Financing of the Green Economy and prospects for Africa-Can Green Banks offer a viable alternative?

Achieving Green Economies and a just energy transition for Africa cannot be achieved without financing. It is said there is sufficient liquidity and capital to finance climate change and green economic revolution in Africa. Unfortunately, much is not reaching the African continent. In East Africa, access to financing of clean renewable energy such as solar is limited and expensive for many rural communities and poor households. There is potential for solar energy but the existing government policy, legal and financing have gaps limiting cheap financing and solar uptake for rural communities.

The US experience show successful green and clean energy financing models through Green Banks which can be adopted and replicated in East Africa.  Large and small financial institutions on the African continent have leveraged instruments and facilities towards financing the green economy, but these are largely unknown. Governments such as Tanzania are considering carbon trading mechanisms while others look towards imposing carbon taxes to raise the necessary financing for the next green economy. What are the viable options?

The problem

African countries still face significant challenges in financing their climate transition. While investment needs resulting from NDCs are estimated at $2.8 trillion by 2030, funds invested on the continent still represent a limited share of global green finance flows, and the share covered by the private sector remains limited[1] Governments, local financial institutions and communities find it difficult to mobilise or access financing. Large private sector players are reluctant to invest due to the high cost of capital, small scale of projects and inhibiting policy terrains that make it difficult to attract capital and financing into the green economies. Much of the available financing is not yet reaching the communities and thus scantly creating lasting change.

Viable options?

Green banks have been so far lauded as one of the most innovative policy developments that can be used to support and deployment of clean energy[2]. Green banks are financial institutions established primarily to use innovative financing to accelerate the transition to clean energy and fight climate change[3]. They mix commercial, public, and philanthropic approach to capital making it cheaper to finance new clean energy projects that otherwise couldn’t be built. They are a good vehicle for leveraging finance and directing investment to areas which are needed to scale up the green economy.  They are good tools for driving or achieving public policy with a social enterprise angle[4].

An assessment by the African Development Bank and the Climate Investment Funds revealed the potential of Green Banks in six African countries, namely Benin, Ghana, Mozambique, Tunisia, Uganda, and Zambia.

“The assessment revealed that green banks have significant potential for attracting new sources of catalytic funds when supporting low-carbon, climate-resilient development through blending capital and mobilising local private investment for green investments in Africa,” the AfDB reported.

Multilateral development banks and international financial institutions had a crucial role in enabling local financial institutions to develop a green pipeline of projects and ease their access to resources. It is for this reason that the AfDB has established the Africa Green Bank Initiative (ABI).

The AfDB’s Green Bank Initiative (AGBI) is described as a powerful tool for reducing financing costs and mobilising private sector investments in climate action in Africa. The African Green Bank Initiative will be backed up next year by a $1.5 billion trust fund due to close in 2025. The initiative will bolster the capacity of local financial institutions to build a robust pipeline of bankable green projects, while de-risking investments and entrenching long-term investor confidence toward climate-resilient and low-carbon projects in Africa.  “It will do so through investing in sectors such as energy efficiency and renewable energy, climate-smart agriculture, resilient infrastructure, and nature-based solutions, AfDB states.

According to Akinwumi Adesina, the AfDB President, the establishment of a green finance ecosystem could generate $3 trillion in climate finance opportunities on the continent, while over the period 2020-2030, the financing gap to address climate change is estimated at between $100 billion and $130 billion per year.

Moreover, there are other financing options that are or can be pursued. These include green bonds, green loans, and carbon trading mechanisms.

Coincidentally, all these financing mechanisms have upsides and downsides, which  upon evaluation climate financing justice advocates such as  the CSO network, Pan African Climate Justice Association (PACJA) and government officials like Ms Isatou  Camara of the Gambia are now calling out financial institutions  for a total re-engineering and redesign  of climate financing to ensure that more is structured in the form of grants than loans and that at least 70% of this funding reaches the communities. The loans are expensive, Africa is over indebted and yet investment in renewable energy is an expensive affair for African governments to pursue alone[5]

At national level access to green finance should be relatively cheap, driven by a combination of less profit maximisation goals and more social enterprise imperatives and back by enabling legislative and regulatory framework.

Purpose of the webinar

This webinar is the second in a series of the different webinars that GEPC plans to conduct this year on the different elements on economic governance and climate economics, with anticipation that we can contribute towards expanding knowledge, public discussion, and engagement in these spaces.

But more significantly creating opportunities for business economic opportunity in country, including space for youth and women led young businesses to benefit from the emerging context.

Our distinguished speakers will dissect this subject and help us understand Financing of Green Economy in the context of climate change and transition to clean energy: Prospects for Green banks and other financing mechanisms in East Africa with a view of

Objectives

  1. Increase awareness and knowledge about the current Climate Economics and Financing the Green Economy in Africa
  2. Provide an opportunity for stakeholders to interrogate financing structures, national policy terrains, initiative potential opportunities and inhibitors to success.
  3. Influence key stakeholders such finance institutions and potentially state parties to hasten reforms for success.
  4. Generate a potential opportunity for non-state actors, communities, and small entrepreneurs to benefit from existing financing plans.

Our distinguished speakers will be:

1. Ms Isatou F. Camara, Ministry of Finance and Economic Affairs, The Gambia, Least Developed Countries Group Climate Finance coordinator:  Restructuring of the global financing architecture for green economies-what financial institutions must do.

2. Ms Audrey Cynthia Yamadjako, Africa Green Banks Cordinator, African Development Bank (AfDB)

3.Ms Grace Mdemu, Capital Markets FSD Africa, former Business Development Officer at Africa Guarantee Fund (AGF): Leveraging of capital and opportunities to finance Green Economies in East Africa

4.    Dr Elifuraha Laltaika, Senior Lecturer of Natural Resources Law, Faculty of Law, Tumaini University Makumira, Tanzania:   Leveraging financing to poor and indigenous communities in Tanzania

5. Ms Cynthia Opakas,  Senior Legal Counsel, Green Max Capital , Kenya: Practical experiences on financing the green economy in Kenya and global best practices

6. Moses Kulaba, Convenor

Date and Time:  Wednesday, June 14, 2023 12:00 PM Nairobi , 11 AM CET and 9AM ACCRA Time

Pass Code:059752

Registration Link:  https://zoom.us/j/94532314396 

[1] https://www.afdb.org/en/news-and-events/african-development-bank-launches-model-deploying-green-financing-across-continent-56903

[2] Richard Kauffman, Yale School of Management, Financing Clean Energy Technology

[3] http://coalitionforgreencapital.com/wp-content/uploads/2019/07/GreenBanksintheUS-2018AnnualIndustryReport.pdf

[4]https://gepc.or.tz/make-it-happen-how-green-banks-acceleration-can-light-up-rural-hamlets-in-uganda/

[5] Her Excellence Dr Samia Suluhu Hassan, President of United Republic of Tanzania during her address to African leaders at a side event on the Southern Africa Power Pool (SAPP) organised during the CoP27 in Egypt

AfCFTA: Dissecting the world’s largest Free Trade Area: Challenges and Opportunities for East Africa. Is AfCFTA a window of opportunity or a fallacy?

The AfCFTA entered into force on May 30, 2019. Despite the speed at which this new Africa continental trading block is unloading, there is very limited knowledge amongst ordinary citizens, particularly youth, women, and small business.  There is a fear that AfCFTA may be built on a weak ground, set itself for an uphill task and potential failure

The Africa Continental Free Trade Area (AfCFTA) is so far the world’s largest Free Trade Area bringing together the 55 countries of the African Union (AU) and eight (8) Regional Economic Communities (RECs). The overall mandate of the AfCFTA is to create a single continental market with a population of about 1.3 billion people and a combined GDP of approximately US$ 3.4 trillion. The AfCFTA is one of the flagship projects of Agenda 2063: The Africa We Want, the African Union’s long-term development strategy for transforming the continent into a global powerhouse[1].

As part of its mandate, the AfCFTA is to eliminate trade barriers and boost intra-Africa trade. It is to advance trade in value-added production across all service sectors of the African Economy. The AfCFTA is expected to contribute to establishing regional value chains in Africa, enabling investment and job creation. The practical implementation of the AfCFTA has the potential to foster industrialisation, job creation, and investment, thus enhancing the competitiveness of Africa in the medium to long term.

The AfCFTA entered into force on May 30, 2019, after 24 Member States deposited their Instruments of Ratification following a series of continuous continental engagements spanning since 2012. By end of February 2023, 54 member states had signed up and 46 already deposited their ratification instruments, paving way for effective implementation of AfCFTA.

The problem

Despite the speed at which this new Africa continental trading block is unloading, there is very limited knowledge amongst ordinary citizens, particularly youth, women, and small business.  There is a fear that AfCFTA may be built on a weak ground, set itself for an uphill task and potential failure.   AfCFTA aims to create a supra regional economic block in an environment where previous efforts to trade and economic  integration  under frameworks such as the Economic Cooperation of West Africa States (ECOWAS), Preferential Trade Area and Common Market for Eastern and Southern Africa (PTA- COMESA), Southern Africa Development Cooperation (SADC) and East Africa Community (EAC)  have struggled to survive and fully benefit member states , particularly in expanding opportunities for small businesses, jobs and free movement of labour. Trade barriers still exits and overlapping regional configurations, with multiple membership of states to more than one block have exacerbated problems in implementation and held back member states and citizens from enjoying the benefits of regional economic integration.

