Tanzania’s parliament approves 44.39tri/- budget

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TANZANIA’s Parliament approved a record 44.39tri/- Budget for 2023/24 on Monday after a week of debate over proposed plans to enhance social and economic development in the country.

National Assembly Speaker Dr. Tulia Ackson announced that 354 MPs or 95 percent voted in support of the proposed budget that was tabled by Finance and Planning Minister Dr. Mwigulu Nchemba on June 15, 2023.

According to the Speaker, 20 MPs abstained from their votes and none voted against the highly expected budget. Should Mps vote against the budget, the move would have prompted President Samia Suluhu Hassan to dissolve the parliament, Dr. Tulia warned.

 

Advisory firms hail budget

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SOME tax, audit and advisory firms said the 2023/24 budget is positive for the economy if implemented accordingly and will significantly advance the business environment.

The firms’ analysed reports showed that the budget’s ambitious revenue collection target seems attainable. However, they pointed at areas of improvement.

The firms – PwC Tanzania, Deloitte Tanzania and Confederation of Tanzania Industries (CTI), termed the budget estimates as ‘pivoting for inclusive growth; promoting the growth of industries and building resilience and driving growth amidst global uncertainty’.

The CTI First Vice-Chairperson, Mr Hussein Sufiani told reporters that the government has taken various reforms in the tax structure, fees levies and amended laws and regulations to improve the business environment.

“The government’s commitment is particularly evident in the budget, with tangible investment and new measures to promote growth of industries, entrepreneurship and job creation,” Mr Sufiani said on Tuesday.

“The proposed tax measures will significantly help domestic industries to reduce the cost of production, improve consumer welfare, promote the use of local materials, enhance competitiveness and stimulate economic growth,” he said.

Minister for Finance and Planning, Dr Mwigulu Nchemba on Thursday last week unveiled a 44.39tri/- national budget for the next fiscal year, up from the 41tri/- budget in the 2022/23 financial year.

In the coming year, domestic revenue is projected to be 31.38tri/- equivalent to 70.7 per cent of the total budget.

Deloitte Tanzania, Tax and Legal Partner, Festo Barthalome said in its budget analysis report that external non-concessional debt financing has been reduced by 31 per cent from last year, a welcome move that will help improve the country’s debt sustainability in these trying times.

“This year’s budget provides the government with an opportunity to enable broad-based solutions that will truly put Tanzania on course towards inclusive growth,” Mr Barthalome said.

To balance between revenue collection and fostering economic growth, he said, the government proposes several reforms to tax laws and regulations such as expanding tax on tobacco products, limiting tax exemptions to 1.0 per cent of GDP and proposing to increase focus on non-tax incentives.

“Tanzania needs loftier goals when it comes to tax reform, which has the potential to simultaneously fix the structural deficit, realign incentives and boost the productive capacity of the economy,” Mr Barthalome said

The areas of focus on non-tax incentives are land, water, infrastructure, and energy, increase consumption taxes such as excise, and modest VAT measures aimed at incentivising certain sectors such as tourism.

PwC headlined the 2023/24 budget as ‘building resilience and driving growth amidst global uncertainty’,

It said the transformation of the nation to a digital economy was another key theme, with reference to a number of initiatives taken in this regard by the government.

“…The 2023/24 tax revenue budget whilst ambitious does seem achievable, the PwC report said adding:

“A particularly important, and potentially transformative, announcement was the reference to the removal of the mobile money transaction levy on electronic money transmission, so that a transaction levy will only apply at the point of exiting the electronic ecosystem, namely at withdrawal,” PwC said in its budget bulletin.

Further, PwC said, the positive news for the sector was the removal of the airtime (simcard) levy as well as the reduction of right-of-way charges for fibre optic cable.

The 2023/24 budget is 7.0 per cent higher than the previous and the estimates showed that the government intends to allocate funds guided by its five-year development plan with plans to increase annual GDP growth to 8.0 per cent.

The proposed budget reduces excise duty on domestic manufactured ready to drink by almost half, increases the excise duty rate on imported energy drinks by almost 20/- per litre, and introduces a three-year excise duty freeze calendar from next month.

Also, CTI mentioned including an adjustment of the rate of 10 per cent to the specific excise duty rates on non-petroleum products and 20 per cent on beer and tobacco products.

