Hope, Fear as Budget set to go into effect

Thursday June 24 2021
Budget pic

Finance and Planning minister Mwigulu Nchemba confers with the Minister of State in the Prime Minister’s Office (Policy, Parliamentary Affairs, Labour, Youth, Employment and Persons with Disability), Ms Jenista Mhagama, in Parliament in Dodoma yesterday. PHOTO | EDWIN MJWAHUZI

By Alex Nelson Malanga
By Rosemary Mirondo

Dar es Salaam. Members of the private sector, economists and business experts yesterday received with mixed reactions the final 2021/22 Budget, which Parliament overwhelmingly approved on Tuesday.

Those who spoke to The Citizen said on one hand the Budget was expressing the government’s commitment to improving business environment, but on the other hand some issues like Sim card levy ranging from Sh10 to Sh200 were likely to derail economic growth.

Confederation of Tanzania Industries (CTI) policy and advocacy director Akida Mnyenyelwa commended the government’s decision to remove 15 percent additional import duty on industrial sugar and duty remission on inputs and raw materials.

He said the move would spur the growth of the manufacturing sector.

Mr Mnyenyelwa said the issues in question were previously eating into their operating capital and so did discourage manufacturers.

Now, he said the new move would cut operational costs and make domestic industries competitive enough to compete in the East African region and beyond.


“The new development will create a level playing field in the region,” said Mr Mnyenyelwa.

He also said government commitment to improving infrastructure like railway, roads and electricity would take the manufacturing sector to the apex.

Tanzania Private Sector Foundation’s (TPSF) Policy, Research, Advocacy and Lobbying director Andrew Mahiga said generally, the budgetary measures considered the need to promote the development of the private sector. The measures that deserved cheers include lowering production costs and protecting domestic industries.

However, after knowing how Covid-19 has ravaged the country’s economy, the private sector’s expectation was that the government could come up with more measures to cushion it.

The global economy was adversely affected by the outbreak of the Covid-19 pandemic and Tanzania was not spared therefore declining from 6.9 percent in 2019 to 4.7 percent last year.

“More package reliefs and boosting measures were expected to revamp the economy,” noted Mr Mahiga. Tanzania Business Community’s communication director Stephen Chamle said the just passed 2021/2022 Budget still had some major challenges even as he expressed optimism on the directives issued to the Bank of Tanzania (BoT) and commercial banks to reduce interests on loans.

“This was a huge stumbling block for members of the business community who have to access loans from time to time to expand their businesses,” he said.

On the challenges, he said small traders, famously known as Machinga, have continued to be a challenge to registered businesses in major cities by selling the same products as the businesses that are placed in front of their premises.

“The small traders only have to pay a total sum of Sh20,000 annually for identification while the registered businesses are paying taxes and levies as well as rent,” he observed.

Asking: “How can registered traders compete with Machingas who place the same products in front of their shops?” He further noted that the passed Budget did not take into consideration the valuation of customs duty on goods.

Explaining, he said they had made their recommendations to a committee of the Ministry of Finance and Economic Planning on how the decision to give full mandate to the commissioner for customs duty to decide the valuation of goods was opening doors to corruption.

“This has not been taken care of and continues to prove a challenge to traders importing goods for business,” he said.

An economist from the University of Dar es Salaam (UDSM), Dr Abel Kinyondo, said levy on sim cards was counter-productive especially for a country which is dreaming of becoming an industrialised economy come 2025.

“We need to be keen on where to introduce tax or levy, or we will retard economic development,” noting that mobile phones were no longer a luxury, but necessity which is a catalyst for economic development.

He was of the opinion that the government should tax more on luxury goods and spare necessities.

Dr Kinyondo added: “It could be wise if we think of broadening a tax base, instead of milking a few.”

A bodaboda rider, Mr George Lewis, seemed to have been reading from a different script.

“Sim card levy deducted on recharge vouchers is a good initiative that will ensure the government has enough resources from different sources for the development of the country,” he noted.

He was also pleased with the Budget because among other things it had taken into consideration the huge sums of fine they had to pay for traffic offences.

However, he was of the view that the government needed to review its decision on the property taxes that will now be deducted from prepaid electricity meters (Luku).

“Not everybody living on a property is the owner and if the government continues with this, it means it will be giving unnecessary burden on tenants,” he said.

Business expert and economist Donath Olomi said the government was doing well when it came to improving the business environment. However, he challenged that more needed to be done.

For that to happen, the government should mend the way it was implementing the blueprint, a document established in 2018 with a view to setting a stage for a raft of amendments to laws and regulations governing the conduct of businesses.

“Yes, the government has been improving the business environment but at a low pace, low level of accountability, monitoring and without being organised” he said.

He also said the government had not expressed bold strategies to enable them to employ themselves.