TANZANIA – TRADE AND TRANSPORT FACILITATION AUDIT ...

TANZANIA – TRADE AND TRANSPORT FACILITATION AUDIT

Submitted to: World Bank Submitted by: René Meeuws NEA Transport research and training Reference: R2004xxxx/xxxxx/rme/lwi Rijswijk, The Netherlands, November 2004

Tanzania – Trade and transport facilitation audit

R2004xxxx November 2004 3

CONTENTS

1 EXECUTIVE SUMMARY ....................................................................7

2 INTRODUCTION.................................................................................9

3 OVERVIEW OF THE TANZANIAN ECONOMY ...............................11

4 TRADE PATTERNS..........................................................................19

5 TRANSPORT INFRASTRUCTURE..................................................26

5.1 Road infrastructure network..........................................................................26 5.2 Management of Road Infrastructure..............................................................30 5.3 Railway Infrastructure...................................................................................34 5.4 Port Infrastructure .........................................................................................36 5.5 Airport Infrastructure ....................................................................................38 5.6 Pipeline Infrastructure ...................................................................................39

6 TRANSPORT POLICY, ORGANIZATION AND REGULATIONS....40

6.1 Transport policy and the organization of the transport sector .......................40 6.2 Regulatory framework for the transport sector .............................................42

7 TRANSPORT AND LOGISTICS SERVICES....................................49

7.1 Port operations ..............................................................................................49 7.2 Railway operations........................................................................................53 7.3 Road transport services .................................................................................56 7.4 Air freight transport operations .....................................................................59

8 TRANSPORT COSTS, EFFICIENCY AND DELAYS.......................61

9 CUSTOMS AND TRADE ADMINISTRATIVE PROCEDURES ........67

9.1 Customs administration and Customs procedures.........................................67 9.2 Trade regulations and import and export procedures ....................................72 9.2.1 Export procedures .........................................................................................72 9.2.2 Import procedures .........................................................................................74

10 CONCLUSIONS AND ACTION PLAN .............................................78

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10.1 Main findings and identified problems .........................................................78 10.2 Implementation strategy................................................................................79 10.3 Action Plan....................................................................................................82

ANNEX 1 REFERENCES AND INFORMATION SOURCES............................91



Map of Tanzania


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1 EXECUTIVE SUMMARY

Tanzania is situated in the south-eastern part of Africa on the Indian Ocean. The mainland has an area of 881,289 km2 and a population of 33,461,849 (Census 2002). The economy is dominated by agriculture and trade and services, making the larger share of the GDP. Tanzania is also the natural economic gateway for the Central African countries like Zambia, Burundi, Rwanda and DR Congo. Also Malawi and Uganda are using Tanzania as a transit country for their import and export. The port of Dar es Salaam is used by its neighboring countries to export and import part of their commodities. Since the mid nineties Tanzania has been undergoing structural socio-economic changes. The centrally planned state-controlled economy is gradually transforming into a market-oriented one maintaining its pro-poor budget policies. The Government of Tanzania has publicly stated to be cognizant of the fact that the private sector is the engine of growth in Tanzania, and that if poverty reduction goals have to be achieved, significant strides must be made in the private sector1. The transport infrastructure is not well developed, putting serious constraints to the commercialization of agricultural products and the transportation of commodities. However, serious efforts are being undertaken to improve the road network in Tanzania. Port and railway operations are in the process of being privatized. The transport sector is constrained by high freight transport costs; a very low level standard of railway services and unpredictability of railway operations; inability of public sector entities in the transport sector to generate enough surplus to keep their assets in a good condition; deteriorating condition of the rail and road infrastructure because of lack of maintenance. Customs efficiency is not improving, despite the efforts the use sophisticated IT equipment. The main problems of Customs remain the low level of productivity and the complicated procedures. The legal and regulatory framework remains behind still reflecting the old bureaucratic reality. This results in excessive paperwork, red tape and corruption regarding business development and trade. All these factors make access to the international markets difficult for Tanzanian producers and exporters. Therefore, it is of utmost importance that the legal and regulatory framework will be urgently renewed and simplified and that mechanisms will be put in place to rehabilitate existing and to invest in new transport structure to improve their competitiveness. At the same time, conditions must be created to strengthen domestic production of agricultural and industrial commodities and investments in the internal transport infrastructure network, in particular the railways, and feeder roads.

1 Macroeconomic Policy Framework for the Plan/budget 2004/05-2006/07; The President’s Office – Planning and Privatization; Dar es Salaam-Tanzania; p.29.


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A pro-active and active attitude from the Tanzanian Government is needed to link the development of the home-based agricultural, industrial, mining and services sectors directly with the development of the transit potential through the transport corridors by removing the physical and non-physical barriers to trade and transport and stimulating competition.



2 INTRODUCTION

The objective of this Trade and Transport Facilitation Audit (TTFA) is to establish a diagnostic, as comprehensive as possible, on the situation in Tanzania in terms transport costs and efficiency related to external trade and international transportation services providing an integrated approach. The area of focus includes:

• Foreign trade patterns. • Organization and quality of transport and logistics services and infrastructure available

to exporters and importers from Tanzania and its neighboring countries. • Assessment of procedural and documentary requirements necessary to move goods

through borders or in transit operations. Ultimately the audit aims at providing a comprehensive understanding of supply chain management constraints in Tanzania irrespective of their cause: governance, regulation, private sector practices and organization. The audit, therefore, focuses on:

• The nature of existing constraints in regulatory, documentary and procedural requirements related to international trade transactions and corresponding transport operations.

• The availability and the organization of transport services to trade in Tanzania and obstacles to their modernization and development.

• The transit issues and the potential of Tanzania as a transit country using the main transport corridors.

Based on the identification of the shortcomings, an action plan and an implementation strategy are proposed for the measures to be taken for the short and longer term.



3 OVERVIEW OF THE TANZANIAN ECONOMY

Tanzania’s economy has generally improved in recent years, with substantial achievements having been made in sustaining macroeconomic stability, following relatively successful implementation of substantial economic reforms. As Table 1 shows, the growth of the real GDP increased from 3.3 percent in 1997 to 6.2 percent in 2002. In 2003 growth slowed down by 0.6 percent mainly caused by a decreased agricultural output. Table 1 Trends in Selected Macroeconomic Indicators

Merchandize exports increased from 902.5 million US Dollars in 2002 to 1142.4 million US Dollars in 2003. But also imports increased from 1511.3 million US Dollars in 2002 to 1973.0 million 2003 US Dollars, which is a growth of more than 30 percent.

The Foreign Direct Investment in 2003 was 247.8 million US Dollars, which is still only half of the level realized in the years 1999 and 2000.



The average lending rate continues to decline from 26.5 percent in 1996 to 13.8 percent in 2003.

Table 2 shows the composition of the GDP from 1997 to 2003. The total GDP increased from Tsh 1578.4 billion in 1997 to Tsh 2173.4 billion in 2003.

The share of agriculture, forestry, fishery and hunting in the GDP decreased from 51.1 percent in 1997 to 46.7 percent in 2003. Also the share of public administration fell from 6.7 percent in 1997 to 5.9 percent in 2003. The share of mining and quarrying increased from 1.7 percent in 1997 to 3 percent in 2003. Also the share of trade, hotels and restaurants increased from 15.8 percent in 1997 to 16.8 percent in 2003. The contribution of transportation and communications to the GDP increased from Tsh 75.1 billion in 1997 to Tsh 106.4 billion.

Projections for the period 2004-2007 assume improvements in the performance of agriculture (still by far the largest sector); higher growth in the manufacturing sector, following extensive rehabilitation of defunct manufacturing enterprises and increased investments in the sector, coupled with implementation of conducive strategic trade policies; a slight slowdown in the growth of the mining sector, following completion of the major investments in the mining projects. Also the trade and services sector (including tourism) is expected to improve as the global economy gets out of recession.

The total revenue of the Central Government was estimated at Tsh 1447.3 billion for 2003/04, as Table 3 shows. This represents 11.8 percent of the GDP. In 1999/00 this was still only Tsh 772.5 billion; 10.1 percent of the GDP. The revenue from tax was likely to increase from Tsh 691.9 billion in 1999/00 to Tsh 1325.1 billion in 2003/04. This means that the share of tax in the total revenue rose from 89.6 percent to 91.5 percent. In 2003/04 Tsh 130.1 billion was to be collected from import duties; 9 percent of the total revenue. The collection from VAT increased from Tsh 223.8 billion in 1999/00 to Tsh 494.8 billion; its share in the total revenue raised thus from 29 percent in 1999/00 to 34.2 percent. It was estimated that Tsh 216.6 billion would be collected from excises; 15 percent of the total revenue.

The total expenditures, however, increased from Tsh 1271.9 billion in 1999/00 to Tsh 2531.5 billion in 2003/04. The overall negative balance between revenues and expenditures without taking into account the grants increased from Tsh 534.4 billion in 1999/00 to Tsh 1084.2 billion in 2003/04.



Table 2 Tanzania: Composition of Gross Domestic Product, 1997-2003 (in billions of Tanzanian shillings)



Table 3 Tanzania: Central Government Operation, 1999/00-2003/04 (in billions of

Tanzanian shillings)



Table 4 Tanzania: Central Government Operation, 1999/00-2003/04 (concluded)

(in % of GDP)

Table 5 shows that the balance of payment developed positively between 2000/01 and 2002/03 reducing the deficit of the current account from Tsh 378.2 billion to Tsh 245.7 billion. Also the deficit of the trade balance decreased from Tsh 724.4 billion to Tsh 649.6 billion in the same time period. However, the deficit of the current account in 2003/04 is estimated at Tsh 552.1 billion and of the trade balance Tsh 927.4 billion.



Table 5 Tanzania: Balance of Payments, 2000/01-2003/04 (in millions of U.S. dollar)





4 TRADE PATTERNS

Tanzania is facing hard times in its trade of traditional export products. The revenues decreased from 399.8 million US Dollars in 1997/98 to 221.2 million US Dollars in 2003/04, as Table 6 shows. The prices for coffee, cotton, cashew and tobacco in 2003/04 was only 40 percent, 70 percent, 75 percent and 100 percent respectively compared with those in 1997/98. In 1997/98 these four commodities presented 89 percent of the traditional export of Tanzania. But also the volumes of export of three commodities decreased. The export of cotton fell from 65.2 tons in 1997/98 to 36.7 tons in 2003/04. The export of cashew decreased from 90.8 tons to 76.6 tons and of tobacco from 40.6 to 25.3 in the same time period. The export of non-traditional export products is booming. In 1997/98 the value of the export of non-traditional commodities was 212.8 million US Dollars; in 2003/04 this was raised to 952.1 million US Dollars already. The major share was of the sector of mineral and metals counting for 623 million US Dollars in 2003/04, equivalent with 53 percent of the total export of Tanzania. Export of gold was responsible for more than 93 percent of the total export of mineral and metals. Also the export of manufactured goods and fish products show a remarkable increase during the last years. The export of fish products increased from 57.1 million US Dollars in 1999/00 to 123.7 million US Dollars in 2003/04 while the export of manufactured goods rose from 31.9 million US Dollars in 1999/00 to 95.5 million US Dollars in 2003/04. The grand volume of export increased from 612.6 million US Dollars in 1997/98 to 1173.1 million US Dollars in 2003/04. Table 7 shows that the share of traditional exports in the total exports decreased from 58.4 percent in 1997/98 to 19.5 percent in 2003/04.



Table 6 Tanzania: Value, Volume, and Unit Values of Principal Exports, 1997/98– 2003/04 (value in millions of U.S. dollars; volume in thousands of metric tons; unit values in U.S. dollars per kilogram)



Table 7 Tanzania: Composition of exports, 1997–2003 (in % of total exports, f.o.b.)

The European Union is the largest trade partner of Tanzania. Table 8 shows that its share in the total exports increased from 30.2 percent in 1997 to 56.7 percent in 2003. This is particularly caused by the export of gold to the UK. Exports to the UK increased from 5 percent in the total exports in 1997 to 33.9 percent in 2003. It is interesting to note that the share of Kenya in the total exports has substantially increased to 7 percent in 2003. The same applies to South Africa, whose share in 2003 was 3.3 percent. Exports to Uganda fell back to 1 percent in 2003.



Table 8 Tanzania: Destination of Exports, 1997-2003 (in % of total exports)

Table 9 and 10 show the value and the commodity composition of principal imports, respectively between 1997-2003.



Table 9 Tanzania: Value of Principal Imports 1997-2003 (in millions of U.S. dollars)



Table 10 Tanzania: Commodity Composition of Imports, 1997-2003 (in % of total imports)

The value of the total imports increased from 1319.5 million US Dollars in 1997 to 2168.2 in 2003. The commodity composition remained the same with capital goods counting for about 40 percent of the imports; intermediate goods 30 percent; and consumer goods also 30 percent. Table 11 shows a clear shift in the sources of import from the EU to South Africa in the period 1997 to 2003. The share of the European Union fell down from 27.8 percent to 19.7 percent, while at the same time the share of South Africa increased from 7.3 percent in 1997 to 14 percent in 2003. The imports from Zambia and Kenya reduced from 1.9 percent and 7.2 percent in 1997 to 0.1 percent and 5.3 percent in 2003, respectively.



Table 11 Tanzania: Sources of Imports, 1997-2003 (in % of total imports)



5 TRANSPORT INFRASTRUCTURE

Development of new infrastructure and the rehabilitation and maintenance of the existing infrastructure network are priority issues to boost economic development. The Government of Tanzania is aware of this and since five years efforts are being undertaken to address this issue. Until the end of the nineties transport infrastructure was largely neglected when setting priorities for state expenditures from the Central Budget. Also the institutional framework was not appropriate to improve the state of transport infrastructure in Tanzania. This has all resulted in a huge backlog of maintenance of both the road and railway network, which not only affected negatively the development of the national economy, but also contributed to the reduction of trade flows with neighboring countries.

