation. We do look forward to your soonest reply. Best Regards. Contact: Chen hai jun. Mobile: +86 17088782553. Email:

Intrigued no end, I just as soon responded to

“Give us your company name, postal mailing address and physical/location address so that we can send you samples, please.”

Thinking that the original message was the usual product of spamming on the ‘eve-of-eve’ of April Fools’ Day – ‘spamming’ being using electronic messaging to send unsolicited messages (spam), especially in advertising – I wrote off to experience the earlier email…

But, surprise of surprises: I received a response to my email at 5:54PM on Sunday, April 1 (All Fools Day), 2018, also purporting to come from ‘Chen Haijun’ at

It read as follows:

“Dear friend, Thank you for your feedback.

“Corporate name: Shaanxi Zengkuo Commercial and Trade co., Ltd. Recipient: Chen Haijun. Phone: +29-88189610. We do look forward to your soonest reply. Best Regards. Contact: Chen hai jun. Mobile: +86 17088782553. Email:”

Well, well, well… As my curiosity heightened a bazillion times over, I hit the QWERTY like mad, googling for ‘Shaanxi Zengkuo Commercial and Trade co. Ltd.’ That gave me a measly ten search results in all of 0.49 seconds:

Shaanxi Sengen Trade Co Ltd: Company Profile – Bloomberg Home Page:

Shaanxi Fortune Trading Co., Ltd, Bearings…

Shaanxi Sengen Trade Co., Ltd -…

Shaanxi Fortune Industries Co. Ltd - Global Sources…


Rating wood stoves: Topics by…

Wood stoves solar: Topics by…

Wood shape effect: Topics by… and,

Images for Shaanxi Zengkuo Commercial and Trade ...

This last search result of ‘Images’ was about the only one that came nearest to my emailer’s stated company, ‘Shaanxi Zengkuo Commercial and Trade co., Ltd.’ But only assorted images were displayed, ranging from beverages and ripe tomatoes to optical lenses, pipes and machinery parts –all apparently other companies’ products!

So, exactly what does Mr Chen Haijun/Chen Hai jun’s company deal in or with, pray: ‘high-grade coffins’ (sic) from Africa, Tanzania?

This isn’t to say that international trade in coffins – burial caskets –doesn’t exist. Far from that…

The burial ‘Rest in Peace’ coffins industry is a $1.6-billion business in the US. China penetrated that market in year-2002 – and today claims a 5 per cent market-share!

But, God knows what’ll happen to the coffins business if and when cremation takes hold worldwide!

Meantime: anyone interested in ‘exporting high grade coffins’ to China can take over from where I never got… Cheers!



Thursday, April 12, 2018

Food shortage looms as pests invade 50pc of farms: report


By Ludger Kasumuni @TheCitizenTZ

Dar es Salaam. Crop pests have invaded nearly a half of Mainland Tanzania farms, a new report has revealed.

To combat the menace, the government has deployed a team of agriculturalists to train farmers on how to control the situation.

Moreover, pesticides worth $132,439 have been distributed to fight armyworms, rodents and crop diseases, but small-scale farmers complain that they reached them late.

“Farmers complained of having incurred huge costs to contain them,” according to the 2018 February Food Security Bulletin by the Ministry of Agriculture, Livestock and Fisheries.

It showed that the Ministry of Agriculture and that of State in the President’s Office (Regional Administration and Local Government) deployed the team of experts to train farmers on how to control the pests.

Smallholder farmer Mathias Ngalimoto, of Mtimbira Ward in Malinyi, Morogoro, is worried that maize will be scarce as farmers have not grown the cereal as rodents had been devouring crops.

“We will face an acute shortage of maize this season,” laments Mr Ngalimoto.

He is also deeply worried about armyworms and other pests that invaded paddy fields, causing a food shortage to families that normally depend on rice for survival.

“The government has brought enough pesticides, but the planting season is over. As a result, most of the pesticides will not be used this farming season,” says Mr Ngalimoto.

According to experts, rodents constitute the largest group of mammals in terms of species numbers and diversity. They play an important role as reservoirs and carriers of zoonotic diseases, and they are responsible for substantial damages of food and cash crops, industrial products, and occasionally forest plants, the ministry’s bulletin reads.

In Tanga, Songwe and a number of other regions, all districts are at risks of food shortages as rodents invaded maize farms, according to the report.

“Rodents have destroyed over 32,000 hectares of crops putting thousands of people at serious risks of food shortages,” report clarifies.

According to the report, prospects of bumper harvests following good rain in recent months have been shattered, with farmers realising that most of the maize in their fields had been destroyed.

“Although an estimation of crop losses due to rodents has not been done countrywide, damage to crops is widespread and tends to be sporadic.”

Rodent outbreaks normally occur in one area for about one or few seasons and cause great losses, after which the populations decline tremendously and hence cause less damage to crops, according to experts. However, in some areas large losses of crops are sustained every year, indicating that the general pattern of rodent infestation is not uniform, according to experts.

Agricultural Non-State Actors Forum, Mr Audax Rukonge suggests that the government the private sector team up to invest in research and development to ensure pesticides are supplied on time and are made available at reasonable prices.


Thursday, April 12, 2018

Tax reforms could help attract venture capital to Tanzania

Jonia Kashalaba

Jonia Kashalaba 

By Jonia Kashalaba

A Venture Capital and Private Equity Conference took place recently in Dar es Salaam, and one topic discussed was whether the current tax regime is conducive to investment in Tanzania by venture capitalists.

As a starting point we need to understand the nature of venture capital, and why it might be important. In broad terms, “venture capital” can be described as a type of private equity, a form of financing that is provided by firms or funds to small, early-stage, emerging firms that are deemed to have high growth potential, or which have demonstrated high growth.

