TANZANIA INVESTMENT REPORT USD 501m and above USD 101m - 500m USD 11m - 100m USD 0m - 10m Report on the Study of Foreign Private Capital Flows in Mainland Tanzania DECEMBER 2001 BOT website: www.bot-tz.org TIC website: www.tic.co.tz NBS website: www.nbs.go.tz Stock of FDI, 1999 Printed by Colour Print (T) Ltd.
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TANZANIA INVESTMENT REPORT
USD 501m and above
USD 101m - 500m
USD 11m - 100m
USD 0m - 10m
Report on the Study ofForeign Private Capital Flows
in Mainland Tanzania
DECEMBER 2001
BOT website: www.bot-tz.orgTIC website: www.tic.co.tzNBS website: www.nbs.go.tz
Stock of FDI, 1999
Printed by Colour Print (T) Ltd.
ABBREVIATIONS AND ACRONYMS
AIDS Acquired Immune Deficiency SyndromeBPM5 Balance of Payments Manual Version 5BOP Balance of PaymentsBOT Bank of TanzaniaBRELA Business Registration and Licensing AgencyCMSA Capital Market and Securities AuthorityCTI Confederation of Tanzania IndustriesDSE Dar es Salaam Stock ExchangeDAWASA Dar es Salaam Water and Sewage AuthorityDFID Department For International DevelopmentDFI Development Finance InternationalEAC East African CommunityESRF Economic and Social Research FoundationEU European UnionEFA External Finance for AfricaFAL Foreign Assets and LiabilitiesFDI Foreign Direct InvestmentGDP Gross Domestic ProductHIV Human Immunodeficiency VirusIFEM Inter-Bank Foreign Exchange MarketICSID International Centre for Settlement of Investment DisputesIIP International Investment PositionIMF International Monetary FundIPC Investment Promotion CentreMIGA Multilateral Investment Guarantee AgencyMNC Multinational CorporationNBS National Bureau of StatisticsPSRC Parastatal Sector Reform CommissionPER PerceptionPI Portfolio Equity InvestmentPCFS 2000 Private Capital Flows System established in year 2000ROC Registrar of CompaniesSADC Southern African Development CommunityTBS Tanzania Bureau of StandardsTANESCO Tanzania Electric Supply Company LtdTIC Tanzania Investment CentreTIR2001 Tanzania Investment Report 2001TRA Tanzania Revenue AuthorityTB Treasury BillsUSSR Union of Soviet Socialist RepublicsUK United KingdomUSA United States of AmericaUSD United States DollarsVAT Value Added Tax
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PREFACE
During the past few decades the world has witnessed increased flows of private capitalparticularly to emerging markets and developing countries. The least developed countries,including Tanzania, have also benefited from private capital flows. These flows haveincreasingly augmented domestic savings, and a substantial part of the capital flows havebeen in the form of private foreign direct investment, which besides providing finance,brings with it managerial skills, technology, marketing expertise and market links, all ofwhich are in short supply in these countries. While it is generally evident that the flow ofprivate capital into Tanzania has been growing, not much has been done to ascertain aboutthe nature, magnitude, composition, and sustainability of these flows.
Monitoring private capital flows in Tanzania has therefore become an increasingly urgent task.With open and liberal payments and exchange regime, Tanzania has found it increasinglydifficult to monitor private investment because most of the monitoring instruments,(including documentation) of the earlier control regime have been abandoned completely.Monitoring private capital flows in a liberalised environment therefore calls for a newarrangement involving enhanced cooperation between the private sector (investors inparticular) and public sector.
In consideration of this need to monitor capital flows, the Bank of Tanzania in closecollaboration with the Tanzania Investment Centre and the National Bureau of Statisticsembarked on a survey study of Private Capital Flows in Tanzania that has lead to thisreport, which should be viewed as an essential step toward establishing a reliable monitoringsystem.
This study, the first of its kind in Tanzania, is intended to provide information on the currentstate of foreign private investment (by type, country of origin, sectoral and regionaldistribution) as well as bring out investor perceptions of the economy and businessenvironment (ranging from the macroeconomic situation, to infrastructure, financial,governance and labour factors).
This study is expected to be followed by similar periodic surveys that will update theinformation contained in this report. The information is also expected to provide a basisfor developing policies on investment promotion and planning on future investmentstrategies.
It is hoped that local and foreign investors, policy markers, donors, international institutions,
academicians and other stakeholders will find the report a useful source of information.
Daudi T. S. BallaliGovernorBANK OF TANZANIA
December 2001
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ACKNOWLEDGEMENT
The Tanzania Investment Report 2001 (TIR2001) was prepared under the overall supervisionof P. M. Noni (Director of Economic Policy – Bank of Tanzania), E. Ole Naiko (Director ofInvestment Promotion – Tanzania Investment Centre), and A. Athmani (Director of Eco-nomic Statistics – National Bureau of Statistics) by a technical team led by S. Mrutu andcomprising F. Rutabanzibwa, C. Assey, and Z. Kiwelu (Bank of Tanzania). M. Kipilimba(Bank of Tanzania), designed and developed the Private Capital Flows Software in addi-tion to his active participation in the preparation of the report.
The technical team was assisted during data collection, verification and inputting by D.Thewa, E. Maganga, N. Moshy, F. Mlele, P. Lawuo, R. Twagirayezu, D. Mattaba, P. Makanza,B. Kasyombe, and L. Temba, ( Bank of Tanzania). Others were N. Senzia, F. Lukwaro, P.Mhondo, and P.Lyimo, (Tanzania Investment Centre); and M. Chintembo, V. Tesha, S.Simba, M. Martin, G. Simbila, A. H. Mafito, G.Temba, D. Masolwa, A. K Ntinika, T.Lyimo, M. V. Domotali and T. Kikombele (National Bureau of Statistics).
Undertaking the countrywide study on private capital flows could not have been possiblewithout the strong commitment and leadership from the top management of the participat-ing institutions namely the Bank of Tanzania, Tanzania Investment Centre, and NationalBureau of Statistics.
The investors across sectors and regions co-operated well in providing information, whichformed the basis for the analysis and conclusions made in the study. In addition, the reportbenefited from various views expressed by participants who attended the Workshop ondissemination of the findings of the study held on 13th December 2001. Appreciation isextended to them all.
Special appreciation is extended to Professor Samuel M. Wangwe (Director of Economicand Social Research Foundation – ESRF) for his valuable comments on the final draft thathave enriched the quality of the final report.
Last but not least, sincere appreciation is also extended to the Governments of Sweden,Switzerland and United Kingdom for their financial assistance and Development FinanceInternational of London for providing technical assistance.
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TABLE OF CONTENTS
ABBREVIATIONS AND ACRONYMS .................................................................... iiPREFACE ..................................................................................................................... iiiACKNOWLEDGEMENT ........................................................................................... ivTABLE OF CONTENTS ............................................................................................. vLIST OF TABLES ........................................................................................................ viiiLIST OF FIGURES ..................................................................................................... ixEXECUTIVE SUMMARY .......................................................................................... xCHAPTER ONE: INTRODUCTION ......................................................................... 1CHAPTER TWO: RECENT TRENDS IN POLICY REFORMS AND FOREIGNINVESTMENT IN MAINLAND TANZANIA ........................................................... 42.1 Major Policy Reforms..........................................................................................42.2 Evolution of Investment Related Policies .......................................................... 52.3 Impact of the Reforms on Business Environment .............................................6
2.3.1 Inflation, Interest Rate and Exchange rate ............................................ 72.3.2 Utility services ...........................................................................................7
2.3.3 Tax regime ................................................................................................ 82.4 The Effect of Policy Reforms on Compilation of Private Capital Flows
Statistics ..............................................................................................................8
2.5 Magnitude of Approved Foreign Private Investment 1990 - 2000 ................ 9CHAPTER THREE: QUANTITATIVE RESULTS ................................................. 113.1 Response Rate ....................................................................................................11
3.1.1 Response rate by region ............................................................................ 123.1.2 Sectoral distribution of responded companies ......................................... 133.1.3 Quality of response....................................................................................13
3.2 Magnitudes and Composition of Foreign Private Capital Flows .................. 133.2.1 Stock of foreign private capital, 1998 and 1999....................................... 133.2.2 Flows of foreign private capital in 1999................................................... 16
3.3 Foreign Direct Investment by Country of Origin............................................ 173.3.1 Stock of FDI by country of origin for 1998 and 1999.............................. 173.3.2 The flow of FDI by country of origin for 1999....................................... 18
3.4 Sectoral and Regional Distribution of FDI....................................................... 193.4.1 Sectoral Distribution................................................................................. 193.4.2 Regional distribution................................................................................. 20
3.5 Income Related FDI Flows................................................................................. 223.5.1 Dividends .................................................................................................. 223.5.2 Interest ..................................................................................................... 22
CHAPTER FOUR: BANKS’ SURVEY ..................................................................... 244.1 Bank Lending Abroad .................................................................................. 24
4.1.1 Reasons for Limited Lending Abroad...................................................... 244.1.2 Motivations for lending abroad ................................................................ 24
4.2 Bank Borrowing from Abroad............................................................................. 254.2.1 Factors Influencing Borrowing from Abroad.......................................... 25
4.3 Other Observations ........................................................................................ 264.3.1 The Impact of Regional Integration Arrangements (EAC, SADC) on
Banks’ Business....................................................................................... 264.3.2 Level Of Competition in Bank Business.................................................... 26
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4.3.3: Problems in Making Repayment Abroad ................................................ 274.3.4 Investors’ Willingness to Report Information to Authorities .................. 27
CHAPTER FIVE: INVESTORS’ PERCEPTIONS................................................... 285.1 Macroeconomic Factors .................................................................................. 29
5.1.1 Monetary Policy .................................................................................. 315.1.2 Fiscal policy ......................................................................................... 315.1.3 Government Stability ................................................................................ 325.1.4 Other Macroeconomic Factors ................................................................ 33
5.2 Infrastructure and Public Services ................................................................... 335.2.1 Utilities ...................................................................................................... 335.2.2 Banking services ................................................................................... 355.2.3 Other Infrastructure services..................................................................... 35
5.3. Financial Factors ............................................................................................... 355.3.1 Domestic Currency.................................................................................. 36
5.4 Governance Factors ......................................................................................... 365.4.1 Investment Incentives ............................................................................... 375.4.2 Bureaucracy ......................................................................................... 375.4.3 Tax Collection Efficiency........................................................................... 385.4.4 Land Law and Administration.................................................................. 39
5.5 Labour Factors ............................................................................................... 405.5.1 Labour Stability......................................................................................... 405.5.2 HIV/AIDS ............................................................................................... 41
5.6 Diverse Factors ............................................................................................... 415.6.1 Corruption .............................................................................................. 415.6.2 Smuggling .............................................................................................. 415.6.3 Domestic Political Scenario and Internal Security.................................. 41
5.7 General Perception on Investment Climate...................................................... 425.8 Improving Dialogue between Government and the Private Sector................. 45CHAPTER SIX: MAIN FINDINGS AND POLICY IMPLICATIONS................... 466.1 Quantitative Results ......................................................................................... 466.2 Qualitative (Perception) Results........................................................................ 486.3 Uses of the Information Collected..................................................................... 50CHAPTER SEVEN: ASSESSMENT OF THE RESULTS AND THE WAYFORWARD..................................................................................................................... 527.1 Assessment of the Results in Relation to the Objectives ................................ 527.2 Gaps to be filled .................................................................................................. 537.3 Lessons Learnt ................................................................................................... 537.4 The Way Forward ............................................................................................... 54REFERENCE ............................................................................................................. 55CONCEPTS AND DEFINITIONS............................................................................... 56APPENDIX 1: METHODOLOGY ............................................................................. 591. Institutional Set-up for the Study...................................................................... 592. Lessons from the Pilot Survey........................................................................... 593. Initial Preparations for the Census.................................................................... 594. Distribution of Questionnaire .......................................................................... 625. Development of Software for Data Entry and Processing .............................. 636. Survey of Bureau de change ............................................................................... 64
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7. Analytical Methods ......................................................................................... 65APPENDIX 2: STATISTICAL TABLES..................................................................... 67 APPENDIX 3: PERCEPTION CHARTS BY SUB-FACTORS .............................. 76Macroeconomic Factors ............................................................................................... 76Infrastructures and Services Factors ..........................................................................78
Financial Factors .......................................................................................................... 80Governance Factors ...................................................................................................... 81Labour Factors .............................................................................................................83
Diverse Factors ............................................................................................................ 85APPENDIX 4: QUESTIONNAIRE ON INVESTMENTS WITH FOREIGNASSETS AND LIABILITIES - QUANTITATIVE .................................................... 87APPENDIX 5: QUESTIONNAIRE ON INVESTMENTS WITH FOREIGNASSETS AND LIABILITIES - PERCEPTION ....................................................... 110
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LIST OF TABLES
Table 2.1: Comparative Cost of doing business in EA region ..................................... 8Table 2.2: Official Estimates FDI Flows in Tanzania - 1992 to 2000 ......................... 9Table 3.1a: Distribution of Questionnaire and Responses in Absolute Numbers ......... 11Table 3.1b: Response Rate of FDI Companies ............................................................... 12Table 3.2: Response Rate by Region ............................................................................ 12Table 3.3: Sectoral Distributions of Responded Companies ....................................... 13Table 3.4: Stock of FDI and Non-FDI 1995-1999 ....................................................... 14Table 3.5: Flows of FDI and non - FDI 1999 ............................................................. 16Table 3.6: Stock of FDI by Country of Origin, 1998 to 1999 ...................................... 17Table 3.7: Flow of FDI by Country of Origin, 1999 .................................................... 18Table 3.8: Flow of FDI Equity by country of Origin, 1999 ........................................ 19Table 3.9: Stock of FDI by Sector, 1998 to 1999 .......................................................... 19Table 3.10: Flows of FDI by Sector, 1999 .................................................................... 20Table: 3.11: Stock of FDI by Region by end 1998 and 1999 .......................................... 21Table 3.12: Flow of FDI by Region 1999 ....................................................................... 22Table 3.13: Dividends paid by Sector1999 ...................................................................... 22Table 3.14: Interest Paid by Debt Type for 1999 ............................................................ 23Table 3.15: Interest Paid by Sector and Debt Type for 1999 ......................................... 23Table 4.1: Direction of bank lending outside Tanzania ............................................... 25Table 4.2: Borrowing Abroad for Domestic Lending ................................................... 25Table 4.3: Direction of Bank Borrowing from Abroad ................................................ 26Table 4.4: Change in Foreign Borrowing for Domestic Lending ............................... 26Table 4.5: Level of Competition in Banking Business ................................................. 27Table 5.1: General Rating of Investment Policies by Sector ....................................... 43Table 5.2: Likely Direction of Investment in the Medium-Term ................................. 43Table 5.3: Most Reliable Source of Information for Initial Investment Decisions .......... 44
Boxes
Box 5.1: Notice to Importers of Substandard Items into Tanzania ............................... 30
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LIST OF FIGURES
Figure 2.1: Trend Inflation, Short-term and Long-term Interest Rates ............... 7Figure 2.2: Average exchange Rate Movements 1990-2000 ................................. 7Figure 2.3: Electricity Tariffs in Southern and East Africa – April 2001
(Industrial Consumption) ................................................................... 8Figure 2.4: Electricity Tariffs in Southern and East Africa – April 2001
(Domestic consumption) ...................................................................... 9Figure 2.5: TIC Approved Foreign Investments, 1990 – 2000 .............................. 10Figure 2.6: Stocks of TIC Approved Foreign Investment 1990 – 2000 ................. 10Figure 3.1: Comparison of FDI and Non-FDI Stock of Liabilities for 1998 and 1
999 ........................................................................................................ 15Figure 3.2: Composition of FDI Stock for 1998 and 1999 ................................... 15Figure 3.3: Comparison of FDI and Non-FDI Flow of liabilities for 1999 ......... 17Figure 3.4: Comparison of FDI Flows for 1999 .................................................... 17Figure 3.5: The Stock of FDI by Country of Origin ............................................. 18Figure 3.6: Stock of FDI by Region for 1998 and 1999 ........................................ 21Figure 5.1: Overall Perception Investors on Main Factors Affecting Investment
Climate .................................................................................................. 29Figure 5.2: Investors’ General Perception on Macroeconomic Factors ......................... 29Figure 5.3: Investors’ Rating of Monetary Policy in Tanzania ........................................ 31Figure 5.4: Investors’ Rating of Fiscal Policy .................................................................. 32Figure 5.5: Investors’ Rating of Government Stability .................................................... 32Figure 5.6: Investors’ General Perception on Infrastructure and Services Factors ....... 33Figure 5.7(a): Investors’ Rating of the Electricity Supply in Tanzania ................................ 34Figure 5.7(b): Investors’ Rating of Electricity Tariff in Tanzania ........................................ 34Figure 5.8: Investors’ Rating of Banking Services in Tanzania ....................................... 35Figure 5.9: Investors’ General Perception on Financial Factors .................................... 36Figure 5.10: Investors’ Rating of Interest Rate in Tanzania .............................................. 36Figure 5.11: Investors’ Rating of Exchange Rate in Tanzania .......................................... 37Figure 5.12: Investors’ General Perception on Governance Factors ................................ 37Figure 5.13: Investors’ Rating of Investment Incentives in Tanzania ............................... 38Figure 5.14: Investors’ Rating of Bureaucracy in Tanzania .............................................. 38Figure 5.15: Investors’ Rating of Tax Collection Efficiency in Tanzania .......................... 39Figure 5.16: Investors’ Rating of Land Law Administration in Tanzania ......................... 39Figure 5.17: Investors’ General Perception on Labour Factors ........................................ 40Figure 5.18: Investors’ Rating of Labour Stability in Tanzania ......................................... 40Figure 5.19: Investors’ Rating of HIV/AIDS in Tanzania .................................................. 41Figure 5.20: Investors’ Rating of Corruption in Tanzania ................................................. 42Figure 5.21: Investors’ Rating of Domestic Political Scenario in Tanzania ...................... 42
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EXECUTIVE SUMMARY
Rationale
During the past few decades the world witnessed the entrenchment of globalisation. Capitalis flowing relatively freely in search of higher returns to emerging capital markets ofdeveloping countries. Developing countries benefit from private capital because theseflows augment the limited domestic savings and bring with it finance, managerial skills,technology, marketing expertise and market links. However, new opportunities also bringrisks that should be managed properly, especially in the case of volatile short-term capitalinflows.
Developing countries have increasingly put in place the environment necessary for attractingforeign private capital flows, such as liberalizing their economies, adopting appropriatemacroeconomic policy frameworks by improving infrastructure and public service delivery,and addressing governance issues. The Government of Tanzania, aware of developmentopportunities associated with private capital inflows, has since the mid 1980s made concertedefforts to attract foreign investment. These efforts include economic liberalization towarda market oriented economy, restoration of macroeconomic stability and implementation ofvarious institutional reforms, accompanied by the formulation of a number of sector specificpolicies, especially in mining and tourism. These reforms have demonstrated theGovernments commitment in promoting a conducive environment for attracting foreigninvestment.
While it is generally evident that the flow of private capital to Tanzania has been growing,very little can be ascertained about the nature, magnitude, composition and sustainabilityof the flows. Although foreign exchange regulations require the companies and individualsthrough their bankers to report to the Bank of Tanzania (BOT) capital inflows for statisticalpurposes, limited information had been submitted which would be useful for balance ofpayments purposes as well as for economic policy making, besides being useful in promotingand facilitating investment.
Given the importance of this information in economic and financial analysis, and decision-making by private investors, government bodies and donors, the Government of Tanzaniacommissioned this study in collaboration with Development Finance International (DFI)of London, and supported by the Government of Sweden, Switzerland and the UnitedKingdom.
Objective and method
The exercise involved conducting an extensive country wide survey of companies partiallyor fully foreign owned. The objectives were to:
• Establish an institutional framework to regularly and comprehensively collect dataon all types of private capital flows for balance of payments, investment promotionand macroeconomic policy formulation.
• Strengthen public-private sector dialogue by regularly obtaining perceptions oninvestment policy and factors affecting the investment climate, and reporting resultsof the analysis back to stakeholders for their information and decision making.
• Design and establish the private capital flows database for data processing andanalysis.
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Findings on Investment Data
Foreign Private investment into Tanzania is much greater than previously estimated…Policy reforms carried out during the 1990s have contributed to attracting additional privatecapital into Tanzania as reflected in data gathered in this exercise for 1998 and 1999. Surveyresults show that total foreign private investment stock rose by more than one third to USD2.6 bn between 1998 and 1999. This amount is much higher than previous estimates hadshown.
Most investment is from affiliated companies….Most of this investment is in the form of Foreign Direct Investment (FDI), which increasedfrom USD 1.6 billion in 1998 to USD 2.2 billion in 1999. This amount is significantlyhigher than previous national and international estimates. The flow of FDI particularlyduring the past decade has contributed substantially to the growth of Gross Domestic Product(GDP). This trend is in line with the Tanzania Investment Centre (TIC) records whichshow that approved investment increased sixteen-fold from USD 47 million in 1990 toUSD 768 million by 2000. The financing structure of foreign companies indicates that in1999 FDI related flows accounted for 82 percent of total, and the flow from non-FDI sources(including minor equity shareholdings and debt from non-affiliated sources) accounted forthe remainder.
The bulk of FDI and overall investment is via equity and long-term debt ….The bulk of FDI stock in 1999 is made up of equity (67 percent) and long-term loans (26percent). This composition suggests that FDI could be a stable source of finance for theeconomy.
The share of equity finance to the total FDI stock decreased from 73 percent to 68 percentbetween 1998 and 1999, with debt finance increasing accordingly. However, this patternvaries by sector of economic activity. In the mining sector, for example, the foreign debt toforeign equity ratio was as high as 80:20 in 1999, reflecting greater exposure to foreigncreditors. It also varies by source country with, for example, Canadian investors providingmainly equity and Italian investors providing mainly long-term debt. This study hasidentified private sector external debt as a priority area for monitoring.
Investors borrow much more from their affiliates abroad.The stock of borrowing from all sources almost doubled from USD 0.7 billion by end 1998to USD 1.1 billion by end 1999 with most of it contracted directly from affiliated companiesabroad on a long term basis. This source and maturity could be generally preferred, as it ischeaper and less risky compared with finance from unaffiliated sources, which are of ashorter duration. However, company decision on project implementation may make debtfrom affiliates risky. It is, for example, relatively easier for a parent company to withdrawa commitment to its subsidiary because terms and conditions in the loan agreement aremore flexible. This figure suggests that this should be a key area for further monitoringand research.
FDI is coming from a diversity of traditional and non-traditional source countries……The source of FDI flows into Tanzania has for historical reasons been dominated by theUnited Kingdom (UK). However, the recent surge in investment in the mining sectorbrought in new investors from Ghana, Australia, Canada and the United States of America(USA).
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These four countries accounted for about 60 percent of the FDI stock by end of 1999, andthe top ten countries for about 80 percent. The biggest advantage of this diversity is that inthe event of adverse changes in economic fundamentals in any of these countries, andcombined with the volatile nature of such changes to the mining sector in particular, theadverse effects on Tanzania would be moderate. The finding showed that some investorslist their companies on markets other than those of the country in which they reside, thusfor investment promotion purposes, there is a difference between the country in which thedecision to invest is taken (a policy issue), and the country from which the actual investmentis recorded (a technical issue).
…and mostly into mining, manufacturing, and tourism but relatively little intoagriculture…Consistent with the country’s privatisation, investment and liberalization policies, the stockof FDI is skewed in favour of mining (about 40 percent at end 1999), manufacturing (22percent), and tourism (13 percent). The bias to mining and manufacturing increased during1999 and accounted for about 80 percent of total FDI flows. In relative terms, agricultureaccounted for a low share of the total FDI stock (7 percent) in spite of its important role inthe economy, contributing to over 50 percent of GDP and foreign exchange earnings, aswell as being the largest employer. This is largely because the Government has not provideda conducive environment and complementary public investment to attract domestic andforeign investments in agriculture.
….and concentrated in particular regions.By end 1999, over 75 percent of FDI stock was found to be concentrated in Dar es Salaam,Mwanza, Shinyanga and Arusha regions. Dar es Salaam accounted for 36 percent, due tothe fact that most of the major privatised manufacturing companies are located there. Mostof the mining activities are concentrated in Shinyanga, Mwanza and Mara, while the majorfish processing companies are located around Lake Victoria in Mwanza and Mara. Asubstantial amount of foreign investments is also found in Morogoro, Iringa, Tanga, Tabora,and Kilimanjaro, with very little located elsewhere. The regional pattern of FDI indicatesthat lower foreign investment goes to regions with less developed economic infrastructureand social amenities. The above scenario suggests that location of FDI within Tanzaniacould be influenced by availability of raw materials, provision and reliability of utilities,transport and communication, access to markets, and, to the extent that region and sector ofeconomic activity can be closely related, sector-specific incentives, and economic viability.All these imply that there may be a need to address constraints through specific policyformulation.
Local banks report low or no external borrowing and lending.Short-term lending by resident banks to non-residents was found to be insignificant. Long-term lending abroad is restricted and is subject to approval by the Bank of Tanzania. Howeverit is unlikely that local banks would start involving themselves with long term lendingabroad if restrictions on capital account transactions were further relaxed. In addition, thehigh interest rates and other structural problems (e.g. lack of bankable projects, restrictionsin the land law and weakness in the judiciary, poor creditworthiness of clientele, lack ofrisk guarantee mechanism, and absence of credit information agencies) discourage domesticlending by local banks. Borrowing from non-resident sources was negligible, and mostbanks indicated that they do not expect to increase liabilities for their own purposes or forlending, despite having no restrictions on this item, and that relatively higher domesticlending rates tend to encourage foreign borrowing.
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Just over half the responding banks felt competition in their sector was either high or veryhigh while just under half felt there was “medium” level of competition, with vast potentialopportunities still to be explored. The nature of competition is mainly urban based andlimited to two categories of clients i.e. few big banks dealing with corporate clients, andsmall and medium sized banks dealing with retail customers. This is related to structuralimpediments adversely affecting financial intermediation and it is an issue for furtherdiscussion between banks and the Government.
Findings on Investor Perceptions
Most investors plan to increase their investment due to social, economic and politicalstability.Economic reforms undertaken since the mid 1980s have been commended, and haveincreased confidence. The role of monetary policy and fiscal policy in reducing inflationfrom above 30 percent in the mid-1990s to about 6 percent in 2000 was under-scored. Amajor finding of the study was that 71 per cent of respondents plan to expand their investmentin the medium-term due to stable social, economic, and political conditions. Manyacknowledged that these are the main factors that influenced their initial decision to investin Tanzania. Those in tourism, transport, finance, mining and manufacturing were pleasedwith investment policy by sector. Investors in the agricultural sector however arediscontented by the unfavourable investment environment and felt that peculiar features ofthe sector are not addressed in the overall investment policy, suggesting the need to formulateagriculture specific investment policies.
Economic liberalization has yielded positive result…Liberalization policies implemented during the 1990s were confirmed to have yieldedpositive results. Investors in the mining and banking sectors expressed strong positiveopinion and recommended further reforms including full financial account liberalization.However, investors in the manufacturing sector had mixed feelings, pointing out the negativeexperiences of trade liberalization, the major concern being the importation of cheap andsubstandard products that have undermined domestic production.
…but respondents feel this could be assisted by further institutional and other reforms…Institutional reforms such as the establishment of TIC, Parastatal Sector Reform Commission(RSRC) and Tanzania Revenue Authority (TRA) have contributed to improvement of thegeneral macroeconomic environment in Tanzania, but these reforms were perceived by theprivate sector not to have gone far enough in addressing the problems faced by investors.For instance, at the time of conducting the survey, there was no harmonization of taxincentives and measures between different Government departments (e.g. between TICand TRA). In addition, land, labour, and legal reforms have lagged behind the other reforms,thereby undermining the impact of the already implemented reforms. Therefore, there is aneed for further review of institutional and other reforms.
