african development fund
TRANSCRIPT
AFRICAN DEVELOPMENT FUND
INSTITUTIONAL SUPPORT PROJECT FOR DOMESTIC
RESOURCES MOBILIZATION AND NATURAL RESOURCES
GOVERNANCE
UNITED REPUBLIC OF TANZANIA
ECGF/ECNR DEPARTMENTS
March 2017
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TABLE OF CONTENTS
Acronyms and Abbreviations
Currency Equivalents, Fiscal Year, Weights and Measures
Loan Information
Project Executive Summary
Results-based Logical Framework
Project Time-frame
I - PROJECT STRATEGIC THRUST AND RATIONALE
1.1 Project Linkages with Country Strategy and Objectives
1.2 Rationale for Bank’s Involvement
1.3 Development Partners Coordination
II – PROJECT DESCRIPTION
2.1 Project Components
2.2 Technical Solution retained and other alternatives explored
2.3 Project Type
2.4 Project Cost and Financing Arrangements
2.5 Project’s Target Area and Population: Beneficiaries
2.6 Participatory Process for Project Identification, Design and Implementation
2.7 Bank Group Experience and Lessons reflected in Project Design
2.8 Project’s Key Performance Indicators
III – PROJECT FEASIBILITY AND IMPACTS
3.1 Economic and Financial Performance
3.2 Environmental and Social Impacts
IV – IMPLEMENTATION
4.1 Implementation Arrangements
4.2 Financial Management, Disbursement and Audit
4.3 Procurement Arrangement
4.4 Monitoring and Evaluation
4.5 Governance
4.6 Sustainability
4.7 Risk Management
4.8 Knowledge- building
V – LEGAL INSTRUMENTS AND AUTHORITY
5.1 Legal Instruments
5.2. Conditions Associated with Bank’s Intervention
5.3 Compliance with Bank Policies
VI – RECOMMENDATION
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LIST OF TABLES
Table 2.1 Project Components
Table 2.2 Project alternatives considered and reasons for rejection
Table 2.3 Project Cost Estimates by Component
Table 2.4 Sources of Financing
Table 2.5 Project Cost by Category of Expenditure
Table 2.6 Expenditure Schedule by year
Table 2.7 Lessons learned from Previous Operations and Other Analytical Reports
Table 4.1 Project Implementation Schedule
Table 4.2 Risks and Mitigation Measures
Appendices
Appendix I. Tanzania Selected Socio-Economic Indicators
Appendix II. Bank Group Portfolio in Tanzania
Appendix III. Donor Coordination Matrix for Tanzania
Appendix IV. ANRC’s Baseline study on local content in Tanzania
Appendix V. Tanzania Revenue Authority - DPs Technical Assistances and Target Areas
Appendix VI. Analytical Work Underpinnings
Appendix VII. Developments in the gas sector in Tanzania
Appendix VIII. Map of Tanzania
i
Acronyms and Abbreviations
AfDB African Development Bank Group MEM Ministry of Energy and Minerals
ADF African Development Fund MoF Ministry of Finance and Planning
ANRC
BRN
African Natural Resources Centre
Big Results Now
MoU Memorandum of Understanding
CAG Controller & Auditor General MTFF Medium-term Fiscal Framework
CCM Chama Cha Mapidunzi MTR Mid-Term Review
CIDA Canadian International Development Agency NDP National Development Plan
CPI Corruption Perception Index NPS National Panel Survey
CPIA Country Policy and Institutional Assessment
CPPR Country Portfolio Performance Review PA&OB Public Authorities and Other Bodies
CSP Country Strategy Paper PAF Performance Assessment Framework
DfID Department for International Development PBA Performance Based Allocation
DPs Development Partners PBO Program Based Operation
EARC East Africa Regional Resource Centre PE Public enterprises
EIPC Energy Infrastructure Procurement Coordinator PCR Project Completion Report
EPP Emergency Power Plants PEFA Public Expenditure and Financial
Accountability
eSWS
EU
Electronic Single Window System
European Union
PFM Public Financial Management
EWURA Energy and Water Utilities
Regulatory Authority
PFMRP Public Financial Management Reform
programme
FDI Foreign Direct Investment PPP Public private Partnerships
FM Financial Management PPRA Public Procurement Regulatory Authority
FYDP Five Year Development Plan PRSP Poverty Reduction Strategy Paper
GBS General Budget Support PSP Private Sector Participation
GCI Global Competitiveness Index REA Rural Energy Agency
GDP Gross Domestic Product RMC Regional Member Countries
GECSP Governance and Economic
Competitiveness Support Programme
SIDA Swedish International Development
Cooperation Agency
GOT Government of Tanzania SOE State-Owned Enterprises
IFMIS Integrated Public Financial Management
Information System
STAMICO State Mining Corporation
IPP Independent Power Producers TANCIS
TANESCO
Tanzania Customs Integrated System
Tanzania National Electric supply Company
IPTL Independent Power Tanzania Limited TPDC
TRA
Tanzania Petroleum Development
Corporation
Tanzania Revenue Authirity
IPSAS
ISPGG
International Public Sector Accounting Standards
Institutional Support Project for Good Governance
TYS Ten-Year Strategy (AfDB)
JAST Joint Assistance Strategy of Tanzania TZFO
TZS
Tanzania Field Office
Tanzania Shilling
JICA Japan International Cooperation Agency UA Units of Account
KPIs Key Performance Indicators USAID United States Agency for International
Development
LGA Local Government Authorities USD United States Dollars
MDA Ministries, Departments & Agencies VAT Value Added Tax
MDG Millennium Development Goals WB World Bank
ZURA Zanzibar Utility Regulatory Authority
ii
Currency Equivalents
As of February 2017
1 UA = TZS 3,019.33
1 USD = TZS 2,222
1 UA = USD 1.358
Fiscal Year
1st July – 30th June
Weights and Measures
1 metric tonne = 2204 pounds (lbs)
1 kilogramme (kg) = 2.200 lbs
1 metre (m) = 3.28 feet (ft)
1 millimetre (mm) = 0.03937 inch (“)
1 kilometre (km) = 0.62 mile
1 hectare (ha) = 2.471 acres
Loan Information
Client’s information
RECIPIENT: United Republic of Tanzania
EXECUTING AGENCY: Ministry of Finance and Planning
Financing plan
Source Amount (UA) Instrument
ADF 19.58 million Loan
GOT 2.17 million Counterpart Funds
TOTAL COST 21.75 million
Timeframe - Main Milestones (expected)
Concept Note approval
September 2016
Preparation
Appraisal
July, 2016
October, 2016
Project approval March, 2017
Effectiveness April, 2017
Mid-term Review June 2018
Completion December 2018
Last Disbursement December 2019
iii
PROJECT EXECUTIVE SUMMARY Paragraph Topics covered
Project
Overview
Project name: Institutional Support Project for Domestic Resources Mobilization and Natural Resources Governance.
Geographic scope: Entire country
Implementation timeframe: 2017-2019
Project cost: UA 21.75 million
Expected Outcomes and Outputs: The expected outcomes are (i) Effectiveness of tax revenue collection, as measured by
PEFA PI-15 and (ii) improvement in the Resource Governance Index; and (iii) Number of contract negotiated by the
Government Negotiation Team (GNT) within the new framework . This will be achieved through the following output
level results: (i)Enhanced legal and institutional framework;; (ii)Strengthening of negotiation capacity ; (iii) support to
the development of a local content plicy in the mining and gas sectors; (iv) support to gas domestication strategy; (v)
strengthened capacity for tax and non-tax revenue collection and management
Project direct beneficiaries: The direct project beneficiaries are:
on the mainland side, the Ministry of Energy and Minerals (MEM), the Tanzania Petroleum and Development
Corporation (TPDC), the Petroleum Upstream Regulatory Agency (PURA), the Energy and Water Utilities Regulatory
Authority (EWURA), the National Economic and Empowerment Council (NEEC) and Tanzania Revenue Authority
(TRA). On the Zanzibar side the project will support the Ministry of Energy and Minerals as well as the Zanzibar Utility
Regulatory Agency. For Zanzibar: the Ministry of Energy and Minerals the Zanzibar Utility Regulatory Agency (ZURA),
and the Tanzania Revenue Authority (TRA). The indirect beneficiaries are the general population of Tanzania, who will
benefit from the development of a sector that will provide increased revenues, private sector development and jobs, as
well as better access to energy. Benefits will also accrue to women as a result of the project’s support to gender-sensitive
local content policy and regulatory framework. The private sector will also benefit from the development of the sector
and particularly the local content policy developed under the project. Needs
Assessment
In the area of natural resources, the Government needs to develop capacity to fully exploit the large discoveries of natural
gas in Tanzania’s offshore waters, which make the country a potential global player/producer in the natural gas sector.
Proven natural gas resources in the country stand at 57.25 trillion cubic feet, as at May 2016. Based on these resources,
the Government of Tanzania (GoT) has continued promoting a mega Liquefied Natural Gas (LNG) project, to be jointly
implemented by a consortium comprising the 6 major oil companies active in deep-waters gas exploration. The
discussions around this major project entail negotiations of complex agreements between GoT and the consortium on,
among other matters, the implementation of a domestic supply obligation under the Tanzania Petroleum Act 2015. The
Government has recently developed key policy documents that define important orientations in the natural gas sector.
Those are considered relatively sound by the international community and private investors, while their implementation
still requires significant regulatory and institutional upgrade. Thus, the major gas discoveries represent a great opportunity
for promoting economic development, but they also come with capacity challenges for the authorities: challenges related
to effectively negotiating the various projects and delivering on the expectations they have raised. Areas where urgent
capacity needs have been identified include (i) setting up the regulatory and institutional framework, (ii) negotiations and
deal-making skills development; (iii) local content policies formulation, and (iv) skills for designing strategies for
domestication of natural gas. Marketing the gas will also come with skills requirements: owing to the envisaged sizable
gas volumes, and expected robust production capacity, there is an opportunity for Tanzania to supply local and regional
markets, as the global gas demand is expected to remain weak in the foreseeable future. This will enhance intra- regional
trade in gas. Tanzania Revenue Authority also require a boost in both human and systems capacity to effectivement
forecast and manage increased revenues, in particular those linked to the natural resources sector.
Bank’s
Added Value
The project builds upon Bank’s track record of capacity building programs in Tanzania. The Bank has the potential to
become a strategic development partner for Tanzania in the natural resources sector, given the strong collaboration and
constructive dialogue with GoT. Contract negotiations, in large natural resources development scenarios, is a particularly
complex and sensitive issue that requires the establishment of a trust relationship. The Goevrnment has indicated that it
would favour working with the Bank because it is perceived as a neutral and technically sound development partner for
the sector. . The Bank has been advising the Government in the local content sector and conducted a baseline analysis
that provides a diagnostics and road map for support. In addition, the Bank has provided through the African Legal
Support Facility (ALSF), capacity building and advisory support to the Government focused on negotiation of gas
production-sharing agreements and other related gas contracts. The proposed project will represent a scaling up of support
in this area. In addition in the context of the High 5 and the New Deal on Energy the Bank has developed a sound
framework to support the development of the energy sector on the continent, to which that project will be an important
contributor by improving access to energy and developing a gas market at national and regional level.
Knowledge
Management
The proposed project will build knowledge, develop skills in regulating, overseeing and monitoring the natural resources
sector together with accounting and financial management, various forms of audit and public procurement. The
implementation of the project will strengthen governance in the natural resources sector by (i) training staff in regulatory
issues; (ii) enhancing knowledge of the industry to promote knowledge based policy decisions; and (iii) developing
various important regulations, guidelines and manuals to guide and inform the work of public officials. Knowledge will
also be acquired through skill transfer by external experts, and study tours to appropriate institutions in other countries.
In addition, sensitisation and public awareness workshops will be undertaken on issues relating to the development of the
gas sector with specific emphasis on local content policies and domestication of the resources. The Bank will disseminate
knowledge through sharing findings of supervision missions, progress reports, and the Project Completion Report.
Lessons learned will inform future operations.
iv
Results-based Logical Framework
Country and project name: Tanzania: Institutional Support Project for Domestic Resources Mobilization and Natural Resources Governance
Purpose of the project: To promote inclusive growth by enhancing economic and financial governance through improved domestic resources
mobilization and effective natural resources governance.
