Key reforms as Tanzania’s Budget is approved

Dar es Salaam. The government said on Wednesday that it is taking a raft of measures to reform the economy by boosting the productive sectors.

The measures outlined by Finance minister Mwigulu Nchemba in Parliament also seek to create an enabling environment for the private sector while also taking on board various concerns that were raised by lawmakers when debating the government’s Sh49.35 trillion Budget for 2024/25.

Parliament approved the Budget later on Wednesday, setting the stage for its execution to start next Monday.

Of the National Assembly’s 383 members, 381 voted on the Budget. The revenue and expenditure plan received overwhelming support, with 362 MPs (92.3 percent) voting in favour, while 18 abstained. No vote was cast against the Budget.

“All views expressed by the Budget Committee, as well as those of individual legislators on the Finance Bill have been considered,” Dr Nchemba said.

“After the Finance Bill, 2024 is approved tomorrow (Thursday), responses to lawmakers’ concerns will be reflected in the document.”

Among the issues that were hotly debated was the need for the government to put in place a clear mechanism to protect consumers against recurrent hikes in sugar prices.

Presenting the Budget in Parliament on June 13, Dr Nchemba proposed the amendment of the Sugar Industry Act, (Cap.251) to give the National Food Reserve Agency (NFRA) the mandate to import, store and distribute sugar to ensure constant availability and supply of the commodity.

The proposed amendments also seek to compel domestic sugar producers to declare their production costs and submit any relevant information that may be required by the Sugar Board of Tanzania (SBT) at the beginning of every production season.

Domestic manufacturers will also be required to declare and publish in a widely circulated newspaper the names of their distributors in every region at the beginning of every production season.

Read: How Tanzania's Sh49.35 trillion budget can work

Issuance of provisional licences and registration of sugar manufacturers, small-scale sugar plant operators and industrial consumers remains the prerogative of the SBT.

This is meant to make it possible for the board to effectively monitor the progress of the implementation of provisionally licensed or registered entities; facilitating new applicants to acquire permits from the relevant authorities during the initial stages and ascertaining the viability and sustainability of provisionally registered or licensed entities.

“The Board shall not issue a sugar import licence unless it is satisfied that the local sugar production is below the level of sugar requirement at a particular time,” the Finance Bill, 2024 reads in part.

“Notwithstanding any other provision to the contrary, the NFRA shall have an exclusive mandate to import, store and distribute sugar for domestic consumption to cover the sugar gap.

“Where the National Food Reserve Agency fails to import sugar, the Minister shall, in consultation with the Board, determine the mode of importing sugar to cover the sugar gap,” the proposed law further says.

In an effort to boost the local processing of minerals and grow the economy, the Finance Bill, 2024 also seeks to amend the Mining Act, Cap 123 with a view to compelling mineral right holders or licensed dealers, other than those that have entered into agreements with the government, to set aside an amount of minerals for processing, smelting, refining and trading in Tanzania at a percentage to be determined by regulations but not less than 20 percent of the minerals extracted.

In a deliberate move to boost gold reserves to counter the rising value of the US dollar, Tanzania is seeking to ensure that a third of the royalty payable to the government by mining companies is paid by depositing in the National Gold and Gemstone Reserve refined minerals equivalent to the ascertained royalty.

Read: Priority areas as Tanzania's Budget set to jump by Sh5 trillion

According to Dr Nchemba, other measures to be implemented include imposition of a Sh382 tax on compressed natural gas (CNG), a decision that was  widely criticised by stakeholders.

Ms Dorothy Semu, leader of the opposition ACT-Wazalendo, said instead of imposing the tax, the government should oversee the conversion of vehicles to use CNG and save a sizeable chunk of the Sh7.2 billion spent annually to import petroleum products.

The new charge was proposed through the amendment of the Road and Fuel Tolls Act, Cap 220 to increase government revenue that will be used in the repair and maintenance of roads, as well as create equity with vehicles that use petrol and diesel.

A CNG vehicle technician based in Dar es Salaam, Mr Satary Juma, said, “There are currently very few refilling stations and this impacts the cost-effectiveness of using CNG. Existing infrastructure and number of refilling stations are inadequate compared to demand.”

He wondered why the government was rushing to collect revenue without having invested in a distribution system, adding that the new charge is likely to discourage people who are contemplating converting their vehicles to use CNG.

But Dr Nchemba said on Wednesday, “Honourable Speaker, the argument seeking to impose tax on CNG has been received by the government. Lawmakers should be patient as experts are finalising amendments to the Income Tax Act.”

Regarding addressing the dollar shortage, Dr Nchemba said the foreign currency’s increased demands led by the implementation of large and strategic projects will keep declining due to the conclusion of some ventures such as the Julius Nyerere Hydropower Project (JNHPP) which spent a large amount for the importation of equipment.

He said the country will remain with some few projects requiring the importation of equipment therefore providing more relief to the country.

“The government has proposed an amendment to the law on the domestic use of US dollars in the country, a move that was respectively made in 2007 and 2017. The new directives are that as the 2024/25 fiscal year commences, regulations and respective penalties will be announced,” he said.

“This is because the law states that the Tanzanian Shilling is the Tanzanian legal tender. Honourable Speaker, this is something that should bring respect to our country as we should stop following the performance of the US dollar,” he added.

Furthermore, he said all quotations should effectively be made in Tanzanian shilling instead of using the US dollar, noting that foreign currencies including South Africa don’t make quotations or charge prices and commodities in foreign currencies.

“If you are a school owner interested in charging on the US dollar, you better go to establish a school in the US. Tanzanian prices are instructed by the law and not personal demands of the Minister for Finance,” he said, insisting on the introduction of the new regulations and penalties.

Dr Nchemba said Tanzania has subjected itself to US dollar pressure to the country’s ability to get other products adversely affected, noting that it is unreasonable to demand dollar payments from someone seeking a domestic transportation licence.

Regarding the cashless economy, he said the government will increase efforts to build enabling environments to ensure payments through merchant’s accounts face no challenges before enforcement issues.

He attributed the increased national debt to the implementation of development projects and increased trust following strengthened economic diplomacy between Tanzania and foreign countries.

“The increase in concessional loans that have less than two interest rates describes how the country is respected. On the contrary, commercial loans have higher interest rates from ten percent and above.”