Tanzania Foreign Investment News (Page 7)

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A five-year plan for Tanzania requires a total of $360m for a phased implementation of the Integrated and Coordinated Community Health Workers program to advance the achievement of Universal Health Coverage. The first year alone will cost $40m.

The cost was released at a workshop held by Africa CDC from 2 to 6 September 2024 in collaboration with donors and implementing partners who supported the Ministries of Health of Tanzania and Zanzibar in Dar es Salaam to develop their country Community Health Acceleration Plan.

The Integrated and Coordinated Community Health Workers (iCCHE) program seeks to scale up Coordinated Community Health Workers programs to increase countrywide coverage of life-saving interventions, contribute to universal health coverage and end preventable maternal and child deaths by 2030, said Dr. James Matthew Guwani, head of Community Health Division at Africa CDC.

The plan covering mainland Tanzania and the island of Zanzibar runs from 2024-2028. It was launched in 2023 by the Tanzania’s Ministry of Health in collaboration with the President’s Office-Regional Administration and local government and partners.

The aim of the iCCHW is to provide a framework for aligning efforts, coordinating activities, mobilizing resources and achieving impactful outcomes in the realm of community health delivery services.

The iCCHE program will prioritise, expand, and professionalise the community health workers workforce by deploying 137,294Community Health Workers in 4,263 Mitaa and 64,384 Hamlets countrywide.

“This iCCHW is a top priority in the government’s transformation plans which will contribute to the country’s vision of a healthy society with improved maternal, newborn, child health, nutrition, sanitation, and a reduction in NCDs (Non communicable diseases), thus contributing effectively to individual and national development,” said Dr Ntuli Kapologwe, Director of Preventive Services, Ministry of Health Tanzania.

Dr Kapologwe indicated that health financing should be broad to include issues such as Universal Health Coverage, which currently stands below the 66% average. To address this, effective integration and coordination of Community Health Workers (CHWs) are essential.

Dr. Ntuli encouraged the use of advocacy tools to attract donors and secure additional funding. “Learning from successful models and the progress made in Zanzibar can enhance their resource mobilization efforts,” he said adding a disease-focused approach was not ideal for this programme, rather a system-focused strategy would be useful to avoid fragmentation.

Dr Barnabas Kwame Yeboah, a Community Health Specialist at the Africa CDC called for institutionalising, integration and sustainability of community health programs and emphasized the importance of political commitment and leadership at global, continental, and national levels. “There is need for structured support and sustainable financing to maintain effective community health initiatives,” he said.

Key recommendations were made to sustain and consolidate the overall gains achieved so far through the implementation of the plan. In Tanzaniahigh-level advocacy meetings with government, funding agencies (new and old) should be held to mobilize resources for the implementation of the Community Health Acceleration Plan.

An investment case should be developed as a tool to guide the resource mobilization efforts and advocacy and include resource mapping to gather resources for the Integrated and Coordinated CHW Program. Fast tracking the roll out of community health workers training for the first three clusters, which amounts to 28,000 community health workers from the ten priority regions must be considered. The Integrated Community Health Service Package and Training Curriculum needs to be revised to facilitate training and deployment of community health workers and a process to develop a comprehensive Community Health Strategy in alignment with the existing national roadmap and priorities for of Tanzania.

Zanzibar will need to continue the roll out of the training program for the 3,000 community health workersand hold high-level advocacy engagements to mobilize resources to procure 3,000 community health workers kits before their graduation.The trained 3000 community health workers will need to be deployed upon completion of the training across Zanzibar.

Dr. Salim Slim, Director of Preventive Service and Health Education at the Ministry of Health Zanzibar said Community Health Workers are a key solution to the shortage of healthcare workers in Tanzania Mainland and Zanzibar.

CHWs were instrumental in advancing antenatal care. Zanzibar is now measles-free due to the dedicated work of CHWs, he said. The first case of measles in Zanzibar was identified by a CHW, underscoring their important role in detection, prevention and response in disease outbreaks. “We provide each CHW with the tools to reach 100 community members,” Dr Slim said.

He called for a collective commitment to meet health goals and address challenges like Mpox, urging the development of robust systems to tackle these issues.

