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Monthly commercial & economic report on Tanzania for December 2006

Economic and Commercial Report for the month of December 2006

1. Gross Domestic Product : The Bank of Tanzania revised the GDP growth prospects for the year 2006 downwards to 5.9% from the earlier estimate of 7.2%. The downward revision was on account of the continuing power crisis ( resulting in about 12-hour rationing daily). Tanzania’s GDP was estimated at US$ 11.8 billion at the end of 2005; GDP per capita (current prices) was estimated to be US$317.8 in 2005 compared to US$ 303 in 2004 and US$262.7 in 2000.
2. Rate of Inflation : The annual inflation rate in the month of October 2006 increased to 6% compared to 5.8% in September 2006. The annual food inflation went up to 5.3 percent in October from 3.6 percent in September, owing to price increases for maize, rice, beans and potatoes. The non-food inflation, which excludes prices of food, declined to 7.0 percent during the year ending October 2006 from 9.0 percent recorded in September 2006.
3. Total Trade : Latest available figures in pertaining to export and imports of merchandise goods are given below ( source : Bank of Tanzania) :
  (Figures in millions of US Dollar)
 
Item 2005 October 2005 October 2006 Year ending October 2005 Year ending October 2006
Exports 1,462.81 174 150.4 (14% decrease over previous month) 1697.8 1675.0
(1.3% decrease)
Imports 2,839.08 249 308.9(24% increase over previous month) 2882.0 3678.4
(27.6 % increase)
Trade deficit 1376.29 75 158.5(111% increase over previous month) 1184.2 2003.4
(69.2% increase)
Trade with 10 major countries
4. Tanzania’s exports
  (US$ millions)
 
country Tanzania’s exports 2004 Tanzania’s exports 2005 Tanzania’s exports Jan-Oct 2006
Switzerland 29.79 115.64 119.79
South Africa 114.99 278.34 116.17
Germany 33.24 77.81 81.77
China 71.16 92.14 65.79
Kenya 84.51 80.03 63.86
Netherlands 60.33 96.89 59.65
Japan 64.97 71.88 52.90
United Kingdom 469.65 119.97 40.47
UAE 17.70 35.16 28.75
India 101.69 64.18 28.04
5. Tanzania’s Imports
  (US$ millions)
 
country Tanzania’s exports 2004 Tanzania’s exports 2005 Tanzania’s exports Jan-Oct 2006
South Africa 282.99 403.52 421.42
Bahrain insignificant 78.03 360.77
UAE 186.56 205.54 354.72
China 173.21 223.62 232.78
Japan 182.44 209.77 207.23
India 218.29 191.21 196.24
Saudi Arabia 54.45 43.82 155.29
Kenya 131.47 173.12 138.72
Germany 76.07 89.59 134.31
United Kingdom 111.43 124.54 121.89
Trade with India:
6. Tanzania’s major Imports from India
 
  2000 2001 2002 2003 2004 2005 Jan-Oct 2006
Machinery/appliances 9.3 9.1 14.0 29.0 27.4 42.0 10.58
Apparel & clothing 5.9 2.3 9.3 13.2 18.5 21.9 insignificant
Pharmaceuticals 9.0 6.4 7.2 5.8 11.7 19.1 25.86
Plastics products including synthetic polymers etc 3.6 3.3 5.6 5.9 8.3 11.9 13.47
Mineral fuels, oils, etc. 0.9 2.0 0.4 6.3 15.4 11.2 44.76
Motor vehicles, including auto parts 6.6 6.0 6.9 11.3 9.9 11.0 7.39
Iron & steel 8.1 6.2 6.6 4.5 5.9 10.6 5.31
Electrical machinery, /equip. 3.0 2.8 2.5 3.5 5.5 6.0 3.45
Cotton fabrics 10.8 12.8 12.6 5.7 4.6 5.2 6.43
Articles of iron & steel 1.9 2.3 2.5 5.9 4.1 2.3 5.31
Cereals 1.0 0.1 5.4 38.2 67.1 0.1 -
7. Tanzania’s major exports to India
 