RESULTS CHAIN PERFORMANCE INDICATORS MEANS OF
VERIFICATI
ON
RISKS/MITIGATION
MEASURES Indicator (including CSI)
Baseline
Target
IMP
AC
T Improved economic performance
through enhanced public finance
management and natural resources governance
FDI in the Natural Resources sector 38% of total
FDI
(2015)
48% of total FDI
(2019)
Bank of
Tanzania and &
IMF
Risk 1: Implementation
capacity constraints
both on the side of GoT and the Bank: Lack of
requisite skills for the
natural resource sector could slow down the
pace of implementation.
Mitigation 1:
GoT is giving a priority to the natural resources
sector and has an
experienced team in MEM dedicated to this
sector.
Mitigation 2:
The Bank will set up a
multi-disciplinary team to supervise project
implementation.
Risk 2:
Fiduciary risk. Although Tanzania has
made good progress in
strengthening institutions and
addressing corruption,
weaknesses still remain,
and these will continue
to pose a risk.
Mitigation 2:
The ISP project will
improve the fiduciary environment with its
compliance with the
Bank’s procurement regulations and annual
audit reports.
Risk 3: Lack of
commitments to
reforms: Sustained support at the highest
level of Government is
required for the success of reforms in the
domestic resources
mobilization and natural resource sector.
Meanwhile, GoT long
processes may impact on the implementation
process.
Tax to GDP Ratio 13
(2015)
14,9
(2019)
MEM reports
OU
TC
OM
ES
Increased domestic resources mobilization
Effectiveness of tax collection PEFA P.I 15
B+(2013) A(2019) MoFP & IMF
Improved natural resources
governance sector
Resource governance index (composite
score)
50/100
(2015)
60/100
(2019)
Natural
Resource
Governance
Institute Report
Number of contract negotiated by
Government Negotiation Team (GNT) within the new framework
None
(2015)
7 contracts
negotiated (2020)
MEM progress
reports
OU
TP
UT
S
Component 1: Support to development of the natural resources sector
1.1 Enhancement of the legal
and institutional framework
Establishment of the Petroleum Upstream Regulatory Agency (PURA)
PURA Created by law but not
operational
PURA established and
functional
Project progress reports
Development of implementing
Regulations, Model Agreements and Guidelines for the gas sector
Regulations
not existing or needing
amendment
Regulations
developed
Availability of
Regulations, Model
Agreements and
Guidelines
1.2 Capacity building for
negotiations in the natural gas
sector
GNT fully operationalised No GNT (2015)
GNT fully operataionlised
(2019)
MEM progress report
Training needs assessments for MEM,
PURA and GNT and development of tailored training programs
(2015)
No training plan in place
(2019)
Training needs assessment report
and training plan
finalised
MEM and
PURA reports
Training in prepararion for negotiations, conducting negotiations, knowledge of
the industry and contractual
arranagements
0 (2015) 40 staff trained -at least 30%
female (2019)
1.3 Support to the development
and implementation of a local
content policy in the mining and
gas sectors
Roadmap for development and implementation of a local content policy
(2015) No roadmap
(2019) Policy guidelines
developed
PURA report
Study of the supply chain in the mining
and gas sectors
(2015) None (2018)
Study completed and validated
PURA report
Monitoring system to track progress by local SMEs in the extractive sector.
(2015) None (2018) System
developed and
operationalized
NEEC progress report
1.4 Support to domestication
strategy
Gas domestication strategy developed (2015)
No strategy in
place
(2018)
Strategy
developed
MEM progress
report
Knowledge sharing & studies on best practices for gas domestication
0 (2015) 20 Government officials – at least
30% female
(2019)
MEM progress report
Technical assistance to key institutions in
charge of gas domestication
(2015)
None
(2019)
50 PURA, MEM
and TPDC staff trained
MEM progress
report
v
Component 2: Enhancing Domestic Resources Mobilization
2.1 Strengthening capacity for
Tax Revenue collection and
management
Training in tax policy, taxation of extractive industry, transfer pricing, tax
treaty and negotiations (at least 30%
female)
No training (2015)
150 TRA,TR, ZRB, staff
trained(2019)
TRA and ZRB progress reports
Mitigation 3:
Constant dialogue
between GoT and the Bank and Development
Partners, should ensure
continued commitment to these important
reforms in this sector.
ZRB’s Revenue forecasting model enhanced
Basic forecasting
model in place
(2015)
Forecasting model enhanced
(2018)
TRA progress reports
Upgrade Tanzania Customs Integrated
Systems (TANCIS) to fully-fledged electronic Single Window System
(eSWS)
TANCIS in
place (2015)
Fully fledged
eSWS operationalized
(2018)
TRA progress
reports
Procurement of two (2) mobile Scanners
No mobile
scanner (2015)
Mobile Scanners
operational (2018)
TRA progress
reports
2.2 Strengthening capacity for
non-tax revenue collection and
management
Enhancement of Revenue Gateway
System for tax and non-tax revenue
collection
Functionality
of system
limited to tax revenue
collection
Functionality
enhanced for
both tax and non-tax revenue
collection (2018)
TRA progress
reports
Training in Programme Based Budgeting No training
(2015)
100 TRA,TR,
ZRB, staff trained(2019)
TRA and ZRB
progress reports
Component 3: Project management
3.1 PIU strengthened and
production of project reports
Number of reports produced (quarterly) None 2019 – 12 reports PIU progress reports
3.2 Project evaluation and
monitoring reports
Steering committee meetings & reports None 2019 – 6 reports PIU progress
reports
KE
Y
AC
TIV
ITIE
S
S
COMPONENTS INPUTS
Component 1: Support to development of the natural resources sector
Component 2 Enhancing Domestic Resources Mobilization
Component 3 : Project management
Inputs : - Funding in million UA
ADF : UA 19.58 million
GoT : UA 2.17 million
Total project cost: UA 21.75 million
vi
Table 1: Project Implementation Schedule
Years
Quarter Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Action By
Activities
Project life cycle
Loan approval AfDB
Fulfilment of conditions for disbursement GoT
Start of the project and launch AfDB & GoT
Supervision and Monitoring AfDB
Mid-term review AfDB/ GoT
Disbursement of Funds AfDB
Aubmission of annual audit reports GoT
Government completion report GoT
AfDB Project Completion Report AfDB
All Components
General Procurement Notice published GoT
Recruitment of contractors GoT
Contract local partner training institute GoT
Procurement of IT equipment and software GoT
Submission of progress reports from contractors GoT
Training and workshops GoT
2017 2018 2019
1
REPORT AND RECOMMENDATION OF MANAGEMENT TO THE BOARD OF
DIRECTORS ON A PROPOSED LOAN TO THE UNITED REPUBLIC OF TANZANIA
TO FINANCE THE INSTITUTIONAL SUPPORT PROJECT FOR DOMESTIC
RESOURCES MOBILIZATION AND NATURAL RESOURCES GOVERNANCE
Management submits the following Report and Recommendation on a proposed ADF Loan of
UA 19.58 million to the United Republic of Tanzania to finance the Institutional Support
Project for Domestic Resource Mobilization and Natural Resources Governance.
I. STRATEGIC THRUST AND RATIONALE
1.1 Project Linkages with Country and Bank Strategies and Objectives
The proposed operation is aligned with Tanzania’s Development Vision 2025, the National
Strategy for Growth and Reduction of Poverty II (NSGRP II), , the Zanzibar Strategy for
Growth and Reduction of Poverty (ZSGRP II)
and the Second Five-Year Development Plan II
(FYDP II, 2016/17-2020/21). The project will
support GoT’s policy objectives in domestic
resources mobilization and in developing the
natural resources sector, through well-targeted
capacity building activities and long term
technical assistance. The Government has
recently developed key policy documents that
define important orientations in the natural gas
sector. Those are considered relatively sound
by international standards, while their
implementation still requires significant
regulatory and institutional upgrade.
These initiatives indicate GoT’s commitments
to strengthening the oil and gas sector. The new
legislation aims to ensure that there is
transparency and accountability in the
extractive industry, and seeks to establish an
effective framework for fiscal rules and
management of oil and gas. Particular emphasis is put on local content policy in the gas sector,
which has also been developed. The overall coordination of local content policy has been vested
in a dedicated directorate at the Prime Minister’s office. Overall, the Government of Tanzania
has prioritized the utilization of natural gas to satisfy the domestic market needs for energy, and
to feed petro-chemical industries. This vision is articulated in the National Energy Policy 2015
and enshrined in the Petroleum Act 2015. It is a priority, and a vision, that could be supported
by targeted intervention under the proposed operation. TPDC, the national oil company,
manages the Government shares in developing the gas projects with the objective of
maxisimising benefits, influencing project development as well as building national expertise
in the sector. The exisiting legal and institutional framework has to be strengthened with
implementating regulations and strategies-tailored to the country vision but aslo meeting the
best international standards in order to attract and retain foreign direct investments in the natural
resources sector.
1.1.2 Alignment with the Bank’s Strategy: The proposed project is also firmly anchored
on the objectives and priorities of the Bank’s Tanzania Country Strategy Paper (CSP)
2016-2020. The CSP places emphasis on strengthening governance and accountability (Pillar II),
Box 1:.Key new provisions in recent policy
documents in the gas sector
Below are some of the key policy orientations
contained in the 2015 Petroleum Act, the 2013
Natural Gas Policy, the draft Natural Gas Utilisation
Master Plan and the 2015 Oil and Gas Revenue
Management Act:
Clarification of the policy objectives and
institutional roles at the upstream, midstream
and downstream levels;
Creation of a Petroleum Upstream Regulatory
Agency and a National Oil Company (the
Tanzania Petroleum Development Corporation,
TPDC ) with clearly separated roles.The two
roles were hitherto carried out by TPDC with
perceived conflicts of interests.
New provisions for the Model Production
Sharing Agreement (PSA);
Confirmation of the conditions for onshore
LNG plants.
Domestic market to be given priority over
exports
To establish a fund to manage gas revenues
Promotion of local firms for contract award in
the extractives sector
2
including in sectors such as energy, oil and gas, as well as in PFM, where domestic resources
mobilization is of critical importance. The proposed project is also aligned with the Bank’s Ten-
Year Strategy (TYS), which has Governance and Accountability as a core operational
priorityand puts specific emphasis on the need for RMCs to enhance domestic resources
mobilization to support their development efforts, in the new global aid architecture
characterized by diminishing Official Development Assistance (ODA). It is also aligned to the
High 5s, particularly the “Light up and Power Africa” objectives that support Transformative
Partnership for Energy in Africa.It will notably support the implementation of the New Deal on
Energy by developing the country’s gas resources with priority given to domestic and regional
markets. Developing these ressources will provide significantly increased access to energy for
public consumption and private sector development at national and regional levels. Furthermore,
the project will support the High5s objective to “Industrialize Africa,” since natural gas will supply
domestic markets, providing sustainable affordable energy source for industrial development. The
proposed operation is also in line with the Governance and Strategic Framework and Action Plan
2014-2018 (GAP II), which supports, among others, institutional capacity development in the public
sector, domestic resources mobilization, sector governance and enhancing accountability and
transparency in the use of public resources.
1.1.3 Complementarity and synergy with past and ongoing Bank operations: This proposed
project will complement and enhance the effectiveness of ongoing Bank operations by
addressing capacity gaps, in the public sector, in domestic resources mobilization and
natural resources governance. It is complementary, and in synergy, with the ongoing ISPGG
III in a number of ways, including: (i) ISPGG III, through improving PFM, will contribute to
further strengthening public sector capacity to generate and manage increased resources from
enhanced domestic resources mobilization; and (ii) ISPGG III, through improving the business
enabling environment, will also render the oil and gas sector more attractive for striking the
required mega deals and attracting private sector investments.
