Tanzania Private Sector Foundation Presentation to DPG Main

Tanzania Private Sector Foundation Presentation to DPG Main By TPSF Executive Director Godfrey Simbeye Dar es Salaam - May 27 th, 2014 1

Agenda 1 Evident contribution of the Private sector in the country’s economy 2 Stipulation of the Vision 2025 and the National Development Agenda 3 Role of Government in Facilitating the Private Sector 4 Enterprise Development and Role of TPSF 5 Role of DP’s and Way forward

Evident contribution of the Private sector in the country’s economy For over past 10 years, the private sector in Tanzania has played its natural role of stimulating this country’s economy. Since the Government’s divestiture in 1990 s, the private sector has played a huge role in not only pushing for economic reforms, but also in actual contribution in projects and investments in various sectors The private sector has made tremendous investments and impact on various sectors that include transportation, power and energy, financial services, agribusiness, mining, manufacturing, tourism, etc. Today, we celebrate the economic growth of 7%, largely contributed by the growing private sector in Tanzania 26 Private sector contribution 56 No. of banks in TZ 1, 362, 559 Total employed in the formal sector (63. 1% in the private sector) No. of insurance companies in in TZ 22 Number of private universities in TZ USD 11 billion Mobile transactions in 2012 2678 Number of primary & secondary schools 3

Evident contribution of the Private sector in the country’s economy With only two (3) banks, namely Twiga Bancorp, Tanzania Postal Bank (TPB) and TIB, wholly owned by the government, and owning shares in other few banks, the contribution of government banks wouldn’t have given such a tremendous contribution to the growth of financial sector in the country, with more 50 banks now, owning more than USD 10 billion of assets, bank lending is more than USD 5 billion to the private sector, which is roughly more than 15% of the GDP. Eco. Energy Africa AB is investing over USD 500 million (TZS 800 billion) into a sugarcane plantation and a factory producing sugar, ethanol, and power in Bagamoyo. SACGOT corridor anchors 110 million Euros agricultural investment in Tea Public financing needs are estimated at USD 1. 7 billion (about 5% of GDP) annually to address infrastructure challenges. TZ needs of private sector USD 4. 13 billion (TZS 6. 5 trillion) investments to improve Tanzania’s central transport corridor – 1, 591 km connecting Tanzania, Burundi, Rwanda, DR Congo, and Uganda. Tanzania Petroleum Development Corporation (TPDC) expects gas reserves to reach 200 trillion cubic feet until 2017. All these need the private sector Tanzania to commercialize Gas by 2020 4

Stipulation of the Vision 2025 and the National Development Agenda The Tanzania Development Vision 2025 state clearly the role and contribution of the private sector in economic transformation of this country. The question is no longer whether the Government and Development Partners should engage with the Private Sector, BUT rather the issue is ‘HOW’ to ‘ENGAGE’ Tanzania 2025 Development Vision: Achievable? 5

Stipulation of the Vision 2025 and the National Development Agenda ⌂ Under Section 3. 3 of the Vision, such a resilient economy is expected to have the following characteristics: ü“a diversified and semi-industrialized economy with a substantial industrial sector comparable to typical middle-income countries…; üa growth rate of 8% per annum and more than 10% after 2016 -2025; üan adequate level of physical infrastructure needed to cope with the requirements of the Vision in all sectors; and üan active and competitive player in the regional and world markets, with the capacity to articulate and promote national interests and to adjust quickly to regional and global market shifts”. ⌂ All of the above anticipates the contribution of the private sector in production of goods and delivery of services, in so doing the private sector will to a great extent promote economic growth hence compliment initiatives to alleviate poverty ⌂ Real life examples happening in Tanzania § A case in education sector and health sectors (efficiency of the private sector delivery compared to public sector) §Have we considered all the implications? This refers to the beneficial conditions attached to the business that at the end of the day is profit making. As such the Government could earn revenues through taxes 6

Stipulation of the Vision 2025 and the National Development Agenda Role of FDI’s in building capacity of the local private sector FDI influences growth by raising total factor productivity and, more generally, the efficiency of resource use in the recipient economy. This works through three channels: the linkages between FDI and foreign trade flows, the spill-over and other externalities vis-à-vis the host country business sector e. g. Technology transfers are an important aspect of Multinational National Enterprises(MNE) presence, particularly through vertical linkages the direct impact on structural factors in the host economy MNEs generally are found to provide technical assistance, training and other information to raise the quality of the suppliers’ products, modernising/upgrading production facilities etc FDI is crucial for economic development but is not enough on its own. Public and private actors must work together to create an enabling environment to ensure knowledge transfer and foster economic growth. 7