From an academic perspective, there is a continuous debate on the role of regional integration and commercial diplomacy as instruments of economic diplomacy on trade export flows among African states. A study by the European University in 2016 show that bilateral diplomatic exchange is a relatively more significant determinant of bilateral exports among African states compared to regional integration. The study found a nuanced interaction between these two instruments of economic diplomacy: the trade-stimulating effect of diplomatic exchange was less pronounced among African countries that shared membership of the same regional block. Generally, this could mean that there exists a trade-off between regional integration and commercial diplomacy in facilitating exports or a lack of complementarity between these two instruments of economic diplomacy[2].

AfCFTA is therefore viewed in some analytical circles as potentially counterproductive, as may potentially open the continent to stiff external competition.  Further, cynics view AfCFTA as a potentially well-orchestrated tactical move suitable for developed economies, to open up Africa as a single market. With AfCFTA in place, its alleged, it will be cheap for large RECs such as the European Union (EU) to easily access Africa’s markets with minimal hinderance, as it may now be easy for large and well-established trading blocs such as the EU to negotiate preferential trade deals with one major African block and not with independent states. This had proven problematic in the past negotiations for trade deals such as the controversial Economic Partnership Agreements (EPAs).

Window of opportunity?

None the less, the AfCFTA is here, providing potentially a land shade moment for Africa to reclaim itself, unlock its trade potential and to take its well-deserved position in the community of nations as an economic giant.

The whole existence of the AfCFTA is to create a single continental market for the free movement of goods, services and investments. The AfCFTA Agreement covers goods and services, intellectual property rights, investments, digital trade and Women and Youth in Trade among other areas. The Secretariat, therefore, works with State Parties to negotiate trade rules and frameworks for eliminating trade barriers while putting in place a Dispute Settlement Mechanism, thereby levelling the ground for increased intra-Africa trade. Could this be a reclaimed window of opportunity for Africa?.

Purpose of the webinar

The purpose of this webinar is to dissect AfCFTA create a space for sensitisation and public dialogue with key stakeholders such as Civil Society Organizations, Africa’s economic diplomats, the Private Sector, Government Officials and Agencies, Partners, and other interest groups; in a bid to create awareness about the AfCFTA Agreement and the potential opportunities it offers, thus, securing their active support in the implementation of the Agreement.

This webinar is a first in a series of the different webinars that GEPC plans to conduct on the different elements of AfCFTA, with anticipation that we can contribute towards expanding knowledge and engagement with AfCFTA in the region and propelling its effective implementation.  But more significantly creating opportunities for business economic opportunity in country, including space for youth and women led young businesses to benefit from this new continental arrangement.

This webinar will be held ahead of marking the 4th Anniversary since the AfCTA came into force on 30th May 2023. The webinar will therefore be a major point for reflection on the aspirations and progress made and in generating views and which can potentially influence its future direction.

Our distinguished panelist speakers

  1. Ms Treasure Maphanga, Chief Operating Officer (COO), Africa E-Trade Group and Former AU Director Trade and Industry
  2. Mr Deus  M. Kibamba, Lecture Tanzania Centre for Foreign Relations
  3. Mr Elibarik Shammy, Programs Manager, Trade Mark  Africa
  4. Ms Jane Nalunga, Executive Director, Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI)
  5. Mr Robert Ssuna,  Tax and Trade Expert and Consultant
  6. Mr Moses Kulaba, Tax Law expert and Economic Diplomat (Convenor)

Tentative Dates: Wednesday, 10th May 2023

Time: 12-13:30 Hrs-EAT/ 11AM CET and 9:00 am Accra Time

To participate please register via: https://zoom.us/meeting/register/tJIsc-ispjwiGdVn1y4w9Jks-h-zs5i9QEzV

Meeting ID: 96141487831. Passcode: 391843

[1] https://au-afcfta.org/

[2] Afesorgbor Sylvanus Kwaku (2016) Economic Diplomacy in Africa: The Impact of Regional Integration versus Bilateral Diplomacy on Bilateral Trade, European University Institute, EUI Working Paper MWP 2016/18

Tanzania’s Transition Minerals potential opportunities, risks, and dilemma in context of Climate Change and Energy Transition

 

While critical minerals offer potential opportunities, there are also latent risks for countries such as Tanzania. These risks range from policy gaps, supply chain governance risks, geopolitics of consumer nations, investment and revenue management risks

By Moses Kulaba, Governance Analysis Centre

Critical Minerals and Energy Transition: Tanzania’s potential

Globally, the zeal to mitigate climate change and keep global warming under 1.5 degrees Celsius by reducing net carbon emissions from fossils by 2030 and transition clean energy by 2050, has picked momentum. According to scoping study report by the Natural Resources Governance Institute (NRGI)[1] , based on data from various geological surveys and government reports show that Tanzania has a wide variety of critical or transition minerals deposits relevant to the future technological transition to clean energy.  Critical mineral deposits found in Tanzania include Graphite, Rare Earth, Cobalt, Copper, Iron, Nobium, Lead, Lithium, Manganese, Diamond, Nickel, Titanium, Uranium, Vanadium, Tungstein, Lead, Bauxite and other gaseous minerals such as helium. Over 18 million tons of graphite reserves (estimated to be the 5th largest reserve in the world) are present in mostly in Lindi, Morogoro and Tanga Regions. An estimated 1.52 million tons of nickel deposits have been discovered in Kagera region and about 138 billion cubic feet of helium is present at Lake Rukwa Basin. This is said to be the second largest helium deposit in the world.

The discussion on energy transition and its implications to the Country has not picked momentum within Tanzania. The potential contribution that these minerals could make to Tanzania’s economic development in the context of energy transition may be known in some circles but not widely discussed.

There has not yet been a specific categorisation of these minerals as critical or strategic. To date minerals in Tanzania are still largely classified as metallic minerals, industrial minerals, and energy minerals. Perhaps, this is due to the limited public understanding of the strategic and critical nature and role some of these minerals will play in defining the global future.

Energy Transition Opportunities for Critical Minerals

Globally, there is a surge in interest in critical or transitional minerals as a pathway to meeting Net zero targets The World Bank estimates that overall demand for at least some critical minerals vital for industrial energy transition will increase significantly over the next 30 years (by 2050).  For instance, copper and aluminum are cornerstone minerals for all electricity-related technologies, since electrical equipment such as motors, transformers and cables use copper to conduct electricity and heat.  Copper, nickel, lithium and cobalt are key elements for batteries used in many of the new technologies. An electric vehicle, for instance, typically contains lithium-ion batteries, which requires lithium, nickel, manganese and cobalt-bearing minerals. Solar panels and wind turbines are made with nickel, graphite and copper. Telecommunication devices we use, such as phones and laptops, require a wealth of minerals, including tantalite, wolframite, graphite, bauxite, etc.

World economic powers and foreign companies have already picked interest and acquired stakes in Tanzania’s Critical Minerals, significantly highlighting what may potentially be a race to control the supply chain into future. So far companies from Australia, China, Canada, Europe and US are known to have interests in Tanzania’s critical minerals. This provides Tanzania with a potential opportunity to leverage its extractive sector (particularly critical Minerals) to benefit from the forthcoming energy transition. With deposits of critical minerals, such as graphite and Helium, Tanzania’s critical minerals subsector could be a game changer.

Energy transition risks in critical minerals

While critical minerals offer potential opportunities, there are also latent risks for countries such as Tanzania. These risks range from policy gaps, supply chain governance risks, geopolitics of consumer nations, investment and revenue management risks

The future of Foreign Direct Investment in mining risks

The investment boom in critical minerals will affect the future of foreign direct investment in Tanzania’ s other major mineral resources such as gold and gemstones. This is already felt in the type of mineral licenses that are being granted. According to NRGI critical mineral scoping study report, 90% of the total exploration licenses in 2005 were granted for gold. By 2020, 70% of exploration licenses granted were for critical minerals. Clearly, investors’ interest for critical minerals is currently surpassing that for gold and other major minerals.

Tax and revenue risks

 Over the past years Tanzania has tried to increase its domestic revenue mobilisation efforts from the mining sector. Tanzania’s DRM efforts, among others, focused on tax reforms to curb tax evasion and maximising benefits from the minerals sector through value addition.  Currently, the mining sector contributes 547 trillion[2] to the total government revenue collections. Between 2018/19 mining companies contributed around 421 trillion TZS (183 billion U.S. dollars) to the revenue collected by the government, while oil and gas companies contributed approximately 177 trillion TZS (77 billion U.S. dollars)[3].

However, the NRGI scoping study found there are gaps in the current Tanzania Development Strategies and Mineral Policies. An independent or separate policy on critical or strategic minerals may not be necessary but aligning the current framework to tap in the energy transition opportunities is essential. Government can benefit more from encouraging/investing in processing of the critical minerals at home, thus capturing and retaining high values from the resource extraction of the value chain. Where the local volumes cannot economic viably support, Tanzania can explore partnering with other Countries in the region. The potential revenue contribution from the critical mineral’s subsector is largely unknown. Critical Minerals are just minerals. If the government doesn’t strategize, the windfall benefits from the energy transition could be missed. There are also significant governance (corruption) risks in critical minerals supply chain which could undermine government’s efforts to maximise revenues[4].

To realize the opportunities offered by this resource wealth, Tanzania needs to take a deeper look at its policy and legal frameworks to ensure proper governance of the sector and a clear identification of its position through a well-tailored strategy on critical minerals. If not well managed, the interest in controlling the critical mineral’s supply chain could benefit more the developed (user) Countries than the supplier countries such as Tanzania.  The new search for critical minerals could also mean more new marginal lands opened up for exploration and mining (large scale and artisanal), sparking off a new wave of land-based conflicts. The boom could also be short lived new alternatives to critical minerals emerge to support clean energy technologies emerge.