5.1 Road infrastructure network

Tanzania has an estimated total road network length between 80,000 – 85,000 km. A district road survey in 1997 showed that 13 percent of the roads were in a good condition; 25 percent in fair condition; and 62 percent in poor condition. When taking the trunk roads and regional roads as one group together 20 percent was in good condition; 32 percent in fair condition; and 48 percent in poor condition. Table 12 Condition of the road network, 1997

Road Type Good Fair Poor Total Trunk Roads Paved Unpaved

3,0932,317

776

4,0211,163 2,858

3,116 441

2,675

10,2303,921 6,309

Regional Roads Paved Unpaved

3,75222

3,730

7,027156

6,871

13,921 45

13,876

24,700223

24,477Sub total 6,845 11,048 17,037 34,930District/Feeder/Urban Roads 3,995 9,755

36,250 50,000

Total Roads 10,840 20,803 53,287 84,930Source: District roads survey data, 1997 The trunk and regional road networks are managed by TANROADS, an executive agency of the Ministry of Works. According to an inventory carried out by TANROADS and completed in December 2003, the condition of trunk and regional roads as of December 2003 was as follows:



Table 13 Condition of the trunk and regional roads (as of December 2003)

Road Type Good Fair Poor Total Trunk Roads Paved Unpaved

3,8802,074 1,806

3,7991,331 2,468

2,255 509

1,746

9,9343,914 6,021

Regional Roads Paved Unpaved

6,132170

5,962

7,014121

6,893

5,853 37

5,775

18,957327

18,630Total 10,012 10,813 8,108 28,892Source: TANROADS, December 2003 Comparing with the data from 1997, regional roads had been reduced from 24,700 km to 18,957 km in 2003. This has to do with the classification criteria and the accuracy of the surveys. The condition of the trunk roads improved, albeit not substantially, from 3,039 km in good condition in 1997 to 3,880 km in 2003 reducing the trunk roads in poor condition from 3,116 km in 1997 to 2,255 km in 2003. As far as the regional roads are concerned, the distribution among roads in good, fair and poor condition is evenly spread. It is to be noted that less than 2 percent of the regional roads are paved. The urban roads, district roads and feeder roads are under the responsibility of 113 urban and rural Local Government Authorities (LGA) and is estimated at 51,108 km. Although both the extent and the condition of district and feeder roads is not well known – which already may be an indication of their condition…-, it is estimated that 13,658 km of the 18,658 km of district roads are in poor condition, which is more than 73 percent. The situation of the feeder roads is even worse; 29,000 km of the feeder roads are in poor condition and only 1,000 km in good and fair condition. Table 14 summarizes the condition of the Tanzanian road network:



Table 14 Tanzania: Road Network (February 2004)

• About 50 percent of the trunk and regional road networks are in poor condition. • The total road network that is in good and fair (which means maintainable) condition is

about 22.500 km. • 7,700 km of the road network under the responsibility of the local government is in

maintainable condition. • Feeder roads are mostly tracks in poor condition. • Only 28 percent of the overall network is in good and fair condition.

The Poverty Reduction Strategy Paper (PRSP) envisaged a rehabilitation of 4,500 km of rural roads in 12 of the poorest regions by 2003. However, the Tsh 5 billion earmarked for the President’s Office, Regional Administration and Local Government (PORALG) for rehabilitation/construction from the development budget for year 2002/2003 was not released making implementation of this plan rather difficult. In the meantime, 7,049 km of rural roads, representing 51.4 percent of the planned 13,727 km received routine and periodic maintenance and spot improvement interventions at a total cost of Tsh 8,9 billion. The main reasons for not achieving the targets are only partial and late release of Road Fund allocation; inadequate capacity of local government authorities to manage district, urban and feeder roads; and lack of competent contractors. It is estimated that the core road network required for poverty alleviation – the network that provides reliable access to the majority (90 percent) of the rural population is of a length of about 44,000 km. This is necessary to unlock the agricultural potential in the regions and facilitate the commercialization and transportation of the produce. To get this core network into maintainable (good and fair) condition, about 3 billion US Dollars for the next 10 years will be needed. This would mean that annually 300 million US Dollars would be needed. The amount



of money spent in road transport sector in Tanzania, about 100-150 million US Dollars has trapped the road sector in a vicious cycle: insufficient money allocated to rehabilitation increases the need for immediate spot improvements and emergency works, which had been financed by funds earmarked for maintenance, leaving insufficient resources for the proper maintenance, leading to a further deterioration of the network, which requires further rehabilitation, for which no financial resources are available, and so on. For the district and feeder roads a District Roads Management System (DROMAS) has been developed, which needs further implementation in the districts. The Ministry of Works has planned for the Urgent Road Rehabilitation Program for the trunk and regional roads and the Ten Year Road Sector Rehabilitation Program. About nine Road Transport Corridors have been identified embracing a total road network of 10,300 km, 40 percent of which is bituminized. According the plan the remaining 60 percent need to be bituminized by 2012. The nine transport corridors include:

1. TANZAM corridor: Dar es Salaam – Morogoro – Mikumi (with a link to Ifakara and Mahenge) – Iringa – Mafinga (with a link to Mgololo) – Makambako – Mbeya (with a link to Itungi Port and Malawi) – Tunduma (1324 km). This corridor facilitates agriculture, tourism, mining and trade.

2. Northeast corridor: Dar es Salaam – Tanga – Arusha – Namanga (950 km). This corridor facilitates production of both subsistence and cash crops, promotion of tourism and mining.

3. Southern coastal corridor: Dar es Salaam – Lindi – Mtware (508 km). Improvement of the road infrastructure of this corridor would promote economic activities in the southern part of Tanzania.

4. Central corridor: Morogoro – Dodoma – Mwanza (on Lake corridor) – Rusumo (Rwanda border) and Kobero (Burundi border) in the West (1584 km). This corridor facilitates extensive farming and mining.

5. Lake circuit: Sirari (Kenian border) – Musoma – Mwanza – Bukoba – Mutukula (border with Uganda) (1019 km). The lake circuit is to attract manufacturing and processing industries and promoting agriculture, mining, tourism, fishing and trade.

6. Southern corridor: Lindi – Mtware – Songea linking to Makambako and Mbamba Bay on Lake Nyasa (1326 km). The corridor promotes agricultural production including livestock and fishing, mining, and trade.

7. Great north corridor: Iringa – Arusha – Namanga (1024 km). The northern corridor serves agricultural schemes, mining and tourism.

8. Western corridor: Tunduma – Sumbawanga – Mpanda – Uvinza – Kigoma – Nyakanazi – Nyakahura (1286 km). Economic activities along this corridor include agriculture, tourism, mining, timberworks, fishing and gold smiting.



9. Mid-west corridor: Iringa – Dodoma (266 km)2. Possible development activities are forestry, tourism and mining.

For 2004/2005 TANROADS proposes to spend Tsh. 210.5 billion to finance road maintenance, road rehabilitation and development activities.

5.2 Management of Road Infrastructure

Recognizing the fact that the road management and financing capacity in Tanzania had been insufficient, leading to a further structural deterioration of the road network and resulting rehabilitation need, the Government of Tanzania had created TANROADS on July 1, 2000, under the Executive Agencies Act and a Road Fund Board (RFB) in 1999. As part of the Act, the new role of the Ministry of Works was to focus on policy formulation, strategic planning and regulation in the road sub-sector. TANROADS and RFB have since then greatly enhanced the road management and financing capacity in the sector. The main functions of TANROADS are to:

• Undertake procurement and management of contracts for design, maintenance, emergency repair, spot improvements, rehabilitation, upgrading and construction of roads under its control.

• Improve road safety. • Perform any work on district roads, on request from local authorities, and charge

a fee for that service. • Establish and maintain appropriate road databank. • Establish and operate weigh-bridges and enforce axle load control. • Manage contracts on operations of ferries. • Advise the Minister on regulations and standards for road works.

TANROADS has four functional divisions headed by four Directors with the following functions: (a) maintenance; (b) development; (c) technical; and (d) finance and administration. In addition, TANROADS has been charged with the management and operation of the former departments of the Ministry of Works, comprising:

• TANWEIGH—portable and fixed weighbridge operations. • TANLAB—formerly Ministry of Works Central and Regional Materials Laboratories. • EHU—Equipment Hire Units at Tanga, Morogoro, Mbeya and Kibaha.

TANROADS, with a total staff of about 780, has been made fully and solely responsible for the delivery of the trunk and regional road programs. It is felt, however, that under the current set-up its autonomy is not sufficient and its sustainability fragile being still an executive agency of the Ministry of Works. Therefore, TANROADS should be turned into a Road Authority created 2 The most likely link meant is the one between Iringa and Dodoma. The National Transport Policy document (2003) mentions the mid-West corridor as extending from the Central corridor in the East to the



under an act approved by parliament with its own independent and decision making Board, as announced by the Government of Tanzania in the TANROADS Establishment Order, in 2000. This Road Authority should develop a detailed business plan; a well defined work program; a clear statement of purpose and management objectives; operate on sound business practices; and have clear lines of responsibilities with the planning and financing agencies. As mentioned earlier, the responsibility for the management of the district roads, urban roads and feeder roads was transferred from the Ministry of Works to the Local Government. However, this has not been smooth as there has not been adequate transfer of staff to the local government and budgetary and procedural constraints. Road Fund The history of the Road Fund in Tanzania goes back to 1985 when the Parliament of the Republic of Tanzania enacted the Roads Tolls No. 2 Act. Two Road Funds were established under two separate declarations by the Minister of Finance—the first “Declaration to establish a special Road Fund” was made in August 1991, with the objective to finance maintenance and rehabilitation costs for the regional core network; and the second “Declaration to establish the local government Road Fund” was made in August 1992, with the objective to finance urban and district roads. However, the Funds were established as part of an administrative procedure and the declarations had no legal force or liability for compliance. In order to give the Fund some legal force, the Parliament enacted in 1998 Road Tolls Amendment Acts, establishing the Road Fund (RF) and the RF Board. The Act stipulated that 90 percent of the Fund should be for maintenance and emergency repairs of classified roads, while not more than 10 percent should be spent to roads development and associated administrative costs. The sources for the Road Fund come from a fuel levy of Tsh 100 (9 US cents equivalent) per liter; transit charges3; heavy vehicle licenses4; vehicle overloading fees5; and from other sources at rates to be determined by the Parliament. The following flow chart shows the criteria used to disburse the money of the Road Fund. In principle 70 percent is for the trunk and regional road network and 30 percent to the remainder part of the network.

Tanzam corridor in the South-west. 3 Transit charges are paid by foreign vehicles when entering Tanzania through the eight entry points. The revenuer is about Tsh 1 billion per year. 4 Heavy vehicle license fees are collected by the Central Transport Licensing Authority (CLTA) for intra-regional operations and by Regional Transport Licensing Authorities (RTLAS) for intra-regional operations. The Road Fund is entitled to receive 52 percent of this fee. 5 The amount of collected overloading fees was estimated at Tsh 1 billion per year, but is now decreasing due to stricter control and enforcement.



Flow chart of disbursement of Road Fund money

In 2002 a total amount of about 65 million US Dollars was collected for the Road Fund. However, a portion of the money had to be spent for rehabilitation, jeopardizing the maintenance of the maintainable network of about 22.500 km. According to Amendment Act No. 11 1998, the Board of Road fund has the following composition. As can be seen, the private sector is well represented: (a) A chairman who shall be appointed by the President from amongst persons outside the civil service; (b) the Permanent Secretary. in the Ministry responsible for roads; (c) the Permanent Secretary in the Ministry responsible for financing; (d) the Permanent Secretary in the Ministry responsible for Local Government; (e) a Senior Civil Servant not below the rank of Director appointed by the roads Minister; (f) four road user representatives appointed by the roads Minister from among the following sectors, institution or associations: (i) the road transport industry; (ii) the tourism industry; (iii) the Tanzania Chamber of Commerce, Industries and Agriculture; (iv) the Confederation of Tanzania Industries; (v) the National Co-operatives Organization; or (vi) any other organization of road users with no potential conflict of interest. It is remarkable that earlier in 1998 Amendment Act No. 6 was approved which stipulated that the Board of the Road Fund consisted of the prime-minister, seven ministers and the attorney-general without any participation from the private sector. Who is responsible for road infrastructure? According the National Transport Policy 2003, the responsibilities for the pan-territorial road infrastructural management are vested in the Central Government through the Ministry responsible for Works. The Ministry of Communications and Works is also involved at policy, planning and regulatory levels, while the Ministry of Home Affairs is involved in enforcement of regulations and the Ministry of Finance at the licensing level. Also the Local Government holds responsibility for an important segment of the road infrastructure network. This may easily lead to lack of sufficient accountability resulting in inefficiency in both management, planning and administration of the road sector.



The problem of overloading, under loading and weighbridges in Tanzania One of the problems TANROADS faces is overloading. The carrying capacity of the roads and bridges should be balanced with the weight of the vehicles using road and bridge infrastructure. This means that TANROADS has to find a balance where it allows as many transporters to perform their job in a level playing field as possible and at the same time make sure that the roads (and bridges) are in good condition. The Government of Tanzania has agreed on harmonization of gross vehicle weights within SADC countries, which has now come into effect. This implies that the maximum gross vehicle weight has been increased from 52 tons to 56 tons. For TANROADS this decision means that the lifespan of the road network will be reduced by 20 percent if road hauliers indeed will adhere to this new permissible weight. In order to control the gross weight, TANROADS is making use of weighbridges in ports, terminals and along the main transport corridors. The investments in weighbridges are considerable: the costs for one fixed weighbridge varies between 50,000 US Dollars and 75,000 US Dollars, excluding other civil works at the weighbridge station, which may rise from 400,000 US Dollars to even 800,000 US Dollars. The average operational cost for one weighbridge is about Tsh 24 million per month. From the road transport operators there are many complaints about the application of rules and procedures related with the weighting of the vehicles. The Federation of Tanzania Hauliers, which is also represented in the Road Fund, and thus aware of the importance of the preservation of the road network in Tanzania, has carried out a campaign to persuade road transport operators in Tanzania not to overload their vehicles. Although one of the arguments is that overloading damages the road infrastructure, it also has negative effects on the tires, the motor and the fuel consumption of the trucks. As there are different weighbridges in use, which are not all calibrated and vary in lifetime and brand, differences occur between the results of one weighbridge and another. These used to be a fault tolerance of 5 percent taking into account different calibrations of the weighbridges, but this tolerance has been abolished. Anecdotic evidence says that it one simply forgot to take this tolerance into consideration, when amending the regulations. Now, the road transport community feel themselves penalized by unfair fines, because of overloading of for instance 300 kilos. The business community in Tanga goes even so far by stating that this problem is one the reasons why the port of Tanga is being avoided by importers. There is also a problem of under loading, according to the Tanzania Revenue Authority (TRA). As reason why there are so many checkpoints along the road from Dar es Salaam to Lusaka mention tax evasion by selling transit goods on the domestic market, in particular fuel. Therefore, a whole chain of weighbridges is stationed along this corridor to control if some



leakage has occurred along the road: Kurasini, Kibaha, Mikese (not operating), Mikumi, Makambako, Uyole and Tunduma at the Tanzanian side; and Nakonde, Mpika, Kapiri Mposhi and Kafulufuta at Zambian side. Trucks have to pass all these checkpoints and have to do that within a prescribed tight time span. If the driver feels that he can not make in the prescribed period of time, he may try to achieve the time target by over speeding. These checkpoints are the cause of excessive delays and annoyance along the corridor. TRA, however, promised to loosen this type of control when the situation improves. Finally, coordination among the authorities is very important. Lake Fast Ferries has bought two express boats for transport on Lake Victoria based in Mwanza. The boats arrived on July 31, 2004 in the port of Dar es Salaam. The company thought they had an agreement with the Tanzanian Authorities for transport of the boats over road as exceptional cargo. However, the Minister of Works blocked the transportation of the boats by land as their weight was far beyond the limit allowed. He insisted that they be dismantled first. The minister defended his stand, saying narrow roads and the small size and capacity of the 295 bridges along the 1,300 km stretch to the lake were the limiting factors. He also stressed that the maximum width of the boat load was 5.2 meters, while the average trunk road carriage width was between 6 and 6.5 meters, adding that they left only 40 to 65 cm on each side of the road, which was insufficient to accommodate other road users. The boats could also be flown to Mwanza. Super Air Cargo Lifters informed that they had access to a cargo plane with a maximum payload of 150 ton, which can airlift the two boats, one at a time. However, the Minister of Works prohibited the use the roads to the airport, which would imply that the boats should be dismantled in Mwanza. Finally, an East African was found. After almost three months of fruitless attempts to transport the two boats, the boats were shipped to Mombasa, Kenya from where they would be transported over land to Kisumu and from their sailing on Lake Victoria to Mwanza…..