The potential relevance of venture capital to Tanzania is that, whilst it has been among the fastest growing economies in sub-Saharan Africa and is projected to continue growing over the years, the ability to raise capital has become more difficult in an environment of tighter liquidity – manifested for example in the reduction in credit growth to the private sector. This scenario creates an opportunity for venture capitalists in Tanzania as on the one hand the projected growth indicates opportunities for new investors and the liquidity issue presents a funding gap that Venture Capitalists could perhaps fill.

Venture capitalists’ returns (share of business profits or sale of shares) are obtained after tax, hence a venture capitalists would be interested in understanding taxes applicable to them before making an investment. The income taxes that a company’s profits are subject to are not unreasonable, with an overall effective rate of 37 per cent (once account is taken of 30 per cent corporate income tax and then 10 per cent withholding tax on dividends). The challenge however arises with the tax treatment of disposals and in particular three aspects: (i) the tax rate applicable, (ii) the lack of indexation of the original TZS cost for inflation/devaluation and (iii) the tax treatment of indirect disposals of shares.

The concern with the tax rate on a gain on disposal of shares is that the rate in Tanzania is relatively high (30 per cent) when compared to rates in other jurisdictions (a few examples Kenya (5 per cent), and South Africa (22.4 per cent). Indeed, there is a school of thought that it is economically more efficient not to tax capital gains, but instead simply tax the profits from the entities in which the shares are held – the logic being that any price paid for shares is effectively paid in anticipation of future profits, which in any case will be taxed (with no relief at the level of the business for the cost incurred for the shares). By way of illustration, Nigeria, Mauritius and Zambia do not tax capital gains. Of interest is that Tanzania’s predecessor income tax legislation (Income Tax Act 1973) provided for a lower rate of 10 per cent which I believe is reasonable.

Where countries do tax capital gains, it is a common feature to provide for indexation of the cost of acquisition – particularly so, if the tax rate is relatively higher (for example, Ethiopia’s tax law provides for indexation). However, Tanzania, in addition to having the high tax rate, does not provide for indexation. As such, even where a gain arises as a result of inflation/currency depreciation, it would be subject to tax at 30 per cent. By way of example, if someone had invested USD 1 when the USD: TZS exchange rate was say 1,500 and sold the investment later at the same amount (i.e. USD 1) but when the exchange rate is 2,000, they would be considered as realizing a gain (subject to 30 per cent tax) of TZS 500, but in USD terms there would not be a gain. This illustrates the risks for outside investors who may realise no gain in hard currency terms, or even possibly a loss, but nevertheless end up being taxed on a TZS “gain” driven by local currency depreciation. Given this concern, it is important that an indexation provision is included in our law. Again, the Income Tax Act 1973 was more attractive in this regard as it had a provision for indexation.

Last but not least, is the indirect disposal/change in control provision which is probably the greatest concern for investors, and which will be the subject of a separate article.

In my view, in order to continue growing the Tanzania economy, investments including venture capital investments should be encouraged. A priority is to change how gains from disposal of shares are taxed (perhaps by reverting to a taxation of gains more similar to the Income Tax Act 1973) and amend the scope of indirect disposal provisions. These changes would be compensated by the increase in taxes as a result of business growth/increased profits.

Jonia Kashalaba ( is a Tax Manager at PwC Tanzania, who has also worked for a number of years on secondment in PwC Ghana and PwC Dubai. The views expressed do not necessarily represent those of PwC.


Thursday, April 12, 2018

Factors that affect banks’ lending rates

Kelvin Mkwawa

Kelvin Mkwawa 

By Kelvin Mkwawa

Without a doubt, banks are considered to be one of the most important institutions that have a great impact on the economy of any country.

A well established and efficient banking industry is essential for rapid economic growth as it is the industry that provides a system by which a country’s most important projects are funded. Banks are financial intermediaries because they serve as a link between the savers and borrowers; they collect money from the savers (depositors) and lend it out to the borrowers at a cost.

So for the banks to perform well, they need to perform the lending function very well, thus the cost of lending (lending rates) determines the profitability of the banks. Since banks’ main source of revenues is through lending (interests earned on loans), the administration of the lending process is imperative for the banks survival.

The higher the lending rates, the more profits to the banks. But higher lending rates have remained an issue of great concern to all major stakeholders in the economy.

Lately, the high lending rates charged by the banks has raised many questions from the policy makers.

From a policy maker perspective, lower lending rates are desirable as they tend to have a positive influence on the investment environment. And that is why we have seen the Government, through the Bank of Tanzania (BoT), has taken several monetary policy measures in the last few years, such as reducing the discount rate from 16 per cent to 12 per cent then to 9 per cent, and reducing the Statutory Minimum Reserve (SMR) from 10 per cent to 8 per cent in order to encourage the banks to lower their lending rates.

Also, the president himself, Dr John Magufuli has been stressing the importance of banks to lend to the private sector at lower rates, as it has been argued by economists that high interest rates are a barrier to economic development.

The lending rate indicates how much it costs for businesses and individuals to borrow funds from the banks, hence it’s critical for the growth of our economy. Therefore, it is evident that the lending rate is crucial for the progress and development of the country, so it is important to understand what factors are affecting the lending rate. In this article, I will discuss the five factors that affect the bank’s lending rates:

Cost of funds - This is the cost banks incur for collecting the deposits from the public (borrowers and shareholders) and operational costs (staff salaries, benefits, overhead). Increase in cost of funds has been a key driver of the increase in bank’s lending rates. Lending is the main function of the banks and main source of their revenue hence the lending rate must be higher than their cost of funds for them to make profits, and the higher the cost of funds the higher the lending rates.. The government, through BoT, has realised this and this is why it has taken several monetary policy measures to encourage the banks to lower their lending rates with no success.

