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Topic : Tanzania Sovereign Wealth Fund  
 
Sovereign wealth funds have increasingly gained prominence in the natural resource management approaches across the world. Cappelen and Urheim (2012) define sovereign wealth funds as entities that can manage the national savings for the purposes of investment. They are typicall ...Click here to read more
     
Comments From TAKNET Members
Deo Mutalemwa  : Thursday, June 19, 2014    
  Dear Taknet participants,

This message is first of all to thank all of you for having participated in the discussion on the Sovereign Wealth Fund (SWF).

A lot of worthwhile contributions were made in the last 5 weeks in which the SWF topic was open for discussion. We are thus thinking to close the discussion but may be some of you may have additional

points to make. Please do so. I am particularly feeling that the following ideas still need to be elaborated upon:

(i) Need to initiate wide public consultations before deciding on setting up the SWF;

(ii) Is it wise or not to invest some of the SWF money overseas ( in foreign countries) for the sake of its security ?

(iii)How to inculcate a savings culture in Tanzania society as a whole (thriftiness) ; in other words to protect the oil and gas revenues (even the SWF) from the pervasive trend of festival/celebratory spending that is engulfing our society ?

(iv) By how much should the SWF also be extended to cover other lucrative mineral resources beside gas and oil?

Kindly let us get your views before we close the topic.

Deo Mutalemwa

Moderator

 
     

Simon Meigaro  : Wednesday, June 18, 2014    
  Hello everybody,

Reading from most of the contributions regarding Sovereign Funds, there is a general agreement that this will be a good thing. There is also another agreement that the sovereign funds will only be useful is there are well defined accountability mechanisms to ensure propriety in regards to its management. For example, quoting from the recent narration, the problem of greedy politicians in our country seems to be an obstacle. That has a relationship with subtle failure of brilliant plans which have not been implemented as planned. I was wondering therefore, what can we feasibly do to overcome the challenge, especially when the greedy, powerful and wealthy politicians have captured the system, to their beneficial support?

Humbly,

Meigaro

 
     

Simon Meigaro  : Wednesday, June 18, 2014    
  Hello everybody,

Reading from most of the contributions regarding Sovereign Funds, there is a general agreement that this will be a good thing. There is also another agreement that the sovereign funds will only be useful is there are well defined accountability mechanisms to ensure propriety in regards to its management. For example, quoting from the recent narration, the problem of greedy politicians in our country seems to be an obstacle. That has a relationship with subtle failure of brilliant plans which have not been implemented as planned. I was wondering therefore, what can we feasibly do to overcome the challenge, especially when the greedy, powerful and wealthy politicians have captured the system, to their beneficial support?

Humbly,

Meigaro

 
     

Fredrick Stivin  : Tuesday, June 17, 2014    
  Dear all,

I have been reading through some of the comments in this forum for quite some time now, and I have to admit that there is no other platform in Tanzania that brings together the finest minds of our beloved country. I think the idea of having a sovereign wealth funds is very good for our country if it will be well managed. We are best known in the world for good plans but poor implementation. I am afraid that our greedy politicians will abuse the funds for their selfish gains.

 
     

frank john kiunsi  : Monday, June 16, 2014    
  Dear Camillus D.N.Kassala congratulation to questions which you had set, Its right questions to us because these questions if its easy to answer in our mind that's its going to measure where we are come from ,where we are and where we are going? every body shall know what is SWF in Tanzania perform but without Accountability and Transparency it is nothing ,If you don't believe on that today ask about IPTL to this Government with their call it expertise you shall get answers that they have many document related to IPTL as much.So where Tanzania going on is it? directed to hills or to slope or to .............?  
     

Camillus D. N. Kassala  : Monday, June 16, 2014    
  Dear Colleagues,

The discussion on SWF until now has assumed a number of things which, I think, need to be looked into. The first assumption is that the SWF will be established in the very near future! The second assumption is that we have enough financial management discipline to run such a large-scale fund without loss or embezzlement. Third, the fund will solve our poverty problems. Fourth, the nature of our poverty is basically economic and nothing else. Fifth, the SWF development programme is not part of the Development Vision 2025. Sixth, the neo-liberal economic approach will still be valid when the SWF will begin to operate, despite the emerging critical mood to mainstream economics. Seventh, the national financial architecture is able to absorb and integrate the SWF reasonably well. The implications of the EAC financial and monetary developments on the socioeconomic role of the Fund. etc...etc... In short we need to tease out all the assumptions behind our approaches and arguments, for or against the Fund, before we are clear as to how and why we would like the Fund to operate!

CDNKassala

 
     

Deo Mutalemwa  : Sunday, June 08, 2014    
  Dear TAKNET Participants,

The idea of direct cash transfer introduced by Rakesh and enthusiastically supported by others (in this TAKNET exchange) is very enticing and worthy TAKNET discussion within the concept of the SWF.

Here is a very brief background and some thoughts:

a. World Bank Economic Update (WBEU) issue No.4 of 2012 expounded on the new initiative for reducing extreme poverty in Tanzania, involving transferring money directly to the poor. Experiences gained in a number of countries, including a pilot scheme in Tanzania, have provided useful lessons already. Thus resolution to scale up the experiment in Tanzania is imminent; although the stakes are high. The budget for an expanded program is about US$250mn p.a.

b. Over the last 4 years, TASAF’s Community Based CCT program has been facilitating provision of cash transfers to poor households. This also includes labor intensive public work programs (i.e. providing productive employment to the poor).

c. This program for reducing extreme poverty might be attractive, also for sustaining spending by poorest families on food to forestall selling family basic assets or accumulating debilitating debts. Another potent attraction is to enable access to basic services (especially basic health and basic education for children).

