ANALYSISBy Owen Skae, Rhodes University

South Africa’s state owned enterprises have been hit by one scandal after another signalling serious political and corporate governance failures. The largest of these, the power utility Eskom, has seen its CEO Brian Molefe resign, then return, and then be fired – all in the space of seven months. This was followed by the unexpected resignation of Eskom Chairperson Ben Ngubane. The Conversation Africa’s Sibonelo Radebe asked Owen Skae to make sense of it all.

What do you make of what’s happening at Eskom?

It’s an unholy mess. The entire basis of the departure, reappointment and subsequent firing of the Eskom CEO raises so many red flags it’s hard to know where to start. And, to cap it all, the chairman has resigned with immediate effect. That means Eskom is without a CEO and now has a stand-in chairperson.

One thing is clear. The board, the chairperson Ben Ngubane, the minister of public enterprises Lynne Brown, and Molefe failed in their duties to serve Eskom. They failed South Africa’s taxpayers who are the indirect shareholders of Eskom. And they failed the country.

To understand their duties, one has to consider the basic principles of governing state owned enterprises. Eskom is a public company and its sole shareholder is the government. The shareholder representative is the ministry of public enterprises. A shareholder compact guides the relationship between the board, the executives and the minister.

The shareholder compact is an annual agreement between Eskom’s leadership and the minister. It documents the power utility’s mandate, as well as key performance measures. It also sets out what’s expected from a good governance perspective. It’s meant to avoid the kind of mess that has visited Eskom over the past few months.

What went wrong?

A number of things.

The main one is that corporate governance rules designed to manage conflicts of interest were totally disregarded.

The country’s Companies Act spells out what a director may or may not do if they have a personal financial interest in a matter. These rules apply as much to state owned enterprises as they do to publicly listed ones. The Eskom situation suggests that directors, and Molefe in particular, disregarded this principle.

This is highlighted in the former public protector Thuli Madonsela’s “State of Capture” report which suggested that Molefe had had an improper relationship with the Guptas, a family of businessmen with close ties to President Jacob Zuma. Among other things, the report questioned the way in which the Eskom leaders collaborated with the Guptas to buy, some say hijack, a mine supplying power utility with coal.

The Eskom board and the minister also failed to apply their minds properly around Molefe’s controversial departure and return. This includes a deal to give him a pension payout of R30 million just 18 months in the job and 13 years before he is due to reach retirement age.

A good understanding of the act, as well as the codes of good corporate governance that have been developed in the country, make it clear that the board should have:

• called a special meeting to consider Molefe’s departure
• applied its mind to the circumstances of his departure
• ensured that the necessary legal, risk and reputation issues were addressed.

Another big area of failure was the role of the board’s chairperson. Even though he has resigned, he should still be held accountable for not providing the necessary oversight at such a momentous time.

As the only shareholder, the government is also complicit. As the shareholder representative the minister of public enterprises had the responsibility of asking the board questions as part of a consultative process that’s set out in the shareholder compact.

Either the minister wasn’t properly informed or didn’t ask the questions she was entitled to ask, or a mixture of both. This raises red flags about her level of commitment to the shareholder compact.

What does it tell us about the broader political environment?

There’s just too much interference – for nefarious reasons – from outsiders in the running of state owned enterprises. Excessive power and authority is vested in too few people. I often use the analogy of being a sports coach. Imagine a situation where the coach is called to account for his actions every day, where he has no say in who is picked and is told to change the game plan. The situation becomes unmanageable.

Interference undermines the way things should be, erodes confidence and allows conflicts of interest to flourish. This is particularly true when the interference is from people who aren’t acting in the best interests of the team.

But being untouchable is also a recipe for disaster. So we have to find a middle ground. The rules of the game must be established and the parties must carry them out with integrity, competence, responsibility, accountability, fairness and transparency.

These rules of the game are clearly set out in the South African context. Nobody can claim they don’t know what they are. In the case of Eskom they’ve simply been flouted.

