Speech

Tanzania rising

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Speech by UK Secretary of State, International Development, Justine Greening.

Introduction

I’m delighted to be here in Tanzania addressing this audience, and I would like to start by thanking Prime Minister Pinda for bringing us all together today, and the Capital Markets and Securities Authority for co-hosting this event.

This is my second visit here as the UK’s Secretary of State for International Development.

On my last visit, five months ago, I saw a country that can, and will, graduate from aid and deliver prosperity for its people.

Thanks to a stable government, growth levels of nearly 7% this last decade, exports of goods and services tripling, and the recent discoveries of off-shore gas: Tanzania is on the verge of an economic transformation.

The challenge is to keep that momentum going, to accelerate growth even faster and to ensure that everyone reaps the benefits of that growth.

The UK is determined to help Tanzania to realise its enormous potential and in doing so lift everyone out of poverty. The key to this will undoubtedly be investment, trade and jobs.

This isn’t news to anyone here. We know it’s jobs that help people lift themselves out of poverty for good. You need investment and trade for economic growth and jobs. And you need a thriving private sector, alongside a proper tax base, to support the health services, education system and infrastructure that everyone relies on.

This is really the lesson of the last 30 years – it is growth and jobs that defeat poverty, aid by itself is not enough. Which is why since becoming Secretary of State for International Development, I have ramped up my Department’s, DFID’s, focus on driving global economic development, making it a top priority to bring down the barriers that stand in the way of businesses and entrepreneurs creating wealth across the developing world. And in our country programmes, challenging ourselves to do more on the ground directly working with government and the private sector.

Tanzania is very much one of our flagship countries when it comes to this new approach, I believe things that work here can be replicated across Africa and other developing nations.

Today, and over the course of this visit, I will be announcing new DFID economic development initiatives that will see us work collaboratively with the Tanzanian Government, and the private sector, to plot a path for accelerated growth and jobs.

Mutual prosperity

This is in Tanzania’s interests – and it’s also Britain’s best interests. We share this common ground. As Tanzania develops, our relationship will increasingly move from aid to trade.

The UK is already the leading investor in Tanzania and there are 35 FTSE companies operating here.

But I know both our countries want to strengthen those commercial links even further and I’m delighted today, to be formally launching a new economic partnership between Tanzania and the UK.

Tanzania is one of five African countries, along with Ghana, Mozambique, Cote d’Ivorie and Angola, to be forming High Level Prosperity Partnerships with the UK.

These partnerships cover sectors where UK expertise matches the partner country’s needs. In Tanzania for example we’re hoping to double the number of UK companies doing business in the renewable energy and agriculture sectors by 2015.

I know Prime Minister Pinda and the Tanzania Government are determined to make a success of this high level partnership - and so are we. Across the UK government, DFID working with our Foreign Office and UKTI, we will be focusing resources on strengthening economic cooperation between our two countries.

And DFID will be stepping up work to improve the investment and trade environment for domestic and international investors – as evidenced by my second visit here in six months.

Business Delegation

This visit is the first time DFID is leading a high-level business delegation to Africa, reflecting our new market-making approach to development.

I’m delighted to be joined here by 18 companies, large and small, from Britain and around the world and all active in sectors key to Tanzania’s development, agriculture, capital markets, transport and logistics, renewable energy and construction.

Some of these companies have already won contracts here. For example Asco, an oil and gas company based in Aberdeen, has won a major contract to provide Supply Base services to BG in Tanzania. This will be operated out of the port of Mtwara and will employ over 100 local people.

Some businesses joining me are interested in expanding their investments in Tanzania and a number who are exploring opportunities for the first time.

As a British Minister I’m pleased that so many UK companies have come with me on this trip. I want to see far more British businesses joining the development push and working collaboratively with DFID.

I should be absolutely clear that this is not about bringing back tied aid. The onus will continue to be on British companies to show Tanzania, and other developing countries, why their offer is the best one – and I believe they are well placed to do this. The UK has been amongst the international leaders in corporate governance, and I know the Dar Stock Exchange is keen to learn from other corporate governance approaches, and disseminate to companies already listed, or planning to list.