The idea is not to be adopted without considering preconditions and possible downsides. Think about the following:

a. The question of sustainability of the cash transfer program nationwide: do not think the gas resources are endless.

b. How to choose those to get direct transfer first (targeting) and roll over to benefit other people nationwide. Of course, this applies to those who are able to work, rather than older people or those with debilitating disabilities.

c. How to promote those who sincerely do no longer need assistance to graduate from the program .

d. How to protect the program from mismanagement and pilferage.

e. How to determine the amount of funds to be transferred to families (in order not to kill self-help initiatives and not to promote laziness).

It is important we keep this discussion within the framework of the Sovereign Wealth Fund (SWF). In other words, comments are invited on how the revenues from natural gas can cater the welfare of the people in the present generation and also keep aside something for future generations. If we want to distribute a lot of cash to the present generation, we will have little left or nothing left for the future generations.

Deo Mutalemwa

 

 
     

Deo Mutalemwa  : Thursday, June 05, 2014    
  Dear TAKNET Participants,

The idea of direct cash transfer introduced by Rakesh and enthusiastically supported by others (in this TAKNET exchange) is very enticing and worthy TAKNET discussion within the concept of the SWF.

Here is a very brief background and some thoughts:

a. World Bank Economic Update (WBEU) issue No.4 of 2012 expounded on the new initiative for reducing extreme poverty in Tanzania, involving transferring money directly to the poor. Experiences gained in a number of countries, including a pilot scheme in Tanzania, have provided useful lessons already. Thus resolution to scale up the experiment in Tanzania is imminent; although the stakes are high. The budget for an expanded program is about US$250mn p.a.

b. Over the last 4 years, TASAF’s Community Based CCT program has been facilitating provision of cash transfers to poor households. This also includes labor intensive public work programs (i.e. providing productive employment to the poor).

c. This program for reducing extreme poverty might be attractive, also for sustaining spending by poorest families on food to forestall selling family basic assets or accumulating debilitating debts. Another potent attraction is to enable access to basic services (especially basic health and basic education for children).

The idea is not to be adopted without considering preconditions and possible downsides. Think about the following:

a. The question of sustainability of the cash transfer program nationwide: do not think the gas resources are endless.

b. How to choose those to get direct transfer first (targeting) and roll over to benefit other people nationwide. Of course, this applies to those who are able to work, rather than older people or those with debilitating disabilities.

c. How to promote those who sincerely do no longer need assistance to graduate from the program .

d. How to protect the program from mismanagement and pilferage.

e. How to determine the amount of funds to be transferred to families (in order not to kill self-help initiatives and not to promote laziness).

It is important we keep this discussion within the framework of the Sovereign Wealth Fund (SWF). In other words, comments are invited on how the revenues from natural gas can cater the welfare of the people in the present generation and also keep aside something for future generations. If we want to distribute a lot of cash to the present generation, we will have little left or nothing left for the future generations.

Deo Mutalemwa

 
     

Monica Stender  : Wednesday, June 04, 2014    
  Dear Sirs

Reading all participants contributions and concerns about the use of Wealth Fund, I only remember the Development Bank of Brazil - BNDES, a institution created to manage public funds and support public and private projects through loans for development projects. I think that is the best way to return to citizens the results of mega-projects.

Tanzania needs invest in infrastructure, education, sanitation, industrialization, etc. and an institution like this will help to increase transparency, competence and farsightedness in the use of resources in a way to give alternatives to society to develop itself with dignity.

Mónica E. Stender, Ph D, MBA

STENDER ASESORES, S.L.U.

Av. Madrid, 102 Entº 3ª

08028 - Barcelona - España

Tel: (34) 610 792450 Fax: (34) 93 229 6934

mstender@stender.biz www.stender.biz

Skype: monicastender

Linkedin: stender@stender.biz

 
     

Mary Mohamed Rutenge  : Wednesday, June 04, 2014    
  May be, just may be,a more stricter law to curb corruption would work. May be life imprisonment for grand theft. Because if we do not set amount, our jails would be filled with small fishes who are the mostly convicted.

I am not against the fund but who can ensure us that the money would be safe? basing on what experience?

 
     

Bariki Karosi Kaale  : Wednesday, June 04, 2014    
  Dear all

Many thanks for the wisdom provided and the enthusiastic commitment for Tanzania to be one of the middle income countries by 2025.

With wise use and efficient utilization of our natural resources Tanzania could be one of the developed countries by 2025. However all abled citizen should work hard daily for the inclusive development of our nation. People should be paid for productive work and not through cash handout. Main challenge is to ensure each citizen has an employment opportunity with true added value to the national development.

The natural gas financial contribution should be regarded as only one component amongst the many potential natural resources in Tanzania. Income from gas should provide a foundation for rapid development of our nation. History has shown that economic development of an individual or nation cannot be attained through begging. Concerted efforts are therefore required to reduce our dependence on donor assistance for funding development project. Wise use of revenue from natural gas is a starting point.

Efforts are required to re-examine funding priorities of the government to ensure each funded activity has true and tangible added value to the nation. For example spending trillions of TZS funding constitution review while millions of Tanzanian school children have no desks could be counter-productive.

Bariki K. Kaale

 
     

Deo Mutalemwa  : Wednesday, June 04, 2014    
  Dear Taknet participants,

The rich piece by Rakesh gives us plenty of food for thought. There are several points on which Taknet contributors are invited to comment; but all contributions should be handled in the context of drawing up a framework for the Sovereign Wealth Fund (SWF) in order to avoid opening up the topic to unmanageable proportions. Here are some of the issues calling for your views:

Q1: How can we ensure that the SWF is managed with full transparence, when so far the deepening practice in Tanzania public institutions in managing public resources is replete with secrecy and opaque rules and practices that are often driven by bad will, ufisadi, or sheer incompetence?

Q2: How can we avoid the oil/gas“ curse”, given a growing culture in society and in government of extravagance in public spending and unwanted merry making at personal and public levels? The word Frugality has been completely forgotten.

Q3: How far can we trust that the Survey by Twaweza, well-intentioned doubtlessly, has not been subdued by the tendency of people to respond to questions without first trying to learn facts about the issue in question or respondents trying to answer questions in ways they think will please the questioner?