 

[1] NRGI: Critical Minerals and Energy Transition: Findings from Tanzania’s Scoping Study of Critical Minerals Potential and implications for Tanzania, 2021

[2] https://allafrica.com/stories/202104300627.html

[3] https://www.statista.com/statistics/1272116/contribution-of-mining-oil-and-gas-to-government-revenue-in-tanzania/

[4] https://eiti.org/events/critical-raw-materials-times-uncertainty-why-good-governance-matters-energy-security

Tanzania’s removal of penalties on transfer pricing: What did government seek to achieve?
Tanzania Finance Hon Mwigulu Nchemba

In this year’s (2021/22) budget speech Tanzania’s Minister for Finance, Mr Mwigulu Nchemba, made a surprising announcement that government would/had scrapped the 100% penalty for transfer pricing. The announcement was surprising as transfer pricing or mispricing in international transactions and currently a point of discussion globally as one of the leading enablers of illicit financial out flows and capital flight from developing and extractive rich countries.  From a Tax justice perspective, the government’s decision was received as a slight slip in the gains scored over the past 10 years.

According to Global Financial Integrity (GFI) and the Mbeki High-Level Panel Report on IFFs latest reports, shows that IFF’s from the African continent have been increasing with losses estimated between USD50 Million and USD 80 Million over the past years. Corruption and the extractive sector has constantly provided a major conduit for tax avoidance and illicit resource outflow from Africa

Transfer pricing is an accounting practice that represents the price that one branch, subsidiary or division in a company charges another branch, subsidiary or division for goods and services provided. Transfer pricing allows for the establishment of prices for the goods and services exchanged between a subsidiary, an affiliate or commonly controlled companies that are part of the same larger enterprise.

A transfer price is based on market prices in charging another division, subsidiary, or holding company for services rendered. Transfer pricing can lead to tax savings for corporations.  However, companies have used inter-company transfer pricing to reduce the tax burden of the parent company. Companies charge a higher price to divisions in high-tax countries (reducing profit) while charging a lower price (increasing profits) for divisions in low-tax countries.  This is what is also often referred to as transfer mispricing which is problematic for tax collection purposes. We have discussed this concept in detail via another publication via: https://gepc.or.tz/how-to-curb-transfer-pricing-tax-dodging-and-illicit-financial-flows-in-extractive-sector/

Why were heavy penalties imposed in Tanzania’s statutes?

Heavy penalties were imposed for transfer pricing  in Tanzania’s tax statutes because many companies dodged taxes through complex structures and subsidiaries in foreign jurisdictions which made it difficult or impossible for government to track transactions for tax purposes.

According to Financial Secrecy Index (2018) reported that Tanzania lost billions of shillings through potential transfer arrangements between mining companies.

The government was not explicit why it had taken this dramatic decision and therefore left experts and civil society actors bewildered and speculating. The reasons given were pointing towards improving Tanzania’s investment climate. The investment motive was more than the tax revenue imperative.

The potential hefty penalty for transfer mispricing was an inhibiting factor for attracting foreign investments as companies feared or found it difficult to structure their businesses with an international network of subsidiaries and branches anchored to Tanzania making sourcing for foreign financing and sourcing or procurement difficult.

The difficulties in determining market price or an arms price in transactions between related parties and establishing without any iota of doubt whether a given transaction was a mispricing arrangement and illicit in the face of Tanzania’s statute may have been another factor.

The Minister made another drastic announcement.  Effective 2021/22 the Minister responsible for finance was empowered to grant tax exemptions on specific projects without full cabinet approval.

The Minister proposes to restore the power of the Minister to grant income tax exemption on projects funded by the government on specific projects, grants and concessional loans if there is an agreement between the donor or lender with the government providing for such exemption. The measure would streamline and make it efficient for such exemptions to be provided as it has been a pain sticking point for many projects.

The government was attempting to address bureaucracy in approving exemptions and waivers which was a major stumbling blocks to investment and vitality to the success of some strategic projects. This was certainly a welcomed change for players in the construction and large-scale investment projects. At the time of presenting the budget some big and strategic projects were in offing. These included the OreCorp Nyazanga Gold Mine project in Mwanza, Kabanga Nickel project, the ongoing Standard Gauge Railway project and the East African Oil Company project (EACOP). The government announced a specific exemption of VAT on imported and local purchases of goods and services for East African Crude Oil Pipeline (EACOP). The government aimed to ensure the costs of EACOP are minimised.

However, by doing this, the government is walking a very tight rope and contentious terrain with a significant risk of returning to bedeviled fiscal policy regime era which dogged its tax revenue collection efforts in the early 2000s.  Hon Jerry Slaa, Member for Parliament for Ukonga Constituency in Dar es Salaam posted a passionate that perhaps the Minister may have been deceived or even this dangerous paragraph may have been smuggled into the Minister’s Speech. He passionately appealed to the Minister does not sign off this years financial appropriation bill which this provision. It is a dangerous route to take with potential risks.

In our opinion, for these latest decisions to be effective government will have to

  1. Strengthen its monitoring and surveillance capacity to ensure the international companies do not structure their operations and tax arrangements in a manner that facilitates tax avoidance and evasion.
  2. Strengthen its (TRA’s) International Tax department to detect in advance and reverse any transactions of a potential transfer pricing arrangement before they happen.
  3. Improving data collection capabilities to establish the true arm’s length price for potentially contentious transactions, such e-commerce, services, and intellectual property.
  1. Increase transparency around exemption by perhaps requesting the Minister to publish the list of all exempted projects and values within a short period of 30-90 days after approval, clearly stating the purpose and rationalisation for the exemption.
  2. Retain some mechanism for punishment for noncompliance to the commensurate level deterrent enough to the induce compliance.

Highlights of Tanzania’s Budget 2021/22

Projected Total Budget 36.6% Trln (3.2% increase) Domestic 26.0 Trln (72%)
Expected GDP Growth 5.6% Grants 2.9 Trln (8%)
Inflation forecast 3.3% Development 13.3 Trln
Tax to GDP ratio 13.5% from 12.9% (2020/21 Recurrent 23.0 Trln
Debt to GDP ratio projections 37.3% Domestic Loans 5.0 Trln (14%)
Projected Budget Outturn 2020/21 86% – 95% External Loans 2.4 Trln (6%)

** The key challenge to government will be to raise domestic revenues in the face of shrinking grants and concessional loans and the COVID 19 pandemic which is stiff affecting key sectors such as tourism.

Uganda signals new impetus to Mining with a bill in offing

The Uganda government has signaled a new impetus in the mining sector with multiple reforms and political weight over the next five years yielded to transform, its previously dormant mining sector. The government plans to scale up its work in the Mining sector. As part of improving its geological data, the government recently announced commencement of aerial surveillance of Karamoja, which is one of the areas highly believed to be mineral rich. This will improve the quality of real time Mineral and geological data.

The Ministry plans to table the new Mining Bill in Parliament soon. Civil society organisations such as the Natural Resources Governance Institute (NRGI) have worked with the Ministry experts on this, and will be monitoring the developments, debate, and the outcome from this bill.

Civil Society and expert advice to government has been that Uganda needs to have a legislative environment which attracts large investments into its mining sector but also ensures citizens benefit from extractive resources. NRGI will be engaging with new Parliament, by providing some capacity building support and making technical presentations on the extractive sector governance during Uganda’s new journey.

On the12th of May, President Yoweri Museveni was sworn into office after a tenacious election period. Despite the violence and contestation, President Museveni was declared winner for a sixth term. Since 2006, the President has constantly anchored his economic development cards on the Country’s oil wealth as a conduit to pursue his long-term development agenda and pathway to a middle-income status. The tilt towards developing the country’s mining sector expands this vision further.

Under a new mining policy passed in 2018 Uganda proposed to maximse gains from its mining sector by automatically making value addition mandatory and owning shares in every mining company granted a mining lease. This policy was a major shift from the previous policy framework where the mining companies owned 100% of ownership with government being relegated to a  spectator.

The old policy regime was characterized by abuse, land conflicts, speculation and nuisance business practices which denied government maximum economic benefits. According to the Uganda Chamber of Mines and Petroleum (UCMP) there are over 800 mineral licenses, with over half held small companies and speculators. Uganda’s Mineral rich areas such as Karamoja are awash with prospective mineral license holders and artisanal miners. The current policy framework was not backed by commensurate enabling law.

With a comfortable majority in parliament, the President has lee way to use the advantage of numbers to push through policies that favour his vision. While  changes among the ministers are expected,  there is no expected much change regarding technical staff in the key government ministries, agencies, and departments. This may be of advantage as these technocrats can now focus on achieving this new ambition. Can Uganda pull it off?  As extractive sector stakeholders will be following the developments with keenest and wishing Uganda success.

 

Uganda-Tanzania East Africa Oil Pipeline: signed deal yes, but hurdles lie ahead.

Samia, Museveni witness pipeline project final actsThe East African Oil Pipeline project received significant boots in April 2021 with Uganda with a series of key oil infrastructure related agreements signed between the government of Uganda and Tanzania and the oil companies for the East Africa Crude Oil Pipeline (EACOP) project to transport crude from Uganda to the Tanzania port of Tanga.