5.3 Railway Infrastructure

The Tanzania railway system has a total length of 3,676 km (mainland), of which 2,706 km is operated by Tanzania Railways Corporation (TRC) and 970 km by Tanzania-Zambia Railway Authority (TAZARA). Together the two systems link 14 of the 20 regions on the mainland, and neighboring countries including Zambia and Kenya. Tanzania Railways Corporation (TRC) The TRC network has a gauge of 1,000 mm and consists basically of two main lines: the Central line running from Dar es Salaam to Tabora (840 km) and from there to Kigoma (411 km) and Mwanza (378 km); and the Tanga line starting from Tanga to Moshi and Arusha with a total length of 438 km. To connect these two lines there is a link line between the Ruvu Junction Station on the Central line and Mruazi Junction on the Tanga line (188 km). There are also four



branch lines: Kilosa-Kidatu 107 km; Kaliua-Mpanda 214 km; Manyoni-singida 115 km; Kahe-Border 16 km. Figure 1 The Tanzanian Rail Network

A = Central Line B = Tanga Line C = Link Line D = Mwanza Line E = Mpanda Line

F = Singida Line G = Kidatu Line

Tanzania Railways Corporation was established in 1977 by the TRC Act after the collapse of the East African Community in the same year. The rolling stock of TRC consists of 120 diesel locomotives, of which 85 can be considered as working fleet. 103 locomotives are older than 20 years. The wagon fleet is 1,847 of which 1514 wagons older than 20 years. The wagon fleet has 888 covered wagons; 216 tanks; and 188 containers.

http://www.trctz.com/aline.htm

http://www.trctz.com/aline.htm



The locomotive and wagon availability is between 70-75 percent. TAZARA The Tanzania-Zambia Railway Authority operates a railway line between the port of Dar es Salaam and New Kapiri Mposhi in Zambia over a distance of 1860 km of which 970 km on Tanzanian territory. It has a different gauge than TRC: 1,067 mm, which allows traffic with other Southern African railways. The rolling stock of TAZARA consists of 79 diesel locomotives, of which 46 can be considered as working fleet. 52 locomotives are older than 20 years. TAZARA has 1,903 wagons; 116 container wagons; and 128 passenger coaches. The locomotive and wagon availability is about 50 percent.

5.4 Port Infrastructure

There are three major ports in Tanzania: Dar es Salaam, Tanga and Mtwara. Smaller port facilities exist in Kilwa, Lindi, Mafia, Pangani and Bagamoyo. Lake ports include Mwanza, Bukoba and Musoma ports on Lake Victoria; Kigoma port on Lake Tanganyika; and Itungi and Mbamba ports on Lake Nyasa. The port of Dar es Salaam has 11 berths and a total quay length of 2,000 m. The total capacity is 3.1 million tons of break bulk; 6 million DWT of bulk liquid capacity and 250,000 TEU at the container terminal. The crude pumping capacity is 5,000 tons/hour and the pumping capacity for refined products 600 tons/hour. The storage capacity of the grain terminal is 30,000 tons. The port of Tanga has a rated capacity to handle 500,000 tons of general cargo per year and the total capacity of the port of Mtwara is 395,000 tons. Table 15 shows the handling equipment of the three ports as per June 2003. The port of Dar es Salaam has 24 portal cranes, 18 mobile cranes, 13 gantry cranes and 1 floating crane. Tanga has 13 cranes and Tanga only 5.



Table 15 Cargo Handling Equipment and Marine Crafts (by June 2003)

Facilities Dar es Salaam Tanga Mtware Cargo Handling Equipment: Cranes Portal cranes 24 6 Mobile cranes 18 6 5Tower cranes 1 Ship to shore gantry crane 3 Rubber tired gantry crane 9 Rail mounted gantry crane 1 Floating cranes 1 Operational Equipment Tractors 74 6 8Trailers 150 22 18Forklifts 84 11 15Front loader 27 3 1Crane crawlers 1 Reach stackers 1 Conveyors 13 Grabs 8 Spreader 18 Weighbridge 1 Bucket elevator 3 Grain hopper 3 Bagging scales 6 Dust coll unit 3 Bag unit mobile 3 Marine crafts Berthing tugs 6 Lighter towing tugs 1 3 Lighters 10 18 Pontoons 9 14 Labor launches 2 Pilot boats 2 1 1Patrol boats 5 1 Mooring boats 12 2 1Water barge 1 SBN tender 1 Source: Tanzania Harbours Authority Table 16 shows the major vessels operated by Marine Service Company on Lake Victoria, Lake Tanganyika and Lake Nyasa.



Table 16 Vessels operated by Marine Service Company

Vessels Passenger Capacity Cargo Capacity (tons) Year built On Lake Victoria MV Victoria 1,200 200 1960MV Butiama 200 100 1980MV Serengeti 593 350 1983MV Clarias 293 30 1961MV Nyangumi (tanker) 350 1958MT Ukerewe (tug) 720 1983ML Maindi 120 1938ML Wimbi 120 1938MV Umoja 240 1964MT Linda (tug) 240 1983On Lake Tanganyika MV Liemba 600 200 1913MV Mwongozo 800 80 1979MT Sangara (tanker) 350 1981Sea Warrior (for tourism) On Lake Nyasa MV Iringa 139 5 1974MV Songea 212 40 1973Source: Marine Service Company

5.5 Airport Infrastructure

Tanzania has a total of 368 aerodromes which are owned, managed and operated by different entities. TAA owns, manages, operates and develops 62 airports. Kilimanjaro International Airport is currently leased to Kilimanjaro Airports Development Company (KADCO). The Tanzania Airports Authority (TAA) distinguishes four types of airports:

1. International airports: Dar es Salaam, Kilimanjaro and Zanzibar. 2. Strategic airports: Arusha, Lake Manyara, Mafia and Ngara. 3. Major Domestic airports: Mwanza, Mtwara, Dodoma, Kigoma, Tabora, Mbeya,

Songea, Lindi, Shinyanga, Musoma, Bukoba, Sumbawanga, Tanga and Lake Manyara. 4. Small airports.

Table 17 shows the main characteristics of the most important airports in Tanzania.



Table 17 Major Airport Infrastructure Inventory Airport TAA Type6 Runway length (m) Runway Surface Type Existing Runway condition Dar es Salaam 1 1 3,000 AC Good Dar es Salaam 2 1 1,000 AC Good Kilimanjaro 1 3,606 AC Excellent Arusha 2 1,639 AC Poor Lake Manyara 3 1,220 GRAV/MUR Poor Ngara 3 1,500 INA INA Bukoba (existing) 3 1,053 MUR Poor Bukoba (proposed) 3 2,000 AC INA Dodoma 2 2,042 AC Adequate Kigoma 3 1,767 MUR/AC Poor Lindi 3 1,609 GRAV/BITUM Poor Lindi 3 1,383 GRASS/CORAL Poor Lindi 3 1,609 GRASS/CORAL Poor Mbeya (existing) 3 1,500 GRASS Poor Mbeya (proposed) INA 2,150 AC INA Mtwara 2 2,258 AC Poor Mtwara 2 1,158 GRASS Adequate Musoma 3 1,600 MUR Good Mwanza 2 3,300 AC Excellent Shinyanga 3 2,000 AC INA Songea 3 1,625 AC Adequate Tabora 3 1,786 MUR/GLASS Poor Tabora 3 1,555 MUR Good Iringa 3 1,679 AC Adequate Iringa 3 1,285 AC/GLASS Poor Kilwa 4 1,930 NA Poor Moshi 3 1,480 AC Poor Moshi 3 1,268 GLASS Poor Nachingwea 4 1,793 INA Poor Njombe 4 1,890 GRASS Poor Mafia 3 1,600 MUR Poor Singida 4 1,070 GRASS Poor Sumbawanga 3 1,600 GRASS Adequate Tanga 3 1,268 AC Adequate Tanga 3 1,385 GRASS Poor Pemba NA 1,525 AC Excellent

5.6 Pipeline Infrastructure

The only pipeline transport in Tanzania is the one which conveys crude oil products from Dar es Salaam to Ndola refinery in Zambia, a distance of 1,750 km. THA has a single mooring buoy for delivery of crude oil from the jetty to the TANZAM pipeline. There is a pipeline under construction from Songo Songo to Dar es Salaam to transport natural gas.

6 1: International Airport; 2: Strategic Airport; 3: Major domestic Airport; 4: Small Airport



6 TRANSPORT POLICY, ORGANIZATION AND REGULATIONS

6.1 Transport policy and the organization of the transport sector

Tanzania has been liberalizing her economy since the beginning of the nineties following market oriented and private sector friendly economic policies. It therefore created in 1992 the Presidential Parastatal Sector Reform Commission (PSRC) to implement the reform process. Considerable progress has been made in the divestiture of various parastatals; by the end of June 2003, a total of 281 enterprises/units had been divested. This trend has also been reflected in the organization of the transport sector in Tanzania. Most of the public enterprises in the transport sector were earmarked for privatization. The identified transport sector related parastatals include Air Tanzania Corporation (ATC), Tanzania Harbours Authority, Tanzania Railways Corporation, Tanzania-Zambia Railway Authority – TAZARA, Regional Transport Companies – RETCOs, the public transport company Usafiri Dar es Salaam (UDA), and Kilimanjaro International Airport (KIA). Already privatized are the Container terminal at Dar es Salaam port, ATC, KIA and most of the RETCOs. However, these trends of concessioning of the main transport infrastructure network and privatizing transport services and operations are still being hampered by outdated legislation and regulations. Another important constraint is lack of capacity building and experience among the main stakeholders in transport infrastructure and transport services and operations, which impedes efficient and effective operations within this new framework, resulting in excessive bureaucracy, red tape and corruption. There are also counter forces operating, which are trying to keep control over the main assets in the field of transport infrastructure and transport services. The Ministry of Communications and Transport is effectively pulling itself out of business operations to remain with the key role of policy formulation, strategic target setting, regulation and monitoring. The ministry is recognizing the fact that it should stimulate the development of the private sector to actively and effectively invest in transport sector and create the necessary conditions for an optimal performance of the private transport operators. In 2003 the Ministry of Communications and Transport in Tanzania published a document called ‘National Transport Policy’ (NTP) in which it states that “the transport sector in Tanzania is characterized by high cost, low quality services due to various reasons including the existence of high backlog of infrastructure maintenance and rehabilitation, inadequate institutional arrangements, laws, regulations and procedures which are not consistent or compatible with each other to create conducive climate for investment and hence growth of the sector, inadequate capacity caused by low level of investment in resources, and low level of



enforcement of safety, environmental sustainability and gender issues.”7 As main reasons for the deteriorated state of the transport sector coupled with unsatisfactory operational performance, NTP mentions:

• Planning and management responsibilities spread over too many governmental bodies. • Lack of coherent policy guidance. • Inadequately formalized coordination and consultation among principal stakeholders. • Shortage of qualified staff • Planning and decision-making not based on reliable information. • Inadequate infrastructure and facilities for non-motorized transport. • Low managerial capacity in public enterprises; under capitalization and absence of

competition. • Lack of regulatory regimes that are adequately equipped to enhance competition and

fair operational practices. • Insufficient dialogue between the public and the private sector due to poorly

developed service providers. The road transport sector is largely privatized with the dismantling of the RETCOs. The road transport sector, however, is not well organized. Table 18 shows the number of road haulage operators by region and the number of commercial vehicles they had in 1999. There were about 29,000 road haulage companies in Tanzania in 1999 of which 92.4 percent driver-owners. Only 286 companies had more than 5 trucks. About 50 percent of the companies were based in Dar es Salaam. A relatively large share of the smaller companies is from the Kilimanjaro region with 2,900 driver-owners and 112 companies with 2 or 3 trucks. There are not many foreign road operators active in Tanzania. A Federation of Tanzania Road Hauliers exists with 100 members. Only few, however, are active member as the Federation. The Federation is member of the Board of the Road Fund. They have recently carried out a campaign to persuade their members and other road haulage companies not to overload their trucks. The major concern raised by the Federation was the abolishment of the 5 percent tolerance at the weighbridges; the lack of facilities at border crossings; and the many customs checkpoints along the corridors causing unnecessary delays.

7 Ministry of Communications and Transport; National Transport Plan; p. 1.



Table 18 Number of Road Haulage Operators by region and ownership category in Tanzania in 1999

Region 1 vehicle 2-3 vehicles 4-5 vehicles >5 vehicles Total Arusha 1,055 86 16 20 1,177Coast 961 56 4 6 1,027Dar es Salaam 13,881 875 112 156 15,024Dodoma 609 41 5 3 658Iringa 705 28 4 5 742Kagera 995 62 13 14 1,084Kigoma 189 12 0 0 201Kilimanjaro 2,900 112 6 12 3,030Mara 553 44 7 10 614Mbeya 612 95 16 13 736Morogoro 259 15 1 0 275Mtwara 60 7 1 0 68Mwanza 1,469 47 10 12 1,538Rukwa 190 15 1 2 208Ruvuma 736 82 12 14 844Shinyanga 389 19 0 0 408Singida 242 46 12 13 313Tabora 118 5 6 4 129Tanga 843 47 5 4 899Total 26,766 1,694 229 286 28,975% total operators 92.4 5.8 0.8 1.0 100Source: Transport Bulletin; Dar es Salaam; 2003.

6.2 Regulatory framework for the transport sector

Tanzania is signatory of several international agreements in the transport sector. The most important multilateral agreement is the SADC Protocol on Transport, Communications and Meteorology. Tanzania has been member of COMESA, but abandoned the Commonwealth in 2000. It is considering becoming member again. In the reform process of the regulatory regime in the transport sector, independent regulatory bodies have been established: the Tanzania Civil Aviation Authority (TCAA); Tanzania Airports Authority (TAA); and the Surface and Maritime Transport Regulatory Authority (SUMATRA). Enactment has taken place of the Surface and Maritime Transport Regulatory Authority (SUMATRA) Act of 2001; the Tanzania Zambia Railways Act of 1995; Railways Act of 2002; the Tanzania Civil Aviation Act of 2003. Also a new Port Act is being prepared. However, despite these developments in the regulatory sphere, the transport legislation for roads and railways in Tanzania is still not detailed enough developed and elaborated and is not



entirely accompanying the socio-economic developments and the changes in the management structures of larger transport infrastructure works and transport operations. Road Transport Tanzania has signed the SADC Protocol on Transport, Communications and Meteorology, which prescribes that Member States shall progressively introduce measures to liberalize their market access policies in respect of cross-border carriage of goods.8 The SADC Protocol stimulates its Member States to conclude appropriate bilateral agreements in this respect as a step towards implementation of a fully liberalized access to the regional road transport market. All the agreements should be based on non-discrimination, reciprocity and extra-territorial jurisdiction. To regulate the land and water transport, the Surface and Marine Transport (SUMATRA) Regulatory Act, 2001 was adopted. The functions of the authority shall be, amongst others, to issue, renew and cancel licenses; to establish standards for regulated goods and regulated services; to establish standards for the terms and conditions of supply of the regulated goods and sources; to regulate rates and charges. Presently, the road transport is still regulated by the Transport License Act from 1973, which is outdated. The SUMATRA Act only amends the Transport License Act from 1973 by assigning all regulatory powers to SUMATRA. The contents remain the same. In this Transport License Act the conditions are stipulated for obtaining a license to transport goods and passengers. There are no criteria for good repute, financial standing or professional competence for the road transport operators. In practice, it is very easy to obtain a license, also for foreign trucks. The fees for a Goods Vehicle License vary from Tsh 35,000 for a one-year license for a truck with a load capacity 2-5 tons to Tsh 195,000 for a truck with load capacity of more than 30 tons for a Tanzanian operator; for a foreign truck one has to pay 52 US Dollars and 250 US Dollars, respectively. It is recommended to revise the qualitative criteria for obtaining an operator’s license and to draft separate laws for road freight and road passenger transport. Railway Transport

8 The SADC Protocol on Transport, Communications and Trade states that this liberalization may go through three stages: “Member States shall introduce the following liberalization phases: Phase 1 Abolition of restrictions on carriers of two Member States to carry goods on a defined route between – (1) such States; or (2) in transit across the territory of another Member State en route to a third Member State or non-Member State: Provided that such transit traffic may only be undertaken if the carrier's vehicle traverses the territory of its home state. Phase 2: Abolition of restrictions on carriers of one Member State to carry goods on a defined route between another Member State and a third Member State or non-Member State, irrespective of whether the carrier's vehicle traverses the territory of its home state; and Phase 3: Abolition of restrictions on carriers of one Member State to carry goods between another Member State and a third Member State or a non-Member State.”