Q4: Who are the local oil/gas companies that we talk about at the moment? This question has been posed by Prof. Muhongo, but many people especially business people have only picked on the tone in which it was posed and avoided to be transparent in showing how they represent the Tanzanian public at large, or how they intend to widen public ownership in their companies.

Deo Mutalemwa

Moderator

 
     

Emmanuel Sulle  : Wednesday, June 04, 2014    
  Hi all,

This is definitely a great idea, and I must admit that it is neither new nor a miracle for our current problems. We definitely need to clean our house for anything to work. If the corruption, irresponsibility in the society continue to be the way it is then, nothing can benefit us that much. I remember writing an OpEd (see below and also attached). It was published way back in 2012 and I remember His Excellency President also mentioned almost the similar ideas that I have written in the OpEd, so the starting point for us all should be on the implementation of all that is already in the public domain. Otherwise, we may continue to write and discuss until the end of the next decade!

Here is the copy of the published article.The Citizen May 28, 2012

Effective policies are vital for the success of any industry in a country. While countries like Norway, Brazil, and Qatar have managed to design and implement efficient policies to manage production and revenues from gas and oil industry, Tanzania still does not have the right policies in place.

For instance, despite having commercially operating natural gas wells in Songo Songo Island for about nine years, Tanzania has no revenue sharing systems that ensure gas revenue benefits for the local communities in areas where such resources are exploited.

It was not until April 2012, when Pan African Energy Tanzania Ltd agreed to pay a service levy of 0.4 per cent for the sales of gas each month to Kilwa District Council.

But the recent large discoveries of natural gas in Tanzania are prompting members of academia, civil society and parliamentarians to voice their opinions on how best Tanzanians should manage this potentially valuable resource.

Experience from countries that have developed successful oil and gas revenue sharing models indicate that government ensured resources are efficiently developed and produced. This has been possible because there have been good resource management policies in those countries.

Also, the profits from gas revenues have been utilized in a sound manner that generates welfare, ensuring at the same time an equal distribution of wealth across the country. In this case, the presence of natural resources leads to further industrial development by building local content and capabilities.

Norway and Brazil provide some useful lessons in terms of best policies and practices to the Tanzanian gas industry. However, there is no single model that can be copied and pasted to the Tanzanian situation. The two aforementioned nations have very different cultural, political and economic characteristics.

For example, Norway has about 5 million people and well established service and industrial sectors. At the same time, Tanzania has about 45 million people with an underdeveloped economy.

The Norwegian government collects large shares of oil and gas revenue through taxation and other instruments. The earned net cash-flow from petroleum activities goes into a specific petroleum fund named the Government Pension Fund – Global.

In 2008, the Brazilian government announced major oil discoveries in pre-salt oil fields off the coast. The government immediately revisited its petroleum policy and act. In December of 2010, the Congress passed a new Petroleum Law to implement a production-sharing model for future developments of oil. The new law requires Petrobras-the state owned company - to be the sole operator of all exploitation fields, and the company will hold 30% stakes in any formed consortia.

Furthermore, the law established a Social Fund. According to the then-President of Brazil, Lula De Silva, this fund will be invested in programs and projects to fight poverty and develop education, culture, sports, public health, science and technology, the environment, and to mitigate and adapt to climate change.

Based on the brief analysis of these two countries, this article offers five policy recommendations which if adopted will make the Tanzanian gas resource a blessing to both the present and future generations.

First, develop home-based policies. There is consensus among scholars that the best policies are those designed to suit the cultural context of a particular society in order to meet their real demands.

In this context, Tanzania must use its local experts to design suitable policies to govern its gas industry. However, the use of local experts does not mean the nation cannot search for talented professionals around the world to add value to its domestic expertise; it rather opposes the old tendency of consulting foreigners for every policy.

Second, establish the “National Wealth Fund”: this will enable the fair distribution of the national endowment, and avoid disrupting the nation’s economy and those of neighboring countries.

The management of this fund should be performed by the Central Bank of Tanzania with directives from the Ministry of Finance. The fund must be used for priority sectors, particularly education, in order to develop the local expertise and build infrastructure and savings for future generations.

Third, develop a broad-based consultative policy making process: this should include the process of establishing policy, legal and institutional frameworks. All these need to be done in a transparent and accountable manner.

This approach will solve the otherwise common problem that exists in many developing countries, including Tanzania, whereby people in power accumulate all powers on their shoulders, thus ignoring the engagement of the majority.

Fourth, capacity building: there is a need to develop both the human and resource capacity at the local level in the country. But, to-date government has done relatively little in this area.

Fifth, prioritize gas for domestic use: as a country with a massive deforestation rate and extremely low electricity supply for both industrial and domestic use, a vigorous energy policy should prioritize the use of

 
     

Lusato Revocatus Kurwijila  : Wednesday, June 04, 2014    
  Dear all,

Does anyone know how much billions of dollars we expect from gas and oil? The per capita income of Tanzanians is currently below 600 dollars if I am not mistaken. By 2025 we hope to be a middle income country with 3000 $ per capita?. Can we expect a direct transfer of $5000 or 1000 per capita from gas revenues alone?. I am surprised that only 17% of Tanzanians thin that gas revenues should go to poverty reducing programmes!.

This is the same syndrome that sees our internal revenues funding mostly recurrent budget and leaving the development budget to be funded by Donner's!. Apart from funding Health and Education as some 43% of respondents suggest, programmes that help Tanzania's to help themselves should receive gas/oil revenues whether it is through subsidies or programme interventions, which are again, currently, Donner funded.

Cash hand-outs are only appropriate to the senior citizens' retirement and the less fortunate in society's welfare schemes. Otherwise, every able bodied adult citizen should earn their money through honest, hard work; with or without gas and oil.