What do the events at Eskom tell us about state ownedenterprises in South Africa?

Sadly, state owned enterprises are seen as instruments to serve an elite few rather than fulfilling their broader mandate.

On top of this they aren’t financially viable which means they’ll continue to be a drain on the fiscus. The government must consider partnerships with the private sector. This can be done by selling minority stakes as suggested by former finance minister Pravin Gordhan.

The success of the partly privatised telecommunications entity Telkom supports this view. The company has just posted handsome profits, suggesting it’s a model that could be used to turn around other state owned enterprises, including Eskom.

Disclosure statement

Owen Skae does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.

By Ali Twaha

State minister for veterans Bright Rwamirama and wife Florence Rwamirama together with Mpororo Group limited have dragged retailer Nakumatt to court for failing to pay them $569,339 (Shs 2b) in rent.

Rwamirama says in court documents filed at the High Court commercial division on April 12 that Nakumatt has since 2013 not paid him a penny in rent. The retailer was operating its Mbarara branch at Multiplex complex along plot 4, Buremba road.

The suit piles more pressure on the Kenyan retailer that is facing demands from tens of suppliers. In April, the company shut down its Katwe branch over rent arrears. Most of its open branches remain empty as suppliers have stayed away from the troubled firm.

Court documents indicate that prior to Nakumatt renting Rwamirama’s premises, it required the landlord to undertake changes at his own cost to fit specific requirements for the retailer’s business as a precondition for renting the premises.

To make the changes, Rwamirama argues, he borrowed money from Dfcu bank and, also to create additional space within the building, sent some tenants away.

“To date, the defendant [Nakumatt] has neglected to pay for additional space despite the several invoices and constant reminders,” says the Rwamiramas in court documents.

In defence, Bernard Mutua , the Nakumatt Uganda country manager, said that the structural changes in the building were to be carried out at the cost of the landlord.

He notes they had agreed to a three month rent free period which he accuses the plaintiffs of not honoring.

By Robert Muhereza

Kanungu — Some residents of Kanungu District and their leaders have sought audience with President Museveni, demanding that the government clears an outstanding Shs18b debt owed to tea nursery bed operators who supplied tea seedlings to the National Agricultural Advisory Services (Naads) in 2015.

They also want government to prevail over the constant power outage they say is hurting their businesses, with factories operating on generators. The district has experienced power outage for now five months, a situation they say has disrupted their businesses.

In a meeting chaired by the Kanungu District chairperson, Ms Josephine Katsya, at Kanungu District council hall recently, religious leaders, district councillors, sub-county chairpersons, elders and area Members of Parliament unanimously resolved to petition President Museveni to have their grievances addressed.

The dean of Machuro Catholic Diocese, Fr Paulino Fokushaba, noted the urgent need for the President’s intervention to streamline the tea enterprise, which he said is the backbone for the people of Kanungu.

The chairperson of the tea nursery bed operators in south western, also the district councilllor for Mpungu Sub-county, Mr Frank Byaruhanga, observed that as a result of government’s failure to pay residents who supplied tea seedlings, the farmers have been disempowered.

“… tea famers have not been paid for a long period of time. Most of their seedlings have dried up in the nursery beds and several tea gardens are bushy since the farmers are financially incapacitated,” he said.

However, Dr Samuel K. Mugasi, the Naads executive director, said they are ready to pay all the tea seedlings farmers in Kanungu District as long as claimants have contracts from government to supply tea seedlings to farmers after the verification exercise.

The farmers also want President Museveni to reconcile State minister for Housing, Dr Chris Baryomunsi, with other development partners in the tea enterprise, including Mr James Musinguzi Garuga, whose rivalry they claimed is crippling development in the district.

“The disagreements between Dr Chris Baryomunsi and Mr James Musinguzi Garuga, the lead agent of tea growing in the region, is crippling development in our district as it has resulted into so many court cases over the same and there is need for urgent resolution,” observed Kinkiizi Diocese Bishop Dan Zoreka.

