ANALYSISBy Florence Mugarula

Last week, Air Tanzania Company Limited (ATCL) launched its routes to Mwanza, Arusha and Zanzibar, with the management saying the company is prepared and ready to offer high quality and reliable services. For many years, ATCL operated poorly due to lack of aircraft, which would have offered reliable services to its passengers.

Flight cancelation and delays became normal for ATCL. All these issues weakened the company. As ATCL became weaker, private owned companies recorded good performance. Majority Tanzanians decided to fly with private owned companies as the national carrier kept struggling to catch up with changes in the market.

Last week, the company’s Director General, Mr Ladislaus Matindi said his company is determined to ensure there is no delay or flight cancellation. He said the company is ready for the business and it has already set strategies that will enable it to compete in the market.

With the revival of ATCL and purchase of new aircraft, it is obvious things will change for the better. Among sectors that expected to improve is tourism. Globally, aviation business has been a crucial factor for the growth of tourism sector.

The connectivity provided by international air transport facilitates the fast-growing global tourism industry. It is estimated that over half of international tourists travel to their destination by air.

Tourism makes a major contribution to the global economy. It directly contributed 2.2 trillion US dollars to the world GDP, almost 10 percent of the global economy, in 2015 and provided over 108 million jobs globally.

By 2024, the World Travel & Tourism Council expects direct employment in the tourism industry to be more than 126 million people globally. When looking at the jobs and GDP supported through the indirect and induced impacts of tourism, the figures are significantly higher at 285 million jobs, 8.7percent of employment, and 7.2 trillion US dollars or 9.8 percent of the global economy. By 2026, tourism could support some 370 million jobs and 11 trillion dollar in GDP.

Tourism sector is important in many developing countries, including Tanzania. With such prospects at global level and the ongoing fifth government efforts to revive ATCL, it is obvious Tanzania will not be left out of these successes in the tourism sector, employment opportunities and total economic growth. According to the ATCL’s plans, in the few coming years, the company will be able to fly across the country and beyond.

This means ATCL will be able to fly tourists to all regions at affordable prices and reliable services. President John Magufuli said last Friday that his government is looking forward to revive the national carrier and ensure it promotes tourism.

The Head of State is aware of the aviation contribution to the growth of the country’s economy, especially through tourism sector. He said more new planes are coming and that in few years to come ATCL will be plying to international routes. Various reports show that over 54 percent of international tourists now travel by air.

In Africa, an estimated 5.8 million people are employed in areas supported by the steady influx of overseas visitors, most of whom arrive in the region by air, and contributed 46bn/-US dollar to GDP in African economies in 2014. In 2014, the Tanzania Tourism Board (TTB) said the country was eying at 2 million tourists arrivals by 2017. Tourists arrival broke the 1 million-barrier for the first time in 2012 when the number of foreign visitors surged 24 per cent.

The country receives an average of 1.1 million tourists a year. The number rose 1.7 per cent in 2013 to 1.095 million, bringing in 1.85bn/- US dollar. Most of the visitors came from Britain, Germany, the United States and Italy.

Tourism is Tanzania’s numberone foreign currency earner. It’s quite clear that with the revival of the national carrier, Tanzania will be able to offer travel and tourism services accordingly. This will probably help to strengthen tourism sector and boost the country’s economy.

By Ivan Okuda

Kampala — Former presidential candidate Amama Mbabazi and Prime Minister Ruhakana Rugunda, among other shareholders of the defunct National Bank of Commerce (NBC), have asked the Constitutional Court to block the planned sale of shares of Crane Bank which took over NBC when it was closed four years ago.

In a November 4 letter to the Court’s registrar, copied to the Chief Justice Bart Katureebe and his deputy Steven Kavuma, Mr Mbabazi’s lawyers John Mary Mugisha and Severino Twinobusingye asked for an expedited hearing of their case filed on September 28, 2012.

NBC shareholders, including businessman Amos Nzeyi, in 2012 secured a court order issued by Justice Remmy Kasule barring Bank of Uganda (BoU) officials from continuing with the sale of NBC pending disposal of a case challenging the closure that year.

The Central Bank at the time said the court order had been overtaken by events since it was issued after it transferred NBC assets, liabilities and customer to Crane Bank, which BoU took over a fortnight ago.

This prompted NBC shareholders to, through the Attorney General, sue the officials and government (in constitutional petition number 42 of 2012-Humphrey Nzeyi versus BoU and eight others) for contempt of court.