According to the government communications, these agreements signal Final Investment Decision (FID) which could be announced soon with production, expected around 2025. There has been already significant work going on at the oil sites in Hoima and as one of the Company officials remarked, work has started. The project is very important to the East Africa region as it promises great economic benefits to the governments and their citizens in the form of jobs, revenues, and other associated economic linkages.

Despite this rekindled hope, shortly after the signing of these agreements, it was evident that multiple uncertainties still lie ahead.

The details of the signed agreements remained undisclosed and technical experts involved in the negotiations remained secret on essential information on key fiscal terms surrounding the tariffs.

The project financing arrangement remains a quagmire.  Few days after signing of the agreements, several banks in France where the lead investor Total is based announced that they were staying away from the financing of the pipeline. The French banks included, BNP Paribas, Société’ Générale and Credit Agricole, Credit Suisse of Switzerland, ANZ of Australia and New Zealand and Barclays.

According to earlier government reports, The Standard Bank of South Africa, China’s ICBC and SMBC of Japan are lead advisors of the EACOP financing. These were under immense pressure from their counterparts Bank Track, Reclaim Finance and Energy Voice for what they described as pushing responsible financing of projects worldwide. According to these banks and activists EACOP’s environmental credentials were failing.

The Uganda government announced that it was not bothered by announcement, describing it as not new. However, the announcement by the banks signalled that the project could be still facing serious negative diplomacy from environmental activists and other political interested actors regionally and globally.

President Museveni described the project and the agreement signing occasion as an act economic liberation. This followed the political liberation which in his view happened some decades ago when Tanzania helped exiled Uganda political groups to take power in Uganda and change the course of history. With the hurdles still to overcome, it was evident that perhaps the financial, environmental, and political woes were not over, and the project was yet to fully get on track.

Tanzania political transition: new era, new opportunity

In March, East Africa was gripped with shock upon the sudden death of Tanzania’s President John Pombe Magufuli. Over the past five years, President Magufuli towered like a political colossus, led with a nationalistic approach, and pursued reforms which sent zillion sentiments across many frontiers. He threw out Accacia, Barrick’s Mining subsidiary in Tanzania, for tax evasion and dubious practices that he descried as stealing against Tanzanians. Enacted new mining laws and renegotiated a 50/50 sharing deal with Barrick which has since been mirrored as a template in other Countries far away such as Papua New Guinea. However, his style was considered as a possible deterrent to potential investors and perhaps disruptive to the extractive sector.

The transition to the new President Ms Suluhu Samia Hassan was peaceful and lauded as a new era for a new opportunity. President Samia has promised to set Tanzania to a new path. Few days into office, President Samia observed that all was not very well as earlier perceived. New investments in the sector were low. The volume of Mineral exports had fallen. Despite the Mererani wall, Tanzanite, the precious gemstone from Mererani, was still being stolen. Negotiations for conclusion of the lucrative LNG project had stalled. The tax laws were impeding and the enforcement style by the Tax Authorities had seen many companies’ close shop. The President has since called a truce with the private sector and declared Tanzania is fully open to investment.

Despite her aspirations, President Samia has insurmountable hurdles to climb. The mining reforms were passed in law and therefore amending or uprooting these will require parliamentary approval. The amendments were so popular with the Tanzanian public and this could be touch political gamble to make.

Nonetheless, Tanzania still has an opportunity to excel. The Country’s extractive wealth lies in Minerals such as gold.  The Country has vast deposits of what are considered critical minerals such as rare-earth, lithium etc which are vital to industrial use during the energy transition. With a revived and careful political navigation Tanzania could still attract potential investors and comfortably reap more benefits from its extractive wealth.

Were 2020/21 National Budgets Ceremonial? A commentary of how this year’s budgets missed the Bigger Picture

National budgets are statements of how the government plans to raise and spend public money. They are based on fundamental economic parameters which inform planning.  Looking at the budget proposals and given the unusual current economic realities that the Finance Ministers found themselves in, this year’s budget can be described as largely ceremonial after all. In This brief commentary, we show why.

By Moses Kulaba; Governance and economic analysis centre

On Thursday, 11th June 2020, the Finance Ministers in Tanzania, Kenya and Uganda presented their annual budget estimates for the year 202/21.  While Tanzania pitched its budget as one for nurturing industrialisation for economic transformation and human development, the Kenyan Budget was presented as a budget for growth while Uganda’s budget was presented as one for consolidation and continuity towards achieving the Five-year development plan.

Conservatively defined, a national budget is a statement of how government plans to raise and spend revenue or public money collected from various domestic and external sources. Domestically, the government largely raises revenues through taxation and externally through borrowing and grants.

Looking at the budget proposals and given the unusual current economic realities that the Finance Ministers found themselves in, this year’s budgets can be described as largely ceremonial after all.  The macro economic parameters of which the budget projections were based are hollow when subjected to the test of COVID 19. There were all indications that the Ministers would soon come back to parliament asking for supplementary budgets before the end of this financial year.

Indeed, the Finance Minister, Mathia Kasaija told Uganda’s Parliamentarians, that the COVID 19 pandemic had necessitated changes to the budget and he would come back seeking  approval for a supplementary budget to reflect the true realities. A similar sentiment was echoed by Kenyan legislators and policy experts, who expected the Treasury Minister, Mr Ukur Yatani, to return to parliament sooner than later with a more aligned budget.

The Daily Nation newspaper summed up the Kenyan National proposals as a ‘Budget for bad times’, while the Kenyan Standard described it’s a ‘Nightmare budget’, stressed with Corona virus, lost jobs, empty coffers, shrinking revenues, huge debts, funding gaps, which all combined to under cut the treasury’s ambitions. In summary, the budget added more pain to the already suffering Kenyans.

So what was contained in the budgets which make them peculiar, largely symbolic and ceremonial.

Key items of the budget frames

Budget Item Kenya Tanzania Uganda
Economic Growth projections 2.5 % 5.5% 3.1%
Total Proposed  Budget 3.4trln ($27Bln) 34.88tln ($20bln) 45tln ($12Bln)
Domestic Revenue 2.79trln 24.07trln 25.5trln
Deficit ( to be financed thru external borrowing, grants and other measures) 840.6bln (7.5% of GDP) 10.81trln 20 trln
Latest National Debt &  Debt to GDP 63% (6.4trln) 55.43tln (27.1%) USD 13.3bln (Approx 43.6%)  

 

From the figures and proposals contained in the budget speeches, it was evident that the finance Ministers were reading from a script of optimism and perhaps missed a big picture.  Tony Watima, an economist writing for the Standard Newspaper’s ‘Business daily’ concluded that positioning of the Kenyan budget as pro-growth was misguided. Stabilisation should have been the tenor of this year’s National budgets.

The East African was franker in its editorial when it wrote; ‘Finance Ministers owe Citizens the truth on budgets’. The Editor noted that despite the unusual circumstances, the Finance Ministers struck an optimistic positive, calculate perhaps to lift the spirits of a region weighed down by the ripple effects of varying levels of COVID 19 related to lockdowns.

Given, the recent changes to the budget policy and public finance requirement, clearly the Finance Ministers, perhaps could be excused. They were caught between the law and COVID 19, the Finance Ministers found themselves in a tight corner. Having prepared the budget statements before March, they had to present what they had.

The Kenyan Constitution, for example, requires the government treasury to disclose to the public spending plans two months before the end of the financial year. In Kenya, a court ruling directed that the treasury publishes the finance bill earlier so parliament can debate in parliament. The Annual Budget Policy Statement (“the BPS”) was issued in February 2020 and as the CS rightly pointed out, the economic environment had vastly changed from what they found themselves in June. Similarly, in Tanzania and Uganda, the budget policy framework papers were passed months ago.

Realities of COVID 19 on the economies

The negative realities of COVID 19 on the economies are everywhere.  The key economic sectors have all been affected. Within a short span of three months, nearly 1 million Kenyans had lost jobs, several companies had closed operations while many were on the edge. Revenue collections had plummeted and some revenue streams were on the verge of total disappearance. Kenya, East Africa’s largest economy was in free fall with rising unemployment and disruption in major economic sectors. Uganda’s economic fundamentals were in tatters while Tanzania appeared to live in self-denial of the current and long-term adverse economic effects of COVID 19. The Minister admitted that COVID19 had affected the economy but was upbeat that measures had been taken to circumvent the pandemic.

Kenya’s Finance Minister was more optimistic with an estimate of the growth at 2.5% in 2020 and 5.8% in 2021. Pre-the pandemic the economy was projected to grow at 6.1% up from 5.4% in 2019. The IMF projected that global economies were expected to contract by as much as 3% growing to 5.8% in 2021 and Kenya was expected to grow at 1% in 2020.  Kenya’s revenue collection by April 2020 was Ksh 20.1 Billion-lower than the same month last year and below target. The fiscal deficit in 2019 was 8.3% up from 6.3% in 2018.

In Uganda revenue collection by April 2020 fell by Ush789.8bln below targeted Ush1.8trln. This was the largest deficit ever recorded in a single month. With the lockdowns, there was no way URA could meet its target. Tourism and business sector was largely affected.  80% of agricultural businesses and 41 Manufacturing had reduced production and employment. Yet, these contribute to the largest share of tax revenue. Agriculture accounts for 45% of exports and employs 64% of all Ugandans. Uganda expected to receive US128bln grants from donors but had only received Ush28bln. All projections were below target.

In Tanzania, the affected areas included tourism, business (wholesale and retail), traditional export crops such as cotton, cashew nuts and coffee. On 8th of June, just three days to the budget day, Tanzania’s Dar es Salaam Stock Exchange (DSE) recorded zero tradings at its equities counter. This signified an economy under distress and barely recovering from loses of COVID 19. Yet, Tanzania’s Finance Minister projected an increase in revenue collections from 14.0% in 2019/20 to 14.7% in 2020/21.