Lusato R. Kurwijila

 
     

Mary Mohamed Rutenge  : Tuesday, June 03, 2014    
  The findings from Twaweza survey are very interesting. What clicked into my mind after reading it is whether or not transparency alone can solve the problem of (possible) mismanagement of the fund. And my mind went to EITI (extractive indusrties transparency initiative). Tanzania is also a member of EITI and Justice Mark Boman is its chair (if I am right). How many Tanzanians are following what EITI is reporting on income from gold? How many Tanzanians know that there were reports from EITI that revealed discrepancies between what the gold mining companies claimed as paid to the government and what government reported as received? And what action those who knew took?

My point is when there is no culture of holding public officials to account no matter how much information is available; corruption will remain. And that has also been identified by studies on the effectiveness of EITI. That is why I would rather propose the direct transfer. This is because when one receives say 5000 USD this year and next year the amount is reduced to say 1000 USD; he/she would start questioning what happened. The interest with what we get from oil and gas would increase when we have direct benefit from the same. By direct transfer the government would also be relieved of some of the service delivery duty as citizens could pay directly for the same.

 
     

Abdallah Hassan  : Tuesday, June 03, 2014    
  Rakesh Rajani, Head of Twaweza, said “If the people of Tanzania are to benefit from our large gas findings, we will need a robust, open and creative governance regime. A full transparent sovereign wealth fund is one essential part of the picture. But we also need to think about alternatives, such as direct transfers to the people. The things that matter most are deep transparency, listening and communication so as to build public confidence in how gas funds are used.”

3 June 2014, Dar es Salaam: Four out of five citizens believe that oil and gas will benefit them, their children and the country. At the same time, four out of ten (37%) believe that people in Government and the rich will benefit the most. More than half of the population (55%) want some of the revenue from oil and gas to be given directly to citizens in cash.

These findings were released by Twaweza in a research brief titled Managing natural resources: what do citizens say? The brief is based on data from Sauti za Wananchi, Africa’s first nationally representative mobile phone survey, that polls households across Mainland Tanzania. The research was conducted in collaboration with the World Bank.

The research highlights a preference for at least some of the revenue from oil and gas to be transferred directly to citizens. One out of five (20%) prefer most of the money being sent directly to citizens; 18% prefer an equal split of revenue between Government and citizens, while 17% prefer Government to receive the majority of the revenue and citizens to receive the balance.

However, a significant group of Tanzanians (43%) want all the revenue to go to the Government for expenditure on services such as education and health. When asked how they believe resource revenues can bring the most benefit to Tanzanians, half (46%) of citizens point to public spending on health and education and four out of ten suggest spending on infrastructure (20%) or anti-poverty programs (17%).

When it comes to natural resource management, the primary concern is to ensure that Tanzania does not fall victim to the resource curse. Experiences from around the world point to transparency about revenue and process as a key element in avoiding this curse, alongside public participation in decision-making around how revenues are managed.

Currently, although most Tanzanians (64%) are aware of oil and gas discoveries, Sauti za Wananchi found that two out of three (65%) wish to have more information. When information is lacking, rumour and speculation often fill the gap. Although current estimates say that large-scale exploitation of oil and gas will not happen for another seven to ten years, one out of three (36%) citizens believe that oil and gas companies are already making money from these discoveries. A further three out of 10 (28%) are unsure whether there is already income from the oil and gas reserves or not. These types of gaps between perception and reality, if unchecked, could give rise to serious discontent.

Another heated debate has been about the role of local and foreign companies in oil and gas exploitation. Many local business people have argued fiercely for preference to be given to Tanzanian companies. Half of Tanzanians (52%) want to take advantage of the expertise of foreign companies in the sector, but in partnership with local companies who should be the majority shareholders in joint ventures. One third (35%) believe that local companies should be given first priority to bid for concessions. In addition, six out of ten (61%) Tanzanians are comfortable with oil and gas being sold internationally to any country. Three out of ten (28%) think, however, that gas should be only be used inside the country and only one out of twenty (5%) think exports should be limited to other East African countries.

More information | Maelezo zaidi: www.twaweza.org

 
     

Deo Mutalemwa  : Monday, May 26, 2014    
  Dear All,

It is rewarding to read the excellent contributions being made on this interesting topic. I have urged ESRF to ensure that selected officials in MEM, particularly those involved in drafting the SWF proposals are accessing the current Taknet exchanges. Otherwise we run the risk of going through this useful discussion only to find out later that those involved in the official SWF process are rushing out with a paper that does not benefit from what the TAKNET contributors have suggested.

On another front, we still need to discuss the merits and demerits of limiting the SWF to oil and gas revenues. In my opinion, the dangers of trying to deal with all types of natural resources are that you would cover too many dissimilar types of revenues, regardless of their respective sizes , and thereby dissipate focus and weaken the quality of management needed. A compromise would be to start with oil and gas resources and expand coverage as other types of resources gain importance and merit.

Deo Mutalemwa

 
     

Deo Mutalemwa  : Monday, May 26, 2014    
  Dear All,

It is rewarding to read the excellent contributions being made on this interesting topic. I have urged ESRF to ensure that selected officials in MEM, particularly those involved in drafting the SWF proposals are accessing the current Taknet exchanges. Otherwise we run the risk of going through this useful discussion only to find out later that those involved in the official SWF process are rushing out with a paper that does not benefit from what the TAKNET contributors have suggested.

On another front, we still need to discuss the merits and demerits of limiting the SWF to oil and gas revenues. In my opinion, the dangers of trying to deal with all types of natural resources are that you would cover too many dissimilar types of revenues, regardless of their respective sizes , and thereby dissipate focus and weaken the quality of management needed. A compromise would be to start with oil and gas resources and expand coverage as other types of resources gain importance and merit.

Deo Mutalemwa

 
     

shijja kevin kuhumba  : Thursday, May 22, 2014    
  Hello Agape.

I concur with your opinions and views over Natural Resource Fund in Tanzania. your solutions seems to be a step forward to make this natural resources blessing to the millions of Tanzanians who are encountering abject poverty despite of being born in pretties of resources.