1.1.4 Complementarity and synergy with development partners operations: The proposed
operation will also complement the interventions of other development partners. In the
natural resources sector, under the ongoing multi-donor PFMRP IV, 2014/18, oil and gas is
recognized as an important sub-sector fraught with “emerging public financial management
issues”1; but the sub-sector is not being supported by PFMRP IV. There has, however, been
support from GiZ, NORAD, JICA, the World Bank and the EU focusing on targeted technical
assistance in specific areas of the sector. Consultations were held with concerned parties during
preparation and appraisal missions to avoid duplication, build synergies and enhance
collaboration. An overview of other DPs operations is presented in Appendix 3. In the area of
domestic resources mobilization, the following DPs are supporting TRA: DfID, Denmark,
Norway, the US Treasury, IMF, World Bank and JICA (see Appendix 42). While this list
amounts to a multiplicity of DPs, the assistance envisaged from AfDB under the proposed
project will complement, and not duplicate, the support of the other DPs. The proposed project
will be complementary by focusing on the following identified areas: (i) Domestic Taxes (large
taxpayers); (ii) Domestic Taxes (medium and small taxpayers); (iii) Customs and Excise and
(iv) Research and Planning.
1.2 Rationale for Bank’s Involvement
1.2.1 The socio-economic challenges facing Tanzania in the context of a huge natural
resource base require continued pursuit of institutional capacity building development
1 See “Mid-Term Review for the Public Finance Management Reform Program Phase Four, Tanzania”, Draft Final
Report, Innovex, July 2015 2 Annex 4 indicates the DPs supporting TRA and their areas of focus.
3
of a sound regulatory framework, and enhancement of transparency and accountability in the
management and utilisation of public resources. The country recently developed key policy
documents that define important orientations in the natural gas sector. While these are
considered relatively sound by international standards, their implementation still requires
significant regulatory and institutional upgrade. Addressing governance challenges by
strengthening the policy, legal, regulatory and institutional frameworks in the oil and gas sector
is timely, given that GoT strategic policy orientations in the sector are currently being
formulated, and long-term contract negotiations are contemplated with the private sector. The
quantum of financial and non-financial resources GoT will be able to extract from natural
resources will depend very much on its ability to create the enabling environment and negotiate
favorable deals with investors. The Bank should intervene now, when there is still an
opportunity to make an impact in natural resource governance in Tanzania.
1.2.2 While support to Tanzania’s oil and gas sector is critical and timely, it is also
important to further strengthen the country’s broader revenue mobilization efforts
through institution strengthening. The Government has faced challenges in financing its
fiscal gap, due to low levels of domestic revenue in a context of increasingly unpredictable
external assistance. With tax/GDP ratio of 13%, Tanzania falls behind its peers such as Rwanda
(15,5%), Kenya (18%) and Uganda (14,3%). This poor performance is explained by low VAT
collection, administrative inefficiency and low tax payer compliance. Addressing this requires
a combination of policy and tax administration reforms. These have been identified as a
challenge in the Five Year Development Plan (FYDP II) and steps being taken to address it
include (i) fighting tax evasion; (ii) streamlining exemptions, (iii) widening the revenue base;
and (iv) strengthening the capacity of revenue collecting agencies. More needs to be done to
increase both tax and non-tax revenue collection, including in the areas of upgrading the IT
system, enhancing forecasting capacities, strengthening compliance risk management, and
building capacity for taxation of the extractive industry. Through the proposed project, targeted
support will be provided to Tanzania Revenue Authority, and Zanzibar Revenue Board to deal
with the challenges and weaknesses identified through (i) provision of training and other forms
of capacity-building to the designated beneficiaries; (ii) procurement of ICT and other
equipment and supplies; (iii) review of key policy documents; (iv) financing key studies to pave
the way for further reforms and appropriate policy implementation; and (v) provision of
technical assistance.
1.2.3 An added value of this operation lies in the fact that the Bank is seen by GOT as a reliable
and trusted partner. Hence, the strong basis for policy dialogue built over the years makes it
easy to engage with the government on critical and sensitive issues such as natural resources
management. The Bank’s vast experience in implementing similar projects, across the
continent, is also a source of value addition.
1.2.4 Analytical Works Underpinning: The design of this project is guided by various
analytical and diagnostic reports as well as broad consultations during the preparation
and appraisal missions. A high level mission was undertaken by the Bank in April 2016 to
engage the Minister of Energy and Minerals and other senior officials in discussions on the
sector challenges. The mission was the opportunity to confirm key policy orientations, delineate
the needs in terms of capacity building and identify main areas of support. In addition, the Bank
conducted a study to provide an overview of the main developments, key orientations,
challenges and opportunities in the natural resources sector in Tanzania, and this was notably
used to produce an annex to the Tanzania CSP. The Bank also conducted a baseline study of
the local content sector in order to provide a diagnostic of the sector,provide the Government
with a roadmap and inform the Bank support. Furthermore, the Bank recently developed
4
knowledge tools on local content policy formulation and capacity building for negotiations.
These knowledge tools provide a conceptual approach based on knowledge building and
tailored to country needs to providing support in these two key areas of the project. Furthermore,
the AfDB is conducting a study of the Gas Domestication strategy developed and implemented
in South Korea over the last 30 years in order to delineate lessons learnt that could be used for
RMCs.
Finally, the Bank developed “Guidelines for Women’s Economic Empowerment in Oil and Gas
Industries in Africa” that are used to inform the activities to support the elaboration of the local
content policy as well as the regulatory
framework. These studies and
knowledge tools have constituted
valuable inputs to the design of the key
activities of the project. Those were also
discussed in details with relevant
stakeholders during the prepararation
and appraisal missions. Other documents
underpinning the design of the operation
include the Tanzania Revenue Authority
Fourth Corporate Plan 2013/14 –
2017/18; Fourth Review of the IMF
Policy Support Instrument and IMF
Article IV Consultation Report, July
2016; Tax Administration Diagnostic
Tools Assessment; March 2016.
1.3 Development Partners’ Coordination
1.3.1 Development partners’ support to Tanzania is coordinated by the Ministry of
Finance and Planning, responsible for aid mobilisation, coordination and reporting.
Development partners’ collaboration is generally good, but there is room for improvement of
the aid coordination mechanism particularly in budget support. At the moment there is no
sectoral working group in the gas sector, though there is one in the energy sector. The Bank
mission team has been able to meet relevant development partners during preparation and
appraisal and was able to ensure that the proposed project does not entail duplication of
activities and provides the opportunity for building synergies and collaborations. PFM reform
dialogue is conducted through the PFMRP IV framework, in which the Bank participates
through the Field Office, TZFO, which has been active in institutional capacity and PFM
dialogue between GOT and development partners. II. PROJECT DESCRIPTION
2.1 Project Components
2.1.1 Project Objectives: The overall development objective of the proposed project is to
promote inclusive growth by contributing to supporting the development of the natural
resources sector and enhancing domestic resources mobilization. The two central
pillars/components of the proposed operation are inextricably linked: sound development of the
natural resources sector will make significant contribution to providing Tanzania with
domestically-generated resources to finance its development programme. The enhanced policy
and regulatory framework and related improvements in natural resource governance is expected
to attract large investments to develop the country’s gas resources, while the development of
the local SMEs, boosted by the local content policy, will generate additional tax revenues.
Operationalization of the Government Negotiations Team (GNT) will also boost negotiation
Box 2:.Key Challenges for local procurement in the
extractives sector in Tanzania
The report conducted by the ANRC indentifies six key issues:
1) gaps in the legal framework for regulation, 2) the issue of a
supplier database, 3) SME development and enterprise centres,
4) addressing the lack of capital for Tanzanian entrepreneurs,
5) support and prioritization for larger industries, and 6) soft vs
hard local content regulations. Key findings include a general
weakness in PA2015 and even more so in the Mining Act 2010
in terms of promoting local content. There is confusion about
who is responsible for monitoring and enforcing local content
in the minerals sector and a lack of information about any
enforcement actions taken to date. Unlike in many other
countries, there are no clauses giving companies value-added
activities in-country preference if they are within a certain
margin of the lowest bid for a tender in either petroleum or
mining. Finally, there are multiple definitions of a ‘local
company’ in Tanzania.
5
capacity and ensure good deals for the Government. Thus, development of the gas sector is an
important initiative in domestic resource mobilization, for which the Tanzania Revenue
Authority is expected by Government to develop the requisite capacity to respond to this
challenge. In adition to this, capacity development of Tanzania Revenue Authority, through
enhancement of the revenue gateway system, better forecasting and capacity building of staff,
will enhance its capacity to raise and manage tax and non-tax revenues.
2.1.2 Project Components: The project has three components: (i) enhancing governance in
the natural resources sector (ii) enhancing domestic resources mobilization and (iii) Project
Management.
Component 1: Enhancing governance in the natural resources sector
The interventions in this component will focus on building capacity of the government to
develop the country’s natural gas resources and maximize economic development outcomes. It
will include support to the development of legal and institutional frameworks,building capacity
for negotiations, and support to the formulation and implementation of local content and gas
domestication strategies. These activities are essential as the sector is being developed to ensure
that the country maximizes development benefits from its large gas reserves and avoids the
curses associated with natural resources. It should be underlined that these activities are
preparatory and it is expected that the gas production, and associated fiscal revenues, will take
place after the project implementation phase.
The main beneficiaries are, on the mainland side, the Ministry of Energy and Minerals, the
Tanzania Petroleum and Development Corporation, the Petroleum Upstream Regulatory
Agency, the Energy and Water Utilities Regulatory Authority, and the National Economic and
Empowerment Council. On the Zanzibar side the project will support the Ministry of Energy
and Minerals as well as the Zanzibar Utility Regulatory Agency.
The following activities have been discussed and agreed with the respective institutions;
Support to the legal and institutional framework
The support will aim at developing and reinforcing the institutions in charge of regulating and
monitoring the sector as detailed in the Petroleum Act of 2015. The support will also aim at
developing the necessary regulations under the act to facilitate implementation and provide a
clear legal framework for the sector for both public and private entities.A key institution in that
context is PURA, whose role and mandate are particularly important. However, as a newly
established agency, the capacity building needs are significant. Currently PURA has staff
allocated –mainly drawn from MEM and TPDC – as well as building allocated. However the
staff needs training in regulatory functions and the ICT –based management system is required
among others. NORAD has just conducted a detailed needs analysis for a comprehensive ICT
system for PURA, following consultations with NORAd and the Government it is suggested
that the AfDB will provide the key elements required under the study.
The AfDB support will include design, procurement and installation of ICT infrastructure,
technical Assistant in development of various regulations and operational documents as well
as essential trainings.
Particular attention will be given to gender equality in that sector. The tool developed by the
ANRC “Guidelines for Women’s Economic Empowerment in Oil and Gas Industries in Africa”
will be used as it provides a checklist to identify and promote women economic empowerement.
This will be useful when developing the regulatory framework.
6
Capacity building and support to negotiations
The proposed project will support the capacity enhancement of the Government Negotiations
Team (GNT) to effectively represent the interests of GoT in negotiations with private investors
and regional partners involved in various gas development projects. The GNT is coordinated
by MEM, and its membershipincludes key agencies such as PURA and TPDC, which play an
important role in supporting and advising the team.
The proposed project will support the establishment of the negotiation framework and defining
the operating environment (structure of the GNT, strategy for future negotiations, mandate,
roles, strategic direction, service delivery model, scope of interventions, etc.). It will also
include studies and benchmarks to inform the negotiation strategies and build knowledge of the
industry.
The support will benefit from the recently developed ANRC’s “Negotiations Capacity Building
Support Training Program”. It is a specific response to the need to strengthen the ability of
negotiators. The framework was developed in collaboration with the ALSF. The desired
outcomes are a clear mandate, an empowered team of negotiators, clear lines of authority and
policy, legal and institutional parameters to stabilize the environment for negotiating and
implementing agreements.
Support to the implementation of a local content policy
Tanzania has developed a local content policy for mining and gas, aimed at ensuring that a
high proportion of project inputs are sourced locally without compromising the economic
benefits of the project. The proposed project will support the implementation of the policy to
capture the value of natural resources wealth as quickly and as early in the project life cycle as
possible. The NEEC, PURA, and EWURA are key institutions in the sector. The AfDB support
will include the development of a detailed roadmap for the local content policy, economic
analysis to inform the policy options.
The badeline study of the local content sector, currently underdaken by ANRC, will provide a
diagnostic of the situation that will inform the Bank support. The AfDB support will also rely
on the ANRC’s local content roadmap which assists policymakers in formulating and
implementing effective local content policies by outlining a step-by-step process to guide key
considerations and weigh trade-offs. It is generic in that it can be used in various contexts to
enable governments to optimize the economic value derived from developing natural resources.
