national key result area (nkra) resource mobilisation€¦ · executive summary. last modified...

National Key Result Area (NKRA)

Resource MobilisationExecutive Summary

Last Modified 4/8/2013 1:45 P

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Summary

▪ Tanzania’s spending has consistently exceeded its revenues, leading to widening fiscal deficits and an increasing debt level

▪ Tanzania faces 3 main problems:– Increasing expenditure at a Compounded Average Growth Rate of 22% annually which supersedes

incurring revenues– An increase in debt service levels at a Compounded Average Growth Rate of 46% due to borrowing of

Development Expenditure– Reliance on development partners for funding to grow the economy to enable a stable fiscal position

▪ The lab has come up with a set of solutions:– Tax Revenue: Increase incremental revenues through Excise duty, Exemptions, Education Investment Levy,

Fuel Levy, Withholding Income Tax, Customs Valuation– Non Tax Revenue: Increase incremental revenues through Parastatals, Local Government Authority

(property tax and land rent), Natural Resources– Expenditure: Capping annual expenditure to improve fiscal position– Public Private Partnerships (PPP): Implement PPP projects and enable joint partnership investments with

the private sector▪ We foresee a few big quick wins that needs to be implemented over the next 6-12 months:

– Implement Tax Revenue initiatives to see immediate incremental revenues– Implement Non Tax Revenue initiatives to increase collections from Local Government Authority– Improve PPP processes, merge the units and implement identified PPP projects from the lab

▪ A total budget of TZS 485 billion (3 year budget request) is required to implement all initiatives by 2015/16▪ However, the lab found TZS3,892 billion in incremental revenues from Tax and Non Tax initiatives which can

help to relieve the overall lab budget request


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Table of content

▪ Abbreviations

▪ Introduction– Case for change– Lab objective and theory of change– Lab scope– Topline targets for Resource Mobilisation

▪ Key initiatives from each workstream

▪ Overall budget request

▪ Governance structure

▪ Key milestones

▪ Key performance indicators

▪ Legal changes

▪ Stakeholder sign off


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AbbreviationsAcronym Full name / Description

PPPU Public Private Partnership Unit (new)

PPP Public Private Partnership

POPC President's Office Planning Commission

BOT Bank Of Tanzania

CMS Capital Market Securities

PMO Prime Minister's Office

TIC Tanzania Investment Centre

POPSM President's Office Public Services Management

DHRM Director of Human Resources Management

CA Contracting Authority

PPPCU Public Private Partnership Coordinating Unit

PPPFU Public Private Partnership Financing Unit

AG Attorny General

CPD Chief Parliamentary Draftman

IMTC Interministrial Technical Commettee

PSDI Private Sector Development and Investment

BRN Big Results Now

TOR Terms Of Reference

PPPFF Public Private Partnership Facilitation Fund

EIA Environmental Impact Assessment

MoE Ministry of Education

MEM Ministry of Enegry and Minerals

IMC Interministrial Commettee

GoT Government of Tanzania

CU Coordination Unit

MoLHHS Ministry of Lands, Housing and Human Settlements

EWURA Energy and Water Utility Regulatory Authority

IFI International Financial Institutions

MIGA Multilateral Investment Guarantee Agency

Acronym Full name / Description

PMO RALGPrime Minister’s Office Regional Administration and Local Government Authority

LGA Local Government Authority

Parastatals Government owned/link companies

TR Treasury Registrar / Head of Parastatals

TSCP Tanzania Strategic Cities Project

NKRA National Key Results Area

IPO Initial Public Offering

RFB Roads Fund Board

MOF Ministry of Finance

PO Private Operator

FU Financing Unit

SPV Special Purposes Vehicle

JV Joint Venture

TPA Tanzania Port Authority

MoT Ministry of Transport

VPO-e Vice President's Office -Envornment

M&E Monitoring and Evaluation

DART Dar es Salaam Rapid Transit

NPSC National PPP Steering Committee

RA Regulatory Authority

PFS Pre-Feasibility Study

FS Feasibility Study

TC Technical Committee

IECDB import export community database

NISC National investment steering committee

DRP Director for Research and Policy


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Table of content

▪ Abbreviations





▪ Key milestones


▪ Legal changes



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37 lab members from 23 different Public and Private sector organisationsparticipated in the lab

Attorney General Chambers

State HousePrimeMinisters

office

SSRA InnovexConsulting

University of Dar Es Salaam

National Housing

corporation

UTT

PMO-RALGTanzania Investment

Bank

Ministry of Tourism and

Natural Resources

Ministry of Energy

and Minerals

Tanzania Minerals Audit Agency

Zanzibar Planning

Commission

Zanzibar President’s Office

TRAKenya Commercial

Bank

POPC Bank of Tanzania

DSE TICMOF TPSF


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List of participating lab membersOrganisation NameInterim PDB - MOF Said Mabie

Attorney General Chambers NdeonikaMwaikambo

Innovex Leonard ChachaMinistry of Finance Samwel MayikuMOF Fatima MoshiNational Housing Corporation Cosmas T. KimarioPrime Minister’s Office Ezamo Maponde

POPC - Monitoring and Evaluation Angela Uforo Shayo

TIB (Tanzania Investment Bank) Jaffer MachanoTIB (Tanzania Investment Bank) Derick MoshiNational Development Corporation Godwill WangaTIC (Tanzania Investment Center) Saidi AmiriTPSF (Tanzania Private Sector Foundation) Lawrence MafuruZanzibar Planning Commission Seif Abdalla JunaInterim PDB – POPC Senya RobertsInterim PDB - TRA Straton Kimario

Dar es Salaam Stock Exchange Magabe KibitiMaasa

Kenya Commercial Bank Brighton BaloziMinistry of Finance Bernard KabakakiTanzania Revenue Authority Salum YusufuTanzania Revenue Authority Cecilia Mpota

Organisation NameTanzania Revenue Authority Stephen GamaTanzania Revenue Authority Emmanuel Hezron

Tanzania Revenue Authority AndengenieMwaipopo

Tanzania Revenue Authority Deogratius ShumaTanzania Revenue Authority Alvera NdabagoyeTanzania Revenue Authority James MbundaTanzania Revenue Authority Mugisha Kamugisha