Justice Kasule on February 15, 2013 maintained and extended an interim order earlier issued by Justice Kavuma until determination of a constitutional petition challenging takeover of NBC. Neither the contempt of court case nor the substantive application has been heard ever since. Following BoU’s takeover of the under-capitalised Crane Bank about two weeks ago, the government announced it is in talks with potential investors to buy some of the bank’s shares.

In last week’s letter written on behalf of Mr Humphrey Nzeyi, a son to businessman and NBC shareholder Amos Nzeyi, the shareholders warned prospective buyers of Crane Bank Ltd shares to “keep their hands off” as the takeover of NBC by Crane Bank remains a matter of litigation.

“We wish to express our deep concern that this related application to determine whether the various respondents committed acts of contempt of court has not been disposed either. To crown it all, the said (respondents) have had the audacity of proceeding to commit the very acts they are prohibited from doing involving transferring the assets of the NBC (U) Ltd to third parties; thereby infringing on our client’s fundamental rights,” the letter reads in part. Judiciary spokesman Solomon Muyita said he had not seen the letter and he would need to “consult with my superiors to establish what response they have given to the petitioners’ lawyers.”

Lawyers Mugisha and Twinobusingye in their latest petition wrote that: “Notice is hereby given to the general public by the shareholders of the NBC (U) Ltd that Crane Bank which is being presented for sale is a subject of litigation in the above cases where NBC and all its assets and property worth $200m (Shs680b) are in Crane Bank Ltd. We equally warn all and sundry to keep their hands off the purported sale of the NBC assets under the disguised sale of Crane Bank Ltd.”

Mr Twinobusingye who said he was speaking on behalf Mr Mbabazi and 270 other shareholders of the bank, including Mr Nzeyi and premier Rugunda, said: “The constitutional court made a ruling wherein Justice Kasule prohibited the dealing in any way; be it winding up or sale of NBC until the Constitutional Court petition number 44 (challenging BoU actions) has been disposed of. That ruling is still in force to the extent that the petition and all applications arising from it have not been determined.

We have now learnt that they are selling Crane Bank but how many banks are they selling? My clients’ view is that it is dangerous for anyone to attempt to buy Crane Bank when these matters have not been resolved.”

Background

Bank of Uganda revoked the license of the National Bank of Commerce (U) Ltd and ordered the winding up of its business under Sections 17(f), 89(2)(f) & (7)(c) and 99(1) of the Financial Institutions Act 2004.

“… the continuation of NBC’s activities is detrimental to the interests of its depositors,” said Mr Kasekende at the time. BOU moved to suspend the management and board of directors of NBC before transferring deposits, accounts and assets of the bank to Crane Bank with effect from October 1, 2012.

By Daniel Finnan

Authorities in Liberia are seeking the assistance of the US and UK governments to help them secure their internet infrastructure following a crippling cyberattack that brought down 60 percent of the country’s network. The size of the attack against Liberia is cause for alarm, according to Eugene Nagbe, the country’s information minister, who believes Liberia was targeted by hackers because its network was perceived as being weak.

“The scale of the attack tells us that this is a matter of grave concern, not just to Liberia but to the global community that is connected to the internet,” Nagbe told RFI by telephone. “We are actively pursuing the option of seeking assistance from friendly countries like the US and Great Britain.”

Nagbe dismissed reports that the cyberattack took down the entire network, saying that it did not affect the African Coast to Europe (ACE) submarine fibre cable that connects the country to the World Wide Web or the Libtelco and Cellcom service providers.

However, the attack was successful in crippling service provider Lonestar MTN, which provides about 60 percent of internet connectivity in the country, according to Nagbe. The company has already deployed a cyber-security specialist to Liberia to investigate what happened.

The internet outage, which lasted for about two weeks and continued until a few days ago, took the form of a Distributed Denial of Service (DDoS) attack, said Nagbe, who was speaking from London. A DDoS attack floods a system with data with the intention of overwhelming it with traffic from multiple sources.

Forensic audit

The minister would not confirm reports that the attack was carried out by the so-called “Mirai botnet” which uses a zombie network of compromised devices such as internet-connected digital cameras.

“We are probing to find the exact culprit,” he said.

Neither would he confirm reported figures between 500 and 600 gigabits per second, in terms of the amount of data that was used to attack Lonestar MTN’s network.

“Some of the figures are realistic,” said Nagbe, “but we want to get a full forensic audit before discussing the exact size of the data pumped into our network illegally”.