The assumption is that in so doing there is an economic multiplier effect that results in greater
value extraction by host countries.
Support for the development and implementation of a Gas domestication strategy
The proposed project will help build the capacity of relevant institutions, particularly MEM,
EWURA and TPDC, to enable them evaluate various alternatives for gas utilization, with
particular focus on the economics of LNG development, based on previous experiences and
best practices. ANRC has conducted a case study on gas domestication in South Korea, from
which key lessons can be drawn for African gas producing countries like Tanzania.The aim is
also to gain negotiation skills in administering and monitoring LNG contract compliance and
performance. The finalisation of the Gas Utilisation Master Plan (NGUMP) is an important
milestone in that regard. The Bank’s support will include technical and market analysis for
domestic and regional markets, studies including on pricing models, technical assistance in
formulating the gas domestication and distribution plan, as well as support to draft regulatory
tools and standards to develop gas transport, storage and distribution.
7
Component 2: Strengthening domestic resources mobilization.
Under this component, the proposed project will provide targeted support to key revenue
collection agencies to complement the natural resources governance intervention. It will focus
on building capacity for both tax and non-tax revenue collection, to complement support already
being provided by other Development partners to the TRA on the Mainland. Beneficiaries on
the Zanzibar side are the Zanzibar Revenue Board, and the Tanzania Revenue Authority.
TRA is the main revenue collection body in Tanzania. Some of the recent achievements include
the implementation of e-filing of VAT; introduction of computerised drivers licence system;
customs modernization through the implementation of import and export commodity database
system; electronic cargo tracking and the implementation of computer forensic laboratories for
tax investigations. It has also succeeded in promoting violuntary compliance by increasing
taxpayer registration through the introduction of electronic fiscal devices; establishment of an
internationaltaxation unit; and the introduction of an enterprise-wide risk management system.
TRA also instituted the Tax Modernization Programme to help implement various initiatives
that were earmarked in the 3rd Corporate Plan, with support from development Partners, such
the World Bank, DFID, Denmark, Norway, IMF, Korea, and Japan.
TRA’s operations are guided by the fourth Corporate Plan 2013/14 – 2017/18, focusing on three
strategic themes: convenience, compliance and continous improvement.
Support to tax revenue enhancement
The project will also finance the acquisition of two mobile X-ray scanners, for containerized
cargo. They wil be used for inspection of medium risk goods as per computerized risk
management (CRMS) selectivity. Since 2008, the volume of importation at Port of Dar es
salaam increased significantly resulting in congestion of the port. To address this challenge the
government introduced Inland Container Deport (ICD). With this arrangement most of
containers were delivered to ICD immediately after discharge from vessel.
Since 2005, the TRA has been using the Tax Revenue Forecasting Model (TRFM) to carry out
its revenue forecasts and establish annual revenue targets for each tax item collected at all levels
and monitor revenue performance. The effectiveness of the model depends on the reliability of
data, which is usually weak and of insufficient quality. This situation has compromised the
quality of revenue forecasting at TRA. The proposed project will provide technical assistance
in reviewing and enhancing the existing revenue forecasting model. The output will be an
upgraded tax revenue forecasting model integrated with the database for data storage and model
performance indicators; enhance the model’s capacity to produce at least five year forecasts
with reasonable level of accuracy; development of a technical and instructional manual for
operating and finetuning the model; and related training in revenue forecasting. A package of
capacity building support geared towards boosting tax revenue collection will also be provided
to beneficiary institutions.
Support to non-tax revenue enhancement
As part of efforts to boost revenue collection, Government has tasked TRA to take steps to
facilitate electronic payment of non-tax revenues across Government institutions. A thorough
evlaution carried out by a team of experts concluded that the existing Revenue Gateway System
should be enhanced to handle the additional capability, instead of establishing a new system
solely focused on non-tax revenues. It will require adding functionalities that will facilitate,
among others, a visibility of reports on revenue collection for both tax and non-tax revenues to
8
the ministry, as well as a customization of the functions of the Revenue Gateway System to
extend their usage to other stakeholders. The proposed project will support this effort.
To achieve this, the project will support TRA’s efforts to enhance voluntary tax compliance
with a view to increasing domestic revenue from 61% of total revenue in 2015 to 70% by 2018.
This is partly necessitated by the declining international trade taxes resulting from regional
integration.
The proposed operation wil help to enhance Tanzania Customs Integrated Systems (TANCIS)
to a fully-fledged electronic Single Window System (eSWS). This will improve
competitiveness of Tanzania in cross borders trading environment in the region. The aim is to
gradually have an integrated solution, which will facilitate application and submission of
relevant documents and single point of getting all information on imports, exports and transit
clearance processes while ensuring the safety and security interests of the country. The single
window environment aims to expedite and simplify information flows between businesses and
the Government. It is a system that allows traders to lodge information to a single platform to
fulfil all import- or export related regulatory requirements.
Component 3: Project Implementation Unit This component will finance the cost of running the Project Implementation Unit (PIU). It will
also cover the cost of annual audits as well as training of PIU staff..
Table 2.1: Project Components and Estimated Cost
Components Component description Estimated
Cost
(UA’000)
Component 1: Enhancing governance in the natural resources sector
Sub-component 1.1:
Support to the legal
and institutional
framework
Under this component, activities will cover the elaboration of the necessary
regulations, rules and guidelines and capacity building for the establishement of
PURA, with the following activities:
Design, procurement and installation of ICT infrastructure,
Technical Assistant in development of various regulations operational
documents including upstream regulations, ‘Model Plan for Development
and Operation Document’, data management and fiscal metering manuals,
Facilitate the benchmark study and development of guidelines for contractual
arrangements with investors including the alignment of the Model
Production Sharing Agreement (MPSA) with the Petroleum Act,
Training on Petroleum resources evaluation.
2,737.2
Sub-component 1.2:
Capacity building and
support for natural
resource management
Through the sub-component, the project will support the government to negotiate
agreements in the gas sector with the following activities:
Support to the establishment of the negotiation framework and defining the
operating environment (structure of the GNT, strategy for future negotiations,
mandate, roles, strategic direction, service delivery model, scope of
interventions, etc.)
Studies and benchmarks to inform the negotiation strategies,
Long course training on the Oil and Gas (Eight (8) geoscientists and engineers will be trained in oil and gas courses at the Masters’ Level. The
course will include Petroleum Geoscience, petroleum Engineering, reservoir
evaluation, Development Geology, Oil and Gas economics, subsurface and
LNG Technology)
Capacity building on processing and interpretation of 3D seismic data
(Capacitate Four (4) geoscientists in 3D seismic data processing and
interpretation. Expected output will be processed (SEGY DATA) 3D seismic
data and interpretation).
4,749.7
Sub-component 1.3:
Support to the
Through the sub-component, the project will support implementation of the
following activities:
9
Components Component description Estimated
Cost
(UA’000)
elaboration and
implementation of a
local content policy
Develop a detailed implementation plan that can be developed using the
ANRC’s toolkit for local content policy formulation,
Develop, install and operationalize monitoring and evaluation system for Local
Content (IT system to register and evaluate local SMEs in the extractive sector,
in collaboration with private sector),
Analysis of the supply chains in the mining and gas sectors,
Analysis of capacity of local SMEs in relation to demand and capacity gap
analysis,
401.1
Sub-component 1.4:
Support to the
elaboration of a gas
domestication strategy
Under this sub-component, the Bank support will include:
Conducting the commercial, technical and market analysis for domestic and
regional market – to inform policy orientations and the negotiation process
Studies including on pricing models,
Technical assistance in formulating the gas domestication and distribution plan,
Support to draft regulatory tools and standards to develop gas transport, storage
and distribution,
Development of a detailed study on structuring the midstream and downstream
gas market,
143.5
Component 1 Sub-total 8,031.5
Component 2: Enhancing Domestic Resources Mobilization
Sub-component
2.1 Enhancing Tax
revenue Collection
This component will help to modernise the tax administration both at Mainland
and Zanzibar level. Under this sub-component, the Project will support:
Procurement of two (2) mobile Scanners
a) Facilitate speedy clearance while supporting optimal revenue collection
and security across sea ports, airports and border stations.
b) Extend the scanning operations across major seaport, airports and land
border stations.
Improve ZRB’s working environment and enforcement functions.
Enhance ZRB’s revenue forecasting model
4,542.9
2.2 Enhancing non-tax
revenue collection
Activities under the second sub-component will focus on:
Enhancement of TRA’s Revenue Gateway System for non-tax revenue
collection;
Training of TRA staff on the non tax functionality of the Revenue Gateway
System;
Upgrade Tanzania Customs Integrated Systems (TANCIS) to fully-fledged
electronic Single Window System (eSWS),
7,576.0
Component 2 Sub-total 12,118.9
Component III: Project Management
The PIU team will be handling and coordinating all activities for the beneficiaries
both in Mainland and Zanzibar. Under this component, the project will support:
Project operating and audits costs
Training activities for the PIU teams
569.2
Contingency (5%) 1,036.0
TOTAL 21,755.55
2.2. Technical Solution Retained and Other Alternatives Explored
2.2.1 During project preparation and appraisal, a number of options were explored regarding
the areas of intervention, the scope of the activities, the number of institutions to support
modality of delivering the capacity building support and implementation arrangements. Based
on these considerations, the recommendations from analytical works, as well as lessons from
the Bank’s and other DPs’ capacity-building operations, it was agreed with GOT to provide
10
balanced intervention targeting both natural resources governance, and domestic revenue
mobilization. The possibility of focusing the project entirely on capacity building for natural
resources was considered, in view of the huge capacity issues in the sector and the challenge of
managing natural resource revenues. However, it was agreed to extend some support to other
agencies such as TRA. The objective is to maximise the impact on the most important
government agencies, as well as facilitate coordination, which can sometimes be a challenge. It
was decided to set up a PIU at TPDC, given the natural resource focus of the project and
TPDC’s capacity to handle reporting and procurement activities, while the Zanzibar side will
use the exisiting PIU set up for ISPGG III. In the past, the use of two PIUs, one for the Mainland
and one for Zanzibar, has ensured that delays in one part of the country do not affect the other
part, while at the same time provding opportunities for experience-sharing. Following
consultations with government agencies and experience from DPs, it was decided to have the
PIU for mainland beneficiaries located at TPDC.
Table 2.2: Project Alternatives Considered and Reasons for Rejection
Alternative Brief Description Reasons for Rejection
Focus entirely on
natural resource
management
The possibility of focusing the project
entirely on capacity building for natural
resources was considered, in view of the
huge capacity issues in the sector and the
challenge of managing natural resource
revenues.
While it is important to give particular attention to
the natural resources sector, its links with the
Government’s wider domestic revenue
mobilization efforts is critical. It is on this basis
that the bulk of the funding is allocated to
component 1, and a smaller amount allocated to
domestic revenue mobilization (both tax and non
tax revenues).
Channel the
resources
through TRA’s
Tax
Modernization
programme,
supported by a
number of
Development
Partners.
The possibility of channeling the project
resources through TRA’s Tax
Modernization programme was
considered. This has the advantage of
maximising harmonization with other
Development Parrners supporting tax
policy and tax revenue administration
reforms in Tanzania.
Given that a large part of the resources provided by
the project is in the area of natural resource
governance, the team found it inappropriate to
channel the resources through TRA. Instead,
TPDC is designated as the PIU for more effective
coordination. However, steps are being taken to
ensure that the limited support to TRA is
coordinated with the Tax Modernization
programme.
2.3 Project Type
The proposed project is an institutional support project designed to complement
ISPGG III, and developcapacityto maximise benefits from the gas sector. It aims at
contributing to building the capacity of GoT to develop its large gas resources to promote
inclusive economic gowth.
2.4 Project Cost and Financing Arrangements
2.4.1 The estimated total cost of the project, net of taxes and duties, is UA21,75 million
(including 10% GoT contribution). A contingency of 5%, has been factored in the project
cost. Tables (2.3) and (2.4) present the estimated project cost by component and sources of
finance, whereas Tables (2.5) and (2.6) present the estimated project costs by Category of
Expenditure. Details of the project cost by component and expenditure category are also
presented in Technical Annex B2. The Bank will finance UA 19.58 million while the GOT
contribution is UA 2.17 million.
