VZCZCXRO7622
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHDR #0164/01 0711358
ZNR UUUUU ZZH
R 121358Z MAR 09
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC 8333
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHJB/AMEMBASSY BUJUMBURA 2842
RUEHKM/AMEMBASSY KAMPALA 3363
RUEHLGB/AMEMBASSY KIGALI 1290
RUEHNR/AMEMBASSY NAIROBI 1202
RUEHDS/USMISSION USAU ADDIS ABABA
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 02 DAR ES SALAAM 000164 
 
SIPDIS 
 
DEPARTMENT FOR AF/E JLIDDLE; INR/RAA FOR FEHRENREICH, AF/EPS 
STATE PASS USAID/EA, USTR, USTDA 
COMMERCE FOR BECKY ERKUL 
TREASURY FOR REBECCA KLEIN 
 
E.O. 12958: N/A 
TAGS: EAGR ECON EIND EINV ENRG ETRD TZ
SUBJECT: TANZANIA ECONOMIC ROUND-UP MARCH 2009 
 
¶1. Contents: 
 
-- Government Regulates Fuel Prices 
-- Tanzania Re-introduces Pre-Inspection of Goods 
-- Cotton Industry Hit by Global Economic Woes 
-- Another Global Impact: Tanzania's Leather Industry 
-- Tanzania Prepares for Underwater Fiber-Optic Cable 
 
Government Regulates Fuel Prices 
-------------------------------- 
¶2. In January, Tanzania's Energy and Water Utilities Regulatory 
Authority (EWURA) imposed a price ceiling on gasoline in response to 
continued high prices in Tanzania relative to world prices.  EWURA, 
which had not previously exercised its authority to regulate fuel 
prices, had threatened intervention since November of 2008, but took 
no decisive action until mid-January.  EWURA based its decision on 
the belief that collusion in the marketplace was leading to 
artificially high prices and placing an inordinate cost burden on 
consumers.  William Ngeleja, Minister of Energy and Minerals, said 
that the government was obliged to protect Tanzanian consumers. 
Additionally, many blame high fuel prices for increased inflation, 
which in late 2008 exceeded 10% for the first time in several years. 
 Some of our contacts also saw an ethnic angle to price setting, 
arguing that the GOT's action would have the effect of reducing 
profits for the Tanzanians of Indian origin who have a significant 
share of the petroleum industry. 
 
¶3. One negative side effect of EWURA's action was a severe but 
short-lived fuel shortage in Dar es Salaam, just as the price 
regulation was to take effect.  Of the various theories advanced to 
explain the shortage, the most plausible may be that consumers, 
fearing a shortage if distributors held their stocks rather than 
selling at the government price, panicked and increased their 
purchases beyond normal supply.  The arrival of a tanker in Dar es 
Salaam port rapidly remedied the shortage, whose impact did not 
reach most of the country.  Some distributors defied the government 
order to lower pump prices for a couple of days, but most have since 
cooperated and prices have fallen by about fifteen percent. 
 
¶4. GOT willingness to intervene in the oil marketplace does not send 
a positive signal to outside investors.  While it is likely that 
collusion did occur at some level, high barriers to entry in 
Tanzania's petroleum sector make it less likely that competitive 
pressures are going to influence pricing at the same rate as the 
world market. 
 
Tanzania Re-introduces Pre-Inspection of Goods 
------------------------------------------- 
¶5. The Tanzania Bureau of Standards (TBS) has announced plans to 
re-introduce a pre-inspection system for imports, which was 
discontinued in 2003.  TBS Marketing Manager Daudi Mbaga said the 
Bureau was in the final stages of establishing Pre-Shipment 
Verification of Conformity of Standards (PVoC), in an effort to curb 
the influx of counterfeit and poor quality goods.  TBS blamed 
counterfeits for huge losses in government revenue, employment, as 
well as profitability and performance of the manufacturing sector. 
 
Cotton Industry Hit by Global Economic Woes 
------------------------------------------- 
¶6. The cotton sector is among the first in Tanzania to be affected 
by the global economic situation.  With world prices down by nearly 
half and buyers scarce, as of mid-January 240,000 bales from the 
2008 crop awaited sale.  In response, the Government, in partnership 
with farmers in the cotton industry, set up two committees to 
resolve market challenges facing the cotton industry. 
 
¶7. Speaking to a journalist in Dar es Salaam at the end of a one-day 
meeting of local buyers, exporters and farmer's representatives in 
the country, Trade Minister Mary Nagu cited the main challenges 
facing the sector as the need to develop cotton production beyond 
the smallholder level and modernizing production.  One stakeholder, 
Mr. Gulam Dewji, suggested a review of taxation and duties currently 
imposed on cotton to enable local cotton dealers to compete with 
imports more effectively. 
 
Another global impact: Tanzania's Leather Industry 
--------------------------------------------- --- 
¶8. The Chairman of the Leather Association of Tanzania, Elbariki 
Mmari, said that exporters of raw hides and skins in the country are 
feeling the pinch of the global economic turmoil as export orders 
 
DAR ES SAL 00000164  002 OF 002 
 
 
have dropped to by 45 percent compared to six months prior. 
According to the Ministry of Livestock Development and Fisheries, 
the 500 million skins sold in the 2007-08 financial year generated 
approximately Tsh 21 billion (USD 16.2 million), but both sales and 
earnings will decrease substantially this year, with price declines 
of seventy percent.  Tanzania mainly exports unprocessed hides to 
China and thus does not benefit from the added value of leather 
processing. 
 
Tanzania Prepares for Underwater Fiber-Optic Cable 
--------------------------------------------- ----- 
¶9. Construction on a landing station for the Seacom undersea 
fiber-optic cable has begun just outside of Dar es Salaam.  The 
15,000km, USD 650 million, cable is 76 percent African owned and is 
expected to significantly boost communications in the region - 
eventually linking countries from Southern and East Africa to 
international broadband networks.  Seacom has already laid cable 
from South Africa to Mozambique and from Egypt to the coast of 
Yemen.  A third segment is being deployed from India towards Africa, 
where the three segments will meet.  Simultaneously, Seacom is 
constructing landing stations for connections to inland networks. 
Seacom Tanzania official Anna Kahama-Rupia projected completion of 
the Tanzania station by April, with the network running by June 
¶2009. 
 
¶10. Currently, satellite access in Tanzania costs three times the 
projected cost of the fiber optic network.  The launch of the Seacom 
network will mean significantly more bandwidth - and therefore 
increased access to information and communications - at lower cost, 
reducing costs of doing business and providing new opportunities in 
various sectors. 
 
ANDRE