However, in a telephone interview with the Daily Monitor on Tuesday, Dr Baryomunsi dismissed the prelate’s allegations as false, saying this was malicious propaganda.

Asked to comment on the stakeholders petitioning President Museveni to mediate his misunderstandings with Dr Baryomunsi, Mr Garuga, said the matter is already in court and he could, therefore, not comment about it.

The Kinkiizi West MP, Mr James Kaberuka, said he has personally petitioned the authorities at the Uganda Electricity Distribution Company over power outages and they promised to resolve the matter.

Background

Economic activity. Majority farmers in Kanungu District are involved in tea growing, planting seedlings, and picking tea leaves, which they distribute to the three tea processing factories in the district.

Market. About 300 tea nursery bed operators and tea growers supplied 40 million tea seedlings worth Shs18b procured by the district through Naads and Operation Wealth Creation. To date, farmers have not been paid.

Origin. The President launched tea growing in Kanungu District in 2008 after local leaders convinced him that it was the only enterprise that could boost their economy and he pledged commitment by his government to buy all the tea seedlings to be supplied to willing farmers at no cost.

The tea enterprise has for now rolled out to all districts of Kigezi and Ankole sub-region.

By Henry Lyimo

Dodoma — The government postponed borrowing from international lenders in the 2016/17 financial year after the interest rates increased, the Minister for Finance and Planning, Dr Phillip Mpango has said.

Dr Mpango said in Parliament yesterday that the government had put on hold borrowing plans from international lenders after interest rates increased to nine per cent from six per cent.

“In 2016/17 a deliberate decision to defer borrowing was made following borrowing rates from international lenders increased from an average rate of six per cent to nine per cent,” he said when presenting a state of the economy to Members of Parliament.

The government plans to issue debut Eurobond to raise funds for financing infrastructure development but there has been delays in the launch as it sought a credit rating.

The Ministry of Finance and Planning had said last year it had concluded talks with Fitch Ratings for a sovereign credit rating and also hoped to finalise similar discussions with Moody’s Investors Service, paving the way for a possible debut Eurobond issue.

The government has increased public investments of some key infrastructure projects to help the country make optimal use of its strategic position as a transport hub in the region. It has outlined some key flagship infrastructure projects with significant multiplier effects to economy including construction of a standard gauge railway, reviving of the Air Tanzania Company Limited and Mchuchuma Coal Mining and Liganga Iron Ore Mining.

Others are construction of a Liquified Natural Gas (LNG) plant in Lindi Region, establishment of Special Economic Zones (SEZ) in Tanga, Bagamoyo, Kigoma, Ruvuma and Mtwara; establishment of Kurasini Logistic Centre; and procurement of new and rehabilitation of existing ships for Victoria, Tanganyika, and Nyasa lakes and construction of Liquified natural gas.

Dr Mpango said delays in disbursement of funds from foreign concessional and commercial loans due to prolonged negotiations with lenders and development partners were among challenges in implementing 2016/2017 development budget.

He said various measures have been taken to address the challenge including further strengthening of domestic revenue collection, improving business environment to attract more private sector investments including small investors.

Wakiso — President Yoweri Museveni has warned that the whole country is facing procurement chaos because the process benefits those bent on making money and not the country. He said huge resources are wasted in claims of procurement.

The President was today commissioning multibillion Komatsu road construction and maintenance equipment from Japan at the Spedag Interfreight Warehouse, Buto Yard in Bweyogerere, Wakiso District.

“The NRM government emphasizes quality and uniformity. Don’t buy Pajero here, Nissan there… how will you maintain them? Why not get one reliable partner to maintain and also get credit. What is the nature of your fleet of vehicles? This is how government vehicles end up in private garages. Government garages are not there anymore,” he said.

He said procuring equipment from one source ensures quality and uniformity and maintenance is easy.

Museveni t re-echoed his concern over more imports in the country that have turned it into a supermarket saying there should be no more imports of commodities that the country can economically produce.