  2000 2001 2002 2003 2004 2005 Jan-Oct 2006
Cashew nuts 82.6 50.1 40.5 36.4 61.7 22.4 3.86
Vegetables, pulses, etc. 0.9 8.3 3.9 15.2 10.0 21.8 10.80
Raw cotton 6.1 9.7 6.9 8.1 13.8 4.4 1.0
Wood & articles thereof 0.1 0.5 0.5 0.7 0.5 1.7 2.60
Tanning/dyeing extract 0.9 0.8 1.5 1.8 0.4 1.2 -
Gemstones, etc. 7.5 7.3 8.3 4.3 5.0 1.2 1.88
Cloves & other spices 0.1 0.0 0.1 1.7 0.0 0.3 1.2
Tanzania’s trade in services
8. In October 2006, export of services declined to US$118.9 million from US$134.2 million in the previous month. For the year ending October 2006, services receipts increased by around 10 % over the previous year’s level to US$ 1,411.1 million.
  (Figures in millions of US Dollar)
 
Item 2004 2005 October
2005
October 2006 Year ending October 2005 Year ending October 2006
Service Exports 944.1 1072.7 113.7 118.9 1281.8 1411.1
(10.1% increase)
Service Imports 972.1 1162.9 89.6 100.1 1196.2 1258.3
(5.2% increase)
Service trade deficit 28.0 90.2 24.1 18.8 85.7 152.8
(78% increase)
Major categories of service trade
  Exports
9. Tourism: The decline in service exports during October 2006 was largely due to the end of the peak tourist season. For the one-year period ending October 2006, however, a noticeable improvement was recorded in tourism, whose share in total services receipts during the year was 60 percent. The sector is expected to earn more for the country in view of the enhanced promotion efforts particularly with regard to the recent recognition of the Kondoa Rock Art site, by UNESCO as the Seventh World Heritage site in Tanzania , adding to the six existing sites Kilimanjaro National Park, Ngorongoro Conservation Area, Ruins of Kilwa Kisiwani and Mnara, and Serengeti National Park, Selous Game Reserve and Stone town in Zanzibar.
10. Transportation : During the year, transportation receipts also increased on account of growing transit cargo to and from the neighbouring countries. A total of USD 342.4 million was recorded compared with USD 211.6 million in the previous year although further improvement is still needed particularly in the clearing of cargo at the port and in railway services.
Imports
11. Freight and insurance on imports: During the month under review, services payments, which include freight and insurance on imports dropped by 21.7 percent to US$ 100.1 million as a result of the decline in imports.
12. On year-to-year basis, service payments increased to US$ 1,258.3 million in the year ending October 2006 from US$ 1,196.2 million. The main triggers for the increase were freight charges because of the high import bill, financial, construction and insurance services.
13. Financial services: The payments for financial services were in the form of fees and charges on letters of credit, foreign exchange and securities transactions.
Major investments in Tanzania
14. According to the Tanzania investment Centre, the cumulative foreign investment in the country during the period 1990 to 2005 was US$10.2 billion involving 3531 projects. Major areas of investment were : tourism, natural resources, energy, manufacturing, telecom, banking and insurance, transportation and infrastructure.
15. Tanzania is a seeker of foreign investment and is not a major investor abroad.
Developments in foreign investment during the month of December 2006
16. Brazilian firm Petrobras in oil exploration deal : Brazilian international energy firm, Petróleo Brasileiro S/A (Petrobras), concluded an agreement with the Tanzania government to start deepwater exploration for Block 6, covering an area of 11,099 square kilometers in deep waters of between 500 and 3,500 meters in the Tanzanian sector of the Indian Ocean. Under the agreement, during the next 11 years Petrobras would spend at least $46 million for exploration activities with $44,306 as annual acreage license fee and $100,000 annually for human resource development. Petrobras has been in Tanzania since June 2004 when it signed an agreement with the Tanzania Petroleum Development Corporation (TPDC), for exploration of block 5 in Mafia Basin.