At the same time DFID is committed to working with the Tanzanian Government, and with Tanzanian, British and international businesses, to help overcome the barriers that can stop businesses from investing, growing and creating jobs: whether that’s a difficult business environment, information gaps that hold back investment decisions or financial challenges.

Co-investment models

There are a number of ways we can do this. Key areas of partnership include the G8 land and tax initiatives which will see us work hand in hand with the Government of Tanzania. The G8 land partnership will put in place a Land Tenure Unit in the Ministry of Lands which will collect and publish data relating to current and future land deals, and develop a road map for land reform by June 2014. The G8 tax partnership will lead to a more efficient, effective, and fair Tanzania tax administration, and bring experts from the UK’s HMRC to advise on customs modernisation. The Government will also see more UK support to Trade Mark East Africa, which is reducing the barriers to trade.

But often the last, most difficult barrier to overcome will be getting the lifeblood of enterprise and entrepreneurship flowing – finance.

On my last visit here I spoke to businesses, including Agrica in Kilombero and Unilever, about how DFID could help collaborate with the private sector to unlock financing projects with clear development outcomes.

The clear ask from them was for DFID to not just look at traditional grants, but to invest in commercial partnerships on sensible business ventures that would also benefit thousands of farmers, employees, and consumers.

In this way DFID would share some of the risk that would otherwise stop investment from taking place - and we would also share the reward if the venture was a success.

Today I’m announcing that DFID is going to trial this new approach of working with the private sector here in Tanzania.

We’ve selected four local projects, which, following due diligence, will likely see us co invest with commercial and not-for-profit partners using returnable loans and equity, rather than traditional aid grants.

The first of these projects will see us co invest in a tea project, through a broader partnership with Unilever, and UK based philanthropic organisations, the Wood Family Trust, and the Gatsby Foundation.

This project is part of the Tanzania Southern Agricultural Growth Corridor of Tanzania programme. SAGCOT, as most of you will know is an innovative public-private partnership, driven by the Government of Tanzania, that aims to catalyse $2.1billion of private investment over twenty years and triple the area’s agricultural input.

DFID is already investing £36 million in the SAGCOT initiative. We’ve now earmarked up to a further £7.5 million to support this specific project, which aims to boost the incomes of more than 3,600 potential tea farmers spread throughout 27 villages. Importantly the funding will be returnable for subsequent investments with the Wood Family Trust that will generate development outcomes.

We are also set to co invest in three further projects, through the Africa Agricultural Development Company, AgDevCo, which aims to raise rural incomes and increase food security, and also reinvests all profit generated into further agricultural development in Africa.

Through AgDevCo, DFID will co invest in Equity for Africa, a UK based organisation that provides leasing finance to SMEs in the agriculture sector. This funding will allow small businesses to scale up, initially in the Mbeya region and in due course throughout Tanzania.

We’re also looking to finance Tanzanian Tea Packers Ltd who want to develop a site as a £ 1.5MW hydro power plant to directly benefit 430 smallholder households working for the Wakulima Tea Company, and to help raise the incomes of 15,000 further smallholder farmers supplying the tea company. The new plant will end the existing reliance on very expensive diesel generators, and will provide excess power to the TANESCO grid.

Finally we’re planning to co-finance with Kilombero Plantations, East Africa’s leading rice producer, to help finance their rice husk gasification plant – a potential first for Africa. This will allow the business to increase its land under irrigation and therefore its yields. KPL already works with over 5000 smallholder outgrowers and plans to further expand this These are all important projects for supporting Tanzania’s agriculture sector and ultimately feeding millions of Tanzanians. Furthermore we estimate that over 80% of the proposed funding will be returned to AgDevCo by 2021 and used for reinvestment in further agricultural projects.

DFID will be monitoring the progress of these projects and watching their success.

If we’re sharing the risk of launching or expanding a business venture, it’s right that we should also share the rewards. And by adopting new methods of financing, we will be able to redeploy our aid money many times over, multiplying the development impact.

I hope this innovative, self-sustaining, job-creating investment, which generates a return that can itself be reinvested, can be a major part of how DFID works in the future and complement the investment that CDC already undertakes.

Capital markets

These co investment ventures could be the short-term future for helping businesses to grow and create more jobs. However the long-term future for financing business growth at scale needs the development of capital markets.

