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The East African : Mar 1st 2015
10 GOING IT ALONE The EastAfrican NEWS FEBRUARY 28 - MARCH 6, 2015 Joint money t≥ansfe≥ by Tigo, Vodacom By ERICK KABENDERA The EastAfrican TANZANIA’S BIGGEST mobile operators have reached an agreement to allow their customers to send money across mobile platforms. The agreement between Tanzania’s Finance Minister Saada Mkuya delivers the 2014/15 budget before Parliament last year. Picture: File Tanzania in plans to amend budget, exclude donor funding Gove≥nment says it will not plan fo≥ any suppo≥t afte≥ it faced challenges accessing p≥omised aid A JOINT REPORT The EastAfrican S tung by a decision by major donors to withhold $500 million in aid until a corruption scandal is fully investigated and implicated officials punished, the Tanzanian government now says it will not plan for any support in the next budget. Servacius Likwelile, the Permanent Secretary in the Finance Ministry, said donors had stayed away from a scheduled budget review meeting in November, and that there were no indications of how much money, if any, they would give to reduce the budget deficit for the 2015/16 financial year that begins in July. “The government has de- cided that, going forward, we will not continue to depend on donors, and we have come up with other measures to offset this,” Dr Likwelile said. The new budget guidelines seen by The EastAfrican acknowledge the difficulties the government has faced in accessing promised aid in the first two quarters of the 2014/ 15 financial year. “The challenge that the government faced in accessing general budget support (GBS) funds in the first two quarters of the 2014/15 budget has cast a shadow on the realism of projecting GBS funds into the budget,” the guidelines note. “Therefore, GBS funds will be recognised once the disbursements are made.” Donors withheld $500 million (5 per cent of their commitment in GBS) in budget support, to encourage the government to investigate the irregular removal of $125 million from the Tegeta escrow account at the Tanzanian central bank in 2013. The withheld financing has impacted the disbursement of Tsh290 billion ($163,413,000) to the national electoral commission to procure biometric voter registration kits, as well as prepare for a referendum on a new constitution, scheduled for April. Major energy and infrastructure projects have also been affected. The EastAfrican under- stands that donors promised about $3 billion for the 2014/ 15 financial year (35 per cent of the country’s budget), most of which was not affected by the aid cuts and continues to go to the earmarked projects. Nevertheless, the guide- lines say the government intends to borrow Tsh4.2 trillion ($2.36 billion) from both domestic and external sources, of which domestic borrowing for rollover of matured government securities is Tsh1.4 trillion ($789 million) in the next financial year. Recurrent expenditure is “The next budget will be a populist one due to the forthcoming election.” Former shadow finance minister Zitto Kabwe estimated at Tsh15 trillion ($8.45 billion) including Tsh6 trillion ($3.38 billion) for wages and salaries for civil servants, while development expenditure is estimated at Tsh4.8 trillion ($2.7 billion). Of this, locally financed development expenditure is Tsh3.3 trillion ($1.86 billion), and foreign financed development expenditure is estimated at Tsh1.5 trillion ($845 million). The government says it will try to close the financing deficit by improving tax collection and implementing a new VAT law. Haji Semboja, a senior economist and lecturer at the University of Dar es Salaam, said Tanzania was not in a position to give up on budget support and the decision may impact the country’s credit rating. “There is no country in the world that can survive without financial support from outside,” he said. Dr Semboja added that the decision could affect plans to pull more Tanzanians above the poverty line, making youths vulnerable to radicalisation by extremist groups. Sources confirmed that the government had decided to make do with its available resources, and open market debt. Zitto Kabwe, a former shadow finance minister and parliamentary Public Accounts Committee chairman, told The EastAfrican that he was aware of the decision, and warned of the challenges of developing new revenue streams and the risk of drawing down national reserves that could lead to volatility in the currency markets. CHANGES Tanzania announced a Tsh19.5 trillion ($11 billion) budget for the 2014/15 financial year, of which Tsh3.456 trillion ($1.94 billion) goes to education, Tsh2.109 trillion ($1.18 billion) to transport infrastructure, and Tsh1.588 trillion (894 million) to health. Compared with the previous fiscal year, there was a reduction in the budget for health by 22 per cent, and in education by five per cent. About 15 per cent of the current budget was projected to be covered by external grants and concessional loans, representing a budget deficit of Tsh3.8 trillion ($2.14 billion). “The next budget will be a populist one due to the forthcoming election. The government after the 2015 election will be forced to introduce a mini-budget immediately after the inauguration,” Mr Kabwe said. A few government offi- cials, including the Attorney General and former Lands minister Anna Tibaijuka resigned from their positions after being implicated in the escrow account scandal. However, with the referendum only a month away and a general election in October, the government appears reluctant to play into the hands of opponents by admitting to widespread corruption among senior officials. Reported by Erick Kabendera and Rosemary Mirondo Millicom, which owns Tigo, and Vodacom customers will be able to send money across mobile platforms. Picture: File Sweden’s Millicom, which owns Tigo, and Vodacom comes after more than a year of negotiations and has created the first integrated money transfer network in East Africa run by four rival telephone companies. The agreement between Vodacom and Tigo, which have six million and four million subscribers respectively, means that customers of the two networks will be able to send money to each other on their mobile handsets. Airtel, Zantel and Tigo reached a similar agreement in April last year. At the time, Vodacom was reluctant to join them due to its dominance of the mobile money transfer market and fear of allowing other networks to access its customers. Arthur Bastings, Mil- licom’s executive vice president, said in a statement that M-Pesa and Tigo Pesa customers will now be able to send and receive money across the network, enhancing financial inclusion. He said Tanzania was the first country in Africa to have its telcos link their money transfer services. An interlinked service helps users pay uniform rates across networks and for the value to be loaded directly to their mobile wallet. This allows them to withdraw money from any of the networks’ agents. In Kenya, integration of money transfer services is yet to take off after the dominant firm, Safaricom, expressed fears similar to those initially raised by Vodacom, which is its parent company. Integration has mainly been pushed in Kenya by Airtel, which views Safaricom’s M-Pesa dominance as a hindrance to subscribers joining its network. Safaricom has argued that it cannot share a platform it has invested heavily in with rivals for free. M-Pesa commands more than 80 per cent of the money transfer market. Although the Communi- cations Authority of Kenya introduced number portability — where subscribers can use their old line even when they change networks — it has not helped shift market share as subscribers are charged a fee to migrate. Recently, the government allowed money transfer services to share agents, breaking from exclusive agency contracts previously employed by telcos, in a bid to enhance competition. In Tanzania, Mr Bastings praised the breakthrough: “With Tigo Pesa, customers will now have Africa’s first universal mobile money exchange system. They will be able to safely and securely transact with millions more people across the country. Following the success of the service with Airtel and Zantel, we hope many more Tanzanians will choose mobile money so that everyone benefits and we can extend financial inclusion even further. We also intend to pioneer similar agreements with networks elsewhere.” Martin Warioba, the project manager, told The EastAfrican that interoperability is considered important because of its potential effects on consumers, businesses and the economy. “Governments believe that interoperability can help advance financial inclusion due to reduced transaction costs and can also lower the cost of printing and managing cash,” Mr Warioba said.
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