11
Table 2.3: Project Cost Estimate by Component
Table 2.4: Sources of Financing
Table 2.5: Project Cost by Category of Expenditure – ADF (in thousand UA)
Table 2.6: Project Cost by Category of Expenditure – GoT (in thousand UA)
Table 2.7: Expenditure Schedule by year (in thousand UA)
%
Total Total Foreign
Component I : Enhancing governance in
the natural resources sector 10,913.4 8,031.5 77%
Component II: Enhancing Domestic
Resources Mobilization16,736.2 12,118.9 96%
Component III: Project Management 773.5 569.2 14%
TOTAL BASE COST 28,423.0 20,719.5 86%
Contingency (5%) 1,421.2 1,036.0
TOTAL PROJECT COST 29,844.2 21,755.5 86%
Total Cost,
'000 US
Total Cost
'000 UA Component
Foreign Local Total
ADF Loan 18,806.2 773.8 19,580.0 90%
GoT Counterpart funding - 2,175.5 2,175.5 10%
TOTAL PROJECT COST 18,806.2 2,949.3 21,755.5 100%
% of total
amount Source of funding
Costs in Thousands UA
Goods 10,264.4 1,140.5 11,404.9
Services 6,986.6 256.3 7,242.8
Operating Costs - - -
TOTAL BASE COST 17,251.0 1,396.8 18,647.7
Contingency (5%) 862.5 69.3 932.3
TOTAL PROJECT COST 18,113.5 1,466.1 19,580.0
Expenditure Account Foreign Local Total
GoT
Goods - -
Services - 2,029.7
Operating Costs - 42.3
TOTAL BASE COST - 2,072.0
Contingency (5%) - 103.6
TOTAL PROJECT COST - 2,175.5
COMPONENT 2017 2018 2019 Total
Enhancing governance
in the natural resources
sector
2,409.4 4,015.7 1,606.3 8,031.5
Enhancing Domestic
Resources Mobilization3,635.7 6,059.4 2,423.8 12,118.9
Project Management 170.8 284.6 113.8 569.2
TOTAL BASE COST 6,215.9 10,359.8 4,143.9 20,719.5
Contingency (5%) 310.8 518.0 207.2 1,036.0
Total Project Cost (incl.
contingency)6,526.7 10,877.8 4,351.1 21,755.5
12
2.5 Project’s Target Area, Population and Beneficiaries
2.5.1 The direct project beneficiaries are: on the mainland side, the Ministry of Finance
and Planning, the Ministry of Energy and Minerals (MEM), the Tanzania Petroleum and
Development Corporation (TPDC), the Petroleum Upstream Regulatory Agency (PURA),
the Zanzibar Utilities Regulatory Authority (ZURA), the Energy and Water Utilities
Regulatory Authority (EWURA), the National Economic and Empowerment Council
(NEEC), Tanzania Revenue Authority (TRA). On the Zanzibar side the project will support
Tanzania Revenue Authority – Zanzibar, Zanzibar Revenue Board. The indirect beneficiaries
are the general population of Tanzania, who will benefit from the development of the gas sector,
that will provide increased revenues, employment oppotunities, private sector developmentand
better access to energy. Benefits will also accrue to women as a result of the project’s support
to gender-sensitive local content policy and regulatory framework. The private sector will also
benefit from the development of the sector and particularly the local content policy developed
under the project.
2.6 Participatory Process for Project Identification, Design and Implementation
2.6.1 Wide stakeholder consultation was carried out with Ministries, Departments &
Agencies (MDAs), development partners, the private sector, NGOs and civil society
during project preparation and appraisal. The preparation mission was preceded by two
high level missions led by the ANRC director that met the Minister of Energy and Minerals and
the Chief Secretary to discuss policy objectives and the key support areas of the project. The
private sector, both local and the international investors, was adequately consulted, mainly
through umbrella bodies, and views expressed guided the selection of several key activities,
notably with regards to the development tof the regulatory framework, support to negotiations
and the elaboration of a local content roadmap.
The appraisal mission held discussions with the key beneficiaries both bilaterally and as a group
to ensure that needs were fully identified. The Bank mission team also met with other DPs
involved in the sector to exchange views on key challenges work towards harmonization and
avoidance of duplication.
The important observations highlighted during these consultations include the need for: country
ownership, gender mainstreaming, sustainability, alignment with the country’s development
priority and harmonization with other DP interventions. These observations and suggestions
informed the design of the proposed project.Thus, the Project is prepared taking into account
the various potential beneficiaries’ strategic/corporate plans, and the Bank’s CSP, which are
products of consultative processes. During the implementation stage, regular consultations will
continue, particularly with private sector bodies and civil society organisations to ensure that
their concerns are addressed. The half yearly supervision missions, and the mid-term review of
project implementation, will ensure continued engagement with all stakeholders, including non-
state actors.
2.7 Bank Group Experience and Lessons Reflected in Project Design
2.7.1 In designing the proposed project, the experience and lessons from previous Bank
interventions in Tanzania were exploited. These sources of experience and lessons include
the Project Completion Reports (PCRs) for ISPGG I and II, and the GECSP budget support
operation; the implementation of the CSP 2011-2015; the findings of the CSP Mid-Term
Review; and of the Country Portfolio Performance Review Report. The PCRs, in particular,
made a number of recommendations, from lessons learned, which have influenced the design
13
of this operation. These recommendations and lessons include (i) care should be taken in the
choice of initiatives/beneficiaries to support, so that the scope, complexity and ambition of the
project or programme is managed to ensure adequate attention to GOT priorities; (ii) in order
to facilitate the measurement of the impact of training programmes, benchmark measurements,
where feasible, should be undertaken to understand the level of staff competences prior to
provision of training; (iii) coordintation among government agencies can also be challenging
and need to be carefully taken into consideration. Those lessons learnt have guided the
elaboration of the proposed project.
2.7.2 As at September 2016, the Bank’s active portfolio in Tanzania amounted to UA 1,361.0
million, comprising 12 national public sector operations of UA 953.2 million and 8
multinational operations of UA 223.3 million and 4 private sector operations of UA 184.4
million (see Appendix 2. for a comprehensive list of ongoing operations). The average
cumulative disbursement rate for the overall portfolio was 21.7% at 30 September, 2016 and
the average age of the portfolio stood at 3.2 years. The portfolio is rated as satisfactory with a
score of 3.2 (on a 0-4 scale) according to the 2016 CPPR. The portfolio has no problem
project or potentially problem project. Key challenges facing the portfolio include the need
to improve performance in areas such as quality at entry, capacity constraints of implementing
agencies, contract management, and slow disbursement. These challenges are being addressed
by GOT and the Bank through the implementation of the Country Portfolio Improvement Plan
2.8 Project Performance Indicators
The key performance indicators identified, and the expected outcomes on project
completion, are set out in the Logical Framework. The expected outcomes from the first
Component “ Support to the development of the Gas sector” are (i) Improved resource
governance index score (ii) Increase in the number of contracts negotiated by the Government
Negotiations Team (GNT) under the new framework.. The expected outcome under Component
2, “Enhancing Domestic Resource Mobilization” are (i) Efectiveness of tax collection, as
measured by PEFA PI-15.
3. PROJECT FEASIBILITY
3.1 Economic and Financial Performance
3.1.1 The economic and financial benefits from the project will be both direct and
indirect. In the long term, assuming the necessary investments are made in the production
phase, natural gas could help provide the fiscal space for investments in infrastructure and other
areas to facilitate fast-tracking social and economic development to transform the living
standards of Tanzanians. However, it should be noted that oil and gas resources are finite, and,
therefore, require the country to build human and institutional capacity to prudently manage
both the resources and the revenue flows in order to maximise impact on economic
development. The benefits of the project will derive from (i) improved regulatory framework
of the natural gas sector, (ii) better capacity to negotiate large and complex investments, (iii)
the development of a local content policy that will provide opportunity for local
(includingwomen) entrepreneurs and (iv) the elaboration of a domestication strategy that will
enhance access to energy at the national and regional level. The project will support the
establishment of a key regulatory body in Tanzania to oversee the development of the gas
sector, create significant job opportunities for local workers and women and facilitate access to
energy for the population of the country and the region. It will also contribute to enhancing the
performance of key revenue collecting agencies through capacity building. In economic and
financial terms, the project has the potential to help increase private investments in the natural
14
resources sector from 38% of total FDI in 2015 to 48% in 2019. Furthermore, it will contribute
to increasing GDP growth rate from 6.9% in 2015 to 7.2% in 2019.
3.2 Environmental and Social Impact
3.2.1 Environment and Climate Change: The proposed project is classified as Category
3 in the Bank’s environmental categorization system. The project will not have a negative
impact on the environment, as its activities are limited to training, technical assistance, studies,
office automation and computer hardware. Project activities that are focused on such human
and institutional capacity building have no negative impact on climate change. The project’s
support to the institutional and regulatory framework has the potential to positively impact on
the environment by increasing the capacity to oversee and monitor developments in a
potentially environmentally sensitive sector such as the natural gas.
3.2.2 Social Impact: The Project will contribute to strengthening governance institutions
and improving the regulatory framework and the business climate. This will eventually
result in a more effective public sector administration, reduction in corruption and an increase
in private investments. This will enhance attractiveness for investments in the natural resources
sector and further unlock the country’s economic growth potential. The impact on poverty
reduction will be indirect, but significant. In addition to promoting women empowerment, the
youth will also benefit indirectly through increased employment and entrepreneurial
opportunities created by an increased FDI flow in the natural resources sector. The increased
revenue collection as a result of the intervention will also help create fiscal space and hence
facilitate investments in critical areas with significant socioeconomic impact.
3.2.3 The proposed project, by supporting the elaboration of a local content policy in a
sector that attracts large FDI inflows, has the potential to boost private sector
development over the medium-term. The support in the elaboration of a roadmap for local
content policy formulation, based on a detailed economic analysis of the supply chain in the
extractives sector, can help the Government to establish guidelines and regulations that will
provide opportunities for the local private sector. In direct support of the industrialisation
strategy of the Bank in the context of the High 5s, the objective is to gradually build capacity
of local SMEs and entrepeneurs to take advantage of the supply chain in the gas servicing
industry, both at construction and operation phases.
3.2.4 The project is expected to contribute to increasing access to energy both at the
national and regional levels in the medium to long term. It will contribute to developing a
domestication strategy for natural gas resources that will inform the drafting of the regulatory
framework and the ongoing negotiations with international investors. In direct support of the
Bank’s “New Deal on Energy” in the context of the High 5s, the objective is to develop a
national and regional gas market that will attract investors, develop a regional distribution
network and improve access to energy for domestic consumption and private sector
development.
3.2.5 Gender Impact: The project is expected to benefit women by improving access to
a safe and clean source of energy for cooking and promoting women entrepeneurship in
the Gas servicing industry. The tool developed by the ANRC “Guidelines for Women’s
Economic Empowerment in Oil and Gas Industries in Africa” will be used as it provides a
checklist to identify and promote women economic empowerement. This will be useful when
developing the regulatory framework and in particular developing a local content policy that
will specifically provide opportunities for women entrepeneurs in the sector. In addition the
development of a natural gas domestication strategy will improve access to energy and in
particular for women provide a safe and clean source of energy for cooking. In the context of
15
supporting the development of local content policies, particular attention will be paid to the
promotion of gender Local content policies provide an important entry point for promoting
women’s economic empowerment in oil and gas industry, for example through (a) Ensuring
that women benefit equally from compensation and community programmes and royalties
(social investments) from these industries; (b) Promotion of women’s direct, waged
employment in the oil and gas sector; (c) Encouraging or mandating suppliers and
subcontractors to the sector to employ women (indirect employment); (d) Enabling also women
entrepreneurs to gain access to oil and gas industries as suppliers.
