: More should be done to improve investment climate in Tanzania

By THEO MUSHI

FOR the past decade, Tanzania has tried to improve its investment climate by giving fiscal incentives to investors like having a one-stop centre at TIC to issue all the necessary documentation to investors.

It has also embarked on intensive and extensive investment promotion. As a result, there has been an increase of FDI inflows from an average of US$10 million in 1990s to $500 in 2005.

The Government has also invested in infrastructure including roads, airports, harbours, communications and energy in order to reduce the cost of doing business in the country. There is a need to have a business friendly bureaucracy which delays decision making and breeds corruption which also increases the cost of doing business.

The programme for Business Environment Strengthening for Tanzania (BEST) was introduced to have better regulations, procedures and stable and predictable policies BEST is part of on going reforms by the Government of Tanzania. Recent research studies by the World Bank ('Doing Business 2007, 2008 and 2009) have shown that there are currently many laws, by laws regulations and administrative procedures that create an unfoavourable business environment in Tanzania through high transaction costs.

It is explained that one of the reasons for high transaction costs is that many Tanzania’s laws do not meet the expectation of firms and entrepreneurs mainly due to deficiencies in consultation and policy analysis prior to introduction of new legislation.

It is also noted that poor quality regulations may turn good laws into impediments for private sector growth and affect adversely the reputation and service delivery capacity of Governments and Parliaments.

It is proposed that these problems will be solved by a adopting into the laws and policy making process Regulatory Best Practice (RBP). This requires any ministry that proposes new laws or regulations that have cost implications for businesses or significant economic or social implications for businesses to carry out meaningful consultation with stake holders.

The consultations should include full analysis of potential costs and benefits of the proposals. Underpinning new legislation and justification of the proposals. The ministries will also be required to consider alternatives to regulations such as education or better enforcement of existing laws.

This is meant to identify specific outcomes to be achieved as a result of the new law and to spell out methods human resources and budgets required for ensuring effective compliance as well as monitoring such compliance. A new concept of Regulatory Impact Assessment (RIA) will also be introduced.

It is a tool for policy making that helps the government to apply the principles of Regulatory Best Practice. It analyses whether or not the new regulation would have the desired impact. It helps to identify any possible side effects or hidden costs of compliance on individual citizen or business.

RIA document assists ministers in decision making process within the cabinet supporting parliamentarians in scrutinizing of draft legislation and communicating the justification for government decisions to the public, private sector and civil society.

RIA is an important tool for contributing evidence – based policy making as it helps to improve the quality of policy and regulatory decision making by uncovering evidence of what effects of potential decisions on proposals will be.

RIA can enhance the quality of law making in social and economic areas, enhance systems of governance and improve the capacity and performance of public service.

By encouraging public consultation and demonstrating potential impacts across society of a proposed law, RIA improves transparency and accountability in government decision-making.

RIA is a central component of BEST programme.

It is being introduced into government policy and law making process as a means to design more effective policies, laws and regulations that reduce the compliance costs to business associated with the regulatory environment in Tanzania.

RIA is not expected to replace the existing system but instead to add value to existing policy and law making process. A good regulation should be necessary, fair, effective in securing envisaged benefits and enforceable.

It should also be balanced, weighing risk and costs and practical benefits. Poorly enforced laws create disrespect for the rule of law, undermines legitimacy of the enforcing authority and it also creates uncertainties and encourages corruption.