…the need for enhanced access to credit…While respondents were generally satisfied with banking services, they indicated that higherbank lending rates and limited availability of credit undermines the level of their activities.Lending rates of above 20 percent have no relation with the low inflation rate of 6 percentand deposit rates of 3 to 5 percent during 2000, implying imperfections in the market.High lending rates have led to market segmentation whereby only large corporate investorscan access the credit at lower cost. Banks on their part insist that high interest rates resultfrom high-risk borrowers, high operational cost and the weaknesses in land law and the
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judiciary system, which make the process of registering mortgage and loan recoverycumbersome. Government needs to address the above factors in its efforts towards thefinancial sector reforms.
…and further efforts in addressing bureaucracy and corruption.
Bureaucracy in some government departments has been observed as a problem, despiteslight improvements in recent years. Incentives offered by TIC play a significant role inattracting FDI, and the establishment of TIC as a one-stop centre is simplifying the processof project registration and start-up. However, investors are still obliged to approach othergovernment departments in the process of setting up their projects. Respondents commendedthe establishment of TRA noting the improved tax administration. However, they complainedof the high VAT rate of 20 percent and of the slow speed of decision-making at TRA withintroduction of VAT. Moreover, investors are concerned that corruption in the VAT andCustoms departments, in the Judiciary and the Police has not been checked sufficiently.This suggests the need for more concentrated efforts to fight corruption in these areas.
Infrastructure and public services were poorly rated, but with some notableimprovements…
Respondents were concerned with the high cost and poor reliability of utilities, electricityand water rates considered to be the highest in the region. This calls for Government actionto address the matter. Conversely, investors commended the positive effects arising fromimprovements in the quality of telecommunications.
…and availability of skilled staff needs to be improved.
Labour factors, were on average not rated favourably. In their view, labour legislationoverprotects employees, there is insufficient availability of highly educated and skilledlabour, and HIV/AIDS is increasingly having a negative effect on productivity. Theseperceptions suggest the need to expand opportunities and incentives for training technicaland managerial staff.
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CHAPTER ONE
INTRODUCTION
During the past few decades the worldwitnessed the entrenchment ofglobalisation that significantly erodedbarriers to cross-boarder movements aprocess that has enabled economic agentsto freely choose where to save and in-vest based on global considerations.Through globalisation, both developingand developed countries are forced toadapt to the fast changing global envi-ronment.
Globalization has among others,facilitated private capital to flow acrosscountries with little restrictions. Capitalis thus flowing relatively freely in searchof higher returns even into the emergingcapital markets of developing countries.Developing countries on their part benefitfrom private capital flows because theyaugment limited domestic savings andbring with them finance, managerialskills, technology, marketing expertiseand market links all of which are mostneeded in developing countries.
These benefits have thus influenceddeveloping countries to increasingly putin place the environment necessary forattracting foreign private capital flows.Among other efforts, countries haveliberalized their economies, adoptedappropriate macro-economic policyframeworks, improved infrastructure andpublic service delivery, put in place theright financial intermediaries andaddressed governance issues. Thegovernment of Tanzania cognizant of thisfact and also aware of developmentopportunities associated with privatecapital inflows has since the mid 1980smade efforts to attract foreign investment.
1 Barry Eichengreen et al (1999), Liberalizing Capital Movements: Some Analytical Issues; IMF Economic Issue No 17,February2 FDI data in Tanzania has thus far been estimated from TIC approval records and privatisation data from PSRC. See detailsin Chapter 2.3 For example Kimei and others 1998, Noni and others 1999
1
Efforts in this regard include economicliberalization and institutional reforms,including the formulation of a newinvestment policy and investment codein 1990, and its revision in 1997. Theformulation or revision of a number ofsector-specific policies, including miningand tourism policies, further shows thecommitment of the Government increating a conducive environment toattract foreign capital.
There is consensus in the literature thatnet private capital flows to developingcountries have been constantly increasingwith time, especially in the 1990s. Onesource suggests that private capital flowshave tripled to USD150 billion a yearduring 1995 to 1997, from about USD50 billion a year during 1987 to 19891 .In Tanzania, recent official statisticsindicate that net Foreign DirectInvestment (FDI) increased from USD 12million in 1992 to about USD 183.0million in 1999, representing more than15 times increase in 7 years2 . Also, otherstudies point to the fact that the role ofFDI as a source of development financein Tanzania has been increasing.3
While it is generally evident that the flowof private capital to developing countrieshas been growing, very little can beascertained about the nature, magnitude,composition and sustainability of theflows. The importance of getting thisinformation for economic and financialanalysis and decision making by privateinvestors, government bodies and donorcommunities cannot be overemphasized.More specifically, monitoring of privatecapital flows is important because:
• The information gathered can be usedfor the compilation of balance ofpayments statistics,investmentpromotion and macro-economic policyformulation.
• Accurate data leads to good econo-mic and financial analysis and appro-priate policy decisions.
• Several developing countries havedeclared the intention to movegradually into full financial accountliberalization,hence the need for amonitoring framework.
• International organisations (e.g. theInternational Monetary Fund (IMF)and the World Bank) and donorsrequire this kind of information foranalysis of its impact on globaleconomic stability, to assess the needfor donor flows and their role inpromoting developing economies.
• International investors representedmainly by Multinational Corpo-rations (MNC), international financialinstitutions and credit rating agenciesrequire accurate and timely infor-mation for financial assessment ofreturn on investments and to assesscredibility of the recipient countries.
• Monitoring capital flows assistgovernments to strengthen dialoguewith the private sector. This will alsohelp in obtaining perceptions oninvestment policy and factors affectingthe investment climate in the country.
• Continuous collection of informationon foreign private capital flowsbuilds a reliable database for a country.It can therefore establish a reliableframework for collecting, processingand analysing private capital flowsdata on an ongoing basis.
4 Details in Noni and Others 1999.5 Formerly known as EFA.
Notwithstanding these underlyingprinciples for monitoring private capitalflows, investment flows into Tanzaniahad not been accorded the attention theydeserve until recently. There is thus lackof reliable and timely data on privatecapital flows (in particular FDI),rendering implementation and evaluationof macroeconomic policy actions relatedto capital flows less effective.
Recognizing the importance ofmonitoring of private capital flows; theGovernment of Tanzania put in place anumber of measures to monitor the flows.For instance, between November 1998and June 1999, a pilot survey oncompanies that are partially or fullyforeign owned covering regional (Eastand Southern Africa) and internationalinvestors, and bank flows was carried outby the Bank of Tanzania (BOT) andTanzania Investment Centre (TIC) incollaboration with External Finance forAfrica (EFA), an organisation based inLondon. A final report for this pilotsurvey was submitted to relevantauthorities in December 19994 .
The current study was initiated by BOT,TIC and National Bureau of Statistics(NBS) in collaboration withDevelopment Finance International(DFI)5with the objective of assessing thenature of foreign private capital flows intoand out of Tanzania. Specific objectiveswere to:
• establish an institutional frameworkto regularly and comprehensivelycollect data on all types of privatecapital flows for balance of payme-nts, investment promotion and macro-economic policy formulation;
• strengthen public-private sectordialogue by regularly obtainingperceptions on investment policy andfactors affecting the investmentclimate in Tanzania; and
2
• design private capital flows databasefor data processing and analysis.
To achieve the stated objectives, thefollowing implementation activities wereplanned:
• Conducting a sensitisation andtraining workshop;
• Conducting census of all companies,which are partially or fully foreignowned;
• Designing computer software for
data input and processing;
• Compiling, processing and analysingdata;
• Report writing; and
• Presenting a final report duringdissemination/closing workshop.
The Governments of Sweden,Switzerland, and UK, and the Bank ofTanzania funded the project activities.
3
CHAPTER TWO
RECENT TRENDS IN POLICY REFORMS AND FOREIGN INVESTMENTIN MAINLAND TANZANIA
This Chapter summarises recent trendsin foreign private capital flows inTanzania. It examines policies andincentives adopted by the Government ofTanzania to attract foreign private capitalsince the early 1990s focusing onliberalization and structural policiesintroduced in order to promote privatesector activities. The chapter also reviewsdata problems encountered followingliberalization and removal of exchangecontrols data tracking mechanism, andexamines the efforts taken to estimatedata for official reporting during theperiod 1992 to 2000.
In order to gauge the responsiveness offoreign private investors to governmentpolicies and incentives given, themagnitude, composition and trends ofprivate capital flows based on TICcertificates of incentives for the periodcovering 1990 to 2000 have also beenexamined. TIC holds enormous data thatcan be extracted from investmentapproval records i.e. Application Formsthat are filled-in and submitted to TIC bypotential investors. Such data if capturedcomprehensively, would form a usefulbenchmark for comparison with actualdata that is collected through censuses.The data on investment approvalspresented in this chapter relates toinvestments that are partially or fullyowned by non-residents.
2.1 Major Policy Reforms
After almost two decades of central plan-ning that was characterized by excessivegovernment interventions in the eco-nomic activities6 , the Government from
1985 changed the direction of its poli-cies towards market based economicmanagement. Key to these changes were:
• Trade and exchange liberalizationo Abolition of exchange controls
on current account transactionso Abolition of import and export
licenseso Partial liberalization of the
financial account
• Parastatal sector reformso Privatisation of state owned
companieso Institutional reforms
• Investment promotion reformso Guarantees against nationalizationo Provision of tax holiday incentiveso Establishment of IPC (trans
formed later into TIC)o TIC transformed into one stop
centre
• Tax reforms (streamlining andbroadening of the tax base)o Establishment of TRAo Introduction of Value Added Tax
(VAT)
• Financial sector reformso Privatisation of state owned bankso Allowing foreign banks to operate
alongside local bankso Establishment of the Capital
Market and Securities Authority(CMSA) and the Dar es SalaamStock Exchange (DSE).
• Civil service reforms7
o Restructuring the Public Serviceo Performance Improvement
6 Promulgation of the Arusha Declaration of 1967 and the nationalization policy that folowed discouraged active participationof the private sector in the economicy.7 URT (2001), Public Service Reform Programme 2000-2011.
4
o Pay Reformo Records and Information Systemo Capacity Building
2.2 Evolution of Investment RelatedPolicies
Noticeable flows of private capital intoTanzania gained momentum only afterthe mid-1990’s when liberalisation andstructural reforms were intensified,especially after the review of theinvestment legislation incentives andother investment promotional andfacilitation efforts. The Governmentadopted a National Investment PromotionPolicy in February 1990 and enacted aninvestment code known as the NationalInvestment (Promotion and Protection)Act No. 10 of 1990 (NIPPA).Accordingly, the Government establishedthe Investment Promotion Centre (IPC)as an institution responsible forpromotion, approval, monitoring andfacilitation of foreign private capitalflows into the country. Thesedevelopments encouraged investmentfrom both local and foreign investors.
However, by the mid-1990s there weresigns that the investment policy and codedid not auger well with investor require-ments especially because of conflicts be-tween the investment code and other lawsgoverning investments. There was also aperception of an unpredictable invest-ment climate due to goal-shifting syn-drome, leading to unpredictable incen-tives and the IPC increasingly being per-ceived as another bureaucracy. This ne-cessitated the initiatives to conduct threestudies i.e. the Investors’ Road MapStudy, Investment Policy Review andInvestment Code review. The three ini-tiatives resulted into the adoption of thenew National Investment Promotion
Policy of 19968, replacing that of 1990followed by the Tanzania Investment ActNo. 26 of 1997 which effectively repealedNIPPA, 1990. The IPC was thus trans-formed into Tanzania Investment Centre(TIC), charged with two main functionsnamely, to promote investments (both for-eign and local) and to facilitate all inves-tors whether registered by the Centre or not.
Considerable improvements were made onthe new Investment Code. For example, in-vestment approvals are now based on aminimum sum equivalent of USD 300,000for foreign investors and USD 100,000 forlocal investors. To minimize bureaucracy,the Investment Code also set a maximumperiod of 14 working days within whichrelevant government agencies were sup-posed to have processed applications sentto them by TIC and that “where the centredoes not receive a written objection fromthe relevant authority within the specifiedtime, the necessary licence or approval shallbe deemed to have been granted”9 . As aguarantee to investors, TIC Act of 1997states categorically that business enterprisesshall be guaranteed unconditional transfer-ability of dividends, loan servicing, remit-tance of proceeds in the event of liquida-tion10 and a guarantee against nationalisa-tion.
In addition to the incentives and regulatorymeasures to attract investors contained inTIC Act 1997, a number of sectoral poli-cies were also reviewed in favour of pri-vate investment in Tanzania, for example,the mining policy in 1997 and tourismpolicy in 1997. Each of these policiesclearly describes the importance and com-mitment by the Government to ensuringthat a conducive environment for attract-ing investments in the country is in place11.
8 Madete (2000), identified several weaknesses in policyand Legislations that necessitated review of National In-vestment Promotion Policy during mid-1990s. Theseweaknesses are, inter alia; reduced credibility of both theIPC code and policy as a result of frequent changes thatwere being made provisions, existence of contradictionsand disputes between IPC code and other legislations/lawsor other government executing agencies, and administra-tive weaknesses that limited effective attraction of foreigninvestors.
9 This is in line with TIC Act, (1997) section 16(4) and (5)- pp444.10 Liberalisation of FDI is declared in 1998 Foreign Ex-change Regulations BoT, as well as Foreign ExchangeCircular no. 6000/DEM/EX.RE/58 of September 1998.11 Details in Tourism Policy (1997); Mining Policy (1996).
5
Furthermore, the Government reformed thetax system by rationalizing the tax struc-ture and establishing Tanzania RevenueAuthority (TRA) as an independent in-stitution to administer the tax system.Under the adopted privatisation pro-gramme, more than half of the 400 pub-lic entities that existed prior to 1993, hadbeen divested by the end of 1999. It isestimated that about one third of Tanza-nia FDI in 1992 – 1993 came through pri-vatisation12.
The Government also enacted the Bank-ing and Financial Institutions Act, 1991,which liberalised the financial sector inorder to increase efficiency in the provi-sion of banking services and to facilitateactivities of investors. Following liber-alisation, the number of commercialbanks increased from two state-ownedbanks in 1993 to 19 banks (17 private)and 12 non-bank financial institutions asof end 2000. The financial sector was lib-eralised.
Rapid transformation towards removal ofexchange controls on the current accountand relaxation of capital controls were ex-perienced after the mid -1990s. For ex-ample in 1996 all current account trans-actions were fully liberalized. However,with respect to the capital account, Tan-zania is moving cautiously towards fullliberalization, avoiding speculative short-term capital flows. Currently, investmentsabroad by residents are still restricted asis the case with participation of non-resi-dents in domestic money and capitalmarket. As a step towards full capital ac-count liberalization, inflows of long-termcapital e.g. loans and foreign direct in-vestments and their associated incomerelated outflows are unrestricted13.
Other measures to attract foreign inves-tors include the establishment of commer-
cial courts in 1999 to speed up the set-tling of commercial disputes thus build-ing investor’s confidence. Besides, Tan-zania has signed a number of bilateral andmultilateral international treaties includ-ing Multilateral Investment GuaranteeAgency (MIGA), the International Cen-tre for the Settlement of Investment Dis-putes (ICSID), and the Convention for theProtection of Industrial Property andConvention on Recognition and Enforce-ment of Foreign Arbitration Award. Thesearrangements guarantee the security ofFDI against losses arising from armed con-flict or international disorder, protectionagainst nationalisation, and ensure transferof profit, dividends and capital.
As part of its efforts to advertise its invest-ment opportunities, Tanzania has partici-pated in many international fora and hostedthe first investment forum in Dar es Salaamin 1996, followed by several other morespecific investment fora such as Mining(1997), Commonwealth (2000), Sweden(2000). These fora have provided foreigninvestors with the opportunity to exploreinvestment potentials in the country and tomeet with their potential domestic coun-terparts.
2.3 Impact of the Reforms on BusinessEnvironment
All these measures were taken along sidemacro-economic stabilisation policies (fis-cal and monetary policies) geared towardslowering inflation to single digit levels.Government commitment to consistentlypursue these macroeconomic stabilizationand structural policies and the frequent nec-essary reviews made to some policies wherenecessary, acted as an important catalysttowards building confidence of private in-vestors.
12 Bhinda et. All 1999.13 Foreign Exchange Regulations, 1998 and Foreign Exchange Circu-lar no. 6000/DEM/EX.REG/58 OF 24
th September, 1998.
6
2.3.1 Inflation, Interest Rate and Ex-change rate.
The foreign Exchange Act of 1992 (furtheramended in 1998) liberalised exchange andinterest rates and are now determined bymarket forces. Short-term lending rates de-clined substantially from an average of 33.4percent in 1995 to 21.9 percent in 1999 butstill remain high at more than 20 percentduring the year 2000 despite a decline ininflation to single digit levels (Figure 2.1).
Deposit rates on the other hand were be-low 5 percent in 2000 implying high inter-est margins.
The nominal exchange rate depreciated fromTZS 195.1 per dollar in the year 1990 to TZS800.5 per dollar in year 2000 (Figure 2.2),implying low and falling purchansing powerof the shilling Such trends imply that furtherreforms in the financial sector are requiredto widen and deepen the services.
Figure 2.2: Average Exchange Rate Movements 1990-2000
Figure 2.1: Trend Inflation, Short-term and Long-term Interest Rates
0.0
10.0
20.0
30.0
40.0
50.0
60.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Perc
enta
ges
Inflation Short-term Rates Long-term Rates
0.0100.0200.0300.0400.0500.0600.0700.0800.0900.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
TZ
S p
er U
SD
2.3.2: Utility Serivices
So far the government under its privatisa-tion programme, has effectively privatisedmost of its commercial and industrial en-terprises but not the main public utilitiesenterprises e.g. in water and power sec-tors, that have a significant bearing on the
cost of doing business. Generally, utilityservices are poor and erratic. In additionTanzania charges higher electricity andwater tariff rates than both Kenya andUganda. However, on average Tanzaniacharges lower oil pump prices thanUganda while Kenya is charging the low-est among the East African countries.
7
Table 2.1 Comparative Cost of doing business in EA region
Electricity Water & Sewerage Diesel* Petrol* VAT
USc/ kWh USc / 1cubic m. USc /1 Litre percentTanzania 9 –12 0.99 67 70 20Kenya 6.5 – 8.5 0. 016 - 0. 002 60 71 16Uganda 5 - 6.8 0. 014 74 86 17
* Oil Pump prices
When compared to its trading partners inSADC region, Tanzania charges (9 – 12USc/kWh) higher electricity tariffs than
many of its partners whose tariffs rangebetween 3 – 5 USc/kWh (Figure 2.3).
Figure 2.3 Electricity Tariffs in Southern and East Africa - April 2001 (Industrial Con-sumption)
0.02.04.06.08.0
10.012.014.016.0
BOTSWANA
MAURIT
IUS
MOZAM
BIQUE
MALAW
I
SOUTH AFRIC
A
KENYA
LESOTHO
NAMIB
IA
SWAZIL
AND
TANZANIA
UGANDA
ZIMBABW
E
ZAMBIA
100-80% 100-50% 100-30% 2500-80% 2500-50% 2500-30%
**
USc
/kW
h
Source:www.sad-elec.com
On household power consumption [Fig-ure 2.4], Tanzania tariffs range between3 and 7 USc/kWh, which is relatively lowwithin the SADC region. The lower tar-iff of household power consumption (thataccount for about 60 percent of total con-sumption of electricity in the country) isa result of subsidisation by industrial con-sumers.
2.3.3 Tax regime
The government has had substantial im-provements in simplifying, rationalisingand broadening the tax base, but it has ahigher VAT rate than Kenya, Uganda andmany of its other trading parteners,
Therefore, Tanzania’ manufactured prod-ucts are generally less competitive be-cause of the high VAT rate, electricity andwater costs.
2.4 The Effect of Policy Reforms onCompilation of Private Capital FlowsStatistics
Monitoring of private capital flows inTanzania experienced serious problemsafter liberalization of the external sector,especially in 1993, after removal of ex-change controls together with their asso-ciated reporting requirements. This de-cision created an information gap relat-ing to Balance of Payments (BOP) sta-tistics in general as it removed the insti-tutional arrangement to regularly collect,
8
compile and analyse the information.
Cognizant of these problems, the Bankof Tanzania estimated some componentsof private capital flows from informationprovided by commercial banks, TIC (ap-proval records) and Parastatal SectorReform Commission (PSRC). The infor-mation collected, though valuable waslimited in use, due to methodologicalflaws associated with its sources. Theycould only give an indication of the trendsand not the actual magnitude and com-position of private capital flowing intothe country. A number of factors ac-counted for this including having a sig-
nificant time lag between approval andactual investments and in some cases, theapproved investments never taking off,actual investments turning out to be lessthan approved investments, and some in-formation necessary for compilation ofbalance of payments like borrowing fromintra-company accounts, reinvested earn-ings and their related investment income,outward payments and withdrawal of in-vestments, not obtained from theserecords. In addition, approval recordsfrom TIC relate only to investmentsabove USD 300,000 and are limited toinflow data.
Figure 2.4: Electricity Tariffs in Southern and East Africa – April 2001 (Domestic con-sumption)
Source:www.sad-elec.com
0.02.04.06.08.0
10.012.014.016.018.0
BOTSWANA
MAURIT
IUS
MOZAM
BIQUE
MALAW
I
SOUTH AFRIC
A
KENYA
LESOTHO
NAMIB
IA
SWAZIL
AND
TANZANIA
UGANDA
ZIMBABW
E
ZAMBIA
USc
/kW
h
1:75kWh 2:200kWh 3:450kWh 4:900kWh
2.5 Magnitude of Approved ForeignPrivate Investment 1990 - 2000
Official estimates of FDI flows for theperiod 1992 to 2000 are as shown in
Table 2.2. No FDI outflows were esti-mated due to existing restrictions oncapital inflows.
9
Million of USDTable 2.2: Official Estimated FDI Flows in Tanzania 1992-2000
Year 1992 1993 1994 1995 1996 1997 1998 1999 2000
FDI Inlows 12.0 20.0 50.0 150.0 148.0 157.8 172.2 183.4 192.8
FDI Outflows - - - - - -
Source: Bank of Tanzania
Data recently compiled from TIC ap-proval records reveal a growth patternthat corresponds with the investmentpolicy evolution and promotional effortsthat the Government undertook since theearly 1990s. From Figure 2.5 it is evi-dent that investors are sensitive to domes-tic policy and incentive packages. Afterthe establishment of IPC in 1990, thevalue of approved investments rosesharply from a total of less than USD 50.0million in 1990 to about USD 369.5 mil-
Figure 2.6:Stocks of TIC Approved Foreign Investment 1990 – 2000
Examined differently, the positive re-sponse of foreign investments to policyincentives can also be seen in Figure 2.6.The chart illustrates that better policy and
Figure 2.5:TIC Approved Foreign Investments, 1990 – 2000
lion and 226.1 million recorded in 1991and 1993 respectively, but fell to USD166.3 million in 1995 as a result of ad-ministrative weaknesses in the IPC. Simi-larly, the positive effects of the MiningPolicy (1997), Tanzania Investment Cen-tre Act (1997) and other promotional poli-cies including investors forum of 1996are noticeable through the increase ofvalue of approved investment during1996, 1998 as well as 2000 when itpeaked at USD 698.3 million.
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
Val
ues
in U
SD M
illio
n
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
698.3
274.6
231.3254.3343.8
166.318.0226.1164.6
369.5
40.7
improved administration during the late1990s resulted in faster growth of thestock of investment than was the case dur-ing the early 1990s.
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
3,500.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Val
ues
in
US
D M
illi
on
10
CHAPTER THREE
QUANTITATIVE RESULTS
14 Detail explanations on data limitations are covered under Analytical Methods sub-section of Appendix 1.
The analysis of quantitative data obtainedfrom the census is based on a number ofassumptions and basic methodologicalstandards for compilation of private capi-tal flows data that are outlined in Appen-dix I.
As much as possible, compilation wasbased on standards outlined in the IMFBalance of Payments Manual Version 5(BPM5) which recommends that privatecapital flows statistics be compiled as partof balance of payments (BOP) and inter-national investment position (IIP) whichrequire grouping of private capital datainto direct investment, portfolio invest-ment and other investments. On this ba-sis, two types of questionnaires were de-signed namely foreign assets and liabili-ties (FAL) for FDI and portfolio equity in-vestment (PI), and banks survey for otherinvestments.
According to international data classifica-tion standards, FDI stocks and transactionsare composed of three sub-classifications:(i) equity capital (ii) reinvested earningsand (iii) other capital (non-equity intra-company transactions). The direct invest-ment income component is obtained fromincome on equity (dividends and profitpayments) and income on debt (non-eq-
uity interest payments). In the absence offoreign participation in organised finan-cial markets (e.g. Stock exchange), port-folio investment is limited to portfolioequity investment. Other investments in-clude short and long-term debt from un-related companies to FDI and Non-FDIcompanies.
To satisfy these international standards andother analytical considerations, companieswith foreign ownership were asked to pro-vide disaggregated information such thatit could be classified by source country,by economic sectors and by geographicalregion in which the investment is locatedin Tanzania. Distinction was made be-tween stocks and flows as well as incomerelated flows. Due to inconsistencies in thedata reported by investors14, the studyadopted both the change in stock approachand transaction approach in calculatingannual flows of FDI.
3.1 Response Rate
A total of 875 questionnaire returns werereceived, being 55.3 percent of all ques-tionnaires distributed. The response ratewas calculated based on all questionnairescompleted and returned, but excluded allthose representing local companies andcompanies that could not be located.
Total Companies Local Notwith foreign Companies Located
ownership
Questionnaires distributed 1583 496 370 717 O/w Returned 875 404 370 101
Not returned 708 92 0 616
Table 3.1a: Distribution of Questionnare and Responses in Absolute numbers
11
Table 3.1b: Response Rate of FDI Companies
Out of the 875 questionnaires received, 404represented companies with foreign owner-ship, 370 were for local companies while101 questionnaire, were for companies thatcould not be located because some compa-nies:
• have changed address;
• have ceased to exist; or• have changed business names and
possibly line of business.
Overall response rate based oncompanies with foreign ownershipsurveyed was 81.5 percent (Table3.1b).
Companieswith foreign In percentageownership
Questionnaires distributed 496 100.0 O/w Returned 404 81.5
Not returned 92 18.5
15 These percentages are computed from Table 3.2
3.1.1 Response rate by region
Table 3.2 shows geographical spread ofcompanies with foreign ownership in thecountry which are concentrated mainlyin Dar es Salaam, Arusha Tanga,Mwanza, and Kilimanjaro . Dar es
Salaam with 269 investment covered hada response rate of 90.7 percent, whereasArusha with 80 companies had a responserate of 83.3 percent, Tanga had 24percent, Mwanza 84.0 percent, andKilimanjaro 93.8 percent
15.
12
Table 3.2: Response Rate by Region
Region Companies with foreign Companies with foreign ownership that were ownership that
covered responded
Arusha 96 80Dar es Salaam 269 244Dodoma 1 1Iringa 6 3Kilimanjaro 16 15Mara 6 3Mbeya 3 1Morogoro 5 5Mwanza 44 37Pwani 1 1Ruvuma 1 1Shinyanga 2 2Tanga 46 11
TOTAL 496 404
3.1.2 Sectoral distribution of respondedcompanies
Out of the 404 foreign investors thatresponded, 30.9 percent were from themanufacturing sector, 17.1 percent fromwholesale, retail trade, catering andaccommodation services 11.1 percentfrom Agriculture, Hunting & Forestry andFishing, 10.4 percent from Finance,Insurance, Real Estate & BusinessServices while Transport, Storage &
Communication accounted for 10.2percent (Table 3.3).
3.1.3 Quality of response
Out of 404 questionnaires received, 397(about 98.2percent) were completedsatisfactorily and in order to expedite theprocess and control the quality ofresponses, continuous follow- ups weremade for further verification.
Table 3.3:Sectoral Distribution of Responded Companies.