Bank of Tanzania (Central Bank) Johnson Jossia Nyella

Ministry of Energy and Minerals, Tanzania Minerals Audit Agency Venance Bahati

Ministry of Energy and Minerals, Tanzania Minerals Audit Agency Paul Masanja

Ministry of Finance Nicholous ShombeMinistry of Finance Emmanuel TutubaMinistry of Tourism and Natural Resources Endrick S. KillengaMinistry of Finance Mary MshangilaPMO RALG Shomari MukandiPMO RALG Monica KwiluhyaSocial Security Regulatory Authority Salma MaghimbiUniversity of Dar Es Salaam Godius Kahyarara

Zanzibar President's Office Bihindi NassorKhatib


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Entire lab team structure consisted of 45 full time lab participants

Facilitators

Content ExpertsFrancisco Goncalves PereiraJose Queijo

LeadershipJohn TohAaron Flohrs

35 Full Time Lab Members

Engagement ManagerMien Dee Yong

Lab LeaderLawrence Mafuru

Deputy Lab LeaderMugisha Kamugisha

Water labDavid MerinPublic-Private PartnershipsEducation lab

Andrew Loh Zhu AnTax Revenue Education lab

Sue Lyn LimTax Revenue


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Table of content

▪ Abbreviations





▪ Key milestones


▪ Legal changes



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Tanzania has set its fiscal vision and targets to develop a strong economy

“Improve domestic revenue and decrease reliance on budgetary support from development partners

Including the private sector in economic development by playing a strategic role in public-private partnerships”

A Strong and Competitive Economy:Macroeconomic stability manifested by low inflation rates and basic macroeconomic balances and a growth rate of 8% or more per annum

2025 vision

SOURCE: Vision 2025; LTPP;FYDP

2025 targets

Preservation of macroeconomic stability to underpin financial confidence for enhanced investment and growth is an underlying prerequisite for the success of the Plan. Such stability, along with the high growth that is necessary for reducing poverty, is possible only under prudent and consistent monetary and fiscal policies.

19 20 21

2015 2020 2025Revenue as % of GDP

107

5

2015 2020 2025Net ODA as % of GNI

ODA: Official Development Assistance


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Tanzania has run budget deficits for the last 15 years

2007/20082005/20062003/20042001/20021999/20001997/19981995/1996 2010/2011

TZS 9.4 trillion

TZS 5.7 trillionGovernment ExpenditureGovernment Revenue

0.61.3

-1.9

-4.4 -4.3

-8.1-8.9 -9.5

-12

-10

-8

-6

-4

-2

0

20

-1 Tril

-2 Tril

-3 Tril

-4 Tril

-10.6-11.6

-10.3-10.9-9.9

-6.8

-5.1

-2.0

Deficit, LHSDeficit/GDP (%), RHS

TZS % of GDP

SOURCE: POPC


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Debt service for the country remains high with development expenditure at ~30% of total budget

SOURCE: MOF, POPC

11%11%

13% 11% 10%

70% 66% 70% 71% 73%

17%24%19% 17%18%

as % of total expenditure

Development Exp(Foreign Sources)

Development Exp(Local Sources)

Recurrent Expenditure

2006/07

245

1,041

2008/09

270

2007/08

325

+46%

2010/11

1,117

2009/10

TZS billions

2006/07 2007/08 2008/09 2009/10 2010/11

Ratio of 70% (Recurrent Expenditure) and 30% (Development Expenditure) Debt service growth (CAGR) at 46%


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Secure funding for 6 BRN labs by having a favorable funding model by end of lab

Reduce budget deficit to (-)TZS 4 trillion by 2015 and surplus by 2025

The lab has key objectives and theory of change

SOURCE: BRN analysis

1

2

Target: -TZS 4 trillion

Initiative 1

Initiative 5

Initiative 4

Initiative 3

Initiative 2

Deficit

Budget surplus in 2025

Deficit in

2015/16

Decrease other costs

Private investments

. Reduce DE

Increase non-tax revenue

Reduce exemptions

Increase tax #2

Increase tax#1

Deficit in

2012/13

Revenue Expenditure

FundingModel

Total BRN funding

for 6 labs

Reallocation from Existing

Budget

LoansGrantsPPP / Private Investments

Total Making the Most

Increase non tax revenue

Increase tax revenue

Structure of model to be determine

12.5% of GDP (estima-ted)


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Lab scope and topline target is to increase revenue and enable public-private partnerships to reduce reliance on borrowing for economic growth

Topline TargetsScope

3 Customs Valuation

2 Exemptions

4 Education Investment Levy

1 Excise Duty

5 Withholding Tax on Imports

2 Local Government Authority

1 Parastatals

3 Natural Resources Collections

3 PPP Fund

1 1 Combined PPP Unit

3 PPP Project with Alternative Financing

Recurrent expenditure: Government vehicle, procurement process, rationalisingresources in ministry, etc.

1

Increase revenue of TZS 3 trillion by 2015/16

Increase revenue of TZS 3 trillion by 2015/16

Implement PPP projects valued at TZS 6 trillion by 2015/16

Implement PPP projects valued at TZS 6 trillion by 2015/16

Budget Deficit

Target: - TZS 4 trillion

Revenue

Expenditure

TZS3 trillion

Development expenditure/debt service

Tax

Non-Tax

Public-Private Partnerships

Recurrent expenditure

(Scope for Phase 2)

4 Capital Market Liberalisation

6 Fuel Levy

2

Expenditure Cap for 2014/15 and 2015/16


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Table of content

▪ Abbreviations





▪ Key milestones


▪ Legal changes



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e14 Initiatives developed from the BRN labs by 37 lab members over 24 working days


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How will we increase revenue for the country?