He said Zanzibar’s President recently launched a 6-month programme for community health worker recruitment, training and deployment. Dr Slimappealed to partners to contribute significantly for Zanzibar to acquire 3,000 CHWs deployment Kits before the first cohort of CHWs graduate in the next 6 months. Seventy-six participants including Africa CDC staff, ministry of health officials and about 12 different implementing and donor partners attended the meeting. The workshop was a follow up to the Africa CDC-UNICEF country consultation in May in Addis Ababa. Africa CDC has committed to the achievement of the decision of Heads of States and Governments to recruit, train, and deploy 2 million Community Health Workers on the continent, by 2030.

Source: allafrica.com

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TANZANIA: TANZANIA is increasingly emerging as a top choice for investors worldwide, reflecting the sixth phase government’s achievements in enhancing the business environment. The country stands out as a beacon for investors seeking stability and growth in East Africa, leveraging its strategic geographical position and political stability to promise returns on investment.

The surge in investment is evident in the recently concluded first quarter (Q1) of the 2024/2025 financial year (FY), where Tanzania registered 256 new projects, a significant increase from 137 projects in the same period last FY.

Mr. Gilead Teri, Executive Director of the Tanzania Investment Centre (TIC), briefed journalists in Dar es Salaam, stating that the value of investments in Q1 reached 3.9 billion US dollars (about 11 tri/-), compared to 2.1 billion US dollars (about 5.7 tri/-) during the corresponding period of the 2023/2024 FY.

Mr. Teri highlighted the government’s unwavering commitment under President Dr Samia Suluhu Hassan to welcome both domestic and foreign investors, underscored by a proactive economic diplomacy approach.

“President Dr Samia has prioritized the investment sector as a key driver for economic growth and poverty alleviation,” he said.

The new Investment Act of 2022 has also played a pivotal role by providing various incentives, allowing investors to enjoy import duty exemptions for capital goods such as machinery, while the deemed capital goods benefit from a 75 per cent import duty relief.

Furthermore, the Act lowered the capital threshold for domestic investors to 50,000 US dollars (about 133m/-) from 100,000 US dollars (about 267 m/-).

In addition to favourable legislation, Mr. Teri noted that collaborative efforts involving Tanzania’s embassies, TIC and other public entities have effectively promoted the country’s economic opportunities and tailored incentives for investors.

ALSO READ: Tanzania seeks foreign investors for energy transition projects

The TIC reported a substantial increase in investment during the last FY’s fourth quarter (Q4, April to June), where 198 projects worth 1.6 billion US dollars (about 4.3 tri/-) were registered, creating over 96,000 jobs.

This represented a 53 per cent increase from the previous year’s Q4, which had 129 projects valued at 1 billion US dollars (about 2.7 tri/-), generating 14,631 jobs.

In terms of sector performance in Q4, the manufacturing sector led with an estimated capital of 637 million US dollars (1.7 tri/-), followed by commercial building, human resources, transportation and tourism.

Foreign Direct Investments (FDIs) constituted a notable share of overall approved investments, valued at 938 million US dollars (about 2.6 tri/-), while domestic investments made up about 12 per cent, amounting to 681 million US dollars (about 1.9 tri/-).

Mr. Teri emphasised that the consistent upward trends in project registrations, capital inflows and job creation reflect growing business confidence in Tanzania, supported by TIC’s facilitation efforts.

In an interview with the Daily News, economist and investment banker, Dr Hildebrand Shayo praised Tanzania’s business-friendly environment and low-risk landscape, noting its exceptional economic potential due to a beneficial tax system and regulatory framework.

“Tanzania’s pivotal location within the East African Community (EAC) enhances its attractiveness to investors,” Dr Shayo remarked, citing the ongoing construction of critical infrastructure, including the electrified Standard Gauge Railway (SGR).

Business expert Dr Sylvester Jotta on his part attributed the country’s investment success to predictable business policies and laws, as well as reforms in ministerial structures, which have amplified the government’s commitment to boosting investments.

Economic diplomacy expert, Professor Kitojo Wetengere highlighted Tanzania’s strong diplomatic relations within the EAC and SADC, enhancing its position as a gateway to these markets.

He urged the government to continue improving transport infrastructure to accelerate regional trade and investments.