Sector Responded In Percentage
Manufacturing 125 30.9
Wholesale, Retail trade, Catering & Accom. Serv. 69 17.1
Agriculture, hunting & forestry 45 11.1
Finance, Insurance real estate & Business Serv. 42 10.4
Transport, Storage & Communication 41 10.2
Mining & Quarry 24 5.9
Construction 19 4.7
Community, Social & Personal Services 6 1.5
Electricity, Gas & Water 1 0.3
Activities not adequately defined 32 7.9
Total 404 100.0
Despite the high response rate and thehigh quality of responses, respondentsfaced a number of problems, for example;
• Some investors (particularly smallones) found the questionnaire compl-icated because they lack competentstaff to answer the questionscorrectly.
• Lack of culture to provide statisticalinformation to public authorities.
• Fear that the information may be usedfor tax purposes despite assurance
that the information would be trea-ted in strict confidentiality.
3.2 Magnitudes and Composition ofForeign Private Capital Flows
3.2.1 Stock of foreign private capital,1998 and 1999
Data collected from the study reveals thatthe stock of foreign private capital incompanies with foreign ownership hasbeen increasing over the recent past(Table 3.4).
13
Table 3.4:Stock of FDI and Non-FDI 1995-1999Millions of USD
FDI and Non-FDI Components 1995* 1996* 1997* 1998 1999
FDI Components
Total Direct Equity 573.2 618.9 661.2 1,190.7 1,458.6
Total Long -term Intra-Company Loans 39.3 50.2 78.0 372.8 570.9
Total Short-term Intra-Company Loans 5.0 7.5 13.6 39.6 79.4
Total Suppliers Credit from Related Companies 2.3 4.8 7.2 34.6 45.5
Total FDI Stock 619.8 681.4 760.0 1,637.7 2,154.4
Non-FDI (Other Liabilities)
Total Portfolio Equity 6.3 6.3 6.4 26.9 27.6
Total Long Term loans From Unrelated
Comp. 7.2 9.0 33.4 170.8 251.3
Total Suppliers Credit from Un-related
Comp. 13.1 13.4 12.4 47.3 50.2
Other Short Term loans From Unrelated
Comp. 1.9 3.4 5.2 50.9 132.0
Total Stock of Non FDI 28.5 32.1 57.3 295.9 460.9
Total Stock of FDI and Non FDI 648.3 713.5 817.3 1,933.6 2,615.3
* Most of the companies did not report historical information for the period before 1998
Study results show that total FDI stockrose by 31.6 percent to USD 2,154.4million as at end 1999, from USD 1,637.7million as at end 1998. Similarly, thestock of non-FDI liabilities increased by55.8 percent to USD 460.9 million, fromUSD 295.9 million. The total stock ofliabilities (FDI and non-FDI) reachedUSD 2,615.3 million as at end 1999compared with USD 1,933.6 million atend 1998, representing an increase of35.3 percent.
In 1998, the stock of FDI relatedliabilities accounted for 84.7 percent ofthe total stock of FDI and Non-FDIrelated liabilities, whereas Non-FDIrelated liabilities accounted for only 15.3percent. The data reveals that a bigproportion of foreign private capital inTanzania originates from FDI related
sources. This type of financing minimisesthe risk faced by companies with foreignownership from creditor threats in theevent that their investments performpoorly. In 1999 FDI related stockaccounted for 82.4 percent while Non-FDI related liabilities accounted for 17.6percent (Figure 3.1)
Further examination of the magnitude andcomposition of FDI stock reveals that atthe end of 1998, direct equity dominatedthe financing pattern, accounting for 73.0percent while non-equity components ofFDI accounted for the remaining 27.0percent. In 1999, the stock of direct equityalso dominated the financing patternaccounting for a reduced share of 67.7percent, while non-equity components ofFDI accounted for an increased share of32.3 percent (Figure 3.2).
14
The financing structure of companies withforeign ownership in Tanzania shows a biastowards equity financing, with a debt/equityratio of 32:68 in 1999. However, if non-FDI liabilities (short and long-termborrowing from unrelated companies) areincluded, the debt/equity ratio increasesslightly to 44:56 but still reflects strongcommitment of foreign investors to theirinvestments in Tanzania.
Regarding debt financing, long-termshareholders and intra-company loans aremore commonly used than short-term intra-
Figure 3.1: Comparison of FDI and Non-FDI Stock of Liabilities for 1998 and 1999
1998
84.7%
15.3%
FDI Non- FDI
1999
82.4%
17.6%
FDI Non- FDI
company loans. The stock of long-termshareholders and intra-company loansaccounted for about 26.5 percent of totalstock of FDI by end of 1999, whereas short-term loans by shareholders and relatedcompanies accounted for 5.8 percent. Theheavy reliance on equity financing byinvestors is attributed to its non-debtcreating nature, whereas the large stock oflong term debt financing, relative to short-term debt is a reflection of the fact that mostof the projects are still at investment stagesor at initial years of their operations.
Figure 3.2: Composition of FDI Stock for 1998 and 1999
15
1998 ShortTerm 2%
LongTerm 23%
SuppliersCredit 2%
Equity 73%
1999
ShortTerm 3.7%
LongTerm 26.5%
SuppliersCredit 2.1%
Equity 67.7%
3.2.2 Flows of foreign private capital in1999
The flow of foreign private capital intoFDI companies has been increasing in thepast years consistent with trends in thestock of foreign liabilities as indicated in
Table 3.5. The Total flow of FDI for the404 surveyed companies during 1999 wasUSD 516.8 million while non-FDI flowsamounted to USD 165.0 million, result-ing into a total flow of USD 681.8 mil-lion which is 7.9 percent of GDP.
Table 3.5:Flows of FDI and non - FDI 1999Millions of USD
FDI and non-FDI Components Amount percent of FDI Percent ofand Total
Non-FDI Flows Flows
FDI componentsTotal Direct Equity (change in stock) 267.9 51.8 39.3Total Long Term Intra-Company Loans 198.1 38.3 29.1Total ShortTerm Intra-Company Loans 39.8 7.7 5.8Total Suppliers Credit from Related Companies 11.0 2.1 1.6Total FDI Flows 516.8 100.0 75.8
Non FDI (other Liabilities)Total Portfolio Equity (change in Stock) 0.6 0.4 0.1Total Long Term loans From UnrelatedCompany 80.5 48.8 11.8Total Suppliers Credit from Un-relatedCompanies 2.9 1.8 0.4Other Short Term loans From UnrelatedCompany 81.1 49.2 11.9Total Flow of Non FDI 165.0 100.0 24.2
Total Flows of FDI and Non FDI 681.8 100.0
Thus, FDI related flows accounted for76.0 percent of total new foreign liabili-ties for 1999 while the non-FDI liabili-ties (mainly new loans from unrelatedcompanies) accounted for 24.0 percent(Figure 3.3).
Similarly, the composition of FDI flowsinto Tanzania during 1999 shows a biastowards equity financing. Out of the to-tal flow of FDI amounting to USD 516.8million, equity capital amounted to USD
267.9 million (or 51.8percent) whereasdebt financing amounted to USD 248.9million (48.2 percent). This structure offinancing implies a debt/equity ratio of48:52. However, if non-FDI liabilities(short and long-term borrowing from un-related companies) are included, the debt/equity ratio worsens slightly to 61:39 in-dicating that foreign investments had ahigher exposure to debt financing in 1999(Figure 3.4).
16
Figure 3.3: Comparison of FDI andNon-FDI Flows for 1999
Figure 3.4: Comparison of FDI Flowsfor 1999
FDI76%
Non-FDI 24%
Long-Term 38.3%
Equity 51.8%
SuppliersCredit 2.1%
Short-Term7.7%
3.3 Foreign Direct Investment byCountry of Origin
3.3.1 Stock of FDI by country of originfor 1998 and 1999
Data on FDI stock by country of originshows unexpected results for 1998 and1999 with, new comers overtaking tradi-tional countries like the UK. Table 3.6
gives a listing of ten leading countrieswith investments in Tanzania as at end1999. It may be noted that Ghana topsthe list with a stock of USD 398.8 mil-lion followed by the UK with the stockof USD 337.4 million. With the excep-tion of the UK, most of the leading coun-tries namely Ghana, Australia and Canadaare heavily involved in the mining sec-tor.
17
Table 3.6 :Stock of FDI by Country of Origin, 1998 to 1999 Millions of USD
LONG-TERM SHORT-TERMSUPPLIERS TOTAL
EQUITY LOANS LOANS CREDIT FDI
COUNTRY: 1998 1999 1998 1999 1998 1999 1998 19991998 1999
Ghana 240.0 240.0 22.0 155.0 2.5 3.8 - -250.3 398.8
UK 202.6 221.8 101.6 108.9 7.8 5.3 1.8 1.3240.9 337.4
Australia 73.1 162.2 21.0 61.5 12.1 13.2 - 0.585.3 237.3
Canada 79.1 155.2 17.6 17.9 - 0.3 - -180.8 173.4
USA 87.5 96.0 33.3 32.2 - - 1.4 1.0 89.0 129.2
Netherlands 105.4 108.7 0.3 0.9 - - 0.7 0.6106.1 110.1
Mauritius 70.4 84.2 0.0 - - 0.2 - - 105.6 84.4
Kenya 43.8 57.9 6.1 6.3 2.4 15.8 1.5 2.947.6 82.8
Bermuda 28.5 28.5 28.7 30.7 2.3 4.2 1.7 1.932.8 65.2
Italy 32.5 21.0 30.1 30.9 0.0 - 5.5 2.7 37.9 54.6
Other 228.0 283.3 111.9 126.5 12.5 36.8 22.0 34.8461.4 481.3
Total 1,190.7 1,458.6 372.8 570.9 39.6 79.4 34.6 45.5 1,637.7 2,154.4
Table 3.7 :Flow of FDI by Country ofOrigin, 1999
Country Amount Percentage
Ghana 134.2 26.0Australia 131.0 25.3Canada 76.6 14.8Kenya 29.2 5.7UK 23.6 4.6South Africa 19.9 3.9Panama 15.3 3.0Mauritius 14.0 2.7France 13.5 2.6Russia 8.6 1.7Other 50.9 9.8
TOTAL 516.8 100
Ghana accounted for 26.0 percent of the
total FDI flows into Tanzania in 1999,followed by Australia with 25.3 percent,Canada 14.8 percent. Countries from the
Eastern and Southern African regionnamely Kenya, South Africa and Mauri-tius account for 5.7 percent, 3.9 percent
and 3.7 percent respectively.
Figure 3.5: The Stock of FDI by Country of Origin
Hence out of the total stock, Ghana ac-counts for 18.5 percent, UK 15.7 percent,Australia 11.0 percent, Canada 8.0 per-cent, USA 6.0 percent and Netherlands5.1 percent. Within the region (Easternand Southern Africa), only Mauritius andKenya feature among the top ten. On theother hand, South Africa, which hasstepped-up its investment in the countrydoes not appear in the top ten list as atthe end of 1999 (Figure 3.5).
One very important finding from thestudy result is that there is no geographi-cal concentration of sources of FDI flowsin Tanzania. This diversification is ben-eficial to the country since it minimisesexternal shocks that may arise as a resultof economic disturbances in any singlecountry.
3.3.2 The flow of FDI by country oforigin for 1999
The FDI flows into Tanzania for the year1999 shows a different ranking of top tencountries when compared to that of FDIstock. While Ghana still leads with a to-tal flow of USD 134.2 million in 1999,new countries have emerged into the top10 list including South Africa, Panama,Mauritius, France and Russia (Table 3.7).
18
Other
GhanaUK
AustraliaCanada
USANetherlands
MauritiusKenya
BermudaItaly
18.3
22.3
Percentage
0.05.0 10.0 15.0 20.0 25.0 30.0
28.2
1998 1999
2.52.3
2.03.0
3.82.9 3.95.16.5
6.5
6.05.4 8.0
11.011.0
5.2 15.714.7
15.3
In terms of FDI flow by equity capital,Ghana does not feature in the list of topten countries implying that FDI fromGhana for 1999 was largely financedthrough debt (Table 3.8). Australia andCanada, which have heavy investment inthe mining sector, had a combined shareof more than 60 percent of total equityinvestments in Tanzania during 1999.
3.4 Sectoral and Regional Distributionof FDI
3.4.1 Sectoral Distribution.
Analysis by sectoral distribution revealsthat Mining & Quarrying, and Manufac-turing sectors accounted for the largestshare of the FDI stocks as at end 1998and 1999 (Table 3.9).
19
In 1998, Mining and Quarrying ac-counted for 30.8 percent of the total FDIstocks, followed by Manufacturing with24.8 percent. At the end of 1999, the shareof Mining and Quarrying had gone up to39.4 percent while Manufacturing re-mained second with a slightly reduced
share of 22.1 percent. The third largestsector is Wholesale, Retail trade, Cater-ing and Accommodation Services, whichaccounted for about 15.4 percent and 13.1percent as at end 1998 and 1999, respec-tively.
Table 3.8 :Flow of FDI Equity byCountry of Origin, 1999
Country Amount Percentage
Australia 89.1 33.2Canada 76.1 28.4UK 19.3 7.2Kenya 14.1 5.3Panama 14.1 5.3Mauritius 13.9 5.2South Africa 8.6 3.2USA 8.4 3.1Lebanon 4.5 1.7Netherlands 3.3 1.2Other Foreign 16.7 6.2
TOTAL 267.9
Table 3.9: Stock of FDI by Sector, 1998 and 1999 Millions of USD
1998 1999Sector Amount Percentage Amount Percentage
Mining & Quarrying 503.6 30.8 848.9 39.4Manufacturing 406.4 24.8 475.4 22.1Wholesale, Retail Trade,Catering &Accommodation Services 251.7 15.4 281.4 13.1Agriculture, Hunting & Forestry 119.5 7.3 151.4 7.0Finance Insurance, Real Estate &Business Services 133.9 8.2 147.7 6.9Construction 106.9 6.5 120.8 5.6Transport, Storage & Communication 49.5 3.0 60.0 2.8Others 29.5 1.8 31.6 1.5Community, Social & Personal Services 1.4 0.1 1.8 0.1Electricity, Gas & Water 35.4 2.2 35.4 1.6
TOTAL 1,637.7 100.0 2,154.4 100.0
The rest of the sectors absorbed less than10 percent each, with investments in theAgriculture sector accounting for about7 percent in both years. Finance, Insur-ance, Real estate and Business Serviceswhose stock of FDI accounted for about7 percent, at end 1999 is a new sectorwith great potential to attract more invest-ments following liberalization of the fi-nancial sector and the trade and exchange
regime. Sectoral distribution of FDI flowsis similar to that of FDI stock with highconcentration in Mining and Quarrying,and Manufacturing sectors. The two sec-tors accounted for a combined share ofmore than 80.0 percent of the total flowsof FDI during 1999, with Mining andQuarrying commanding the largest shareof 66.8 percent (Table 3.10).
across regions in Tanzania shows a biasin favour of Dar es Salaam and Mwanza.The two regions account for a combinedshare of nearly 60.0 percent of the stockof FDI in Tanzania at the end of 1998 and1999 (Table 3.11).
Dar es Salaam has attracted substantialinvestment mainly because of being themain commercial centre and havingunparalleled social and economicinfrastructure conducive for a wide rangeof business activities. Mwanza on theother hand is the main commercial centrein the Lake zone and is endowed withabundant natural resources, namely, LakeVictoria with great potential for fishing,and good weather that supportagricultural activities and is also rich inminerals especially gold.
Agriculture, Hunting and Forestry, thelargest sector in the economy attractedonly 6.2 percent of FDI flows during1999, slightly ahead of Wholesale, Re-tail Trade,Catering & AccommodationServices Sector (tourism related activi-ties) that accounted for 5.7 percent.
The sectoral pattern of FDI flows indi-cates a policy and promotional bias infavour of Mining and quarrying, andmanufacturing sectors. The results doindicate that there has not been substan-tial investment in the agriculture sectorpartly because of the risks associated withinvestments in the sector, and also due tolack of policy incentives to attract moreinvestment in the sector.
3.4.2 Regional distribution
Distribution of foreign direct investments
Table 3.10: Flows of FDI by Sector, 1999 Millions of USD
Sector Amount Percentage
Mining & Quarrying 345.3 66.8Manufacturing 69.0 13.4Wholesale, Retail Trade, Catering & AccommodationServices 29.7 5.7Agriculture, Hunting & Foresty 31.9 6.2Finance Insurance, Real Estate & Business Services 13.8 2.7Contruction 14.0 2.7Transport, Storage & Communication 10.5 2.0Others 2.1 0.4Community, Social & Personal Services 0.4 0.1Electricity, Gas, Water 0.0 0.0
TOTAL 516.7 100.0
20
Table 3.11: Stock of FDI by Region by end 1998 and 1999Millions of USD
1998 1999Region Amount Percentage Amount Percentage
Dar es Salaam 649.8 39.7 767.3 35.6Mwanza 327.4 20.0 503.3 23.6Shinyanga 111.2 6.8 196.2 9.1Arusha 159.2 9.7 173.4 8.0Mara 66.7 4.1 147.3 6.8Morogoro 119.3 7.3 127.4 5.9Iringa 88.9 5.4 90.3 4.2Tanga 50.2 3.1 55.2 2.6Tabora 21.7 1.3 43.0 2.0Kilimanjaro 25.3 1.5 32.1 1.5Mbeya 10.9 0.7 8.3 0.4Dodoma 5.3 0.3 7.2 0.3Pwani 1.9 0.1 3.4 0.2
TOTAL 1,637.80 100.0 2,154.40 100.0
Figure 3.6: Stock of FDI by Region for 1998 and 1999
Other regions, which have attracted sub-stantial amounts of FDI, are Shinyanga,which accounted for 9.1 percent of totalstock in 1999, followed by Arusha with8.0 percent and Mara with 6.8 percent(Figure 3.6).
Mining activities in the lake region havebeen responsible for attracting invest-ments in the regions of Shinyanga andMara while Arusha, being the main com-
mercial centre in the northern zone, hasattracted substantial amounts of FDI dueto its potentials in Manufacturing, Min-ing and Tourism. Arusha is also the head-quarters of the East African Community(EAC) and its easy accessibility by air,rail and road networks has become oneof the main destinations of foreign invest-ments in Tanzania.
The study results indicate that Mwanza
Percentages
Mwanza9.1
20.023.4
35.639.7
45.040.035.030.025.020.015.010.05.0
1999 1998
PwaniDodoma
Mbeya
IringaTanga
Tabora
Kilimanjaro
MorogoroMara
ArushaShinyanga
Dar es Salaam
0.10.20.30.4
0.40.7
1.51.52.6
3.10.2 5.4
4.2 7.35.94.16.8
9.78.0
6.8
0.0
21
was leading with a share of about 34 per-cent in the distribution of FDI flows byregion in 1999, followed by Dar es Sa-laam with 22.8 percent, Shinyanga with16.5 percent and Mara with 15.6 percent.There is very little flow of FDI in the restof the regions. (Table 3.12).
Table 3.12 :Flow of FDI by Region, 1999
Region Amount percentage
Mwanza 175.9 34.0Shinyanga 85.0 16.5Dar es Salaam 117.6 22.8Mara 80.6 15.6Tabora 21.3 4.1Arusha 14.2 2.7Morogoro 8.1 1.6Kilimanjaro 6.7 1.3Tanga 5.0 1.0Dodoma 1.9 0.4Pwani 1.5 0.3Iringa 1.4 0.3Mbeya -2.5 -0.5
TOTAL 516.8 100
3.5.1 Dividends
Table 3.13 provides data on dividends pay-ments by sector for 1999. In 1999 a total ofUSD 42.4 million was paid to foreign in-vestors. 62.7 percent of the dividends paidin 1999 originated from the manufacturingsector, followed by Finance, Insurance,Real Estate, and Business services sectorwith 26.1 percent, whereas tourism relatedservices accounted for 9.1 percent. (Table3.13).
The table reveals that very little dividendswere paid out with respect to Agricultureand Transport sectors, which signifies thelow level of foreign investments in thesesectors. The mining sector, which featuredprominently on both stocks and flows in1999, did not register any dividendspayments during 1999, indicating that mostof the mining projects were new and somenot fully operational.
3.5.2 Interest
Total interest income payments during 1999amounted to USD 28.0 million out of which61.8 percent was paid for long-term loansand the remaining 38.2 percent for short-term loans. This implies that FDI externaldebt is largely dominated by long-termborrowing, and mostly from relatedcompanies. Similarly much of the short-term borrowing originated from relatedcompanies (Table 3.14).
3.5 Income Related FDI Flows
Income related flows include dividendspaid to foreign shareholders, and intereston foreign borrowings by FDI compa-nies.
22
Table 3.13: Dividends paid by Sector1999
Sector Amount Percent ofTotal
Manufacturing 26.6 62.7Financing,Insurance,Real Estate & Business Services 11.1 26.1Wholesale, Retail Trade ,Catering & Accommodation Services 3.9 9.1Agriculture, Hunting & Forestry 0.6 1.4Transport & Storage and Communication 0.2 0.5Community, Social and Personal Services 0.0 0.0Construction 0.0 0.0Mining and Quarry 0.0 0.0Electricity Gas and Water 0.0 0.0Others 0.1 0.2
Total 42.4 100.0
Table 3.14:Interest Paid by Debt Type for 1999Millions of USD
Debt Type Amount Percentage
Long Term loans From Unrelated Company 9.6 34.3Long Term Intra-Company Loans 7.7 27.5Short Term loans From Unrelated Company 7.4 26.4Short-Term Inter-Company Loans 2.0 7.1Suppliers Credit From Related Companies 0.0 0.0Suppliers Credit from Un-related Companies 1.3 4.6
Total Interest Paid 28.0 100.0
During 1999, sectoral distribution of in-terest payments indicates that Manufac-turing and Mining sectors account for33.2 percent and 31.8 percent of totalpayments respectively followed by tour-ism related services that accounted for12.1 percent.
Interest payments on long-term loans wasdominated by Mining sector that ac-
counted for 41.9 percent, followed byManufacturing sector with 17.9 percent.(Table 3.15).
This is consistent with the earlier find-ing that the mining sector was mainly fi-nanced by long-term loans, hence thehigh interest payments.
Table 3.15: Interest Paid by Sector and Debt Type for 1999Millions of USD
Long Short
Sector Term Percentage TermPercentageTotalPercentage
Manufacturing 3.1 17.9 6.2 57.9 9.3 33.2Financing, Insurance, Real Estate &
Business Services 1.7 9.9 0.1 1.0 1.8 6.4Wholesale, Retail Trade , Catering &
Accommodation Services 2.8 16.0 0.7 6.5 3.4 12.1Agriculture, Hunting & Forestry 0.4 2.5 1.2 11.2 1.7 6.1Transport & Storage and Communication 1.1 6.3 0.5 4.71.6 5.7Community, Social and Personal Services 0.2 1.2 0.0 0.00.2 0.7Construction 0.6 3.4 0.3 2.8 0.9 3.2Mining and Quarry 7.2 41.9 1.7 15.9 8.9 31.8Electricity Gas and Water 0.0 0.0 0.0 0.0 0.0 0.0Others 0.2 0.9 0.0 0.0 0.2 0.7
Total 17.3 100.0 10.7 100.0 28.0 100.0
Interest payments on short-term debt wasdominated by manufacturing sector ac-counting for 57.9 percent, followed bymining sector that accounted for 15.9percent. The pattern indicates that there
23
is a substantial amount of short-term bor-rowing particularly suppliers credit tofacilitate operations in the manufactur-ing and mining sectors for the periodunder study.
CHAPTER FOUR
BANK’S SURVEY
In principle, private capital flowscomprise of FDI, Portfolio Investment(PI) and other investments. In the absenceof non-residents participation in the Dares Salaam Stock Exchange (DSE),portfolio investment flows through thestock market could not be surveyed.However, efforts were made to surveyother investment flows by the privatesector/locally owned companies andother entities through the banking system.The banks survey was conducted inrecognition of the important role banksperform in mobilising and allocatingfinancial resources. In total, 16 bankswere surveyed for quantitative andqualitative information with respect tobanks themselves as well as their clients.
The following is a summary of the resulton both quantitative and qualitativeaspects.
4.1 Bank Lending Abroad
Private capital flows – inflows andoutflows through banks appeared to bevery limited. Bank lending abroad waslimited to bank placements recording astock position amounting to USD 49.0million by end 1999, being a decline fromUSD 66.3 million by end 1998. Only fivebanks out of 16 reported bank placementsamounting to USD 0.25 million during1999, up from USD 0.12 during theprevious year. There were no trade creditsor any type of long-term lending abroadby local banks.
4.1.1 Reasons for Limited LendingAbroad
• The existence of profitable opport-unities in the local market.
• Absence of risk guarantee mechani-sm. Four banks out of 16 indicated
the absence of having credit risk guaranteemechanism in the country and absenceof credit rating agency as some of themain impediments to expanded lendingwithin and outside Tanzania.
• Most banks in Tanzania are foreignowned with their main businessfocus to the local market ratherthan external market.
• Existence of restrictions on exter-nal lending by local entities (i.e.capital account is partially libera-lised with foreign investmentsbeing subjected to BOT approvals).
4.1.2 Motivations for lending abroad
Despite difficulties experienced onlending abroad, four banks out of 16pointed out that their continued lendingwas mostly influenced by the followingfactors:
• Character of the borrower (mostlending directed to banks abroad).
• Level of profitability.
• Credit risk insurance mechanismavailable abroad (largely ensuredif it is bank to bank lending).
• Speedy recovery process andexistence of legal jurisdiction incase of default.
In spite of the existence of externalmotivations for lending abroad by localbanks, the volume of lending abroad stillremain low as explained in sub-section4.1.1.
In general, and as observed above, manybanks indicated that they do not lendabroad and have no immediate plans fordoing so (Table 4.1).
24
Table 4.1: Direction of bank lending out-side Tanzania
Short Longterm term
Start/expand 3 2Maintain 1 0End 2 0No opinion 10 14
Total 16 16
Out of 16 banks surveyed, only 3indicated the intention to start/expandshort-term lending abroad in order tomeet external obligations of thecorrespondent banks as well as improveleverage among related banks abroad. Onthe other hand, 2 banks indicated theintention to stop short-term lendingabroad due to limitations in internaljurisdiction. One bank cited the existenceof local profitable opportunities as onereason that might slow down their motiveto lend abroad.
4.2 Bank Borrowing from Abroad
Contrary to expectation, it was only onebank out of 16 that reported to have bor-rowed externally (for long-term) on itsown and clients’ financial needs. By end1999, the stock of foreign borrowingamounted to about USD 3.0 million,which was a decline of 12.3 percent fromUSD 3.8 million at end 1998. None ofthe banks reported any short-term bor-rowing from abroad.
The bank that reported having foreignborrowing had a net outflow amountingto USD 1.1 million during 1998 com-pared with a net outflow of USD 0.2 mil-lion during 1999. The higher net outflowin 1998 was mainly due to the absenceof borrowing (loan disbursement) duringthe year. Similarly, principal repaymentsand interest charges were higher in 1998compared to 1999.
4.2.1 Factors Influencing Borrowingfrom Abroad
When asked on factors influencing theirbehaviour on borrowing from abroad,two banks indicated that they do notconduct any such transactions. Two otherbanks cited the following internal andexternal factors as their mainconsiderations on foreign borrowing:
External factors:
• Availability of competitiveinstruments abroad;
• Cost of borrowing;
• Feasible terms.
Internal factors:
• Exchange risk;
• Limited opportunities for onwarddomestic lending.
Based on these observations, most of thebanks (14 out of 16) did not attach anyimportance on external borrowing foronward lending domestically (Table 4.2).
25
Table 4.2: Borrowing Abroad for Domestic Lending
Borrowing for Very NotLending Significant Significant Significant
Foreign currencies 1 1 14Local currencies - 1 14
The future outlook of foreign borrowingby Tanzanian banks is still uncertaingiven the factors described under 4.2..However, the bank, which reported tohave borrowed from abroad is planning
to expand borrowing in the future. Oneother bank reported to be planning to startshort and long-term borrowing fromabroad while two banks were thinking ofstarting long-term borrowing (Table 4.3).