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Compared to other emerging market countries, Tanzania’s revenue collection is below average Both tax and non-tax revenue can be improved

26.0

19.1 19.5

13.8 13.4 15.210.9 12.0

2.6

3.8

6.33.3

4.1

9.4

Nigeria

9.7

0.3

Uganda

12.40.4

Indonesia

15.0

Tanzania

16.41.2

Ghana

16.7

Malaysia

20.1

Kenya

20.30.8

Chile

22.9

South Africa

28.6Revenue as % of GDP

Tax revenue (as % of GDP)

Non-tax revenue (as % of GDP)

Average of 18%across all countries

SOURCE: TRA, MOF, World Bank latest figures


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Incremental revenue by 2015

Our ambition was to attain additional revenue of TZS 3 trillion but we have surpased our ambition to find TZS 3.9 trillion by 2015

3,892

Target

3,500+892

Identified Initiatives

3,000

TZS billions

Additional target


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Incremental revenues are from Tax and Non Tax initiatives

Total Incremental Revenue

Revenue

Tax Revenue

Revenue Collection Areas

1,158B

Exemptions 461B

Customs Valuation 181B

Education Investment Levy 158B

243B

Local Government Authority 53B

Parastatals

Natural Resources 114B

Excise Duty

Potential Impact by 2015 (TZS)

Non Tax Revenue

Withholding Tax on Imports 677B

Fuel Levy 847B

TZS 3,892B TZS 3,892B


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Domestic goods (beer, spirits, tobacco, soft drinks) & Luxury goods

Revising excise duty rates will provide additional TZS 1,158 billion

Incremental revenue

TZS 1,158 Bby 2015/16

@ 80% collection

Current state

Specific excise duty Quantity

▪ Annual duty increases lead to yearly public outcries

▪ Annual duty increases does not taken into account inflation

Future state

% at regional

ratesValue

▪ Eliminates annual duty review▪ Automatically accounts for inflation

Current Rate New Rate

Beer 19% 45%

Tobacco 31% 84%

Soft Drinks 7% 10%

Spirits 45% 80%

Luxury Goods 0% 10%* rates vary depending on goods


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Current state Future state

Reducing exemptions will provide additional TZS 461 billion

Flow

StockIncremental revenue

TZS 461B

100B on Industrial Sugar Import Duty Exemption, for specific companies

28%Others

FoodGiant

15%

FoodGiant

20%

BottlingCo

20%

Bottling Co

16%

653998

1,591

2009/10

4,437

2013/14

12,0488,033

10,127

2011/12

6,5145,315

Tax collected

Tax exemptions

TZS billionsAverage growth rate of 56%per year from 2009/10 to 2011/12

Company TaxesBottling Co 90% additional

taxes paid for industrial sugar imports

Bottling CoFood Giant

0% Exemptions

653

2009/10

998

4,437

12,048

2013/14

10,1278,033

2011/12

6,514

1,591

5,315

TZS billionsCap increase at 15% or nominal GDP growth per year

Cap revenue loss

Cap revenue loss

by 2015/16


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Using the more dynamic Import Export Commodity Database(IECDB) on will provide an additional TZS 181 billion

Customs and inspection

Transaction price database (based on historical value)

Valuegoods

Customs officer

Valuegoods

Customs officer

Airport

Airport Import export commodity database (IECDB) -recommended by the World Customs Organization

▪ Undervaluation of imported goods at customs

▪ Misclassification of goods (HS code)– Human error– Intentional

▪ Robust and dynamic database with valuation (current pricing –high, medium, and low values) for other goods and non-transactional values

▪ Risk management criteria for inspections and internal affairs unit to detect corrupt / suspicious behaviour

▪ Linking pre-arrival and customs clearance process via systems

▪ Enhance enforcement methods and anti-corruption measures

▪ Training / capacity building for customs

Incremental revenue

TZS 181 B by 2015/16


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Introduction of an Education Investment Levy will provide additional TZS 158 billion

Incremental revenue

TZS 158 B by 2015/16

2.5% rate2.5% rate Company TurnoverCompany Turnover = $X ][

Telecommunication companies

Assumptions: 15% annual growth rate from 2013-2015/16

▪ The telecommunications industry is the fastest growing industry in Tanzania (22% in 2010)▪ The industry has been passionate about contributing to education – through their respective

philanthropic foundations and Corporate Social Responsibility (CSR) projects▪ Licenses were given out to companies initially without auctioning

▪ The telecommunications industry is the fastest growing industry in Tanzania (22% in 2010)▪ The industry has been passionate about contributing to education – through their respective

philanthropic foundations and Corporate Social Responsibility (CSR) projects▪ Licenses were given out to companies initially without auctioning

• This new tax will most probably be passed on to a broad base of consumers (28 Million Tanzanians) – so the impact will be spread out

• Per year, each phone line will pay about TZS 1881 more. Virtually unnoticed by consumers


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Introducing a withholding Income tax on imports willgive Tanzania an additional TZS 677 B in revenue

Current State

Pays customs duties

Pays income tax

Doesn’t pay income tax

Future State

Pays customs duties

Pays income tax

Doesn’t pay income tax

5% withholding income tax

Collection at time of importation Filing of income taxes Income tax paid

Collection at time of importation Filing of income taxes Income tax paid

New revenue

100%When filing taxes

50%Upfront

50%When filing taxes

50% Collected upfront

▪ Enforcing compliance▪ Some importers will move from the

informal sector to the formal tax regime – then can offset paid tax via quarterly provisional declarations

▪ Some importers will stay in the informal sector, but will be forced to pay 5% withholding income tax

▪ Will be able to offset paid withholding tax via quarterly provisional income tax declarations

▪ Does not pay corporate or individual income tax (evasion)

▪ Pays corporate or individual income tax

Assumptions: 50% collection and 0% import growth by 2015. Petroleum products excluded

Incremental revenue

Tsh 677 Bby 2015/16


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Adjusting the fuel levy to its real value in 2007 (to account for inflation) will result in at least additional TZS 847 billion

Unadjusted fuel levy (reality)

Incremental revenue

TZS 847 Bby 2015/16

TZS per liter

▪ The last time the fuel levy was reviewed was in 2007▪ Since 2007, the fuel levy has not been adjusted,

even for inflation▪ With inflation, the fuel levy is estimated to have lost 47% of its value since 2007▪ Funds will be channeled to the Roads Funds Board

▪ The last time the fuel levy was reviewed was in 2007▪ Since 2007, the fuel levy has not been adjusted,

even for inflation▪ With inflation, the fuel levy is estimated to have lost 47% of its value since 2007▪ Funds will be channeled to the Roads Funds Board

350

400

300

250

0

200

242216

2007

371

2012/13

354

316

2010/11

287259

2008/09


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Auctioning Natural Resource assets will provide additional TZS 114 billion

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Incremental revenue

TZS 114 Bby 2015/16

Tanzania’s Assets

156 Hunting blocks,25,503,200 ha

Current state

Hunting Blocks

ForestLots

Applications to purchase from

ministry

Awarded to companies at applied prices

Future state

Auction Method (with Ministry of Natural Resources and MOF)

Hunting Blocks

ForestLots

1 - Local

2 - International

3 - Local

1 - International

2 - Local

3 - International

Bidder Bid price<low>

<medium>

<high>

<high>

<medium>

<low>16 Government forest plantations, 85,387 ha

Awarded to highest bidder !