One of those measures is to lower their discount rate (interest rate BoT is charging the commercial banks when lending to them) to 9 per cent which is an all-time low but still the current average lending rate of the banks is about 20% per annum. With that being said, it is obvious that is not enough and the banks need to do their part by reducing their operational costs which will reduce their overall cost of funds.

If BoT succeeds in lowering the cost of funds for banks, will that automatically lower the lending rates? Probably not, since there are other factors affecting the lending rates. Next week, I will discuss the remaining four factors affecting the lending rates.


Thursday, April 12, 2018

Exploit opportunities in health sector, minister urges businesses

By Deogratius Kamagi @Deogratiuskamagi

Dar es Salaam. Investors have been urged to tap into opportunities in the health sector.

Tanzania has 14 pharmaceutical companies.

Since they are inadequate, the country sources 94 per cent of supplies externally.

On April 4, ministers Ummy Mwalimu (of Health, Community Development, Gender, Children and Elderly Ummy Mwalimu) and Charles Mwijage (of Industry, Trade and Investment) brought together stakeholders across the country.

“We need to have vibrant local pharmaceutical industries so that Tanzania can get all medical supplies domestically,” said Ms Mwalimu.

Medical Stores Department director general Laurean Bwanakunu said apart from creating jobs and speeding up economic growth, the industries would enable the government to get medical supplies locally.

The Ministry of Health says although more than Sh1 trillion is spent annually on health-related expenses, less than 10 per cent of that amount is spent on local industries.

About 40 investors showed their interest in investing in pharmaceutical factories, with many expected to start construction in the next six months.

Among the investors were the founder and chairman of the Aga Khan Development Network, His Highness the Aga Khan, who would set up a Sh45 billion pharmaceutical plant.

Mpendae MP Salim Hassan Turky is ready to install a Sh162 billion factory.

Other investors include Biotech Limited, Novabi Limited, Zinga Pharmaceutical, Guilin Pharmaceutical, Simiyu Project Bahari Pharmacy Africables, Hester Pharmaceutical and Kairuki Pharmaceutical Industry, Revital Healthcare, Pharco Ltd, Mohammed Enterprises, Suma JKT, Subhash Patel, Cure Afya Pharmaceutical and Emedics Pharmaceutical.

Tanzania Investment Centre executive director Geoffrey Mwambe said supports investors.


Thursday, April 12, 2018

How outsourcing can transform financial delivery

By Jumanne Mpimbi

In any organisation, the finance function plays a crucial role in contributing to organisational success. It is much like going to the dentist, no one really wants to take the time out to do it, but neglecting the issue can lead to serious repercussions.

Chief financial officers (CFOs) must maximise technology, to redesign the process and invest in talent for the finance function to meet increased regulatory demands, requests for improved information and intense scrutiny it faces from stakeholders.

Entrepreneurs and investors grow their business by driving revenue into the company. Business, per se, is all about making money. Due to this, a lot of entrepreneurs unintentionally ignore their accounting tasks that are equally crucial to the overall performance of their business. They either lack the time or expertise to handle this area in their business. For this reason, entrepreneurs face a dilemma on whether to outsource the accounting services or not.

Business organisations frequently decide to outsource some functions in order to focus on their core competencies, while improving performance and lowering the cost of their non-core activities. It allows companies to achieve sustainable, profitable growth and use capability sourcing in more innovative ways than their competitors.

The most commonly outsourced services within accounting are payroll processing, receivable together with accounting and compliance.

– Payroll. As businesses grow and expand internationally, managing staff and payroll becomes increasingly complex. Failure to file accurate and timely returns, pay staff correctly or maintain payroll confidentiality could put the business at risk of financial penalties and loss of good will.

– Accounting and compliance. Maintaining accounting books and records in accordance with prevailing regulations and preparing and filing all the paperwork required by local authorities can be a time consuming and costly exercise. It places an administrative burden on your staff which has little perceived added value.

Cost reductions are the table stakes, and companies want to know what else their outsourcers can do to make their processes and technology run more efficiently with less costs. Accounting and bookkeeping firms offer services that are beyond just counting your assets and expenses, and balancing sheets. They also provide you with proven and tested financial advice and insights concerning financial health of your business.

Moreover, they produce financial statements, budgets, forecasts, and an all-in-one dashboard for you to monitor all your data. Indeed most business leaders rely on financial data for better management and decision making.

Outsourcing allows the organisation to focus on its core, value-adding activities without the distraction of having to run support services such as accounting services. Support services can consume both management time and financial resources when these resources would be better utilised on revenue generating initiatives or capability enhancement to gain competitive advantage in the market.

Outsourcing to a specialist company can give access to the latest technologies. This is more so to small companies that find it difficult to develop or make new processes.

Mr Mpimbi is an associate at Accounting Advisory Service, KPMG Advisory Limited in Tanzania. The views do not necessarily represent the views and opinion of KPMG


Thursday, April 12, 2018

Former marketing student attracts 6m YouTube customers

Natalie Alzate started making videos on YouTube four years ago when she was 20-years-old, with the intent of making people’s lives more efficient and fun. That combination has paid off big time, as she has grown a passionate following of nearly 6 million subscribers for her channel, Natalie’s Outlet.

Alzate’s fans can tune in to videos twice a week on beauty hacks from around the world, deep dives into viral trends, cooking and fashion tips and advice for everything from organization and productivity to how to prank your friends.

Now Alzate is expanding into the world of podcasts. With #Viral, Alzate will interview the online creators that she admires about how they have achieved their success Alzate shared her insights with Entrepreneur about the questions you must ask yourself to find your own niche as a YouTuber.