4. IMPLEMENTATION
4.1 Implementation Arrangements
4.1.1 Project Coordination Unit: As for similar past and ongoing Bank projects, 2 PIUs, one
for Zanzibar beneficiaries and the other for the Mainland beneficiaries, will be used. Experience
suggests that the use of two PIUs, will ensure that delays in one part of the country do not affect
the other part, while at the same time providing opportunities for experience-sharing between
the two PIUs. Following consultations with government agencies and DPs, it was decided to
have the PIU for mainland beneficiaries located at TPDC, mainly because of their capacity to
handle reporting and procurement procedures. The objective is to maximise the impact on the
most important government agencies as well as facilitate coordination, which can sometimes
be a challenge.
4.1.2 Project Steering Committees: For the Tanzania Mainland Component, the overall
implementation of the project will be the responsibility of a Project Steering Committee
(PSC) chaired by the Deputy Permanent Secretary at the Ministry of Energy and
Minerals. The members of the steering committee will include representatives of each
beneficiary agency, i.e. MEM, TPDC, PURA, ZURA, EWURA and the NEED, TRA, and ZRB
. The PSC will meet at least once every quarter to review overall progress in implementation
and take action when necessary to resolve emerging or outstanding issues. A Project
Implementation Unit (PIU) will be set up within TPDC. The PIU will be headed by an
experienced Project Manager, assisted by a Project Accountant, Administrative Assistant/Clerk
and a Secretary. The PIU will coordinate and manage the day-to-day project tasks for each
beneficiary agency, particularly in respect of matters relating to procurement, contract
supervision, monitoring and reporting on project implementation.
4.1.3 For the Zanzibar Component, a similar institutional arrangement will be deployed
for the implementation of the project. The PIU set up for the Institutional Support project for
Good Governance (ISPGG III) will be used for the project. A Project Steering Committee,
under the chairmanship of the MoF Principal Secretary, is in place. Membership of the PSC
will be expanded to include new beneficiaries such as TRA-Zanzibar and Zanzibar Revenue
Board.
4.2 Financial Management, Disbursement and Audit Arrangements
4.2.1 The Bank has conducted an assessment of the adequacy of the financial management
system of the proposed project covering Tanzania Mainland and Zanzibar. The assessment
based on the Bank’s FM Implementation Guidelines-2014 concluded that the overall residual
risk is “Moderate”. The proposed mitigation measures, as per the risk table, Annex 1, when
implemented, will enhance the Project ability to (i) use the funds for the intended purposes in
an efficient and economical way; (ii) prepare accurate, reliable and timely periodic financial
reports, and (iii) safeguard the entities’ assets.
16
4.2.2 In line with the Paris Declaration on Aid Effectiveness and Accra Agenda for
Action, the project will substantially make use of the Country’s financial management
systems. The day to day management will be as per the rules and procedures as stipulated in
the Tanzania (Tanzania mainland) Tanzania Petroleum Development Corporation (TPDC) and
the Zanzibar Ministry of Finance (MoF)) Financial policies and procedures. The Director of
Finance of TPDC and the Accountant General for Zanzibar will be the overall responsible
Officers for the financial management of the Project in their respective organizations/ Ministry.
The Internal Audit Departments (TPDC and Zanzibar) will audit the project financial
transactions regularly. The internal audit reports will be shared with the Bank as needed. Both
institutions are committed to configuring their SAGE Evolution Pastel and Epicor Version 10
respectively to accommodate the Project accounting and reporting requirements. In addition
TPDC will put in place Projects Implementation Manual (including Financial Management) to
guide operations of projects. TPDC will assign Project Accountant while MoF will assign an
Assistant Project Accountant to coordinate or assist the day to day financial management
requirements of the Project.
4.2.3 Disbursement Arrangements: Disbursement will be in accordance with the Bank
Group’s Rules of Procedure for Disbursement, as stipulated in the Disbursement
Handbook (2012 Version). The Executing Agencies will each open two special accounts (one
denominated in US Dollars and the other in Tanzanian Shillings) for the purpose of this project,
at a bank acceptable to ADF. The loan resources will be deposited in the special accounts and
will be operated as a revolving fund. The ADF will replenish the special accounts at the request
of the Executing Agencies, after justifications for the use of at least 50% of the most recent
deposits and 100% of all the other older advances have been provided. The four disbursement
methods will be available for use during project implementation. The Bank will issue a
disbursement letter, which will provide specific guidelines on key disbursement procedures and
practices.
4.2.4 Financial Reporting and Auditing: The Project will follow the Tanzania Mainland
and Zanzibar financial year of 1st July to June 30th. The financial statements will be
audited by the Controller and Auditor Generals (CAG) in Tanzania Mainland) and
Zanzibar in accordance to area of their jurisdiction. The audit will be conducted in
accordance to the terms of reference for Audit of Bank financed projects. Two Separate audit
reports for TPDC and MoF, complete with Management letters, will be submitted to the Bank
within six months of the end of the financial year
4.3 Procurement Arrangements
4.3.1 Procurement of goods (including non-consultancy services) and the acquisition of
consulting services, financed by the Bank under the project, will be carried out in accordance
with the Bank’s“Procurement Policy and Methodology for Bank Group Funded Operations”
(BPM), dated October 2015 and following the provisions stated in the Financing Agreement.
Specifically, Procurement will be carried out as follows:
Bank Procurement Policy and Methodology (BPM): Bank Standard Procurement
Methods and Procedures (PMPs), using the relevant Bank Standard or Model Solicitation
Documents (SSDs) for contracts that are above certain financial thresholds detailed in the
Procurement Technical Annex.
Borrower Procurement System (BPS): Specific Procurement Methods and Procedures
(PMPs) under BPS comprising its Laws and Regulations, Public Procurement Act, 2011
17
revised 2016 and its Directives, or any acceptable revision made thereto and acceptable to
the Bank, using the national Standard Bidding Documents (SSDs) or other Solicitation
Documents agreed during project negotiations” for various group of transactions to be
entailed under the project.
4.3.2 Procurement Risks and Capacity Assessment (PRCA): the assessment of procurement
risks at the Country, Sector, and Project levels and of procurement capacity at the Executing
Agencies (EAs) (i.e. Tanzania Petroleum Development Corporation (TPDC) for the main land
and Ministry of Finance and Planning for Zanzibar), were undertaken for the project and the
findings have informed the decisions on the procurement regimes, Borrower Procurement
System (BPS) and Bank Procurement Methods and Procedures (BPP), be used for specific
transactions or groups of similar transactions under the project. The details of risks, mitigation
measures have been included in the Procurement Technical Annex B5.
4.4 Monitoring and Evaluation
4.4.1 The project is scheduled for implementation over a 36-month period, from
January 2017 to December 2019. This schedule is reasonable, given the scope of activities to
be implemented and project implementation capacity in Tanzania. The project task team on the
Bank side and the 2 PIUs will be responsible for project monitoring and evaluation, using the
Result Monitoring Framework (Technical Annex B7) and the project log frame. The periodic
performance assessment and result reporting will be carried out by the task team in
collaboration with the project Coordinators and the beneficiary institutions. Quarterly and
annual activity reports will also be prepared and submitted to the Bank. The Bank will undertake
monitoring of project implementation, and the use of project resources, through regular contact
with the PIUs, half yearly supervision missions and the mid-term review mission. The Bank
will also sustain regular consultations with DPs supporting GOT capacity-building under the
ongoing PFMRP IV. The Field Office, TZFO, being on the ground, will play an active role in
the coordination, country dialogue, and project supervision and monitoring. A Project
Completion Report will be prepared to evaluate progress against outputs and outcomes and
draw lessons for possible follow-up operations. Table 4.2 presents the Project Implementation
and Monitoring Schedule. Table 4.1: Project Implementation Schedule
Task Responsible Party Start Date
Loan Approval ADF March 2017
Loan Effectiveness ADF/GOT April2017
Project Launching ADF/GOT May 2017
Procurement of goods and services GOT June2017
Technical assistance and training program GOT July2017
Annual Audit Report GOT March 2018
Supervision Mission ADFGOT September 2017
Mid-term Review ADF/GOT June, 2018
Project Completion Report ADF/GOT June, 2020
4.5 Governance
4.5.1 Financial management of the proposed project will be carried out by the PIU under
the supervision of the Chief Executive Officer TPDC for the Mainland Component. For
the Zanzibar Component, this task will be carried out by the PIU under the supervision of the
MoF Principal Secretary. A Steering Committee for the Mainland Component will be
established under Deputy Permanent Secretary of MEM, comprising representatives of the
beneficiaries. Anexisting Steering Committee on the Zanzibar side under the Principal
18
Secretary, Ministry of Finance, will be used. The 2 PIUs will prepare their respective manuals
of administrative, financial and accounting procedures. Accounting records will be kept,
presenting project expenditure by component, category and source of finance. The project
accounts will be audited annually by the Controller and Auditor Generals (CAG).
4.6 Sustainability
4.6.1 The sustainability of the proposed project will, first and foremost, be anchored on
GOT’s strong commitment to developing a stable legal, regulatory and institutional
framework, as well negotiating balanced constracts while undertaking consultations with
private stakeholders as well as civil society. A key element of the project design is a strong
capacity building and knowledge transfer dimension. This will help ensure that adequate
capacity is built across Government during the project’s implementation phase. In addition, the
proposed project will finance certain activities, such as the development of regulations,
guidelines and reference manuals, which will guide and inform the day-to-day work of public
officials. The regulatory body for the petroleum sector (PURA) will also be established in the
context of this project. In addition, achieving a sound and balanced negotiation process will
lead to balanced agreements with international investors that will help sustain the development
of the sector. Finally, the project envisages regular consultations with the private sector and
civil society in order to take their views into account and promote an inclusive decision making
process.
4.7 Risk Management
4.7.1 The potential risks and mitigation measures for the project are summarized in Table 4.2.
below: Table 4.2: Risks and Mitigation Measures
Risks Probability/
Impact
Mitigation Measures
Risk 1: Implementation capacity constraints: Lack of
requisite skills in the natural resources sector could slow down
the pace of implementation.
Medium/high GoT is giving priority to the natural resources sector
and has an experienced team in MEM dedicated to
this sector.
Risk 2: Fiduciary risk. Although Tanzania has made good
progress in strengthening institutions and addressing
corruption, weaknesses still remain, which may pose a risk.
Low/medium The Bank’s on-going ISPGG III, and the PFMRP IV
will improve the fiduciary environment, assist in
addressing institutional weaknesses and contribute to
the fight against corruption.
Risk 3: Lack of commitments to reforms: Sustained support
at the highest level of Government is required for the success
of reforms in the domestic resources mobilization and natural
resource sector. Meanwhile, GoT long processes may impact
on the implementation process.
Low/medium Continuous dialogue between GoT, the Bank and
Development Partners, would help to ensure
sustained commitment to these important reforms
4.8 Knowledge Management
4.8.1 The proposed project will build knowledge, and develop skills, in regulating,
overseeing and monitoring the natural resources sector. The implementation of the project
will strengthen governance in the natural resources sector by (i) training staff in regulatory
issues; (ii) enhancing knowledge of the industry to promote knowledge based policy making;
and (iii) developing various important regulations, guidelines and manuals to guide and inform
the work of public officials. Knowledge will also be acquired through skill transfer by external
experts, and study tours to appropriate institutions in other countries. In addition, sensitisation
and public awareness workshops will be undertaken on issues relating to the development of
the gas sector with specific emphasis on local content policies and domestication of the
19
resources. As a consequence the knowledge base on the sector will increase, not only among
public servants but also the private sector and civil society at large. This is particularly
important in the natural resources sector that creates important expectations which are
sometimes not realistic due to lack of reliable information on the sector.
V – LEGAL INSTRUMENTS AND AUTHORITY
5.1 Legal Instrument
5.1.1 An ADF Loan will be used to finance this proposed project, governed by a Loan
Agreement between the United Republic of Tanzania and the African Development Fund.
5.2 A. Conditions Associated with Bank’s Intervention
5.2.1 Prior Action to be fulfilled before submission of the the Financing Proposal to the Board:
Designation of two Project Coordination Units, one for Tanzania Mainland and the other for
Zanzibar (evidenced by a letter sent to the Bank by the Government).
5.2.2 Conditions Precedent to Entry into Force: The entry into force of the Loan
Agreement shall be subject to the fulfilment by the Borrower of the applicable provisions of
section 12.01 of the General Conditions Applicable to Loan Agreements and Guarantee
Agreements of the African Development Fund.