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New act, strict Treasury Registrar and enforcement will provide additional TZS 243 billion from Parastatals

Incremental revenue

TZS 243 B by 2015/16

Current state Future state

TreasuryRegistrar

Total parastatals: 236100% government owned: 166Paying: 12Not paying: 11

Mandatory remittance of 10% of company gross revenue annually

Auto deductQuarterly

Value of payments today

TZS 19.4B annually

$$

Total parastatalsexpected to pay: ≥15 (currently profit making)

For profit making entities only

TreasuryRegistrar

$$

New Treasury Registrar Appointed

Value of payments tomorrow

New TR Powers & Functions Act Implemented

ParastatalsParastatals ParastatalsParastatals

Implement Performance Contracts on Parastatals

BUT

Low compliance among parastatals

TZS 43.5B to TZS 98.9B annually


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Simplifying guidelines and empowering local government authorities will provide additional TZS 53 billion

Future stateCurrent state

Many properties missed out from valuation and collection of property tax

Local councils(147#)

Local councils(147#)

Expensive!Estimated cost: ~TZS 4B for 495,000 DAR properties only, over 3 years

Access to valuation company

(10#)

Access to valuation company

(10#)

Collections from 10 councils = TZS5.8 B

No access to valuation company

(137#)

No access to valuation company

(137#)

▪ Collections from 53 councils = TZS1.7 B

▪ No collection from 84 councils

Own valuation & Data gathering

GuidelineProperty rate

= Building areax Base Flat Rate per Sq Mx Quality multipliersx (1-Depreciation)x Location Adjustment

Increase in collections

▪ Collect land info while conducting valuation

▪ Merge billing and revenue management system

▪ Collect land info while conducting valuation

▪ Merge billing and revenue management system

Local councils empowered to carry out own valuations and widen collections of property tax & land rent

Local councils(≥147#)

Local councils(≥147#)

Land RentProperty Tax

▪ Single bill for property tax, land rent & other taxes

▪ Mobile payment system

▪ Single bill for property tax, land rent & other taxes

▪ Mobile payment system

TZS 53 B by 2015/16

Incremental revenue

Note: First year pilot implementation plan is for 11 councils only


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How will we reduce government’s expenditure?


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Government expenditure has outpaced revenue in the last decade

2000/2001

5,736

2010/2011

+20%

930

9.439

2000/2001

22%

1.305

2010/2011

TZS billion

TZS billion

Revenue

Expenditure

Budget deficit (2012/13): -6 trillionRevenue:

9.1 trillionExpenditure:

15.1 trillion


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The lab is proposing an expenditure cap for 2014/15 and 2015/16

2015/162014/152013/142010/11

President Office

Prime minister Office

Vice President Office

Labor and Youth Development

Livestock and Fishing

Water and Imigation

Tourism and Natural Resources

Lands,Human Settiement Development

Justice and Constitutional

Infrastructure

Information Culture and Sports

Industries,Trade And Marketing

Home Affairs

Health and Social Welfare

Foreign Affairs and International Cooperation

Finance and Economic Affairs

Energy and Minerals

Education and Vocational Training

East Africa Cooperation

Defense and National Services

Community Devt,Women Affairs & Children

Communication,Science and Technology

Agriculture and Food Security

Expenditure Cap

Options:

1

2

Absolute cap (exact same budget from year before)

Account for inflation

NKRA labs & other high priority projects

MOF can do internal shuffling of funds between Ministries, but general cap is ironclad (inflexible)


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Tanzania can free up TZS 12.5 trillion from the proposed 2-year budget cap. Extra resources to be used for purposes of NKRA and to reduce the budget deficit

2015/16

26,345

17,700

8,645

2014/15

21,594

17,700

3,894

2013/14

17,700

17,700

+Savings

TZS 12.5 trillion

Assumptions:▪ Using 2013/14 ceiling as a base▪ Historical CAGR of +22% used

for projections

Expenditure Cap


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How will we involve the private sector to help develop our

economy?


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1 A basket of 19 transport projects, submitted to PMO, PMO forwarded to PPP unit2 Used public procurement act, which didn't reflect the new PPP Act

Public Private Partnership case for change

PPP Policy put in place

Nov. 2009

Aug. 2010

PPP Act

passed

Oct. 2011

Coord-ination unit

formed

Jun. 2012

First project concepts

submitted1

Apr. 2013

0 PPP projects

approved

Jun. 2011

PPP Regulations put in place

Oct. 2010

PPP Finance

Unit formed

19 Submitted

3 Assessed

0 Approved

The PPP law was passed more than two years ago, but no PPPs have been approved

19 projects have been submitted, 0 approved Meanwhile, informal PPP projects are completed1 Mchuchuma Coal Project and Liganga Iron Ore Project

[Two projects jointly organized under Tanzania China International Mineral Resources Ltd.] (Financial Close September 2011)

2

3

Singida Wind (Likely Financial Close April / May 2013)2

Kilwa Energy (Likely Financial Close April 2013)


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Reducing the government’s development expenditures by increasing private financing of infrastructure projects

Infrastructure Finance Options Roadblocks

Currently Available in Tanzania How We Can Get Past It

Domestic Private CapitalDomestic Private Capital

Underdeveloped capital markets do not offer sufficient financing instruments

Create sufficiently attractive investment opportunities to draw in savings from outside the traditional banking sector (i.e., IPOs, Bonds)

Development PartnersDevelopment Partners

As Tanzania moves towards middle income status, DPs will be less willing to fund projects

We would like to reduce our dependence on this financing channel going forward

Government BudgetGovernment Budget

Current revenue collection, re-curring expenditure amounts, and debt levels hinder future govern-ment development expenditures

Improve government finances by increasing revenue collection and reducing recurring expenditures

International Private CapitalInternational Private Capital

Illiberal capital account restrictions reduce international appetite to invest in Tanzania

Liberalize the capital account and establish mitigating mechanismsfor potential risks (i.e., reduce the need for Tanzanian companies to list on the Nairobi stock exchange to facilitate international investment)