17. UAE firm RAK Gas to explore oil in Tanzania: Tanzania Petroleum Development Corporation (TPDC) signed agreements for oil and gas exploration with the United Arab Emirates (UAE)-based Ras Al Khaimah Gas Company (RAK Gas). The PSA is 11 year old contracts broken into 4:4:3 years of implementation in the Indian Ocean, South of Tanzania.
18. Tanzania Royalty Exploration discovers gold in Kagera region: Tanzania Royalty Exploration announced that one of its royalty partners, MDN Northern Mining, made a significant gold discovery on one of its prospecting licences in Tulawaka area, Kagera Region. MDN Northern Mining is a Canadian exploration company that holds a 30 per cent stake in the Tulawaka gold mine. The firm also has operations in Eritrea, and Quebec, Canada.
India’s investment interests
19. According to Tanzanian government statistics, 118 companies with “Indian interest” (meaning both India-based or with Indian shareholders or partners)have invested a total of $764.88 million between 1990 and July 2005. These figures have been calculated very liberally by Tanzania and actual India-based investments are much lower. Major Indian companies operating in Tanzania are : Bank of Baroda, Air India, Tanzindia Insurance ( owned by a consortium with Indian connections), Tata International Limited ( Tatas have signed a MOU with the National Development Corporation( NDC) of Tanzania for creating a facility for soda ash extraction from Lake Natron in northwestern Tanzania), National Mineral Development Corporation ( has a prospecting concession at Nzega, Ibungu in north-central Tranzania) and RITES ( currently has a small project office at Tabora for the locomotives leased to the Tanzania Railway Corporation. (In March 2006 RITES was awarded the concession worth US$100 million to run Tanzania Railway Corporation for 25 years. The details are being negotiated.)
20. Potential exists for Indian investment/participation in projects relating to development of IT and telecom systems, power generation - gas, hydel as well as coal based, power transmission, construction-roads, bridges, hospitals and infrastructure development, mining, agro processing, gem cutting and polishing, educational services, railways.
Major Trading agreements proposed/ finalised:
21. African Development Bank offer of $80 Million for Nairobi –Dar es Salaam Road : The African Development Bank Group approved a US$ 80.33 million package ( $75.05m loan and $ 5.28 million grant) to rehabilitate the Arusha-Namanga-Athi River Road Development project, which would improve the essential road transport infrastructure between Kenya and Tanzania, particularly between Arusha, Nairobi, Mombasa, Malindi and Dar es Salaam.
22. US$68 Million Grant from the European Union for Education Reforms: The European Union (EU) signed an agreement with the government of Tanzania to provide a US$68.9m grant to support Tanzania’s Education Sector Reform Programme.
23. US$ 22million assistance from DIFD and WB: The British Department for International Development (DFID) signed a Memorandum of Understanding (MoU) with Tanzania and the World Bank for a 22-million dollar Financial Sector Support Project, which will support the Second Generation Financial Sector Reforms which include reforms in banking supervision, financial markets, pensions, insurance, long-term finance, micro and rural finance and SME finance. . DFID’s contribution of 3m pounds (approx US$5m ) will complement World Bank funding of 15 million dollars and a Tanzanian government injection of 2 million dollars.
24. Denmark cuts budget support : The government of Denmark announced that it would reduce its general budget support to Tanzania by 20% equivalent to US$ 4 million in the 2007/2008 financial year because of Tanzania government’s failure to fulfil its commitment to table anti-corruption legislation in Parliament in November, 2006 as agreed between the government of Tanzania and Denmark.
25. Tanzania’s principal five export destinations: Switzerland, South Africa, Germany, China, Kenya ( followed by Netherlands, Japan, UK, UAE and India)
26. Tanzania’s principal five import sources: South Africa, Bahrain, UAE, China, Japan ( India is sixth largest exporter to Tanzania)
27. The principal five export commodities
  ( figure in bracket indicates % share of the commodity)
 