How did you get your start with YouTube?

It was about four years ago. I was a marketing student in college and I was studying business and entrepreneurship. I didn’t quite know what I wanted to do, but I knew I wanted to have something of my own. I had been watching Youtube since I was in sixth grade. I loved following the lives of some of my favorite content creators like Michelle Phan, and all these ladies just left me inspired every single day.

I wanted to have that. I wanted to create my own personal outlet. In 2014 I started my channel and I launched it and I was doing it all. I was producing. I was editing. I was the actor, you could stay. I loved the challenge and it’s been absolutely amazing.

How much of your time do you spend on a video and what does that entail?

That’s a whole process. Right now I’m posting twice a week, on Wednesday and Saturdays. I’ve broken my week up into filming twice a week as well, so I film every Monday and every Friday. Shooting takes anywhere from two hours to eight hours depending on the quality or if I’m changing locations. Editing could take anywhere from two full work days, about 16 hours. Thankfully I now have an editor.

As you can imagine doing this all by yourself can be crazy. My editor is amazing and she really understands my vision. The thumbnail is very important. It’s the little picture that you see on your screen right before you click a video. Taking that and editing takes around two hours and then the backend of YouTube, which is what a lot of people don’t know of, tags and SEO and logistics, and asking how can I get this to trend? All that good stuff -- all the numbers. Promo and engagement also takes about an hour. Surprisingly, I never loved numbers but now I’m dealing with all this stuff.

So it is launching the video, engaging with fans, seeing how people respond to the content. Quite a long time. It’s a full-time job for sure.

How do you leverage your YouTube channel and to what extent do you monetize it?

Other than the YouTube ads that run right before video, I also do a lot of brand sponsorships, so I integrate a lot of brands with my content. Recently I did one with Tide, which was really fun. Another was Olay. I’m really grateful for YouTube. I feel like it’s given me so many different outlets to explore. Merchandise is another form of monetizing, and then putting yourself out there [for example, on tours].

What advice do you have for other people who want to build brands on the platform?

Do your homework, watch a lot of content, analyze it. Ask yourself why did the creator say this here? Why are they starting off the videos in this way? What does this all mean? YouTube is such a unique platform. Creators are really changing the game. You have to work from people who are currently doing it and observe them. But also making sure to ask yourself, what could I do that is different? You need to have something that will still set you apart.

It’s so important to really understand the platform that you’re going to be putting your time and effort into. There’s a ton of different ways to do that. There’s YouTube tutorials and there’s simply watching your favorite creators and asking yourself why am I watching this person? What made me intrigued? Why did I subscribe? All this human behavior stuff.

What’s a misconception many people have about YouTube?

I always hear people say, oh YouTube is so easy. You pick up a camera, you just sit there for seven minutes and then upload it. It’s not like that at all. [My demographic] is primarily female between the ages of 13 and 24 in the US. I really have to put myself in those shoes.



Thursday, April 5, 2018

Age-dependency ratio and socio-econo-development


By Karl Lyimo

I wasn’t particularly surprised by press reports that 92 per cent of Tanzanians are dependent upon eight per cent of the population, projected to reach 54.2 million this year – half of them minors below 18 years!

Known as the ‘age-dependency ratio,’ this is computed as the ratio of the young population (under 15 years) and the elderly (65 and over) to the working-age population (15-to-64 years).

According to the National Bureau of Statistics (NBS) – as cited by the minister for Finance & Planning, Dr Philip Mpango – “the chilling revelation is that the dependency rate on (Tanzanians) aged between 15 and 64 years by (Tanzanians) aged below 15 and above 65 years is 92 per cent…!” [See Daily News and The Citizen, March 1, 2018].

In other words: 92 out of every 100 Tanzanians below 15 and above 65 years (in 2017) were dependent on the other 8 aged between 15 and 65 years!

This ratio isn’t far-removed from what it was at the 2012 population census, when Tanzania was home to 44.9 million souls. The census also established that only about 3.6 million of the entire population were economically-productive, with the remaining 41.3 million being dependent on the 3.6 million!

That also works out at the 92/8 per cent dependency ratio (in 2017) whereby 92 out of every hundred Tanzanians still looked to the other eight for succor and their life’s needs some six years ago! [See MTANZANIA; March 3, 2018; and

According to the World Bank [], Tanzania’s age-dependency ratio in 2016 was 93 per cent, with the world average estimated at 54 per cent. The 2016 ratio ranged from 18 and 20 per cent for UAE and Qatar respectively, to 101 for Uganda – and 112 per cent for Niger! [

As also projected by NBS, Tanzania’s population growth is relentlessly growing regardless, increasing by an estimated 1.6 million a year – as against an estimated 400,000 Tanzanians kicking the bucket each year!

Whichever way one looks at it, it’s somewhat discombobulating for an economy that’s among the fastest-growing in Africa – but that has never kicked poverty out of the way!

Indeed, 92 per cent ‘internal’ dependency in a Tanzania which is home to the world’s 25 poorest populations seems to be a contradiction in terms. But, that’s a statistical reality: 92 per cent of two huge age groups depending on 8 per cent of two small age-groups for life’s needs.

Tanzania’s high age-dependency ratio is attributed to chronic poverty and lack of enough educational awareness across the population – but, especially among girls and women in general.

It might sound gratifying to know that no country will ever eradicate poverty root and branch as long as there are ‘children’ over 15 years and adults under 65 who aren’t productive for one reason or another. These include students and disabled adults, as well as the jobless, the ill, the ignorant – and shirkers!

Also, there’re under-15s who’re productive as child labor (‘Machingas,’ etc.) – and over-65s who’re productive in the economy, politics, CBOs, etc.!