In 2002 the Railways Act was adopted “to make better provisions for development and promotion of rail transport services”9. The act established the Reli Assets Holding Company Ltd. and provides a regulatory framework of railway transport by SUMATRA. The act assigns the following objects to the Reli Assets Holding Company:

• To acquire by operation of this Act or otherwise, the rail transport functions of the Tanzania Railways Corporation and such of its property, including chooses-in-action, rights and liabilities transferred to it.

• To secure the provision of, or to provide, rail infrastructure. • On behalf of the Government, to develop, promote and to manage the rail infrastructure

assets. • To enter into agreements with other persons in order to secure the provision of railway

transport services, whether by means of concession, joint venture, public, private partnership or other means, and to this end to delegate its own function of providing rail transport services to one or more railway operators.

The company shall also establish and operate a Railway Infrastructure Fund through a separate account with a bank or any other financial institution. The Act assigns, amongst others, the following regulatory powers to SUMATRA in respect of railway transport:

• To issue licenses to railway operators. • To regulate tariffs. • To monitor rail transport services standards and standards of performance for the

provision of rail transport services. • To initiate and conduct investigations in relation to the quality of service provided by

rail transport operators. • To collect and compile data on rail transport operators as it considers necessary for the

performance of its functions under this Act and the Surface and Marine Transport Regulatory Authority Act, 2001.

• To levy charges and fees for the granting of licenses and other services provided by SUMATRA as may in its opinion be appropriate.

• To levy the rail transport industry up to one percent of total turnover. • To lay down standards, and codes of conduct in respect of rail transport operators and

customers. This Act thus provides the legal framework to concession TRC to the private sector, which decision was taken by the Government of Tanzania at the end of 1997. The concessioning process of TRC is well advanced with the process of pre-qualification of potential bidders completed. Presently, seven companies have been approved to bid for the concession of 25 years of TRC: New Limpopo Bridge Projects Investments (NLP); Spoornet Consortium; Great

9 The Railways Act, 2002; Acts Supplement No. 4, 26th April 2002 to the Gazette of the United Republic of Tanzania No. 17, Vol. 83 dated 26th April, 2002; p. 179.



Lakes Railways Company Consortium (COMAZAR); Sheltan & Mvela Consortium; Dynamic Rail; Rites Limited Consortium of India; and CANAC of Canada. The first five consortia are all from South Africa. It is foreseen that at the end of 2004 or the beginning of 2005 the bidding process will be concluded. The concessionaire is expected to take over responsibility for the operation and expansion of the rail transport services by June 2005. The concessioning of TAZARA is also foreseen for the next future. The joint owners of TAZARA, the governments of Tanzania and Zambia, have made a decision to engage private sector participation in TAZARA’s management and operations. A grant under PPIAF has been arranged to undertake the necessary studies to identify and evaluate the various options for private sector participation in the operations; to make recommendations on the institutional arrangements for the rail asset holding entity and the regulator; and to propose necessary changes in the legal and regulatory regime. It is highly recommended to further develop the Railways Act, 2002 into a comprehensive Railway Code and to clearly define the relationship between the Reli Assets Holding Company Ltd., SUMATRA and the railway operators and the respective responsibilities in more detail. Ports A new Port Act is presently undergoing its third reading transforming the Tanzania Harbors Authority (THA) into the Tanzania Ports Authority (TPA) which will act as landlord only and facilitates the delegation of ports operations to private companies through concessions. Currently, all sea ports including Dar es Salaam, Tanga, Mtwara and six small ones on the east coast are under the responsibility of the THA, while lake ports under the marine Company Services Ltd. According to the new Port Act, TPA shall be responsible for maintenance of port infrastructure, access roads, rail, navigational aids and utilities. This new Port Act follows the positive experience of the leasing of the Container Terminal in Dar es Salaam in September 2000 to Tanzania International Container Terminal Services (TICTS), a company backed by the Hong Kong-based Hutchison Port Holding Development. Since its start in 2000 throughputs via its terminal increased by 63 percent and transshipment increased by 150 percent, generating around Tsh 4.5 billion a year to the Treasury. The next terminal to be concessioned is the General Cargo Terminal, which has eight deep water berths and an annual capacity of 2.5 million tons. Maritime and Coastal Shipping In 2002 the Shipping Agency Act was adopted to provide regulation and control of the business of a shipping agency. Under this act the following services of the shipping agency are mentioned: (a) arrangements for the arrival or departure of ship; (b) arrangements for the provision of port services through port operators, Customs and other Government or semi-governmental institutions, firms or private individuals; (c) arrangements for cargo



documentation and forwarding of cargo; (d) arrangements for procuring and processing of documents and performing activities required for dispatch of cargo; (e) arrangements for the provision of services pertaining to crew matters; and (f) arrangements for the provision of ship stores, supplies, ship repairing and any other related services. The responsibility for the licensing and registration is in the hands of SUMATRA, which also should superintend the conduct of shipping agents and formulate and enforce the standards required of the conduct of the business of shipping agency. The Act stipulates that the Authority shall not issue a license if the applicant is not a citizen of Tanzania or less than 50 percent of the shares of the company are in the hands of the Tanzanian citizen. Also no license will be granted if (a) the applicant is a ship owner, an operator or a charterer; (b) the applicant does not possess the prescribed qualifications for the proper carrying on of the business of shipping agency; (c) the applicant has a known criminal record inside or outside the country or (d) the provisions of this Act or regulations made under this Act have not been complied with. Merchant shipping is well regulated by the adoption a comprehensive Merchant Shipping Act in 2003. Airports and Air Transport The Tanzania Airports Authority (TAA) was established in 1999 as a government semi-autonomous agency to manage, develop and operate airports in Tanzania. The TAA share of airports represents 17.1 percent of all airports in the country and 46 percent of all airports owned by the Government of Zanzibar and the Government of the Tanzania. It includes all major airports. The Tanzania Civil Aviation Authority (TCAA) was established by TCAA Act No. 10 as the regulatory authority for aviation. Its main functions are (i) to issue, renew, vary and cancel air service licences; (ii) to establish standards for regulated goods and regulated services; (iii) to establish standards for the terms and conditions of supply of the regulated goods and services; (iv) to regulate rates and charges; (v) to make rules for carrying out the purposes and provisions of this Act. The Tanzania Central Freight Bureau and SUMATRA The Tanzania Central Freight Bureau was established by TCBF Act in 1981 as part of the Ministry of Communications and Transport as a semi-commercial institution charged with the dual role of a participant and arbiter of the shipping industry. It protected the national shipping industry by trying to negotiate fair rates for importers and exports at the international shipping



lines. It also engaged itself in bookings and was to a lesser extent also involved in developing regulations. However, with the new policy of economic liberalization and the decision of the Government to disengage itself from transport operations, the Government proposed amendment of the TCFB Act, which was approved in 2000. The main new task assigned to TCFB was to assume and perform the role of Regulator of commercial shipping in Tanzania. For the full and effectual discharge of its functions, the Bureau has power to:

• Monitor the conduct and practices of shipping lines, shipping agents, freight forwarders, terminal operators and other service providers.

• Facilitate negotiation of freight rates, other charges and surcharge agreements through a consultation forum and mechanisms to be initiated jointly with shipping industry participants.

• Require all shipping lines with ships loading or discharging cargo at Tanzania ports to:

o Submit ships particulars on first call. o File their tariffs. o Submit copies of cargo and freighted manifests and charter parties for both

imports and exports. o Submit copies of operational or service agreements where applicable. o Submit notification of any imposition of new charges.

For every import consignment the consignee or his agent shall avail to the Bureau through Customs copies of commercial invoices, bills of lading and any other information which the Bureau may deem necessary. Every shipping line carrying Tanzania cargo has to provide the Bureau with certified copies of cargo and freight manifest; in case of import two days before the arrival of the ship; in case of export cargo, within seven days after sailing. TCBF issues also certificates of registration of shippers, shipping agents and clearing and forwarding agents, which are annually subject to renewal. Remarkable is that the Act stipulates that every service provider, terminal operator, shipping agent, carrier, clearing and forwarding agent and other intermediary when intending to introduce new or revised tariffs, charges or other conditions affecting the trade, has to serve a three months notice to the Bureau and to the shippers in order to allow consultations, negotiations or representations if any, by consumers of services. The Bureau shall, according to the Act, be paid on every consignment discharged or loaded at any Tanzania port by the shipping line or its shipping agent. Government Notice No. 214 published on 2/6/2000 prescribes the following fees and charges:

• Imports of petroleum products and dry bulk: 0.25 – 0.30 USD per ton.



• Imports of liquid bulk: 0.25 – 0.75 USD per ton. • Imports of general cargo: 0.75 – 1.75 USD per ton. • Exports: 0.25 USD per ton.

The Act also established the Shipping Industry Consultative Forum to provide stakeholders an opportunity for exchange of views, issues of standards, costs and services with a view to enhancing communication, consensus and overall competitive leverage. This Forum consists of representatives from the Tanzania Harbours Authority; Tanzania Railways Corporation; Tanzania Zambia Railways Authority; Shipping Agencies Association; Freight Forwarders Association; Tanzania Shippers Council; Zanzibar Port Corporation; Tanzania Chamber of Commerce, Industries and Agriculture; Zanzibar Chamber of Commerce, Industries and Agriculture; Board of External Trade; Tanzania Exporters Association; Truck Owners Association; Customs Department of the Tanzania Revenue Authority; ship operators; and three other members. This Shipping Industry Consultative Forum published in 2001 a very interesting report on delays in import cargo clearance from Dar es Salaam Port, which is for a part still valid in the present situation10. TCFB has 32 staff. The Bureau has its Head Office is in Dar es Salaam and branches in Tanga, Zanzibar and Mtwara. In the next future the TCFB will become part of the Surface and Marine Regulatory Authority (SUMATRA).

10 More details about the background for this study and the actual situation can be found in the chapter on Customs and Trade.



7 TRANSPORT AND LOGISTICS SERVICES

The development of transport sector is still facing many challenges and its performance is still poor, inefficient and highly adequate. The contribution of the transport sector to the Gross Domestic Product is steadily decreasing from 7.8 percent in 1980 to 4.7 percent in 2003.

7.1 Port operations

The output of three main ports in Tanzania, Dar es Salaam, Tanga and Mtwara has been fluctuating between 1999-2003. In 1999 the imports and exports handled by the three ports was 5,804,022 tons, raising to 6,192,982 tons in 2000, but decreasing to 5,436,120 tons in 2003. Table 19 Imports and exports handled at the main ports 1999-2003 (in tons)

Type 1999 2000 2001 2002 2003 Exports 1,145,574 1,503,436 1,317,954 1,127,763 1,004,305Imports 4,658,448 4,689,546 3,611,853 4,793,500 4,431,815Total 5,804,022 6,192,982 4,929,807 5,921,263 5,436,120Source: THA Table 20 shows the dominance of the Port of Dar es Salaam in relation with the ports of Tanga and Mtwara. Table 20 Cargo traffic at major ports 1999-2003 (in DWT) Port and type 1999 2000 2001 2002 2003 Dar es Salaam Imports 3,420,527 3,272,752 3,218,586 3,431,432 4,137,968Exports 678,978 740,634 624,018 715,092 723,301Total 4,099,505 4,013,386 3,842,604 4,146,524 4,861,269Tanga Imports 94,362 82,158 96,105 97,742 126,680Exports 81,903 92,192 105,767 152,335 215,147Total 176,265 174,350 201,872 250,077 341,827Mtwara Imports 74,049 82,101 74,244 65,555 68,430Exports 111,083 118,387 109,694 72,264 69,640Total 185,132 200,488 183,938 137,819 139,070Grand total 4,460,902 4,388,224 4,228,414 4,534,420 5,342,166Source: THA



The Port of Dar es Salaam has the largest in cargo traffic, which 5,170,435 tons in 2003. All transit traffic is coming through the port of Dar es Salaam and has dropped from 1,503,505 tons in 1995 to 844,216 tons in 2002. In 2003 transit traffic increased to 992,896 tons and in the first semester of 2004 transit traffic already amounted 721,644 tons. Table 21 Transit cargo through the Port of Dar es Salaam 1995-2003 (in metric tons)

Year Transit Total % Transit 1995 1,503,505 4,686,287 32.1 1996 1,124,209 3,794,209 29.6 1997 966,258 4,525,517 21.4 1998 963,835 4,042,437 23.8 1999 838,507 4,075,730 20.6 2000 659,507 3,836,168 17.2 2001 875,072 4,271,574 20.5 2002 844,216 4,524,508 18.7 2003 992,896 5,170,435 19.2

1st half 2004 721,644 2,987,456 24.2 Source: THA, Port Statistical Unit, September 2004 Table 22 shows the transit traffic through the Port of Dar es Salaam by country of origin and destination 1999-2003 (in DWT). The total amount of handled in cargo in the time period 200-2003 fluctuated around 600,000 tons per year of which 60 percent imports and 40 percent exports.



Table 22 Transit traffic through Dar es Salaam Port by country of origin and destination 1999-2003 (in DWT)

Country Type 1999 2000 2001 2002 2003

Zambia Imports 27,000 40,000 28,000 74,000 55,000 Exports 150,000 159,000 139,000 103,000 122,000DR Congo Imports 59,000 66,000 83,000 100,000 114,000 Exports 3,000 5,000 18,000 1,400 4,000Burundi Imports 55,000 78,000 72,000 51,000 48,000 Exports 22,000 29,000 17,000 14,000 25,000Rwanda Imports 108,000 77,000 64,000 40,000 44,000 Exports 9,000 9,000 7,000 8,000 6,000Malawi Imports 4,000 5,000 6,000 66,000 29,000 Exports 100 100 0 300 200Uganda Imports 146,000 116,000 87,000 24,000 53,000 Exports 36000 22,000 25,000 16,000 17,000Other Imports 56000 7,000 13,000 21,000 12,000 Exports 0 0 79,000 84,000 66,000Total Imports 455,000 389,000 352,000 376,000 355,000 Exports 220,000 224,000 286,000 227,000 240,000Grand Total 675,000 613,000 638,000 603,000 595,000Source: compiled from data of THA Transit traffic to and from Uganda and Burundi is also carried by vessels of the Marine Service Company through Mwanza Port on Lake Victoria: Table 23 Transit cargo through Mwanza Port by MSC vessels 1999-2003 (in tons)

Country 1999 2000 2001 2002 2003 Uganda Imports 177,725 182,838 201,400 176,832 194,214Exports 30,065 49,208 52,500 75,733 43,251Burundi Imports 136,855 140,146 171,328 130,752 116,513Exports 21,082 30,933 26,416 17,457 24,499Source: MSC The composition of the freight handled by the port of Dar es Salaam shows that 60 percent is dry general cargo and 40 percent bulk (for 90 percent bulk oil).



