Utilizing SADC DFIs in mitigating industrialization

TANZANIA’S development finance institutions (DFIs) including–TIB Development Bank, National Development Corporation and Tanzania Agricultural Development Bank hosted the bi-annual meetings of the Southern African Development Community’s Development Finance Institutions (SADC) Development Finance Institution (DFI) in July 2017.

The theme of the meeting was “Towards Industrialisation for Sustainable and Inclusive Development– Role of DFIs in SADC”.

The meeting was officiated by Tanzania’s Vice- President Samia Suluhu. While officiating the meeting, Vice-President Samia Suluhu Hassan’s proclaimed at Julius Nyerere International Convention Centre in Dar es Salaam said that it had been over two decade now when the SADC Heads of State resolved to transform the region’s agenda to an economic integration agenda to industrialization in order to transit from the commodity- dependent growth.

The VP’s proclamation was attributed by in recognition of the prioritization of industrialization by SADC Heads of State as a key element towards the achievement of sustainable economic growth and development in the SADC region and enhancing the welfare of its peoples.

Industrialisation process in Tanzania is captured well in the Second Five Year Development Plan (FYDP II) 2016/17–2020/21, which takes into account the integration of the Five Year Development Plan (FYDP) and the National Strategy for Growth and Reduction of Poverty (NSGRP/MKUKUTA) planning frameworks.

The theme of FYDP II “Nurturing Industrialization for Economic Transformation and Human Development” incorporates the main focus of the two frameworks, namely growth and transformation (FYDP) and poverty reduction (MKUKUTA).

The FYDP II outlines new interventions to enable Tanzania industrialize in a way that will transform its economy and its society. It also outlines interventions carried over from predecessor plans,-FYDP I and MKUKUTA that are deemed critical for the aspiration of FYDP II goals.

More importantly, and in tandem with the two predecessor Plans, FYDP II also implements Tanzania’s Development Vision (TDV) 2025 which aspires to have Tanzania transformed into a middle income, semi industrialized nation by 2025.

According to subsection 2.7 (Financing strategy) of the FYDP II Financing is identified as the core challenges to the implementation of development plans in the country, hence, over a time now, Tanzania as a country has been mobilizing financing of the successful implementation of the industrialization strategy, which require massive investments across various industrial sectors.

However, this ascertain may be resolved as financial institutions in the country, and more specifically, Tanzania’s DFIs, in tandem with the private sector, will play a critical role in mobilizing the requisite financial resources.

Moreover, while ensuring adverse impact on macroeconomic stability is mitigated, generally, the Plan will encourage national DFI to organize the Loans Syndications as an alternative non-tax financing opportunity as some banks join together to finance a large public project under a certain arrangement.

More influential role for Tanzania’s DFIs together with regional and international development banks DFIs such as TIB Development Bank to play a more influential role in designing and structuring development projects associated with FYDP II, and linking these projects to funding opportunities (e.g. arranging and leveraging funds for investment; developing bankable projects; managing project funding and implementation).

This can be possible as a nation we ended up the year 2018 with big news of the appointment of the Tanzania Investment Bank (TIB-Development), Mr Charles Singili to be appointed as a the new Chairman of SADC DFI subcommittee.

Mr Singili’s appointment is good news for our country because his role plays a strategic intervention in country’s developmental space, especially in investing in long term projects.

As a Chairman SADC DFI, he is conferred with a number of responsibilities, among others; include working with other DFIs in the network to promote effective mobilization of resources by financial institutions in the SADC region.

Resources mobilized are to be directed to investments in key areas with potential to stimulate economic growth, create employment and alleviate poverty in line with the SADC Regional Indicative Strategic Development Plan (RISDP).

Speaking to the media on 08 January, this year, Mr Singili said he will hold the position for period of two years effective December 2018 to 2020, where as a Chair of SADC DFI Subcommittee, he also becomes an ex officio member of the Board of Trustees of SADC Development Finance Resource Centre (DFRC). He added that TIB would cooperate with other DFIs in the network to facilitate preparations for bankable projects through SADC Fund.