Indeed, such factors do play havoc with the ‘age-dependency ratio equation’ – and one wonders why we bother with such statistics at all! Tears!


Thursday, April 5, 2018

Beware of electronic fiscal device risks


By Shabu Maurus

Electronic fiscal devices (EFDs) have been in Tanzania for about eight years now. Generally, there are three kinds of EFDs current in use in Tanzania. The electronic tax register (ETR), which is standalone EFD for issuing fiscal receipts. The electronic fiscal printer (EFP), is a printer connected to a point of sale (POS) system and it also produces receipts. The third kind is electronic signature device (ESD) which is intended for use by business issuing tax invoices from a computerised system. ESDs do not produce receipts but put a string of alphanumeric characters (a signature) on an invoice. The eight years of EFDs use in Tanzania provide an important experience to taxpayers and the Tanzania Revenue Authority (TRA)— both positively and negatively.

This article seeks to highlight two tax risks to taxpayers related to EFDs. Taxpayers, need to be aware of these and other tax risks for a proper management of them.

Unreported errors

There is always a risk that an error can be made when using an EFD. Suppose you have sold a product of worth Sh10,000 but inadvertently punched 10,000,000 in your ETR. There are already incidences where an operator at a fuel station punched a trillion sale instead of thousands! There are also errors related to tax categorisation of products. An “exempt” product sold as a “zero-rated” product.

One of the key features of EFD is that you a taxpayer (user) cannot erase an error. Making an error in itself may not be a big problem. But what you do to realize if errors have been made. And what do you do once you have realized that an error has been made? These two are critical questions. If there is no daily or monthly checking of the numbers and z-reports generated from your EFDs, it will be difficult five years later for you to reconcile the EFDs records with your other sales records. It is also a good practice to immediately report the errors to TRA once identified.

Stolen identity

Despite the usefulness of the EFDs system, it appears that there are still some loopholes that fraudsters can use to their advantage. Do you know how many EFDs have been registered under your name (TIN number)? Your identity may be stolen and you may not be aware until TRA comes for an audit or they raise an enquiry. Someone may fraudulently register an EFD under your name and use it to make his own sales. The problem is that the amount of sales from EFD Management System (“EFDMS”) will be higher than your other records like the VAT returns. It is becoming a common audit practice by TRA to require a taxpayer under the audit to reconcile other sales records to what TRA sees in the EFDMS. This way, you may end up paying tax on sales that you have never actually made!

Understandably, this risk is very difficult for a taxpayer to detect. And most customers do not bother to securitize the names or TIN numbers in the receipts issued to them. So, a periodic confirmation on the status of your EFDs with TRA may be helpful.

Administrative reforms

EFDMS can be improved to help taxpayers address some of the EFD risks. Taxpayers with EFDS can be given a read access to the EFDMS. This will allow them to know the number of EFDs under their names. It will also give them access to their sales records (similar to “bank statements”). This way, taxpayers can perform periodic reconciliations. This will help seal the possible revenue leakages from fraudulent use of EFDs.


Thursday, April 5, 2018

Build your knowledge of shares investment


By Moremi Marwa

In his 53rd Letter to Berkshire Hathaway’s investors/shareholders, as usual Warren Buffet had a lot of words of wisdom that he had to share with his co-investors. He has been doing the same for the past 53 years through his Annual Letters to Shareholders, which are highly anticipated not only by his co-investors but by many across the world. One among many words of wisdom that his recent letter (released on 24th February 2018) was the words related to the investor psychology, and he says: “seizing the market opportunities offered does not require great intelligence, a degree of economics, or a familiarity with Wall Street jargons such as Alpha and Beta. What investors need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for sustained periods — or even look foolish — is also essential”.

Basically, what Warren seem to say is that investors should focus on their long term goals and understand it’s not going to be straight line to get there. That the problem of chasing returns and failing to stock to investment plans is the undoing of most investors.

In my recent past articles, I have focused in sharing the knowledge and understanding on the basics of investing in shares. In the process, we learnt that with some basic education and a simple strategy, over the long-term, one can become extremely wealthy by investing in shares. Let us recap again on this important aspect of investment by looking at the two simple, yet inspiring true investment miracle story in the United States and then in Australia that will reveal to us, even if we forget other aspects of investing in shares that we have covered, we may need to remember this.

If you invested about Sh1 million in Berkshire Hathaway’s (Warren Buffet Investment Vehicle) 53 years ago — that investment is now worth Sh11 billion (that is over 10,000 times the initial investment) with a compounded annual growth rate of 19 per cent per annum for a period of 53 years. Yes, I understand how you may want to interpret this, but it is what it is, and yes, as Warren says — it doesn’t require a great intelligence, or a degree of economics. It requires a great deal of focus on a few simple fundamentals.

Second example, if you had invested the equivalent of Sh1 million in the listing of Westfield Holdings (an Australian shopping centre group undertaking ownership, development, design, construction, funds/asset management, property management, leasing, and marketing activities, in September 1960 (when Westfield listed in the Australian Stock Exchange), that amount of Sh1 million that inflation has turned into today’s about Sh12 million, and reinvested every dividend and bonus that Westfield paid, your investment would have been valued at about Sh152 billion today!

The Berkshire Hathaway’s and Westfield experiences are some of the best example of long-term wealth creation by investing in shares. Some years of consecutive increases in Berkshire or Westfield’s overall investment and profits have gone toward generating these amazing investment records.

And before I forget, it is important we note that not every share does what Berkshire or Westfield has done. There are cases where companies’ fail and their shares disappear from the market and take their investors’ money as well. Plucking one exceptional share out of many may distort what is possible.