With abundant natural resources, including gas, minerals and fertile land, Tanzania presents a wealth of opportunities for investors.

Mr Akberalis Jozer, Director and Founder of Akberalis Hardware and Electric Limited, noted that good governance under President Dr Samia has reduced bureaucracy, fostering a supportive environment for business operations.

In her end-of-year speech on December 31, 2023, President Samia announced that the TIC registered a total of 504 projects worth 5.6 billion US dollars (about 14 tri/-) in 2023, a 58 per cent increase from 292 projects in 2022, with 55 of those being expansion projects, further testament to investor’s’ confidence in Tanzania’s business climate.

As Tanzania continues to enhance its investment landscape, it stands poised as a promising destination for global investors seeking growth and stability in East Africa.

Source: allafrica.com

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The government has assured that it will continue to strengthen the services provided by Tanzania Posts Corporation (TPC), focusing on modernising its operations and transitioning to a more advanced system.

Speaking during his visit at the headquarters of the TPC in Dar es Salaam, the Minister for Information, Communication and Information Technology, Jerry Silaa said the improvements focus at boosting the postal services.

“The ongoing efforts are part of a broader strategy to ensure that postal services keep up with technological advancements, enabling them to offer more efficient, reliable and accessible services to the public.”

He added that TPC is a major institution in this country and it has long been at the forefront of connecting people and providing essential services, from communication to financial transactions.”

Mr Silaa said Posta is set to establish the Jamii Exchange, a platform that allows customers to access multiple services in one place. Through Jamii Exchange, citizens can obtain vital services such as National ID (NIDA), birth and death certificates (RITA), driving licenses, passports and other essential documents.

He added that the innovative platform is part of a broader government initiative to streamline service delivery and improve efficiency across public institutions.

“By bringing together various services under one roof, Jamii Exchange aims to simplify procedures that often require citizens to visit multiple offices, thus saving time and resources,” said the Minister.

According to Mr Silaa, the integration of the services marks a significant step in making government services more accessible to the public and that it ensures that no one is left behind in Tanzania’s digital transformation.

“I commend the efforts of the Posta team for their relentless work ethic in driving progress. The implementation of integrated systems is crucial as we strive to make Tanzania a digital nation and we have made remarkable strides in this direction,” he explained.

The Head of International Postal Affairs, Mr Elias Madulesi pointed out that despite misconceptions, postal services have evolved significantly.

“We have taken measures to raise awareness and educate the public about the modern services that Posta offers. Many believe that Posta is a relic of the past, but that’s far from the truth,” he said.

Source: allafrica.com

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Tanzania’s opposition leaders have recently been the target of government crackdowns against political dissent. A planned march in late September 2024 to protest against the abduction and murder of an opposition figure was stopped by the police, and its organisers were detained.

This renewed crackdown on opposition leaders dashes the promise of a more even political field conjured by the initially conciliatory tone taken by President Samia Suluhu.

Among those recently held by the police was Freeman Mbowe, the chairman of the country’s main opposition party, Chadema (Chama cha Demokrasia na Maendeleo). Mbowe has been the target of arrest and harassment by current and previous Tanzanian regimes.

Since taking over as chairman of the party in 2004, Mbowe has built a political machinery that threatens the supremacy of the ruling party, Chama Cha Mapinduzi. The ruling party, which grew out of the independence party Tanzania African National Union, has dominated politics in the east African nation since independence in 1961.

Tanzania amended its constitution in 1992 to allow for a multi-party system. However, it has not been possible for an opposition party to win the presidency. The constitutional changes were largely cosmetic and kept the ruling party in control of decision making in government and parliament. This has constricted the space for opposition.

Between the 1995 and 2015 general elections, however, there were gains in opposition parliamentary seats. In 1995, the first election after the constitutional amendments, 55 seats (23.7%) out of the available 232 went to opposition members of parliament. By 2015, out of 377 seats, 114 seats (30.2%) went to the opposition.

Read more: Tanzania is ruled with impunity – four key issues behind calls for constitutional reform

Over this period, different opposition parties took leading positions. Between 1995 and 2005, for instance, NCCR-Mageuzi and the Civic United Front were the dominant parties.