Role of the Government in Facilitating the Private Sector The Government Role as a facilitator to achieve TDV 2025 ØPromotion of pro-growth macroeconomic stability, ØEnsure Government responsiveness and speed of making decisions ØPromoting a conducive business environment Øaggressive investment promotion Øproper land use planning Øensuring environmental sustainability, Øgood political and economic governance, Øproperty rights management. 8

Are we doing better? A Despite all these contributions made by the private sector, more still needs to be done to unlock and develop the potentials that this country offers Tanzania is staged to become one of the gas economies in Africa, attracting billions B of investments crucial for transforming the socio-economic landscape of the country. But achieving this blessing, the role of private sector is not only crucial but also inevitable. §Access to power is still below 30% §Less than 17% of Tanzanians have access to formal financial services § less than 5% of Tanzanians are able to reach the university level C §Despite Tanzania being the second on the list with natural attractions after Brazil, we still have less 1 million tourists a year §More than 30% of post-harvests goes into waste § 28. 2% of Tanzanians live in poverty (Household Budget Survey) D E All these require a crucial and active role of the private sector to make a potential transformation, that will not only bring desirable returns, but also improve the socio -economic conditions of the people. But the private sector is diverse, many players, both domestic international, small and large, sector by sector, this is where the role of TPSF is paramount in organizing them and act as an advocate for a better business environment for them to operate Tanzania has about 46. 5 Trillion Cubic Feet of Gas discoveries 25. 8 m Mobile users in Tanzania 241 hospitals in TZ (2012) 145 Tanzania’s rank in WB doing business report in 2014 9

Enterprise Development and the Role of TPSF and other PSO’s Unlocking these economic potentials, and facilitating the role or private sector in playing the crucial role, TPSF is positioned to act not only as a link but also as an enabler for the ideal business environment, with pushing for the right policies in place. This is not a NEW or rather an ALIEN role for TPSF to play, we have done it before, we are doing it, and we are positioned to do even more given the SUPPORT of DP’s. For the enterprise development and growth of Private Sector in Tanzania, TPSF has succeeded in doing the following; §The implementation of Business Development Gateway, which was a huge success. Establishment of TECC §Lobbying and advocacy for a number of policies and government programmes which were dwindling the role of private sector. KILIMO KWANZA etc §Participation in “Big Results Now” programme §Local content policy And now TPSF is preparing other ambitious programmes which help transform the private sector, some of which include § Continued advocacy for meaningful locals participation in the economy § Fighting corruption in the private sector through Business Action Against Corruption § Enterprise Growth and Creation Monitoring Programme § Association for Private Equity and Venture Capital in Tanzania §Skills development and Youth empowerment Role of TPSF in enterprise growth in TZ Annual sales of enterprises supported by TPSF MGP increased from TZS 4. 4 b to 8. 9 b Capital of these enterprises supported by TPSF grew from TZS 3 b to 7 b Assets of these enterprises grew from TZS 12. 5 to TZS 17 b 10

How can we achieve broad-based economic growth? TPSF believes that Enterprise Development is the key ingredient to Broad –based Economic Growth and Poverty Alleviation Promotion of enterprises in particular the MSMEs in augmenting resources mobilization base in the country HOW üThe role of innovation in addressing challenges in productivity and competitiveness üThe relations between large corporations and SMEs üEvaluation policies: assessment and impact üSome success stories of innovation üBarriers and difficulties for innovation and competitiveness in SMEs üKey factors to take into consideration in the design of innovation Empowerment Programmes for local SME’s as a source of sustainable job supply, economic shocks stability and political stability. Formalization and firm level competitiveness 11

Role of DPs We believe that enabling the private sector to become the engine of growth in this economy, multilateral partners need to work and compliment each other. Technical support Funding support These include the Government, TPSF, Development Partners, and the private sector players. DPs have been making tremendous and commendable contributions for the development of private sector in this country. We believe, DP’s direct support to local private sector can make the private sector an engine for growth and bring about necessary changes for the lives of the people of Tanzania to receive TZS 6 billion from Japan for Agricultural development Lobbying and advocacy Program partnerships Tanzanian Railway Receiving USD 300 Million Funding From WB The German Government is funding a USD 27 Million Power Line in Tanzania that will provide access to electricity for 32, 500 households in rural areas 12

THANK YOU 13