Nagbe is keen to point out that his country “already has a lot of protection” on its network, insisting that this helped to prevent the DDoS attack crippling the ACE fibre cable or Libtelco and Cellcom providers. But the government is “very, very concerned” that Liberia’s internet infrastructure could be attacked in this way, he said.

“Perhaps we were singled out because we were perceived to be a weak link,” said Nagbe. “Also perhaps because they are aware that we are still expanding and developing our own telecommunications infrastructure.”

Tanzania has been ranked the leading country in East Africa and sub-Saharan Africa in 2016 in terms of having an enabling environment for financial inclusion, the latest survey shows.

According to The Economist Intelligence Unit’s Global Microscope 2016 overall scores and rankings, Tanzania is ranked 9th out of 55 countries in the world. The ranking was assessed using 12 indicators in determining global progress and challenges facing financial inclusion.

According to the survey, Tanzania has been recognised again because of its continued progress in achieving financial inclusion goals and improving the regulatory environment.

“The main developments in the past year have been the National Payment Systems Act (NPSA) and the Electronic Money Regulations (EMR), both enacted in 2015, which extend financial consumer protection,” the Global Microscope 2016 survey partly reads.

It notes that the NPSA and its attendant regulations and the EMR have extended the range of institutions covered by the Bank of Tanzania’s policy on disclosure, notably mobile money operators.

The report notes further that the new Microfinance Act is in the draft stage and that there are other activities taking place like increasing the number of players in the insurance market in order to increase coverage of the services to members of the public. The survey mentions the Bank of Tanzania’s mandate to enforce consumer financial protection and its decision to set up a customers’ complaint desk.

Also to require all banks and financial institutions under its supervision to submit quarterly reports on complaints received and resolutions achieved as another positive measure to enhance financial inclusion.

The country has been occupying the first position in financial inclusion in sub- Saharan Africa for three consecutive years since 2014, thanks to the various measures that are being implemented over the years to increase access, affordability and usage of financial services among people.

The Economist Intelligence Unit’s Global Microscope analyses the overall regulatory and institutional environment for financial inclusion in more than 50 countries.

It examines the policy and institutional environment that enables providers to offer financial products and services and employ new technologies to deliver them and ensure safe coverage of low-income populations.

It is intended to support practitioners, policymakers, investors and other stakeholders in advancing financial inclusion–to help them evaluate countries’ progress in the area and to identify further targets that will yield additional benefits.

Compared to the 2015 Global Microscope survey, Tanzania did not move in the rankings; however, Kenya and Rwanda are catching up due to significant improvements in their financial inclusion rankings based on regulatory environment and implementation of initiatives. Kenya moved three ranks above and Rwanda eight ranks above their 2015 rankings.

It is the second time within the past three months for Tanzania to be recognized internationally for its financial inclusion measures.

During the September 2016 Alliance for Financial Inclusion (AFI) Global Policy Forum in Nadi, Fiji, Tanzania through the Bank of Tanzania clinched two awards from AFI- Leadership and Peer Review awardsfor outstanding work in promoting financial inclusion.

By Tapiwa Zivira

For months, the introduction of bond notes as a measure to curtail the cash shortages seemed to be the usual empty talk by a cornered government.

Without a consensus among government officials and financial experts on whether or not the bond notes would be good for Zimbabwe’s ailing economy, and with civic groups strongly opposing their introduction, it appeared the Reserve Bank of Zimbabwe (RBZ) would relent on the decision to bring the notes.

For those pessimistic about bond notes — understandably so because of the 2008 hyperinflation ghost that still haunts Zimbabwe — they would rather struggle to access the United States dollar than have a currency they fear would bring back the ghost of hyperinflation, “money burning” and food shortages, among other troubles Zimbabweans went through eight years ago.

In conformity with the cash crisis, stranded Zimbabweans resorted to spending nights in bank queues to access their money, and keeping a keen eye on the developments related to the introduction of bond notes, which looked like they would never see the light of day considering the contestations around them.

It was only last week when reality dawned on many Zimbabweans after President Robert Mugabe invoked his presidential powers and gazetted Statutory Instrument 133 of 2016 paving the way for the introduction of bond notes as legal tender.

Showing no signs of going back, the RBZ immediately began an aggressive media campaign in the face of vagueness on where the notes would be printed after Germany recently turned down the job.

For many Zimbabweans, it sounded like the return of the 2008 money-printing and hyperinflationary era, and those with savings immediately started withdrawing them from the already cash-strained banks.