“Increasing of 20 per cent excise duty on beer and tobacco products introduction of excise duty at the rate of 20/- per kilogramme of imported and domestically manufactured cement will have a negative impact on industrial development,” Mr Sufiani said.

PwC also raised a red-flag on increasing taxes on beer and tobacco, saying this will be of significant concern to beer and cigarette manufacturers, especially with indications of more constrained demand in the first half of 2023 as compared to 2022.

“The government’s rationale for such a drastic increase is that the last upward adjustment for locally manufactured excisable goods was in 2017,” stated PwC, warning that the increase will also be a concern for example, producers of soft drinks.

Additionally, the reduction of import duty on clothes ‘kanga’ and ‘kitenge’ from 50 per cent to 35 per cent, as well as valuation from 80 cent US dollars to 40 cent US dollars per meter, will have a huge negative impact on the industries which incidentally are among the leading industries that bring in more tax revenue in the country. Also, they want the previous taxes on cotton yarn to stay.

Imposition of excise duty at a rate of 20/- per kilogramme on cement reduces the effect of emission gases not only means an increase in cost but manufacturers will also face the existing challenges in the implementation of Electronic Tax Stamp (ETS). The significant related costs are equipment installation and operations of the system.

DSE AGM Notice

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DCB consolidates capital base and profit generation

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Dar es Salaam. Despite facing economic challenges, DCB Commercial Bank has consistently expanded its capital base, while its profit generation has also maintained an incremental trend, the bank told shareholders over the weekend.

Addressing the 21st edition of the Annual General Meeting (AGM) of the bank’s shareholders, chairperson of the bank’s Board of Directors Zawadia Nanyaro said the bank’s capital, which is at Sh28.5 billion, far exceeds the mandatory minimum set by the central bank of Sh15 billion.

She said the bank registered an after-tax profit of Sh747 million in the year 2022, which was attributed to non-interest income amounting to Sh10.3 billion.

Pro-growth budget

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THE government has hiked taxes on beers, cigarettes and gambling machines and increased road and fuel tolls to raise additional revenue and promote growth.

Presenting government budget estimates for 2023/24 financial year in the National Assembly on Thursday, the Minister for Finance and Planning, Dr Mwigulu Nchemba said road and fuel tolls would be increased by 100/- per each litre of petrol and diesel and the funds obtained will be channeled for strategic projects.

He said excise duty on beers and tobacco products would be increased by 20 per cent and duty rates for non-petroleum products would be increased by 10 per cent.

The minister said the government intends to raise Value Added Tax (VAT) registration threshold from 100m/- to 200m/- and gradually increase it to 500m/- to enhance administrative efficiency and promote voluntary tax compliance.

He said the government would also extend Value Added Tax (VAT) exemption on sale and lease of aircraft, aircraft engine or parts by a local operator of air transportation.

The government also intends to introduce an excise duty rate of 30 per cent to cigarettes and other tobacco products including water tobacco, electronic cigarettes, vape products and shisha and increase excise duty rate on imported energy drinks from 589.05 to 600/- per litre.

The Finance Minister said the government intends to introduce excise duty at the rate of 20 per cent on imported and domestically manufactured gambling machines and increase gaming levy from 10,000/- to 30,000/- per slot machine in bar sites (clubs/places selling liquor).

It has also planned to reduce the tax rate from 25 per cent to 18 per cent on gross gaming revenue (GGR) for Forty Machines Site operations.

Other measures will be to introduce excise duty at the rate of 20/- per kilogram of imported and domestically manufactured cement.

The government also plans to introduce an excise duty rate of 5 per cent on electric motor vehicles, with engine capacity of more than 1000cc.

Looking to promote local businesses, the government has proposed that regulatory authorities will from 1st July, 2023 be prohibited from suspending business operations due to violation of various legislations.

And as part of measures to promote local manufactures the government plans to exempt Value Added Tax (VAT) on inputs used to manufacture insecticides and acaricides, the minister said.

The government plans VAT deferment on domestically manufactured capital goods in the list of capital goods that qualify for deferment, he said.

According to Dr Nchemba the government will zero rate Value Added Tax (VAT) on textiles products manufactured using domestically produced cotton for a period of one year.