Widely Available Moderately Available Hardly Available


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We developed an innovative expedited process to deliver Big Results Now through PPP for the other lab projects

34

10

Tanzania BRN

-70%

UK Average

Average time from concept to financial close, months

SOURCE: UK Audit Office

▪ Early and continuous engagement of key stakeholders

▪ All items that can be done in parallel are done in parallel, with early starts for long lead time items

▪ Necessary approval meetings are scheduled without delay and all parties are prepared for the meeting to ensure speedy approval

▪ Utilize a steering committee to create a strong mechanism to ensure key decisions are made quickly

BRN Process Changes Impact


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The revised PPP process is streamlined to ensure it is efficient and easily accessible

Start

CAIdentifica-tion of the project

Pre-feasi-bility

Feasibility study

TR MDAs Stake-holdersLandRegulatorAO

PPP Unit (Technical& Financial Feasibility + TA) Provide assistance inselection, prioritisation, development and implementation of PPP projects

PS MoF sign off

YesNo

30 days

discussions & consultations

CA prepare for implementation Procurement (PPA) Contract negotiation

Signing PPP CA + partner

Partner Implementation of construction

Operation

Hand back

AG vets the draft agreement

Monitoring by PPPU

1

2

Funded by PPPFF Funded by PPPFF

Major Changes

▪ Pre-feasibility and feasibility studies funded by PPP Unit

▪ One sign off from PPP Unit (Permanent Secretary –Minister of Finance) due to unification of PPP units

Major Changes

▪ Pre-feasibility and feasibility studies funded by PPP Unit

▪ One sign off from PPP Unit (Permanent Secretary –Minister of Finance) due to unification of PPP units

1

2


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Unifying the PPP units in to one cohesive unit will see shorter time to implement

From an organization spread between different ministries …

… to a unified organization in the Ministry of Finance

Key reasons for the change

Legal Advisor Technical Advisor

Environ-mental Advisor

Coordinating Officer

Economic Advisor

TIC Exec Director

PPP Manager

PMO– Investment

PPP Coordinator

PPP Commissioner

Project Evaluation, Compliance and Financing

Project Performance, Monitoring and Evaluation

MoF

Streamlining the org structure will …

▪ … enable us to reduce the number of approvals required and reduce processing time

▪ … reduce duplicative work

▪ … reduce confusion within the contracting authorities and create a one stop shop for PPPs

MoF

PPP Commissioner

PST

Business Development

Project Development

Project Appraisal Contract Mgmt / Monitoring & Evaluation

Finance & Administration

National PPP Steering Committee


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Setting up a facilitation fund to help pay for feasibility studies on priority projects

Project develop-ment fund (~ TZS94Bn)

Viability gap fund(~ TZS 160 Bn)

▪ To implement strategically necessary PPPs that are not commercially viable

Key information

1 It will be a recurring expenditure and must be out of budget cycle (annual fund)

2 It will increase over time as the country does more PPPs

3 While the project development fund needs to be funded immediately, the viability gap fund does not need to be funded in year 1

Component

▪ Contribution to project costs to make prospective PPPsmore at-tractive to private sector partners

What will it pay for?▪ To ensure quality proposals

from the contracting authorities

▪ To encourage the contracting authorities to do PPPs

▪ To pay for top quality advice

▪ Pre-feasibility studies▪ Feasibility studies▪ Transaction advisors

▪ Arusha Airport rehabilitation

▪ Dawasco (Dar esSalaam water)

▪ Arusha Musomarailway construction

▪ Dar Chalinzeexpressway

▪ Kattavi Geita Simiyuand Njombe regional hospitals

Why do we need it? Examples

PPP Facili-tationFund

Priority


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The fund will support pre-feasibility activities for 48 identified projects to produce 10 PPP projects

Pre-feasibilityPre-feasibility 48 projects $100k USD average cost

100% of costs covered

$4.8M USD total cost

~50% success rate

Feasibility StudiesFeasibility Studies 24 projects $1M USD average cost


$24M USD total cost

~50% success rate

Transaction AdviceTransaction Advice 12 projects $2.5M USD average cost


$30M USD total cost

~80% success rate

48

24

12

Transaction Advice

Feasibility Studies

Pre Feasibility

303024244.84.8 58.858.8

XXXX Total Cost, $M USD# of projects

It ends up costing $5.8M USD per completed project

Completed projects

1059

88

147

2013/14 2015/162014/15

252515151010

XXXX # of projects$M, USD

Total costs will grow as the # of projects grows


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Pipeline of PPP projects

During the lab we increased the number of projects in the PPP Pipeline by 84%

19

35

PreLab

+84%

PostLab

Number of projects

Breakdown of post-lab pipeline

Number of projects

3

7

6

8

8

3

Agriculture

Transport: Rail

Transport: Ports

Transport: Airport

Energy

Transport: Road

Breakdown of pre-lab pipeline

Number of projects

0

0

6

5

6

2

Transport: Rail

Transport: Ports

Transport: Airport

Energy

Agriculture

Transport: Road


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We have identified 3 priority projects to begin immediatelyEnergy Kinyerezi III

Description▪ 300 MW gas power generation plant in

greater Dar that will run off of new gas finds to reduce Tanzania’s reliance on emergency power generation

Time to Financial Close▪ ~10MonthsType of Project▪ GreenfieldSize of Project▪ ~ TZS 750 billion

Transport Dar-Chalinze-Morogoro Expressway

Description▪ Build a 6 lane toll road to ease traffic

congestion, thereby enhancing links to tourism and increasing capacity for regional trade

Time to Financial Close▪ ~13 MonthsType of Project▪ GreenfieldSize of Project▪ ~ TZS 100 billion

Quick Win Dar Rapid TransportDescription▪ A modernized autobus mass transit

system with dedicated bus lanes, elevated stops and stations to alleviate traffic congestion in Dar

Time to Financial Close▪ ~6 Months Type of Project▪ Concession for operation of trunk route and

provision of busesSize of Project▪ ~ TZS 100 billion


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We have also developed innovative alternative financing mechanisms to be further explored post-lab