It’s capital markets that mobilise long-term finance for the public and private sectors. They also drive improvement in corporate, environmental, social and governance standards. And they give people, through owning shares, a stake in economic growth.

Tanzania’s capital market is at an early stage, with seventeen companies listed on the Dar es Salaam Stock Exchange, but we’re seeing rapid expansion.

And it came across clearly from my discussions with CSMA, Dar Stock Exchange and others on my previous visit, that this capital market, when properly developed has the potential to transform the Tanzanian economy.

I believe the UK, which is a global centre of financial expertise, can play a key role in working in partnership to develop Tanzania and Africa’s capital markets.

We have already established strong links with Africa. There are 103 sub-Saharan companies listed on London Stock Exchange markets with a market capitalisation of over $70 billion. Since 2007, African companies have raised over $9.9 billion on LSE markets from international investors. But true success lies in having a vibrant capital market right here in Tanzania, in Africa, to meet the rapidly growing demand for investment.

And DFID, together with other development partners, is funding financial sector development organisations in Tanzania and across the region.

But we can do more to ensure African capital markets share in UK expertise.

I am delighted to announce today that DFID will form a strategic partnership with the London Stock Exchange Group (LSEG) to support capital market development in East Africa.

As a first step, we will look at addressing the very real skills shortages that our country partners have identified as a critical constraint on market growth. We will be providing bespoke training for financial sector professionals, regulators and government officials, in partnership with the world-class LSEG Academy. Our experience, your entrepreneurship should make for a powerful combination.

Of course we’re not only concerned with financing big business in Tanzania. It is often smaller enterprises that hold the key to creating more jobs in communities across this country and more prosperous economies. But 69% of smaller-sized Tanzanian businesses have no access to finance, and only one in six Tanzanian adults has access to formal financial services.

The Enterprise Growth Market, that Prime Minister Pinda will shortly be launching, is an incredibly exciting initiative for providing much needed finance for smaller growing companies. The UK, alongside some of Tanzania’s other development partners have supported this initiative through the Financial Sector Deepening Trust of Tanzania.

Finally, I’m also announcing today that DFID will invest £4.4million in Women’s World Banking, a global network of financial service providers dedicated to achieving women’s economic empowerment by increasing their access to financial services, assets and resources.

And this investment, in a partnership with three commercial banks in the region including NMB in Tanzania, will provide over one million women across Africa with access to financial services.

Investing in women in this way is hugely powerful - we know that when a woman generates her own income she re-invests 90% of it in her family and community. Women are an engine of growth and no country can fully develop unless women are economically empowered as well as men.

Conclusion: Improving the business environment

Today I’ve outlined a number of new projects that will see the United Kingdom government and my Department, DFID, work with government, with business to help get finance flowing in Tanzania, giving existing and emerging businesses the economic lift-off they need to grow. Of course finance is one of the ingredients for success. There are more. If there isn’t the right kind of climate for trade and investment then businesses won’t prosper.

Over the next two days I will hope to hear more from businesses on the ground about how the UK can further support the Tanzanian Government to move up the Doing Business ranking – I know there are particular concerns around the complexity of the tax regime and availability of power and electricity.

Improving the business environment will be a key part of our Prosperity Partnership, and over the course of this visit I will be announcing measures to boost infrastructure in Tanzania and speed up trade across the region.

The World Trade Organisation Ministerial Conference next month will be a very important moment for Tanzania. The UK is strongly supporting an ambitious outcome including an agreement on Trade Facilitation to cut unnecessary bureaucracy at all borders, which is costing business and ultimately the public.

This will benefit all those who trade, especially SMEs and firms in developing countries who currently have the least efficient customs procedures.

If agreed, we estimate this deal would deliver $100billion each year to the global economy – with $10bn of this going to Sub-Saharan Africa. So let’s all do everything possible to shout about the benefits of this deal and make sure we get the right outcome next month. 100% of a 60% perfect deal is better than a failed outcome which gives no benefits to anyone.

The UK Government will work with Tanzania, building on our new prosperity partnership, developing our commercial links and pushing down the remaining barriers to growth.

There is no doubt in my mind that with the right support and the political will, Tanzania can complete its success story to a middle income country, a major market and economy of the future, and in doing so, improving the day to day lives and prospects of millions of Tanzanians and generations to come.