26
Table 4.3:Direction of Bank Borrowing from Abroad
Short Longterm term
Start/expand 2 3Maintain - -End - -No opinion 14 13
Total 16 16
The rest of the banks were largelyuncertain on their future plans. Whenasked on how their borrowing fordomestic lending have changed over
time, almost all the banks did not showany immediate change in their borrowingbehaviour (Table 4.4).
Table 4.4:Change in Foreign Borrowing for Domestic Lending
Borrowing Notfor lending Increase changed Decreased
Foreign currencies 1 15 -Local currencies 1 15 -
4.3 Other Observations
4.3.1 The Impact of Regional Integra-tion
Arrangements (EAC, SADC) onBanks’ Business
Almost all banks gave favourable opinionabout the impact of revival of EAC andthe increased spirit of co-operation underSADC. Many banks consider increasedfree movement of capital, labour andentrepreneurship within the region underthe auspices of EAC and SADC to be thedriving force towards increased scope of
economic activities and ultimatelyleading to widening and deepening ofbanking business. Business opportunities,trade flow, investments and corporatefinance are expected to increase leadingto an advancement of modern bankingpractices through sharing of experiencein important areas like credit riskmanagement and fraud control.
4.3.2 Level of Competition in BankBusiness.
All banks admitted that competition inthe banking business existed (Table 4.5).
Four banks considered the competitionto be very high due to the fact that thenumber of banks and non-bank financialinstitutions together with bureaux dechange is quite high in relation to the sizeof the economy. Big foreign investorsespecially from Europe and South Africachannel their business to the well-established foreign banks. However, six
banks pointed out that the level ofcompetition is only medium becausethere are vast potential opportunities,which are yet to be fully utilised. Thenature of competition is limited to twocategories of clients i.e. a few big banksdealing with few corporate customers andsmall and medium size banks dealingwith retail customers.
27
Table 4.5:Level of Competition in Banking Business
Very Veryhigh High Medium low low
Level ofcompetition 4 4 6 0 0
4.3.3: Problems in Making RepaymentAbroad
Since most banks indicated low volume ofborrowing from abroad (for both themselvesand their clients) they currently do not faceany problems related to making repaymentsabroad. However, the bank that reported bor-rowing from abroad (and potential borrow-ers in future) considers exchange rates vola-tility the greatest risk facing the nature offuture borrowing.
4.3.4 Investors’ Willingness to ReportInformation to Authorities
Reporting of various types of informa-tion by investors to relevant authoritiesis important for statistical and policymaking purposes. All investors includingbanks were asked to provide views onmethods that could be used by the au-thorities to improve the level and qualityof reporting. Almost all banks pointed outthat they already comply by submittingstatutory monthly, quarterly, and annualreturns to the Bank of Tanzania and mostare willing to further comply if there is
additional information requirement by theBOT. However, the banks made the fol-lowing suggestions as regards to submis-sion of information to other institutions.
• Assurance that the information requested would be treated with strictconfidentiality and that it would beused by only the requestinginstitutions and for the intendedpurposes only.
• Creation of a transparent regulatoryframework that allows institutionsto participate in appropriate policyformulation and review of issuesaffecting them.
• Getting feedback on the reportpresented to the government andsee whether they are of anyrelevance in the improvement oftheir banking business.
• Harmonising the reporting systemand reducing the number ofreports.
CHAPTER FIVE
INVESTORS’ PERCEPTIONS
during the “start-up period” since start-updates differ, some going as far back as the1950’s and 1960’s. However, most of thecompanies that responded to thequestionnaires were registered in Tanzaniaduring 1990s.
Apart from the specific factors, investorswere also requested to respond to open-ended questions, which solicited views on arange of issues including sources ofinformation that guided investors to investin Tanzania, factors that attracted theinvestors, the likely direction of their futureinvestment, and investors’ general feeling onthe Government efforts to promoteinvestments in Tanzania. As a means ofpromoting dialogue between the private andthe public sectors, investors were also askedto suggest measures that the Governmentcould take to encourage investors tovolunteer information to the Governmentregarding their operations.
In addition to written responses qualitativeinformation was also obtained through oralinterviews that were conducted byenumerators.
Generally, perception questionnaires werewell received and completed by theinvestors. Overall results indicate that as atend of 2000, on average, about 70 percentand 58 percent of investors had a favourableopinion on macroeconomic factors andgovernance factors respectively (Figure 5.1).
The factors that did not feature wellin investors’ perceptions wereinfrastructure and public services,financial, labour and diverse factors.
Only significant results (positive ornegative perceptions) on sub-factorsare presented in the following sections.In order for the analysis of perception
16 Kimei C. et al (1997)
This chapter analyses the determinants of theflow of foreign private capital into mainlandTanzania based on investors’ perceptions onhow various economic and political factorshave affected their investment decisions andoperations in Tanzania.
Overall, foreign private capital flows areinfluenced by both ‘pull’ and ‘push’ factors.In Tanzania pull factors includemacroeconomic stability, governance,existence of large savings-investment gap,improvements in the state of infrastructure,improvements in the provision of financialservices, labour stability and other social-economic factors such as labour productivity,legal framework and other sectoral policyreforms. Push factors include, globalisation,recession/boom conditions, the need fordiversification of investment portfolio, returnon investment, and historical relationshipbetween countries16.
In this study, foreign investors were requiredto identify the extent to which factorsincluding macroeconomic policies,infrastructure and public services, financialservices, governance, and labour haveaffected investment in their business. Theywere also requested to give their opinion onother factors namely corruption, internalsecurity, and regional and internationalpolitical concerns. Investors were requiredto rank the impact of each of these factorson investment decisions and their day to dayoperations. Ranking levels ranged from 1 for“very positive effect” to 7 for “very negativeeffect”. Rank 4 was given for “No effect”.In order to value the dynamic aspects of thesefactors, investors were required to comparethe situation at the time they started businessand the current period i.e. year 2000.Nevertheless, caution has to be taken on theinterpretations and conclusions arrived at
28
5.1 Macroeconomic Factors
In order to understand the opinion ofinvestors on macroeconomic policymeasures pursued by the Government,investors were required to rank thevarious macro-economic factors thataffect their operations. These factorsare: fiscal policy, monetary policy,government stability, governmentspending, regulatory framework, stateintervention in private business,business environment, environmentalpolicy, foreign policy and financialsector stability.
scores to be meaningful, a rank of 4that represented “no effect” was takento mean either negative or positive butwith no significant effect perceived.Thus rank 4 score was added to thedominant perception. For example, ifthe general perception was negative(as may be depicted by the graph), thenthe percentage of rank 4 wasincorporated in the total negative scoreand vice versa. The perception resultson all considered sub factors arepresented in Appendix 3.
Figure 5.1: Overall Investors Perception on Main Factors Affecting Investment Climate(in percentage)
72
-78
58
-73
-94
70
-58 -58-69
58
-72
-95-120
-100
-80
-60
-40
-200
20
40
60
80
100
Mac
roec
onom
ic
Main Factors
Ave
rage
rat
ing
in p
erce
nt
Start-up Now
Infr
astr
uctu
res
Fin
anci
al
Lab
our
Div
erse
and
Serv
ices
Gov
erna
nce
Figure 5.2:Investors’ General Perception on Macroeconomic Factors
29
10%
17%20%
24%
15%
9%
4%
9%
18%20% 22%
15%
10%
5%
0%
5%10%
15%20%
25%30%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Start -Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
The perception of investors on themacroeconomic factors has generallybeen positive, implying that investorshave confidence in government economicreforms, which have been undertakensince the mid 1980s. 72 percent of theinvestors found macroeconomic factorsto have been positive at the start-up ofbusiness and 70 percent still found itpositive in the year 2000 (Figure 5.2).
Despite the good impression the investors
have on macroeconomic policies, therewas no consensus on the extent to whichthe Government should liberalise17 .While most investors in the banking andthe mining sectors, prefer furtherliberalisation as well as full liberalisationof the capital account, most investors inthe manufacturing sector would preferlimited liberalization with some level ofprotection. These views are based on thepremise that too much external trade
17 This observation was also noted in the report on the pilot survey of foreign investments by Noni et al, 1999.
Tanzania Bureau of Standards
NOTICE TO IMPORTERS AND WHOLESELLERS OF DRYCELL BATTERIES
We have noted with great concern that the Tanzania market has been flooded withsubstandard imported batteries (dry cells) which are not certified by TBS. Substandardbatteries have short life period and can destroy the electronic equipment through leakage.In accordance with the standards Act, 1975 it is illegal for any person to import, distribute/sell the batteries unless they comply with the Tanzania Standard (TZS) 143: 1981.
All importers of the undermentioned brands of batteries are hereby required to reportwithin two weeks from the date of this notice at the offices of Tanzania Bureau ofStandards Headquarters, Ubungo Dar es Salaam where they will be informed on themodalities of certification of their producrs. After the expiry of this period, TBS will takelegal action against all importers wholesellers and distributors who will not complywith this notice. These brands of batteries are:
Brand Origin1. ABC Indonesia2. ABC China3. Bell China4. Tiger Head China5. Yarico China6. Rambo China7. National Hyper Indonesia8. National Prima Indonesia9. Novino India
Consumers are advised to refrain from buying batteries which are not certified byTBS to ensure safety of their electronic equipment and long service output. So farTBS has certified the following brands of batteries:-
Brand Size(s) Company
National UM-1, UM--2, UM-3 Matsushita Electric Co (EA)
Duracell (Alkaline) LR6, LR14, LR20 Kingsway Internatinaland 6 LR61 (T) Ltd P.O. Box 9712,
Dar es Salaam.
D. J. MwakyembeDIRECTOR
Box 5.1: Notice to Importers of Substandard Items into Tanzania
30
STANDARDS
tbs
TA
NZANIA BUREAU
OF
Figure 5.3:Investors’ Rating of Monetary Policy in Tanzania
4%
18%
24%
31%
14%
7%2%
5%
17%
29%26%
13%
7%4%
0%5%
10%15%
20%25%30%35%
1 2 3 4 5 6 7Per
cent
age
of I
nves
tors
Start -Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
liberalization can turn Tanzania into adumping place for sub-standard andcheap imports. Indeed this contention issupported by Tanzania Bureau ofStandards (TBS) concern that waspublished in the Sunday Observer on 22nd
November 1998, which warned thepublic and importers against inferiorimported items such as batteries, matchboxes, tyres, radios,” khanga” etc. (Box5.1).
5.1.1 Monetary Policy
Results show that at start-up 77 percent ofthe investors found monetary policy to beconducive to the investment decisions(Figure 5.3). Monetary policy is generallycommended for containing inflation tosingle digit. For more than two yearsinflation remained at single digit from ashigh as 33.1 percent in 1994, down to 21.2percent in 1996, 12.8 percent in 1998, 7.7percent in 1999 and to 5.9 percent by endDecember 2000.
5.1.2 Fiscal policy
The study results shows that 68 percentof investors found fiscal policy to be
conducive for investment at the time ofstart-up and only 56 percent found fiscalpolicy to be conducive by the year 2000implying that fiscal policy has beenundermining their operations (Figure 5.4).They cited in particular VAT at the rateof 20 percent to be too high. The negativeperception may have been influenced bythe following: -
• Establishment of TRA in 1996,which strengthened taxadministration;
• Introduction of VAT at a rate 20percent which broaden the taxbase;
• Coming to an end of IPC relatedtax holidays.
However, the tax reforms implementedduring the mid 1990s have been generallypro-business except that the lag in policyeffectiveness might have contributed tothe weakening of the favourable opinionexpressed at the start up time .
31
Figure 5.4:Investors’ Rating of Fiscal Policy
0%5%
10%15%20%25%30%35%
1 2 3 4 5 6 7Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7= Very Negative
16%13%
5% 4%
Start-Up Now= Year 2000
23%
29% 28%
20%17% 16%
13%8%
3% 5%
5.1.3 Government Stability
Government stability was singled out asthe most important factor that attractedforeign investors to Tanzania with 96percent of investors indicatingfavourable opinion at start of their
operations, compared with 98 percentin the year 2000. Furthermore, mostinvestors commended the governmentfor not intervening in the day-to-dayoperat ions of pr ivate businesses(Figure 5.5).
Figure 5.5:Investors’ Rating of Government Stability
32
31% 32%
16% 17%
3% 1% 1%
31%36%
15% 16%
1% 1% 1%0%
10%
20%
30%
40%
1 2 3 4 5 6 7
Start - Up Now = Year 2000
Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7= Very Negative
5.1.4 Other Macroeconomic Factors
Institutional reforms such as theestablishment of TIC, PSRC and TRAhave been praised for having supportedthe macroeconomic reforms. Howeverinvestors perceived lack of co-ordinationamong institutional reforms thus causingbureaucracy, and confusion, partlybecause of conflicting laws especiallybetween TIC and TRA. There is thereforea need to harmonise the laws andregulations in order for them to be moreeffective in promoting a conduciveinvestment environment.
In addition, the investors found thegeneral legal framework inadequate insupporting the economic reforms,expressing concern that legal reformshave lagged behind economic reforms.There is need, therefore for the
Government to speed up the review ofthe legal framework.18
5.2 Infrastructure and Public Services
The infrastructure and public servicesfactors include inland transport, ports,electricity and water supply, postalservices, telecommunications, customsservices, immigration facilities,municipal services (garbage, sewerage),banking services and credit rating. About58 percent of the investors foundinfrastructure and public services to bein poor state at start up and the same wasreported for the present (Figure 5.6).However, investors acknowledgedremarkable improvement in thetelecommunication sector but expressedconcern on the state of the electricity andwater supply services and rural roads.
5%
11%
17%
25%
18%14%
9%
5%
12%
18%
23%18%
14%10%
0%
5%
10%
15%
20%
25%30%
1 2 3 4 5 6 7Per
cent
age
of I
nves
tors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
18 A review of outdated laws in Tanzania has been well documented, most recent is a report of a study by ESRF for Confeerationof Tanzania Industries (CTI) on “Review of Legal, Regulatory and Judicial Framework Regarding MAnufacturing and BusinessSector in Tanzania”December, 2000.
Figure 5.6:Investors’ General Perception on Infrastructure and Services Factors
5.2.1 Utilities
Major concerns with regard to utilitiescentred on unreliable supply and highcosts of electricity and water. About 76percent of the investors found electricityservices to be poor at the start-upcompared with 68 percent by year 2000
(Figure 5.7(a). One investor pointed outthat unreliable supply of electricity; waterand sewerage services cost his company7.5 percent over and above normal costsin 1999. The high operational costundermines the competitiveness ofTanzania’s products in the market.
33
Figure 5.7(a):Investors’ Rating of the Electricity Supply in Tanzania
Figure 5.7(b):Investors’ Rating of Electricity Tariff in Tanzania
Electricity and water tariff are consideredtoo high in Tanzania relative to itsneighbours. While 87 percent of investorsfound electricity tariff to have a negative
impact on their investment at the start-up, the number increased to 89 percentat the year 2000 [Figure 5.7(b)].
Household consumption, which accountfor about 60 percent of total consumptionof electricity in the country is subsidizedby industrial consumption hence the highindustrial tariffs. TANESCO isbeleaguered with high losses (technicaland non-technical), which for example
amounted to about 50 percent of expectedrevenue for the year 2000. In order forTANESCO to break-even, tariffsespecially for industries are maintainedhigh. There is need therefore to improveefficiency in the utility company and
34
5%8%
17%20%
22%
17%
6%9%
17%13%
23%
17%15%
0%
5%
10%
15%
20%
25%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Start-Up Now = Year 2000
10%
Perception (1=Very Positive to 7= Very Negative
3% 3%6%
28%
23%
2%5% 4%
19% 19%23%
28%
0%
5%
10%
15%
20%
25%30%
1 2 3 4 5 6 7
Perception (1=Very Positive to 7=Very Negative)
Perc
enta
ge o
f In
vest
ors
18% 18%
Start-Up Now = Year 2000
review and adjust the tariffs across theindustrial and household categories witha view to improving the investment andbusiness environment.
5.2.2 Banking services
Financial services are consideredfundamental for operations of investors.77 percent of the investors had favourable
opinion on the state of banking servicesby year 2000, which is an improvementfrom 67 percent at the start-up (Figure5.8). The financial reforms have enabledTanzania to attract investors ofinternational reputation in the bankingand insurance business. However,investors expressed concern on the lackof long-term financing facilities.
Figure 5.8:Investors’ Rating of Banking Services in Tanzania
4%1
25%
20%
8%5%
10%
25%29%
22%
9%
3% 2%
0%5%
10%15%20%25%30%35%
1 2 3 4 5 6 7Perception (1=Very Positive to 7=Very Negative
Per
cent
age
of I
nves
tors
Start-Up Now = Year 2000
23%
5%
5.2.3 Other Infrastructure Services
Generally the state of infrastructure wasfound to be poor but improving, callingfor an urgent need to improve rural roads,water, electricity supply and municipalservices.
5.3. Financial Factors
The following sub-factors wereconsidered under the financial category:inflation, availability of business credit,interest rate, depreciation of domesticcurrency, national payment system andexchange control. At the start-up, 76percent of investors considered financialfactors to have a negative effect in theirinvestment decisions. However, by year2000 only about 69 percent of investors
still had a negative perception implyingthat there has been some improvementin the delivery of financial services(Figure 5.9).
Investors singled out high bank lendingrate and non-availability of credit as themost disturbing factors. Short-termlending rates declined substantially froman average of 33.4 percent in 1995 to anaverage 21.9 percent in 1999 but stillremain high at more than 20 percentduring the year 2000 despite a decline ininflation to single digit levels. Regardinginterest rates, investors find the highinterest rates restricting investments inthe country (Figure 5.10). Banks maintainthat high lending rates are a result of highcredit risk.
35
Figure 5.9:Investors’ General Perception on Financial Factors
5.3.1 Domestic Currency
Depreciation of the domestic currencywas considered destabilizing by manyinvestors (Figure 5.11). 87 percent ofinvestors perceived negatively thedevelopment in the shilling exchange rateat start-up. The negative perception hasremained high, improving slightly to 82percent by year 2000. Some investorswere concerned that the value of theshilling was overvalued, henceundermined the level of competitivenessof Tanzania products in the world market.
5.4 Governance Factors
Governance factors examined include,regional trade integration, trade policy,
investment incentives, bureaucracy, taxcollection efficiency, effectiveness of thelegal system, land law and administration,and speed of decision-making. Figure5.12 shows that 58 percent of investorshad favourable opinion of governancefactors and the same percentage ofinvestors held this opinion at year 2000.However, specific factors reveal mixedperceptions with favourable opiniongiven to investment incentives and speedof decision-making by TIC and BOT. Onthe other hand, unfavourable opinion wasexpressed on bureaucracy, tax collectionefficiency, effectiveness of the legalsystem and delays in decision making byTRA.
Figure 5.10:Investors’ Rating of Interest Rate in Tanzania
36
3%
13%
29%
21%16%
10%
4%
12%16%
26%
20%
14%9%
0%
5%
15%10%
20%
25%
30%
35%
1 2 3 4 5 6 7
Start-Up Now = Year 2000
Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7= Very Negative
7%
2%5% 6%
40%
14% 13%
2%5%
11%
32%
26%
10%14%
0%5%
10%15%20%25%30%35%40%45%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Start-Up Now = Year 2000
20 %
Perception (1=Very Positive to 7= Very Negative
Figure 5.11:Investors’ Rating of Exchange Rate in Tanzania
Figure 5.12: Investors’ General Perception on Governance Factors
5.4.1 Investment Incentives
78 percent of investors at start-up and 80percent of investors by year 2000 ratedthe investment incentive packagefavourably. This follows the review ofInvestment Promotion Policy thatresulted in the establishment of TIC as aone-stop centre. Investment registrationprocedures at the TIC have since beensimplified and became less bureaucratic.TIC is thus praised for offeringreasonable incentives to investors andmoving steadily towards a truly one-stopcentre (Figure 5.13).
5.4.2 Bureaucracy
About 90 percent of investors rankedbureaucracy negatively at the start up, aperception that is still maintained byinvestors despite a slight improvement to87 percent by the year 2000. Generallyinvestors find Tanzania to be verybureaucratic, with some governmentdepartments lacking consistency andcoherence in their operations, factors thatdiscourage investment. Despite theestablishment of TIC as a one-stop centrein 1997, investors are still obliged tocontact other institutions and government
37
2% 5%6%
40%
20%14% 13%
2% 5%
11%
32%26%
10%14%
0%
10%
20%
30%
40%
50%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
5%
11%
17%
25%
18%
14%
9%
5%
12%
18%
23%18%
14%10%
0%
5%
10%
15%
20%
25%
30%
1 2 3 4 5 6 7
Perc
enta
ge o
f Inv
esto
rs
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
agencies in the course of setting upbusiness. It is observed that somegovernment departments have not been
friendly to investors, although there hasbeen a slight improvement in recentyears. (Figure 5.14).
Figure 5.14:Investors’ Rating of Bureaucracy in Tanzania
Figure 5.13:Investors’ Rating of Investment Incentives in Tanzania
10%16%
23%
29%
11%6%
4%8%
19%25%
28%
8% 8%4%
0%5%
10%15%20%25%30%35%
1 2 3 4 5 6 7Per
cent
age
of I
nves
tors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
%
Per
cent
age
of I
nves
tors
4
2% 1%
7%
17%
26% 25%
2% 2%
10% 11%
25%4%
0
5%
10
15%
20%
25%
30%
1 2 3 5 6 7
Start-Up Now = Year 2000
22%
27%
Perception (1=Very Positive to 7= Very Negative
5.4.3 Tax Collection Efficiency
About 77 percent of investors had anegative perception on tax collectionefficiency compared with 74 percent in2000, indicating a slight improvement(Figure 5.15). Investors acknowledgedthat the establishment of TRA hadimproved tax administration butcomplain of the slow pace in decision-
making after the introduction of VAT.However, investors emphasized not to bemisunderstood that they do not liketaxation, instead they disliked the mannerin which tax authorities were treatingtaxpayers, a situation which created roomfor corruption. Investors expressed theneed to improve efficiency especially inthe administration of the Customs andVAT Departments.
38
Figure 5.15:Investors’ Rating of Tax Collection Efficiency in Tanzania
Figure 5.16:Investors’ Rating of Land Law Administration in Tanzania
5.4.4 Land Law and Administration
Many investors rated land laws andadministration negatively. About 43percent of the investors at start-upindicated that land law and administrationhad no impact on their operations. The
same proportion of investors maintainedthe same opinion by year 2000 (Figure5.16). This is consistent with the fact thatmany of the investors are not in theagricultural sector which is mostimpacted by land laws.
Per
cent
age
of I
nves
tors
3% 3%
15%
43%
23%
8% 6%3% 4%
13%
43%
14% 15%
7%
0%
10%
20%
30%
40%
50%
1 2 3 4 5 6 7
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
5.5 Labour Factors
Labour factors that were examinedinclude labour legislation, employmentof expatriates, labour stability, minimumwage, availability of highly educated andskilled employees, and HIV/AIDS. In
general, labour factors were perceived bythe investors to have had a negative effecton investment both at start-up and in year2000. 73 percent of investors had anegative opinion at start-up and 72percent by the year 2000 (Figure 5.17).
39
2% 2%
18%
32%
20%17%
10%
3%8%
16%22% 19% 16% 17%
0%5%
10%15%20%
25%30%
35%
1 2 3 4 5 6 7Perc
enta
ge o
f In
vest
ors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
Figure 5.17:Investors’ General Perception on Labour Factors
2%
9%
16%
32%
21%
12%8%
2%
9%
17%
29%
22%
14%
7%
0%5%
10%
15%20%
25%
30%
35%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
Many investors indicated that theminimum wage legislation had no effecton their business. However, theyobserved weaknesses with regard tolabour legislation that overprotectemployees making it difficult foremployers to fire unsuitable ones.Limited availability of highly educatedand skilled labour was also observedespecially in specialised fields such ashuman resource management, tourism,
insurance and finance.
5.5.1 Labour Stability
About 77 percent of the investors foundlabour to be reasonably stable and therating improved slightly to 79 percent inyear 2000 (Figure 5.18). Strict lawsgovern Trade Unions in Tanzania.Lockouts are not unusual but not frequentenough to be a concern to investors.
Figure 5.18:Investors’ Rating of Labour Stability in Tanzania
3%
13%
23%
41%
13%
4% 3%3%
15%
23%
38%
14%
6%2%
0%
10%
20%
30%
40%
50%
1 2 3 4 5 6 7Per
cent
age
of I
nves
tors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
40
5.5.2 HIV/AIDS
The effect of HIV/AIDS on investmentis increasingly becoming a problem.While about 70 percent of investors wereneutral about the impact of HIV/AIDS at
start-up, only 55 percent of the investorsfelt the same in year 2000. On the otherhand, investors who have been negativelyaffected by HIV/AIDS increased from 28percent at start up to 42 percent by 2000.(Figure 5.19).
Figure 5.19:Investors’ Rating of HIV/AIDS in Tanzania
70%
6%
0%10%20%30%40%50%60%70%80%
1 2 3 4 5 6 7Perc
enta
ge o
f In
vest
ors
Start-Up Now = Year 2000
0%0% 2%0% 0% 2%
55%
%2024%
%412%
4%
Perception (1=Very Positive to 7= Very Negative
5.6 Diverse Factors
Diverse factors, which were examined,include corruption, internal security,domestic political scenario, regionalpolitical scenario, domestic economicsituation, global economic situation,market expansion, Zanzibar route andsmuggling. Investors singled outcorruption, and smuggling as the mostdisturbing factors while domesticpolitical scenario, and market expansionwere the most encouraging factors.
5.6.1 Corruption
While investors praised Governmentefforts in fighting corruption, theypointed a finger at corruption in theJudiciary, Police and Customs andrecommended that corruption should beaddressed more seriously and culpritspenalised accordingly. Out of the 404investors surveyed, 94 percent found
corruption to be a problem at start up. Thenumber has declined to 91 percent by2000 implying a slight improvement(Figure 5.20).
5.6.2 Smuggling
Some investors particularly those in themanufacturing sector expressed concernover the high level of smuggling in thecountry. They complained that someconsumer goods smuggled into thecountry resulted into unfair competitionin the market.
5.6.3 Domestic Political Scenario andInternal Security
Investors consider Tanzania as a stablecountry politically, an important factor inattracting investment in the country. 87percent of investors at start up and 85percent in the year 2000 consider thecountry’s political stability to have made
41
19 For example Dr. Godwin Mjema, Dr. Charles Kimei, Dr. Ben tarimo and Anna Msutze on Capital flows to Tanzania presentedto the EFA Workshop on Private Capital Flows to Sub-Saharan Africa, held at Cape Town 14-15 July 1997.
Tanzania a safe destination forinvestments (Figure 5.21). Otherstudies19 on capital flows conducted inTanzania arrived at a similar conclusion.For many years since its independence
in 1961, Tanzania has not experiencedany serious political turmoil unlike someof its neighbours. Many investors haverated favourably the state of internalsecurity.
Figure 5.20:Investors’ Rating of Corruption in Tanzania
2% 1% 2%
30%28%
21%
15%
2% 2%5%
21%
30%
20% 20%
0%
5%
10%
15%
20%
25%
30%
35%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Star t-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
Figure 5.21:Investors’ Rating of Domestic Political Scenario in Tanzania
6%
19% 18%
44%
9%2% 1%
7%
24%17%
41%
8%2% 1%
0%
10%
20%
30%
40%
50%
1 2 3 4 5 6 7Perc
entag
e of I
nves
tors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
5.7 General Perception on InvestmentClimate
Investors were asked open-endedquestions on factors influencing their
investment decisions, future trends of theinvestments and general opinion onGovernment policies and management ofthe economy.
42
20 By the time of the survey there was only 1 private electricity company that has been registered. It responded positively to theinvestment climate hence the 100 percent21 The percentage given in the table refer to the proportion of investors in each specific sector who found the investment climatefavourable and by reference implying how attractive the seector is to investment.