Energy Kinyerezi FinancingDescription▪ Finance the Kinyerezi III power plant

through a public listing on the Dar Stock Exchange

Proposal▪ Set up a special purpose vehicle to own

and manage Kinyerezi power project and list it on the Dar Stock Exchange

▪ Raise funds from the private sector and domestic market

Impact▪ Lower interest rates from current

deal structure▪ Reduced transaction costs due to

domestic fund raisingRisk:▪ Timeline to implement Kenyerezi III

Transport National Transport Infrastructure FundDescription▪ To establish a unified mechanism for

financing transport infrastructure development and maintenance projects

Proposal▪ Leveraging the Roads Fund platform and

putting together national transport assets to raise funds (eg bonds) to fund new infrastructure projects and maintain existing infrastructure

Impact▪ TZS 7 trillion immediately available to

be raised from the market (through TZS 1 trillion worth of annual cash flow)

▪ Government budget is relieved from borrowing and increase in debt service

Risk:▪ Ring fencing Road maintenance funds▪ Consensus from all infrastructure

stakeholders


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Alternative financing: Raise money through an IPO on the Dar Stock Exchange to finance infrastructure projects

IPOIPO

IPOIPO

Govt.Fund IPO

Power plant – phase iPower plant – phase ii

Power plant – phase iii

Power plant – phase iv

ENERGY LAB EXAMPLE

Using IPOs to finance infrastructure (Concept of idea)

050

100150200250

SPV (5% int)Existing (7% int)

Insurance/fee cost

Gov’t Equity

Debt

Preferred Shares

Capital structure cost comparison for government financing vis-à-vis IPO financing ENERGY LAB EXAMPLE


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Alternative financing: A National Transport Infrastructure Fund tohelp finance infrastructure development and maintenance projects

Why we should do it: Interdependencies justifies cross subsidization

How we should do it: Expand the existing road fund to be a national transport infrastructure fund

Sources Current revenue streams (i.e., Tanzania Port Authority profit, fuel levy)

Privatizations (i.e., Dar Airport)

Future revenue (i.e., borrow against rail levy)

Uses Fund new infrastructure development (rail, port, airport, roads)

Maintain existing infrastructure

Guarantees for debt financing of new infrastructure development

National Transport Infrastructure Trust

Cost

Revenue

From

From

Road cargo

Congested port with limited options to unload cargo

To

Rail cargo

Lower road maintenance cost

Higher profit at ports

To More trans-parent options make it easier to increase traffic

PRELIMINARY


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Table of content

▪ Abbreviations





▪ Key milestones


▪ Legal changes



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723 6,087

Total 2012/13 to 2015/16 Budget

514,420

Total RE:13,420

Total DE: 501,000

PPP

507,610

6,610

501,000

Non TaxTax

Recurrent ExpenditureDevelopment Expenditure

TZS in millions

Resource Mobilisation - First 3 years of implementation (2012/13 to 2015/16) Budget Request


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-514

4103,407

6,000

3,482

Net Incremental Revenue by 2015/16

Total Private Investment by 2015/16

Budget Ask Non-TaxTax

TZS 514 B budget ask from resource mobilization will yield TZS 3,892 Bincremental revenue and unleash TZS 6,000B of private investment by 2015/16


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Resource Mobilisation – 2012/13 Budget Request arefor Recurrent Expenditure only to begin implementingQuick Wins now

303

234

640

Total RE: 1,177

1,177

Total 2012/13 Budget

Total DE:0

PPPNon TaxTax

Recurrent Expenditure

Development Expenditure

TZS in millions


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Resource Mobilisation – 2012/13 Lab Budget Request (Details)

TZS millionNo Initiatives RE DE TOTALTax Revenue1 Implement excise duty rate changes 108.94 0 108.94

2 Implement reduction in exemptions for industrial sugar, cap for overall exemptions and TIC

175 0 175

3 Implement withholding tax on commercial imports 3.5 3.5

4 Cross initiatives – printing for act changes 16.2 0 16.2

Non Tax Revenue5 Implement auto-deduction, performance contract and

performance monitoring for Parastatals183 0 183

6 Implement new valuation guidelines and collection method for property tax and land rent in local councils

51 0 51

Public Private Partnerships7 Set up of combined PPP unit, hiring of new staff,

operationalisation of unit and PPP fund 640 0 640

1,177 0 1,177


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Resource Mobilisation – 2013/14 Budget Request

4203,256

Total 2013/14 Budget

105,402

Total RE: 5,402

Total DE:100,000

PPP

101,726

1,726

100,000

Non TaxTax

Recurrent ExpenditureDevelopment Expenditure

TZS in millions


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Resource Mobilisation – 2013/14 Lab Budget Request (Details)

TZS million

No Initiatives RE DE TOTAL

Tax Revenue

1 Implement excise duty rate changes 5.67 0 5.67

2 Implement reduction in exemptions for industrial sugar, cap for overall exemptions and TIC

50 0 50

3 Implement customs valuation import-export commodity database 238 0 238

4 Cross initiatives – printing for act changes 16.2 0 16.2

5 Cross initiatives - communications 110.28 0 110.28

Non Tax Revenue

6 Implement auctioning of forest lots 1,119 0 1,119

7 Implement auto-deduction, performance contract and performance monitoring for Parastatals

129 0 129

8 Implement new valuation guidelines and collection method for property tax and land rent in local councils

2,007 0 2,007

Public Private Partnerships

9 Set up of combined PPP unit, hiring of new staff, operationalisation of unit and PPP fund

1,727 0 1,727

10 Set up of PPP facilitation fund 0 100,000 100,000

5,402 100,000 105,402


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Table of content

▪ Abbreviations





▪ Key milestones


▪ Legal changes



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Governance Structure for Resource Mobilisation

Owners:▪ TRA

Tax Revenue1

Owners:▪ TRA▪ PMO-RALG▪ Min Natural

Resources▪ Treasury Registrar

Non-Tax Revenue 2

Owners:▪ MOF▪ Governor▪ All Ministries

Expenditure3

Owners:▪ PPP unit (in

MOF)▪ TIC▪ Min of Energy▪ Min of Transport▪ Min of Works


4

1

2 Secretariat:Minister Delivery Unit (supported by PDB)

Secretariat:Minister Delivery Unit (supported by PDB)

Members:▪ MOF Permanent Secretary▪ Central Bank Governor▪ PMO-RALG Permanent Secretary ▪ LGA Permanent Secretary▪ POPC Executive Secretary▪ Attorney General

Members:▪ MOF Permanent Secretary▪ Central Bank Governor▪ PMO-RALG Permanent Secretary ▪ LGA Permanent Secretary▪ POPC Executive Secretary▪ Attorney General