 
     

shijja kevin kuhumba  : Thursday, May 22, 2014    
  Hello Agape.

I concur with your opinions and views over Natural Resource Fund in Tanzania. your solutions seems to be a step forward to make this natural resources blessing to the millions of Tanzanians who are encountering abject poverty despite of being born in pretties of resources.

 
     

Agape Ishabakaki  : Thursday, May 22, 2014    
  This is an interesting topic for sure.

My participation on this topic is to understand the importances of Natural Resource fund in Tanzania are as follows:

Natural resource funds can help governments manage oil, gas and mineral revenues well. For example, they can be used to cover budget deficits when resource revenues decline, save finite revenues for future generations, orhelp alleviate the Dutch Disease. However they can also be sources of patronage or nepotism and can harm economic growth by undermining public financial management systems. In the over 40 countries with natural resource funds, fund transparency, accountability and appropriate operational rules are essential for transforming natural resource wealth into well-being.

From the above importances we have seen that through allowing funding of our natural resource we going to benefit alot and reduce almost the debts which are discouranging our economy and reduce poverty in Tanzania.

Best regards,

Agape

 
     

Thomas Lassourd  : Wednesday, May 21, 2014    
  Dear all,

This is a fascinating debate. Please allow me to chip in.

I am an economic analyst at the Revenue Watch Institute, based in New York. I am not Tanzanian and I do not know what exact model would suit Tanzania best. However, as many of you stress the need to look at other countries' experiences, I wanted to share with you that my organization has just set up a website with 18 case studies of different natural resource funds, a report and many policy papers on good and bad practices from these funds, which can be found here: http://www.revenuewatch.org/natural-resource-funds

Our overview paper can be found here: http://www.revenuewatch.org/sites/default/files/NRF_RWI_BP_Overview_EN_rev5.pdf

I hope you'll find this material useful as this debate progresses.

Please feel free to reach out if you have any follow-up questions.

Kind regards,

Thomas Lassourd Economic Analyst

tlassourd@revenuewatch.org

 
     

Mr. Maduka Kessy  : Tuesday, May 20, 2014    
  Very interesting topical issue and really timely. Back to the questions (1) The opportunity is that we take into leaf of lesson from experiences of other countries and adapt them in our own context. The pity experience of our own in managing revenues from other natural resources, mineral especially gold and diamond in particular has made the society not only aware but also willing to engage in positive debate with the view of it avoiding the negatives of the past.

(2) Should we establish a new institution to manage the fund. I think this is unnecessary and we should avoid. For, we have a number of institutions with ample experiences enough in "investing to invest" we can use them. Investing to invest means that the proceeds from natural resources are used to invest in areas to augment future capacity of the economy to continue growing even after the natural resources have been exhausted. In this regard, we are not short of organisations for the purpose. We have NDC, SIDO, TTU, TIB, TADB and the likes that can effectively serve the purpose. This will reduce not only the initial cost but also time for learning the business. Nevertheless, BOT may need to give guidance.

(3) Specific portion of the fund may need to be used in human resource developing, particularly in creating brainful people that will have to lead the transformation of the productive infrastructure of the economy.

 
     

Martanus Ochola Omoro  : Tuesday, May 20, 2014    
  You put it right Mary Rutege. What is happening in a resource-rich countries is mess! To Africa to have a resources is just like welcoming and live with the devil in your home. Remember we are like the wretched of the earth. Corrupt governments and multilateral organization won't let us enjoy the natural blessing the mother nature gave us!  
     

Saidi R Fundikira. MD  : Tuesday, May 20, 2014    
  Hello Moderators,

I need to know why it is called a Sovereign Wealth Fund, and why it has come up now obviously in relation to oil and gas. As someone has observed these are not the only natural resources from Tanzania that have been exploited by big industry, so why oil and gas, and why now? I am suspicious of the fact that this is being touted as the fund that will take care of future generations..are not all long term investments as for example in education or railways doing exactly this? I am not familiar with high finance, hence whenever keepers of the public purse start using complex jargon i get very very worried that another Richmond is in the making, if you pardon me. Please alllay my fears! Many thanks

Saidi R Fundikira, Dsm

 
     

Godwin Martin Nyelo  : Tuesday, May 20, 2014    
  Dear friends,

First and foremost, i wish to inform you of the various aspects on natural resources management, in which the SWF is one avenue that can be followed.

The second aspect is to consider all equitable distribution of wealth between the present and future generation, without one generation benefitting more at the expense of the other.

Lastly, there is a new 'fad' called the Natural Resource Charter' in which Tanzania has also subscribed to the principles of the Charter. One can search the internet and get enough info on the Charter.

SWF is one area where the charter gives some recommendations. I happen to be among the Panel of Experts for the Tanzanian Natural Resource Charter.

Therefore, I would urge whoever needs to contribute to refer to the Natural Resource Charter as source of valuable info for the proposed SWF, and any other aspects of the management of natural resources.

Thanking you all.

Sent from my iPad

 
     

Hebron Mwakalinga  : Tuesday, May 20, 2014    
  The contributions are quite enlightening, I also see more challenges of building and or managing SWFs, I concur with those who noted that Tanzania should learn more from Nigeria and other developing countries instead of thinking it can model its SWF on Norway. One important observation which I also share is that the integrity of governance institutions have a strong bearing on the effectiveness of SWFs. So how can we insulate the SWF from our deep rooted systemic weaknesses in governance? By the way SWF can be created from many sources of surpluses not necessarily oil and or gas, see how we (Tanzanians) are decimating our wild life that brings in millions of dollars which are just as important as those from gas.

A subsequent indeed consequent question is whether we have a deserving political will and therefore are creating the right environment for effective SWF? In many countries SWF have targeted (transparently) publicly ratified investment priorities, I hope Tanzania too has identified its priorities. I would expect a clear link between the SWF, MKUKUTA II and Tanzania Development Vision 2025. Not BRN because it is a medium-term plan. One area that we have debated quite often and all analyses the world over confirm, is correlation between education and economic growth and development, education is the critical make or break factor in sustainably transforming the country.

