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TOWARDS INDUSTRIALIZED ECONOMY: THE ROLE OF DFIs

IN TANZANIA IN THE IMPLEMENTATION OF THE SECOND
FIVE YEAR DEVELOPMENT PLAN. (FYDPII)

Charles G Singili Ag. Managing Director

TIB Development Bank

6 June 2017

Early Development Arena & the Notion of
Development

National Development Corporation was established in 1962

i.
To catalyze economic development in all sectors of the economy;

  • ii.
  • NDC became a holding corporation under the Public Corporation Act

1969;

iii. Had a broad mandate as a development and promotion institution to stimulate industrialization in partnership with private sector.

Tanzania Investment Bank was established in 1970-

i.
To make available long and medium term finance for economic

development

ii. To provide technical assistance and advice for the purpose of promoting industrial development

iii. To administer such funds as may from time to time be placed at the disposal of the Bank

iv. To undertake such other activities as may be necessary or advantageous for the purpose of furthering the foregoing objects.

Early Development Arena & the Notion of
Development

Tanzania Agricultural Development

Bank was established in 2012

i. apex national-level bank with the key role of being a catalyst for delivery of short, medium and long- term credit facilities for development of agriculture in Tanzania

ii. enshrined in the Vision 2025 to achieve food

self-sufficiency and food security, economic development and poverty reduction

Early Development Arena & the Notion of
Development

During establishment of the above SOEs

“Economic Development” was defined as:

i. The development of manufacturing, assembly

and processing industries including industries engaged in the processing of products of

agriculture, forestry or fishing;

ii. The development of the engineering, construction, transport, tourist and mining

industries;

iii. The development of large-scale corporate agriculture, ranching, forestry and fishing.

NOTE: This still holds.

The Changed Arena…

Up until early 80’s TIB enjoyed high success rate

in establishing various industrial, infrastructural and agricultural projects

NDCs glory came to an end in 1992 under the Public Corporation Act, 1992 as amended when

Parastatal Sector Reform Commission was

established (Privatization of SOEs kicked in. The Government privatized 196 entities)

The History

9 000 6 000
2 400.00 2 300.00 2 200.00 2 100.00

2 000.00

1 900.00 1 800.00 1 700.00 1 600.00 1 500.00 1 400.00 1 300.00

1 200.00

1 100.00 1 000.00 900.00
3 000
-

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16p

(3 000)

(6 000) (9 000)
(12 000) (15 000)
800.00 700.00 600.00 500.00

400.00

300.00 200.00 100.00 -

  • Profit before tax
  • USD/TZS rate

The Transformation of TIB

The Transformation of TIB

NUTURING
INDUSTRIALIZATION FOR

ECONOMIC

TRANSFORMATION AND HUMAN DEVELOPMENT

2015/16-2020/21
A SEMI-
INDUSTRIALIZED

MIDDLE INCOME

COUNTRY BY 2025

The New TIB

1. Transformation of Tanzania Investment Bank Limited

resulted into a two-tier Group of companies:

  • I.
  • TIB Development Bank Ltd

TIB Corporate Bank Limited TIB Rasilimali Limited
II. III.

2. Main focus of TIB Development Bank:

i. Long & Medium term finance ii. Special Products: Financial Advisory and Managed Fund

TIB, NDC & TADB Strategic Focus

1. Main focus is anchored on Tanzania

Development Vision 2025

2. Translated in FYDPII (2015/16-2020/21)

3. Steered by Corporate Strategic Plans of each institution.

10

TIB Strategic Focus

i. Infrastructure- Local and National Government;

income generating projects

ii. Industrialization- specifically in general

manufacturing, Agro–processing, and mining

iii. Services- Real Estate, Tourism sector

iv. Oil and Gas

11

NDC Strategic Focus

i. Heavy Industries – Chemical, Power Production,

Iron & Steel (metallurgical)

ii. Value Addition Industries - Agro Industries,

Biological Industries, and Industrial Parks iii. Research and Development

12

TADB-Strategic focus

• Promoting financing of entire agriculture value chains, the agro-processing;

• Increase availability of raw materials for domestic industries through facilitation of enhanced productivity in the primary

production;

• Catalyzing banks and other financial institutions to increase

their lending to agro-processing and agribusiness Sector

through guarantee facilities;

• Provision of credit facilities to small and medium scale

industries and processing facilities of agricultural produce within the focus value chains;

TADB-Strategic focus

• Collaborating with the Cereals and Other Produce

Board (CPB) and National Food Reserve Agency (NFRA) to construct Strategic modern

warehouses with new technologies;
• Collaborating with other financial intermediaries

to fund the project with large value investments in agriculture in the country;

Examples of Projects Financed by

TIB Development Bank

CATA MINING – GOLD PROCESSING FACILITY

ALKO VINTAGE – GRAPE PROCESSING

KAGERA SUGAR COMPANY
AMIR HAMZA INSTANT COFFEE

PROCESSING PLANT

TPDC
GAS DISTRIBUTION PROJECT

15

Examples of Projects Promoted by

NDC

MALARIA BIOLARVICIDES PLANT

KILIMANJARO MACHINE TOOLS COMPANY

NGAKA COAL PROJECT

LIGANGA AND MCHUCHUMA IRON ORE

16

Special Products

• Fund management(administration of GOVT special

funds)