Table 24 Composition of freight through the Port of Dar es Salaam in 2003 (in DWT)

Description 2003 Dry General Cargo Imports 2,244,000 Exports 842,000 Sub total 3,086,000 Bulk oil Imports 1,662,000 Exports 37,000 Sub total 1,699,000 Other bulk liquid Imports 166,000 Exports 5,000 Sub total 171,000 Total Imports 4,072,000 Exports 884,000 Grand total 4,956,000

Source: THA The imports of dry general cargo in 2003 consists of 338,054 tons of wheat; 41,937 tons of bulk fertilizer; 414,706 tons of bagged cargo; 196,082 tons motor vehicle tractor and trailer and motor vehicle spare parts; 1,261,341 tons of non-specified containerized cargo; and less than 100,000 tons other cargo. In 2003 1,307,432 tons of dry cargo was cleared by road and only 272,696 tons by rail. 74,015 TEU of containers were cleared by road in 2003 and 9,051 TEU by rail. Containerization The amount of containerized cargo traffic in the port of Dar es Salaam has been increasing since the since 1999 from a total of 124,648 TEU to 186,117 TEU in 2003. In the first half of 2004 104,500 TEU had already been handled. Almost 90 percent of all containers are being cleared by road and only 10 percent by rail.



Table 25 Containerized cargo traffic in the Port of Dar es Salaam (in TEU)

Imports Exports Transshipment Total 1995 50,313 47,981 265 98,5591996 48,973 49,911 22 98,9061997 54,823 48,638 25 103,4861998 51,003 49,627 8,916 109,5461999 56,827 49,137 2,194 108,1582000 62,119 60,549 1,980 124,6482001 68,921 66,519 6,280 141,7202002 73,090 68,297 12,409 153,7962003 90,135 77,663 18,319 186,117

1st half 2004 46,008 45,323 13,169 104,500Source: THA, Port Statistical Unit, September 2004

7.2 Railway operations

The performance of the railways has been fluctuating: from 1993 to 1998 there was a decrease in the railway freight performance, after which an upward trend can be discerned as Table 26 shows. However, the installed capacity is much higher and the reliability of the railways is highly jeopardized. Table 26 Railway Freight Performance 1993-2003 (in thousands tons)

Year TRC Freight TAZARA Freight Total Railway Freight 1993 1,205 1,238 2,4431994 1,234 643 1,8771995 1,342 633 1,9751996 1,244 663 1,9071997 1,073 555 1,6281998 955 632 1,5871999 1,127 615 1,7422000 1,165 634 1,7992001 1,351 595 1,9462002 1,446 552 1,9982003 1,443 614 2,057

Source: TRC&TAZARA Remarkable is the increase in the output of TRC from 955,000 tons in 1998 to more than 1.4 million tons in 2003, while TAZARA remained at its same level of 600,000 tons per year. Table 27 and 28 show the performance of domestic and international railway freight respectively.



Table 27 Domestic Railway Freight 1999-2003 (in thousand tons)

Year TRC Freight TAZARA Freight Total Domestic Freight 1999 644 319 9632000 672 273 9452001 826 257 1,0832002 988 164 1,1522003 998 177 1,175

Source: TRC&TAZARA Table 28 International Railway Freight 1999-2003 (in thousand tons)

Year TRC Freight TAZARA Freight Total International Freight 1999 483 296 7792000 493 361 8542001 525 338 8632002 458 388 8462003 445 437 882

Source: TRC&TAZARA From 1999 to 2003 TAZARA reduced domestic transport from 319,000 to 177,000 tons, while TRC increased its domestic output from 644,000 tons in 1999 to 998,000 tons in 2003. For international transport the trend is opposite: TAZARA increased its international rail transport from 296,000 tons in 1999 to 437,000 tons in 2003 and TRC reduced its output in the same time period from 483,000 tons to 445,000 tons. Most of domestic cargo transported by TRC is general cargo counting for 43 percent in 2003 and petrol, oil and lubricants with a share of 15 percent in 2003.



Table 29 TRC Domestic Traffic by commodity 1999-2003(in tons)

Traffic 1999 2000 2001 2002 2003 Cement 109,992 81,147 119,806 85,516 81,511Coffee 23,113 19,018 16,027 18,915 16,233Cotton 25,110 35,403 38,565 44,646 33,418Cotton cake 2,228 739 13,824 16,809 25,351Fertilizer 6,562 3,352 11,413 18,262 21,065General cargo 193,903 215,702 308,090 390,437 428,919Grains 13,353 29,408 20,030 49,080 34,149Gypsum 20,893 8,000 12,476 24,271 16,873Livestock 9,399 12,685 11,899 13,539 19,405Maize 61,008 41,867 26,755 59,942 48,276Petrol, oil 78,614 123,942 131,358 151,829 146,422Salt 14,139 17,830 24,838 25,920 31,127Sugar 41,651 41,999 40,047 41,890 45,806Timber 9,295 10,423 8,792 11,072 13,153Tobacco, cigarettes 18,723 15,951 21,995 18,462 21,622Parcels, luggage 15,717 14,592 20,155 17,731 14,237Total 643,700 672,058 826,070 988,321 997,567Source: TRC The domestic cargo transported by TAZARA consists mainly by cement and timber counting in 2003 for 73 percent. The domestic transport of general cargo has reduced dramatically since 1999: it dropped from 148,808 tons to 16,304 tons in 2003. Table 30 TAZARA Domestic Traffic by commodity 1999-2003(in tons)

Traffic 1999 2000 2001 2002 2003 Cement 78,775 89,849 93,539 70,850 49,673 Coffee 14,043 2,605 10,668 1,250 486 Fertilizer 13,502 10,040 11,981 8,556 8,762 General cargo 148,808 69,942 32,619 56,537 16,304 Grains 0 9,746 9,526 1,258 1,214 Livestock 0 82 29 310 514 Maize 14,029 24,875 50,373 286 3,267 Petrol, oil 1,900 7,721 2,614 6,675 5,081 Sugar 3,734 9,680 4,578 2,898 3,246 Timber 44,139 48,890 41,670 15,394 53,139 Total 318,930 273,430 257,417 163,964 141,691 Source: TAZARA Railway passenger transport has decreased from 2,037,000 in 1999 to 1,705,000 in 2003.



Table 31 Railway passenger transport 1999-2003

Year TRC Passengers TAZARA Passengers Total Passengers 1999 615,000 1,422,000 2,037,0002000 631,000 1,543,000 2,174,0002001 728,000 1,541,000 2,269,0002002 685,000 1,069,000 1,754,0002003 683,000 1,022,000 1,705,000

Source: TRC&TAZARA

7.3 Road transport services

There are no compiled transport statistics available in Tanzania. There are no data on road transport since the sector has been liberalized. Neither the National Bureau of Statistics nor the Ministry of Communications and Transport include road transport data in their annual statistical publications. Therefore, as it is important for policy development to dispose over reliable data – for instance feasibility studies for construction or rehabilitation of roads should be based on existing and forecasted traffic flows - , it is recommended that the Ministry of Communications and Transport together with the National Bureau of Statistics carry out on regular basis road haulage surveys. Another way of collecting data, at least for the operators registered in Tanzania, is to directly link the issuance of the road service licenses with the obligation to provide statistics on a regular basis to the issuing agency and create a legal basis for this obligation. In a study carried out by TRL/DFID making a comparison of freight transport operations in Tanzania and Indonesia, it was estimated that in 1993/94 the following output in road transport was realized:

• International road transport: 750 million tonkilometers. • Inter-regional road transport: 2,850 million tonkilometers. • Intra-regional road transport: 150 million tonkilometers.

A large share of the inter-regional road transport was between Dar es Salaam and the main centers in the country. The amount of inter-regional road transport is to some extent compatible with the Origin-Destination Matrix of the Freight Flows in the base year 2002 that the Policy and Planning Department of the Ministry of Communications and Transport (Table 32). This matrix provides a good indication of the type of commodities that are traded and transport between Dar es Salaam and the major regions in Tanzania. The total amount of transport between Dar es Salaam and the other regions in Tanzania was approximately 3 million tons. The matrix probably did not take into account transport by railways. If one take into consideration that in



2002 10,134 licenses for commercial trucks have been issued by the Tanzanian authorities11, this would imply an average load performance of 300 tons per vehicle, which would be quite reasonable in the Tanzanian context taking into account that an average inter-regional trip is about 700 km.

11 Central Transport Licensing Authority; Dar es Salaam, 2003.



Table 32 Total Origin-Destination (O-D) Matrix Goods Flows Base Year 2002

Consumption Sugar Cattle Cotton Coffee Cashew Timber Drinks Petroleum Cement Steel Fertilizer Tobacco Oil Other Total Dar Morogoro 21364 31866 0 0 0 0 0 18258 20457 17938 2510 0 8014 15088 58332 193827 Dar Iringa 41411 0 0 0 0 0 0 0 8827 0 1115 0 0 5927 1223 58504 Dar Mbeya 96553 0 2462 1166 7738 0 7497 63928 84597 0 3347 0 0 4935 61248 410345 Dar Songea 19734 0 986 0 7262 0 0 4691 5747 0 2789 0 0 5287 30786 77282 Dar Lindi 9889 0 0 0 0 0 0 0 0 22222 669 0 0 0 272 10830 Dar Mtwara 0 0 0 0 0 0 0 36483 4738 107625 3626 0 0 5139 1524 51511 Dar Tanga 14318 0 0 0 0 0 334 16076 33695 0 2231 0 0 10867 103118 202861 Dar Moshi 4071 4760 0 0 798 0 0 20653 8319 17938 2789 0 0 5378 1157 155549 Dar Arusha 29647 0 11819 0 0 0 0 76935 27154 0 11158 0 0 4976 43346 205036 Dar Dodoma 18473 0 0 0 0 0 0 17331 7484 82 2231 0 0 4835 18092 86385 Dar Manyoni 3 0 456 0 0 0 0 0 0 697 781 0 0 0 0 1239 Dar Singida 14244 0 8208 0 0 0 0 10670 1957 4685 7253 0 0 0 2571 44985 Dar Tabora 2995 0 1803 22 0 0 1917 12804 12867 35875 558 0 0 4935 31201 69800 Dar Shinyanga 61292 0 54749 19210 4088 0 0 20487 15400 0 3347 0 0 4993 100362 288657 Dar Mwanza 44353 0 10548 6128 38548 0 0 64241 131401 3277 12274 0 0 3216 330560 677160 Dar Musoma 0 0 1483 0 0 0 0 14939 7021 4106 0 0 0 0 0 23442 Dar Bukoba 176 0 0 0 15121 0 0 0 0 27 2231 0 0 0 8299 29105 Dar Kigoma 44719 0 164 0 21095 0 0 8536 57765 0 2789 0 0 3004 196851 339030 Dar Rukwa 1662 0 342 0 0 0 3266 0 0 0 0 0 0 0 908 6204 Dar S’wanga 20 0 0 0 0 0 0 12804 3056 0 781 0 0 0 137 16799 Dar Mufindi 29623 0 0 0 14129 0 40502 4691 0 0 0 0 0 0 0 88945 Dar Ifakara 10972 18350 0 0 0 0 0 0 0 0 0 0 0 0 0 29323 Dar Rwanda 0 0 0 0 0 0 0 0 0 0 0 0 0 2315 0 2315 Dar Burundi 0 0 0 0 0 0 0 0 0 0 0 0 0 2315 0 2315 Dar Zambia 0 0 255 0 3817 0 0 14599 315 0 0 0 0 0 44486 63472 Dar Malawi 1097 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1097 Dar Other Dar 50552 7869 0 0 0 2574 0 62084 1508524 20429 111586 523 0 108599 223532 2096272 Dar Other Tanga 0 0 0 0 0 0 0 0 0 0 0 0 0 3451 0 3451 Total 517168 62845 93275 26526 112596 2574 53516 480210 1939324 234901 174065 523 8014 195260 1258005 5235741 Source: Ministry of Communications and Planning; Policy and Planning Department; May 2004.



7.4 Air freight transport operations

Air freight transport is still not well developed in Tanzania. Remarkable is the fact that in 2003 the airport of Mwanza handled a larger share of air freight transport than Dar es Salaam: 12,311 tons vs. 11,176 tons. Data on the freight handling of Kilimanjaro International Airport (KIA) from 2000 onwards are not available in the statistics provided by the Tanzania Airports Authority. This is probably due to the fact that KIA airport is given into concession to the private company12. Table 33 Air freight transport in main airports in Tanzania 1998-2003(in tons)

Airport 1998 1999 2000 2001 2002 2003 Dar 12,305 10,705 13,503 13,294 11,326 11,176Kilimanjaro 1,785 2,320 n.a. Mwanza 11,283 4,333 19,562 21,063 17,420 12,311Arusha 0 0 0 0 194 275Mtwara 323 189 150 177 123 86Source: TAA The airport of Dar es Salaam handled 67 percent of the international passengers in Tanzania in 2003. Kilimanjaro Airport and Zanzibar had each a share of 16 percent in 2003. Dar es Salaam handled over the same year 38 percent of the domestic passengers; Mwanza and Zanzibar 16 percent each; and Arusha 12 percent.

12 This is, however, no justification why data should not be published. Confidentiality of data of business data of private companies may in many cases be respected, but in this case, this is not justified.