Proceeds of a SWF should be directed to revamp and build the primary, secondary and college education on long term programmes – we phased out PEDP and SEDP now we are with BRN. It is possible say to ring fence 50% of the funds proceeds to education sector targeting to increase investment in literacy, science and maths. It is possible to lengthen the period that pupils spend at schools, improve laboratories, teaching aids, retraining of teachers, etc. Targeting human resource development is the ultimate goal of many SWFs.

It is important to ring-fence SWF end use to specific areas from the outset because in most poor it can be susceptible to political whims of the day.

Hebron Mwakalinga

Facilitating Markets for Development

Urafiki Flats. Block EC. 2nd Floor. Morogoro Road..

P.O.Box 78496. Dar es Salaam.

Tel. + 255 786 171 000 or +255 752 171 000

 
     

Camillus D. N. Kassala  : Thursday, May 15, 2014    
  Dear ALL!

Let me join the discussion with some initial questions:

1. What mistakes have we learned so far in running the various funds which are afloat now? How can the experience help us to delineate the 'methodology' of running SWF?

2. How much financial discipline do we have in our festival/celebratory culture of pompous and sumptuous spending? What happens if you translate this at the national level?

3. Some people have said 'the bigger the money, the bigger the corruption'. What mechanisms - educational, legal, religious, ethical, etc. - are we thinking to put in place in order to contain the now already wetting appetite of 'big corrupt potatoes'?

4. The developing craze for real estate development (sky-rocketing plazas and towers!) is growing at the expense of the common majority's housing basic rights. How can we resist spending the money for speculating investments rather than for the essential human services (housing, education, sanitation, hospitals, water, food security)?

5. Why hasn't the government so far published a document IN KISWAHILI for everybody to read and participate fully in the debate? Shall we go through the same zigzag journey as that of the New Katiba?

6. How much thought are we giving to Mwalimu Nyerere's wisdom that 'Fedha siyo msingi wa maedneleo'?

CDNKassala

 
     

Felichesmi Lyakurwa  : Thursday, May 15, 2014    
  Dear interested partisans

In this very national and international subject pertaining to resource exploration, use and proper management of the same. Though I am not an expert in this field but I am currently doing a research on implementation of industrial ecology principles in which strategies for resource optimization in production systems are addressed.

Indeed I join hand with previous speakers for their advice that we should learn from both countries which succeeded to implement SWF together with those ones which do not succeed as pointed our earlier. This could be carried out by an extensive study of the frameworks or models in place so that we can introduce some variables that are relevant to our situation (I mean Tanzania).Based on the developed framework, much improvements can be done in the future in a more sustainable way.

Thank you very much.

 
     

Felichesmi Lyakurwa  : Thursday, May 15, 2014    
  Dear interested partisans in this very national and international subject pertaining to resource exploration, use and proper management of the same. Though I am not an expert in this field but I am currently doing a research on implementation of industrial ecology principles in which strategies for resource optimization in production systems are addressed. Indeed I join hand with previous speakers for their advice that we should learn from both countries which succeeded to implement SWF together with those ones which do not succeed as pointed our earlier. This could be carried out by an extensive study of the frameworks or models in place so that we can introduce some variables that are relevant to our situation (I mean Tanzania).Based on the developed framework, much improvements can be done in the future in a more sustainable way. Thank you very much.  
     

Sailas Lowokelo  : Wednesday, May 14, 2014    
  Dear Taknet,

Hope it is well with you all.

Proper planning and good implementation of the activities gotten from planning will result in to better approach towards the best result in terms of cash from oil revenues for a bit current generation and most for the future. The state has a body Tanzania Petroleum Development Corporation, TPDC where as the role of plus other many things TPDC is set out in theTanzania Petroleum Corporation as to to develop and produce oil and gas, to conduct research relating to and develop the oil and gas industry in Tanzania and to advise the government on petroleum production data.

In 26th October 2013 our President launched the 4th Tanzania Deep Offshore and North Lake Tanganyika Licensing Round.

He told the local businessmen that that they can’t afford costs of gas and oil exploration, He said that already licensed foreign companies spend approximately $ 100 million (Sh. 160 bn/-) to explore gas and oil potential reserves from a single gas bloc sitting in a water depth of about 2 km by using highly sophisticated technology and modern equipment which an ordinary local firm cannot afford to purchase. What I want to cite here is how expensive is for exploration of oil and gas. The state or other businessmen and women has to make proper investment bearing on mind that what is done is deeply researched so that in future we wont waste revenues.

Sailas Lowokelo DUWASA P.O.BOX 431 Dodoma - TANZANIA

 
     

Deo Mutalemwa  : Tuesday, May 13, 2014    
  Hi TAKNET<

The idea of distribution of benefits raised by Rutenge is also very interesting. If I am not wrong, this is what  was attempted by Col. Ghadafi of Libya. The caveat is that it requires a society with thrift mentality, and not a spend free mentality.

Those who have done some work on Cash transfer program  pioneered by TASAF have some information with which to chip in here.

Deo Mutalemwa

Moderator

 
     

Frank Malulu  : Tuesday, May 13, 2014    
  Ladies and Gentlemen!

Honoured indeed to have a say on this prosperous issue to my country!

With strong note this fund to achieve its intended goal the government Must as soon as possible review Natural resources Legislation and policy.Since Legislation authorized any undertakings in so far we will be in a position to give what it take to make Tanzania vision achievable.

Morever SWF requires a well integrated governance structure and investment strategies then we need resoureces, in terms of Human Capital, frameworks, leadership support.Good governance and transparency in general need to be strengthened in all sectors so that citizens and and the Public might see and feel the multiplier effects of this fund.For the present and future generations.