Agriculture financing window: MOF

Small scale mining: Grants (WB), Credits & dev. Scheme
(MEM)

Financial Inst. Credit line for energy financing: TEDAP

(WB & REA)

Horticulture refinancing & financing structure: MOF &

BOT

Dutch and German Gov’t renewable energy fund: SNV

Financing FYDP II

18

FYDP II in Context

1. Formulated to rally national efforts towards realization of TDV 2025

2. TDV 2025 goal is to attain a middle income (GDP per

capita $ 3,000), semi-industrialized economy status by 2025 with following attributes:

i. Self propelling high quality of life ii. Peace, stability and unity

iii. Good governance

iv. Well educated and learning society v. Competitive economy capable of sustainable and inclusive

economic growth

  • FYDP II in the Context of TDV 2025
  • Industrialization as a High Growth Factor
  • Understanding FYDP II

Prioritized projects worth TZS 107 trillion in:

1) Promoting growth and industrialization: Manufacturing,

mining, construction, agriculture, trade, natural

resources, tourism, technology and innovation

2) Enhancing human development: Education; skills

development; health; water supply and sanitation; urban

planning, housing, and human settlement; food security and nutrition; social protection; and good governance.

3) Creating an enabling environment for enterprises:

Macro-economic stability; infrastructure and services;

and ease of doing business.

Flagship Projects:

projects with high development impacts

i. Construction of new central railway line to standard gauge;

ii. Revamping the National air Carrier - Air Tanzania

Corporation Limited(ATCL); iii. Mining of Coal and Iron ore and Construction of

Iron and steel complex in Mchuchuma and

Liganga; iv. Establishment of Special Economic Zones;

v. Construction of a liquefied Natural Gas

Plant(LNG);

Flagship Projects:

projects with high development impacts

vi. Establishment of Kurasini Trade and Logistics centre;

vii. Development of Mkulazi Agricultural Farm and

Sugar factory

viii. Mass training for development of specialized
Skills for Industrialization and human

development, fostering science, technology and

Innovation

DFIs Roles Under FYDP II

• TIB Development Bank as an Agent for Financial
Resources Mobilization through leveraging and

syndication(TIB RECAPITALIZATION IS IMPORTANT

FOR EFFECTIVE DISCHARGE OF THIS OBLIGATION);

• Provide technical assistance for preparation of

bankable projects and assist clients on project

planning and implementation;
• Design and structuring financing programmes(packaging);

• Joint project financing with SADC DFIs;

• Facilitate Private Participation in Public

infrastructure;

• Create a data base for pipeline of Bankable projects and solicit syndications.

• Enhance Corporate Governance both for the

DFI and at Client level.

• Support and create linkages between SMEs

and large Companies for sustainable industrialization.

• Ensure Environmental risks are properly

mitigated.

• Increase availability of raw materials for domestic industries through facilitation of enhanced productivity in the primary production;

• Collaborating with the Cereals and Other Produce
Board (CPB) and National Food Reserve Agency (NFRA) to construct Strategic modern warehouses with new

technologies;

• DFIs to maintain highest level of integrity;

• Observe and comply to Prudential Standards,

Guidelines and Rating system as adopted by AADFI.

Sample Fund Structure - Infrastructure

Example Projects that Might fall Under this Programme

AMOUNT (USD

  • PROJECT NAME
  • INST.
  • REPAYMENT STRUCTURE

BILLIONS)

  • 1.00
  • Bagamoyo Portside Industrial Zone EPZA

Kurasini Logistic Centre

Mtwara Freeport Zone

Kigoma Special Economic Zone Mwanza Industrial Park
Concession Fee Concession Fee

Concession Fee

Concession Fee Concession Fee
EPZA

EPZA

EPZA EPZA
0.05

0.50

0.02 0.02

Bagamoyo Port

Mtwara Port Mwanza Port Kigoma Port
TPA TPA TPA TPA
0.70 0.30 0.20 0.15
User Fee / port wharfage User Fee / port wharfage User Fee / port wharfage User Fee / port wharfage
Power : Coal Power: Kinyerezi III Power: Urban Elecrification

Cities: Gas distribution

Cities: Water distribution
TANESCO TANESCO TANESCO

TPDC

0.10 0.30 0.20

1.50

1.00
User Fee / PPA User Fee / PPA User fee / Connection

User fee / Connection

  • User fee / Connection
  • Water Authorities

  • Total
  • USD 6.04 ~ TZS 14 trillion

N.B. Most of projects costs are assumed based on available literature / pre-feasibility

TADB– Earmarked Projects

• Large scale nucleus farms which support

smallholder farmers
• Large irrigation schemes which use modern

irrigation technologies
• Construction of modern warehousing and storage facilities

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