Table 34 International passenger throughput at the major airports

Airport 1999 2000 2001 2002 2003 Dar es Salaam 324,000 349,000 358,000 396,000 459,000Kilimanjaro 65,000 87,000 97,000 107,000 111,000Zanzibar 121,000 128,000 111,000 135,000 110,000Arusha 0 0 0 0 0Bukoba 0 0 0 0 0Dodoma 0 0 0 0 0Kigoma 1,000 1,000 0 0 0Moshi 0 0 0 0 0Mtwara 0 0 0 0 0Mwanza 3,000 3,000 3,000 3,000 3,000Shinyanga 0 0 0 0 0Tabora 0 0 0 0 0Other 2,000 2,000 5,000 3,000 9,000Total 517,000 569,000 574,000 644,000 692,000 Source: TCAA Table 35 Domestic passenger throughput at the major airports

Airport 1999 2000 2001 2002 2003 Dar es Salaam 200,000 220,000 245,000 254,000 296,000Kilimanjaro 62,000 68,000 57,000 39,000 37,000Zanzibar 55,000 80,000 91,000 124,000 128,000Arusha 44,000 55,000 63,000 60,000 96,000Bukoba 10,000 12,000 15,000 16,000 18,000Dodoma 0 1,000 1,000 0 5,000Kigoma 3,000 7,000 8,000 5,000 13,000Moshi 3,000 2,000 1,000 2,000 0Mtwara 25,000 21,000 21,000 19,000 20,000Mwanza 73,000 75,000 82,000 90,000 127,000Shinyanga 10,000 10,000 10,000 9,000 12,000Tabora 2,000 3,000 4,000 4,000 6,000Other 66,000 79,000 98,000 90,000 19,000Total 563,000 633,000 696,000 712,000 777,000Source: TCAA



8 TRANSPORT COSTS, EFFICIENCY AND DELAYS

The main problem that transport is facing is a backlog of investments and maintenance of railway infrastructure and efficiently operating intermodal connections. The transport costs in Tanzania are high, like in most countries in Southern Africa. The main causes are unbalanced freight flows: Tanzania has much more incoming cargo (imports) than outgoing (exports); long distances; long trip times due to deficient rolling stock, low capacity transport infrastructure and non physical barriers. This makes export promotion of traditional, but also non-traditional products quite a challenge. The Minister of Communications and Transport of Tanzania is well aware of this problem according to a statement he made in May 2003: “The cost of transport in the region is high. It is estimated to be four to five times compared to the cost in developed countries. For landlocked countries, the cost accounts for 30 - 40 per cent of the price of goods. Low levels of the intra-regional trade in the region are a result, of among other things poor transport and communications infrastructure. It is the desire of Tanzania and EAC member states to reduce transportation costs with the objective of achieving competitiveness, poverty alleviation, and development.”13 The transport costs for international road transport in Tanzania are between 0.06 – 0.085 USD per tonkilometer, depending on commodity, volume and destination. Road transport cost for shorter haul domestic transport is between 0.03-0.04 USD. The cost of rail transport is between 0.04 and 0.05 USD, which twice as high as normal in similar circumstances. Table 36 shows comparative transport costs of the various international corridors to and from the Port of Dar es Salaam. Distances are long with an average of 1730 km. The calculation of the costs is based on road transport costs of 0.07 US Dollar per tonkilometer; railway transport cost of 0.045 US Dollar per tonkilometer; and ferry transport cost of 0.06 US Dollar per tonkilometer. Transport of 20’ feet and 40’ feet is much more expensive. The rates charged for containers to Kigali and Bujumbura are between 3,800 – 4,200 US Dollars for a Full Load Truck. With the restrictions imposed by TANROADS on the axle loads, this implies that by road only one 20’ feet containers can be transported instead of two 20’ feet containers or one 40’ feet.

13 Prof. M.J. Mwandosya, Minister of Communications and Transport, United Republic of Tanzania; Trade Facilitation and Infrastructure Development: Tanzania and East African Region; May 28, 2003.



Table 36 Comparative transport costs of international routes with origin/destination Dar es Salaam Origin/Destination Mode Distance in km Distance in km Distance in km Total distance Total cost per ton Road Rail Ferry Kampala-Uganda rail Mwanza-ferry 0 1230 360 1590 77.0 Kigali-Rwanda rail Isaka-road 580 990 0 1570 85.15 road 1500 0 0 1500 105.0 Bujumbura-Burundi rail Kigoma-ferry 0 1250 180 1430 67.1 rail Isaka-road 730 990 0 1720 95.6 road 1660 0 0 1660 116.2 Lusaka-Zambia rail TAZARA-ZR 0 2030 0 2030 91.4 road 2020 0 0 2020 141.4 Ndola-Zambia rail TAZARA-ZR 0 1980 0 1980 89.1 rail K.Mposhi-road 120 1860 0 1980 92.1 road 1930 0 0 1930 135.1 Lilongwe-Malawi rail Mbeya-road 780 860 0 1640 93.3 road 1670 0 0 1670 116.9 Mzuzu-Malawi rail Mbeya-road 400 860 0 1260 66.7 road 1290 0 0 1290 90.3 Lubumbashi-Congo rail TAZARA-ZR 0 2050 0 2050 92.3 road 2110 0 0 2110 147.7



The length of the trip is also influencing the costs of transport. The average distance that road transport in Tanzania achieves is about 400 km per day. The following average duration of trips to neighboring countries have been registered:

• Dar es Salaam - Lusaka: 4-5 days • Dar es Salaam - Bujumbura: 4-5 days • Dar es Salaam - Kigali: 4-5 days • Dar es Salaam - Mwanza (to Kampala by ferry): 3 days.

Rail transport not only takes longer, but is also much more unreliable and may vary from one trip to another:

• Dar es Salaam – Kapiri Mposhi: 9 days, while target is 4 days • Dar es Salaam - Mwanza (to Kampala): 4 days, while target is 3 days • Dar es Salaam – Kigoma (to Bujumbura): 4days, while target is 3 days • Dar es Salaam – Isaka (to Rwanda): 3 days, while target is 2 days.

This performance is normally achieved when no major failures take place during the trip. And this occurs with more and more frequency. The target for mean time between TRC locomotives failures was in 2001 25,000 km. Practice, however, showed that it went down from 10,000 km in 1999 to less than 5,000 km in 2003. The performance of TAZARA is more or less the same: the target in 2002 was 30,000 km; in practice the mean time between locomotives was reduced from 9,287 km in 1999 to 5,912 km in 2003. This caused by the state of the rail infrastructure; the very old rolling stock; the lack of spare parts; and cannibalizing methods in repair practices. The efficiency of port handling, in particular the container terminal in Dar es Salaam, is steadily increasing. In the Port of Dar es Salaam the ship turn-around time has fallen from 4.1 day in 1995 to 2.0 days in 2003. The waiting time in this period decreased from 0.5 days to 0.2 days; and the service time from 3.6 to 1.8 days. The crane productivity of the Container Terminal improved from 12 moves per hour in 1998 to 23.2 moves per hour in 2003. The overall dwell time of an imported container was reduced from 42 days in 1995 to 12.9 days in 2003. However, the good performance of the handling of the container terminal was not accompanied by improved performance in the clearing of the containers in the port. The situation has got worse in the second semester of 2004 after the introduction of the Destination Inspection making use of high tech scanning equipment replacing the Pre Shipment Inspection. Importers and their clearing agents complain that it takes two or even three weeks more to get a container cleared from the port area than before the introduction of Destination Inspection. What is affecting the efficiency of the ports operations are the operational problems that both TRC and TAZARA are facing. Both railway companies have planned to have two container trains per day in the port of Dar es Salaam, but in practice only achieved in transporting about 30 containers per day in 2003.



About 25 international shipping lines are presently serving the Port of Dar es Salaam. Table 37 gives an idea about the freight rates charged for exported containerized shipments from Dar es Salaam. Remarkable is the wide variation in prices for the transport tobacco to Europe and of coffee to Europe, the Far East and North America, There is also quite some variations in the prices depending on the type of goods exported. The freight rates for imported containerized shipments to Dar es Salaam are:

• From Southern Africa – 500-600 US Dollars per TEU. • From Northern Africa – 600 US Dollars per TEU. • From Europe – 900-1100 US Dollars per TEU. • From Arabian Gulf – 600-800 US Dollars per TEU. • From India and Pakistan – 800-900 US Dollars per TEU. • From the Far East – 1200-1300 US Dollars per TEU.

The prices for imported containerized shipments to Dar es Salaam are generally 20-25 percent higher than those for exported containerized shipments, which reflects both the fact that the value per ton of imported goods are generally higher than the value per ton of exported commodities and the imbalance of imported and exported freight flows. A fully operational logistics corridor concept, integrating ports, maritime and coastal shipping, railways, road transport, terminals and warehouses and distribution centers is still far from implementation in Tanzania. Integrated modal connections and multimodal transport hardly exist. The Government of Tanzania and the Tanzania business community, however, have recognized this weakness and are in the process of developing the corridor concept in a public-private partnership. Examples are the efforts undertaken concerning the development and promotion of the Central Corridor, the TAZARA Corridor and the Mtwara Corridor.



Table 37 Average freight rates of exported containerized shipments from Dar es Salaam (2003-2004) (in US Dollars) Commodity Southern

Africa Northern Africa

Western Africa

Europe Arabian Gulf Indian Ocean islands

India and Pakistan

Far East North America

Cotton fabrics TEU 850 2000 FEU 700 2900 1200 2500 1500 Raw Cotton TEU FEU 1250 1500 350-600 600-800 Tea TEU 300 800 500 FEU 1300 Tobacco TEU 1100 750-1150 FEU 1000 2120 2000 1000-1800 1450 Coffee TEU 1200 650-1000 1000-1400 1000-2000 FEU Cashew TEU 400 700 650 700 1950-2550 FEU Sisal TEU 300 600 550 1300 FEU 2200 1780 1300 Horticulture TEU 700 FEU Nile Perch TEU 1000 FEU 3800-5200 3600 4300 5100 Logs TEU 300-600 500-550 FEU 450-1000 Yellow gram TEU 450-500 FEU Gemstones TEU 625-750 FEU Source: compiled from data from the Tanzania Central Freight Bureau



9 CUSTOMS AND TRADE ADMINISTRATIVE PROCEDURES

9.1 Customs administration and Customs procedures

The Customs Administration is part of the Tanzania Revenue Authority, which is divided into three departments: income tax; VAT; Customs and excise duties. In the Customs administration about 2,000 staff is working. The import duties contribute 9 percent to the total revenue of the Central Government and excises 15 percent in 2003/04. The major part comes from VAT which contributes more than 34 percent to the total revenues.

Table38 Fiscal performance of TRA/Customs and Excise Administration, 1999-2004

1999/00 2000/01 2001/02 2002/03 2003/04

Total Revenue Central Government 772.5 929.6 1042.9 1217.5 1447.3

Tax revenues 691.9 827.8 938.5 1105.7 1325.1

Import duties 87.7 95.6 88.9 106.4 130.1

Excises 88.5 154.8 177.6 187.3 216.6

VAT 223.8 302.0 352.3 424.3 494.8

Income tax 205.1 194.0 228.4 276.1 360.4

Other Tax 86.9 81.4 91.3 111.7 123.2

Non Tax revenues 80.5 101.8 104.5 111.8 122.3

Import duties and excises constituted 1.2 and 1.9 percent, respectively, of the total value of the imports in 2003/04. The Tanzania Revenue Authority formulates as its most important function to increase revenue collection in a cost effective way by broadening the tax base, improve enforcement of tax laws, monitor and control cost of revenue collection and modernize processes and systems14. It makes to explicit reference to trade facilitation as one of the possible tasks. Although Customs has elaborated a quite sophisticated modernization plan, the main constraints are still at the performance of its human resources. Working hours of customs are not in compliance with the interests of other stakeholders in the clearing process. Also the procedures, especially the import procedures are very complicated and do not facilitate trade.

14 TRA Second Corporate Plan 2003.4 to 2007/8.



An informal survey among traders, shippers and forwarders in October 2004 brought forward the following recommendations:

• Reduce the many Customs checkpoints along the main transport corridors.

• Apply risk management system based on historical records.

• Reduce physical inspections as much as possible.

• Assess results of Destination Inspection and reconsider introduction of Pre Shipment Inspection again.

• Use ASYCUDA++ nationwide an integrated software management system for all border agencies and train staff to use the system efficiently and effectively.

• Introduce and further develop electronic advance declaration processing.

• Harmonize valuation and create classification capacity in customs; abolish provisional valuation by TISCAM.

• Establish bilateral and multilateral committees to harmonise control mechanisms with neighboring countries.

• Contribute to development of inter-border agency co-operation.

• Co-operate in developing single processing and payment window for all agencies.

• Align border agency opening hours to customer needs.

• Select determined periods of the year to introduce changes in legal and regulatory framework.

• Improve human resources management in customs.

• Introduce change in internal procedures targeting unofficial payments and illegitimate trade focusing on reducing interactions between users and officials; assign processing at random; split the control chain; allow for immediate penalties.

• Introduce performance monitoring.

• Strengthen transparency and disseminate rules and regulations on a permanent basis.

• Strengthen Customs transit management.

• Improve payment facilities for duties. We will elaborate on two Customs issues which are causing deep concern among shippers, forwarders and transporters: Destination Inspection and customs transit systems and checkpoints along the main transport corridors. Destination Inspection



In July 2004 the Tanzania Revenue Authority introduced a new Destination Inspection Scheme, replacing the Pre-Shipment Inspection, where goods were inspected at the country of supply abroad prior to shipment. One of the problems with Pre-Shipment Inspection, according to the Customs authorities, was that the suppliers frequently failed to submit the final invoice to complete the process. Destination inspection is the inspection of all imports upon arrival at destination in Tanzania, which is done either physically, or through X-Ray Scanning for Full Loaded Containers, or through fast track release without any inspection, depending on the pre-determined level of intervention. The level of intervention is determined by application of a computerized risk management system. This risk management system is supposed to use historical records of shippers, importers, clearing agents and importer’s declarations to determine the risk level. There are three levels: green channel (low risk; pass all the procedures; no inspection); yellow channel (medium risk; full loaded containers will be subjected to X-Ray Scanning); red channel (high risk; imports will be subjected to full physical inspection). Exempted goods are: a) supplies imported for the use of Diplomatic Missions, and International Organizations to which Tanzania is member; b) commercial samples and goods returned to the country after repair; c) goods entered for transit; d) goods imported by parcel post or express courier with a value less than 5,000 US Dollars per individual consignment; e) emergency supplies with a value less than 10,000 US Dollars per consignment. According to the Customs Authorities this new scheme will facilitate trade, as importers under the green channel will benefit the fast track clearance procedures. However, reports from the Port of Dar es Salaam indicate that the clearing time of containers has increased with two or three weeks due to the introduction of this new system. Experiences of Customs clearance in the Port of Dar es Salaam Customs clearance in the Port of Dar es Salaam has for many years been subject to many discussions and polemics. On December 8, 2000 the Minister of Industry and Trade visited the Port and received many complaints about hussles and delays in the clearance of cargo. He directed immediately the constitution of a Task Force, which would look into the problems, hindering efficient clearance of import cargo. This task was later assigned to the Shipping Industry Consultative Forum, which came with a detailed report on the causes for the delays and recommendations for solving the major problems15. The Tanzania Central Freight Bureau in a later memo identified the following causes of delays for documentation processing time at the Dar es Salaam Port

1. Incorrect tariff classification by Customs Agents.

15 Report of the Sub-Committee on the Study on Delays in Import Cargo Clearance from Dar es Salaam Port; Tanzania Central Freight Bureau, The Shipping Industry Consultative Forum; Dar es Salaam, February, 2001.



2. Inability of the owners to pay the assessed duties on time. 3. Submission of incomplete documents, e.g. late submission of Quality Control

Certificates by Customs Agents/Importers. 4. Customs Agents are not adhering to the verification of schedules and timetables. 5. Compliance to the findings/recommendations after verification by the Customs Agents

takes time and sometimes the cases are referred to the Commissioner for further guidance.

6. Incompetent Clearing and Forwarding Personnel. 7. Lack of power by the Tanzania Revenue Authority (TRA) over the documents when it

is in the hands of Inspection Control Services (ICS)/COTECNA, i.e. from the date of selection up to the date of release of the documents.