It also plans to exempt Value Added Tax on supply of precious metals, gemstones and other precious stones at buying centres, mineral markets and Gem houses designated by the Mining Commission under the Mining Act or refinery situated in Mainland Tanzania.

The government has increased expenditure by 7.0 per cent to 44.39tri/- in the next financial year, up from 41.48 in the current financial year to shore up the economy against the fallout of the war in Ukraine and the continued aftermath of the coronavirus pandemic.

The lion’’s share of the budget would be financed by domestic revenue estimated to reach 31.38tri/- or about 70.7 per cent of the total budget.

Other sources will be grants and concessional loans from development partners estimated to reach about 5.47tri/- or 12.3 per cent of the total budget.

The government also expects to borrow 2.10tri/- from non-concessional sources for the purpose of accelerating implementation of development projects.

DSE records substantial market turnover in May

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DAR ES SALAAM Stock Exchange (DSE) has recorded a significant activity after equity market turnover increased by 113 per cent last month, thanks to dividend payments.

Exodus Advisory, a Monthly Market Report, said the equity turnover increased from 4.36bn/- in April to 9.25bn/- last month.

“This primarily resulted from stock demand spurred by release of earnings and payment of dividends,” the report released on Tuesday said.

Despite the turnover increase, the total market capitalisation declined by 2.4 per cent to 15.19tri/- by end of last month while domestic market capitalisation went down by 0.81 per cent.

“This resulted from fall in share prices after the stocks began trading post corporate actions,” the report said.

Similar to the market cap performance, all share index (DSEI) declined from 1,867.18 to 1,821.99 points while the Tanzania Share Index (TSI) decreased by 0.81 per cent.

“This indicates that both local and cross listed counters recorded a negative performance in the period,” the Exodus Advisory report showed.

Locally, TCCL recorded the highest share appreciation of 69 per cent followed by DSE (6 per cent), NMB (4 per cent) and TPCC (0.5 per cent). On the other hand, CRDB recorded the lowest performance falling by 14.81 per cent followed by Jatu 8.62 per cent.

In general, Exodus said, the domestic market has observed a decline as a result of corporate actions undertaken by prominent domestic companies.

“Consequently, it is anticipated that dividend investors will opt to either divest or maintain their positions for the foreseeable future,” it noted.

Additionally, the bourse shows that the banking sector recorded the lowest performance to push down the banking sector index by 4.1 per cent. Commercial services followed with a drop of 0.19 per cent.

“The majority of the counter prices have declined post ex dividend trading date. As such, the market is expected to shift towards fixed income market,” the report painted the future outcome.

However, Industrial and Allied recorded a positive performance growing by 0.91 per cent.

During the month under review, Vodacom Tanzania released their preliminary annual results showing huge turnaround recording a profit of 44.55bn/-.

“This is a significant growth from the loss recorded in the preceding year”.

Overall, the shilling depreciated against the US dollars moving from 2,324/97 as at end of April to 2,330/75 at the end of last month.

BoT insists foreign exchange reserves sufficient

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BANK of Tanzania (BoT) has said the country is experiencing shortages of US dollars, the dominant currency in international transactions but insisted that there was no cause for alarm, as the level of reserves was sufficient to cover four months of imports.

BoT Director of Economic Research and Policy, Dr Suleiman Missango told editors in Dar es Salaam yesterday that the stock of foreign exchange reserves declined to 4,881.2 million US dollars at the end of April 2023, from 5,461.4 million US dollars in the similar period in 2022.

Despite the decline, reserves remained adequate, covering 4.4 months of projected imports of goods and services, in line with the country benchmark of at least four months.

“There is a decline in foreign exchanges reserves in the country, however, that is not a crisis, as the level of reserves remains sufficient to cover four months of imports,” insisted Dr Missango.

Dr Missango said much as Tanzania’s external sector continued to be affected by cumulative effects of global shocks, particularly the war between Ukraine and Russia, Covid-19 and climate change, which largely impacted the global commodity prices, the country is grappling with the situation by instituting various measures.

He said that the available stock of foreign exchange which 4.9 billion US dollars is being used prudently to cope with the global dollar scarcity.