5.7.1 Generally how do you find theinvestment policy and climate inpromoting private capital flows inTanzania?
Investors were required to provideopinions on whether the investmentpolicy is favourable with regard to theirrespective sectors. Answers to thisquestion are presented for each sector.
Table 5.1, shows that 72 percent ofinvestors across sectors found theinvestment policies and climate to befavourable. Agriculture and constructionhad the least favourable investmentclimate while the only investor in theelectricity/water/gas sector found theinvestment climate to be favourable. Forother sectors, the majority of investorsfound the investment climate favourable,ranging between 72 percent to 82.
Table 5.1: General Rating of Investment Policies by Sector
5.7.2 What is the likely direction of yourinvestment in Tanzania in the medium-term?
Table 5.2 shows that about 71 percent ofinvestors surveyed plan to expand theirbusinesses in Tanzania in the medium termmainly because of the socio-politicalstability. Other factors include stablemacroeconomic conditions, improvedinfrastructure, improved market conditionsand market expansion, and goodgovernance (efforts towards fightingcorruption and labour stability).
FAVOURABLESECTOR DESCRIPTION (in percentage)
Agriculture, Hunting & Forestry 55Mining & Quarry 75Manufacturing 72Electricity, Gas & Water 100
20
Construction 53Wholesale, Retail, Accommodation & Tourism 79Transport & Storage and Communication 79Financing, Insurance & Real Estate and Business Services 75Community, Social & Personal Services 80Activities not adequately defined 76
Responses out of Total 72
Table 5.2: likely Direction of Investmentin the Medium-Term
InvestmentDirection Number Percentage
Expansion 230 71No Change 61 19Contraction 31 10
Total 322 100
43
Only 10 percent of investors surveyedindicated the intention to reduce theirinvestments in the medium-term while 19percent expect to maintain their currentlevels of investment. The reasons givenfor the decision to reduce futureinvestment levels in agriculture relate tounfavourable weather, high electricitytariffs and unstable world prices. In themining sector, the reasons advanced forreduction were high costs of operationsand limited access to credit. In themanufacturing sector, problems relate tohigh electricity costs, tax evasion andinadequate protection of domesticindustries and dumping.
5.7.3 Specify the most important factorsthat influenced your initial decision toinvest in Tanzania
More than 60 percent of investorsmentioned political stability as thenumber one factor influencing thedecision to invest in the country. Otherinfluencing factors include domesticeconomic situation, natural endowments
and the country’s strategic location as agateway to Eastern, Central and SouthernAfrica.
5.7.4 Identify or tick below the mostreliable source of information for yourinitial investment decisions
Different investors used different sourcesof information, which influenced theirinitial decision to invest in Tanzania. Themost preferred sources were businessassociates with 29 percent; Governmentsources such as TIC with 16 percent andword of mouth and local media with 13percent and 10 percent respectively. Fewinvestors used donors and internationalagencies as sources of investmentinformation. One implication of thesefindings is that there is a need for theGovernment to enhance its promotionalefforts by targeting specific groups ofinvestors using high level executives(including the president) in the promotionstrategy as was done in the case of themining sector.
Table 5.3:Most Reliable Source of Information for Initial Investment Decisions
Source of Information Number of Responses Percentage
Local Media 65 10
International Media 57 9Government 106 16Donor and International Agencies 43 6
Business Associates 190 29Competitors 54 8Word of Mouth 89 13
Other 59 9
Total 663 100
44
5.8 Improving Dialogue betweenGovernment and the Private Sector
One of the objectives of conductingprivate capital flows census is to enhancedialogue between private and publicsectors for their mutual benefit.
5.8.1 What measures can theGovernment undertake to improveinvestors’ willingness to report to theGovernment on their operations?
The responses received focused on thesurvey methodology, confidentiality,education of investors and feedback of
survey results. On methodology, mostinvestors found the questionnaire rather longand some questions were to their opinionsensitive. Physical visits were preferredrather than having questionnaires sentthrough the post. They also preferred shortand simple questionnaires. Investors alsoindicated that they would be more willing toreport if the Government was perceived tobe solving their problems in time and if theywere given feedback on the actions taken.Feedback could be given through regulardialogue with the private sector or throughseminars and workshops and supplementedby public notices and radio/televisionadvertisements.
45
CHAPTER SIX
MAIN FINDINGS AND POLICY IMPLICATIONS
This Chapter focuses on the mainfindings and policy implications based onquantitative and qualitative results.
6.1 Quantitative Results
6.1.1 Policy Measures and their Impacton Private Capital Flows
The level of stock and flows of foreignprivate capital, FDI in particular, intoTanzania has been increasing during the1990s. Although historical informationon the stock and flows of FDI for theperiod prior to 1998 has been scanty.Results from the study suggest that policyreforms carried out during the 1990s haveattracted additional private capital intoTanzania as shown by the increase ininvestments approved in TIC from USD47.3 million in 1990 to USD 767.8million by year 2000. Furthermore, theincrease in the stock of FDI from USD1,637.7 million in 1998 to USD 2,154.4million in 1999 shows a positive responseto actions taken in the past few years.These investments have further expandedproduction capacity, increased the scopeof forward and backward linkages andenhanced the demand and supply ofgoods and services in the economy. Thusinvestment policies put in place duringthe 1990s have yielded positive resultsand should be maintained and improvedfurther in order to make Tanzania a majorinvestment destination.
6.1.2 Financing Pattern
The financing pattern indicates thatcompanies with foreign ownership relymore on shareholders’ and inter-companyborrowing compared to other types ofborrowing. For example in 1999, FDIrelated flows accounted for 82.4 percent
and financing from non-FDI accountedfor 17.6 percent. Shareholders and inter-company borrowing are more preferredpresumably because they are less costly.As regards FDI related stocks, equityfinancing accounted for 73.0 percent and67.7 percent during 1998 and 1999respectively, while debt financingaccounted for 27.0 percent and 32.3percent respectively. In other words, debt/equity ratio on stocks increased from27:73 in 1998 to 32:68 in 1999. However,for the mining sector debt/equity ratiowas as high as 75:25 in 1998 and 80:20in 1999, indicating a more exposure toforeign creditors.
6.1.3 FDI Foreign Debts and Impact onPolicy Formulation
Most of the borrowing was contracteddirectly between companies with foreignownership and creditors. Althoughforeign exchange regulations require thecompanies through their bankers to reportthese transactions to BOT for statisticalpurposes, little information has beensubmitted for incorporation in thecountry’s balance of payments and inTanzania’s International InvestmentPosition (IIP), and hence it is not takeninto account in the course ofmacroeconomic policy formulation. Thismatter raises some concern given themagnitude of liabilities that FDIcompanies have contracted. The studyindicates that the stock of inter-companyand other types of borrowing increasedfrom USD 742.9 million in 1998 to USD1,156.7 million by end 1999. The failureto capture these transactions, reduces thequality and reliability of external debtdata and impairs macroeconomic policyformulation. In addition, the fact thatsome companies with foreign ownership
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maintain offshore accounts, from which,their debt servicing is made directlywithout exerting pressure on the inter-bank foreign exchange market (IFEM)complicates the matter even further.Therefore, there is need for theGovernment to set up a mechanism forcapturing these outflows.
6.1.4 FDI Flows by Country of Origin
The source of FDI flows into Tanzaniahas for historical reasons been dominatedby the UK, but the recent surge ininvestment in the mining sector hasbrought in new investors from Ghana,Australia, Canada and the USA, whichtogether with UK accounted for 59.2percent of the FDI stock by end 1999.About 77.7 percent of FDI stock wasfrom the ten top countries. The diversityof FDI flows by country of origin hasadvantages and disadvantages. The mostimportant advantage is that in the eventof adverse changes in economicfundamentals in any of the sourcecountries, the effects on Tanzania are notlikely to be very substantial. Howeverwhen it comes to formulating policies itbecomes difficult to design a policy thattarget investors from a particular countryor a block of countries such as EU orSADC or EAC.
6.1.5 Flows of FDI by SectoralDistribution
Flows of FDI in Tanzania areconcentrated in the mining andmanufacturing sectors which togetheraccounted for 61.5 percent of total stockby end 1999. Substantial FDI flows havealso been recorded in the wholesale andretail trade and catering, andaccommodation services (tourism relatedactivities), and agriculture, hunting andforestry. The sectors that have attracted
least investments are utilities supply(water, gas and electricity), andcommunity, social and personal services.This finding is consistent with thecountry’s privatization22, investment andliberalization policies, which havefocused more on mining, manufacturing,and tourism. The stock of FDI inagriculture stood at USD 151.4 million,or 7.0 percent of the total by the end of1999. Agriculture, which accounts formore than 50 percent of GDP, and morethan 50 percent of foreign exchangeearnings, and employing 70 to 80 percentof the labour force lags behind othersectors in attracting investments. Thissituation reflects the little efforts madeto provide the necessary incentives toattract investors and the limitedcomplementary rural investments that thegovernment is making in the agriculturalsector. Current government efforts infighting poverty could be enhanced ifsubstantial flows of FDI are attracted inthe agricultural sector. The low level ofFDI in utilities is a reflection of the slowprivatization process of water(DAWASA) and electricity (TANESCO)companies. On the other hand,liberalization measure in the financial,and transport, storage andcommunication sectors have led to asurge in FDI flows in recent years.
6.1.6 Flows of FDI by RegionalDistribution
The location of FDI flows in Tanzania isinfluenced by factors such as availabilityof raw materials, level and reliability ofutilities (water and electricity), transportand communication services and accessto markets. The study findings indicatethat most of companies with foreignownership are concentrated in Dar esSalaam, Mwanza, Shinyanga and Arusharegions. By end 1999, the four regions
22 Privatization of utilities companies is presently underway
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together accounted for 76.1 percent oftotal stock of FDI, with Dar es Salaamaccounting for 35.6 percent, which showsthat most of the major privatizedmanufacturing companies are located inDar es Salaam. On other hand most ofthe mining activities are concentrated inShinyanga, Mwanza and Mara regions,while all fish processing companies arelocated around Lake Victoria in Mwanzaand Mara regions. A substantial numberof companies with foreign ownership arealso located in Arusha, Morogoro, Iringa,Tanga, Tabora, Kilimanjaro, and Mbeya,but very few investments are located inDodoma, Pwani, Mtwara Lindi, Ruvuma,Rukwa, Singida, Kigoma and Kagera.The pattern of the geographicaldistribution of FDI flows indicates thatregions with few national resources andless developed economic infrastructureand social amenities also tend to have lessflows of FDI. In order to address theproblem of uneven development, thegovernment has to improve basicinfrastructure of regions that haveresources for attracting FDI. There is alsoneed to enhance mechanisms forpromoting private investments at alllevels of government (central, regionaland local levels) particularly, at theregional level.
6.1.7 Income Related Flows
Dividend payments during 1999amounted to USD 42.4 million, up fromUSD 32.4 million in 1997. Interestpayment on loans amounted to USD 27.6million during 1999, of which 60.5percent was for long-term loans and theremaining 39.5 percent was for short-term loans. This implies that FDI relatedexternal debt is dominated by long-termborrowing. Availability of thisinformation on a continuous basis wouldimprove the coverage in the balance ofpayments and International Investment
Position (IIP) of Tanzania.
6.1.8 Other Investment Flows (BanksSurvey)
Bank Lending Abroad
The study results revealed that banklending abroad is dominated by short -term bank placement. Long term lendingabroad was not recorded due to existingrestrictions on capital accounttransactions. It is unlikely that banks inTanzania will lend abroad even if capitalaccount restrictions are relaxed becausemost of the banks are foreign owned withtheir business focused mainly on the localmarket. However, high interest rates andother structural problems23 discouragedomestic borrowing and hence banksresources tend to be invested ingovernment papers, which are less risky.The majority of the banks surveyed didnot indicate any immediate intention toexpand their level of lending abroad butintended to increase their short- termbank placement.
Bank Borrowing from Abroad
Only one bank reported information onits borrowing abroad making it difficultto make any remarks of policysignificance. However, based on thequalitative survey, most banks clearlystated that they do not expect to increasetheir borrowing from abroad despite thefact that there are no restrictions on banksthat limit their scope of foreignborrowing.
6.2 Qualitative (Perception) Results
6.2.1 General Macroeconomic andPolitical Environment
Many investors acknowledge thatmacroeconomic environment and
23 Included are lack of bankable projects, weaknesses in land laws and judiciary, poor creditworthiness of theclientele, lack of risk guarantee mechanism, and absence of credit rating agencies.
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political stability are the main factorsinfluencing their decision to invest inTanzania. The economic reformsundertaken by the government since themid 1980s have been commended andhave increased investors’ confidence. Therole of monetary policy and fiscal policyin reducing inflation from above 30percent in the mid 1990s to about 6percent by mid 2000 was under-scored.However, political stability was singledout as the most important factor.
6.2.2 Institutional and Other Reforms
Despite the fact that institutional reformsthat led to the establishment of TIC,PSRC and TRA have contributed towardsimprovement of the generalmacroeconomic environment inTanzania, there are feelings that thesereforms have not gone far enough inaddressing the problems faced byinvestors. For instance, there is need toharmonize tax measures betweendifferent government departments, forexample between TIC and TRA. Land,labor, and legal reforms have also laggedbehind the other reforms, therebyundermining the impact of theimplemented reforms to the economy.Investors noted that the establishment ofthe commercial court is a commendableinitiative but more needs to be done toimprove the regulatory legal framework.
6.2.3 Liberalization Policy
Liberalization policies implementedduring the 1990s were perceived to haveyielded positive results with investors inthe mining and banking sectorsexpressing strong positive opinion onliberalization policies covering theirrespective sectors and recommendingfurther reforms including full capitalaccount liberalization. However,investors in the manufacturing sectorpointed out some negative experiences oftrade liberalization particularly the
importation into Tanzania of cheap andsubstandard products which amounts todumping, a situation which is perceived tohave undermined production of domesticproducts. The Government should, as amatter of urgency, enact an anti-dumpinglegislation and effectively implement it.
6.2.4 Quality of Economic Infrastructure
Surveyed companies with foreignownership were generally satisfied with thequality of telecommunication and bankingservices in the country; but were muchconcerned with high cost and unreliabilityof electricity and water supply services.Tanzania’s electricity tariff rates (industrial)are considered the highest among its tradingpartners in the EAC and SADC regions.The Government should therefore speed upprivatization of electricity and water supplycompanies as well as implement the SongoSongo gas to electricity project in order toimprove reliability and efficiency andreduce the cost of electricity in the country.In addition efforts should be increased toimprove road infrastructure including ruralroads..
6.2.5 Financial Factors
Investors indicated that higher bank lendingrates and limited availability of creditundermines the level of their activities.Lending rates of above 20 percent have norelation with inflation of about 6 percent inyear 2000, implying that there areimperfections in the market. High lendingrates have led to market segmentationwhereby only big investors can access thecredit at low cost, and adverse selectionwhereby high-risk investors are the onesthat access credit. Government needs toaddress the factors behind thisphenomenon. Banks on their part insist thathigh interest rates are caused by high riskborrowers, high operational cost and theweaknesses in the land law and judiciarysystem which make the whole process ofregistering mortgages and loan recovery
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cumbersome.
6.2.6 Governance Factors
Bureaucracy in some governmentdepartments has been observed as one ofthe problems investors face despite someimprovement in recent years. Investmentsincentives offered by TIC play asignificant role in attracting FDI and theestablishment of TIC as a one-stop centerhas simplified the process of investmentregistration and made it less bureaucratic.However, investors are still obliged toapproach other government departmentsin the process of licensing theirbusinesses. There is a need to continuestrengthening TIC and making it aneffective one-stop center for investors.TIC should also establish regional/zonalcenters to address problems experiencedby investors in the regions. Investors alsocommended the establishment of TRA,noting that it has improved taxadministration but perceived the VAT rateof 20 percent as too high and the speedof decision-making at TRA to be too slow.It is also perceived that corruption in VATand Customs departments has not beenadequately checked and that TRA shouldspeed up decision- making and addresscorruption in its departments.
6.2.7 Labour Factors
Labour factors, were on average not ratedfavourably by many investors becauselabour legislation over- protectsemployees, there is limited availabilityof highly educated and skilled labour, andHIV/AIDS is increasingly having anegative effect on labour productivity.
Government should consider reviewingthe labour legislation to take into accountthe concerns of employers. Opportunitiesfor training technical and managerial staffshould be expanded and the private sectorshould be encouraged (e.g. throughappropriate incentives) to establish
training institutions to complementgovernment efforts. Furthermore,Government in collaboration with theprivate sector and other stakeholdersshould step up its HIV/AIDS campaign.The establishment of TACAIDS is animportant initiative in this direction.
6.2.8 Other Factors
Corruption was singled out as one of themost frustrating problems affectinginvestors. While commending thegovernment recent efforts in fighting themalaise, investors are still concerned overthe level of corruption in the Judiciary,Police, and Customs departments. Thereis need therefore, to increase efforts tofight corruption involving thecollaboration of other key players.
6.2.9 General Perception On InvestmentPolicy
About 72 percent of investors covered inthe study generally expressed a favorableopinion on the quality of the investmentpolicy in Tanzania despite some variationacross sectors. While investors in thetourism, transport, finance, mining andmanufacturing sectors seem to becomfortable with policies in place,investors in the agriculture, andconstruction sectors are discontented bythe investment environment. Theseinvestors observed that currentinvestment policies have not addressedsome peculiar features in agriculture andconstruction. Government shouldtherefore review the investment policytaking into account the observationspointed out by the investors in the specificsectors.
6.3 Uses of the Information Collected
6.3.1 Continuous collection of inform-ation on foreign private capitalflows builds a reliable databasefor a country. It is therefore
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important to establish a reliableframework for collecting, proce-ssing and analyzing private capi-tal flows data on an ongoingbasis for use by both the publicand the private sectors.
6.3.2 The information gathered will beused for the compilation ofbalance of payments statisticsand IIP, investment promotionand macroeconomic policyformulation.
6.3.3 International organisations (e.g.IMF and World Bank) and Dono-rs require this kind of informationfor compilation and analysis ofits impact on global economicstability, to assess the need fordonor flows and their role in
promoting development in deve-loping economies.
6.3.4 International investors represe-nted mainly by MultinationalCorporations(MNC), internati-onal financial institutions andcredit rating agencies requireaccurate and timely informati-on for financial assessment ofreturn on investments and forassessing credibility of the recipi-ent countries.
6.3.5 Monitoring capital flows assistgovernments to strengthen dialo-gue with the private sector byregularly obtaining perceptionson investment policy and factorsaffecting investment climate inthe country.
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CHAPTER SEVEN
ASSESSMENT OF THE RESULTS AND THE WAY FORWARD
This chapter examines theimplementation of the Private CapitalFlows Project and assesses the extent towhich the objectives have been met, andidentifies implementation gaps(methodological and analytical) andproposes a strategy for the way forward.
7.1 Assessment of the Results in Relationto the Objectives
7.1.1 Objective One: ‘to establishan institutional framework to regu-larly and comprehensively collectdata on all types of private capitalflows for balance of payments,investment promotion,and macroe-conomic policy formulation’.
The following have been achieved:• Institutional framework invol-
ving BOT, TIC, and NBS formonitoring private capitalflows data; in particular FDIhas been established.
• Built technical capacity acrossthe three institutions for orga-nizing and conducting thesurvey on private capital flows;
• Information gathering instru-ment on investors’ perceptionshas beenestablished and throughit, information on investors’perception on investmentclimate was collected.
7.1.2 Objective Two: ‘to strengthenpublic sector dialogue with privatesector by regularly obtainingperceptions on investment policyand factors affecting the investmentclimate in Tanzania’.
The following were achieved:
• Sensitization Workshop condu-cted in May 2000, has promoteddialogue between the public andprivate sectors on issues ofinvestment policy and enhancedthe awareness of the privatesector on information reporti-ng.
• Instruments for informationgathering on investors’ percep-tions have been establishedand information on investors’perception on investmentclimate was collected.
• The census and the methodologyemployed deepened and wide-ned the scope of personalcontact, thereby improvingworking relationship betweenthe public sector officials andinvestors.
• The Dissemination Workshopheld in December 2001 hasenhanced the dialogue by provi-ding feedback of the surveyresults to the investors/privatesector and provided a platformfor discussion of policy issuesarising thereof.
7.1.3 Objective Three: ‘to design privatecapital flows data base for dataprocessing and analysis’.
The project achieved the following:• A computer programme for
monitoring private capital flowswas designed and developedusing local expertise.
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• Developed technical capacityacross the participating institu-tions to operate, maintain, andupdate the database on privatecapital flows.
• Established a database capableof storing and facilitating theprocessing and analysis of dataon private capital flows.
• Established more realisticbaseline data on FDI and PIstocks for 1998 to 1999 andflows for 1999.
• Established more realistic incomerelated flows (dividend payme-nts and interest payments onexternal debt of companies withforeign ownership) for 1999.
7.2 Gaps to be filled
Despite the achievements outlined above,there were several gaps identified:
• Survey of PI through the stockexchange was not conductedbecause the capital account isnot fully liberalized.
• Information on outward privatecapital flows was not surveyedbecause that part of the capitalaccount is not liberalized.
• Most investors failed toprovide information on marketvalues as indicated in thequestionnaire and hence mostinformation reported on stocksand flows reflect book values.
• Many investors did not provideseparate information for retai-ned earnings and instead it wasincluded in the reported stock/flow of equity.
• Information on principal repay-ment of external loans was notcaptured by the survey.
• Many investors did not providehistorical information on invest-ment levels that would helpin building up investment dataseries.
• Private capital flows by loca-lly owned companies were notwell covered by the census.The current census focused oncompanies with foreignownership.
• Survey on other private capi-tal flows through banks did notprovide adequate informationdue to poor response by thebanks. Even where response ratewas good, the information pro-vided lacked many detailssuch as sectoral/geographicaldistribution for borrowing andlending abroad.
7.3 Lessons Learnt
The following are the lessons learntduring implementation of the project.
• Institutional coordination hasenabled sharing of technicalexpertise and resources.
• Strong commitment by topmanagement of the institutionsand the project team has beeninstrumental in the successfulimplementation of the project.
• Creating awareness throughsensitization workshop andmedia publicity has enhancedcooperation of the privatesector.
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• Physical visits and direct intervi-iews in conducting the surveyhave enhanced cooperationwith the private sector andimproved quality of reportingand compliance.
• Participation of internationalresource persons from DFI hasbrought in international experi-ence and expertise at the designand implementation stages ofthe project and this helped tobuild local capacity in severalaspects of this work.
7.4 The Way Forward
The following strategies arerecommended as a way forward:
• Reviewing and updating thecurrent investors’ register toinclude both local and foreigninvestors.
• Reviewing the current datacollection instrument (FDI) toencompass both foreign directinvestment and other privatecapital flows through banks,and to include all the necessaryinformation and details to fillgaps identified in section 7.2.
• Undertaking a company survey,targeting both locally and fore-ign owned private companies tocollect data/information on allprivate capital flows (for years2000 and 2001).
• Establishing a new data colle-ction instrument for Portfolio
Investment in preparation forfull capital account liberaliza-ation.
• Strengthening institutionalparticipation and coordinationfor future monitoring of privatecapital flows.
• Enhancing partnership betweenthe private and the public througha continuous process of dialo-gue and information sharing.
• Provision of adequate fundingfor future surveys by all concer-ned institutions.. Donor fundingshould only supplement short-falls in local resources.
• Integrating the developed moni-toring system for privatecapital flows in the nationalmonitoring frameworks so thatthe system is streamlined andbecomes part and parcel of thedata compilations of TIC andNBS.
• Inclusion of Zanzibar in futuresurveys.
• Deciding on institutions respo-nsible for future collection andcompilation of private capitalflows data.
• Deciding on how private capitalflows data should be collected in a more sustainable manner.
• Deciding on the criterion to beused in determining the samplefor the future sample surveys.
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REFERENCE
Bank of Tanzania (1998), Foreign Exchange Circular no. 6000/DEM/EX.RE/58, September.
Bank of Tanzania (1998), Foreign Exchange Regulations
Bank of Tanzania, Economic and Operations Report, Various issues, Dar-es-Salaam.
Barry Eichengreen et al (1999), Liberalizing Capital Movements: Some Analytical Issues;International Monetary Fund Economic Issue No 17, February.
Bhinda N., S. Griffith-Jones, J. Leape and M. Martin (1999), Private Capital Flows toAfrica: Perception and Reality. FONDAD, Netherlands.
ESRF-CTI (2000), Review of Legal, Regulatory and Judicial Framework RegardingManufacturing and Business Sector in Tanzania, December.
IMF (1993), Balance of Payments Manual, 5th ed. Washington.
IMF (1995), Balance of Payments Compilation Guide, Washington.
Kimei C, Mjema G, Tarimo B, and Msutze A (1997), Capital Flows to Tanzania, PaperPresented to the EFA Workshop on Private Capital Flows to Sub-Saharan Africa, held atCape Town 14-15 July.
Madete, L. B. (2000), Foreign Direct Investment and Public Policy in Tanzania. UnpublishedMA Thesis. University of Dar es Salaam.
Mrutu, S. S, Assey C. S and Kipilimba, M (2001), A Proposal for Establishment ofTanzania Foreign Direct Investment Database. Paper prepared for Tanzania TechnicalWorking group (TWG) for the Regional Integration Facilitation Forum (RIFF) for Easternand Southern African Countries.
Noni P., Ole-Naiko E., Mrutu S, Assey C, Kiwelu Z, Senzia N (1999), Tanzania: CountryReport of the Survey on Foreign Assets and Liabilities, Results of the Pilot Study of ForeignInvestment conducted by Bank of Tanzania and Tanzania Investment Centre in 1998-1999.
URT (1996), Mining Policy 1996.
URT (1997), Tanzania Investment Act, 1997
URT (1997), Tourism Policy, 1997
URT (2001), Public Service Reform Programme 2000-2011
WWW.SADC-ELEC.COM.
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CONCEPTS AND DEFINITIONS
It is important to be familiar with the fol-lowing terminology and the relationshipbetween the terms before reading the fullreport.
Balance of Payments (BOP) is an ac-counting statement designed to provide,for a specific period of time, a system-atic record of an economy’s transactionswith the rest of the world. BOP refers totransactions between residents and non-residents for a period of one year. It is astatistical statement that brings togetherinflows and outflows of transactions clas-sified under appropriate components, intwo accounts – the current account andcapital & financial accounts. BOP dataare therefore concerned with transactionsbetween residents and non-residents andNOT with the currency of transaction.Typically, a transaction in foreign cur-rency between two residents of any coun-try would not be considered a BOP trans-action.
Book values Value of an asset as recordedin the books of account of an organiza-tion, usually the historical cost of the as-set reduced by the amounts written offfor depreciation. If the asset has ever beenrevalued, the book value will be theamount of the revaluation less amountssubsequently written off for depreciation.Except at the time of purchase of the as-set, the book value will rarely be the sameas the market value of the asset.
Dividends are income on equity.
Equity means shares in companies, andequivalent ownership interest in unincor-porated enterprises. Foreign Direct Eq-uity Investment denotes ownership of 10percent or more of the ordinary shares,voting power, or equivalent in an enter-
prise, by someone resident in anothereconomy.
Estimated - Market value: Market valuesor market prices are used for valuingtransactions. This is the amount of moneythat a willing buyer pays to acquiresomething from a willing seller, whensuch an exchange is one betweenindependent parties and on the basis ofcommercial considerations only. This isthe best measure of economic value. Theactual price at which transactions arerecorded in the books of the transactorswill be the market price – or a closeapproximation thereof. However, thesetransactions may be between relatedcompanies – which could impact on the“commercial consideration” of marketvalues. Related companies in differentcountries may charge transfer prices toeach other (different to what they wouldhave charged independent parties) so asto shift profits between enterprises andcountries, and minimise taxes. Marketvalues are usually difficult to estimate.The Preferred techniques of calculatingmarket values (particular to equity)include stock exchange valuations oflisted companies, auditor’s estimates ofmarket values, a recent purchase or salebetween directors of the company,Director’s estimate, Financial Manager’sestimate, and accountant’s estimate.