5.2.3 B. Conditions Precedent to First Disbursement: The first disbursement of the loan
shall be conditional upon the entry into force of the Loan Agreement, and the Borrower
providing evidence of the fulfilment of the following condition, in form and substance satisfactory
to the Fund: Opening by each Executing Agency at a bank or banks acceptable to the Fund of
two Special Accounts (one denominated in USD and the other in Tanzania Shillings). The
opening of such accounts will be evidenced by letters from the bank(s) in which the accounts
have been opened, confirming that the said accounts have been opened, and providing the
account numbers.
5.3 Undertakings of the Borrower
5.3.1 The Borrower undertakes tocarry out and cause its contractors to carry out the Project in
accordance with: (i) the Fund’s rules and procedures; and (ii) national legislation; and (iii)
submit on a quarterly basis a progress report acceptable to the Fund, on the status of
implementation of the Project
5.4 Compliance with Bank Policies
5.4.1 This project complies with all applicable Bank policies.
VI. RECOMMENDATION
6.1.1 Management recommends that the Board of Directors approve an ADF Loan not
exceeding UA 19.58 million to the United Republic of Tanzania for the purposes of, and subject
to, the conditions stipulated in this report.
- 1 -
APPENDIX 1: Tanzania: Selected Macroeconomic Indicators
Indicators Unit 2000 2011 2012 2013 2014 2015 (e) 2016 (p)
National Accounts
GNI at Current Prices Million US $ 10,537 33,929 36,971 42,179 48,195 ... ...
GNI per Capita US$ 310 720 760 840 930 ... ...
GDP at Current Prices Million US $ 10,186 33,562 38,809 44,333 48,030 47,382 51,410
GDP at 2000 Constant prices Million US $ 10,186 21,163 22,251 23,868 25,530 27,329 29,295
Real GDP Growth Rate % 4.9 7.9 5.1 7.3 7.0 7.0 7.2
Real per Capita GDP Growth Rate % 2.3 4.5 1.8 3.9 3.6 3.7 3.9
Gross Domestic Investment % GDP 16.8 33.2 28.5 30.3 31.0 28.7 29.9
Public Investment % GDP 5.7 6.2 6.4 5.5 4.8 4.8 5.4
Private Investment % GDP 11.2 27.1 22.1 24.9 26.2 23.9 24.5
Gross National Savings % GDP 10.8 13.9 13.2 11.6 13.6 15.4 17.2
Prices and Money
Inflation (CPI) % 6.0 12.7 16.0 7.9 6.1 5.6 5.9
Exchange Rate (Annual Average) local currency/US$ 800.4 1,572.1 1,583.0 1,600.4 1,654.0 1,979.7 2,091.2
Monetary Growth (M2) % 61.1 16.0 12.1 10.4 16.7 14.6 ...
Money and Quasi Money as % of GDP % 24.1 34.6 33.3 31.8 33.1 32.2 ...
Government Finance
Total Revenue and Grants % GDP 13.8 15.4 16.1 15.3 15.4 12.4 11.8
Total Expenditure and Net Lending % GDP 15.2 20.2 19.1 20.1 18.7 15.7 15.4
Overall Deficit (-) / Surplus (+) % GDP -1.4 -4.6 -3.0 -4.8 -3.4 -3.9 -4.4
External Sector
Exports Volume Growth (Goods) % 27.5 -11.3 2.3 3.9 6.4 3.9 6.9
Imports Volume Growth (Goods) % -3.0 17.7 11.3 3.9 8.0 4.0 3.3
Terms of Trade Growth % -3.8 262.6 2.5 -3.2 -4.2 -2.9 -1.0
Current Account Balance Million US $ -364 -2,871 -2,396 -4,566 -4,947 -4,453 -4,206
Current Account Balance % GDP -3.6 -8.6 -6.2 -10.3 -10.3 -9.4 -8.2
External Reserves months of imports 5.5 3.9 3.8 4.2 3.9 3.8 ...
Debt and Financial Flows
Debt Service % exports 17.4 3.2 2.8 2.9 3.8 5.0 5.6
External Debt % GDP 70.2 25.7 25.9 25.9 28.7 29.8 29.3
Net Total Financial Flows Million US $ 1,229 2,437 2,848 3,641 3,375 ... ...
Net Official Development Assistance Million US $ 1,064 2,440 2,823 3,431 2,648 ... ...
Net Foreign Direct Investment Million US $ 282 1,229 1,800 2,131 2,142 ... ...
Source : AfDB Statistics Department; IMF: World Economic Outlook, October 2015 and International Financial Statistics, October 2015;
AfDB Statistics Department: Development Data Portal Database, March 2016. United Nations: OECD, Reporting System Division.
Notes: … Data Not Available ( e ) Estimations ( p ) Projections Last Update: April 2016
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
%
Real GDP Growth Rate, 2004-2016
0
2
4
6
8
10
12
14
16
18
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Inflation (CPI), 2004-2016
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2,004
2,005
2,006
2,007
2,008
2,009
2,010
2,011
2,012
2,013
2,014
2,015
2,016
Current Account Balance as % of GDP,2004-2016
- 2 -
APPENDIX 2: Bank Group Current Portfolio in Tanzania Nov. 2016
SOURCE OF
FINANCE
APPROVAL
DATE
CLOSING DATE APPROVED
AMOUNT (UA
million)
TOTAL
DISBURSED
DISB RATE (Am t
Dis b /T o ta l Lo a n )
Marketing Infrastructure, Value Addition and Rural Finance Program
(MIVARFP)
ADF Loan 29-Jun-2011 31-Dec-2017 40.00 25.52 63.79
SUB-TOTAL (AGRICULTURE) 40.00 25.52 63.79
Tanzania Road Sector Support Programme I ADF Loan 2-Dec-2009 15-Dec-2017 152.00 126.38 83.15
Tanzania Road Sector Support Programme II ADF Loan 5-Apr-2012 31-Dec-2018 140.00 75.24 53.74
Dar es Salaam Bus Rapid Transport Infrastructure Project ADB Loan 30-Sep-2015 31-Dec-2020 69.74 0.19 0.27
AGTF 30-Sep-2015 31-Dec-2020 31.71 0.16 0.51
Transport Sector Support Program ADF Loan 26-Nov-2015 31-Oct-2021 54.00 0.60 1.11
ADB Loan 26-Nov-2015 31-Oct-2021 193.97 0.00 0.00
SUB-TOTAL (TRANSPORT) 641.42 202.58 31.58
Zanzibar Urban Water & Sanitation Project ADF Loan 19-Dec-2012 31-Dec-2017 14.00 4.36 31.13
Arusha Sustainable Water & Sanitation Delivery Project ADB Loan 16-Sep-2015 30-Jun-2020 102.83 0.06 0.06
ADF Loan 16-Sep-2015 30-Jun-2020 18.00 0.32 1.78
AGTF 16-Sep-2015 30-Jun-2020 30.07 0.04 0.14
SUB-TOTAL (WATER SUP/SANIT) 164.90 4.78 2.90
Iringa-Shinyanga Transmission Line ADF Loan 26-Oct-2010 31-Oct-2018 45.36 18.71 41.24
Scaling-Up Renewable Energy Program SCF Grant 20-Dec-2013 15-Sep-2017 0.50 0.10 20.86
SUB-TOTAL (ENERGY) 45.86 18.81 41.01
Alternative Learning and Skills Development (ALSD) II ADF Loan 29-Jun-2011 31-Dec-2017 15.00 3.74 24.93
Support to Technical Vocational Education and Training & Teacher
Education
ADF Loan 2-Apr-2014 31-Dec-2019 34.00 1.37 4.03
SUB-TOTAL (SOCIAL) 49.00 5.11 10.43
TZS Line of Credit to First National Bank Subsidiary in Tanzania (FRB
Subsidiary in TA)
ADB Loan 12-Dec-2012 31-Dec-2017 34.36 14.32 41.67
CRDB Bank Ltd Line of Credit 2015 ADB Loan 18-05-2016 85.54 0.00 0.00
SUB-TOTAL (FINANCE) 119.90 14.32 11.94
ISP for Good Governance III ADF Loan 3-Feb-2016 30-Jun-2019 12.00 0.80 6.71
SUB-TOTAL (MULTI SECTOR) 12.00 0.80 6.71
TOTAL (NATIONAL) 1073.08 271.92 25.34
East Africa Transport and Trade Facilitation (EAC) ADF Grant 29 Nov. 2006 31-Dec-2016 6.20 4.15 66.98
Arusha-Holili/Taveta-Voi Road Project ADF Loan 16-Apr-2013 31-Dec-2018 79.90 15.84 19.83
Lake Victoria Water Supply & Sanitation Programme Phase II (LVWSSP) ADF Grant 17-Dec-2010 30-Dec-2017 17.48 12.59 72.01
The EAC Payments & Settlement Systems Integration Project (EAC - PSSIP) ADF Grant 5-Dec-2012 30-Jan-2017 15.00 6.09 40.62
Regional Rusumo Hydropower ADF Loan 27-Nov-2013 31-Aug-2019 22.41 0.02 0.09
EAC Railway Sector Enhancement Project NEPAD IPPF
Grant
29-Jun-2012 20-Dec-2016 0.89 0.61 69.02
EAC Centres of Excellence Skills Technology ADF Loan 3-Oct-2014 31-Dec-2019 6.25 0.90 14.42
Kenya -Tanzania Interconnection ADF Loan 18-Feb-2015 31-Dec-2019 75.29 1.06 1.41
SUB TOTAL (MULTINATIONAL) 223.41 41.27 18.47
GRAND TOTAL (NATIONAL/MULTINATIONAL) 1296.50 313.18 24.16
FINANCE
MULTI-SECTOR
B. MULTINATIONAL OPERATIONS:
A. NATIONAL OPERATIONS:AGRICULTURE
TRANSPORT
WATER SUPPLY/SANITATION
ENERGY
SOCIAL
- 3 -
APPENDIX 3: Donor Coordination Matrix for Tanzania
Focus area Phasing IN
Focus area and Current
Chair/co ChairPhasing OUT
Some support Future Chair
FYDP II Sub sectors
AfD
B
Be
lgiu
m
Can
ada
De
nm
ark
EU
Fin
lan
d
Fran
ce (
AFD
)
Ge
rman
y
Ire
lan
d
Ital
y
Jap
an
Ko
rea
Ne
the
rlan
ds
No
rway
Swe
de
n
Swit
zerl
and
UK
(D
FID
)
UN
USA
Wo
rld
Ba
nk
(pe
nd
ing
CA
S
ap
pro
val)
Agriculture
Food and nutrition
Manufacturing
Mining
Construction
Tourism
Business environment
Environmental and Natural
Resources
Urban Planning, Housing
and Human
Settlement
Energy
Transport
Education
Skills development
Water and sanitation
Health
Poverty Reduction and
Social protection
Good Governance
Science Technology and
Innovation
Creative industry
Current Sector/thematic working
group DPG
Agriculture
Infrastructure
Education
Culture
Governance
Social Protection
Industry and Trade (PSD)
Environment, natural ressources and
Climate Change
Water
Health
Ministry for Agriculture, Livestock and
Fisheries
Ministry for Education, Science,
Technology, and Vocational Training
Ministry for
Works, Transport,
and
Communication
Ministry for Energy and
Minerals
Ministry for Water and Irrigation
Ministry in the President's Office - Regional
Administration and Local Government,
Public Service Management, and Good
Governance
Ministry in the Vice President's Office -
Union Affairs and Environment
Ministry for Education, Science,
Technology, and Vocational Training
Ministry for Health, Community
Development, Gender, the Aged, and
Children
Lead Ministry
Ministry for Industry, Trade and Investment
Ministry for Information, Culture, Artists,
and Sports
Innovation and Technology
- 4 -
Appendix IV : ANRC’s Baseline study on local content in Tanzania
In Tanzania, the ANRC is conducting a baseline study of the local content in at the request of the the
National Economic Empowerment Council (NEEC) at the Prime Minister’s office, with the role to be
responsible for local content development and management covering key sectors of the economy. This
will help the Government to identify key gaps and opportunities as well as inform future activities
including the AfDB support in the sector.