Closer to us (understanding my limits on commenting in either of the DSE listed companies, but for the sake of knowledge sharing and awareness creation — I need to mention something closer to us so it may make better sense), there are many shares on the Dar es Salaam Stock Exchange that have similar successes but are smaller context. And, the message is a simple one. Sh1 million invested in September 1998 in Tanzania Breweries Limited is worth Sh35 million today. A similar example is that of Tanzania Cigarettes Company whose current price is Sh16,300 from Sh410 when it was listed in the DSE in year 2000, in a period of 17 years, investors total investment growth of 40 times or 3,900 per cent. This means that Sh1 million invested in TCC in year 2000 is currently wealth Sh40 million. (and in both TBL as well as TCC cases, dividends incomes have been excluded in the computation).

The TBL and TCC cases do not exactly compare to either Berkshire or Westfield examples, but they are similarly better examples closer to us that investors may easily compare.

So, the moral of the above cases is that with some basic education, knowledge and skills coupled with a simple strategy, over the medium to long-term, one can become relatively wealthy.

With regard to education and knowledge, in our recent articles, we learnt the basic education about investing in shares, we know that shares represent ownership of a company and its assets and earnings. We learnt in detail about valuation and pricing of shares as well as what to look out for when investing in shares. We learnt that the important point in determining the value of shares in a particular company is on paying close attention to its operating environment as well as its strategy and performance.

As it relates to analysis prior to investing, we learnt that taking a top-down approach to analysing a company’s prospects involves looking first at the broad macroeconomic, social and political environment. We then focus the analysis to consider the more industry specific or even locational influences on a company’s earnings. We learnt that the bottom-up approach of share analysis begins with the narrow focus of the individual merits of a particular company and then expands to look at the sector, the market and the economy. We also learnt that earnings or profit is the single most important item on the statement.

We learnt about factors that influence return on a share and therefore its pricing. We learnt that company shares tend to track the market and sector or industry peers. We learnt that share prices react to supply and demand. We also learnt that economic statistics such as interest rates, affect the share market. Market sentiment also plays an important role.

Investing in shares in an educated way will give you a great start and an important foundation on your path to financial literacy.

Like anything in life, investing in shares is really quite easy if you are prepared to learn, be disciplined and apply basic common sense to the choices you make. There is no magic formula or quick solutions to becoming well off when buying and selling shares, but education about what a share is and why you would invest in shares is very important before you dive further into such investments.


Thursday, April 5, 2018

Experts fret about banks’ new reporting standards


By Janeth Muhizi @janethmuhizi

Dar es Salaam. The financial sector is unnerved by the compliance of new international standards in an environment which funding woes are already biting.

Experts ponder how Tanzania will comply with International Financial Reporting Standards (IFRS 9) as the banking industry hobbles.

The standards, which came into force in January 2018, introduced new features, including stringent requirements for bad loan provisions as well as provisioning for trade financing transactions.

They are expected to increase the stock of credit impairment provisions and affect profits of the banks.

However, the impact may be reflected in the banks’ financial statement for the first quarters which ended March 31.

The new standards require financial institutions to account for expected credit loss (ECL) from day one of issuing a loan, compared with the previous standard (IFRS 39), whereby the ECL was accounted for after 30 days of a dishonoured loan.

That means, if a loan is not serviced in time, it will end up being a non-performing loan after only a single day.

Also, loans to government which were previously considered risk-free are now required to be accounted for their ECL, meaning more expenses in their financial statements.

In her statement, the PwC Tanzania senior associate in Assurance Services, Ms Isabella Mwambalaswa, said: “Previously, banks placed expected credit loss on loans that had not been honoured in 30 days. Now they will be required to provide for them from ‘day one’, including government loans which were previously considered risk-free.

“Prior to these changes, banks may turn to their investors for injections into investments - or considered consolidation - to regulate the volatility of their profits and assets.”

She advised banks to invest in systems and processes that would accommodate the new ECL models and their extensive use of data and at the same time develop and implement stringent internal controls that would mitigate the expected losses.

A member of the Global Board of Directors at the Institute of Internal Auditors, Mr Augustine Mbogella, notes that the IFRS 9’s application will portray the reality of financial institutions’ performance.

“One of the accounting principles is being conservative, whereby we anticipate loss instead of income or profit. As the standard suggests a provision for expected credit loss at the beginning of the loan issue will result in high accumulation of expenses in the financial statement than the later,” he said.

However, he said since the standard is more conservative, financial institutions that record under-performance expected credit loss would be high. However, certified public accountant Dinna Dario said it would be an outstanding time for the financial institutions to follow the transition as they might choose to transfer the risk to loan seekers and be hit with higher rates at a time when they are advised to increase issuing of credit to investors.

“On adaptation of the IFRS 9, financial institutions should be prepared by developing tailored approaches on how to deal with these losses, and continuously updating all the processes that affect calculation of provisions,” she said.

Tanzania’s banking industry had an average nonperforming loan (NPL) ratio of 12.5 per cent at the end of September 2017, up from 10.6 per cent in June 2017 and 9.06 per cent in September 2016. However, new IFRS 9 requirements may worsen the NPL position in the banking subsector despite the fact that there are many other factors which accelerate the NPL ratios.

According to some experts, the implementation of IFRS 9 is expected to hit into banks’ earnings, capital levels and deny banks of cash.

which could have otherwise been used as loanable funds or used for trading for revenue generations.


Thursday, April 5, 2018

Tea farming reels as fertiliser prices soar


By Halili Letea @hletea

Dar es Salaam. Poor weather, aged tea plants and high fertiliser prices are among factors that reduce crop production.

The Tea Board of Tanzania (TBT) reported that the crop production decreased to 26,975.4 tonnes in the year to June 2017 from 32,628.6 tonnes the previous year.