“We shall trade in areas which we can not produce economically. This is vertical integration, from the garden to the table, from the field to clothing, Uganda should be able to do that,” he said.

Museveni said he decided to negotiate a procurement deal with the Prime Minister of Japan after government realized that previous equipment procured from China easily broke down. In 2014, Museveni then initiated the idea of procurement with Eiji Inui, then JICAs Director-General for Africa Department.

He however advised that the Chinese equipment should be rehabilitated and used alongside the new Komatsu equipment from Japan.

“Since am not a businessman looking for tenders and njawulo, I was convinced that acquiring equipment from Japan on a large scale was viable. There is somebody called a chief engineer who is supposed to help avoid this meandering. I don’t need consultation fees or commission. My commission is God. He will reward me,” he said.

1151 pieces of road equipment was procured for all the 121 district local governments including the six newly created districts that will come into force in July 2017. Each district will receive one motor grader, one wheel loader, one vibro roller, one water bowser and two dump trucks worth Shs 2.7billion. Equipment will also be given to UNRA, KCCA, UPDF, the Ministry force account units and Zonal centers.

Museveni warned that there should be no more tenders at the districts for road construction and that maintenance must be force on account (be done by staff of the ministry). He said all districts will receive a full unit of equipment. The bulldozer valued at Shs 900million and excavator valued at Shs 850million will be based at the regional level including in all the three colonial zones of Mengo, Masaka and Mubende.

The Minister of Works and Transport Monica Azuba Ntege said 1151 pieces of road equipment was procured for all the 121 district local governments including the six newly created districts that will come into force in July 2017. Each district will receive one motor grader, one wheel loader, one vibro roller, one water bowser and two dump trucks worth Shs 2.7billion. Equipment will also be given to UNRA, KCCA, UPDF, the Ministry force account units and Zonal centers.

The equipment was procured using a loan that was secured from the Japan Bank for International Cooperation and counter-funding by the government of Uganda.

The equipment is fitted with a KOMTRAX system to help monitor fuel usage, engine operation and tracking the equipment’s location to curb abuse.

The Ambassador of Japan to Uganda Kazuaki Kameda said the success of the equipment depends on maintenance and regular check-ups.

“My experiences show that a small number of machines have either broken down or have been abandoned because of no proper maintenance. Road construction equipment used under rough conditions requires an effective maintenance strategy,” he said.

COLUMNBy Saumu Jumanne

The humanity capacity for self destruction is unfathomable at times. There are myriad examples, but today I will focus on one – tobacco/cigarettes use. Why on earth should someone smoke tobacco knowing very well, you are smoking life out of your system? Why die of something preventable!

World Health Organisation (WHO) estimates that over 7 million people (smokers) and about 600,000 non-smokers every year die from tobacco-related diseases. Looking at that picture, then it’s a paradox of paradoxes that many governments across the world (including Tanzania) allow tobacco use, but at the same time ascribe to WHO.

WHO every year has a day (May 31) known as World No Tobacco Day (WNTD) to discourage smoking and tobacco business across the globe. Since 1987, WHO has been disseminating information about the dangers of using all forms of tobacco, which have massive negative health effects on active and passive users.

This year, the global body main message was that apart from tobacco being a threat to people’s health it also threatens the development of nations. The 2017 theme WNTD was “Tobacco – a threat to development.”

WHO director of the Department for the Prevention on Non-communicable Diseases, Dr Douglas Bettcher, made it clear that “Tobacco-related death and illness are drivers of poverty, leaving households without breadwinners, diverting limited household resources to purchase tobacco products rather than food and school materials, and forcing many people to pay for medical expenses.” Do I need to say more?

Our country became a party to the WHO Framework Convention on Tobacco Control in 2007, but to what extent has the convention been implemented? The mere fact alone that smokers in Tanzania are at discretion of smoking in public, is a bad indicator. Yes, there is a law that bars anyone from smoking in public, as nonsmokers, who inhale are adversely affected. But do smokers follow the law? We don’t hear much of implementation. When you go to a shop, a smoker buys a cigarette and lights it up there.