Response measures are taken

The governments undertook some fiscal and tax administration reforms and provided some stimulus packages aimed at cushioning the economies against the pandemic. However, when deeply analysed, the measures were based on shaky economic grounds, expensive in revenue foregone, difficult to achieve and can not guarantee to reverse the negative impacts of COVID 19.

Summary of some COVID 19 related response measures taken in 2020/21 budgets

Kenya Tanzania Uganda
Concessional Loans from External Lenders (IMF & WB) amounting to USD 739Mln and USD1Bln Negotiated debt relief of USD14.3Mln and potentially up to USD25.7Mln under IMF Catastrophe Containment Relief fund. Ongoing negotiations with other donors Concessional Loans (IMF & WB) –USD100Mln in 2020 and 90 Mln in 2021 and negotiation for debt relief.
Reduction of CBR from 8.25% to 7% and Cash Reserve Ration from 5.25% to 4.25%-Releasing 35bln to commercial banks Reduction of BoT Discount rate from 7% to 5% , Lowering statutory Minimum Reserve Rate (SMR) from 7% to 6% Reduce BoU Central Bank Rate from 9% to 8%
Turn over tax rates reduced from 3% to 1%, Allowance for restructuring and rescheduling of distressed loans by commercial banks and lenders Reduce the cost of Mobile Money transactions by Increasing daily minimum transfers from 3Mln to 5Mln and Minimum balance from 5mln to 7 Mln Extension of time to file Income taxes or presumptive tax  for six months
KSH 10 Bln for Kazi Mtaani Vijana Program targeting 200,000 youth, recruitment of teachers and health workers Zero-rating of import duty on raw materials for COVID 19 Manufacturers sanitizers, PPE Masks Local Manufacture and purchase of PPE for free distribution to all Ugandans
Reduction of VAT from 16% to 14%, Reduction of Corporate tax from 30% to 25% 100% allowable deductions on contributions in support of government’s COVID 19 response Ush130bln for vulnerable but able-bodied persons affected by COVID19
Reduction of PAYE for low earners of up to Ksh 24,000 per month Allowing loan restructuring and rescheduling, VAT exemption on Agricultural Crop insurance Ush1.045bln to UDB for low-interest credit to manufacturers agribusiness
500 mln for purchase of locally made hospital beds and 600mln for purchase of the locally assembled vehicles Abolishment of over 144 levies charged by MDA and Local Authorities for an improved business environment. Ush138 to UDC to facilitate public-private import substitution investment
Ksh18.3bln to support local manufacturing, 3bln for Agric Credit Guarantee schemes, 400 million in food and non food commodities to household affected by COVID 19 Subventions to TANAPA, NCAA, TMWA to meet their operational expenses,  Increase minimum threshold of Primary SACCOS liable to income tax for 50,000,000 to 100,000,000 Provide Credit through SACCOs and Micro-Finance Institutions

 

What was missed?

The plans and fiscal reforms were taken as if the economy would be normal.

The trend shows that the finance Ministers planned normally and even increased their budgets estimates, despite the odds and indications that the outturns were likely to be suppressed by COVID 19. The law firm Bowman’s noted that Budget speeches did not necessarily provide any solutions to the perineal challenges the countries faced and in some ways simply repeated what we have heard before.

What have been the budget trends?

Country 2017/18 2018/19 2019/20 2020/21
Kenya Ksh 2.3bln Ksh 2.5bln Ksh3 trln Ksh 3.4trln
Tanzania Tsh 31.7trln Tsh32.4trln Tsh 33.11trln Tsh 34.88trln
Uganda Ush 29 trln Ush 32.7 trln Ush 40.487trln Ush45 trln

 

The actual budget out turns has fallen short of projections. Kenya, which is the biggest economy in the region has missed targets for the past eight years. In 2018/19 Tanzania recorded a shortfall in budget outturn only achieving 88% of its targeted revenue collection. Tanzania had collected 26.13trln (93.4%) of its budget by the end of April 2020. Uganda Tax Revenue Authority had perennially missed its targets. In the current environment, it is very unlikely that the economy will bounce back before 2021 and by all accounts, 2020 was going to turn out the tough year.

In Uganda, the budget was not significantly different from the previous Budgets.

Table of Uganda’s sectoral allocations

Sector Allocation Approved Budget 2020/21 % share Approved budget 2019/20 % share
Works  & Transport 5,846.00 12.85% 6,404.60 15.82%
Security 4,584.68 9.90% 3,620.80 8.94%
Interest Payment 4,086.50 8.98% 3,145.20 7.77%
Education 3,624.06 7.97% 3,397.60 8.39%
Health 2,772.91 6.10% 2,589.50 6.40%
Energy & Minerals 2,602.60 5.72% 3,007.20 7.43%

 

In Kenya, the 10 bln stimulus packages offered youth employment under the Ajira Mtaani program appears generous. However, experiences from the past indicate that stimulus packages never trickle down to the real people who need them. This was the case with the maize stimulus package passed during the maize shortages in 2017. The scandals that have rocked the National Youth Service program for years further underscored the weakness of Kenyan institutions in managing affirmative budget programs such as these. Kenya’s imposition of tax on pensioners was clearly off the mark as it indicated that perhaps the government was robbing from the elderly to reward the youth and wealthy.

The agricultural sector which had already been devastated by the floods and locusts a received a raw deal in Kenya and Uganda. The post-COVID 19 scenario presents the region with significant food insecurity. There is likely for a surge in food prices, squeezing further on the household incomes.

Yet, in Uganda, the Ush 1.3trln (2.9%) budget allocated to the agricultural sector was equivalent to that allocated to Uganda’s Public administration. Uganda’s Parliament accounted for Ush 667.78bln equivalent to half of the total budget allocated to the Agricultural sector. 

As Ms Salaam Musumba, a Ugandan political activist said, people, expected a clean cut for political niceties such as for conferences, meetings, benchmarking on foreign travels, health care abroad, etc. However, this was not reflected in the budgets.

In Kenya, the Governors, MCAs and their political handlers account for a substantive portion of the recurrent budget. Kenya’s parliament received a budget twice that of the entire Judiciary. In 2020/21 some political offices such as that of former Prime Minister even received 100% budget (Ksh 71.9Mln) allocations for first time since they were created.

Generally, East African public services are bloated with public servants and money guzzling politicians and their handlers, who have become too expensive for governments to carry, yet, politically costly to offload. As a net effect, the recurrent expenditures have increased tremendously to take care of this political baggage and the entities associated with this. The Finance Ministers could do nothing to reduce taxpayers of this burden.

In Tanzania, the government did not provide much booster to the tourism sector which is a leading foreign earner. The sector has faced the largest hit from COVID 19. The government instead took away powers to collect tourism-related revenues from the authorities Tanzania National Parks Authority (TANAPA), Ngorongoro Conservation Area Authority (NCAA), Tanzania Wildlife Management Authority(TWMA) to Tanzania Revenue Authority (TRA). The revenues collected from these authorities would be directly remitted to the consolidated Fund and disbursed back through normal government budget channels. The government would provide some subventions to keep the operational and development expenses of the authorities afloat.

The Finance Minister acknowledged that Tanzania’s flagship projects aimed at putting Tanzania back to a spurring economic path faced 11 risks including COVID 19, which had affected the global economies and financing environment. The government planned to raise and spend Tsh 12.78 trln (27%) of the budget on mega infrastructure projects. According to the Minister, an evaluation conducted in April showed that the Country had not been badly affected by the pandemic, allowing it to raise its growth forecasts and maintain firm financing for its mega-development projects.

However, the truth is that the real impacts of COVID 19 on countries such as Tanzania, which are not interlinked to the global financial systems take a while to be registered and will likely be evident in the 4th Quarter of this financial year and 1st to 2nd Quarter of the new financial year 2020/21 as distressed economic sectors and business begin filling distressed tax returns for income and corporate tax purposes.

Political –economy risks underestimated

The budgets underestimated the political risks that were associated with the national general elections taking place in Tanzania (2020) and Uganda (2021) during this year’s financial year. Election seasons are largely characterised with politicking and less to production. Investment decisions and external donor commitments tend to be staggered as foreign investors and donors weigh the political barometer and wait for the electoral results and policy directions of the new government.

The electoral environment in East Africa has often been adversarial and conflictual. In Uganda and Kenya, the political environment before and during elections is often characterised with political turbulence and violence to the extent that the fundamentals of the economy, such as insecurity and government paralysis rocks the key production and business sectors of the economy.

Although, the Kenya general elections will take place in 2022, the political tension that characterises Kenya’s electoral politics had been building before being slowed down by the COVID 19 in March. It is likely as soon the lockdowns are eased, Kenyan politicians will be back to their usual political tirades and overtures. Tanzania’s Finance Minister acknowledged that political instability in the neighbouring countries, region and globally was an external risk. It did not acknowledge that it was an internal risk too and did not provide any mitigation against this risk on the economy and investment in 2020/21.

Clearly, the budgets were based on a positive scenario that COVID 19 would end soon. But given the trends, we can ably project that the journey of return to full economic recovery will be quite long. The likely upturn under a suppressed Corona Virus environment would be towards the third quarter of 2021.

