CTI: Tanzania needs industrial bank to address capital woes

Dar es Salaam. An industrial bank is needed to address capital woes among manufacturers, it has been proposed.

The director of policy and advocacy with the Confederation of Tanzania Industries, Mr Hussein Kamote, said about Sh1 trillion is needed to set up the bank.

He called on the government to spearhead, the set-up of the bank. “As it was possible to establish the Tanzania Agricultural Bank so it should be for the Tanzania Industrial Bank, which will address capital woes and promote the performance of the manufacturing sector.”

To establish a factory, one requires at least Sh200 million in capital, the amount which is not easy for small and medium enterprises (SMEs) to source from commercial banks, according to him. The only way Tanzania can revive its factories is to have the industrial bank. Over the decade, he said, the performance of the industrial sector has not been impressive as its pivotal role to the country’s economy is yet to be felt to the extent it was supposed to.

The sector, which is currently having more than 60,000 factories, generates only150, 000 formal jobs, he said.

Going by the 2014 industrial census data, he said the sector contributed only 8 per cent to the gross domestic product (GDP), compared with Kenya’s and South Africa’s where the sector’s contribution to GDP, accounted for 13 per cent and 17 per cent respectively.

But, if Tanzania is to become an industrial country come 2025, the growth rate of the sector should be above 10 per cent, from the current 9 per cent, and contribution to the GDP should not be less than 13 per cent come 2025, according to him.

As Tanzania gears up to become a middle income country by 2025, it is expected to have as many industrial areas as possible, with incentives being issued to investors.

Incentives enjoyed by investors operating under the Export Processing Zones Authority (EPZA), include the exemption of value-added tax and withholding tax for 10 years being given to investors in industrial areas which are to be established countrywide. Also there should be incentives in power costs at least by 50 per cent to cut operations’ costs by industrial players.

However, basing on the EPZA data, in 2015 the number of companies operating under the authority increased to 155 in 2015, from 130 in 2014.

Speaking recently with BusinessWeek, EPZA director of investment, promotion and facilitation, Ms Zawadia Nanyaro, said, exports were this year expected to hit $300 million ( about Sh645 billion), compared with $220 million (about Sh473 billion) that was recorded last year. If everything goes as planned, Tanzania’s dream of becoming an industrialised country will be realised in the coming 10 years.

The authority has set aside 22,000 hectares in Bagamoyo for investment through a special processing zone.

EPZA has set aside 700 hectares in Kigoma for development of a trade hub and industrial zone that will enhance the cross-border trade between Tanzania and DRC, Zambia and Burundi.

Economics professor Humphrey Moshi, of the University of Dar es Salaam said: “However, still we have a long way to go for the sector to prosper, but it is possible if production costs and importation which are three times than exports are cut.”

He also advised the government to ban the use of foreign currencies in the country to avoid the shilling’s depreciation.

If inflation is sent high by the depreciation of the local currency, operational costs of factories will also rise, causing closure of some of them.

“We can take a leaf from countries such as Kenya, South Africa and China, which have strictly prohibited the use of foreign currencies within their countries, to protect their currencies and the economies at large,” noted Prof Moshi.

On which areas were to be intensively invested in, if Tanzania has to become an industrialised country, agriculture topped the list, followed by infrastructure and manpower.

Mzumbe University’s Prof Honest Ngowi said: “I’m confident manufacturing will shine in future, but only if there would be investment in high technology, infrastructure, including a stable reliable power supply and elimination of bureaucracy and reduction in imports.”

The move, according to him, would create an environment for competitive industries, which would stand a chance to compete in the world market.

One of President John Magufuli’s promises during his presidential campaign was to revive factories.