How traders in Tanzania are being ripped off in elaborate dollar racket

Dar es Salaam. Businesspeople have voiced their concern about what they say is a booming black market caused by the dollar crisis in Tanzania.

The country has been grappling with a shortage of dollars since last year that has largely been attributed to external factors such as the impact of the global Covid-19 pandemic, the war between Russia and Ukraine, the US Federal Reserve’s decision to raise interest rates and climate change.

These crises disrupted supply chains, leading to higher commodity prices in the world market and increased demand for dollars.

According to businesspeople, black market foreign exchange transactions are now commonplace in Tanzania, with financial institutions being accused of taking advantage of the crisis to sell dollars at higher prices than those officially quoted by the banks.

“These financial institutions readily buy dollars, but when it comes to selling, they claim that they don’t have enough dollars to sell. I recently needed $150,000 to pay for imports, but several banks informed me that they could only provide a maximum of $5,000 daily, which is peanuts,” said a businessman who asked not to be named.

He added that a bank teller asked him to leave his mobile number and a few hours later he was called and directed to a person who would have sold him dollars at Sh2,800 each, contrary to the displayed exchange rate of Sh2,540.

A clearing and forwarding agent, who also declined to be identified, said he has been struggling to get $5,600 for two weeks to clear goods at Dar es Salaam Port.

“I have visited almost all banks and bureaus de change in Dar es Salaam in vain. As we are speaking now, I’m preparing to travel to Arusha and Moshi and see if I can get that sum or at least something close to that,” he said.

Another trader who sells clothes in some SADC countries said he was approached by a person while in a bank queue, who asked him that they step aside and talk

“We went outside the banking hall and he asked me how much I wanted in dollars. I told him I needed $3,000 and he offered to sell me each dollar for Sh3,000. I was worried because I had heard that people were being sold counterfeit dollars in the streets, so I declined.

“When I returned to the queue a few minutes later, we were informed that the bank was running out of dollars and were asked to come back the next day. On my way out, I saw the same person talking to other people, who were also desperate for dollars,” he added.

The Bank of Tanzania (BoT) prohibits the conducting of foreign exchange transactions outside approved premises, with licensed outlets being required to put in place effective controls to ensure that off-premises transactions are prevented.

The prohibition of foreign currency transactions in settings not approved by the central bank is aimed preventing the entry into circulation of counterfeit foreign currency, among other objectives, according to BoT governor Emmanuel Tutuba.

“The dollar crisis is global and while it has affected us, we are a bit well off because we have come up with strategies that include facilitating tourism activities, reducing imports and increasing exports to ensure greater availability of dollars,” he said.

Mr Tutuba further noted that the central bank has also relaxed regulations for bureaus de change, including opening a window at hotels to buy foreign currency from tourists and visitors entering the country.

Contacted for comment, Tanzania Bankers Association (TBA) chairman Theobald Sabi said he was not aware of the existence of a dollar black market.

“I’ve not received any information of that nature,” he said.

Institute of Management and Entrepreneurship chief executive Donath Olomi said some people would always take advantage of a situation where demand exceeds supply.

“Sellers will increase prices and buyers will be ready to buy at any cost because they are in dire need of the commodity,” he said.

The solution is to find the culprits and take exemplary legal action against them while at the same time looking for a lasting solution to the crisis, Dr Olomi added.