Steering CommitteeChair: PresidentDeputy Chair: Minister of Finance

NKRA Steering Committee level: Meet once a month▪ Workstream / initiative

owners to provide progress updates

▪ SC to make decisions and provides guidance / direction to the team

▪ SC to resolves conflicts

▪ SC to oversees all other matters related to NKRA

Working level:Meet more frequently (eg fortnightly)▪ Liaise directly with

Ministry’s Delivery Unit and respective PDBdirectors

▪ Min of Natural Resources & Tourism Permanent Secretary

▪ Treasury Registrar▪ TRA Commissioner General▪ PPP Commissioner▪ TIC Executive Director


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Table of content

▪ Abbreviations





▪ Key milestones


▪ Legal changes



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Quick Win Milestones for Resource Mobilisation NKRA

2013 2014Jun SeptAugJul Oct Dec Jan Feb Mar JunNov

PPP: Complete unification of PPP units

PPP: Priority projects secured with funding and ready for implementation

Tax: Excise duty, Exemptions, Education investment levy, Withholding tax on imports implemented

Parastatals:TRFunctions & Powers Act passed; New Treasury Registrar appointed

PPP: Facilitation fund set up

Acts: Parliament passing changes in Act for Revenue and PPP initiatives

Parastatals: Auto deduction from profitable companies implemented

Natural Resources: New auctioning method for forestry lots implemented

PPP: Liberalisationof capital markets complete

Expenditure: Cap introduced as part of 2014/15 budget for the entire government


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Table of content

▪ Abbreviations





▪ Key milestones


▪ Legal changes



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Key Performance Indicators for Resource Mobilisation NKRA

RESOURCE MOBILISATION KPI(Quantitative) FrequencySource (data

collection)Method (data

collection)# KPI Category Workstream / Initiative

KPI Owner KPI description Unit 2013/14

Target2014/15 Target

2015/16 Target

Topline Leading Indicators

T1 OverallGovernment revenue and expenditures

Minister of Finance

Reduce budget deficit (before grants) to no more

than TZS 4 trillion by 2015/16

TZS (-)5.5 trillion (-)5 trillion (-)4 trillion Annual Ministry of Finance

Yearly budget allocations [Yearly budget request seating / session ]

T2 Revenue Tax revenue Minister of Finance

Cummulative Incremental revenues from tax initiatives

of TZS 3.48 trillion by 2015/16

TZS 1.16 trillion 1.16 trillion 1.16 trillion Annual Ministry of Finance / TRA

TRA annual collections audit

T3 Revenue Non tax revenue Minister of Finance

Cummulative incremental revenues from non tax

initiatives of TZS 410 billion by 2015/16

TZS 98.7 billion 128.3 billion 182.5 billion Annual Ministry of Finance / TRA

TRA/PMORALG/Ministry of Natural Resources annual collections audit

T4 PPP Public Private Partnerships

Minister of Finance

Implement/Initiate TZS 6 trillion worth of PPP projects

by 2015/16TZS 950 billion 2 trillion 3.05 trillion Annual

Ministry of Finance / PPP unit

Value of PPP projects implemented each year

T5 Expenditure

Expenditure cap for entire government's budget outside of BRN projects

Minister of Finance

Cap the Government's non-BRN total expenditure

budget for 2014/15 and 2015/16 (based on 2013/14

ceiling outside of BRN projects) .

TZS N/A 17.7 trillion 17.7 trillion Annual Ministry of Finance

Yearly budget request seating / session

T6Acts/ Regulation Changes

Revenue (Tax and non tax) and PPP - Acts and regulations to change

Minister of Finance

Passing of changes in all legislations (Acts/

Regulations) related to Tax, Non Tax and PPP initiatives

Date by 21st June 2013 N/A N/A One-off N/A N/A


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Table of content

▪ Abbreviations





▪ Key milestones


▪ Legal changes



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LawSchedule/ Section Which Initiative Why

ExciseManagement and Tariff Act

Excise Change to advalorem Expand list of excisable items

Road and Fuel Toll Act

Fuel Levy Adjust rate for inflation

VAT Act Section 10, Schedule 2,Item 14

Exemptions Revoke exemptions for tourism services

East Africa Community Customs Management Act (EACCMA)

Section 140 Exemptions Staying of application (not amendment) Revoke exemptions of customs duties for industrial sugar

Investment Act Section 17, 19, 20

Exemptions To limit tax incentives on deemed capital goods by establishing a negative list of items that cannot be exempted

To require TIC to prepare an annual budget for its allocation of exemptions to be submitted to Parliament as part of the normal budget process.

Limit exemptions for rehabilitation and expansion projects

Increase NISC threshold for extraordinary (non-TIC) tax incentives to investments of USD 100 million.

Income Tax Act (ITA)

Division II or new section

Withholding tax on imports

Introduce withholding income tax on commercial imports

Education Fund Act

Section 13 Education InvestmentLevy

Introduce Education Investment Levy

Immediate legal changes are required to implement initiatives – Tax Revenue


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Immediate legal changes are required to implement initiatives – Non Tax Revenue


Treasury Registrar Functions & Powers Act

Parastatalcontributions

Fast track enactment of new Treasury Registrar (Powers and Functions) Act to empower the Treasury Registrar to collect and enforce contributions from parastatals

Local Government Urban Rating Act No. 2 of 1983

Section 7,8 , 9 ,18

Property tax The Act stipulates responsibilities of taxing authority, methods of tax assessment timing, collection, penalty, as well as recovery of uncollected property tax. Amendment to enable implementation of new mass valuation method

Local council by-laws

Property tax Prepare by-laws which facilitate application of Law in terms of rates, timing, penalties, and recovery of uncollected revenues.


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Immediate legal changes are required to implement initiatives – PPP (1/3)


PPP Act Preliminary Provisions,Sec 4, 5,6,7.Sec9(1) ©Sec 11 (5)Sec 18 (1)Sec 22 (a) Sec 24 (1)&(3)

Simplify PPP process The PPP Act to

recognize the role PO-PC

Formation of National PPP Steering Committee and National PPP Technical Committee to advice the Minister for Finance

Introduction of PPP facilitation fund at Ministry of Finance

Establishment of one PPP Unit at Ministry of Finance as one stop center for all PPP services

Merge of functions of PPP Coordination Unit and PPP Finance Unit. Head of PPP Coordination unit will not exist anymore, therefore the PPP Act

may recognize head of proposed PPP Unit The PPP Act does not recognize the role of PO-PC National Steering Committee will be advising the Minister for Finance on all

matters regarding PPP projects. The fund to be recognize by the PPP Act.