In 2005, Chadema fielded its first presidential candidate: 44-year-old Mbowe. Since then, Mbowe has spearheaded the party’s growth.

I have researched opposition politics in Tanzania for over a decade. In a recent paper, I traced how adaptive Mbowe has been in a changing environment. In my view, the ongoing clampdown is largely the price Chadema and its leadership are paying for posing a serious threat to the survival of an unpopular ruling party ahead of Tanzania’s presidential elections in 2025.

Mbowe’s chairmanship redefined Chadema’s growth strategy. He focused on party organisational building in terms of party structures, policies, agenda and branding; financing and sustainability; and ground operations and mobilisation.

The fruits of these efforts are evident. In the 2015 elections, Chadema’s presidential vote share increased to 40% from 6% in 2005.

Who is Freeman Mbowe?

Prior to entering party politics in 1992, Mbowe was a businessman. He also worked at the Central Bank of Tanzania.

His father, Aikaeli Mbowe, was a wealthy businessman who supported then president Julius Nyerere in the independence struggle. His father-in-law, Edwin Mtei, is the founder of Chadema and was the first governor of Tanzania’s central bank.

In his book, Mtei narrates how impressed he was with Mbowe’s ability to organise and campaign for the party in the 2005 elections. Scholars such as Dan Paget have published on the pragmatism and organising capabilities of Mbowe, and his role in strengthening Chadema’s organisation and financing capabilities.

As chairman, Mbowe led membership mobilising and party building operations between 2005 and 2010. His campaign in 2005 introduced the opposition party to citizens across the country through the use of helicopters – a first in Tanzania at the time.

The gains of this work were evident in the 2010 election results, where Chadema’s presidential vote share increased to 26%. The party fielded Wilbrod Slaa, a member of parliament, as its flagbearer.

With these results and the countrywide presence of Chadema, the party politics structure of Tanzania became a default two-party system. Chadema continued to establish its political presence and pushed for an anti-corruption agenda. Between 2010 and 2015, the party gained even more strength as a dominant opposition party.

In the 2015 elections, Chadema got 40% of the presidential vote with Edward Lowassa, a former prime minister under president Jakaya Kikwete, as its candidate. However, Mbowe faced criticism for this decision as Chadema had profiled Lowassa as one of the ruling party’s corrupt leaders.

There are a couple of explanations for Chadema’s high vote share in 2015. First, Lowassa had the resources to launch a broad campaign. Second, Chadema had put in a lot of groundwork between 2010 and 2015.

Tanzania’s political landscape

Arguably due to the results of the 2015 elections, Tanzania’s ruling party changed its strategy and the government took a more autocratic approach under President John Pombe Magufuli.

Under this regime, Tundu Lissu, Chadema’s vice chairperson, was shot multiple times. Mbowe was attacked and arrested. His assets and businesses were destroyed.

During the Magufuli administration, Chadema couldn’t organise using the traditional means of rallies. In June 2016, the president banned opposition rallies, ostensibly to prevent incidences of civil disobedience. Further, the government restricted public funding flows to Chadema.

Nevertheless, the party deployed other strategies to reach the masses, such as organising at the household level in an operation known as ChademaNiMsingi (Swahili for “Chadema is in its branches”) and Chadema Digital. These operations were systematically carried out in a restricted political space. The party’s “walking rallies” drew huge crowds.

Where to from here

Being a dominant opposition party with formidable strengths, Chadema is a constant target of the Chama Cha Mapinduzi government. The ruling party sees Mbowe as the force behind Chadema’s success as an organised opposition party. There have been state-sponsored calls against him being a party chairman for 19 years.

In 2021, her first year as president, Suluhu’s government arrested Mbowe and charged him with non-bailable terrorism charges. He stayed in jail for eight months. Surprisingly, after his release, Mbowe agreed to reconciliation talks with the president. This move led to criticism from within and outside Chadema.

Mbowe’s rationale was pragmatic: given the country’s political situation, Tanzania’s problems could only be addressed by engaging with the president.

Read more: Tanzania’s Hassan has made changes: but the ruling party retains a tight grip

Prior to these reconciliation talks, the political situation in the country was at a stalemate following the 2020 elections. They had been described by analysts and observers as the most rigged and violent ones Tanzania had ever had.