For the matter of diligence its time now the government Must also see the risk associated with relying on Natural resources economy to drive their economical development as we experienced in 2011 during the economic crunch how badly affected the prices of Oil,Minerals too then we need now to learn from other successful countries in Management of natural resources like Botswana, Norway etc

Thank you

FRANK P.MALULU

TANZANIA PUBLIC SERVICE COLLEGE

 
     

Deo Mutalemwa  : Tuesday, May 13, 2014    
  Dear Mr.Lugendo,

The idea of including other natural resources apart from gas (and oil) in the SWF is very enticing but it risks expanding the subject into an inwieldy dimension, with resources that have different types of stakeholders, have different markets and revenue perspectives,etc. The more the subject becomes unwieldy, the more it opens to opportunistic characters. LETS CONTINUE THINKING ABOUT THIS.

Deo Mutalemwa

 
     

Deo Mutalemwa  : Tuesday, May 13, 2014    
  Thanks Dr. Songo. You have opened the discussion by being the first respondent.

Deo Mutalemwa

 
     

Deo Mutalemwa  : Tuesday, May 13, 2014    
  Thanks Dr. Songo. You have opened the discussion by being the first respondent.

Deo Mutalemwa

 
     

Monica Stender  : Tuesday, May 13, 2014    
  In my understanding, when a Fund is created, objectives, regulation and supervision must be designed before publishing it, this will avoid any further problem of resources use and paying back. In the state of arts of Tanzania development, I think that public benefit must be prioritized. Benefits that contribute to increase the future hope and way of life of citizens. Exploitation of natural resources must return to population as new perspectives of life.

Mónica E. Stender, PhD, MBA

STENDER ASESORES, S.L.U.

Av. Madrid, 102 Entº 3ª

08028 - Barcelona - España

Tel: (34) 610 792450 Fax: (34) 93 229 6934

mstender@stender.biz www.stender.biz

Skype: monicastender

 
     

Mary Mohamed Rutenge  : Tuesday, May 13, 2014    
  Hi everyone.

This SWF is interesting. Yes I agree that we should learn from Norway and other success stories. But again we should also learn from those who failed like Nigeria. Because we know Norway is among few countries who escaped resource curse; and the reason is among others the fact that they have good institutional set up. I am not quite sure whether we have what it takes to operate such funds.

I came across one article few days a go (am currently busy, will search for it and come back again with details) that argues that the best way to manage natural resource income is to directly distribute it to individual citizens; it was an eye opener to me as they argued that centrally managed funds reinforce disinterest of citizens with their government practices and does not build accountability as the larger portion of government money is coming from very few; multinationals.

That is what is happening in Nigeria; no representation without taxation. Ordinary citizens don't pay tax to run government activities. Their government uses the money as it wishes and citizens do nothing since the money comes from Shell. Since not all of them are negatively impacted (except Ogoni) they don't feel they have right or motivation to hold their government to account.

But again how much money are we talking about here...because redistribution would also depend on the size of the cake......

The point I want to raise is, we need to learn from both success stories and failure and also explore other alternatives that fits best our situation.

 
     

Godfrey Tahona Walalaze  : Tuesday, May 13, 2014    
  This is such a good perspective, oil fund for development.

But allow me to just raise a concern. without proper supervision and strict regulations on how to borrow from the fund, the reporting and the clear identified goals of which the fund will be used for, we might end up making another leak for the leaders to borrow without paying back-- case of social security funds.

We are at a right track if people are empowered more to understand their role and demand accountability. What happened in Norway was a determination from leaders and few who were in position to make a choice; luckily they made a right choice for public benefit, we still have leaders who are making wrong decision-- that of individual over public benefit. We are at a point where we may be deciding for a bright future or a dull one.

It is not for politicians alone, but for the technocrats to come up with clear vision that will lead a way to be echoed by politicians in making policy. We at the same time should not forget as mentioned by one Prudence, the fact that we have more of natural resources that need make the tangible impact to the life of so many desperate Tanzanians -- gold, uranium, big forests, fishing industry and nickel to mention a few. If these are not in position to contribute positively, I doubt if we are not talking of people good in making policy but with their intentions looking in the opposite direction to the made policies.

Thanks

 
     

Monica Stender  : Tuesday, May 13, 2014    
  Dear Sirs,

I agree with Mr. Songo.

The great opportunity that petroleum and gas discovering represents to Tanzania must be transformed in development to its population. This fund must be used in education, basic to university levels, in a way to let aside the apology of lack of local capacity. Now Tanzania has funds to invest in its citizens giving them alternatives for the future. This will be the Tanzania development path, other decision will give the foreign companies the profit that never will be transmitted to locals.

Best Regards

Mónica E. Stender, Ph D, MBA

STENDER ASESORES, S.L.U.

Av. Madrid, 102 Entº 3ª

08028 - Barcelona - España

Tel: (34) 610 792450 Fax: (34) 93 229 6934

mstender@stender.biz www.stender.biz

Skype: monicastender

 
     

Yahya Ipuge  : Tuesday, May 13, 2014    
  I am just an old doctor but let me give my ten cent worth contribution.

This is a very good idea and timely. A good example is Norway. Before discuring oil...some 70 years ago..Norway was poor (in European terms and maybe not like us). However after discovering oil, they created an oil fund in which most of the oil income are put. They spend only a small amount e.g 10% for specific spending areas......In this case, the future generation is assured to benefit on the oil. Norway is involved in Tanzania energy sector, we should listen to them. They have helped one or two other countries to develop the same.

Ipuge

___________________________________

Dr. Yahya A. Ipuge

Wazo Hill, Tegeta

PO Box 66764, Dar es Salaam

+255 754 000 476, +255 783 000 476

 
     

PRUDENCE LUGENDO  : Tuesday, May 13, 2014    
  Dear all

Establishment of SWF for revenue coming from gas is good idea. But we should consider also including other funds coming from other natural resources like gold.

