Dar es Salaam. Good morning! The Chanzo is here with a rundown of major news stories reported in Tanzania on Wednesday, May 31, 2023.
Tanzania responds to the dollar shortage crisis
Tanzanian authorities confirmed yesterday through various channels that the country is facing a dollar shortage, a crisis that has been affecting several nations in Africa.
During the budget presentation by Minister of Energy, January Makamba, the Ministry acknowledged that the nation has been struggling with a shortage of dollars, which has, at times, put the country at risk of fuel scarcity.
“Global oil trade has been significantly impacted by the reduction of Russian oil supplies in the global market,” said Minister Makamba as he was tabling his Sh. 3 trillion budget for the financial year 2023/24.
Makamba explained that because of the cut of the Russian oil in the global supply, oil prices have continued to surge causing nations to face huge import bills.
“Moreover, many countries in Africa including Tanzania and other nations in the world are facing the US dollar shortage problem, currency required for the importation of oil” added Makamba.
Minister Makamba explained that the government has taken short-term and medium-term measures which have made the country not face fuel scarcity challenges.
On a separate occasion the Minister of Finance and Planning, Dr Mwingulu Nchemba tasked economy experts from his ministry to devise strategies to mitigate the effects of the dollar shortage on the economy.
“We have been recovering from the Covid-19 crisis and the Russia-Ukraine war but the dollar shortage is affecting the economy to the largest extent” underscored Dr.Nchemba in his meeting with officials from his Ministry and IMF officials who were in the country to assess the IMF loan facility extended to Tanzania.
The main driver of the dollar shortage in Tanzania and other African economies is the rising costs of imports and borrowing in the global market.
Due to disruptions in the global oil supply and other essential commodities such as fertilizers, Tanzania is faced with a substantial import bill compared to its foreign currency earnings from exports.
According to the latest data from the Bank of Tanzania, the current account deficit for the year ending April 2023 has increased to USD 5.29 billion, compared to the deficit of USD 2.9 billion recorded in April 2022.
The deteriorated balance of payment is also eroding the shilling value, meaning Tanzania’s debt will also increase because of currency issues.
In a move that seems to respond to some of the challenges in the market, On May 31, 2023, the Bank of Tanzania released a directive on foreign exchange operations in the country.
The directive requires transactions exceeding USD 1,000,000 must be conducted through banks at prevailing market prices. Transactions by a single customer in a day will be aggregated to determine this amount.
The directive also prohibits trading with unregistered international currency traders and requires currency dealers to follow procedures for recording customer information. Additionally, all Letters of Credit (LCs) for transit cargoes must be funded using foreign exchange obtained from the respective destination countries
The move seems to ensure there is no rapid appreciation of dollars as traders search for the scarce currency, the interbank market is closely monitored. The directive also seeks to curtail the unwarranted outflow of dollars from the economy.
According to the report by the International Monetary Fund (April 2023) titled Managing Exchange Rate Pressures in Sub-Saharan Africa, economies in Sub-Saharan Africa risk having higher public debts and deteriorated trade balance due to external pressure.
About 68 percent of Tanzania’s external debt is denominated in dollars meaning any depreciation of the shilling will greatly affect Tanzania’s bottom line.
The country is also running several strategic projects such as the Julius Nyerere Hydropower project and the Standard Gauge Railway which all require foreign currencies in their implementation.
While Gold, other minerals such as coal, tourism, and several loan disbursements have provided relief to foreign exchange pressure, more caution is needed as the global economy remains uncertain.
What’s up with Tanzania’s Proposed Intelligence and Security Service Act?
The Samia Suluhu Hassan Administration is under fire for its attempt to force through amendments to the Intelligence and Security Service Act of 1996 which the opposition, activists, and independent experts have decried as dangerous, undemocratic, and unnecessary.
Reports of the government’s plans to amend what is considered one of Tanzania’s draconian laws surfaced last week when opposition politician Zitto Kabwe accused the administration of attempting to force through the amendments without public oversight.
The former lawmaker and now leader of the opposition ACT-Wazalendo party said he had reports that an amendment bill had been sent to the parliament, but it was not released in public for discussion, something Mr Kabwe said was both unusual and improper.
Following the criticisms, the amendment bill started to circulate on various social media platforms, where members of the public had an opportunity to see for themselves the administration’s plans to reform the country’s intelligence and security service.
Several proposed amendments have raised eyebrows among members of the public, who have been left wondering what exactly the government intends to achieve with them.