Under a suppressed COVID 19 situation, the economy was still expected to shrink further by 1%.  In a worst-case scenario, the economies would shrink by at least 2% significantly affecting the key revenues sources. Governments would lose further revenue through the stimulus packages offered. For example, Kenya expected to lose cumulatively Ksh172bln to cushion vulnerable Kenyans and the economy from the vagaries of COVID19.

It was no wonder that the editor for the East African concluded, that coming against a backdrop of a back to back missed targets by the taxman and uncertainty around COVID 19 and global economy, this year’s budgets are either based on an informed optimism or simply a bluff. We conclude that this year’s budget estimates were symbolic and the Ministers would return.

Recommendations or take waypoints for budget stakeholder.

  • Tax Payers-Ready for engagement with government on real measures that will save
  • Investors- Take precautionary measure and monitoring the economic trends, avoid taking decisions which will worsen the situation further.
  • Governments-Remain conservative in expenditure and open for re-negotiation with taxpayers and adjustments of the budgets to fit the unusual 2021
  • Citizens- Expect changes in the budgets as the effects of COVID 19 bite harder, minimise luxurious consumption and expect a tight budget.

Indeed, as noted by the legendary Economist and tax theorist Adam Smith:

There is no art which one government sooner learns than that of draining money from the pockets of People-Adam Smith

National Budgeting amidst COVID 19:Why 2020/21 National budgets should be revised and steps government could take

COVID 19 has been known for many reasons but for Tanzania and East African governments in general, the pandemic arrived at a very wrong time. Coming in the middle of national economic planning and budgeting for the 2020/21 financial year, the pandemic has totally ripped apart as much as it can all the basic economic fundamentals that governments had banked on in projecting their 2020/21 revenue and economic growth forecasts.

By Moses Kulaba, Governance and economic analysis center

Developed close to five years ago as Five Year National Development Plans, as they are known, the plans were modelled based on a myriad of positive assumptions and designed to achieve stellar economic growth targets.

According to the Ministry of Finance and Economic Planning, Tanzania’s economy was projected to grow at 6.9%. Kenya projected to grow by 6.2% while Uganda expected an outstanding growth of 6.3% during the 2020/21. But going by the havoc currently wrecked by the COVID 19 pandemic and the global statistics so far it is highly likely that these plans will be significantly affected.

According to the World Bank, the global economy will shrink by 3% in 2020 sending millions deeper into poverty. Sub Saharan Africa’s economic growth is expected to contract from 2.4% in 2019 to between -2.1 and -5.1% in 2020, sparking the region’s first recession in 25 years.

McKinsey & Company forecast that East African economy will shrink by 3% and 1.9% during this financial year. In East Africa, Kenya, under a contained-outbreak scenario, GDP growth could decline from an already reduced 5.2 per cent accounting for the locust invasion earlier this year, to 1.9 per cent.

Under a best-case scenario, Kenya is looking at a reduction in GDP of $3billion while South Africa could be whipped to a GDP growth fall from 0.8 per cent to 2.1 per cent, representing a reduction in GDP of roughly $10 billion, the reports indicate. Other sources such as have even made higher projections that East African economies may shrink by 5.4% in 2019. It is clear now that the economic impacts of the pandemic could be more catastrophic than their health dimension.

Why Tanzania should revise its Budget Estimates

In the 2020/21 budget speech delivered to parliament in March 2020 by Tanzania’s Minister of Finance and Economic Planning the government projected to spend Tsh 34.879.8 billion for the implementation of its final year of the Five-Years National Development Plan (FYDP II) 2016/17-2020/21

The Minister highlighted that the Growth Domestic Product (GDP) had shown a positive trend, increasing at an average of 6.9% per annum for the period between 2016-2019 and government revenue collection had increased. The FYDP II indicates the government targeted to raise annual tax revenue collection from TZS 15,105,100 million during the FY 2016/17 to TZS 25,592,631 million during FY 2020/21, which translates into an increase in tax revenue to GDP ratio of 15.9 per cent by 2020.

Although the period between July 2019 and January 2020 witnessed revenue collection targets hitting high levels with TZS 10.62 trillion, which is about 97% of the target for that period which was TZS 10.96 trillion, It is sufficient to anticipate that revenue collection starting the fourth quarter of 2019/20 will experience significant decrease as a result of COVID-19 impact in the economy.

The budget ceilings for the financial year 2020/21 indicate a 5% increase of the national budget from TZS 33,105.4 billion in 2019/20 to TZS 34,879.8 billion in 2020/21. The budget proposals presented in March 2020 by the Minister of Finance and Planning for 2020/21 projected raising domestic revenue collection from TZS 23.05 trillion in 2019/20 to TZS 24.07 trillion in 2020/21 which will be equivalent to 69% of the total budget estimates.

This is despite the clear indications that the 2020/21 budget will experience serious shortfalls never experienced before.  The evidence from the economic shocks encountered so far with the closure of business, transport restrictions and exports such as horticulture, suggest tell that the current government’s economic plans and revenue projections for 2020/21 could be quite zealous and perhaps needed review.

According to the African Development Bank’s (East Africa Economic outlook report for 2019) economic growth in Tanzania and East Africa, in general, has been driven by tourism, services, agriculture and consumption sectors.  Tourism and services sector in Kenya and Tanzania grew and maintained an upward trend for the past five years.

All these vital sectors have been significantly affected and will centris pari bus record negative growth in their last and first quarters of 2020. Both the formal and the informal sector have been massively hit by this global pandemic. The economy will undoubtedly shrink substantially and therefore this should be reflected in the 2020/21 national budgets.

Global projections show that travel, hospitality and services sector will significantly be affected. Kenya, the regional economic powerhouse has so far downgraded key sectors such as the tourism sector to projected growth of about 2% in 2019 and this could even worse.

According to the World Tourism Council, the direct and indirect contribution of tourism was 14% of Tanzania’s GDP in 2014 with USD 6.7bn. This was expected to rise by 6.6% annually in the next 10 years, according to the World Travel and Tourism Council (WTTC).

According to the Bank of Tanzania Monthly Economic Review report, the tourism industry was the main source of foreign exchange receipts by Tanzania in 2018. In the MER report for the year ending December 2018, travel earnings (dominated by tourism) increased due to a rise in the number of tourist arrivals. The earnings reached US$2.44 billion from US$2.25 billion tabled in the same period the previous year.

The total receipts from services recorded a positive trend due to also the increase in the transport sector, which rose from $1.14 billion in 2017 to $1.22 billion in 2018.  MER reported that following an increase in travel and transport foreign receipts, the total foreign exchange receipt from services was $4.01 billion in the year to December 2018, an increase of $182.8 million from the amount registered in the corresponding period in 2017

“Transport receipt increased due to growth in the volume of transit goods to and from neighbouring countries particularly Zambia, DRC, Rwanda and Burundi partly contributed by improved competitiveness at the DSM port, including removal of Value Added Tax on auxiliary services of transit cargo, the bank reported.

The current lockdowns and travel restrictions in the neighbouring countries clearly indicate that these gains will be thrown out of the equation.

Zanzibar as a major tourist destination will be significantly affected and this will pull down the overall national economic growth of the sector and its impacts on the country.

Production and consumption will equally be affected by the economic lockdowns, staff layoffs and economic distress as disposable incomes shrink and consumer’s marginal propensities to spend drastically reduce.

Agriculture which has always been taunted as the backbone of the economy will also be affected by the menacing locusts, floods and disruptions in agricultural chains for inputs and domestic and export markets. Lending towards the sector will likely be affected and large scale production curtailed. The net effect in the wake of this will be potentially increased food insecurity, high prices (food inflation) and famine in large parts of the country.

Government costs of health care and treatment will significantly increase, drawing away resources from investment in other social and development sectors. According to public health experts, COVID 19 is one of the most expensive diseases to treat. It draws a lot of resources as it requires specialized facilities, expertise and treatment to deal per capita patient.

The financial sector will be distressed. Non-performing loans have increased and will increase significantly in defaults, distressed assets and foreclosure. The government could be a net loser too as banks, entities and individuals experience financial squeeze, fall back in tax payments and doing with on matters financial such as the purchase of government fiduciary instruments, such as treasury bills.

The industrialization agenda mooted by the government five years ago will significantly be affected as foreign capital to investment becomes difficult to mobilise. The major source countries of FDI inflows into Tanzania such as China, Europe and the United States and South Africa have been the epicentres of the pandemic and struggled to cope.

The turbulence in the global stock markets in the key financial centres such as New York, Tokyo, Frankfurt and London has worsened the situation further as major companies saw their net value and investments wiped within a short span of two months. The balance sheets and bottom lines of major companies shrunk significantly and remain extremely stressed. During and immediately after the COVID 19, investors and companies will be conservative to invest en masse and choosy in which markets and type of business they invest.

It is based on these realities that the Governance and Economic Policy Center and other Civil Society Organisations (under the umbrella of Tanzania Tax Justice Coalition) caution that the government needs to be precautionary in its projections and conservative in its estimates. As stated above that chances for the economy to shrink and domestic revenue mobilisation will adversely be impacted. It is likely that investment and revenues from key sectors such as tourism, construction and the extractive sector will likely be affected.