Country of Origin (of investment): isassociated with the residence of theshareholders where main decisions onthe operations of a company are made.
Financial Instruments: These areinstruments/special documents that areused to facilitate financial transactionse.g. treasury bills, bonds, debentures,stocks etc.
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Flows: Flow is a change in stock positionand it takes place during a period of time.Private Capital Inflows can be seen as anincrease in international indebtedness(liabilities) to a country’s private sectorduring a specified period of time. Thisconstitutes foreign investment in anenterprise. Capital Outflows can similarlybe seen as an increase in country’sInvestment (Assets) abroad. This alsoimplies Investments abroad by a domesticenterprise. Categories: Flows fall underthree major categories namely,transactions, holding gains or loses andother changes in Assets. Transactions areeconomic exchange involving two economicentities (e.g. a foreign and a local enterprise).It may be worth noting that all transactionsare flows but not all flows are transactions.Holding gains and loses (also known asvaluation changes or capital gain/loses) arethose types of flows that involve change instock position that is due to price changes ofan asset, but not a result of economicinteractions. These are types of flows whichare not transactions thus not recorded in BOP.
Foreign Direct Equity Investment(FDEI) denotes ownership of 10 percentor more of the ordinary shares, votingpower, or equivalent in an enterprise, bysomeone resident in another economy.
Foreign Direct Investment (FDI) is de-fined as a case where a resident entity inone economy (creditor) acquires lastinginterest in an enterprise in anothereconomy (recipient) with significant de-gree of influence. Usually FDI is in theform of ownership of means of produc-tion like factories or equity share includ-ing equity purchase, reinvested earningsand inter-company loans and debt trans-actions. FDI in the census form is ob-tained by summing up: new equity invest-ment Q5 plus reinvested earnings in Q6plus the sum of {shareholder and intra-company loan (long term) + shareholderand intra-company borrowing (short-term) + supplier’s credit from relatedcompany (short term)} in Q8.
Foreign Portfolio Equity Investment(FPEI) is defined as a case where ashareholder owns less than 10 percent ofequities in an enterprise.
Foreign Portfolio Investment (FPI): -Foreign Portfolio Investment (FPI) arepurely financial assets, which include,Foreign Portfolio Equity Investment(FPEI), Investments in Bonds, Moneymarket instruments and Financialderivatives other than the items includedin the definition of foreign directinvestment.
International Standard IndustrialClassification (ISIC) is a standardisedway of dis-aggregating economicactivities for international datacomparison purposes. For the currentcensus, this has been modified withfurther dis-aggregation to better coveractivities in Tanzania and remainsconsisted with international norms.
Net asset values (the difference betweenassets and liabilities)
Non-equity means all other financialinstruments including loans, trade creditand supplier credit (for goods andservices), bonds, debentures, notes,money market instruments, shareholderand inter-company loans, arrears of debtor interest, and deposits.
Regional Classifications: A way to de-fine geographical distribution of eco-nomic activities, enterprises and subsidi-aries in Tanzania. e.g. Dar es Salaam,Arusha, Mwanza, Mbeya, Tanga etc.
Reinvested (or retained) earnings (prof-its) These are the direct investor’s share(calculated as a proportion of direct eq-uity held) of that part of the earnings (af-ter tax on earnings) that are not distrib-uted as dividends by the direct investmententerprise, together with earnings ofbranches that are not remitted to the di-rect investor. This is a component of FDI.
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Related Companies: Related companieswith a direct investment enterprise (10percent of ordinary shares) are subsidi-aries (a non-resident owner owns morethan 50 percent of the shares) andassociates (50 percent or less). Branches(unincorporated enterprises whollyowned by non-residents).
Resident, Non Resident and country ofResidence: A resident is any individual,enterprise, or other organisation ordinar-ily residing in Tanzania. In other words,its centre of economic activity is in Tan-zania. All other entities are regarded asnon-residents. For statistical purposes, anindividual who lives in Tanzania for morethan a year is considered to be a resident,regardless of the individual’s citizenshipor nationality. An enterprise incorporatedin Tanzania is considered a resident ofTanzania irrespective of the domicile ofthe owners of the enterprise. A branch ofa foreign company operating in Tanza-nia for more than a year is treated as a
local company.
Shareholder and inter-company loans /borrowing: This is the borrowing or lend-ing of funds (among related companies)between the direct investor (non-resi-dent), and the direct investment enterprise(resident). These transactions can createor dissolve investment as well as main-tain, expand or contract it.
Stocks: Stock refers to position at a pointin time (e.g. end of year position). Stockscan be divided into assets and liabilities.
Supplier’s Credits: These include tradecredits. On one hand they are claims fromthe direct extension of credit by suppliersof goods and services to buyers, whileon the other hand they are liabilities ofbuyers of goods and services. In additionthis concept include advance paymentsfor work in progress, or to be undertaken,associated with such transactions. Mostare short term.
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APPENDIX 1: METHODOLOGY
A series of activities that were undertakenin conducting the study are chronologi-cally explained below. First and foremostis the institutional set-up for conductingthe study, and a review of the lessonsdrawn from the pilot survey conducted afew years back. Issues related tosensitisation seminar and a training work-shop will also be highlighted. This willbe followed by the methods employed inthe conduct of the study, including issueson data base development for data cap-turing and processing. Lastly, analyticalmethods used in the calculations with re-gards the quantitative results will be ex-plained.
1. Institutional Set-up for the Study
The Bank of Tanzania (BOT), in closecollaboration with Tanzania InvestmentCentre (TIC) and the National Bureau ofStatistics (NBS), conducted the study.The reasons for the co-operation includethe following:
• To share expertise and experience• Efficient use of available man
power at headquarters and theregions
• Capacity building for this andfuture surveys
• Joint ownership of the project• Used a combined legal authority
for the conduct of the surveywith anticipation of improvingcompliance
The study was co-ordinated by the BOTthrough its department of Trade, Financeand Investment Policies.
2. Lessons from the Pilot Survey
The Pilot Survey was intended to measurethe magnitude and nature of FDI flowswithin the Eastern and Southern Africanregion. It was carried out in Tanzania
between November 1998 and July 1999and was organized by the ExternalFinance for Africa and conducted by theBOT in collaboration with the TIC. Thesurvey involved 101 companies most ofthem in Dar es Salaam, and a few othersin the regions. The survey was conductedby use of questionnaires that weredesigned to cover a wide range ofinformation, both qualitative andquantitative. It also involved directinterviews with top executives for mostof the companies visited in and aroundDar es Salaam area. The response rate forthis survey was 62 percent. The BOT andTIC used this survey as a capacitybuilding and learning exercise forconducting a more comprehensive study.Most of the practices adopted for thepresent study were drawn from thelessons learned in the Pilot Survey.
3. Initial Preparations for the Census
For the study to commence smoothly,initial preparations were necessary. Thepreparations were meant to enable thestakeholders to properly understand theirroles and responsibilities in the study.Hence, a sensitization seminar and atraining workshop were convened for thatpurpose.
3.1 Sensitization workshop
Sensitization workshop was held in Dares Salaam on the 8th of May 2000. Thepurpose of the one-day sensitizationworkshop was to promote and launch thestudy of foreign private capital flows bycreating awareness among senior privatesector representatives, of the importanceof data collection for both governmentand the private sector. More specificallyto:
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• Introduce and to impress upon theprivate sector, data requirementsby the public sector (i.e. BOT, TICand NBS) and their role andmandate in collection of such data.
• Stress the importance of therequired data for balance ofpayments, investment promotion,and macroeconomic policy formu-lation.
• Brief private sector on conclusionsfrom the last (pilot) survey as ameans of providing feedback to theprivate sector.
• Provide a forum for private investorsto air their concerns in supplyingdata.
• Test the suitability of survey formsby disseminating the forms tothem for information andcomments.
The Sensitization Workshop that wasofficiated by His Excellency Mr. B.Dinwiddy, the British HighCommissioner to Tanzania, was wellattended by Chief Executives of BOT,TIC and NBS and their staff. Inattendance were also executives from theprivate sector, other public institutions,and donor community. A total of 20executives from the Tanzania businesscommunity attended and participatedactively in the discussions. TheInternational resource persons comprisedMr. Nils Bhinda from External Financefor Africa (EFA), Mr. Hendrie Scheunfrom the Bank of Namibia, and EFADirector, Dr. Mathew Martin.
3.2 Training workshop
Training workshop followed immediatelyfrom 9th May 2000 to 12th May 2000 withthe purpose to train the enumerators onvarious stages of survey procedure.Training workshop drew 9 participants
from BOT, 7 from NBS, and 2 from TIC.All BOT and TIC staff were fromHeadquarters, However, NBS had 3 fromHeadquarters and 4 from Tabora, Tanga,Kilimanjaro and Mara regions. Resourcepersons were Mr. Nils Bhinda of EFA,Mr. Hendrie Scheun from Bank ofNamibia, Mr. Shaft Mrutu, Mr. CharlesAssey and Mr. Modest Kipilimba, allfrom BOT, Ms. Nakuala Senzia fromTIC, and Mathew Chintembo from NBS.
The training was practically focused onevery stage of survey implementation. Itwas conducted through lectures,discussions and working groups. Topicscovered include:
• Learning on census implementationfrom the pilot survey, and othercountries
• Devising methods to improveaccuracy and detail of investors’register
• Appreciating the importance oflegal mandate to collect data, anddata confidentiality.
• Training in concepts used in balanceof payments in the context of theForeign Assets and Liabilities(FAL) questionnaire.
• Training in concepts used in balanceof payments in the context of theBanking Survey questionnaire.
• Checking data quality throughchecks built into the survey form,and company financial statements.
• Understanding purpose of, andterminology used in the InvestorPerceptions questionnaire.
• Developing interview techniquefor all enumerators through practicalexercises.
• Determining which data entry and
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24 The register of Companies (ROC) has since been transformed into a government agency andassumed a different name of “Business Registration, and Licensing Agency (BRELA).
analysis software to use for thepresent and future surveys.
• Checking the accuracy of data input by full or sample check, andin-built protection of cells in thecomputer programme to reducescope for errors.
• Marketing of the study throughmedia and closing workshop.
• Designing implementation timetableand division of labour for thesmooth conduct of the study.
3.3 Preparation of investor’s register
Following the successful completion ofthe Workshop, the next task was toprepareinvestor’s register. The in-tention was to establish an investor’sregister containingall the necessary infor-mation relevant for smooth conduct of thesurvey. The main source of informationfor the register is BOT (for banks andother financial institutions), and TIC,Registrar of Companies (ROC)24, andPSRC for all other investors. The regis-ter was meant to cover all establish-ments that are fully or partially foreignowned. In a nutshell, the exercise of pre-paring the register was so demandingbecause file records in some organi-zations were not organized well and thatsome records were already in archives.A consolidated list of 1583e s t a b -lishments that was compiled formed thebasis for the study.
3.4 Finalization of the Survey Question-naires
For any survey to be successful, thereshould be simple and well-designed ques-tionnaires. Advantages of a good ques-tionnaire includes; easy to fill (i.e. be-ing simple and understandable), high
possibility of getting accurate and timely data, less time to be consumed whilefilling, and high response rate. On theother hand, poorly designed questionnairesresults into low response rate, low qualitydata and usually takes longer to complete. In view of the above, the questionnaires for the survey were redesigned based oncomments raised by the private sectorresource persons and the training workshopparticipants including international re-source persons. The comments raisedwere helpful in making the questionnairessuited for the intended purposes. Twotypes of questionnaires were redesigned.
The first questionnaire, in blue papers,was for Foreign Assets and Liabilities(FAL) and was supposed to be filled byeither the Chief Executives and/or ChiefAccountants or Directors for Financebecause they know much about theirinvestments than junior officers. Thesecond questionnaire in green papers wasfor perception (PER) survey. This wasspecifically for Chief Executives who knowmuch about existing policies and theirimpact in their company’s operations.The colour for each type ofquest ionnaire p a p e r w a s m a d edifferent for easy identification.A supplementaryquestionnaire wasdesigned to capture private capital datathrough banks.
3.5 Enumerator’s Manual
The manual was a tool for guiding enu-merators in conducting interviews duringthe survey. It contained the meaning of dif-ferent terminologies that were used in thequestionnaires as well as explaining themeaning of the questions.
3.6 Marketing of the Study
Different approaches were used in mar-keting the survey including press releases
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and press conferences. Press releases de-scribing the survey and the role of pri-vate sector investors in the survey ap-peared on three different newspapersnamely; Daily News, Financial Timesand Business Times. In addition, pressconferences were held in early July 2000and mid-August 2000.
4. Distribution of Questionnaire
4.1 Physical Visits
The study was conducted to cover allidentified establishments in Tanzaniawith foreign ownership either fully orpartial. As already pointed out, the studyof 1,583 companies was based on the lists
from TIC, BOT, ROC (now BRELA),and PSRC. Questionnaires weredistributed to companies located in Dares Salaam starting from the 12th June2000, while distributions ofquestionnaires in the regions started onthe 26th June 2000 after substantialprogress has had been made in Dar esSalaam. Regional visits were arranged insix different routes as follows:
• Morogoro, Iringa and Mbeya• Tanga• Arusha and Kilimanjaro• Tabora and Shinyanga• Mwanza and Mara• Pwani (Coast).
Table 1 below summarizes the distribu-tion of questionnaires.
Table 1: Distribution of Questionnaire in Da es Salaam and in the Regions
REGION NUMBER OF INVESTORSCOVERED INTERVIEWED BY POST
Dar es Salaam 824 424 400Morogoro 51 38 13Iringa 16 5 11Mbeya 9 5 4Tanga 69 18 51Arusha 353 149 204Kilimanjaro 64 37 27Tabora 2 0 2Shinyanga 18 13 5Mwanza 115 57 58Mara 12 9 3Pwani 16 6 10
TOTAL 1549 761 788
In the course of distributing question-naires, direct interviews were conductedwith senior officials of the companies thatwere physically visited by the enumera-tors in Dar es Salaam, Morogoro, Iringa,Mbeya, Tanga, Arusha, Kilimanjaro,Tabora, Shinyanga, Mwanza, Mara andCoast regions. The enumerators ex-
plained to the respondents how to com-plete the questionnaire. Apart from thedata collection, discussions between theenumerators and senior executives cen-tered on qualitative aspects of the ques-tionnaire in order to obtain detailed in-formation on investor’s perception andthe impacts of various policies on theiroperations.
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4.2 By post
Questionnaires were sent by post to com-panies that could not be located easily forinterview with pre-paid envelopes for re-turn. Follow-ups were made by telephoneto clarify and/or to assist in filling thequestionnaires. All investors includingthose who were visited were requestedto complete and return the questionnairesto either BOT or TIC or NBS.
Since it was not possible to make visitsto all regions, only the most importantcenters with high concentration of foreigninvestments were covered. Distributionof questionnaire to investors in the restof the regions was done by post as indi-cated in Table 2 below:
Table 2: Distribution of Questionnairein the Regions - through post
REGIONS NUMBER OFINVESTORS
Dodoma 8
Kagera 9
Kigoma 3
Lindi 2
Mtwara 5
Singida 4
Ruvuma 3
TOTAL 34
4.3 On-job training and follow ups
In the course of distributing question-naires in the regions, the trained enumera-tors spent extra time to train NBS regionalstaff on how to facilitate the conduct ofthe interviews. Following the low rate ofresponse during the initial stages of thestudy, efforts to collect questionnaireswere stepped up through physical visitsas well as by telephone. As a result ofthese efforts the response rate improvedsignificantly.
5. Development of Software for Data
Entry and Processing
5.1 The system and manual development
In the absence of a system to capture andprocess data on private capital flows inTanzania, efforts were made by BOT todesign one, namely ‘Tanzania PrivateCapital Flows System’ (PCFS 2000). Inaddition a System’s Manual was also pre-pared as a guide to end - users. The sys-tem has gone through continuous updatesand is now operational.
5.2 End-user training workshop
Between 15th to 19th January 2001 a train-ing workshop was conducted inMorogoro for the purpose of introducingdata entry personnel and processors to thenewly developed PCFS 2000 System.More specifically the objectives of theTraining Workshop were to:
• Cultivate the expertise among theusers by providing them with thebackground to the project and theway forward, introduce key macr-oeconomic/BOP concepts, examineand interpret questionnaires, stressthe importance of the study forBOP, investment promotion andmacroeconomic analysis.
• Train end-users on how to use theSystem by providing basic MsAccess application and data entryand report writing skills.
• To test the System with regard toits suitability in data inputting,accuracy, dependability, reliabilityand to obtain participant’s views onthe necessary improvements.
• The training was practical. Itfocused on the description andanalysis of the private capital flowsas practical training on the use ofPrivate Capital Flow database.
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Training was conducted throughlectures, discussions and workinggroups.
The Training Working was attended by13 participants from the threeparticipating institutions namely BOT,TIC and NBS.
5.3 Data entry, verification andprocessing
The exercise of data entry startedimmediately after the Training Workshopin Morogoro ended, and was completedin end February 2001. Data verificationwas also conducted to ensure consistencyand accuracy.
6. Survey of Bureau de change
The survey on bureau de change andpension funds was not conducted due toa number of reasons. Bureau de changeare mainly moneychangers and haveceased to conduct internationaltransactions. Likewise, pension funds inTanzania mainly deal with social securityand do not have foreign contribution intheir capital neither do they invest abroad.
7. Analytical Methods
7.1 Adherence to internationalstandards
In Chapter three, quantitative dataobtained from the study was presentedand analysed. The analysis is based on anumber of assumptions and basicmethodological standards for compilationof private capital flows data. As much aspossible, compilation was based onstandards outlined in the IMF Balance ofPayments Manual Version 5 (BPM5). Themanual recommends that private capitalflows statistics be compiled as part ofbalance of payments (BOP) andinternational investment position (IIP)which require grouping of private capitalflows into direct investment, portfolio
investment and other investments. On thisbasis, two types of questionnaires weredesigned namely foreign assets andliabilities (FAL) for FDI and PortfolioEquity Investment (PI), and banks surveyfor Other Investments.
According to international dataclassification standards, FDI stocks andtransactions are composed of sub-classifications, namely:
• Equity capital
• Reinvested earnings, and
• Other capital. These are non-equityFDI comprising of:
- Shareholders and intra-company loans, and
- Suppliers credit from relatedcompanies.
Direct investment income is comprisedof:
• Income on equity (dividends andprofits), and
• Income on debt (interest paymentsarising from Non-equity FDI)
In the absence of foreign participation inorganised financial markets (eg. Stockexchange), portfolio investment is limitedto portfolio equity investment.
Other investments include short and longterm debt from unrelated companies tocompanies with or without foreignownership.
To satisfy these international standards andother analytical considerations, companieswith foreign ownership were asked toprovide disaggregated information insuch a way that it could be classified bysource country, by economic sectors orby geographical region in which
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investment is located in Tanzania.Distinction was made between stocks andflows as well as income related flows.
7.2 Computation of FDI
It was revealed in the study that someinvestors included retained earningswhen reporting stock levels for directFDI equity while others made thedistinction between the two. For the sakeof consistency, the analysis in this reportassumes that retained earnings areautomatically included in the amount ofdirect FDI equity as reported byinvestors, hence there is no separate itemfor retained earnings.
7.3 Calculating flows
There are two methods of calculatingflows namely stock approach, andtransaction approach. Stock approachtakes the change in the value of stockbetween successive years as a proxy forflows, while transaction approachconsiders the sum of the values of alltransactions that occurred during a year.Due to inconsistencies observed in thedata reported by the investors, acombination of both methods wasadopted in calculating flows. All thecompanies that responded reported stockpositions of equity for 1998 and 1999 butvery few reported on transactions of newequity for 1999. Reporting of both stocksand flows is important for crosscheckingand ensuring consistency in data. It wasalso noted that most companies reportedstock position for non-equity FDI as atend 1999 but some did not reportinformation for end 1998. In general, veryfew companies reported historicalinformation. Therefore, the change in stockfor non-equity FDI between 1998 and 1999is not reliable. On the other hand, mostcompanies provided information on non-equity (loans) FDI transactions for 1999only.
In view of the lack of sufficient data inboth equity and non-equity FDI, a com-bination of change in stock (for the caseof equity) and transactions (for the caseof non-equity FDI) was adopted in cal-culating FDI flows. The same approachwas also used in calculating non-FDIflows. As pointed out earlier, retainedearnings were assumed to have been in-cluded in the change in stock between1998 and 1999.
7.4 Analysis of perception results
The questionnaire on perceptions re-quired investors to rank the impact offactors on their investment decisions andday-to-day operations. Ranking levelsranged from 1 for “very positive” to 7for “very negative”. Rank 4 was givenfor “no effect”. In order for the analysisof perception scores to be meaningful,rank 4 was taken to mean that the rankedfactor could either be negative or positivebut with no significant effect perceived.So rank 4’s score was added to thedominant perception. For example if thegeneral perception was negative (as maybe depicted by the graph), then the per-centage of rank 4 was incorporated in thetotal negative score and vice versa.
7.5 Reporting period
The questionnaire on Foreign Assets andLiabilities (FAL) was aimed at collect-ing information for the years 1998 and1999. Additional information was re-quested for historical data covering theyears 1993 to 1997, but most companiesdid not provide the information especiallyfor1993 to 1997, and therefore analysisdone in Chapter three is focused for theyears 1998 and 1999. However, in orderto get the general trends of foreign liabili-ties overtime, the scanty data that wasobtained for 1995 to1997 was in someisolated cases presented.