टंगा सीमेंट, म्बेया सीमेंट सुस्पेंड्स production

CHEAPER CEMENT FROM CHINA, INDIA AND PAKISTAN LEADS LOCAL PRODUCERS TO . . .
Total surrender
*Tanga, Mbeya cement suspends production
ERICK TOROKA
Local cement industry is going through turbulent weather as major producers are closing down in a move that paves way for market dominance by imported cement from China, India and Pakistan.
The shut down of two, out of three major cement producing companies in Tanzania came amidst news which reached Business Times this week, that two new prospective investors, Maweni Limestone Limited of Kenya and Dangote Limited of Lagos, Nigeria, have canceled their investment plans in the country.
Mbeya Cement Company Limited belonging by 62.7 percent share to the multinational Lafarge Group of France, became the first to suspended production three weeks ago, 'forcing' its 200 employees to go home.
The jobs of other 5000 people involved in business with the company like transportation and gypsum mining have been uncertain since then.
Managers of Mbeya Cement refused to talk about reasons for the shut down. But sources had told Business Times that the company's go-downs were full of cement that failed to compete in the free market.
Problems at Mbeya Cement aggravated since last year when the government suspended duties on imported cement, to create room for competition that would relieve consumers of heavy burden on their shoulders.
The total imports of cement into Tanzania were 30,000 tons in March this year. While cement from India, China and Pakistan started flooding the market Twiga Cement, a close competitor of Mbeya Cement doubled its production capacity and reduced the price of its cement to reach TZS 11,000 per 50 kg bag in Dar es Salaam.
Tanga Cement Company Limited (TCCL), also increased capacity, worsening 'trouble' for Mbeya cement, which finally had no option but to close.
But Tanga Cement itself couldn't survive substantially long. The second largest producer of cement in the country, suspended production on Wednesday this week, after its go-downs became over-flooded with cement.
In an exclusive interview with Business Times, Tanga Cement Communications Manager, Kati Kerenge, said “we have decided to shut down our factory since our storage facility is full. To be honest this has never happened and because of that we can not continue with the production.”
According to her, about 60 employees have been sent home and the jobs of thousands people involved in business with Tanga Cement including the gypsum miners among others are now on the line.
Asked when the situation will calm down, Kati said: “ it will depend on the action taken by the government on this matter.”
Consumer outcry
For years the price of cement in the country has been exorbitant, leading to overwhelming complaints to the government by consumers.
The existing local major cement producers have always wanted to maintain some kind of monopolistic position in the market. Hardly four in number, Tanzania's cement giants which appear to have ties with other producers in East African sub region, had always determined prices that made life to consumers difficult.
Decision by the government to lower cement import charges was meant to assure advantages to consumers.
Resistance
Local producers have strongly showed disapproval of the government's decision to suspend restrictions on importation of cement into the country.
Basing on claims of expensive power supply system in the country and presence of 'dumping' game in the market (with imported cement getting government subsidies in source countries) local producers have been quoted as arguing the current market situation is unfair to them.
Who tells the truth?
The government has maintained that local cement producers whose profits have never lowered (as evidenced by the dividends paid to their investors), have no substantial reason to demand for re-imposition of import duty on foreign cement.
A senior businessman in the country (name withheld), commended the government's strategy saying it would make local cement manufacturers become more efficient and producers of quality products.
“It's wrong to protect our industries. Firstly we are one of the members of World Trade Organization (WTO) and sooner or later next year we will join the Customs union whereby everything imported would be at zero tariff. The problem is that our industry does not want competition from abroad they want to dominate and set prices, which is wrong,” he said.
“We should be careful. How come a bag of cement coming all the way from Pakistan should sell cheaper than one produced in Tanga?” he said.
Talking of Maweni Limestone Limited which plant establishment in Tanga and Dangote Limited, a subsidiary of West Africa's conglomerate Dangote group, that intended to invest in Mtwara, the businessman said the 'newcomers' might have threatened to cancel investment plans 'as a token of solidarity with their fellows'.
“They know they will also benefit from protection once the government bows to them. That's bad” he said.
Prior to cancel plans, Maweni Limestone Limited, a subsidiary of Athi River Mining co. of Kenya, was expected to commence operations in October 2010. Its ground breaking ceremony was attended by President Jakaya Kikwete in Tanga last year.

स्टोरी फिर्ट्स अप्पेअरेड इन बिज़नस टाईम्स तंजानिया