What governments should do

  1. Revise the previous and current budget projections to take care of the negative effects that COVID 19 will have on the economy and revenue mobilisation. (The World Bank and IMF both project that the African economy will shrink between 1.9% -3%). The new budget projections should factor this into their models to avoid a serious shortfall.
  1. Reduce VAT from the current 18% to 16% for the year 2020/21 to encourage production, tax rebates for manufacturers producing products for fighting Covid19, such as sanitisers, soap, masks and a well-reduced price for products hence increasing the purchasing power by consumers.
  1. The government should suspend all debt payments and re-negotiate future debt servicing in the context of COVID-19.
  1. Businesses and self-employed individuals in sectors hard-hit by the crisis or with serious repayment difficulties related to it should be allowed to reschedule their loan repayments or defer payments for a limited period (3 months). This will enable businesses and self-employed individuals in sectors hard-hit by the COVID-19 crisis or with serious repayment difficulties to remain in control.
  1. Halt or pause or stagger large expenditure on some large ongoing and proposed strategic projects such as infrastructure projects this year and reschedule the respective fund to short-term productive sectors for the economy and saving people’s lives.
  1. Set up an emergency fund or reserve fund at the Central bank capable of shielding the economy from the longer effects of COVID- 19 and the CB increase more liquidity into the banks to facilitate cheap lending.
  1. Businesses adversely affected by the COVID-19 should be given temporary tax payment relief in this regard. This should, however, be closely to avoid misuse.
  1. The governments need to earmark existing or additional funds to reinforce all mechanisms to fight COVID-19.
  2. Protect the public and consumers from hoarding, price hikes and disruptions in the supply chain of vital goods and services, which could gradually drift the country into structural inflation, affecting further the poor and extremely economically vulnerable.
  1. Consider pay cuts for highly paid public servants transfer some of these savings towards the national fund to finance COVID 19 response mechanisms
  1. Take measures that shield the private sector from collapse, protect jobs and hence protecting the government’s vital tax base.
  1. External borrowing at this stage to fight COVID-19 could be extremely dangerous as it is not exactly known when the situation will return to normalcy and the economy could be badly beaten after COVID-19 and not able to meet the ability for the government to pay its debt without default.

East African governments have been victims of ambitious budgeting appetites, whose targets are never achieved. According to a review of budget trends by GEPC in 2018/19 showed there were perpetual shortfalls between what was projected and what was collected. The trend showed that budgets estimates had been increasing over the years with every year’s budgets touted as the highest since independence. However, the actual budget out turns had fallen short of projections.

Kenya, which is the biggest economy in the region had missed targets for the past seven years while Uganda was a perpetual budget crusher with key ministry asking for supplementary budgets midway.

In 2018/19 Tanzania recorded a shortfall in budget outturn only achieving 88% of its targeted revenue collection. This was attributed to a number of factors, decline in domestic revenue, tighter global conditions, decline and delayed disbursement in government.

Generally, governments were net beggars, relying heavily on domestic and external borrowing to fill their budget deficits. Very little was saved. For this year, the signs are all over that the economies are glaring into the abyss. Cautionary budgeting could save the economies from further meltdown.

 

How to curb transfer pricing , tax dodging and illicit financial flows in extractive sector

Tackling tax dodging and illicit capital flight in the extractive sector can be a challenge for tax officials and policymakers in new extractive resource-rich Countries such as Tanzania, Uganda and Kenya, whose tax and extractive governance regime is just in its formative stages and local expertise in its pupilage stage

Tax and development:  How to curb transfer pricing and illicit financial flows in the extractive sector

By Moses Kulaba, Governance and economic analysis centre, Dar es Salaam-Tanzania 

This brief highlights some of the basic strategies that can be used by tax authorities and governments to tackle aggressive tax planning and dodging in the extractive sector.  It touches on basics such as understanding corporate and financing structures synonymous with extractive MNE’s and how these are used as conduits for base erosion, tax-avoiding and illicit financial outflow. We conclude with a case scenario to facilitate discussion. The brief is in response to feedback from our readers reacting to our previous posted online article and in which we touched on the basics of understanding illicit capital flight in the extractive sector. After highlighting the problem, our readers have challenged us to also share some solutions.  The brief targets sector practitioners, policymakers and leaders, professionals, students and other stakeholders.

In recent years there have been legislative and policy reforms in Countries to ensure that governments have a firm grip and maximize their take from their extractive wealth. However, as governments celebrate these attempts, experience and practice suggest lacunas still exits and the current reforms maybe not enough in curbing the tax avoidance and illicit capital flight menace.

According to Global Financial Integrity (GFI) and the Mbeki High-Level Panel Report on IFFs latest reports, shows that IFF’s from the African continent have been increasing with losses estimated between USD50 Million and USD 80 Million over the past years. Corruption and the extractive sector has constantly provided a major conduit for tax avoidance and illicit resource outflow from Africa. Alarming evidence from leaked documents such as the Panama papers now shows, Multinational companies, have taken advantage of their titular counterparts in government to structure complex aggressive tax planning arrangements used to evade, avoid and ship out potentially taxable income, denying government and local billions of dollars in revenue and development. The arrangements can be so complex and entwined, making it a nightmare for tax authorities and governments to crack.

Even with the new negotiations and deals signed between governments and extractive MNEs, governments have to constantly up their game and mantra to ensure that the old normal does not evolve into just the new normal as the old saying goes “monkeys do not change. They only change their forests’.

So what are some of the basic measures which can be taken

The debunking of Corporate Structures

Governments can tackle tax dodging and illicit flight by debunking and constantly monitoring the corporate structure of the extractive MNE’s.  The corporate structure can determine whether an entity is a resident or non-resident entity for tax purposes. The rules applied for taxing resident and non-resident entities are different and the status of the MNE may be favourable depending on its resident status and the corporate vehicle and form that it chooses to take.

Extractive MNEs have corporate structures with their parent companies located in one Country as Headquarters and subsidiaries located in more than one country or tax jurisdictions, depending on the interests of the company and its shareholders.

The MNE’s headquarters or major subsidiary may be located in low or non-tax jurisdictions, such as Jersey, Guernsey, Isle of Man, Mauritius and in recent years Middle East Countries and Cities such as Bahrain, Dubai have been added on the infamous list of tax havens.  As these Middle East countries compete to economically diverse from Oil and develop themselves as a global investment and financial centres, they have created low or non-tax regimes as incentives for attracting foreign investment.

MNE’s whose corporate structures have footprints in these Countries need to be subjected to extra scrutiny and background checks to determine whether they are not used for aggressive tax planning measures.

Corporate restructuring, takeovers through mergers or acquisitions or buying shares or stakes in other companies (also known in the petroleum industry as farming in or farming out). Quite often this may be used to ensure that the company diversifies its investment portfolio and minimizes its risks by spreads its operations and ownership in other profit-making business. However, this presence in multiple companies creates a spaghetti of ownership structures which may be difficult for the tax authorities to trace and effectively control for tax purposes. Imagine, a nonresident entity operating in your country but with stakes in more than 20 companies and over 300 projects.

Debunking Management structures

Extractive MNE’s also structure the management in a manner which can likely reduce their tax and labour related obligations.

Governments, therefore, need to examine and understand, where the extractive MNE’s key decision is taken and how staff are recruited.  An extractive MNE with operations in Tanzania but whose majority board members are nonresident and board meetings take place outside Tanzania, would easily pass for a non-resident entity.  The income tax rules treatment and obligations for such a company would obviously be different from a fully registered resident entity.

As a channel for reducing employment tax and labour law obligations, extractive MNEs can outsource Human Resource and Employment related services to management companies. The outsourced Management companies handled staff contracts on behalf of the extractive company in return for a management fee.

Here two things can happen.

The Management Services can be handled by the company’s subsidiary located outside the Country, either at the Company’s headquarters located in low or non-tax jurisdiction or another subsidiary, whose majority shareholders could be domiciled in a low or non-tax jurisdiction.  The fees charged by the subsidiary or parent company can be overinflated to reduce the profit and tax burden in the country of operation and channelled out of the country to low tax jurisdiction.

Secondly, the Management Company can be a local entity paid to handle all Management and Human Resource services on behalf of the MNE.

The Management Company reduces the MNE’s employment tax obligations by directly recruiting and providing short term contracts or jobs to staff which are paid below the labour market in the extractive sector.  The MNE pays the Management Company a fee for this service and has no overall tax obligations thereafter on the staff it receives supplied by the Management Company.  The staff are literary employees of the management company and not the extractive MNE. Therefore, any tax obligations such as employment taxes or income taxes on services including labour rights issues such as negotiations, compensations for damage or loss are handled by the Management company. The MNE, therefore, reduces its employment tax obligation by minimizing the amount it pays to the staff through the management company.

A debunking of Financing Arrangements

Multinational Extractive Companies finance their operations through arrangements structured across multiple financial institutions.  These financing arrangements can be structured in a manner which ensures that payment of interests on the loan is too high and leaves the company with a very little taxable income. In most countries, interest payments on loans are nontaxable.  Although governments have been tightening their tax laws on thin capitalization rules by ensuring that the debt to equity ratios are within the limits, companies may also restructure the financing through a complex web of financing institutions that make ultimate taxable income in the extractive resource-rich countries is left low. Debts may be sold and restructured to take longer than earlier conceived and therefore prolong the period for the company starting to pay taxes.

Remedy for adjusted tax assessments

An adjusted assessment basically refers to a notice to reduce or increase the amount of tax imposed on an entity by the tax body. The government has the power to conduct an adjusted assessment based on new or additional information which may come in the public knowledge or purview of the tax authority, even after the Company’s accounts have been implemented. The adjustments, however, need to be fair, transparent and based on solid evidence of aggressive tax planning and evasion.