The banks, in turn, appeared to fail to meet the rising cash demand, with some limiting withdrawals to as low as $20 a day, forcing depositors to return to the bank on a daily basis until they exhausted the cash in their accounts.

In a survey in Harare’s central business district and the city’s outskirts last week, it was established that several banks had hundreds of people queuing outside from as early as 5pm the previous day and the queues grew with each hour.

For some of those who have day jobs, they join the queue soon after work, while others travel from home, armed with blankets and food.

At the CABS Fourth Street branch, where there is noticeably a higher number of people sleeping in queues, people line up the pavement, wrapped in their blankets.

The young and the old — showing all signs of desperation and fatigue — brave the rain showers and stay put in their positions.

Any movement from their position could render them out of the queue, a waste of the sacrifice they would have made.

One 46-year-old woman from Epworth who identified herself only as Mai Tafadzwa on Thursday said she was spending the night in the queue.

“After spending the night in the queue, I only got $100 at around 3pm so I decided to stay put so that tomorrow I may be lucky to get another $100,” she said.

“Maybe I can meet my cash demands for now, but I will resume on Monday till I have all my money as cash,” she added, disclosing that she had $500 in her account, an amount one could get in one withdrawal before the cash crisis started.

A mother of three, Mai Tafadzwa is afraid that despite assurances from government and the RBZ, the bond notes may not have the same value as the US dollar.

“I lost all my money in 2008 and I cannot afford to do that this time, so I have to get the last of my money before the bond notes come and we will see about the rest when the bond notes come,” she said, before joining a conversation with other women in the queue.

Typical of any gatherings, bank queues have become melting pots for political and social discourse.

This paper established during the small survey carried that unlike the fear that characterises many public forums in the country, there is an atmosphere of free speech and Zimbabweans appear to express themselves without fear of any consequences in the overnight queues.

This reporter listened to groups of people huddled together discussing — in unrestrained tones — the disappearance of human rights activist Itai Dzamara, the arrest of Higher and Tertiary Education minister Jonathan Moyo, President Robert Mugabe’s advanced age and his wife’s alleged interference in the running of the State.

They also spoke freely about corruption, election rigging and other hot topics in Zimbabwe.

But it is not just serious political and social issues that are discussed in the queues, humour and jokes also make part of the conversations.

As the night wears on, one by one, people would settle to their place, wrap themselves in blankets and doze off to wait for yet another day.

It is at this time, according to some in the queue at CABS Park Lane branch, that thieves are likely to take advantage.

“So some of us stay awake to make sure that we look out for thieves and street children who may want to steal, and we take turns to do that,” said one of the men who remained awake as others slept.

In addition to the risk of being robbed, depositors also face, among other challenges, the unavailability of ablution facilities, with women bearing the biggest burden as they have to relieve themselves in public spaces in full view of others.

“We just go around the corner, but it is always embarrassing because the city always has people walking around all the time, but there is nothing we can do, you cannot hold it until the morning,” said one middle-aged woman.

In the struggle to access their money, some are making a killing as they stand in the queue and sell their positions for $1 to those who come in the morning.

One young man, a self-confessed street person, said he can get up to $5 per day if he manages to hold five positions throughout the night.

Night vendors also pass by the banks, selling food stuffs that range from soft drinks to buns and snacks.

For all this struggle, the quest is simply to get the money that one would have worked so hard for.

Zimbabwe has experienced a number of cash shortages since the turn of the millennium resulting in the closure of many banks.

The worst cash crisis was between 2008 and 2009 leading to the death of the local currency.

Analysts say Zimbabwe cannot sustain its own currency owing to the collapse of the local economy and the introduction of the bond notes would be a temporary measure.

COLUMNBy Andrew Mwenda

Lesson for Central Bank from the experience of the takeover of Crane Bank

This week, the government injected Shs 200 billion into Crane Bank to bolster its liquidity position. This is only 40% of the Shs 500 billion needed to bring the bank into a healthy liquidity position. Yet, even if an extra Shs 300 billion is pumped into the bank, it is unlikely to be enough to ensure its turnaround. This situation could have been avoided had Bank of Uganda (BoU) exercised its powers with foresight.