He added that BoT is selling 2 million US dollars to local banks every day, in efforts to curb the deficit of US dollars in the market. He said from January 2022 to May 2023, the BoT has traded a total of 376 million US dollars through Inter-Bank Foreign Exchange Market (IFEM).

Another measure initiated by the BoT is that of purchasing gold from the government for its reserve and has so far acquired 418 kilogrammes of the precious metal. Gold reserves have always been an important part of the diversification of global reserves for countries

He said since the move was introduced, BoT has been purchased gold worth 280 million US dollars annually, equivalent to six (6) tonnes as part of the measures to swell the foreign exchange reserve capacity.

He further said that BoT has moved to issue licence to at least 88 Bureau de change in various part of the country to increase the level of forex domestically.

Dr Missango further said that the prices of petroleum products is declining, which is one of the supporting measures being taken by the BoT to reduce use of dollars in transactions.

However, Dr Missango maintained that the situation will recover soon, especially during the tourism peak season — July to September, as well as market season for traditional cash crops, which will pump into the country more dollars.

He also said that BoT will continue to strictly manage foreign exchange reserves, to meet the objectives of the financial markets.

“The objectives of the financial markets are to ensure that the Bank preserves capital, meet liquidity needs and enhances income given the viability of the market environment,” he said.

Recently, the BoT announced strengthened measures of controlling forex exchange in the country, with experts considering it as a part of efforts to curb the deficit of US dollars in the market.

The measures that according to the BoT Governor Emmanuel Tutuba came to effect from May 1st this year, include the mandatory use of interbank foreign exchange for transaction that exceeds 1 million US dollars

The government has also restricted trading of foreign exchange with international foreign currency brokers, who are not licensed in Tanzania.

“All foreign exchange transactions exceeding 1 million US dollars per transaction in the retail market shall at all-time be traded within the interbank foreign exchange market prevailing quoted prices,” he said.

The governor also instructed that transactions of a single customer in a day shall be summed up for the purpose of determining the amount.

According to him, at all times, foreign exchange dealers are required to strictly observe the procedures for Know Your Customer (KYC) in their undertakings, while the limit for the foreign exchange Net Open Position (NOP) shall be ten per cent of Core Capital and has to be observed at all times.

All Letters of Credit (LCs) for transit cargoes shall be funded by foreign exchange mobilised from respective destination countries.

DSE trading activities slow down

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Equity market

TRADING activities on the Dar es Salaam Stock Exchange (DSE) registered reduced activities for the trading week ending June 2nd. The total turnover for the week reached TZS 921.11 million, marking a decrease of 81.23 per cent compared to the previous week.

The overall market exhibited mixed sentiments, resulting in growth in the total market capitalisation and slightly fall in the domestic market capitalisation.

Among the top trading counters for the week were TCC, CRDB and NMB, dominating the market with 51.03 per cent, 17.88 per cent and 13.90 per cent of the total market turnover, respectively.

Notably, pre-arranged deals involving 78,340 TCC shares were executed at an average price of TZS 6,000 per share, significantly contributing to the overall turnover for the week.

During the week, two counters experienced price gains. NMB led the gainers with a notable increase of 4.6 per cent, closing at TZS 3,640 per share. SWISS also observed a gain of 2.67 per cent per share, finishing the week at TZS 1,540 per share.

On the losing side, TCCL backtracked by 9.47 per cent ending the week at TZS 1,720 per share, CRDB continues to decline as its shares trade ex-div falling by 8 per cent to reach TZS 460 per share. DCB lost 2.7 per cent closing the week off at TZS 180 per share.

In terms of market capitalization, the total market capitalization rose by 0.16 per cent to TZS 15,193.38 billion, while the domestic market capitalisation decreased by 0.31 per cent, reaching TZS 10,901.61 billion by the end of the week.

  • All Share Index (DSEI) closed at 1,821.99 points increasing by 0.16 per cent.
  • Tanzania Share Index (TSI) closed at 4,120.50 points decreasing by 0.31 per cent.

 BoT issues directives on foreign exchange operations

The Bank of Tanzania (BOT) released a directive on foreign exchange operations in the country last week. The directive requires transactions exceeding USD 1,000,000 must be conducted through banks at prevailing market prices. Transactions by a single customer in a day will be aggregated to determine this amount.