“That was largely contributed to an uneven distribution and low rainfall as tea cultivation is rainfed to a large extent,” reads a TBT report.

The report shows that the rainfall decreased to 19.84 per cent to 99.41mm during the same period.

That happened at a time when demand for tea in the global market was high, pushing up prices, according to the Bank of Tanzania.

In the year ending January 2018, the average annual tea price increased by 16.1 per cent compared with last year’s.

The price of a kilo of tea rose to $3.1 from $2.7 during the period.

However, the monthly price remained flat -- at $3.1 -- between December 2017 and January.

Meanwhile tea prices at the Mombasa Auction increased from $2.3 to $2.8 a kilo during the same period.

“The price of tea increased mainly due to a low supply following a decline in production in East Africa and India due to unfavorable weather conditions” BoT report reads in part.

TBT has spelt out strategies to improving tea quality and quantity. That included setting an indicative price.

TBT Planning, Monitoring and Evaluation director Theophord Ndunguru said: “We have our experts in Njombe-Igomini educating growers on better farming methods and extending their farms to increase production.”

Agricultural Non-State Actors Forum executive director Audax Rukonge spoke about the necessity of replacing aged tea plants with new ones and drawing up new farming strategies.

Mr Rukonge calls on tea farmers to sell their produce immediately to avoid quality depreciation, which will result in poor earnings.

Tea exports fell to 23,314.5 tonnes in 2016/17 from 30,057.9 tonnes in 2015/16.

Tea is mainly grown in Mufindi, Njombe, Rungwe, Lushoto, Korogwe, Muheza, Bukoba and Muleba.


Thursday, April 5, 2018

5 essentials to growing successful business


Picture this. You get to your desk on that last Monday morning. You’ve spent years working this job that hasn’t been what you wanted for your life, but you smile because it’s almost over. You put in your notice two weeks ago. You’re down to your last week. This is it. You’re about to leave the nine-to-five world behind to begin living your dream of entrepreneurship.

You spend the week saying goodbye to coworkers you’ve enjoyed working with (you smile at those you didn’t). Each day you recall what you’ve gone through and consider where you’re going. You come to the end of that week and clean out your things. When you walk out of those doors on Friday evening, you feel victorious. What happens next in your life will be on your terms.

You spend the weekend with those you love. You breathe easier because you don’t have to punch a clock anymore. Monday morning you wake up without an alarm clock, get out of bed and smile until your face hurts from smiling so much. The freedom feels good on you.

Now that your dream of entrepreneurship is reality, the real work of your life begins. You will be free in a way you haven’t been before, but how you pay your bills is on you. The amount of money you earn is proportional to the amount of work you put into your business. Here are five essentials to growing a wildly successful business now that you have become your own boss.

1. Get clear on your outcome

To get anywhere, you have to know where you’re going. It’s the same in any business. To succeed as your own boss, you have to know what you want your outcome to be. You became your own boss for a reason greater than making money without punching the clock.

Get clear on your goals. Get honest about all the things you want to accomplish in your life and how your business will help you get those things. Give yourself metrics to build upon each step of the way. Set lofty goals that are attainable but not easily. Live each day knowing you will one day accomplish those goals and keep your focus on the outcome of those accomplishments.

2. Build systems that can be scaled

Being the boss is more than signing your name on some paperwork. It means you are the person responsible for the growth of your business. To grow, you need to implement strategies and put systems in place that allow you to scale. Your goal should be to grow your business bigger than just you. You need marketing systems (even, possibly, a team), plans for each quarter, sales goals, a system to organize your time and more. Tools and technology can help you with creating systems. Research what systems work best to grow the type of business you have.

3. The real goal is to become the best you

You become a better boss as you become a better person. Your personal development is inseparable from the growth of your business. Your reward for putting in the work to be the best you is the energy and motivation you need to grow your business.

Continue to eat food that nourishes your body. Spend the appropriate amount of time exercising. Read books and consume content that educates and inspires you. Experiment outside your comfort zone.

Wake up each day determined to challenge yourself more than the day before. Become the best version of yourself in every area of your life. It will make you a strong entrepreneur who grows an amazing business.

4. Leverage today’s tools and opportunities

We are very fortunate to live in the internet age. More than 3.5 billion people log into the internet every day. About 2.46 billion people use social media every day. Today, you can access all the information you want -- about anything -- with a few strokes of your finger on your smartphone. You can use software and technology that can take your business to the next level in months.

Your business will experience explosive growth when you leverage all these opportunities.

Leverage the power of the internet to market and give your business exposure to millions of people. You can get interviewed on podcasts about your business and write for large business and personal development publications. These two strategies alone will grow your audience and exposure.

Use tools such as Wordpress, Clickfunnels, Hootsuite, Asana, Mailchimp, DocuSign and many more. You don’t need to understand and know how to use all of it. The goal is to leverage what makes sense for your growth strategy.

5. Surround yourself with entrepreneurs who push you

Your circle has an effect on how successful you become. One secret to becoming successful as your own boss is surrounding yourself with entrepreneurs who inspire and push you. You want those in your life who are just as hungry as you.

People who are complacent will drag you down to their level quickly. Join a mastermind group. Network with local entrepreneurs doing great things where you live. Join Facebook groups with like-minded game changers. The point being: elevate your circle to become successful.

Use these five essentials to help you build the business of your dreams and create a life of freedom.



Thursday, April 5, 2018

Gold heads to $1,400/oz as Sprott sees ‘winnerless’ trade tensions


Singapore. Gold will surge to the highest level in five years if a global trade war breaks out, according to Rick Rule, CEO of Sprott US Holdings, who’s been involved in the market for four decades.