“TIB would cooperate with the government and other institutions to build enabling environment for Tanzania to host SADC Development Fund as that would enable development projects in Tanzania to get financial resources.

“With government approval, TIB would help development projects in Tanzania with impact in the SADC region to get funds and guarantee from SADC finance institutions through syndication and club loans,” he said.

Through TIB, country can enjoy financing of the number of developmental projects through provision of fund for Industrial Financing.

As it is known, the manufacturing sector remains relatively small, with most activities largely concentrated in the production of basic consumer products such as food, beverages, tobacco, textiles, furniture and wood allied products.

This is because sector continues to be of considerable importance to the Tanzanian economy as it is still one of the sources of government revenue in terms of duties and other taxes.

The bank’s Industrial Loan targets the following sub sectors namely Agro-processing, Mining processing or extraction and processing and General manufacturing. TIB has formulated a strategy to complement Government economic development efforts through investments in infrastructure with a focus in the transport, utilities, oil and gas and the telecommunications sectors.

Building up of infrastructure is essential, if the country is to achieve rapid economic development and delivery of equitable quality services that will improve the living standards of Tanzanians. In its approach to provide loans to service the sector, the bank has designed Infrastructure Loans available to the following three categories of projects.

These include National Projects; these are nation-wide projects and will ordinarily originate and be implemented in collaboration with respective State-owned enterprises/corporations.

The bank’s loans are therefore directed to finance development of infrastructure such as utilities and Communications: electricity generation and distribution, water treatment and distribution, oil and gas infrastructure, telecommunications, and ICT.

Transport: ports, airports including airport buildings, and railway lines, and attendant facilities and Transport Equipment: locomotives, marine vessels, aircraft and buses related equipment. On Local Government Projects, the bank has developed a lending framework to support financing of municipal infrastructures to assist Local Government Authorities (LGAs) to bridge existing financing gaps in otherwise economically and financially viable projects.

Through partnership with local governments, the bank intends to extend its successes in the development of satellite cities, bus terminals and modernisation of markets.

Public Private Partnership (PPP), the loan provided under this category include the infrastructure loans under this category are directed to solid partnerships between a public entity and a private company that answer to the important need for infrastructure.

While the financial leasing product enables enterprises to access the use of equipment for their production and service delivery activities to enhance productivity and increase production mainly in the manufacturing, construction, mining, transportation and agro-processing sectors. The facility can be provided as an operating lease where the participation and agreement with equipment manufacturers will be obtained.

It is clear that the appointment Mr Singili catalyzes development pace in the country especially during this period where as a country we are focusing on industrialization strategies as advocated by the Government through the FYDP II.

As well as catalyzing Vice-President’s vision on DFIs’ role towards Industrialization as she narrated: “The central challenge facing Africa is how to transition from the commoditydependent growth path in which African countries find themselves to value-adding, knowledge-intensive and industrialized economies.

The goal is to occupy a higher place in the global division of labour. Africa at present is predominantly viewed as a producer and exporter of primary commodities and an importer of value-added manufactured goods,” VP Samia said.

SADC DFI Network and DFRC were established by a decision of the SADC Council of Ministers in 2002 and have since been operating under the SADC Finance and Investment Protocol. Membership of the DFI Network is open to all DFIs operating in the SADC region.

TIB Development Bank is among the founding members of the SADC DFI Network which currently comprises 41 development finance institutions from 15 SADC countries. In Tanzania other members Tanzania Agricultural Development Bank (TADB) and National Development Corporation (NDC).

The TIB Development Bank Limited was established in November 1970 initially by the Parliamentary Act, the Tanzania Investment Bank Act of 1970 with the main purpose of financing development with emphasis on industrialization of the country.

TIB was able to fulfil its mandate with notable success in the setting up of textile, leather, paper and other processing industries until the macroeconomic instabilities of the 1980s when the country’s economy deteriorated. *Said Ahmed works with the TIB Development Bank Limited.


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