The reconciliation talks created the space for Chadema to reorganise and mobilise after Suluhu lifted the ban on rallies. However, with the rejuvenation of Chadema’s presence ahead of the forthcoming elections, Suluhu’s administration has gone into a repressive mode, clamping down against Mbowe and the party.

In this political context, Mbowe and Chadema’s leadership will need to persist in their push for political reform. This will require embracing creative ways to organise, mobilise and fundraise ahead of elections.

Aikande Clement Kwayu, Independent researcher & Lecturer, Tumaini University Makumira

Source: allafrica.com

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The mining sector has long been a cornerstone of Tanzania’s economy, significantly contributing to the nation’s Gross Domestic Product (GDP) and employment.

For example, the 2024/25 national budget states that in the year 2023, the mineral sector contribution to GDP rose to 9.0 percent from 7.3 percent in 2021.

At the same time, the Ministry of Minerals also indicate that by March 2024, the mining sector had created approximately 19,356 jobs in larger scale mining, with 97 percent of these jobs going to Tanzanians. This equates to 18,853 jobs for Tanzanians and 505 jobs for foreigners.

However, beneath the surface of this vital industry lies a troubling reality: the persistent issue of Illicit Financial Flows (IFFs).

Here, literature defines IFFs as cross-border movements of illegally earned, transferred, or utilized financial capital that deprive countries of essential resources, undermining development and the well-being of citizens.

IFFs exist in Tanzania’s mining sector, with a good example being the seized 15.78 kilogrammes of gold that was smuggled at the Dar es Salaam Port, last month, valued at approximately 3.4bn/-.

In Tanzania’s mining sector, the mechanisms behind IFFs are complex and deeply entrenched. One prevalent tactic is mis-invoicing, where investors either underreport the value of exported goods or overstate the cost of imported goods, thereby siphoning off profits and evading taxes.

This practice is particularly common in the mining, oil, and gas industries, where the high value of commodities makes them susceptible to manipulation.

Another common method involves using complex corporate structures, shell companies, and tax havens to obscure the true ownership and origins of wealth.

By exploiting loopholes and regulatory gaps, both domestic and multinational companies operating in the mining sector can shift profits to low-tax jurisdictions, depriving Tanzania of vital revenue.

The Tanzanian government has also identified transfer pricing–where parent companies charge their subsidiaries inflated prices for goods and services–as a significant contributor to IFFs. This practice effectively shifts profits out of Tanzania, reducing the tax base and limiting the government’s ability to fund essential development initiatives.

From a regional perspective, the problem of IFFs is not unique to Tanzania; it is a widespread challenge across the African continent. In neighbouring countries, similar patterns have emerged.

For instance, in the Democratic Republic of the Congo (DRC), the mining sector has faced significant illicit outflows, with estimates suggesting that the country loses billions of dollars annually through various forms of mis-invoicing and tax avoidance.

In Kenya, the extractive industry also suffers from IFFs, with an estimated loss of USD 1.8 billion per year due to trade mis-invoicing alone. These practices hinder economic development and deprive local communities of the rightful benefits of their natural resources.

The consequences of IFFs in Tanzania’s extractive sector are far-reaching, impacting both local communities and the nation as a whole. At the community level, revenue losses deprive host regions of vital resources for infrastructure, healthcare, and education, perpetuating cycles of poverty and underdevelopment.

The impact of IFFs on Tanzania’s economy is illustrated by examining key economic indicators over the past decade. Tanzania’s GDP growth rate has fluctuated significantly, reflecting the volatility introduced by IFFs.

ALSO READ: Local content realised in mining sector

According to World Bank data from 2021, the GDP growth rate peaked at 7.0 percent in 2013 but has since declined, reaching a low of 4.8 percent. This downward trend suggests that IFFs have undermined the country’s economic stability and resilience, constraining its ability to maintain consistent, high-level growth.

Tanzania’s tax revenue as a percentage of GDP has remained relatively stagnant over the past decade, hovering around 12-14 percent.

This low tax-to-GDP ratio is a direct consequence of the erosion of the country’s tax base due to IFFs, as companies and individuals engage in various forms of tax evasion and avoidance. The inability to mobilize sufficient domestic resources has limited the government’s capacity to invest in critical public services and development initiatives.