Bullion could top $1,400/oz in 2018 as escalating trade tensions drive investors to havens and the three-decade bull market in bonds nears an end, said Rule.

Spot gold traded at $1,338 on Tuesday after three straight quarters of gains, while exchange-traded fund holdings are around the highest in half a decade.

President Donald Trump has ordered import tariffs on steel and aluminum and sought new restrictions on Chinese investment. Asia’s top economy retaliated by imposing its own levies on Monday, while the US is expected to release this week a new list of Chinese products to be slapped with duties. A trade war could crimp demand for US assets just as the budget deficit swells, with the dollar vulnerable should international buyers shun American debt.

“In the 40 years I’ve been involved in the gold market, the most important determinant of the gold price has been international confidence in the US dollar and in particular, the US dollar as expressed by the US 10-year Treasury,” Rule said in an interview March 29. “The fact that the US seems to be bound to engage in a zero-sum trade war has begun to strike people as something that’s bad for everybody in the world, not just the US. The potential for a winnerless trade war certainly gives cause to some concern.”

The aggregate federal, state and local debt in the US, both on balance sheet and entitlements, relative to levels of savings and investments in the economy, will contribute to worries over the longer-term purchasing power of the dollar, particularly in view of low current yields, Rule said.

Rising income and savings in Asia, a region with a disposition for gold buying, could also lead to more demand, he said.

Sprott US Holdings is a subsidiary of Toronto-based Sprott, which had C$11.5-billion under management as of December 31.

An easing of the China-US trade row may damp bulls’ enthusiasm.

China on Monday urged talks to prevent greater damage to relations, and repeated its position that disputes should be resolved with dialogue. Plus, the biggest US tax overhaul in years signed into law by Trump in December will provide more stimulus to the US economy and may curb the impact on the budget deficit.

BNP Paribas SA predicted at end-February bullion will probably be lower by the end of the year than the start, with four Federal Reserve rate hikes expected in 2018, while IHS Markit sees gold dropping to $1 200 by the year-end. (Bloomberg)


Thursday, April 5, 2018

Is Tanzania ready for IFRS 9 transition?


By Isabella Mwambalaswa

This year began with a bang in a financial accounting sense for financial institutions in Tanzania as their 2017 accounts (with a mandatory 31 March reporting deadline) are the first to be subject to newly adopted International Financial Reporting Standards (IFRS), in particular IFRS 9!

Taking effect at the beginning of this year, the standard brings about big changes in the calculation of expected losses for financial assets and their recognition. It also introduces hedge accounting. It assumes that because every financial asset has a risk of defaulting, it therefore has an expected credit loss (ECL) attached to it. This credit loss will now be recognised at its origination.

Previously, banks provided for loans that had not been honored past 30 days. Now they will be required to provide from ‘day one’, including government loans which were previously considered risk free.

The standard also introduces the forward looking aspect over and above the day one expected credit losses; as such, it requires institutions to include forward looking economic scenarios or variables in the their ECL calculations and considerations of credit risk.

At face value, this will may well mean higher provisions and more volatile profits for financial institutions, especially banks. The challenge for the banks is the effective “double whammy” of implementation of this standard at the same time when the state of the economy is such that the banking sector has been struggling with deteriorating Non-Performing Loan (NPL) ratios (which overall were at 11 per cent as at the end of December 2017); but are at the same time they are urged to keep providing credit.

Other possible impacts of this transition include the expected downward pressure on regulatory capital and equity from the increase in provisions. Banks may turn to their shareholders for injections in investment - or consider consolidation - so as to regulate the volatility of their profits and assets. Banks will also need to invest in systems and processes that will accommodate the new ECL models and its extensive use of data and at the same time develop and implement stringent internal controls that will mitigate these expected losses.

This means tighter control of the credit appraisal processes and improving monitoring of the loan portfolios so as to reduce the burden of the provisions. But let’s not forget; on the flip side the burden associated with provisioning means that borrowers will also be affected as borrowing costs will go up and stricter rules on collateral will be enforced.

One interesting aspect which I find intriguing is the forward looking twist in assessing the credit losses and its subjectivity. IFRS 9 is silent on which specific forward looking scenarios should be considered, let alone how to calculate them in the first place. It does, however emphasize the need to be unbiased in the consideration of these variables.

One concern is potential uncertainties and differing interpretations of these new concepts across our banks. Who is right or wrong? Would it have been safer if the standard gave actual guidelines on which forward looking variables to incorporate in our considerations?

One thing that is clear is that banks do need to have not only carried out a robust assessment of the impacts of the standard, but also that this can be evidenced. They need to develop tailored approaches on how to deal with these losses, and continuously update all the processes that affect the calculations of provisions. This also means that, in the long run, investment in systems is a must as this will enable banks to accurately and easily analyze the trends of all borrowers in their lending books.

As this door opens, and with the state of the banking industry being under pressure on many sides, it is definitely a bitter pill to swallow.

However, looking ahead, this may be the beginning of the stability we have always wanted.

Credit quality for any economy needs to be constantly reviewed with fresh set of eyes. The implementation of IFRS 9 could be the lens we needed.

In the long run, with prudence and better processes supporting it, I believe this standard will be the launching pad used to improve the industry’s credit quality and push the country towards economic prosperity.

The columnist is a senior associate – Assurance Services, PwC Tanzania. The views expressed do not necessarily represent those of PwC.


Thursday, April 5, 2018

Code of Ethics on franchising


One of the most glaring gaps for new franchisors starting off in East Africa is that they do not give any tangible disclosures to prospective franchisees prior to signing up. Beyond rosy financial projections which may never work out as presented, nothing much else is availed. This is because the sector is unregulated and there are no strong franchise associations to enforce ethics. Consequently, gullible franchisees ar