One particular proposal that has left Tanzanians awe-struck is the one that calls for members of the Tanzania Intelligence and Security Service (TISS), the country’s national intelligence and security agency, to be given immunity for things they will do while on duty.
Full story here.
Experts urge caution as Tanzania prepares project-specific law on LNG
Energy Minister January Makamba said Wednesday that the government is preparing a project-specific law on the Liquefied Natural Gas (LNG) project a few days after it closed a deal with energy companies Equinor, Shell, and ExxonMobil to develop the US$42-billion project.
Mr Makamba, who doubles as Bumbuli MP (Chama cha Mapinduzi – CCM), revealed the plan in the parliament while presenting his ministry’s budget for the 2023/2024 financial year.
Mr Makamba said that on top of the special project law, the government also plans to establish a special office for the highly-anticipated project authorities expect to unlock Tanzania’s vast offshore gas resources.
“Madam Speaker, this law will be brought to the parliament for the first reading anytime from now,” Mr Makamba said, who called the finalisation of talks with the energy companies on the project “a historic milestone.”
Full story here.
New AfDB funding to boost farmers’ access to fertilisers
The Africa Development Bank (AfDB) has released a US$2 million partial credit guarantee to assist suppliers and importers in purchasing fertiliser for Tanzanian hub agro-dealers under its Africa Fertilizer Financing Mechanism (AFFM).
A statement released Monday stated that the project aims to increase productivity by enabling timely access to and appropriate fertiliser use by smallholder farmers. It will enhance access to quality inputs through a functional, efficient and sustainable fertiliser supply chain in Tanzania and improve access to finance for large fertiliser distributors.
The project, implemented from July 1, 2023, through July 31, 2026, has three main components: support for hub agro-dealers to access the credit guarantee facility; support to increase fertiliser availability; and project management and coordination.
In addition to the 14 regions where the 2019 credit guarantee project was implemented, the project will expand its current project activities to at least five additional regions: Ruvuma, Manyara, Rukwa, Kagera and Mwanza.
The project targets five suppliers and 35 hub agro-dealers as direct beneficiaries, 1,000 retailers as indirect beneficiaries, and 550,000 smallholder farmers as the ultimate beneficiaries.
According to a census conducted by the government at the end of 2020, out of 12,007,839 households in Tanzania, 7,837,405 households (65.3 per cent) were engaged in agricultural activity.
Despite an upward trend in fertiliser consumption over the years – from 15.858 kg per hectare in 2018 to 19 kg per hectare in 2023, according to the Fertiliser Regulatory Authority, it remains well below the continental target of 50 kg per hectare.
AfDB also said that Tanzania is heavily dependent on fertiliser imports. Fertiliser demand in the current season of (2022/2023 in the country is currently estimated at 698,262 tonnes, of which about 418,883 tonnes must be imported to cover the local production shortfall of 43,579 tonnes, with a balance of 117,900 tonnes carried over from the previous season.
NMB Bank, China’s UnionPay partner to boost mobile commerce among businesses
NMB Bank Tanzania has partnered with a Chinese digital payment company, UnionPay International, to introduce the latter’s UnionPay QR code payment in Tanzania that would enable small and medium businesses to transact over mobile commerce across many sectors.
Funded by the government and China’s largest commercial lenders, UnionPay clears and settles payments directly with banks and licensed lenders by issuing debit, credit and prepaid cards.
With over 190 million UnionPay cards issued in 79 countries and regions, UnionPay’s network comprises 181 countries and regions.
UnionPay ranked first by number of cards in circulation worldwide as at the end of 2021 with 9.4 billion, according to the world’s renowned newsletter about the payment industry, Nilson Report.
On the other hand, its competitors, Visa and Mastercard, had 3.7 billion and 2.5 billion cards in circulation, respectively.
Filbert Mponzi, Chief of Retail Banking at NMB Bank Tanzania, said in a press statement that the bank was committed to leveraging innovative solutions to enhance financial inclusion in Tanzania.
“Our partnership with UnionPay International to introduce QR code payment to the world’s largest cardholder base is a testament to our commitment to providing safe, convenient, and inclusive payment solutions to our customers,” Mponzi said.
“We are proud to be at the forefront of digital payment adoption in the East African region and look forward to continuing to drive financial inclusion through technology,” he added.
Asad Burney, Head of UnionPay International Africa Region, said NMB Bank Tanzania is their significant partner to extend their business in the East Africa region, describing it as one of the fastest-growing economic zones in Africa.
“We are excited to participate in the mobile commerce space, enabling digital payments in Tanzania,” he said.
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