Dr. John Euseby, an economist at the Institute of Finance Management (IFM) Mwanza Campus, supports the literature by stating that tax evasion fuels IFFs. According to his experience, many investors seek profits beyond average expectations, which drives tax avoidance in Tanzania’s mining sector. Consequently, many investors view corporate tax, as well as loyalty and corporate social responsibility requirements, as burdensome.

Furthermore, a lack of geological data exacerbates IFFs. Artisanal and small-scale miners (ASMs) often take months to secure minerals, and when they finally obtain these resources, the levies and taxes they face differ significantly from their investments in time, money, and energy, hence, tax avoidance.

Dr. Euseby notes that: – “Geological data is of utmost importance to indicate mining claims full of minerals. This will help the miners to have what they seek, in the targeted time- frame, and therefore see no reason for tax avoidance.”

Mr. Hassan Kulwa, an ASM and Deputy Information Officer for the Federation of Miners’ Associations of Tanzania (Femata), comments that IFFs in the mining sector are largely driven by the complex revenue collection systems.

This includes multiple taxes, as miners do pay on both raw and processed minerals, on top of levies they give to several government agencies, including the National Environment Management Council, Occupational Health and Safety Authority, and local councils.

Moreover, the government loses considerable revenue by excluding Minerals Associations from efforts to combat IFFs, even though these associations are well aware of traders buying minerals above international market prices.

“The business beyond the market price is a money laundering scheme conducted in haste. We, the associations, are well-positioned to tackle it since we are constantly on-site. Let the government make use of us” he explains.

Mr Francis Mihayo, the Assistant Commissioner for ASMs in the Ministry of Minerals, acknowledges that IFFs, particularly through mineral smuggling and tax evasion, are serious issues.

Historically, smuggling has been exacerbated by a lack of mineral markets near mining, with the government being installed at-least 100 as of now, country-wide, to fight such a challenge.

At the same time, he states that a task force is currently working at mining sites to track production levels and ensure that all consignments reach designated buying centers.

The stakeholders, including the Lecturer at the University of Dar es Salaam, Geography and Economic Department, Prof. Abel Kinyondo, say that despite the government efforts to combat IFFs, the Global Financial Integrity Organization states that Tanzania still loses approximately $3.5 billion, annually, following trade-based money laundering and IFFs.

And in East Africa, the loss is estimated to be $6bn/-, he said during the Journalists’ training on Domestic Resource Mobilization that was organized by the Policy Forum in Dodoma, recently.

In efforts to address the negative impacts of illicit financial flows (IFFs) in Tanzania, the stakeholders recommend, among others, the strengthening tax administration and enforcement, that it is imperative to invest in enhancing the capacity and resources of the Tanzania Revenue Authority (TRA).

This investment would help improve tax collection, auditing, and compliance monitoring. Additionally, robust transfer pricing regulations should be implemented and enforced effectively to prevent multinational corporations from engaging in profit shifting and tax avoidance.

Increasing transparency in the extractive industries by requiring comprehensive public disclosure of payments made by companies to the government is also crucial.

Source: allafrica.com

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The Tanzania Government has suspended the online operations of The Citizen, one of the country’s leading English-language newspapers, following the release of animated videos depicting President Samia Suluhu Hassan.

The animations, which referenced the recent abductions and killings of political dissidents, have sparked significant controversy in the country.

One of the videos, released earlier this week, portrayed President Hassan watching news reports about dissidents and victims of state repression, indirectly accusing her government of involvement. Hassan has faced increasing criticism, both domestically and internationally, over allegations that security forces were responsible for the kidnappings and murders of opposition figures.

In recent months, her administration has intensified its crackdown on opposition activities, banning two major rallies organised by the Chadema party since August and briefly detaining some of its leaders. These actions have drawn widespread condemnation from human rights groups and Western governments, including the United States, who accuse Hassan of backtracking on democratic reforms.

On Wednesday, The Citizen announced that its online operations had been suspended for 30 days by the Tanzania Communications Regulatory Authority (TCRA). The regulatory body stated that the newspaper’s animated videos presented “negative interpretations for the nation, something that affects and undermines national unity, peace, and cohesion.”