Forex Regulations, 1998

Reg 9 Liberalization of capital market

Remove restrictions that do not allow residents of Tanzania to purchase foreign securities unless acquired by externally generated funds; or cross-listed by June 2013

Forex Circular No. 6000/DEM/ EX.REG /58 of 1998

Forex Circular No. 6000/DEM/ EX.REG /58 of 1998

Liberalization of capital market

Remove restrictions that do not allow residents to undertake outward portfolio investments (e.g. IPOs) by June 2013


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Forex Circular No. 6000/DEM/ EX.REG/58 of 1998

Forex (Listed Securities) Reg, 2003

ForexCircular No. 6000/DEM/ EX.REG/58 of 1998


Remove restrictions that do not allow residents to engage in outward direct investment except with BOT’s approval by June 2013

Reg. 3(2); CMS(Foreign Investors) Reg, 2003, Reg. 3(2) and Forex Circular No. 6000/ DEM/EX.REG/58, 1998, Clause 3.3


Remove restrictions that do not allow non-residents to purchase, sell or transfer Govt securities in the primary market by June 2013

CMS (Foreign Investors Reg., 2003

Reg 3(4), 3(6) and 3(7) and DSE Rules (blue print)


Remove restrictions that do not allow foreign investors to purchase securities in excess of 60% in total by June 2013


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CMS (Foreign Investors

Reg., 2003, Reg 3(4), 3(6) and 3(7) and DSE Rules (blue print)


Remove restrictions that do not allow a single individual foreign investor or two or more foreign investors jointly to purchase securities in excess of 1% by June 2013

CMS (Foreign Investors) Reg., 2003,

Reg 3(4), 3(6) and 3(7) and DSE Rules (blue print)


Remove restrictions that do not allow a single individual foreign investor or two or more foreign investors jointly to purchase securities in excess of 1% by June 2013

CMS (Foreign Investors) Reg., 2003

,Reg 3(4), 3(6) and 3(7) and DSE Rules (blue print)


Remove restrictions that do not allow a single institutional foreign investor or by two or more institutional foreign investors jointly to purchase securities in excess of 5% in total by June 2013

Forex (Listed Securities) Reg, 2003

Reg. 3(1); Forex Circular No. 6000/DEM/EX.REG/58, 1998, Clause 3.3 and CMS(Foreign Companies & Cross Listing) Reg, 2003, Reg. 4


Remove restrictions that do not allow non-residents to participate in domestic money and capital markets (including sale or issue of debt securities) by June 2013


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Table of content

▪ Abbreviations





▪ Key milestones


▪ Legal changes



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InitiativesH.E. Dr Jakaya KikwetePresident of Tanzania

Tax Revenue

Non Tax Revenue

Expenditure


I hereby affirm my support for the findings of the Resource Mobilisation Lab (conducted between February 22, 2013 –April 12, 2013) and endorse the lab’s recommended initiatives and implementation programme. I also hereby pledge the efforts of each ministry/department/ agency/organization to achieving the initiatives and outcomes from the lab as part of the Big, Results, Now programme

Big Results Now – Resource Mobilisation Lab : Stakeholder Sign-Off


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InitiativesH.E. Dr Mohamed Gharib BilalVice President of Tanzaia

Tax Revenue

Non Tax Revenue

Expenditure





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InitiativesMizengo PindaPrime Minister of Tanzania

Tax Revenue

Non Tax Revenue

Expenditure





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InitiativesAmbassador Ombeni SefueChief Secretary of Tanzania

Tax Revenue

Non Tax Revenue

Expenditure





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InitiativesProf. Benno NdulluGovernor of Bank of Tanzania

Tax Revenue

Non Tax Revenue

Expenditure


I hereby affirm my support for the findings of the Resource Mobilisation Lab (conducted between February 22, 2013 –April 12, 2013) and endorse the lab’s recommended initiatives and implementation programme. I also hereby pledge the efforts of my organization to achieving the initiatives and outcomes from the lab as part of the Big, Results, Now programme



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InitiativesHon. Dr. William MgimwaMinister of Finance and Economic Affairs

Tax Revenue

Non Tax Revenue

Expenditure


I hereby affirm my support for the findings of the Resource Mobilisation Lab (conducted between February 22, 2013 –April 12, 2013) and endorse the lab’s recommended initiatives and implementation programme. I also hereby pledge the efforts of my ministry/department/ agency/organization to achieving the initiatives and outcomes from the lab as part of the Big, Results, Now programme



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InitiativesHon. Janet MbeneDeputy Minister of Finance and Economic Affairs

Tax Revenue

Non Tax Revenue

Expenditure





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InitiativesHon. Saada Mkuya SalumDeputy Minister of Finance and Economic Affairs

Tax Revenue

Non Tax Revenue

Expenditure





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InitiativesDr. Ramadhan KhijjaPermanent Secretary for the Ministry of Finance

Tax Revenue

Non Tax Revenue

Expenditure





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InitiativesDr. Servacius B. LikwelileDeputy Permanent Secretary for the Ministry of Finance

Tax Revenue

Non Tax Revenue

Expenditure





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InitiativesDr. Philip MpangoExecutive Secretary of President's Office Planning Commission

Tax Revenue

Non Tax Revenue

Expenditure


I hereby affirm my support for the findings of the Resource Mobilisation Lab (conducted between February 22, 2013 –April 12, 2013) and endorse the lab’s recommended initiatives and implementation programme. I also hereby pledge the efforts of my organization to achieving the initiatives and outcomes from the lab as part of the Big, Results, Now programme



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InitiativesHon. Amb. Khamis S. KagashekiMinister of Natural Resources and Tourism

Non Tax Revenue: Auctioning of Natural Resources




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Initiatives

Hon. Hawa Abdul Rahman GhasiaMinister for State (Regional Administration and Local Government)

Non Tax Revenue: Local Government Authority –Property Tax and Land Rent




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“…let’s all be committedto CHANGE! ….and deliver BIG, RESULTS, NOW!...’

national key result area (nkra) resource mobilisation€¦ · executive summary. last modified...

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