The directive also restricts trading with unregistered international currency traders and requires currency dealers to follow procedures for recording customer information. Additionally, all Letters of Credit (LCs) for transit cargoes must be funded using foreign exchange obtained from the respective destination countries

Impact:

The intervention aims to cushion effects of foreign exchange supply constraints. As much as the current forex tightness within the region are structural, policy intervention will give a breathing room for the market.

 BoT shift Yetu Plc assets to NMB.

The Bank of Tanzania has transferred the assets and liabilities of Yetu Microfinance Bank to NMB Bank. Yetu was suspended from trading on the Dar es salaam Stock Exchange after it was placed under the administration of the Central Bank last December to determine the best resolution to its regulatory challenges. Depositors and other creditors of Yetu Microfinance will be advised in due course how and when they will commence accessing banking services through NMB.

Impact:

The regulatory measures undertaken by the Central bank has shown their efforts to protect the interests of depositors and creditors and maintain confidence in the banking sector given its importance to the financial market. Since, creditors and depositors have more priority on the company’s net assets than the shareholders, we are yet to see the fate of the shareholders of the company.

 BoT releases Monetary Policy Committee Statement

The Monetary Policy Committee (MPC) meeting was held on 22nd May 2023 and the MPC noted with satisfaction the sustained implementation of a less accommodative monetary policy that succeeded in containing inflation within the target while ensuring an adequate supply of liquidity. Given the domestic and global economic conditions, the MPC approved the Bank of Tanzania to sustain the implementation of less accommodative monetary policy in May and June 2023.

Primary Market

On Wednesday 31st May 2023, the Central Bank was in the market offering TZS 103.41 billion to investors for a new 10-Year Treasury bond offering a 10.25 per cent coupon rate annually.

The auction was subscribed by 37.1 per cent – the auction received bids totaling TZS 38.36 billion and accepted bids worth TZS 34.54 billion.

The weighted average yield to maturity climbed 16.72 basis points relative to the previous auction held in early February this year from 11.0548 per cent to 11.222 per cent. Yields have edged higher over the last four auctions gaining 76.73 basis points from the average yield in September 2022. Moreover, the price floor has been lowered to 92 from 97 over the same period. This continues to reflect lessened monetary policy accommodation by the central bank to maintain inflation within the target.

Despite the price floor currently standing at 92, which is the lowest as compared to all other tenures, the 10-yr bond still receives low subscription since most investors have more preference for longer tenures such as the 20-yr and 25-yr maturities which have relatively higher average yields thus driving more demand in those tenures.

Secondary Market

Market activities fell relative to the preceding week, however still registering above average weekly trades. Total turnover for the trading week concluding on June 2 fell by 46.97 per cent, falling from TZS 181.52 billion in the previous week to TZS 96.24 billion. Equally, the number of trades decreased from 48 trades in the previous trading week to 47 trades.

The majority of the traded securities had longer tenures, particularly focusing on the on-the-run 20-year and 25-year bonds issued this year, which accounted for a substantial 73.96 per cent of the total trading volume.

On the other hand, corporate bond activities were slightly elevated, registering a total of two trades with aggregate notional value of TZS 45 million traded at average prices of 92.5.

Looking ahead, we anticipate that secondary trading activities will continue to remain elevated in the forthcoming weeks as we reach the end of Quarter 2.

During the week benchmark indices recorded a mixed trend breaking previous weeks uptrend. Tanzania Share Index (TSI) decreased by 0.31 per cent to close the week at 4,120.50 points from 4,133.41 points while the All-share index (DSEI) increased by 0.16 per cent to close the week at 1,821.99 points from 1,819.11 points. We expect the TSI to further shed a few points in the coming weeks as counters such as NMB exercise their book closure.

However generally prevailing market sentiment is characterised by optimism, with AGM’s hosted last week cemented investors’ confidence in companies as they communicated their positive strategies to investors.

Looking at the year-to-date performance, the market capitalisation of the Dar es Salaam Stock Exchange (DSE) has experienced a decline of 3.2 percent, primarily driven by the devaluation of cross-listed stocks.

However, the domestic market capitalisation has shown consistent growth, recording a 6 percent increase since the beginning of the year.