In response, The Citizen removed the animations and issued a statement acknowledging the “misinterpretation” the videos had generated.

The videos, which have since been taken down, included a scene where the father of artist Shadrack Chaula, who was sentenced to two years in prison in July for burning a picture of President Hassan, is heard saying, “Dead or alive… I want to see my child,” while the president watches silently from a sofa.

President Hassan, who succeeded the late John Magufuli in 2021, was initially praised for easing restrictions on opposition rallies and the media. However, critics argue that her recent actions reflect a return to the repressive measures seen during her predecessor’s authoritarian rule. With local elections scheduled for November and a general election in 2025, observers fear that political repression may intensify.

Source: allafrica.com

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THE Bank of Tanzania (BoT) maintained its key lending rate at 6 per cent for the quarter ending December citing easing inflationary pressures and a positive economic outlook.

The Central bank governor, Emmanuel Tutuba, said in a statement that improving domestic and global conditions supported the decision to hold the rate steady by the monetary policy committee which met on Wednesday.

In the two quarters to September, the central bank held the benchmark rate at 6 per cent from 5.5 per cent that was announced in January when the bank introduced the rate.

The central bank targets to maintain inflation below 5 per cent, but consumer inflation has stayed comfortably below that figure, despite growing pressure on the shilling.

Inflation increased to 3.1 per cent year-on-year in August from 3.0 per cent the previous month, data from the National Bureau of Statistics show.

An economist and investment banker, Dr Hildebrand Shayo said the rate was likely to be maintained given the continued improvement in the global economy with inflation rate declining.

However, Dr Shayo raised concerns about the significant disparity between the Bank of Tanzania’s (BOT) key lending rate and the double-digit lending rates offered by commercial banks to customers.

He questioned the reasons behind this mismatch, suggesting that risk premiums alone cannot account for the high borrowing costs faced by consumers and businesses.

“Who will explain this significant discrepancy between the central bank rate and the commercial banks’ lending rates, which remain in double digits? What can account for the reality of expensive loans, aside from risk premiums?” he inquired.

Bank lending rates in Tanzania decreased slightly to 12.78 per cent in July from 12.82 per cent in June. Despite this minor decline, the spread between the central bank’s rate and commercial bank rates remains substantial.

The Head of Research and Financial Analytics at Alpha Capital, Imani Muhingo, said maintenance of the CBR at 6 per cent was expected, especially as inflation is still at the bottom of the target range, while US’s rate cut and seasonal foreign inflows are expected to relieve foreign exchange pressures.

ALSO READ: FED rate cut: The resounding effects (Part 1)

Despite presumed liquidity pressure in the banking sector, cutting rates would be moving in too quick given the time lag of US’s policy, he said.

Financial analysts were divided on their prediction on the new central bank rate, with opinions varying on the whether to increase, maintain, or slightly decrease the key rate.

Some predicted the central bank would maintain the rate at 6.0 per cent for the third consecutive time, citing stable inflation and favourable macroeconomic conditions.

Others suggested there would be a modest reduction to stimulate investment and support private sector credit growth given the recent US Fed rate cut.

Meanwhile, Mr Tutuba told reporters that foreign currency availability improved from July to September 2024 alongside the tourism season and sales of agricultural products and exports, as well as rising gold prices in the global market.

He stated that as a result of this trend, the depreciation rate of the shilling decreased to 10.1 per cent for the year ending September 2024, down from 12.5 per cent for the year ending June 2024.

Tutuba mentioned that foreign reserves increased to 5,413.6 million US dollars by the end of September 2024, up from 5,345.5 million US dollars in June 2024, sufficient to cover over four months of imports, aligning with the country’s goals.

He projected that foreign currency availability is expected to continue improving, driven by rising gold prices in the global market, tourism activities and sales of natural products like cashews, tobacco, coffee and cotton, as well as exports of staple foods like maize and rice to neighboring countries.

This improvement will also be supported by a decrease in fertiliser imports and declining energy product prices, which are expected to reduce the demand for foreign currency and enforce legal requirements regarding quoting and making payments in Tanzanian shillings.

Source: allafrica.com

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