25 May 2013

Tanzania: Trade Ministry Budget Has Something for Small Enterprises

UNTIL February this year, Industry and Trade ministry had received only 23 per cent of the total budget approved by the Parliament in the last fiscal year (2012/13), according to the chairman of the parliamentary Industry and Trade standing committee, Mr Mahmoud Mgimwa.

A total of 170 bn/- was approved for the ministry in the 2012/13 financial year, but only 39bn/- was disbursed by February this year. Save for this anomally, the ministry's 2013/2014 budget tabled in Parliament on Wednesday dreams well for this country's trade and industrialisation.

The integrated industrial development strategy that targets transforming Small and Medium Entreprises into outward looking institutions from across all sectors, is all but welcome. If it is executed diligently, it can go far in driving the realisation of Vision 2025 and make Tanzania competitive regionally.

The obvious reason is that it targets growing small enterprises into entities that break into complexities of regional and global markets. Another reason is that the 108.5bn/- Ministry of Trade and Industry envisages creating over 15,000 jobs from a number of massive industrial projects under Export Processing Zones and revival of some defunct industries.

Some of the major projects targeted include Solvochem, Xinghua and Dangote Cement fatory in Mbeya, Mchuchuma Liganga ore project, two leather industry plants and revival of General Tyre (EA). However, the Ministry also outlined that the Tanzania Commodity Exchange to start in 2013/2014 would also help farmers easily find external markets for their produce.

Tabling his ministry's budget, Dr Abdallah Kigoda said that in 2012/2013, in an efforts to unleash local industrial potential, they are working within an integrated industrial development strategy that targets transforming Small and Medium Entreprises into outward looking institutions from across all sectors.

Significantly coming out of the challenges in last year's budget was that local businesses have not yet taken advantage of regional and international markets to optimal levels. Explaining on expected impact of investments under EPZ, he said that in one year alone, a total of 29 companies have been given licences to put up industries under EPZ with five of them having already started production.

This brings the number of companies under EPZ to 70. The 29 companies licenced in 2012 would offer 9254 jobs. The companies would invest $113m to bring the total amount of investments under EPZ to $1bn and 23,000 direct jobs. EPZ had also completed regulations for Special Economic Zones which allows for investors who want to sell to the local market and it is expected, would attract more investors through SEZ.

In Mtwara, due to the ongoing gas exploration activities, the Tanzania Port Authority had designated 110 hectares as Mtwara Freeport Zone and that 18 companies had already shown intention to invest in the area. Solvochem (T) Ltd, a company from Lebanon is going on with construction of an industry for plastics equipment at the port through EPZA.

The factory would start working at the end of 2013 and employ 250. Other EPZ projects are in Kigoma where 3000 hectares have been acquired for EPZ/ SEZ projects in the region bordering DR Congo, Burundi and Zambia. Another announcement of significance that the budget makes reference to is the Singida Wind Power project to start in 2014 and feed 50MW every year to the national grid.

It will be feeding 300MW into the national grid by 2019. With an initial investment in the project being $136m, said the power would be fed into the national grid through the High Voltage sub station in Singida. He said the Ministry, through working with National Development Corporation and Ministry of Finance and economic affairs were in pursuit of a loan with friendly conditions from Exim Bank of China and the China government.

He said that in the 2013/2014 financial year, the government would through National Development Corporation continue with efforts to revive the defunct Tanzania General Tyre factory. He said they had renovated some structures at the plant already and put in place a business plan.

An evaluation of existing plant and equipment has already been done and were looking forward to reviving the plant and attract private sector partners as well to expand it further including some from China, South Africa, India and Taiwan who have already shown interest to invest. In the leather industry, he said the smaller industries had grown from 3 to 8 in 2012/2013 with installed capacity of using 12.4m per year.

He said the increase in sale of leather to foreign markets had increased revenue from the industry from 10.6bn/- in 2011 to 62.3bn/- in 2012. The sector had also increased jobs from 1500 in 2011 to 2000 in 2012. In 2012/2013, he said the government had increased taxes on exported unprocessed animal skin from 40 per cent to 90 per cent.

As a result, there has been increase in processing locally of animal skin from skins of 166,773 cattle in January 2012 to 343,860 in 2012. He also said the Meru Tannery plant currently being built would start work next month and employ 30 workers. Another plant of Xinghua Investments being built in Shinyanga would start work in August this year with the objective of processing up to finished leather and employ 500 workers, among others.

On the regional and global trade front, he said the SADC-EAC-COMESA Tripartite negotiations were ongoing with various committees already formed to start looking into Rule of Origin, customs cooperation. Exports to the rest of EAC had fallen slightly last year due to some countries engaging in unfair practice like importing raw materials without tariffs.

In the budget, out of the 29.7bn/- on other votes, 22.2bn/- is for salaries and 7.5bn/- for other costs. Out of the funds for salaries, 2.3bn/- is for salaries at the Ministry and 19.9bn/- for salaries at institutions under the ministry. Among the 7.4bn/- on other votes, 5.9bn/- is for expenditure by the ministry and 1.5bn/- for institutions under the ministry.

Out of the 48.9bn/- for development expenditure,42.1bn/- is from domestic revenue and 6.7bn/- is from external sources. Out of the domestic funds allocated, some 40.9bn/- is for developing two projects under EPZ A like China Logistic Centre, General Tyre (EA) Ltd, Soda Ash project on lake Natron, and SMEs Industrial Infrastructure Expansion and Capacity Building. Some 1.2bn/- is for development projects under programmes at 15 institutions under the Ministry.

He said that for the 6.7bn/- funds that would come from development partners, 3.1bn/- is for MUVI project, which will finance value addition for products that would be chosen by respective region, access to seeds and markets. He said 547.6m/- was allocated to the Agricultural Sector Development Programme (ASDP) to strengthen the market information system, to start the Commodity Exchange among others.

He told Parliament that no country among the emerging economies had developed by depending on agriculture alone. The Industrial sector, in 2012, grew by 8.2 per cent as compared to 7.8 per cent in 2011. He attributed the growth to the increase in production activities of food, sunflower oil, production of drinks, cement and metal products.

He, however, said that even with such growth, the statistic was still below the Vision 2025 target of 15 per cent growth. He said the contribution of the industrial sector to the GDP had grown from 9.7 per cent in 2011 and reached 9.85 per cent in 2012/2013. He said that in the same year, production in industries such as iron, beverages and cigarettes had increased, occasioned by a higher domestic demand for such products.

He said they were currently working on the Integrated Industrial Development Strategy that would look into cross cutting sectors targetting development of Small and Medium Enterprises. However, some MPs were concerned that the industries were growing at a slower pace, leaving many unemployed youth still out of such opportunities.

Contributing to the budget, Iringa MP, Rev Peter Msigwa (Chadema) said the government should find a way of mobilising petty street traders into formal groups so that they can be recognised by systems. Responding, Dr Kigoda said that they would reach out to them but it was important that they form formal groups that can be recognised by established business and financial systems.

Kyera MP Eustace Katagira (CCM) wanted the government to remove export fee on coffee produce on grounds that it hurts small farmers. Musoma rural MP Nimrod Mkono asked the government to ensure business registration was structured in a way that it works efficiently to improve business environment for investors.

Wete MP Assa Othman Hamad (CUF) asked that the Ministry should create strong links between agriculture and industrial growth. Mbinga East MP Gaudence Kayombo asked that the government puts more emphasis on electric power production on grounds that the lack of it has a relationship with failure to industrialise.

For all that the Budget promises, it is important that it also looks at how it can use people trained in vocational institutions as human country to industrialise and trade in regional markets.

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