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Tanzania |
ECONOMY
Tanzania’s business community is urging President Mkapa
to improve the
country’s business environment.
But, what’s the hurry?
The policy of regional free trade areas has prompted the Tanzanian business community to convey to President Benjamin William Mkapa’s government what amounts to a warning: «Serve two strong masters, but not at the expenses of your own house!» What’s it all about?
Well, local business people want a rapid change in the internal business environment and is pressurising the government to act. Tanzania is a member of both the East African Community (EAC) and the Southern Africa Development Community (SADC).
Since President Mkapa came to power in 1995, various economic reforms have taken place. The inflation rate has dropped to 6% from 35% experienced 20 years ago. Tanzania’s changes have attracted much needed Foreign Direct Investment (FDI), resulting in its recognition by international organizations as Africa’s «number one» in improving its business environment.
But the major challenge for Tanzania is: How to start implementing the EAC‘s and SADC‘s proposed free trade areas’ protocol, without killing its infant industries. Other member countries in the two economic blocs are well braced to absorb the after-shocks of implementing the free trade areas. They made preparations including putting into place a simplified taxation system and reasonable power tariff rates; also, educating their respective populations on how to undertake business and business negotiations with competitor neighbours.
The Tanzanian scene
In Tanzania, things look different. Power tariff rates are still the highest in Sub-Saharan Africa. And while other SADC and EAC countries simplified their taxation system (into Import Duties, Value Added Tax and Income Tax), Tanzania’s taxation system is positively harmful to the business community. What happens?
Taxes are sometimes collected in advance. The authorities assume that as soon as companies have set up business, they will be making a profit, so they can be taxed. Businesses are required to obtain additional licences to employ suitably qualified personnel, in addition to their ordinary operating licence. At the moment, the Dar es Salaam city council charges about US $3,000 annually for qualified foreign personnel to work, and US $375 for Tanzanians. This adds a lot to the cost of doing business.
Aware of this burden, the government has promised to lower the current power tariffs by between 20%-30% and to streamline the taxation system. However, the business community says it will only be happy with electricity charges of less than US $0.6 per unit. Their main worry, however, is the Tanzanian government’s slackness in acting. While it drags its feet on the current issues, their counterparts in the EAC and SADC are improving their internal business environment fast.
Elvis Musiba, the president of the Tanzania Chamber of Commerce, Industries and Agriculture (TCCIA), is concerned: «The government is supposed to put its own house in order, first, while preparing to ratify the EAC and SADC free trade areas protocol. This should be by addressing problems».
Tanzania’s business community is not afraid of competition, but all they want is a level playing field which can best come from a quick removal of obstacles facing them locally. Level playing fields, however, won’t come easily, because Tanzania, as for other members of SADC and the EAC, must start by removing tariffs on commodities between member countries of these two proposed free trade areas.
Although many of the problems facing business communities are expected to be addressed after the inauguration of the Tanzania National Business Council (TNBC), it’s believed that slow acting by decision makers, will still make implementation of some government promises, a failure.
The SADC‘s kick-off day for zero tariffs was 1 September 2000, and member-states were given a further six months to make some amendments to the trade protocol, specifically those pertaining to rules of origin, and the elimination of all duties on all products. EAC member countries postponed implementation of the free trade areas which was supposed to commence last year, until later this year.
Obviously, then, things are hotting up and Tanzania should quickly get its act together or it risks being left behind.
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