The Local Content Situation Analysis is focused on Tanzania’s oil, gas and mining sectors in order to
support NEEC. There are three phases to the situational analysis:
Phase 1 – Gather information available both publicly and privately about legislation,
policies, and key stakeholders and their roles and initiatives to promote local content.
Identify gaps and inconsistencies, drawing examples from successful initiatives that can be
replicated;
Phase 2 - Examine previous public and private work on skills gaps and supply chains. Make
key recommendations based on the gaps identified;
Phase 3 - A validation workshop will be held to confirm key findings and recommendations
and share them with relevant stakeholders.
The information found in the Phase 1 report for the local content situational analysis sets the ground
work for the more detailed Phase 2 report, which will capture more of the available knowledge
regarding local content in Tanzania’s extractive industries identify gaps in legislation and information,
and provide key recommendations to the government of Tanzania. NEEC will play an important role
in verifying the information in this report and providing feedback. After Phase 2, wider consultation
and verification will be conducted to produce the final situational analysis.
Phass 1 has just been completed and provides an overview of the sector and current challenges. While
the Mining Act of 2010 is the more out of date legislation, neither the Mining Act nor the Petroleum
Act contain hard local content policies other than PA2015 Section 219. While local content regulations
for the petroleum sector are now being developed, it is unclear whether regulations will be forthcoming
for mining as well. Additionally, both policies seem to preference Tanzanian ownership as opposed to
in-country value addition by both foreign and domestic firms.
Table 1. Key Legislation for Local Content in the Extractive Industries Mining Act, 2010 Requires that applications for a Special Mining Licence or Mining Licence contain a
procurement plan of goods and services available in the United Republic, a plan with
respect to the employment and training of citizens of Tanzania, and a succession plan for
expatriate employees
Petroleum Act,
2015
Mandates a preference for goods and services available in Tanzania. When those are not
available, they should be delivered by a company that is in joint venture with a local
company whose participating share is not less than 15%. Further requires a recruitment
and training plan and procurement plan be submitted to a newly created Petroleum
Upstream Regulatory Authority (PURA) and updated on a regular basis after the granting
of a licence and Act prescribes a new role to the Energy and Water Utilities Regulatory
Authority (EWURA) in respect to midstream and downstream petroleum and natural gas
activities.
In terms of key actors for local content policy formulation and implementation, Section E breaks these
down into government, international institutions and governments, the private sector, and civil society
(including the media and trade unions, as seen in Table 2.
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Table 2. Key Actors for Local Content in the Extractive Industries in Tanzania Government NEEC LCD set up in Sept 2015 to promote and coordinate local content across the
national economy.
MEM Coordinates the development of energy and minerals resources in Tanzania,
setting policies, strategies and laws
TMAA Monitors and audits mining operations
EWURA Monitors and regulates the downstream and midstream petroleum sectors
PURA Monitors and regulates the upstream petroleum industry and advise o=the
Minister on local content policy
TPDC Implements petroleum exploration and development policies and participates
in exploration, development, production and distribution of oil and gas and
related services in partnership with IOCs
STAMICO Vehicle through which the government participates in mining
TNBC Facilitates dialogue between the government and private sector
VETA Coordinates, regulates, finances, promotes and provides vocational education
and training in Tanzania
International
Institutions and
Governments
World
Bank
Conducts studies on local content in Tanzania
European
Union
Funding support to NEEC for local content in non-extractive sectors
UNDP Has several projects related to education and training in Tanzania
UNIDO Works with technical institutes to support education and training programmes;
has done work on building linkages through SMEs
Norway/
Norad
Involved in several education and training initiatives; implements Oil for
Development programme in Tanzania and sponsors CMI’s ‘Tanzania as a
Future Petro-State’ project
Private Sector OGAT Industry association for IOCs in Tanzania. Involved in several local content
studies, lobbies for softer local content regulations
BG and
Statoil
Partners in the proposed Tanzania LNG plant. Together, they have been
conducting other studies of skills gaps, labour needs, and the supply chain for
the LNG plant
Achilles Provides procurement services in the form of an online cloud-based portal that
buyers and suppliers can use for managing tenders
TPSF Umbrella body of private sector in Tanzania
Civil Society VSO Involved in education, training, and skills gap analyses in Tanzania
Oxfam Advocates for transparency of contracts and supports local partners to
advocate for social and environmental safeguards and fair distribution of
natural gas revenues
AKF Operates Coastal Rural Support Programme (CRSP) in Lindi and Mtwara
Regions
ESRF Tanzanian policy research think tank that produced a baseline study in 2016
called Effective Management of the Tanzanian Natural Gas Industry for an
Inclusive and Sustainable Socio-Economic Impact
REPOA Tanzanian research institution with the mandate to contribute to the alleviation
of poverty in its multiple dimensions through research and capacity building
Policy
Forum
Network of 74 Tanzanian civil society organizations doing advocacy on oil
and gas as well as other questions of development
The report makes some preliminary conclusioorganized according to four themes: local employment,
education and training, local procurement and governance. In terms of local employment, the report
collects baseline data for petroleum and mining. The section therefore highlights the lack of clarity
about how NEEC would be able to participate in the monitoring of expatriate labour to ensure that
skills are being transferred to Tanzanians and suggests that there may be a need for NEEC to have a
formal role in the approvals process. Although there are still gaps and inconsistencies in the way data
is collected, the data already demonstrates how significant it could be to reduce Tanzania’s reliance on
foreign skilled labour in the extractive industries—both for reducing costs and encouraging greater
local participation in the sector over time.
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For local procurement, the report discusses six key issues: 1) gaps in the legal framework for
regulation, 2) the issue of a supplier database, 3) SME development and enterprise centres, 4)
addressing the lack of capital for Tanzanian entrepreneurs, 5) support and prioritization for larger
industries, and 6) soft vs hard local content regulations. Key findings are that there is a general
weakness in PA2015 and even more so in the Mining Act 2010 in terms of promoting local content.
There is confusion about who is responsible for monitoring and enforcing local content in the minerals
sector and a lack of information about any enforcement actions taken to date. Unlike in many other
countries, there are no clauses giving Tanzanian companies or companies that domicile value-added
activities in-country preference if they are within a certain margin of the lowest bid for a tender in
either petroleum or mining. Finally, there are multiple definitions of a ‘local company’ in Tanzania.
Table 3: Key Issues in Local Content in Tanzania
Information and data
required
NEEC and the other ministries and agencies responsible for local content in the
extractive industries lack the necessary research and data to properly design and
implement local content policies. NEEC in particular lacks a department tasked with
research, data and statistics.
Sectors of economic
activity
The local capacity in various service sectors is not well-known, nor has comparative
work and engagement been done with a view toward prioritizing which sectors to focus
on in local content development. This issue affects questions about to what extent
regulations will involve hard targets, in which areas project sponsors will focus their
local content initiatives, and how to align local content policy with national development
objectives.
Involvement of
stakeholders
Currently there is a lack of coordination of stakeholders from the private sector and
international donors, as well as very little involvement of local and international civil
society in the issue of local content in oil, gas and mining. This issue affects both design
and implementation of local content, particularly on the question of monitoring.
Capacity building of local
companies
Local small and medium-sized enterprises lack the capacity, training, internal processes
and capital to participate in tenders from larger oil, gas and mining companies.
Regional local content On their own, the reserves of hydrocarbon resources in Tanzania and other countries in
East Africa lack the scale to justify the development of certain supporting service sectors
that are particularly specialized or capital intensive. There is a little coordination among
governments and agencies responsible for local content. Regional local content offers
the possibility of better economies of scale for larger Tanzanian companies offering
certain kinds of services.
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Appendix 5: Tanzania Revenue Authority - DPs Technical Assistances and Target Areas
S/N AREA DPS AREA OF ASSISTANCE
1 Domestic
Revenue (Large
Taxpayers)
US Treasury a) Transfer Pricing b) Audit of Multinational Companies c) Audit of specialized sectors (tourism Financial
institutions, and telecommunication) d) Development of specialized Audit Guide.
DfID/HMRC* Development of Interstate Automatic information exchange
system for tax purpose
2 Domestic
Revenue
(Medium and
Small Taxpayers
US Treasury a) Review tax returns and filing procedures to simplify self-assessment
b) Audit of construction sector
IMF AFRITAC a) Development of a Compliance Management Strategy b) Development of a National Audit Plan
3 Tax
Investigation
US Treasury Develop Investigation Guide/Manual and Case Inventory
Management Information System (CIMIS)
US Treasury Transitioning of TID form audit work to criminal
investigation
4 Internal Affairs DfID/HMRC External Review of TRA Integrity and Transparency
HMRC Modernize TRA physical and digital Security
5 Internal Audit DfID/HMRC Implement Internal Audit Strategy
6 Information
Technology
DANIDA/SKAT** Design and implement integrated Enterprise Application
Architecture
Key: *HMRC – Her Majesty Revenue & Customs – UK
**SKAT – Danish Tax Authority - Denmark
Source: Tanzania Revenue Authority, June 2016
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APPENDIX 6: Analytical Work Underpinnings
Component/Reform
Areas
Analytical Work Institution
Overall Strategic
Context
Tanzania Development Vision 2025; and
National and Zanzibar strategies for growth
and poverty reduction
MoFP
BRN Strategic Documents
Country Strategy Paper (2016-2020) AfDB and GoT
Public Service
Management
The Reforming Tanzania Public Sector
Report: An Assessment of Future Direction
(November, 2013)
GOT
Governance Governance and Corruption Survey (2014) GOT
Public Finance
Management
PFMRP IV and Action Plan (2011) MoF
PFMRP IV Mid-Term Draft Final Report,
July, 2015
GOT and PFMRP
Secretariat
2014 General Budget Support Annual
Review: Final Report, September, 2015
GOT
PEFA Assessments , 2010 and 2013 MoF
OPEV Joint PFM Evaluation Public Finance
Management Reform??? (2011)
AfDB
Development Policy Operation for Tanzania World Bank
Tanzania Revenue Authority Fourth
Corporate Plan 2013/14 – 2017/18
TRA
Fourth & Fifth Review of the IMF Policy
Support Instrument and IMF Article IV
Consultation Report, July & Oct. 2016
IMF
Tax Administration Diagnostic Tools
Assessment; March 2016.
World Bank
Natural Resources
Management
ANRC’s Baseline study on local content in
Tanzania
AfDB
Guidelines for Women’s Economic
Empowerment in Oil and Gas Industries in
Africa
AfDB
ANRC knowledge tool on local content
policy formulation
AfDB
ANRC knowledge tool capacity building for
negotiations.
AfDB
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APPENDIX 7: Main projects of other Development Partners in the natural resources sector
NORAD Under the Oil for Development Program, NORAD has supported Tanzania to
develop the Petroleum Act 2015 and build capacity for economic modelling in the
sector. The program is currently in a new programming phase which has enabled
to exchange with AfDB to build synergies and avoid duplications. The role of the
AfDB to develop the regulatory framework is much welcome given that Statoil is
a key investor in Tanzania which creates perceived conflicts of interest for
NORAD.
JICA JICA has support GoT to develop the Natural Gas Utilization Master Plan which
is currently in finalization phase for approval. and approval phase. JICA has also
received request form the GoT to assist in formulating the domestication of gas and
distribution plan. JICA is considering short-term training sessions for different
stakeholders (mainly government officials) in Japan and Tanzania also under the
implementation of the master plan. Several exchanges between the Bank team and
JICA enabled to avoid duplications and build synergies.
World Bank The Energy Sector Capacity Building Project for Tanzania is to strengthen the
capacity of the Government of Tanzania (GoT) to develop its natural gas sub-
sector, and Public Private Partnerships (PPP) for the power generation sector. The
project has five components. Component A is petroleum policy and legal
framework. Component B is strengthening institutional sector management,
coordination and governance. Component C is education and skills development.
Component D is power generation and natural gas PPP projects capacity building.
Regular consultation has been ongoing with the Bank team over the last few years
given the Bank has also been a key DP in the energy sector.
EU The EU supports the GoT to undertake a baseline study of the local content
situation is economic sectors other than extractives, e.g. the agriculture and
tourism sector. Early coordination with the Bank team enabled to build synergies
with the ANRC preparatory study on local content in the mining and gas sectors.
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APPENDIX 8: MAP OF TANZANIA