8. Under declaration of values by the Customs Agents necessitating TRA to make adjustments.

9. Late submission of shipping manifests. 10. Shortage of examining staff at wharf. 11. Lack of back-up services, equipment and facilities at the wharf, e.g. transport, shelter. 12. Late notification of Customs Agents for documents requiring examination by ICS. 13. Requirement by TRA that release order should be issued in the presence of a Clearing

Agent as opposed to issuing the same in the absence of the Customs Agent. 14. 100 percent examination by ICS:

a. Price search. b. Weekends & Holidays

15. Single day validity period of TRA release list. 16. Failure by importers to pay terminal dues in time. 17. Special delivery arrangements by some importers. 18. Assessment of the contribution of each player to the delay is difficult due to most of the

players not filling the Domestic Documents Movement Form (DDMF). It did not focus too much on customs while the report from 2001 was quite critical about Customs performance:

• There were delays resulting from misplacement of manifests or lost by Customs. • The process of examination, certification, verification and issuance of Clean Report of

Finding (CRF) was time consuming and therefore delayed the process, notwithstanding that consignments were in the first place covered by pre-inspection prior to shipment.

• Problems occurring with the processing of documents in the long room; wrong entry of data, inadequate staff, inaccessibility of ASYCUDA.

• Delays at the Head of Declarations Office because it was a one-man office. • Delays in dispatch of documents from the Long Room. • Problems associated with Inspection Control Services (ICS)/Customs; too much

physical control of goods. • Problems in bringing of necessary parties together for control and inspection.



According to the business community, not much has been changed in these weaknesses from Customs since 2001. Customs transit systems and checkpoints along the Dar es Salaam southern corridor Many shippers and transport companies complain about the many Customs checkpoints along the route for transit shipments. Customs justifies these procedures by stating that they found huge tax evasions of commodities in transit, which in reality were sold on the domestic market; in particular, fuel products have been involved in these practices. By introducing checkpoints, the customs administration hopes to discipline the importers. If the experience allows, it will loosen control in the next future. A consultative survey regarding current customs transit in the Dar es Salaam Corridor was carried out in June 2003 by the Regional Center for Southern Africa. The Dar es Salaam Corridor was the second corridor identified by the SADC Customs Working Group for implementing the SADC Customs transit system. This corridor is made up of the highway and railway (TAZARA) from the Port of Dar es Salaam through Mbeya to the Tanzania/Zambia border posts of Tunduma/Nakonde and beyond, and the road to Malawi through Kasumulu/Songwe border posts. The main conclusions of the survey were the following:

• Although the Single Bill of Entry (SBE) used in Tanzania, Zambia and Malawi are based on the ASYCUDA system, there exist features specific for each country, which also use different versions of this Customs Information system.

• Assessment of declarations of Customs authorities in one country are rarely accepted by Customs in the neighboring country.

• Transit bond structures are country specific are not transferable to any other country. • Nakonde (Zambia), Songwe (Malawi) and Tunduma (Tanzania) administer a

decentralized bond structure. • In Tanzania and Malawi the bond acquittal is still done manually, which may take

several days to effect the acquittal, since the document has to be sent to the entry/originating port by fax or by postal services.

• In Tanzania and Zambia all goods are required to be covered by bonds, while in Malawi break bulk transits and cargo without adequate bond are escorted from the originating port to the one of exit.

• In Zambia clients obtain their refunds only from the port where such deposits were lodged, while Malawi and Tanzania have a centralized refund system.16

Along the road corridor from Dar to Zambia the following Customs checkpoints exist:

16 Technical Report: Consultative Survey Regarding Current Transit Procedures in the Dar es Salaam Corridor; R. Munyaradzi and S. Kaombwe; June 2003.



• National Stadium; 2 kilometer from the port; truck drivers assemble there until sealed SBE together with the vehicle movement sheet are brought by the Customs Transit Monitoring Unit three times a day.

• Kibaha weighbridge, 60 kilometers from Dar; operated by TANROADS. If overloading is noticed, Customs has to be called in from Dar to cut seals and witness re-arrangement or off-loading excess cargo; alternatively one has to drive back to National Stadium.

• Chalinze Customs Checkpoint at a distance of 67 kilometer from Dar; vehicles are given five hours to go from the National Stadium to Chalinze. If truck drivers arrive too late, they have to drive back to Dar as the office is not authorized to collect such fines.

• Makambako Customs Checkpoint; drivers are given 24 hours to drive from Chalinze to Makambako.

• Tunduma Border Post. • After clearance, the vehicles may proceed to the Nakonde Border Post (Zambia), from

where the itinerary continues. It is no surprise that road transport operators complain about these procedures.

9.2 Trade regulations and import and export procedures

Any business needs to be registered by the appointed registration authority. The business registration authority in Tanzania is the Business Registration and Licensing Agency (BRELA), a semi-autonomous governmental executive agency under the Ministry of Industry and Trade established by Government Executive Agency Act, No. 30 of 1997.

9.2.1 Export procedures

Export procedures in Tanzania are relatively easy to comply with and not very complicated. Some products require specific licence/permit from the Government departments/institutions or a controlling body legally empowered to do so. Exporters, for example, have to contact the following:



Once an exporter has obtained an order from a buyer abroad and an agreement has been reached to export goods to the buyer and mode of shipment determined, the following steps are necessary: Shipment by air The exporter applies for an export licence/permit for the export product if it falls under the above mentioned product groups, otherwise other products do not need any licence. After confirmation of cargo space an airway bill is prepared by the carrier or its agent on presentation of the following:

• A commercial invoice • An export licence/permit (if required). • Technical documents (if required) on health, quality, weight, certificate of origin etc. • Process a Single Bill of Entry (SBE) by submitting all the above documents at the

customs long room. A customs release/approval is obtained. • Goods are taken to the Airport for air freight transport.

Shipment by sea

• Apply/obtain a licence/permit (if required). • Apply/obtain technical documents for you product. • Apply for shipping space to an agent/shipping company. • Then obtain a single bill of entry from customs, complete it and then attach all the

previous or required documents for processing the SBE at the long room. • A shipping company/agent will finally prepare a bill of lading after accomplishing

Certificates of Origin The Certificate of Origin verifies the commodity's country of manufacture. In Tanzania the document is notarized and certified by the Tanzania Chamber of Commerce Industry and Agriculture (TCCIA). Because the country of manufacture is a key element in customs entry (for quotas, etc.), many countries require a Certificate of Origin for some shipments exceeding a certain value. Even though the commercial invoice usually includes a statement of origin, most countries require that a separate certificate be completed. Customs offices will use this document to determine whether or not a preferential duty rate applies on the products being imported. The data required for a certificate of origin is more or less the same as for a commercial invoice. Basic information includes a description of the goods, gross and net weight, and the number of packages. The certificate will also include a brief statement as to the origin of the goods. A few countries require specialized certificates of origin that might include more detailed information and/or require a specific wording for its origin declaration.



TCCIA is the sole issuant of all certificates of origin for products originating from Tanzania. It issues seven types of certificates: 1. International (ICC) 2. COMESA 3. SADC 4. SACU-MMTZ 5. EUR1 6. AGOA 7. GSP The fees for the issuance of Certificates of origin are: 1. International Certificates of Origin and Generalized System of Preferences (GSP)

• If FOB value as per Single Bill of Entry or invoice Value is more than Tsh 50 Million, the fee is Tsh 50,000

• If FOB Value as per Single Bill of Entry or invoice Value is between Tsh 10 Million and Tsh 50,000, the fee is Tsh 30,000

• If FOB Value as per Single Bill of Entry or invoice Value is less than Tsh 10 Million, the fee is Tsh 20,000

2. EUR 1 Certificates of Origin – Fee = Tsh 20,000 3. AGOA Certificates of Origin – Fee = Tsh 100,000 4. SADC, COMESA, SACU-MMTZ Certificates of Origin – Fee = Tsh. 20,000.

9.2.2 Import procedures

Import procedures in Tanzania are complicated and time consuming. The freight forwarder Interfreight has provided an excellent service to the importers in Tanzania by explaining in detail what these procedures and how they function. Import Declaration Form (IDF) All imports to Tanzania require an IDF. When the importer in Tanzania applies for an IDF, the information to be filled out on the application is to be provided by the supplier together with a Pro Forma Invoice. The following information is required on the Pro Forma Invoice to facilitate accurate application of IDF. Required from the supplier: 1. Specification and a clear description of the quantity and quality of the goods. 2. Free On Board (FOB) value. 3. Freight value (if applicable).



4. Customs Harmonised Commodity Code. 5. Currency of the payment. 6. Mode of Transportation. 7. Goods Country of Origin. 8. The Pro Forma invoice number and final invoice number must read same. Destination Inspection (DI) The Tanzania Revenue Authority has mandated that effective July 1st, 2004 all imports into Tanzania will be subject to Destination Inspection by TANZANIA INSPECTION SERVICE CO. (TISCAN). This is a Tanzanian registered company and a member of the COTECNA S.A GROUP. The key objectives of DI in Tanzania are as follows;

• To verify the quality and quantity of imports. • To assist Customs with the collection of the correct amounts of duties and taxes. • To provide Customs with an independent opinion of the Dutiable Value for Customs

purposes. • To verify the accuracy of tariff codes classifications. • Computation of the correct duties and taxes payable. • To provide the Government of Tanzania with reliable and up-to-date statistics related to

Trade and Customs revenues. All imports to Tanzania irrespective of value are subject to DI. However, some imports are exempted:

• Commercial samples and goods returning after repair. • Supplies to Diplomatic Missions or International Organizations. • Transit Goods. • Parcel post goods or express couriers not exceeding USD 5,000 in value. • Emergency supplies airlifted as may be approved by the Tanzania Revenue Authority.

As soon as an importer has arranged to import goods and has entered into a contract with an overseas supplier, he should apply to his Commercial Bank for an Import Declaration Form (IDF). The importer must present a Pro Forma Invoice for the goods to be imported and will be obliged to pay a Destination Inspection Processing Fees of 1.2% of the FOB value to his Commercial Bank. The Bank will then transfer the IDF and Pro Forma Invoice to Importer and TISCAN in Dar-es-Salaam, usually within the same working day. Importers and agents have to ensure that an IDF with all relevant Documents reach the Inspection Company at least 10 working days prior to arrival of the goods. With each import, associated risk is identified through risk profiling.

• Low risk (Green Channel) – Goods may be released without physical inspection.



• Medium risk (Yellow Channel) – Full Container Load (FCL) consignments will be subject to x-ray scanning.

• High risk (Red Channel) – Goods shall be subject to physical inspection by Tanzania Revenue Authority (TRA) to determine compliance.

The DI Process

1. Once TISCAN receives the IDF and Pro Forma Invoice from the Bank, a preliminary review of the documents is carried out and the details entered into TISCAN computer system. TISCAN will electronically transmit the IDF data to affiliate in country of export for documentary data verification.

2. Upon receipt of original documentation from suppliers, TISCAN shall prepare an Internal Findings Report (IFR).

3. Upon receiving the IFR and there is no discrepancy in the importer’s declaration, TISCAN issues a Preliminary Classification and Valuation Report (PCVR) and Declared Classification and Valuation Report (DCVR). The PCVR / DCVR provide TISCAN’s opinions on values, classification and level of Intervention / Inspection determined by the CRMS.

4. If importer accepts PCVR, he signs it and applies for a Single Bill of Entry (SBE). Documents to be submitted together with the application include PCVR, IDF copy, Original Shipping documents e.g. Commercial Invoice and Ocean Bill of Lading together with original duty/taxes exemption documents (if applicable).

5. Once SBE has been issued and accepted into the Customs Sytem, no additional declaration or access is permissible. In event the importer rejects contents of the PCVR; he may put it in writing to TISCAN giving reasons for not accepting the declared information. In accordance with importer’s right to appeal, the importer can prepare own SBE under protest and attach to this the original SBE issued by TISCAN. This is then lodged with Customs to determine the finality in accordance with the law.

6. TISCAN will then issue a Final Classification and Valuation Report (FCVR) together with the SBE.

7. Once SBE has been issued the importer or his agent will pay applicable duties and taxes to the designated Bank.

8. The importer/agent submits the certified original of the SBE, Pay-in Slip and IDF together with supporting documents to Customs for goods clearance.

9. The importer requests for Inspection at the port once Customs Long room process has been completed. This is done either physically, documentary check and/or by x-ray scan for all loaded containers.

10. If scanning results conform to declaration, release is issued immediately. Any discrepancies e.g. undeclared goods noted, the container is directed to a re-check area for physical examination. Any undeclared goods are seized and subject to forfeiture with penalties imposed according to Customs Laws. Such action could also lead to possible prosecution.



Shipping Documents · Air freight – Original AWB, Supplier’s invoice(s) and Packing list(s) to accompany shipment. · Sea freight – Original OB/L, Supplier’s invoice(s) and Packing list(s) to be couriered to importer or his C&F Agent immediately after shipment of goods. The DI process in Tanzania Importer

• Purchases an IDF at relevant bank (USD.10). • Submits completed IDF to the bank (pay 1.2% of the FOB value on Tanzania Revenue

Authority account) along with a legible and complete Pro Forma invoice (PFI). TISCAN

• Registers the IDF previously received from the bank and electronically transmits data to affiliate in country of export for documentary data verification.

Seller

• Submits original commercial invoice and packing list to TISCAN. TISCAN

• Prepares Internal Findings Report (IFR) and issues. a) Preliminary Classification and Valuation Report (PCVR). b) Declared Classification and Valuation Report (DCVR).

Importer

• PCVR and applies for Single Bill of Entry (SBE). TISCAN

• Issues a Final Classification and Valuation Report (FCVR) together with SBE. Importer

• Pays to the bank the duties and taxes as indicated in the SBE. • Lodge request for Inspection.

TISCAN

• If scanning results conform to declaration, goods are released. • Any discrepancies, container is directed to re-check area for physical examination. • Any undeclared goods found are seized, forfeited and penalties imposed to importer. • Any excess goods found, full duties and taxes are payable.



10 CONCLUSIONS AND ACTION PLAN

10.1 Main findings and identified problems

The main findings and identified problems in the field of trade and transport are: High costs for trade and transport The overall costs for trade and transport are excessively high. The road tariffs average 0.07 US Dollars per tonkm; the railway tariffs 0.045 US dollars, which twice as high as the rate prevailing in efficiently-run railways. This is mainly due to lacking infrastructure and old rolling stock, widely unbalanced trade flows, inefficient operation of the service providers and still existing red tape and administrative bureaucracy. Road transport faces the problem of axle load limitations and overloading enforcement through weighbridges without any tolerance. Inadequate customs performance, lack of customs facilities, lack of harmonization of customs procedures with neighboring countries, in particular Zambia, and lack of coordination among inspections at border crossings The main cause of the delays at border crossings is the lack of border facilities, modern information and communication technology and banking facilities. The restricted opening hours of the customs clearance points and borders do not permit and efficient flow of commodities and passengers. The Transport Information Management System is not in all offices installed and operational. Electronic payment at borders is still not possible. Customs lack modern premises and adequate equipment to facilitate controlling and clearance procedures. The lack of clearance facilities is causing unnecessary delays. Customs procedures are often changing. Besides, customs rules are being interpreted in many different ways and there is evidence that the procedures themselves are not full comprehended by those who have to administer it. There is lack of cooperation between Customs, other border agencies, transport authorities and law enforcement authorities still causing long waiting times at the borders causing extra costs for the transport companies and the shippers. Transparency of costs, timing and access to information Transparency of costs and procedures related with customs, transport and trade should be promoted. The procedures are often changing in time as well without adequately informing the respective stakeholders.