Item 2004 2005 Jan-Oct 2006
Gold 629.4(42.9%) 641.7 ( 41.9%) 723.60(43.2%)
Manufactured goods 109.56(26.89%) 156.06(10.2%) 195.98(11.7%)
Fish & Fish Products Not available 146.88(9.6%) 134(8%)
Cotton 73.53(5%) 111.69(7.3%) 82.08(4.9%)
Tobacco 57.14(3.9%) 81.09(5.3%) 48.58(2.9%)
Coffee 49.42(3.3%) 74.97(4.9%) 58.63(3.5%)
Vegetable & Oil Seeds Not available 62.73(4.1%) 46.90(2.8%)
Other Minerals 49.78(3.3%) 50.49(3.3%) 50.25(3%)
Cashew nuts 66.35(4.5%) 45.90(3%) 65.33(3.9%)
28. The principal five import commodities
  ( figure in bracket indicates % share of the commodity)
 
  2004 2005 Jan-Oct 2006
Other Consumer Goods 518.1(22.1% 585.42(22%) 592.16(16.1%)
Machinery 445.5(19%) 532.20(20%) 665.72(18.1%)
Oil 431.8(18.4%) 510.91(19.2%) 1048.23(28.5%)
Transport equipment 229(9.7%) 290.05(10.9%) 386.19(10.5%)
Building & construction equipment 185.5(7.9%) 258.12(9.7%) 334.70(9.1%)
Industrial raw materials 227(9.7%) 255.46(9.6%) 353.09(9.6%)
Food & foodstuffs 248.8(10.6) 167.64(6.3%) 246.43(6.7%)
Fertilizers 54.1(2.3%) 63.86(2.4%) 51.49(1,4%)
Major economic and commercial developments
29. External Debt: Tanzania’s external debt was US$ 8,435.84 million at the end of October 2006, an increase of 1.9% over the amount recorded at the end of previous month. Out of the total debt stock, US$7,161.3 million (84.9 %) was disbursed outstanding debt (DOD) and the remaining balance was interest arrears. Government external debt service amounted to US$ 3.0 million during October 2006, the largest part being interest payment.
30. Tanzania to Concession Dar Port Cargo Terminal : The Tanzania Ports Authority (TPA) was reported to be planning to concession the Dar es Salaam general cargo terminal by June 2007. The Authority has already leased the container terminal.
31. Tanzania and Zambia considering acquisition of Dar es Salaam Oil Jetty : Tanzania and Zambia were reportedly considering the acquisition of a $44 million jetty to replace the crude oil offloading facility at Dar es Salaam to avert a possible fuel crisis in case of a sudden breakdown.
32. GAPCO under receivership: GULF Africa Petroleum Company (GAPCO) and GAPOIL, oil marketing companies, are under receiverships following a court order over debt dispute between the firms and two commercial banks- Barclays Bank Tanzania Limited and Standard Chartered Bank Tanzania Limited. The High Court in Dar es Salaam earlier this month appointed Ishengoma, Masha, Mujuluzi, Magai (IMMMA) Advocates as joint administrative receivers (JAS) of GAPOIL and GAPCO. The court, however, restrained the receivers from taking over companies' business and assets pending the determination of a dispute between the banks and the oil marketing firms. GAPCO is part of the RITES consortium which was awarded the concession to run the Tanzania Railways Corporation ( operational details of which are still being finalized).
33. Tanzania to establish biotech centre: The Sokoine University of Agriculture, Tanzania would establish an agricultural biotechnology centre aimed at modernising agriculture. Tanzania’s proposal to establish the centre was approved at the International Centre for Genetic Engineering and Biotechnology (ICGEB) Board of Governors meeting in New Delhi.
34. EAC treaty amended : During a mini-summit on 15 December 2006 on the sidelines of the Great Lakes leaders' conference, the EAST African heads of state approved an amendment to the EAC Treaty , endorsing establishment of an Appeals Court of the East African Court of Justice (EACJ). This was first amendment since the signing of the Treaty in 1999; the rushed amendment came just a few weeks after the EA Court approved a temporary injunction, barring Kenya's EA Legislative Assembly nominees from being sworn in.

Source: Commercial Section, Embassy of India, Tanzania