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APPENDIX 2:
STATISTICAL TABLES
Table 1: STOCK OF FDI BY COUNTRY OF ORIGIN - 1998
Millions of USD
Country Equity Long-term Short-term S/Credit Total
UK 202.6 101.6 7.8 1.8 313.8Ghana 240.6 22.0 2.5 - 265.1Australia 73.1 21.0 12.1 - 106.3USA 87.5 33.3 - 1.4 122.2Netherlands 105.4 0.3 - 0.7 106.4Canada 79.1 17.6 - - 96.7Mauritius 70.4 - - - 70.4Italy 32.5 30.1 - 5.5 68.1Bermuda 28.5 28.7 2.3 1.7 61.2Kenya 43.8 6.1 2.4 1.5 53.7Malaysia 2.8 35.3 - 2.4 40.5Germany 27.2 7.8 0.1 0.1 35.1Norway 22.9 8.2 - 0.4 31.5South Africa 18.8 7.1 - 6.5 32.4France 22.3 7.8 - 0.2 30.2Denmark 17.9 6.0 0.1 - 24.0Luxembourg 11.1 5.4 - - 16.5Switzerland 13.5 4.6 2.1 8.1 28.3Sweden 17.6 3.3 - 3.7 24.5Isle of Man 9.8 3.2 - - 13.0IFC 2.8 8.0 2.0 - 12.8China 8.9 - 1.0 - 9.9Malawi 7.7 0.8 2.0 - 10.5Zambia 5.5 1.2 2.0 - 8.6Japan 3.2 - 3.2 0.1 6.5India 0.8 3.9 - - 4.7Saudi-Arabia 2.9 1.2 - - 4.1Libya 3.8 0.8 - - 4.6Foreign-Not Specified. 3.4 0.2 - 0.1 3.7Kuwait 0.4 3.2 - - 3.5Ireland 2.5 0.3 - - 2.7Egypt 2.6 - - - 2.6United Arab Republic 1.9 0.1 - 0.2 2.2Virgin Islands (U.S) 1.0 0.9 - - 1.9Bahamas 1.9 - - - 1.9Channel Islands 0.3 1.6 - - 1.9Seychelles 1.7 - - - 1.7Greece 1.5 0.2 - - 1.7Korea 1.5 - - - 1.5Belgium 1.1 0.3 - 0.1 1.4
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Country Equity Long-term Short-term S/Credit Total
U.S.S.R 1.1 - - - 1.1Austria 1.0 - - - 1.0Panama 1.0 - - - 1.0Thailand 0.1 0.8 0.1 - 0.9Pakistan 0.8 - - - 0.8Cote D’Ivoire 0.6 - - - 0.6Zimbabwe 0.5 - - - 0.5Liechtenstein 0.5 - - - 0.5SAS 0.5 - - - 0.5Yugoslavia 0.4 - - - 0.4Uganda 0.4 - - - 0.4Finland 0.3 - - - 0.3Singapore 0.2 - - - 0.2Swaziland - - - 0.2 0.2Gibraltar 0.1 - - - 0.1Cyprus 0.1 - - - 0.1Lebanon 0.1 - - - 0.1Sri Lanka 0.1 - - - 0.1Dominica 0.1 - - - 0.1Quatar 0.1 - - - 0.1Sudan - 0.1 - - 0.1Indonesia - - - - -Senegal - - - - -Guinea - - - - -Yemen - - - - -Sierra Leone - - - - -European Community - - - - -
TOTAL 1,190.7 372.8 39.7 34.6 1,637.7
Table 2: STOCK OF FDI BY COUNTRY OF ORIGIN-1999Millions of USD
Country Equity Long-term Short-term S/Credit Total
Ghana 240.0 155.0 3.7 - 398.7UK 221.8 108.9 5.3 1.4 337.4Australia 162.2 61.5 13.2 0.5 237.3Canada 155.2 17.9 0.3 - 173.4USA 96 32.3 - 0.9 129.2Netherlands 108.7 0.9 - 0.6 110.1Mauritius 84.2 - 0.2 - 84.4Kenya 57.9 6.3 15.8 2.9 82.8Bermuda 28.5 30.7 4.2 1.9 65.2Italy 21 30.9 - 2.7 54.6
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Country Equity Long-term Short-term S/Credit Total
South Africa 27.3 4.8 18.1 2.6 52.8Germany 27.4 7.8 9.7 4.4 49.2Malaysia 4.5 35.3 - 4.8 44.6Norway 25.1 9.6 - 0.4 35.2Denmark 17.7 8.1 3.4 - 29.2France 24.5 2.9 - 0.3 27.7Switzerland 16.5 0.6 0.3 9.7 27Luxembourg 4.2 17.9 - - 22.1Sweden 18.2 1.4 - 0.4 2-Panama 15.1 1.2 - - 16.3Foreign-Not Specified. 8.7 1.9 1.6 3.4 15.7Isle of Man 9.9 4.2 - - 14.1IFC 4.8 9 - - 13.8China 9.8 - - - 9.8Malawi 7.7 1.9 0.1 - 9.7Japan 3.2 - 3.4 2.3 9Saudi-Arabia 4.6 2.1 - - 6.7Lebanon 4.6 1.3 - - 5.8Zambia 5.5 - - - 5.5India 1.1 4.2 - - 5.3Belgium 4.8 0.3 - - 5.1Virgin Islands(U.S) 1 1.9 - 1.3 4.2Egypt 3.4 0.7 - - 4.1Austria 3 - - 0.8 3.8Libya 3.8 - - - 3.8Ireland 2.5 1.3 - - 3.7Pakistan 3.7 - - - 3.7Channel Islands 0.7 2.7 - - 3.4Barbados 3 - - - 3Kuwait 0.4 2.6 - - 2.9United Arab Republic 2 0.5 - 0.3 2.9U.S.S.R 1.3 0.2 - 1.3 2.8Uganda 0.4 2 - - 2.3Greece 1.8 0.2 - - 2.1Cote D’Ivoire 2 - - - 2Bahamas 1.9 - - - 1.9Seychelles 1.7 - - - 1.7Swaziland - - - 1.6 1.6Korea 1.5 - - - 1.5Yemen - - - 1.2 1.2SAS 0.8 - - - 0.8Zimbabwe 0.5 - - - 0.5Liechtenstein 0.5 - - - 0.5Cyprus 0.4 - - - 0.4Yugoslavia 0.4 - - - 0.4Finland 0.3 - - - 0.3Singapore 0.2 - - - 0.2Guinea 0.2 - - - 0.2Gibraltar 0.2 - - - 0.2Quatar 0.2 - - - 0.2Sri Lanka 0.1 - - - 0.1
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Region Equity Long-term Short-term S/Credit Total
Dar es Salaam 547.3 163.8 35.4 15.5 761.9Mwanza 295.2 198.7 13.5 10.2 517.7Shinyanga 176.2 18.1 1.5 1.9 197.6Arusha 129.0 42.9 10.5 2.3 184.7Mara 143.7 - - - 143.7Morogoro 79.7 15.4 14.4 - 109.5Iringa 29.4 60.5 0.3 - 90.3
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Country Equity Long-term Short-term S/Credit Total
Hong Kong - - 0.1 - 0.1Dominica 0.1 - - - 0.1Thailand 0.1 - - - 0.1Sierra Leone 0.1 - - - 0.1Sudan - 0.1 - - 0.1Indonesia - - - - -Senegal - - - - -Israel - - - - -
TOTAL 1,458.60 570.9 79.4 45. 2,154.40
Table 3: STOCK OF FDI BY REGION-1998Millions of USD
Region Equity Long-term Short-term S/Credit Total
Dar es Salaam 460.4 157.6 15.5 16.3 649.8Mwanza 270.1 45.1 12.1 - 327.4Arusha 111.2 40.2 6.2 1.5 159.2Mara 66.7 - - - 66.7Shinyanga 90.2 19.3 - 1.7 111.2Morogoro 110.3 5.2 3.8 - 119.3Iringa 27.6 56.0 0.2 5.1 88.9Tanga 32.7 15.8 1.8 - 50.3Kilimanjaro 13.2 4.0 - 8.1 25.3Tabora 0.8 20.9 - - 21.7Mbeya 5.5 5.4 - - 10.9Dodoma - 3.4 - 1.9 5.3Pwani 1.9 - - - 1.9Ruvuma - - - - -
TOTAL 1,190.7 372.8 39.7 34.6 1,637.7
Table 4: STOCK OF FDI BY REGION-1999
Millions of USD
Region Equity Long-term Short-term S/Credit Total
Tanga 34.5 17.0 3.6 - 55.1Tabora 0.8 42.2 - - 43.0Kilimanjaro 14.9 4.6 - 12.5 32.0Mbeya 5.8 2.1 0.3 - 8.3Dodoma - 4.3 - 2.9 7.2Pwani 1.9 1.3 - 0.1 3.4Ruvuma - - - - -
TOTAL 1,458.6 570.9 79.4 45.5 2,154.4
Table 5: STOCK OF FDI BY SECTOR - 1998
Millions of USD
Sector Equity Long- Short- S/Credit Totalterm term
Mining & Quarry 473.1 81.3 12.1 1.7 568.2Manufacturing 334.5 57.4 6.9 8.3 407.1Wholesale, Retail Trade, Catering &Accommodation Services 187.3 46.2 8.6 9.4 251.5Financing, Insurance, Real Estate& Business Services 99.1 32.4 - 1 132.5Agriculture, hunting & forestry 52.97 49.47 1.91 1 105.34Construction 38.45 45.64 3.34 5.59 93.02Transport, Storage &Communication 36 1.9 6.7 3.2 47.7Electricity, Gas &Water -6 35.3 0 0 35.36Community, Social & Personal Services1.06 0.34 0 0 1.4Others 22.61 2.86 0 3.89 29.36
TOTAL 1,245.00 352.8 39.6 34.1 1,671.50
Table 6: STOCK OF FDI BY SECTOR - 1999Millions of USD
Sector Equity Long- Short- S/Credit Totalterm term
Mining & Quarry 583 265.5 14.2 2.1 864.8Manufacturing 363.5 67.8 31.6 15.4 478.2Wholesale, Retail Trade,Catering & Accommodation Services 215.7 5- 15.3 13.2 294.1Financing, Insurance, Real Estate &Business Services 112.7 32.8 - 0.6 146.1Agriculture, hunting & forestry 67.9 58.8 4 4.6 135.3Construction 46 51.3 7.9 3.3 108.5Transport, Storage & Communication 41.9 5.1 6.3 5.5 58.7Electricity, Gas & Water 0.1 35.3 - - 35.4Community, Social & Personal Services 1.4 0.5 - - 1.8Others 26.5 3.9 0.2 0.9 31.5TOTAL 1,458.60 570.9 79.4 45.5 2,154.40
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Table 7: STOCK OF NON-FDI LIABILITIES BY COUNTRY OF ORIGIN-1998Millions of USD
Country Portfolio Long-Term Short-Term S/Credits Total
Malaysia - 83.8 - - 83.8USA 16.7 14.5 6.0 3.9 41.1Australia - 16.9 1.2 5.0 23.0Bermuda 0.1 17.0 0.4 5.0 22.5South Africa - 4.4 - 17.8 22.2Kenya 1.1 5.6 11.0 0.9 18.6UK 1.5 6.6 6.4 1.3 15.8Switzerland 0.1 1.8 4.2 - 6.1Mauritius 0.1 0.8 5.0 - 5.9France 2.4 2.5 - - 4.9IDA - 4.8 - - 4.8Germany 0.1 - 2.9 0.9 3.9Netherlands 3.6 0.2 - - 3.8IFC - 3.2 - - 3.2Norway - 2.3 - - 2.3Italy - - - 2.3 2.3Belgium - - - 1.8 1.8Channel Islands - 1.4 - - 1.4EADB - 1.3 - - 1.3Canada 0.1 0.1 - 0.7 0.9Isle of Man - - 0.9 - 0.9Indonesia - - - 0.6 0.6India 0.4 - - 0.1 0.5Swaziland - - - 0.4 0.4Denmark - - - 0.2 0.2Japan - - - 0.2 0.2Greece - - - 0.1 0.1Sudan - - - 0.1 0.1Sweden - - - - -Other 0.7 3.5 12.8 6.2 23.2
TOTAL 26.9 170.8 50.9 47.3 295.9
Table 8: STOCK OF NON-FDI LIABILITIES BY COUNTRY OF ORIGIN - 1999Millions of USD
Country Portfolio Long-Term Short-Term S/Credits TOTAL
Malaysia - 104.1 - 7.6 111.7UK 1.7 62.9 6.3 3.2 74.1Germany 0.1 - 45.7 0.2 46.0
USA 16.8 12.8 9.0 6.5 45.1Australia - 20.2 7.0 7.8 35.0
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Country Portfolio Long- Short- S/Credits TOTALTerm Term
Mauritius 0.2 0.8 25.0 - 26.0Bermuda 0.1 19.1 0.2 4.3 23.7South Africa - 6.3 - 6.0 12.3Kenya 1.2 1.3 6.1 2.0 10.6Switzerland 0.1 2.2 4.9 - 7.2France 2.3 4.3 - - 6.6Netherlands 4.2 0.8 0.1 0.1 5.3Saudi-Arabia - - 5.2 - 5.2PTA Bank - - 5.1 - 5.1IFC - 4.8 0.2 - 5.0IDA - 5.0 - - 5.0Italy - - - 4.8 4.8Isle of Man - 0.9 1.3 - 2.2Norway - 2.1 - - 2.1Channel Islands - 1.3 - 0.2 1.4Belgium - - - 1.3 1.3Indonesia - - - 0.8 0.8Canada 0.2 0.1 - 0.3 0.7Zambia - 0.4 - - 0.4India 0.2 - - 0.1 0.3Japan - 0.2 - - 0.2Sudan - - - 0.2 0.2Denmark - 0.2 - - 0.2Zimbabwe - - - - -Other 0.5 1.7 15.5 4.6 22.4
TOTAL 27.6 251.3 131.7 50.2 460.9
Table 9: STOCK OF NON-FDI LIABILITIES BY REGION - 1998Millions of USD
Region Portfolio Long- Short- Supplier-Term Term Credits Total
Dar es Salaam 25.8 133.9 24.2 24.2 208.0Tabora - 16.9 1.2 5.0 23.0Arusha 0.6 6.8 5.6 8.1 21.1Shinyanga - 4.3 4.7 5.0 14.0Kilimanjaro 0.4 9.4 - 9.8Morogoro 0.1 - 5.0 3.0 8.1Mara - 3.3 - 1.0 4.3Mwanza 0.4 2.8 - 1.1 4.3Iringa - 2.3 - - 2.4Tanga - 0.1 0.9 - 1.0Ruvuma - - - - -
TOTAL 26.9 170.8 50.9 47.3 295.9
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Table 10: STOCK OF NON-FDI LIABILITIES BY REGION - 1999
Millions of USD
Region Portfolio Long-Term Short-Term S/Credits TOTAL
Dar es Salaam 26.3 159.4 33.2 2- 238.8Arusha 1.0 6.4 48.3 8.5 64.3Mwanza 0.2 56.2 - 0.9 57.3Tabora - 20.1 7.0 7.7 34.8Morogoro 0.1 - 25.0 5.0 30.1Shinyanga - - 6.7 4.3 11.0Kilimanjaro - 0.2 10.4 0.3 10.9Mara - 5.7 - 2.5 8.2Iringa - 2.1 - 1.1 3.1Tanga - 1.1 1.2 - 2.3Ruvuma - 0.1 - - 0.1
TOTAL 27.6 251.3 131.8 50.2 460.9
Table 11: STOCK OF NON-FDI LIABILITIES BY SECTOR - 1998Millions of USD
Sector Portfolio Long- Short-Equity Term Term S/Credits TOTAL
Electricity, Gas & Water - 84.0 - - 84.0
Manufacturing 23.0 30.4 13.6 15.0 82.0
Wholesale, Retail Trade,
Catering & Accommodation Services 1.4 20.8 18.7 3.6 44.6
Mining & Quarry - 20.2 1.2 1- 31.3
Transport, Storage & Communication - 8.1 - 15.0 23.1
Construction 0.1 1.6 12.2 3.3 17.2
Agriculture, hunting & forestry 0.6 5.6 4.7 0.3 11.2
Financing, Insurance & Business Services 1.8 - 0.5 - 2.3
Community, Social &Personal Services - 0.1 - - 0.1
Other 0.1 - - 0.1 0.3
TOTAL 26.9 170.8 50.9 47.3 295.9
73
Table 12: STOCK OF NON-FDI LIABILITIES BY SECTOR - 1999
Millions of USD
Sector Portfolio Long- Short- S/Equity Term Term Credits TOTAL
Manufacturing 22.3 34.7 35.1 18.8 110.9Mining & Quarry 0.1 74.2 7.0 12.1 93.3Electricity, Gas & Water - 85.9 - - 85.9Wholesale, Retail Trade, Catering &Accommodation Services 1.5 23.5 28.9 2.8 56.7Transport, Storage & Communication - 2- 0.2 9.2 29.4Construction 0.1 7.4 10.5 6.3 24.4Agriculture, hunting & forestry 0.9 5.3 6.9 0.2 13.4Financing, Insurance & Business Services 2.4 - 1.1 - 3.5Community, Social & Personal Services - 0.2 - - 0.2Other 0.3 0.2 42.0 0.8 43.3
TOTAL 27.6 251.3 131.8 50.2 460.9
74
APPENDIX 3: PERCEPTION CHARTS BY SUB-FACTORS
Macroeconomic Factors
75
Fiscal Policy
0%10%20%30%40%
1 2 3 4 5 6 7
Per
centa
ge
of
Inves
tors
Perception (1=Very Positive to 7= Very Negative
Start-Up Now = Year 2000
Monetary Policy
0%
10%
20%
30%
40%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
State Intervention in Private business
0%
10%
20%
30%
40%
50%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Regulatory Framework
0 %5 %
10 %15%20%25%30%35%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
0%
10%
20%
30%
40%
1 2 3 4 5 6 7Perception (1=Very positive to 7= Very Negative
Per
cent
age
of I
nves
tors
Start-Up Now=Year 2000
Government Stability
0%5%
10%15%20%25%30%
1 2 3 4 5 6 7Perc
enta
ge o
f In
vest
ors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7=Very Negative)
Composition of Government Spending
Business Envirnment Stability
0%5%
10%15%20%25%
30%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very Negative)
Start-Up Now = Year 2000
Macroeconomic Factors (Cont.)
76
0%10%20%30%40%50%60%
1 2 3 4 5 6 7Perc
enta
ge o
f In
vest
ors
Start-Up Now = Year 2000
Environment Policy
Perception (1=Very Positive to 7=Very Negative)
Foreign Policy
0%
10%
20%
30%
40%
50%
60%
Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
0%5%
10%15%20%25%30%35%
1 2 3 4 5 6 7Per
cent
age
of I
nves
tors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
Financial Sector Stability
Infrastructures and Services Factors
77
0%
5%
10%
15%
20%
25%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Inland Transport
Water Supply
0%5%
10%15%20%25%30%35%40%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Postal Services
0%
10%
20%
30%
40%
50%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Perception (1=Very Positive to 7=Very Negative)
0%
10%
20%
30%
40%
50%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Start-Up Now = Year 2000
Access to Sea Ports
Air Ports and Air Transportation
0%
10%20%
30%
40%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7=Very Negative)
Electricity Supply
0%
5%
10%
15%
20%
25%
1 2 3 4 5 6 7Per
cent
age
of I
nves
tors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative)
Infrastructures and Services Factors (Cont.)
78
Telecommunicatios
0%
5%
10%
15%
20%
25%
1 2 3 4 5 6 7Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Custom Services
0%5%
10%15%
20%25%30%
1 2 3 4 5 6 7Per
cent
age
of I
nves
tors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative)
Immigration Facilities
0%5%
10%15%20%25%30%35%40%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Municipal Services
0%5%
10%15%20%25%30%35%40%45%50%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Banking Services
0%5%
10%15%20%25%30%35%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7=VeryNegative)
Start-Up Now = Year 2000
Credit Rating Agencies
0%
20%
40%
60%
80%
1 2 3 4 5 6 7
Per
cen
tag
e o
f In
ves
tors
Perception (1=Very Positive to 7=Very Negative)
Start-Up Now = Year 2000
Financial Factors
79
Inflation
0%5%
10%15%20%25%
30%35%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Availability of Business Finance/Credit
0%
10%
20%
30%
40%
50%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative)
Interest Rates
0%
10%
20%
30%
40%
50%
1 2 3 4 5 6 7Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Depreciation of the DomesticCurrency
Per
cent
age
of I
nves
tors
0%
10%
20%
30%
1 2 3 4 5 6 7Perception (1=Very Positive to
7=Very NegativeStart-Up Now = Year 2000
National Payment System
0%
10%
20%
30%
40%
50%
60%
70%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Exchange Control
0%5%
10%15%20%25%30%35%40%45%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative
Governence Factors
80
Trade Policy
0%10%20%30%40%50%60%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7=Very NegativeStart-Up Now = Year 2000
Regional Trade Integration
0%10%20%30%40%50%60%70%
1 2 3 4 5 6 7Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Investment Incentives
0%5%
10%15%20%25%30%35%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Bureaucracy
0%
5%
10%
15%
20%
25%
30%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
veto
rs
Start-Up Now = Year 2000
Perception (1=Very Positive to 7=Very Negative)
Tax Collection Efficiency
0%5%
10%15%20%25%30%35%
1 2 3 4 5 6 7
Perc
enta
ge o
f Inv
esto
rs
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Effectiveness of the Legal System
0%5%
10%15%20%25%30%35%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7= Very Negative)
Start-Up Now = Year 2000
Governence Factors (Cont.)
81
Land Law and Administration
0%
10%
20%
30%
40%
50%
1 2 3 4 5 6 7Perc
enta
ge o
f Inv
esto
rs
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Speed of Decision Making (BOT)
0%
10%
20%
30%
40%
50%
60%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Speed of Decision Making (Min. of Commerce & Trade)
1 2 3 4 5 6 70%
10%20%30%40%50%60%
Perc
enta
ge o
f In
veso
rs
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Speed of Decision Making (Immigration)
0%5%
10%15%20%25%30%35%
1 2 3 4 5 6 7
Perc
enta
ge o
f nv
esto
rs
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Speed of Decision Making (TRA)
0%5%
10%15%20%25%30%35%
1 2 3 4 5 6 7Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Speed of Decision Making (TIC)
0%5%
10%15%20%25%30%35%40%
1 2 3 4 5 6 7
Perc
enta
ge o
f Inv
esto
rs
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Labour Factors
82
Labour Legislation
0%10%20%30%40%50%60%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Restrictions regarding Bringing in Expertriates
0%
10%
20%
30%
40%
50%
1 2 3 4 5 6 7Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Labour Stability
0%5%
10%15%20%25%30%35%40%45%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Minimum Wage Levels
0%10%20%30%40%50%60%70%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Availability of Highly Educated Employees
0%
5%
10%
15%
20%
25%
30%
1 2 3 4 5 6 7
Perc
enta
ge o
f In
vest
ors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative)
Availability of Skilled Employees
0%
5%
10%
15%
20%
25%
1 2 3 4 5 6 7Per
cent
age
of I
nves
tors
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative)
Labour Factors (Cont.)
83
HIV/ AIDS
0%10%20%30%40%50%60%70%80%
1 2 3 4 5 6 7Per
cent
age
of n
vest
ors
Perception (1=Very Positive to 7=Very NegativeStart-Up Now = Year 2000
Diverse Factors
0%
10%
20%
30%
40%
1 2 3 4 5 6 7
Per
cent
age
of I
nves
tors
Corruption
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Internal Security
0%5%
10%15%20%25%30%35%
1 2 3 4 5 6 7Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Domestic Political Scenario
0%10%20%30%40%50%
1 2 3 4 5 6 7Perc
enta
ge o
f Inv
esto
rs
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative)
Regional Political Scenario
0%10%20%30%40%50%60%
1 2 3 4 5 6 7Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very NegativeStart-Up Now = Year 2000
Diverse Factors (Cont.)
84
Domestic Economic Situation
0%5%
10%15%20%25%30%
1 2 3 4 5 6 7 Pe
rcen
tage
of
Inve
stor
s
Start-Up Now = Year 2000
Perception (1=Very Positive to 7= Very Negative)
Global Economic Situation
0%5%
10%15%20%25%30%35%40%
1 2 3 4 5 6 7Perc
enta
ge o
f In
vest
ors
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Electricity Tariff
0%
5%
10%
15%
20%
25%
30%
1 2 3 4 5 6 7
Perc
enta
ge o
f Inv
esto
rs
Perception (1=Very Positive to 7=Very Negative)
Start-Up Now = Year 2000
Water Tariff
0%10%20%30%40%50%60%
1 2 3 4 5 6 7
Per
cent
age
of In
vest
ors
Perception (1=Very Positive to 7=Very Negative)
Start-Up Now = Year 2000
Market Expansion
1
40%
35%
30%
25%
20%
15%
10%
5%
0%2 3 4 5 6 7
Perception (1=Very Positive to 7=Very Negative
Start-Up Now = Year 2000
Per
cent
age
of I
nves
tors
Zanzibar Route
Perception (1=Very Positive to 7=Very Negative)
Start-Up Now = Year 2000
0%10%20%30%40%50%60%70%80%
1 2 3 4 5 6 7Perc
enta
ge o
f Inv
esto
rs
APPENDIX 4
Questionnaire on Investments with foreign Assets and Liabilities - Quantitative
Confidential
National Bureau of Statistics Bank of Tanzania Tanzania InvestmentCentreP.O.Box 796 P. O. BOX 2939 P. O. Box 938DAR ES SALAAM DAR ES SALAAM DAR ES SALAAMTel: (255)-51-122722-3 Tel: (255)-51- 110946-52, Tel: (255)-51-116328-32
(255)-51-111634 (255)-51-110977-79 (255)-51-34200Fax: (255)-51-112352/135601 Fax: (255-51) 112573/113325 Fax: (255-51) 118253
June 5th 2000
Dear Investor,
CENSUS OF INVESTMENTS WITH FOREIGN ASSETS AND LIABILITIES
FORM TYPE : BOP/1/2000COMPANY REFERENCE NUMBER :…………….......….. (for internal use only)REPORTING PERIOD : Year-ends 1998 and 1999 for Stocks; Calendar Year 1999 for Flows.DUE DATE FOR RETURN: Thursday 6th July 2000
PAR T A: GENERAL INFORMA TION
Date completed:
Company name:
Name and position of person completing this return:
Company Address:
Tel: Fax: E-mail:
Please give details of an alternative person whom we may contact in case wehave any questions.
Date of Establishment Date of Commencing Operations
____/ _____/ _________ _____/ _____/ _________
85
PLEASE READ THIS FIRST
Purpose of surveyThis form collects information to be used in the compilation and classification of Tanzaniabalance of payments statistics and international investment position. This information willbe used by the Bank of Tanzania, Tanzania Investment centre, National Bureau of statisticsand the Government in national and international economic policy formulation, and inanalyses of international transactions and their relationships to domestic economic activ-ity. By quantifying inward and outward investment we also wish to assess confidence inthe economy, and use your feedback to design policies to encourage private investment.Your co-operation is therefore vital to this effort.
ConfidentialityInformation will be used only for statistical purposes, and be published in aggregated form.Data relating to individual organisations will not be made available to anybody outside theBank of Tanzania, Tanzania Investment centre or National Bureau of Statistics. Govern-ment officials failing to comply with confidentiality clause face severe penalties includ-ing summary dismissal. This is in accordance with Bank of Tanzania Act, 1995, Tanza-nia Investment Act, 1997, and the Act establishing National Bureau of Statistics.
Collection and submission of dataCompletion of this form is compulsory under section 6(b) of the Tanzania Investment ActNo. 26 of 1997, Statistical ordinance No. 33 of 1961 establishing the National Bureau ofStatistics and section 47 sub-sections (1), (2) and (4), and section 49 of Bank of TanzaniaAct of 1995. Failure to comply could result in legal and/or administrative action againstnon-compliance. Please note the due date for return, given at the top of this form, and keepa copy for your reference.
HelpTo help us, please attach a copy of your latest annual financial statements to your com-pleted form. If you need help in completing, or explanation of terms or questions, pleaserefer to the notes attached. Alternatively, please contact Mr S. Mrutu of BOT – telephone119312, Mrs N. Senzia of TIC - telephone 116328 and Mr M. Chimtembo of NBS-telephone 122722.
THANK YOU IN ADVANCE FOR YOUR COOPERATION.
86
PLEASE READ THE FOLLOWING NOTES & INSTRUCTIONS BEFORE COMPLETING THEFORM.INSTRUCTIONS AND DEFINITIONS
Reporting basisThis form requests information and statistics on foreign investment in your enterprise (or group of com-panies) and on investment in foreign companies by your enterprise (or group). Where possible, pleaseuse figures from your accounts. Unaudited data are perfectly acceptable for this purpose. Some datamay not be readily available from your accounts. In these cases, please provide careful estimates. Wewould rather have your best estimate than nothing!
If your business has more than one branch or enterprise in Tanzania, consolidated data should be submit-ted on a single form. If your business is a member of a group of related companies, a single form shouldbe completed in respect of all related companies in your group in Tanzania.
Please do not leave blank spaces even where the question does not apply to you. So we know we do notneed to follow up with you,, please enter “n/a ” in the appropriate box, or at the start of the question.
Definitions
1. Residents and Non-residents
A resident is any individual, enterprise, or other organisation ordinarily residing in Tanzania. In otherwords, its centre of economic activity is in Tanzania. All other entities are regarded as non-residents. Forstatistical purposes, an individual who lives in Tanzania for more than a year is considered to be aresident of Tanzania, regardless of the individual’s citizenship or nationality. An enterprise incorporatedin Tanzania is considered a resident of Tanzania irrespective of the domicile of the owners of the enterprise.A branch of a foreign company operating in Tanzania for more than a year is treated as a resident ofTanzania. Balance of Payments (BOP) data are concerned with transactions between residents and non-residents, NOT with the currency of transaction. Typically, a transaction in foreign currency betweentwo residents of Tanzania would therefore not be captured in the BOP.
2. Financial instruments
a. Equity means shares in companies, and equivalent ownership interest in unincorporated enterprises.Direct Equity Investment denotes ownership of 10% or more of the ordinary shares, voting power, orequivalent in an enterprise, by someone resident in another economy.
b. Non-equity means all other financial instruments including loans, trade credit and supplier credit (forgoods and services), bonds
, debentures, notes, money market instruments, shareholder and inter-company
loans arrears of debt or interest, and deposits.
3. (Estimated) Market value
This form asks you to submit market values. If shares in your company (or foreign companies in whichyour company has invested) are traded on a stock exchange or other organised market, the 1999 and1998 year-end value of those shares should be used as the basis for the “(Estimated) market value”.
If no stock market price or other market value is available for shares in your company (or foreign companiesin which your company has invested), please use the best available proxy. Where possible, please use netasset values (or shareholders’ funds). Alternatively, use a recent transaction price, a directors’ valuation,valuation by your auditor, or valuation by analogy.
4. Transactions
Transactions (flows) in foreign currency should be converted to Tanzania Shillings (TZS) at the midpoint of the buying and selling rate applying at the date of the transactions. Levels (stocks) should betranslated at the midpoint of the buying and selling rates applying to end-1998 and end-1999 as appropri-ate.
5. Countries
In most questions on this form (ie, numbers 3-5, and 7-14), you are asked to disaggregate information onyour assets and liabilities by country. In each of these questions you are given 6 country boxes. The firstthree boxes are for you to enter information relating to up to three main countries, judged according tosize. The fourth box is for you to provide a sum of information for all the other countries, so we canderive the total for all foreign investors. The fifth box is for all Tanzanian shareholders combined so thatwe can derive total investment in your enterprise (box 6).
87
1. INDUSTRIAL AND REGIONAL CLASSIFICATION
Please tick the main area(s) of economic activity, and the location of your enterprise and itssubsidiaries in Tanzania, giving brief information on major activities and/or products, basedon gross receipts.
Industrial Classification Summary of main Location (s) in which activities your activities are
located
1. Agriculture, hunting,forestry and fishing
2. Mining and quarrying
3. Manufacturing
3a. Agro-industry
3b. Food and beverages
3c. Machinery, motors and equipment
3d. Chemicals and petroleum
3e. Other manufacturing (specify)
4. Electricity, gas and water
5. Construction
6. Wholesale & retail trade, & catering & accommodation services
6a. Accommodation and tourism
6b. Wholesale, retail and catering
7. Transport, storage & communication
7a. Transport and storage
7b. Communication
8. Financing, insurance, real estate, & business services
8a. Financing, insurance and business services
8b. Real estate
9. Community, social and personalservices
0. Activities not adequately defined(specify)
88
2. SUBSIDIARIES
For this survey, please report if possible, on a consolidated basis including all of yourTanzania subsidiaries. Please list any subsidiaries (or sub-subsidiaries) your enterprise hasin Tanzania, and indicate whether their international transactions are included on this form.
Name of subsidiary Are its international transactionsincluded in this form? (YES/NO)
PART B: FOREIGN INVESTMENT IN THIS ENTERPRISES
Please complete this section if your enterprise or any of its subsidiaries in Tanzaniahad non-resident shareholders or any other liabilities to non-residents during 1999.
3. FOREIGN DIRECT EQUITY INVESTMENT IN YOUR COMPANY
Please list the name, country of residence and ownership stake of each non-resident company,or other non-resident individual or organisation, owning 10% or more of the total equityin your company. Please see Note 1,3 and 5 on page 3 for guidelines on residence, marketvalue and country of residence respectively.