Second are the issue of transparency and management of the fund. This raises questions like; what portion of revenue can be spent/saved my be over a 1 year or 5 year from the fund; when the Government can withdraw from the fund and where revenue can be invested in foreign or domestic assets.

These questions should be addressed properly by policy makers.

Regards Prudence

 
     

Masejo Songo  : Monday, May 12, 2014    
  Tanzania Sovereign Wealth Funds

Introduction

Sovereign wealth funds (SWFs) have been around since the 1950s, but it is only in the last several years that they have become a household name — at least in some households. Starting out modestly as either central banks or government investment offices, today these institutions are among the largest and most powerful investors in the world. Collectively they manage approximately $3 trillion across global markets, a number that is widely expected to climb throughout the next decade.

President Kikwete of Tanzania has said that the government’s intention was to ensure natural gas revenues were used to speed up development. “Since 1954 some 61 wells have been drilled. Out of those, natural gas was found in 22 wells … We haven”t been lucky yet to find oil but we have discovered gas in both onshore and offshore areas,” he said. The recoverable gas reserves stood at 28.9 trillion cubic feet , President Kikwete added. “Offshore oil and gas exploration started in 2004 with just one company but we now have 18 companies. Gas exploration has escalated since the first gas discovery in 2010 … I believe that a lot more gas will be discovered,” he said

Opportunities

Tanzania could prime the pump and pour money into the pockets of the population without worrying too much about how it is spent. This approach will add benefit of creating a very positive economic environment and perhaps co-opting political opposition, but it does little for long-term development prospects. It could devote the bulk of our resources to development by putting funds into both physical infrastructure and human resources. This would presumably maximize our return on investment over time, but there would be substantial lags and uncertainties, and in the short term, the benefits would not be very visible.

Good news is that Tanzania’s plan to create a gas sovereign wealth Fund (SWF) to finance development projects in future has been praised. It has said that with revenues management and investments, it was important for the government to start entertaining the idea of a sovereign fund. For instance, according to President Jakaya Kikwete “the government is studying various models for managing revenues from gas production, adding that they were focusing on those with sovereign wealth funds”.

Analysts ensures us that sovereign fund allows a country to save money for future generations; stabilises inflows of cash into the economy to ensure macro-economic stability; while also ensuring balanced national economic development. According to Dr Lenny Kasoga (University of Dar es Salaam) “ the country can use profits from its state enterprises to set up its first sovereign wealth fund that will reinvest the money to advance the country’s commercial interests”

Challenges

The lack of transparency also applies to corporate governance and, again, has implications both domestically and internationally. Not only do these entities not always have a well-defined legal status, public audit trail or other attributes usually expected of a public institution, they have not always exercised their responsibilities vigorously as shareholders and owners of the businesses they invest in.

Part of the problem lies in finding qualified local staff; yet, in the University of Petroleum and Minerals, Why should Tanzania not seek to create centers of excellence where bright young Tanzanian could be trained to work in a sophisticated investment environment, where they are paid for their results and retain some of the fees?

In practice, of course, regional decision makers, policymakers have satisfied the other needs of the state to a subservient role in which they have relatively little say in terms of policy but, of course, a great deal of say regarding how these sums are invested. While this may insulate them from the politics of the decision-making process, it removes them from participating in defining the broad terms of their investment mandates and usually forces them to focus on foreign investments, ignoring the possibility of adding value in terms of national economic goals.

Conclusion and recommendation

Tanzania government has to create a fine academic institution capable of turning out respected engineers and technicians. In addition to the actual management of the funds, there should be a numerous secondary support functions revolving around fund management — custodial services, fund accounting and administration, and consulting, to name a few — that could be helpful in ameliorating the region's growing unemployment problem.

References

1. Abu Dhabi Investment Authority, Annual Review 2009, p. 3.

2. F. Gregory Gause III, "'Rentier Exceptionalism': Oil and Political Mobilization in Saudi Arabia" (unpublished essay, Princeton University, November 17, 2009).

3. Garbis Iradlan, "GCC Regional Overview." Institute of International Finance, September 28, 2009, p. 5.

4. IRRC Institute RiskMetrics, "An Analysis of Proxy Voting and Engagement Policies and the Practices of Sovereign Wealth Funds," October 2009, p. 42.

5. Sven Behrendt, Chapter 1 in Managing Arab Sovereign Wealth in Turbulent Times — and Beyond, Sven Behrendt and Bassma Kodmai, eds., Carnegie Papers, April 2009, p. 4.

6. Steffen Kern, "Sovereign Wealth Funds." Deutsche Bank, July 15, 2009, p. 5.

7. The GCC in 2020," The Economist Intelligence Unit, September 2009, p. 2.

Submitted by Masejo Nyabigeso Songo

 
     

Abdallah Hassan  : Monday, May 12, 2014    
  Dear TAKNET members,

We once again we invite you to the current discussion on Sovereign wealth funds.

Sovereign wealth funds have gained prominence in the natural resource management approaches across the world. They are state owned entities that can manage the national savings for the purposes of investment. Many of the most important sovereign-wealth funds originate from oil revenues and their aim is to guarantee that future generations also benefit from the present large oil revenues.

Following discovery of large natural gas resources in Tanzania, the Government is in the process of establishing a national sovereign wealth fund relative to enable future generations to accrue deserving benefits.

Indeed ample savings of today from natural gas proceeds will benefit future generations because they imply thrifty or moderate consumption by the current generation so as to afford substantial investments for the sake of coming generations.

We invite TAKNET members to contribute to this discussion. To begin with we request you to respond to the below questions;

1. What opportunities and challenges do you foresee towards establishment of the national sovereign wealth fund, and what should be done to move forward successfully?

2. What do you think the Government should dare not miss out relative to the terms and conditions, as well as goals and objectives, of the national sovereign wealth fund?

3. Should such wealth fund also be extended to cover other lucrative mineral resources?

This topic is moderated by Mr. Deo Mutalemwa, Mr. Ian Shanghvi and Mr. Abdallah K. Hassan.

 
     

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