At the beginning of July, BoU warned Crane Bank that its nonperforming loans portfolio had eroded the bank’s capital base and asked shareholders to inject $25m (Shs 85 billion), later reduced to $10m (Shs 34 billion). The main shareholder, Sudhir Ruparelia, promised to put in this money over three months. BoU stopped Crane Bank from issuing Letters of Credit, Bid Bonds, Performance Guarantees, new loans, overdrafts and credit cards. Yet this was the third largest bank in the country with huge overheads

Between January and June, Crane had been making Shs 6 billion in profit per month. Beginning July, the new restrictions caused the bank to make losses of Shs 2 billion per month. Besides, Crane was a bank of the business community. When all these people could not get overdrafts, Bank Guarantees, Bid Bonds, Letters of Credit, new loans etc, they began shifting their businesses to other banks, which could provide them thus leading to loss of deposits.

As many of Crane’s business customers could not get the services, they began suspecting that something was amiss. They told their friends who told their friends and business partners in turn. This caused many other people to withdraw their money. By mid October when social media began saying Crane was in trouble (causing frantic withdraws), the bank was already facing a severe liquidity problem.

Restricting Crane from doing business while keeping it open for three months was a recipe for disaster given its size and overheads. BoU should have anticipated the rumors of trouble and withdrawal of deposits. In August, Sudhir offered to borrow from BoU and mortgage some of his buildings. BoU refused this offer, a position it accepted two months later in mid-October. Thus by the time BoU took over the bank, the liquidity shortage (Shs 500 billion) was far larger than the money initially needed for recapitalisation.

BoU should have given Sudhir three months to raise the Shs 34 billion while keeping the bank running normally without the said restrictions or accepted to give him a loan against collateral of his buildings. This would have kept the bank profitable while avoiding the risks of rumors and loss of deposits that led to the liquidity crisis. Consequently, the taxpayer would not have had to fork out Shs 200 billion to inject liquidity into the bank. Yet, even Shs 500 billion may not be enough to bring Crane back to health. Why?

Crane was successful because of Sudhir’s personal intimate knowledge of the local business community and the kind of service it offered them. Whoever buys Crane Bank will not attract Sudhir’s customers. This is because they went to Crane Bank for a very specific service. Worse still, the local business community who were being served by Crane is now in a quandary.

The new owner would have bought a shell that would require many years to build public confidence. This means the new owner would have to cut the number of branches from 46 to about five, cut down employees by more than 60% and prepare to make losses for the next five years. Yet giving the bank back to Sudhir cannot be an option either because his personal reputation has been gravely damaged. And we did not need to get to this. Based on its history, there was little reason for BoU to enforce its rules with the kind of rigidity they did especially given the size and role of Crane Bank.

By end of March 2015, Crane Bank had grown from zero in 1995 into the third-largest bank in terms of shareholder funds, assets and deposits. The question for the Central bank, Uganda’s policy makers and those interested in banking policy, is: how did one man, Sudhir, do this? This is especially intriguing because Sudhir performed this feat in circumstances where the market is dominated by multinational banks – Stanbic Bank, Standard Chartered Bank, Barclays Bank and Bank of Baroda plus one institutional bank, Centenary Bank owned by the Catholic Church. Therefore one local individual had the least chance to succeed.

Crane Bank succeeded in large part because Sudhir understood the concerns of Ugandans, especially the business community. He therefore designed banking practices that very well resonated with local people. This not only allowed the bank to grow rapidly and out-compete its multinational rivals, but it also helped local businesses to grow and expand. Without Crane Bank, many local businesses with great potential would never have succeeded, a factor I outlined in my last column using this newspaper as an example.

Some readers wrote to me suggesting that Crane’s loose lending practices like the example of this newspaper are the ones that brought it into trouble. This is totally wrong. Over the last 20 years when it was using these lending methods, Crane Bank has had the least ratio of nonperforming loans – fluctuating between 0.25% and 1.76%. But for most years, it has been below 1%. This is one of the best positions any bank in the world could dream of. Therefore, in terms of managing its loans, Crane had proved its excellence. The 2015 failure was widespread across all banks in Uganda, writing off huge amounts of loans and most of them have had to recapitalise.

This brings us to the government policy in the management of banks. Uganda officially surrendered its banking sector to the ideas of IMF and World Bank. These two institutions insist that poor countries should not have national policies specifically aimed at ensuring local control of the national banking sector. In their view, this should be left to market forces. This argument is not merely theoretical. It has a lot of self-interest as well because it allows multinational banks to enter local markets, eliminate local ones, make tones of money and ship it abroad as dividends to their shareholders.

I do not know of any country that has transformed from poverty to riches with the largest share of its banking sector controlled by multinational capital. In South Korea and Singapore (as in China today), local control was over 90% during their intense period of transformation. It is unlikely that Uganda will be the first exception.