3(a) AS AT END-1998
Name of foreign direct investor/ Country of Ownership stakeInstitution(eg ADB) residence (please at end 1998(shareholder/owner) enter below) (shareholding)
(Estimated) Percent of total Market value voting rights
1.2.3.4. All other Foreign investors5. All Tanzanian Investors combined TanzaniaTotal
Please report all values in thousands of (TZS or USD).PLEASE TICK THR CURRENT YOU USE IN COMPLETING THIS FORM
USD TZS
89
3(b) AS AT END-1999
Name of foreign direct investor/ Country of Ownership stakeInstitution(eg ADB) residence at end 1999(shareholder/owner) (please enter below) (shareholding)
(Estimated) Percent of totalMarket value voting rights
1.2.3.4. All other Foreign investors5. All Tanzanian Investors combined TanzaniaTotal
4. FOREIGN PORTFOLIO EQUITY INVESTMENT IN YOUR COMPANY
For individual equity holdings by non-resident companies, other non-resident individualsor organisations of less than 10% of total equity in your company, please group holdingsand ownership stake together by investors’ country of residence (Please see Note 1,3 and5 on page 3 for guidelines on residence, market value and country of residence respec-tively)
4(a) AS AT END-1998
Country of residence/Institution Ownership stake (shareholding)(eg ADB) (please enter below)
(Estimated) Percent of total votingMarket value rights
1.2.3.4 All other Foreign Investors combined5 All Tanzanian investors combined
4(b) AS AT END-1999
Country of residence/ Institution(eg ADB) Ownership stake (shareholding)(please enter below)
(Estimated) Percent of totalMarket value voting rights
1.2.3.4. All other Foreign Investors combined5. All Tanzanian investors combined
90
5. NEW EQUITY INVESTMENT BY (SHARES ISSUED TO) NON-RESIDENTSPlease calculate (giving totals by country of non-resident) for your enterprises andsubsidiaries in Tanzania:
• amounts received from non-residents (in cash or otherwise) for new shares (or othernew ownership stakes) issued to them in calendar year 1999;
• amounts paid to non-residents (in cash or otherwise) for redemption or acquisitionof shares (ownership stakes) in your enterprise in calendar year 1999:
Enter country name 1. 2. 3. 4. All others(see Note 5) combined
Amounts received
Amounts paid
6. REINVESTED EARNINGS ATTRIBUTABLE TO FOREIGN DIRECT INVESTMENT FOR YOUR COMPANY
Please calculate total retained earnings attributable to Foreign Direct Investment in calendaryear 1999 for your enterprises and subsidiaries in Tanzania, by working through thefollowing table.
NOTE: all businesses with foreign assets and liabilities should complete this section.
1. Operating profit earned (before taxes on profit)
2. Taxes on profit
3(a). Dividends paid and profits remitted to non-residents (FDI and Portfolioinvestors combined)
3(b). Dividends paid and profits remitted to residents
4. Dividends and profits remitted to foreign direct investors only
5. Total retained earningsPlease calculate as: Item 1 – 2 – 3(a) –3(b)
6. Retained earnings attributable to foreign direct investors(Eg, if a company is 50% owned by foreign direct investors, then Item 6 wouldbe 50% of Item 5).
7. PROFITS REMITTED AND DIVIDENDS PAID TO NON-RESIDENTS
Please state total profits remitted and dividends paid to non-resident individuals ororganisations, classified by country for the calendar year 1999. Please note: if youraccounting year is not the calendar year please provide your best estimates based on,for example, aggregating quarterly data.
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Country (enter names – Profits remitted in 1999 Dividends paid in 1999see Note 5)
1.
2.3.4. All others combined
8. FOREIGN NON-EQUITY LIABILITIES TO NON-RESIDENTS
Please provide the following information by country, in the tables below (Please see Note2b,4 and 5 on page 3 for guidelines on non-equity, transactions, and country of resi-dence respectively)
• total stocks by country, for end-1998 and end-1999, of non-equity liabilities to non-resident organisations or individuals;
• transactions during 1999.• interest paid on the above during the calendar year 1999;Please do not include domestic (resident to resident) borrowing in foreign currency orTanzania Shillings.
For banks completing this form: Please do not include the deposits held by non-resi-dent parent companies or non-resident unrelated companies in the tables below.
8(a) STOCKS FOR END 1998
LIABILITY TOTAL (Stocks) FOR END 1998
Long-term foreign borrowing (original maturity greater than 12 months)
Enter country names 1. 2. 3. 4. All others/Institution(eg ADB) combined
Shareholder & Inter- Company borrowing
Other long-termBorrowing with Unrelated companies
Short-term foreign borrowing (original maturity 12 months or less)
Enter country names / 1. 2. 3. 4. All othersInstitution(eg ADB) combined
Shareholder and Inter- Company borrowing
Supplier credits fromRelated companies
Supplier credits from Unrelated companies
Other short-term Financing
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8(b) STOCKS FOR END 1999
LIABILITY TOTAL (Stocks) FOR END 1999
Long-term foreign borrowing (original maturity greater than 12 months)
Enter country names 1. 2. 3. 4. All others/Institution (eg ADB) combined
Shareholder & Inter- Company borrowing
Other long-term Borrowing with Unrelated companies
Short-term foreign borrowing (original maturity 12 months or less)
Enter country names / 1. 2. 3. 4. All othersInstitution(eg ADB) combined
Shareholder and Inter- Company borrowing
Supplier credits from Related companies
Supplier credits from Unrelated companies
Other short-term Financing
8(c ) TRANSACTIONS DURING 1999
LIABILITY TRANSACTIONS DURING 1999
Long-term foreign borrowing (original maturity greater than 12 months)
Enter country names / 1. 2. 3. 4. All othersInstitution(eg ADB) combined
Shareholder & Inter- Company borrowing
Other long-term Borrowing with Unrelated companies
Short-term foreign borrowing (original maturity 12 months or less)
Enter country names / 1. 2. 3. 4. All othersInstitution(eg ADB) combinedShareholder and Inter-
Company borrowing
Supplier credits from Related companiesSupplier credits from
Unrelated companies
Other short-term Financing
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8 (d) INTEREST PAID IN 1999
LIABILITY INTEREST PAID IN 1999
Long-term foreign borrowing (original maturity greater than 12 months)
Enter country names / 1. 2. 3. 4. All othersInstitution(eg ADB) combined
Shareholder & Inter- Company borrowing
Other long-term Borrowing with Unrelated companies
Short-term foreign borrowing (original maturity 12 months or less)
Enter country names / 1. 2. 3. 4. All othersInstitution(eg ADB) combined
Shareholder and Inter- Company borrowing
Supplier credits from Related companiesSupplier credits from
Unrelated companiesOther short-term
Financing
PART C: INVESTMENT ABROAD BY THIS ENTERPRISE
Please complete this section if your enterprise or any of its subsidiaries in Tanzania hadinvestments in (or loans to) foreign enterprises during 1999.
9. FOREIGN DIRECT EQUITY INVESTMENT IN NON-RESIDENT ENTER-PRISES
Please list the name, country of location and ownership stake of each non-resident com-pany in which your company owns 10% or more of the equity, and any non-residentbranches of your company Please see Note ,3 and 5 on page 3 for guidelines on marketvalue and country of residence respectively.
9(a) AS AT END-1998
Name of non-resident Country of Ownership stake at end-1998company location (please (shareholding)
enter below)(Estimated) Percent of totalMarket value voting rights
1.2.3.4. All others combined
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9(b) AS AT END-1999
Name of foreign company Country of Ownership stake at end-1999location (please (shareholding)enter below)
(Estimated) Percent of totalMarket value voting rights
1.2.3.4. All others combined
10. FOREIGN PORTFOLIO EQUITY INVESTMENT IN NON-RESIDENT ENTER-PRISES
For your company’s individual equity holdings in non-resident companies amounting toless than 10% of total equity in the foreign company, please group holdings together bycountry (where these companies are located) and show total investment Please see Note 3and 5 on page 3 for guidelines on market value and country of residence respectively.
AS AT END-1998, AND END-1999
Total investment
Country of location Total (estimated) Total (estimated) (of companies) market value at market value at
End-1998 End-1999
1.2.3.4. All others combined
11. PROFITS AND DIVIDENDS RECEIVED FROM NON-RESIDENTS AND RE-TAINED EARNINGS
Please state total profits and dividends received from non-resident companies and retainedearnings classified by country, for the calendar year 1999. Please note: If your accountingyear is not the calendar year please provide your best estimates based on, for example,aggregating quarterly data.
Country (enter Profits earned in Dividends received Reinvested Earn-below – see Note 5) 1999 in 1999 ings for 1999
1.
2.3.
4. All others combined
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12. FOREIGN NON-EQUITY ASSETS (CLAIMS ON NON-RESIDENTS)
Please provide the following information by country (directly negotiated with foreign bor-rowers), in the tables below (please turn to page 3 and read Note 2b for definitions of nonequity, Note 4 on transactions, and Note 5 on country):• transactions during 1999.• interest received during the calendar year 1999;
Please do not include foreign currency (or other resident-to-resident ) loans from Tanza-nia institutions.
For banks completing this form:• Please ensure that you include lending (short or long term) to parent and non-
parent foreign direct investors or other unrelated non-resident companies in thetables below.
• Please note that this question overlaps slightly with the more detailed Question 2on the Annual Survey for Banks, which is for analytical rather than BOP datacompilation purposes. You are kindly requested therefore, to complete both ques-tions.
12 (a) TRANSACTIONS DURING 1999
ASSET TRANSACTIONS DURING 1999
Enter country names 1. 2. 3. 4. All otherscombined
Long-term foreign loans (original maturity greater than 12 months)
Shareholder & Inter- Company loansOther long-term
Loans to UnrelatedCompanies
Short-term foreign loans (original maturity 12 months or less)
Shareholder and Inter- Company loansSupplier credits with
Related companiesSupplier credits with
Unrelated companiesOther short-term
Financing
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12(b) INTEREST RECEIVED IN 1999
ASSET INTEREST RECEIVED IN 1999
Enter country names 1. 2. 3. 4. All otherscombined
Long-term foreign loans (original maturity greater than 12 months)
Shareholder & Inter- Company loans
Other long-term Loans to UnrelatedCompanies
Short-term foreign loans (original maturity 12 months or less)
Shareholder and Inter- Company loansSupplier credits with
Related companiesSupplier credits with
Unrelated companiesOther short-term
Financing
PART D: HISTORICAL DATA ON FOREIGN INVESTMENTS IN THIS ENTER-PRISE
13. If available, please provide historical data (at year-end) of foreign companies/individuals who own 10% or more equity investment in your enterprise during theperiod 1993-97
Name of foreign investor Country of EQUITY HELD AT YEAR ENDResidence
‘93 ‘94 ‘95 ‘96 ’971.2.3.All other foreign investorsAll Tanz. Invest. Combined
14. If available, please provide historical data (at year-end) on foreign companies/individuals who owns less than 10% equity investment in your company during theperiod 1993-97.
Name of foreign investor Country of EQUITY HELD AT YEAR ENDResidence
‘93 ‘94 ‘95 ‘96 ’97
1.2.3.All other foreign investorsAll Tanz. Invest. Combined
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15. Please state total profits remitted to foreign individuals or organisations, classi-fied by country for the calendar year 1993-97 (Please note: If your accounting year isnot the calendar year please provide your best estimates based on, for example,aggregating quarterly data.)
Country of Residence DIVIDENDS PAID DURING THE YEAR
‘93 ‘94 ‘95 ‘96 ’971.2.3.All other foreign investorsAll Tanz. Invest. Combined
16. Please state total dividends paid to foreign individuals or organisations, classi-fied by country for the calendar year 1993-97 (Please note: If your accounting yearis not the calendar year please provide your best estimates based on, for example,aggregating quarterly data.)
Country of Residence PROFIT REMITTED DURING THE YEAR
‘93 ‘94 ‘95 ‘96 ’971.2.3.All other foreign investorsAll Tanz. Invest. Combined
17. Please give the total retained earnings in calendar year 1997 for your enter-prises and subsidiaries in Tanzania.
Country of Residence RETAINED EARNINGS
‘93 ‘94 ‘95 ‘96 ’971.2.3.All other foreign investorsAll Tanz. Invest. Combined
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18. If data is available, please give aggregate totals for 1993-97, of non-equity liabilitiesto non-resident organisations or individuals.
Total as at year end
Liability 1993 1994 1995 1996 1997Long-term foreign loans (original maturity greater than 12 months)
Shareholder and Inter-company loansOther long-term loansShort-term foreign financing (original maturity of 12 months or less)
Shareholder and Inter-company loansSupplier credits from
Related companies Supplier credits from Unrelated companies
Other short-term Financing
19. For 1993-97, and if available, please indicate interest paid for each year:
Interest paid
Liability 1993 1994 1995 1996 1997Long-term foreign loans (original maturity greater than 12 months)
Shareholder andInter-company loansOther long-term loansShort-term foreign financing (original maturity of 12 months or less)
Shareholder and Inter-company loansSupplier credits from
Related companies Supplier credits from Unrelated companies Other short-term
Financing
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PART E: SUPPLEMENTARY QUESTIONS FOR BANKS AND OTHER FINAN-CIAL INSTITUTIONS
PLEASE READ THIS FIRSTPurpose of surveyThis form collects information to be used by the Government of Tanzania to improve na-tional and international economic policy formulation and for investment promotion pur-poses. As such, it is a means to improve dialogue between government and the privatesector. It complements the Assets and Liabilities Survey (Parts A, B, and C above)
ConfidentialityInformation will be used only for statistical and policy making purposes, and be publishedin aggregated form. Data relating to individual organisations will not be made available toanybody outside the Bank of Tanzania, Tanzania Investment Centre and National Bureauof Statistics. Any official of these institutions failing to comply with confidentiality facestern disciplinary actions including summary dismissal and in severe cases prosecutionwhich may lead to imprisonment.
Collection and submission of dataCompletion of this form is compulsory under section 47 sub-sections (1), (2) and (4), andsection 49 of Bank of Tanzania Act of 1995. Failure to comply could result in legal and/oradministrative action against non compliance. Please note the due date for return, given atthe top of this form, and keep a copy for your reference.
HelpIf you need help completing the forms, or any explanation of terms or questions on this partof the questionnaire, please contact Mr C. Assey or Mr S. Mrutu of Bank of Tanzania,telephone 119312.
INSTRUCTIONS AND DEFINITIONSReporting basis
This form requests information and statistics on the stock and inflow of private capital(both short term and long term) through your bank/institution (or group of companies) andon private lending abroad through your bank/institution (or group). Where possible, pleaseuse figures from your accounts. Unaudited data are perfectly acceptable for this purpose.Some data may not be readily available from your accounts. In these cases, please providecareful estimates. We would rather have your best estimate than nothing! If your bank hasmore than one branch or office in Tanzania, consolidated data should be submitted on asingle form.
Valuation
All values should be reported in thousands of TZS or USD. For transactions, pleaseconvert amounts denominated in other currencies to TZS or USD at the rate used at thetime of the transaction and, for opening and closing positions, the rate applying at thereference date. If the transaction rate is not known, use the mid-point of the buying andselling rate applying at the date of the transaction.
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Definitions
1. Residents and Non-residentsThe definition of resident/non-resident is as appearing in Part A of this questionnaire
2. Financial instruments
Trade CreditAssets consist of:1. Prepayments on imports, extinguished upon delivery of the goods or services.2. Trade credit extended on exports, extinguished by actual payment (postpayment).
Liabilities consist of:1. Prepayment of exports, extinguished upon delivery of exports.2. Trade credit received on imports, extinguished by actual payment (postpayment).
Other Loans
Loans are financial assets created through the lending of funds by a creditor (lender) di-rectly to a debtor (borrower). They include loans (different from trade credits) to financetrade, mortgages, other loans and advances, financial leases for the purchase of goods (wherepayment consists of interest on the outstanding liability, and repayment of the loan liabil-ity). Repurchase agreements are treated as a form of securitised loan. They consist of thesale (made with the intention that the transaction will be reversed at a specified future date)of a security such as a government bond by one institution to another.
Bridging Loans
These are usually short-term loans, taken out to help cover the repayment of other loans.
3. Maturity
Short-term: original contractual maturity of one year or less.Long-term: original contractual maturity of more than one year.
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PART E.1: LENDING ABROAD (TO NON-RESIDENTS)- ASSETS
Please report all Values in thousands of (TZS or USD).PLEASE USE ONLY ONE CURRENCY EITHER TZS OR USD IN COMPLETING
THIS FORM
LENDING TO NON-RESIDENTS BY LOAN TYPE (FINANCIAL INSTRUMENT)Please state your total exposure to non-residents (giving stocks at year-end 1998 and 1999,and transactions during 1999) for the following types of lending, distinguishing betweenlong and short-term lending (please refer to notes & definitions on pages 14 and 15):
20. Please state the stock of the amount of your total lending abroad by category ofcredit as at end 1998 and end 1999.
STOCK POSITION END 1998 END 1999
Trade Credit (short-term)Export Import
Other short-term (specify)123Long-term (specify)123Total stock
Short-termLong-term
21. Please state the amount of your total lending abroad by category of credit during1998 and 1999
TRANSACTIONS 1998 1999DURING THE
PERIOD
Trade Credit (short-term)ExportImport
Other short-term (specify)123
Long-term (specify)123
Total flowsShort-termLong-term
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PART E.2: BORROWING ABROAD (FROM NON-RESIDENTS) - LIABILITIES
BORROWING FROM NON-RESIDENTS BY LOAN TYPE (FINANCIAL IN-STRUMENT)Please state your total borrowing on behalf of your client and yourselves from abroad (non-residents) (giving stocks at year-end 1998 and 1999, and transactions during 1999) for thefollowing types of borrowing, distinguishing between long-term and short-term borrowing(please refer to notes & definitions on pages 14 and 15)
22. Please state the stock of the amount borrowed abroad (from non-residents) bytype as at end 1998 and 1999.
STOCK POSITION END 1998 END 1999Trade Credit (short term)
ExportImport
Other short-term (specify)123
Long-term (specify)123Total stock
Short-termLong-term
23. Please state the amount disbursed, principal repaid, and interest and othercharges paid in respect to each category of short-term and long-term loans during1998.
TRANSACTIONS Disbursements Principal Interest and Net flowsDURING 1998 repaid other
charges paid1 2 3 (1-2-3)
Trade Credit(short-term)
ExportImport
Other short-term(specify)123Long-term (specify)123Total disbursed/repaidShort-termLong-term
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24. Please state the amount disbursed, principal repaid, and interest and othercharges paid in respect to each category of short-term and long-term loans during1999.
TRANSACTIONS Disbursements Principal Interest and Net flowsDURING 1999 Repaid other charges
paid1 2 3 (1-2-3)
Trade Credit(short-term)
ExportImport
Other short-term(specify)123Other long-term(specify)123
Total disbursed/repaidShort-termLong-term
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PART F: MOTIVATIONS AND EXPERIENCES OF BANKS AND OTHER FI-NANCIAL INSTITUTIONS
25. What is the likely direction of your bank’s lending outside Tanzania, withregard to each type of instrument (tick box), and why?
Start / Maintain End / REASONExpand Contract
Lending to non-residentsTrade Credit
Export ImportOther short-term (specify)123Other long-term (specify)123
26.What is the likely direction of your bank’s borrowing from non-residents(abroad), with regard to each type of instrument (tick box), and why?
Start / Maintain End / REASON Expand Contract
Borrowing from non-residents (abroad)Trade Credit
Export ImportOther short-term (specify)123Other long-term (specify)123
27. What influence do the following risk guarantee mechanisms have on yourlending:
Export Credit Agency
Private insurance
Other (Specify)
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28. What instruments do you use to hedge against risks associated with borrowingfrom abroad (by yourselves and your clients)?
29. What are the key factors that influence the level of borrowing from non-residents(abroad) on behalf of your clients (and yourselves).
30. Please list the key factors in order of importance, you see as most critical inyour lending decisions to non-residents (abroad).
31. Please list the key factors in order of importance, you see as most critical inyour borrowing decisions from non-residents (abroad).
32. In which direction is your business likely to be affected by the current initiativetowards reviving East African Co-operation as well as the influence of South Africain the region.
33. How significant is your borrowing from correspondent banks abroad for lend-ing to Tanzania residents
Very significant Significant Not significant
1 Borrowing forlending in foreigncurrencies
2 Borrowing forlending in localcurrency
106
107
33. How has your borrowing abroad for domestic lending changed over time
Increased Not changed Decreased
1 Borrowing forlending in foreigncurrencies
2 Borrowing forlending in localcurrency
Comment on your views
34. What problems (by yourselves or your clients) if any, do you face in makingrepayments abroad in servicing external debt.
35. What incentives and mechanisms can government provide, to make banks morewilling to report to government on their operations?
36. How do you characterise the level of competition in banking business in Tanzania.Please tick as appropriate
Very high High Medium Low Very low
Level of competition
Please give reasons for your opinion
THANK YOU FOR YOUR COOPERATION.
APPENDIX 5
Questionnaire on Investments with foreign Assets and Liabilities - Perception
Confidential
National Bureau of Statistics Bank of Tanzania Tanzania InvestmentCentreP.O.Box 796 P. O. BOX 2939 P. O. Box 938DAR ES SALAAM DAR ES SALAAM DAR ES SALAAMTel: (255)-51-122722-3 Tel: (255)-51- 110946-52, Tel: (255)-51-116328-32
(255)-51-111634 (255)-51-110977-79 (255)-51-34200Fax: (255)-51-112352/135601 Fax: (255-51) 112573/113325 Fax: (255-51) 118253
June 5th 2000
Dear Investor,
CENSUS OF INVESTMENT WITH FOREIGN ASSETS AND LIABILITIES
PERCEPTIONS FORM
FORM TYPE : BOP/2/2000COMPANY REFERENCE NUMBER :…………………….. (for internal use only)REPORTING PERIOD : Year-ends 1999DUE DATE FOR RETURN: Thursday 6th July 2000
A. GENERAL INFORMA TION
Date completed:
Company name:
Name and position of person completing this return:
Company Address:
Tel: Fax: E-mail:
Please give details of an alternative person whom we may contact in case we haveany questions.
Date of Establishment Date of Commencing Operations
_____/ _____/ _________ _____/ _____/ _________
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PLEASE READ THIS FIRST
Purpose of surveyThis form collects information to be used by the Government of Tanzania to improve na-tional and international economic policy formulation and for investment promotion pur-poses. As such, it is a means to improve dialogue between government and the privatesector. It complements the Assets and Liabilities Survey, which is being disseminated toyou to capture and classify balance of payments statistics and international investmentposition.
ConfidentialityInformation will be used only for statistical purposes, and be published in aggregated form.Data relating to individual organisations will not be made available to anybody outside theBank of Tanzania, Tanzania Investment centre or National Bureau of Statistics. Govern-ment officials failing to comply with confidentiality clause face severe penalties includ-ing summary dismissal. This is in accordance with Bank of Tanzania Act, 1995, Tanza-nia Investment Act, 1997, and the Act establishing National Bureau of Statistics.
Collection and submission of dataCompletion of this form is compulsory under section 6(b) of the Tanzania Investment ActNo. 26 of 1997, Statistical ordinance No. 33 of 1961 establishing the National Bureau ofStatistics and section 47 sub-sections (1), (2) and (4), and section 49 of Bank of TanzaniaAct of 1995. Failure to comply could result in legal and/or administrative action againstnon-compliance. Please note the due date for return, given at the top of this form, and keepa copy for your reference.
Start-up DateThe questionnaire includes questions that require information to be given at particular dates,including start-up. Start-up refers to the year when foreign investment first took place (i.e.date of commencement of the project).
HelpTo help us, please attach a copy of your latest annual financial statements to your com-pleted form. If you need help in completing, or explanation of terms or questions, pleaserefer to the notes attached. Alternatively, please contact Mr S. Mrutu of BOT – telephone119312, Mrs N. Senzia of TIC - telephone 116328 and Mr M. Chimtembo of NBS-tel-ephone 122722.
1. To what extent have the following macroeconomic factors affected investment inyour business?
Very strong Strong Limited No Limited Strong Verypositive effect positive positive Effect negative negative strong
effect effect effect effect negative effect
1 2 3 4 5 6 7
* Note: “at start-up” refers to the year when foreign investment first took place.
109
at start-up* Now
Fiscal policy ( ) ( )
Monetary policy ( ) ( )
Government stability ( ) ( )
Composition of government spending ( ) ( )
Regulatory Framework ( ) ( )
State intervention in private business ( ) ( )
Business environment stability ( ) ( )
Environmental policy ( ) ( )
Foreign policy ( ) ( )Financial sector stability ( ) ( )
Please add any additional Information
2.To what extent have the availability and condition of the following infrastructuresand services affected investment in your business?
at start-up* now
Inland Transport (roads, rails) ( ) ( )
Access to seaports ( ) ( )
Airports and Air Transportation ( ) ( )
Electricity supply ( ) ( )Water supply ( ) ( )
Postal services ( ) ( )
Telecommunications ( ) ( )Custom services ( ) ( )Immigration facilities ( ) ( )Municipal services (garbage, sewerage, etc.) ( ) ( )
Banking services ( ) ( )
Credit rating agencies ( ) ( )
Please add any additional Information
* Note: “at start-up” refers to the year when foreign investment first took place.
Very strong Strong Limited No Limited Strong Verypositive effect positive positive Effect negative negative strong
effect effect effect effect negative effect
1 2 3 4 5 6 7
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3. To what extent have the following financial factors affected investment in your business?
at start-up* Now
Inflation ( ) ( )Availability of business finance/credit ( ) ( )
Interest rates ( ) ( )
Depreciation of the domestic currency ( ) ( )
National Payment System ( ) ( )
Exchange control ( ) ( )
Please add any additional Information
4. To what extent have the following governance factors affected investment in yourbusiness?
at start-up* nowRegional trade integration ( ) ( )Trade policy ( ) ( )
Investment incentives ( ) ( )
Bureaucracy ( ) ( )
Tax collection efficiency ( ) ( )
Effectiveness of the legal system ( ) ( )
Land law and administration
Speed of decision making in the following institutions
Tanzania Investment Centre ( ) ( )
Ministry of Commerce and Industries ( ) ( )
Tanzania Revenue Authority ( ) ( )Immigration ( ) ( )
Bank of Tanzania ( ) ( )Other (specify) ( ) ( )
Please add any additional Information
Very strong Strong Limited No Limited Strong Verypositive effect positive positive Effect negative negative strong
effect effect effect effect negative effect
1 2 3 4 5 6 7
Very strong Strong Limited No Limited Strong Verypositive effect positive positive Effect negative negative strong
effect effect effect effect negative effect
1 2 3 4 5 6 7
* Note: “at start-up” refers to the year when foreign investment first took place.
111
5. To what extent have the following labour factors affected investment in your business?
at start-up* nowLabour legislation ( ) ( )Restrictions regarding bringing in expatriates ( ) ( )
Labour stability ( ) ( )Minimum wage levels ( ) ( )
Availability of highly educated employees ( ) ( )
Availability of skilled employees ( ) ( )
HIV / Aids ( ) ( )
Please add any additional Information
6. To what extent have the diverse factors presented below affected investment inyour business?
at start-up* nowCorruption ( ) ( )
Internal security ( ) ( )
Domestic political scenario ( ) ( )
Regional political scenario ( ) ( )
Domestic economic situation ( ) ( )Global economic situation ( ) ( )Market expansion ( ) ( )Electricity tariff ( ) ( )Water tariff ( ) ( )Zanzibar route ( ) ( )Smuggling ( ) ( )
Please add any additional Information
Very strong Strong Limited No Limited Strong Verypositive effect positive positive Effect negative negative strong
effect effect effect effect negative effect
1 2 3 4 5 6 7
Very strong Strong Limited No Limited Strong Verypositive effect positive positive Effect negative negative strong
effect effect effect effect negative effect
1 2 3 4 5 6 7
* Note: “at start-up” refers to the year when foreign investment first took place.
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7. Please specify the most important factors that influenced your initial decision toinvest in Tanzania.
8. What is the likely direction of your investment in Tanzania in the medium-term?Please tick appropriate box.
Expansion No change Contraction
Please specify which factors would influence such decision.
9. What measures can the government undertake to improve investors’ willingnessto report to the government on their operations.
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10. Please identify or tick below the most reliable sources of information for yourinitial investment decisions.
Local media (please specify)
International media (please specify)
Government (please specify agency)
Donors and international agencies(please specify)
Business associates
Competitors
Word of mouth
Other (please specify)
11. Generally, how do you find the investment policy and climate in promotingprivate capital flows in Tanzania?
12. Any other comment regarding the effect of Government policies on your organisation.
THANK YOU FOR YOUR COOPERATION.
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