Poor transport infrastructure and transport performance The conditions of the rail network in Tanzania need structural improvement. There is a shortage in handling and storage facilities at terminals and in ports. International shippers are also in need of more terminals, dry ports and bonded warehousing facilities. Absence in Tanzania of these facilities leads to delays. The Tanzanian transport, forwarding and clearing services are often below standard, which makes it difficult for them to compete with foreign companies. Smaller forwarders and clearing agents often lack international experience and the sector has not yet grown mature. This leads to forwarding and clearing agencies that do not take their responsibility and step out as soon as cargoes are lost or damaged. This is also possible due to a poor legal framework for forwarding and clearing agencies. International standards are not yet incorporated and the sector is hardly organized. Transporters, forwarders and clearing agents need to enhance their level of professionalism. Lack of adequate transport legislation Transport legislation, in particular for road and railway transport, does not reflect the new socio-economic reality in Tanzania and is largely still based on old values causing problems in control and enforcement. Excessive administrative business regulations Tanzania applies excessive administrative regulations for establishing and operating a company: company registration is time-consuming and costly; administrative procedures are costly; application of the rules of origin is not always clear; reimbursement of VAT takes too long; labor legislation is too rigid. Lack of adoption, implementation and enforcement of international agreements Several international agreements have been developed to facilitate transport and trade and to promote seamless transit traffic: regional cooperation agreements, multilateral conventions and bilateral arrangements. However, implementation and proper enforcement are often lacking.

10.2 Implementation strategy

Modal Integration Modal integration is a prerequisite for an efficient and effective logistic chain reducing time and costs of transport and facilitating trade and transport. Free market access and liberalization of transport and terminal operators are important conditions for efficient transport and terminal operations. This process is well underway in Tanzania with the concessioning of ports and railways. Investments in railway infrastructure, dry ports, terminals and basic transport infrastructure are needed to increase its quality and



removing the present constraints. Private capital should be attracted to participate in these required investments. There is a growing market for providers of integrated logistic services (transport, warehousing, document processing, payment administration, packaging, assembling, order management, etc.). The transit traffic could be stimulated by value-added service providers. It is necessary to introduce a liberalization policy for Multimodal Transport Operators, which also should obtain a legal status. Trade, transport and transit charges and tariffs must be optimized and should be based on actual costs and no surcharge should be allowed. Administration should be done in an efficient and effective way. Charges and tariffs should be made transparent and public. Information Flow Integration Integration of the information flows accompanying flows of transport and trade may contribute to increasing the efficiency of movements of goods, services and persons. As such it constitutes an important component of a trade and transport facilitation strategy. The information flow integration strategy consists of the following elements: a) Simplifying and standardizing border-related documentation requirements with

neighboring countries (no duplication of international/national documentation) for all controlling government entities.

b) Documentation must be unified maximally. c) Mutual recognition of neighboring countries documents.

On the basis of bilateral or multilateral agreements governmental bodies of the countries have to recognize the documents, issued by a second country. As an example can be considered the recognizing of the phyto-sanitary and veterinarian certificates when the goods supplied by the certificates issued in neighbor country do not need to undertake additional phyto and veterinarian inspecting on the border.

d) Acceptance of electronic pre-arrival declaration/data for processing purposes. A system of the electronic pre-arrival declaration should be introduced, which allows to organize and systemize the process in the better way by connecting customs with trades and transport operators. In this case attention will be given to the introduction of risk management and selectivity methods for the controlling by the customs.

e) Data exchange among customs and other government agencies. Data exchange between customs and other governmental bodies must be organized in such a way, that the exchanged information is sufficient to comply with the legal and regulatory.

f) Advance data exchange between controlling government entities and transport operators. There is also need for advance data exchange between controlling government entities and transport operators (web sites, border crossing manuals, shields on the check



points) with full information on tariffs, procedures and necessary documents for border crossing.

g) Timely and transparent publication of controlling agency requirements. h) Selected information sharing with neighboring countries.

All necessary information and demands of the controlling entities must be attainable, and when it is based on IT technologies, it will be attainable also for neighbor countries. Besides on the basis of bilateral agreements between the customs of countries volumes and form of the data exchange, also updating of such data must be regulated.

Integrated Border Management and Corridor Management The process of modernization, simplification, further promotion of international harmonization of border crossing procedures and increasing transparency of rules and regulations is an important component of a strategy, which focuses on trade and transport facilitation. Tanzania has set an important step with Kenya and Uganda in this direction by creating the East African Customs Union and striving for integrated border management. The simplification of border crossings implies both a revision of the individual legal and administrative requirements for traded commodities and transported goods, services and persons from the perspective of increasing effectivity and efficiency as well as a more intense cooperation among customs and other government agencies interacting with trade and transport. The simplification of border crossings may lead in last instance to one-stop processing at borders and clearance through delegation of responsibilities among border agencies. Investments will be needed to upgrade the infrastructure at the border crossings. Other measures as pre-arrival processing and advance clearance; controls on the basis of risk management and selectivity, balancing security and facilitation requirements, at border and in transit; removal of internal checkpoints; and promotion of inland clearance facilities also lead to more effective and efficient management of border crossings. Also the international harmonization of border crossing procedures with neighboring countries, which implies structural cooperation with border agencies of neighboring countries, such as the initiatives put forward by SADC constitutes an important element in the strategy. Results of this harmonization process may be officialized in bilateral or multilateral trade and transport agreements between countries. The final result could be the establishment of joint border facilities. Tanzania is no longer member of COMESA. COMESA is striving for further harmonization of border crossing and customs procedures and Tanzania is considering becoming member of COMESA again. Increasing transparency of border crossing procedures and fast and efficient dissemination of changes in these procedures are necessary for the operation of an efficient border management system. Monitoring through measuring of performance (cost, time, reliability, security, flexibility) is an important tool to achieve this objective. Therefore, it is important to involve the shippers, forwarders and transport operators in this monitoring process.



10.3 Action Plan

Legal framework

• International agreements like the SADC Protocol on Transport, Communications and Meteorology and the SADC Trade Protocol should be transposed into national legislation to obtain legal enforcement authority.

• New transport legislation should be developed. New road transport legislation should

regulate road freight transport and road passenger transport in different acts. New qualitative criteria for road transport operators as financial standing and professional competence should be introduced. Transport tariffs and prices should be liberalized. A new Railway Code should be elaborated.

• A legal base for co-ordination and streamlining of border regulations should be created

and the mandates of the different border agencies and controlling authorities should be clearly defined and implemented.

Institutional/administrative capacity

• Clearly define the regulatory role and function of governmental transport institutions and increase the capacity of its staff.

• Coordinate and streamline the application of all border regulations among controlling

agencies to minimize negative impacts on traders and transporters, while implementing their responsibilities and duties; and monitor actual border and clearance performance on a regular basis.

• Create capacity for electronic data exchange of customs and other border agencies and

implement the Trade Information Management System properly.

• Agencies involved in border crossings should co-ordinate among themselves and with the respective authorities of the neighboring countries aiming at facilitating border clearance procedures. The format of trade and transport documents should be further harmonized with international standards (UN, SADC, COMESA).

• Promote the dialogue between the private sector and the public sector on trade and

transport facilitation issues and establish a National Working Group on Trade Facilitation with all important stakeholders involved.



• Set-up and manage a system to monitor the performance of the trade and transport corridors, with tracking and performance indicators involving all stakeholders in the process, including the private sector.

Procedures

• Reduce the many Customs checkpoints along the main transport corridors.

• Customs procedures should be modernized, simplified and harmonized with those from other agencies in Tanzania and neighboring countries, in particular Zambia. The concepts of integrated border management and one stop processing are aimed at.

• Adapt opening hours at borders to customers needs and harmonize with neighboring

countries.

• Facilitate Direct Trade Input and advance clearance.

• Facilitate electronic payment of tariffs, taxes and duties. • All inspection procedures should be carried out more efficiently and be based on risk

assessment and selectivity.

• Rules and regulations should be enforcement properly.

• Changes in Customs rules and procedures (including valuation methods) should timely be made transparent and public.

• Import and export inspections should be better targeted the number of inspections

reduced.

• Organize (re)training of Customs officials on continuous basis.

• Facilitate establishing and operating businesses by simplifying registration and other administrative procedures; reducing inspections; shorten reimbursement period for VAT; etc.

Infrastructure

• Investments in railway infrastructure and feeder roads are needed.

• Facilitate investments in intermodal infrastructure and (bonded) warehouses.



• Improved border facilities should be created to accommodate efficient trade and transport of goods, passengers and services.

Industry competitiveness

• Training in transport and logistics management, financial management, marketing and legislation and regulations should be organized for providers of logistics services, road transport operators, forwarders and clearing agents.



Project Proposals for Implementing the Trade and Transport Facilitation Strategy



1 Customs Modernization Program Tanzania revenue Authority 2005-2111 • Apply risk management system based on historical records

• Reduce physical inspections as much as possible

• Assess results of Destination Inspection and reconsider Pre Shipment Inspection

• Use ASYCUDA++ nationwide an integrated software management system for all border agencies and train staff to use the system efficiently and effectively.

• Introduce and further develop electronic advance declaration processing

• Harmonize valuation and create classification capacity in customs; abolish provisional valuation by TISCAM.

• Establish bilateral and multilateral committees to harmonise control mechanisms with neighboring countries.

• Contribute to development of inter-border agency co-operation.



• Co-operate in developing single processing and payment window for all agencies.

• Align border agency opening hours to customer needs.

• Select determined periods of the year to introduce changes in legal and regulatory framework.

• Improve human resources management in customs

• Introduce change in internal procedures targeting unofficial payments and illegitimate trade focusing on reducing interactions between users and officials; assign processing at random; split the control chain; allow for immediate penalties.

• Introduce performance monitoring.

• Strengthen transparency and disseminate rules and regulations on a permanent basis.

• Strengthen Customs transit management.

• Improve payment facilities for duties.



2 Upgrading of transport infrastructure, in particular railways and invest in intermodal and cross border infrastructure

TRC, TAZARA, Ministry of Works, Ministry of Communications and Transport

2005-2008 • Define comprehensive transport infrastructure needs assessment and development strategy.

• Invest in railway infrastructure and feeder roads.

• Further develop public-private partnerships for financing infrastructure investments.

• Promote and facilitate the building and operation of (dry) ports and intermodal terminals.

• Improve border crossing infrastructure.

3 Training of transport operators, providers of logistics services, forwarders and terminal operators

2005-2006 • Training Certificate of Professional Competence for Transport Operators.

• Training of Logistic Managers in Supply Chain Management.

• Training FIATA of Freight Forwarders.

• Training of Clearing Agents

• Training of Terminal Operators.



4 Strengthen the Public-Private Dialogue in Transport and Trade Facilitation, Transit and Border Crossings

2005-2008 • Create capacity at SUMATRA to carry out monitoring of performance transport, transit and border crossings.

• Define an independent Ombudsman (appeal) mechanism for complaints and infringements of rules and regulations.

• Conduct regular independent audits.

5 Transport Reform Program Ministry of Communications and Transport

2005-2008 • Elaborate new transport legislation: road freight transport act; road passenger transport act; Railway Code;

• Further develop regulatory framework for transport conducive for the development of trade.

• Strengthen implementation and control of the Ministry of Communications and Transport.

• Set-up transport information system to monitor developments of the sector.

• Further develop technical capacity of staff of SUMATRA and related transport institutions.



ANNEX 1 REFERENCES AND INFORMATION SOURCES

• An Overview of the Mtwara Development Corridor; Graham Smith; Dar es Salaam; May, 2003.

• Brief on Dar-es-Salaam Port; Tanzania Harbours Authority, Port Statistical Office; September 2004.

• Central Transport Corridor Project; Project Appraisal Document; World Bank; March 31, 2004.

• Consultative Survey Regarding Current Customs Transit Procedures in the Dar es Salaam Corridor; Munyaradzi, Kaombwe; Regional Center for Southern Africa; USAID; Gaborone, June 2003.

• Dar es Salaam Container Terminal Tariff Book; September 2004. • Does Transport Cost Mean Anything for Trade Policy in Tanzania?; J. Kweka; ESRF;

Dar es Salaam, June, 2004. • Fish Supply Chain Development in Tanzania; Ron Kopicki; 2004. • Macroeconomic Policy framework for the Plan/Budget 2004/05-2006/07; The

President’s Office – Planning and Privatization; Dar es Salaam; April, 2004. • Mwandosya, Hon Prof M J, Minister for Communications and Transport, United

Republic of Tanzania; Trade Facilitation and Infrastructure Development: Tanzania and the East African Region; May 28th, 2003.

• National Trade Policy; Trade policy for a competitive economy and export-led growth; Ministry of Industry and Trade; Dar es Salaam; 2003.

• National Transport Policy; Ministry of Communications and Transport; Dar es Salaam; 2003.

• Study on a Framework for Joint Utilization of Border Post Infrastructure Facilities; Dr. H. B. Lunogelo; July 2004.

• Tanzania Central Freight Bureau, average freight Rates for July 2003 – August 2004. • Tanzania Central Freight Bureau, the Shipping Industry Consultative Forum; Report on

the Sub-Committee on the Study on Delays in Import Cargo Clearance from Dar es Salaam Port; Dar es Salaam; February, 2001.

• Tanzania Diagnostic Trade Integration Study under the Integrated Framework; concept paper; 2004.

• Tanzania Harbours Authority, Brief on Dar es Salaam Port; Port Statistical Unit; September 2004.

• Tanzania Harbours Authority Annual Report 2002/2003; June 2004. • Tanzania Harbours Authority Ports Handbook 2004/05; • Tanzania Revenue Authority; Inspection Procedures under Destination Inspection (DI);

Dar es Salaam; June, 2004. • Tanzania Revenue Authority; Customs Modernization Plan; Dar es Salaam, 2003. • Tanzania Revenue Authority; TRA Second Corporate Plan at glance; Dar es Salaam;

2003.



• The Civil Aviation Authority Act, 2003. • The Merchant Shipping Act, 2003. • The Ports Bill Act, 2004. • The Railway Act, 2002. • The Road Tolls Act, 1985 and its amendments. • The Shipping Agency Act, 2002. • The Surface and Marine Transport Regulatory Authority Act, 2001. • The Transport Licensing Act, 1973 and its amendments. • The Tanzania Central Freight Bureau Regulations 2000. • The Transport Sector in Tanzania: Emerging Challenges & The Way Forward; Prof. H.

K. Amani; ESRF; Dar es Salaam; October 2004. • Transport Bulletin issues 1,2,3,4 and special edition; Ministry of Communications and

Transport; Dar es Salaam; 2003-2004. • Transport and Trade Facilitation: East and Southern Africa; Volumes 1 and 2;

Consilium Legis; Pretoria, 2003. • Transport, Communications and Meteorology Sector Statistics and Information;

Ministry of Communications and Transport; Tancot House Dar es Salaam; July 2004. • Wood, Geoffrey; Tanzanian coastal and inland ports and shipping: crises and policy

options; Marit. Pol. Mgmt., April-June 2004, Vol. 31, No. 2, 157-171. • Tanzania: Selected Issues and Statistical Appendix; International Monetary Fund;

September 2004. • Various transport legislation and regulations as laid down in Parliament Acts and

published in the Gazette of the United Republic of Tanzania.