Identifier
Created
Classification
Origin
09DARESSALAAM164
2009-03-12 13:58:00
UNCLASSIFIED
Embassy Dar Es Salaam
Cable title:  

TANZANIA ECONOMIC ROUND-UP MARCH 2009

Tags:  EAGR ECON EIND EINV ENRG ETRD TZ 
pdf how-to read a cable
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ZNR UUUUU ZZH
R 121358Z MAR 09
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC 8333
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHJB/AMEMBASSY BUJUMBURA 2842
RUEHKM/AMEMBASSY KAMPALA 3363
RUEHLGB/AMEMBASSY KIGALI 1290
RUEHNR/AMEMBASSY NAIROBI 1202
RUEHDS/USMISSION USAU ADDIS ABABA
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
UNCLAS SECTION 01 OF 02 DAR ES SALAAM 000164 

SIPDIS

DEPARTMENT FOR AF/E JLIDDLE; INR/RAA FOR FEHRENREICH, AF/EPS
STATE PASS USAID/EA, USTR, USTDA
COMMERCE FOR BECKY ERKUL
TREASURY FOR REBECCA KLEIN

E.O. 12958: N/A
TAGS: EAGR ECON EIND EINV ENRG ETRD TZ
SUBJECT: TANZANIA ECONOMIC ROUND-UP MARCH 2009

UNCLAS SECTION 01 OF 02 DAR ES SALAAM 000164

SIPDIS

DEPARTMENT FOR AF/E JLIDDLE; INR/RAA FOR FEHRENREICH, AF/EPS
STATE PASS USAID/EA, USTR, USTDA
COMMERCE FOR BECKY ERKUL
TREASURY FOR REBECCA KLEIN

E.O. 12958: N/A
TAGS: EAGR ECON EIND EINV ENRG ETRD TZ
SUBJECT: TANZANIA ECONOMIC ROUND-UP MARCH 2009


1. Contents:

-- Government Regulates Fuel Prices
-- Tanzania Re-introduces Pre-Inspection of Goods
-- Cotton Industry Hit by Global Economic Woes
-- Another Global Impact: Tanzania's Leather Industry
-- Tanzania Prepares for Underwater Fiber-Optic Cable

Government Regulates Fuel Prices
--------------

2. In January, Tanzania's Energy and Water Utilities Regulatory
Authority (EWURA) imposed a price ceiling on gasoline in response to
continued high prices in Tanzania relative to world prices. EWURA,
which had not previously exercised its authority to regulate fuel
prices, had threatened intervention since November of 2008, but took
no decisive action until mid-January. EWURA based its decision on
the belief that collusion in the marketplace was leading to
artificially high prices and placing an inordinate cost burden on
consumers. William Ngeleja, Minister of Energy and Minerals, said
that the government was obliged to protect Tanzanian consumers.
Additionally, many blame high fuel prices for increased inflation,
which in late 2008 exceeded 10% for the first time in several years.
Some of our contacts also saw an ethnic angle to price setting,
arguing that the GOT's action would have the effect of reducing
profits for the Tanzanians of Indian origin who have a significant
share of the petroleum industry.


3. One negative side effect of EWURA's action was a severe but
short-lived fuel shortage in Dar es Salaam, just as the price
regulation was to take effect. Of the various theories advanced to
explain the shortage, the most plausible may be that consumers,
fearing a shortage if distributors held their stocks rather than
selling at the government price, panicked and increased their
purchases beyond normal supply. The arrival of a tanker in Dar es
Salaam port rapidly remedied the shortage, whose impact did not
reach most of the country. Some distributors defied the government
order to lower pump prices for a couple of days, but most have since

cooperated and prices have fallen by about fifteen percent.


4. GOT willingness to intervene in the oil marketplace does not send
a positive signal to outside investors. While it is likely that
collusion did occur at some level, high barriers to entry in
Tanzania's petroleum sector make it less likely that competitive
pressures are going to influence pricing at the same rate as the
world market.

Tanzania Re-introduces Pre-Inspection of Goods
--------------

5. The Tanzania Bureau of Standards (TBS) has announced plans to
re-introduce a pre-inspection system for imports, which was
discontinued in 2003. TBS Marketing Manager Daudi Mbaga said the
Bureau was in the final stages of establishing Pre-Shipment
Verification of Conformity of Standards (PVoC),in an effort to curb
the influx of counterfeit and poor quality goods. TBS blamed
counterfeits for huge losses in government revenue, employment, as
well as profitability and performance of the manufacturing sector.

Cotton Industry Hit by Global Economic Woes
--------------

6. The cotton sector is among the first in Tanzania to be affected
by the global economic situation. With world prices down by nearly
half and buyers scarce, as of mid-January 240,000 bales from the
2008 crop awaited sale. In response, the Government, in partnership
with farmers in the cotton industry, set up two committees to
resolve market challenges facing the cotton industry.


7. Speaking to a journalist in Dar es Salaam at the end of a one-day
meeting of local buyers, exporters and farmer's representatives in
the country, Trade Minister Mary Nagu cited the main challenges
facing the sector as the need to develop cotton production beyond
the smallholder level and modernizing production. One stakeholder,
Mr. Gulam Dewji, suggested a review of taxation and duties currently
imposed on cotton to enable local cotton dealers to compete with
imports more effectively.

Another global impact: Tanzania's Leather Industry
-------------- ---

8. The Chairman of the Leather Association of Tanzania, Elbariki
Mmari, said that exporters of raw hides and skins in the country are
feeling the pinch of the global economic turmoil as export orders

DAR ES SAL 00000164 002 OF 002


have dropped to by 45 percent compared to six months prior.
According to the Ministry of Livestock Development and Fisheries,
the 500 million skins sold in the 2007-08 financial year generated
approximately Tsh 21 billion (USD 16.2 million),but both sales and
earnings will decrease substantially this year, with price declines
of seventy percent. Tanzania mainly exports unprocessed hides to
China and thus does not benefit from the added value of leather
processing.

Tanzania Prepares for Underwater Fiber-Optic Cable
-------------- --------------

9. Construction on a landing station for the Seacom undersea
fiber-optic cable has begun just outside of Dar es Salaam. The
15,000km, USD 650 million, cable is 76 percent African owned and is
expected to significantly boost communications in the region -
eventually linking countries from Southern and East Africa to
international broadband networks. Seacom has already laid cable
from South Africa to Mozambique and from Egypt to the coast of
Yemen. A third segment is being deployed from India towards Africa,
where the three segments will meet. Simultaneously, Seacom is
constructing landing stations for connections to inland networks.
Seacom Tanzania official Anna Kahama-Rupia projected completion of
the Tanzania station by April, with the network running by June

2009.


10. Currently, satellite access in Tanzania costs three times the
projected cost of the fiber optic network. The launch of the Seacom
network will mean significantly more bandwidth - and therefore
increased access to information and communications - at lower cost,
reducing costs of doing business and providing new opportunities in
various sectors.

ANDRE