Use advance tax rulings

The tax authority can issue advance tax ruling specifying how specific extractive transactions will be treated for tax purposes. Current income tax statutes and practice notes provide for this. However, the existing rulings have been too general and subject to abuse. These ruling should clear and time-bound, to ensure that the extractive MNE does not abuse them.  The government also needs to increase surveillance during this period to ensure that the MNE is not using this period to circumvent the law by either over importation or exportation, dumping overstocking or mis-invoicing aimed to reduce either current or future tax liabilities or achieving a predetermined tax benefit.

For example, if a Company receives an advance tax ruling on the importation of certain capital goods such as heavy-duty Caterpillar tires or heavy-duty mining machinery, surveillance should be put in place to ensure that the company imports and pays an amount which commensurately matches its required operation. 

Implementation of legislative reform to curb potential lacunas

There is a need for an evaluation of the legislative and fiscal reforms so far passed to seal lacunas in the Country’s fiscal and policy regimes governing the extractive sector. 

Despite being passed over the years, have remained largely unimplemented.  The Resource Governance Index released by the Natural Resources Governance Institute (NRGI) shows that Tanzania lagged behind by 26 points in the implementation of its extractive policies and legislation. Transparency and potentially tax avoidance curbing measures such as   Contract disclosure and Beneficial ownership has remained unimplemented. Smooth exchange of information for tax purposes between less developed countries where mining operations take place and the OECD countries where the Companies are headquartered has remained poor and curtailed by ridiculous international law and treaty restrictions.

Tax incentives need to be properly awarded and managed. The government has to ensure that jobs will be created and revenue will be collected from these jobs. Fiscal, legislative and policy reforms have to be predictable and applied in a non-arbitrary way to avoid uncertainty and shocks in the extractive sector. Companies have to know in advance the consequences of flouting the rules and the burden for actions such as tax avoidance, evasion and illicit outflow.

Review of Double Taxation Agreements (DTAs)

Double Tax Agreements are treaties signed between two contracting states ensuring that nationals and residents of the two states are not taxed twice. They are primarily supposed to facilitate the international flow of capital, technology, services by eliminating taxation of income and other taxes through a bilateral arrangement and occasional resolution of income. DTAs prescribe whether the income will have taxed at the source where the income is made or where the taxable entity resides (resident principle) or a combination of both. They also provide for exchange of information for tax purposes

Despite their underlying intentions, DTAs are used as conduits for tax evasion as they facilitate income to flows from less developed countries where MNEs derive it to developed countries where MNEs are resident. Since less developed countries are resource-rich and not capital-rich, essentially, income flows substantively from one directions from developing countries as a source to the developed countries as a residency country.

DTAs allows aggressive tax planning schemes such as ‘treaty shopping’ where a Company registers a subsidiary in a country with a wide treaty network and invests through it to enjoy treaty benefits. Round tripping where investments, capital, income and profits obtained in one Country are re-routed back into the Country through low tax havens as investment from abroad to enjoy tax treaty protection.

A study by the Tanzania Tax Justice Coalition in 2016[1] revealed that the current DTAs are old and contain taxation regimes that surrender Tanzania’s treaty powers in favour of economically developed partners. DTAs have capped withholding tax rates that can be levied on interests, dividends and royalties Although the current DTAs have rated higher than 10% set in Tanzania’s income tax statutes, there are potential risks for tax loss in the future.

Establish transfer pricing methods to be used in determining the arm’s length price of transactions between related extractive MNEs and training tax officials to master them.

Tax avoidance and illicit financial outflows in the extractive sector largely take place through transfer mispricing arrangements. In principle, transfer pricing is not bad in business, however, when it is used as an aggressive tax planning measure by manipulating the transfer price (mis-pricing) to achieve a tax benefit, it becomes problematic.

Transfer pricing is an accounting practice that represents the price that one division in a company charges another division for goods and services provided. Transfer pricing allows for the establishment of prices for the goods and services exchanged between a subsidiary, an affiliate, or commonly controlled companies that are part of the same larger enterprise. Transfer pricing can lead to tax savings for corporations. A transfer price is based on market prices in charging another division, subsidiary, or holding company for services rendered.

However, companies have used inter-company transfer pricing to reduce the tax burden of the parent company. Companies charge a higher price to divisions in high-tax countries (reducing profit) while charging a lower price (increasing profits) for divisions in low-tax countries.

Transfer prices that differ from market value will be advantageous for one entity while lowering the profits of the other entity. Multinational companies can manipulate transfer prices in order to shift profits to low tax regions.

To remedy this, regulations enforce an arm’s length transaction rule that requires pricing to be based on similar transactions done between unrelated parties. Several methods can be used by MNEs and tax authorities to determine the accurate arm’s length pricing for transactions between related MNEs.  The OECD has outlined five major methods which can be used these include; The Comparable uncontrolled price method (CUP), the resale price method, the Cost plus method, Transactional net margin method (TNMM) and the transactional profit split method. According to the OECD, the option that an organization chooses to use depends on the particular situation. It should take into account the amount of relevant comparable data that is available, the level of comparability of the uncontrolled and controlled transactions in question, and whether a method is appropriate for the nature of a particular transaction (determined through a functional analysis). We will discuss this subject in detail in another tax and development bulletin which will be released soon.

In recent years there have been legislative and policy reforms in Countries to ensure that governments have a firm grip and maximize their take from their extractive wealth. However, as governments celebrate these attempts, experience and practice suggest lacunas still exits and the current reforms maybe not enough in curbing the tax avoidance and illicit capital flight menace.

According to Global Financial Integrity (GFI) and the Mbeki High-Level Panel Report on IFFs latest reports, shows that IFF’s from the African continent have been increasing with losses estimated between USD50 Million and USD 80 Million over the past years. Corruption and the extractive sector has constantly provided a major conduit for tax avoidance and illicit resource outflow from Africa.

Even with the new negotiations and deals signed between governments and extractive MNEs, governments have to constantly up their game and mantra to ensure that the old normal does not evolve into just the new normal as the old saying goes “monkeys do not change. They only change their forests’.

We conclude with a fictitious case scenario which can be read for further discussion and reflection on the subject.

Extractive Company Corporate Structure and Tax Case Scenario

 

Indemen Resources Plc is a large mining company with interests in Mining and Petroleum.  The Company was registered with its Headquarters in Jugoland but has subsidiaries in Temboland, Caconia, Alsania and Mende Islands. One of these, Mende Islands is renowned for its secret laws to protect the identity of investors, it provides a litany of investment facilitation incentives, including o% tax on corporate income. In Mende Islands, an investor does not have to be physically present to establish a company.

In 2017, Indemen Resources acquired Mining Interests in Temboland where it started operations. It established   Shamudulio Energy Plc as a subsidiary in this country to take care of the Mining and Oil & Gas fields which been operational for the past 5 years. The Company’s subsidiary, Matecash Intl located in Mende Islands manages its accounts, banking and legal affairs on behalf of the other subsidiaries.

Most of its operations have declared losses for the past ten years.  However, the books of accounts of its subsidiary, Matecash in Mende Islands have continuously improved with large volumes of transaction emanating from engaging in business with its other related subsidiaries.

In the Year 2018 the company Shamudulilo Energy Plc in Temboland farmed into Calabash resources located in Alsania where it acquired 30% of its shares and therefore becoming the second-biggest shareholder.  Comodore Oil is a majority shareholder in Calabash resources and its Headquartered in Conundrum Iand which is also a renowned tax haven.  Comodore Oil owns 20 per cent in Conglomerate LLC which is located in Caconia.  Shamudulilo also owns 10% of Conglomerate LLC. Metcash, Idemen’s subsidiary in Mende Island owns 70% of Commodore Oil.

The board of Indemen Resources only sits and makes decisions in Jugoland and has only 1 of its directors from each of its subsidiaries sitting on the board as a non-executive board director.

Recently, it outsourced Labour Management to contract to Luguburious Consulting. Luguburious Consulting is registered and located in Conudrum Islands and has shares in Metcash Intl and Commodore Oil.

Luguburious Consulting is responsible for the recruitment and placement of staff in all Indemene’s subsidiaries. The staff are recruited on a 6 months’ contract, only renewable upon satisfactory assessment and passing of a regular test. Luguburious also provides copyrighted hi-tech technology to Indemene’s subsidiaries, including Shumudulilo Energy Plc in return for a fee. It also sells water purification equipment to conglomerate LLC.

Jugoland, where Indemene Resources comes from, has a Double Taxation Agreement with Temboland and under which Income taxation on dividends, interests, royalties are capped. Management or expert director fees from these Countries are exempt. Also, 100% of income repatriation from these Countries is allowed and exempt from Taxation.

In 2011, Jugoland, as a sign of reassurance of the bilateral cooperation between the two countries and has committed 100 bln dollars to support the Country’s fiscal reforms for the next five years.

Indemene Resources has been declaring losses in your Country, Temboland and in Jugoland. But recently, you have heard that Conglomerate LLC has intentions to buy Indemene Resources through either a Merger or Acquisition which will make it the biggest Company in the region. The deal valued at 890 billion dollars is the largest ever recorded in recent history.

As a Tax justice campaigner, a Tax Administration Officer or Policymaker, you have been asked to examine and brief the President on this entire scenario

What are the key issues would you bring to the attention of the President? What are the potential legal and taxation issues do you see?  What would be the appropriate transfer pricing methods you could apply in determining the arm’s length price of transactions between these companies. What policy, legislative and actions would you recommend for the government to take without necessarily being exposed to litigation and sparking of accusations of the government as being against foreign investors?

 

 

[1] Moses Kulaba:  Double Taxation Agreements: Gain or Loss to Tanzania? A study by Tanzania Tax Justice Coalition, May 2016