In 2013, the Ministry of Health in collaboration with the National Institute for Medical Research (NIMR) and the WHO study indicated that about 17.5 per cent of people in households (Tanzania) “who did not actively smoke tobacco were exposed to the substance by other smokers. And, 24.9 per cent are exposed to the tobacco smoke in workplaces.” How terrible!

Some stakeholder bodies like@AfricaNoTobacco, a non-profit Pan-African network of more than 120 Civil Society Organisations, are working hard to promote health by building a tobacco-free Africa. I think this should be the way. In Tanzania, khat is illegal. So, is bhang. Why can’t we do the same for the destructive tobacco! There is a need to fully enforce the WHO Convention on tobacco if Tanzania wants “to protect present and future generations” from fatal adverse consequences for tobacco and protect the well-being of the nation and people.

There are reports the government has promised to repel the Tobacco Products (Regulations) Act, 2013 so as to curb tobacco related diseases. According to the Ministry of Health official, Dr Sarah Maongezi, there will be a ban on public advertisement of tobacco products in the billboards, TV and radio stations. Well and good. What we need to see is action. At least if nonsmokers are fully protected from smokers within the law that will be a big step. Likewise, if tobacco companies, which are very moneyed, are denied the right to introduce smoking to children through their flashy advertisements, it will be another big step.

Tobacco is a big business globally. Tobacco companies have immense financial resources to influence governments in the developed world as well as third world. Only moral governments can win the war against such.

The author is an assistant lecturer at Dar es Salaam University College of Education (DUCE).

ANALYSISBy Mwassa Jingi

Tobacco is the most controversial cash crow amongst the main cash crops Tanzania has been depending on for its economy for many centuries. It’s the only cash crop that its consumption by human beings is hundred per cent harmful.

Despite this obvious and genuine fact, that tobacco is harmful to human health, it has remained on the list of cash crops that the country promotes for its economic advantages. Thus, there are two different and contradictory approaches, when the world is marking World No Tobacco Day on every May 31 each year.

This year’s theme on May -World No Tobacco day was: ‘Tobacco is a threat to development’. Why it should be a threat to development, while it is has been supporting the country’s economy for many years? Why tobacco should be a threat to development, while it has been sustaining the livelihood of many people, particularly in those areas, where it is grown? For many years political leaders of almost all countries in which tobacco is grew and marketed never entertain facts that tobacco is harmful to health.

Economic advantages of tobacco and its products have been promoted, while playing down its negative effects on human health. According to the World Health Organisation (WHO), about 7.2 million people die every year due to tobacco related diseases. In Tanzania alone, about 16,000 people die every year and about 83 die every week due to tobacco related diseases. From these facts is there any reason to continue promoting tobacco farming?

According to WHO, action to stamp out tobacco use can help countries prevent millions of people from falling ill and dying of tobacco-related disease, combat poverty and reduce large-scale environmental degradation. Because of these obvious health problems caused by tobacco use, WHO calls on governments to implement strong tobacco control measures.

These include banning marketing and advertising of tobacco, promoting plain packaging of tobacco products, raising excise tax and making indoor public places and the workplace smoke-free, things, which are not done by our government. While WHO leads in urging countries to make sure they reduce or if possible stamp out tobacco use, Tanzania promotes tobacco farming despite its harmful effects on human health.

According to Ocean Road Cancer Institute (ORCI) and Muhimbili National Hospital (MNH) data, 32 per cent of cancer cases are linked to smoking tobacco. A study by the Ministry of Health in collaboration with National Institute for medical Research (NIMR) and WHO, 17.5 per cent people in households did not actively smoke tobacco were exposed to the substance by other smokers and 24.9 per cent are exposed to tobacco in the workplace.

These statistics are really shocking and logically it could be anticipated that tobacco be stamped out and be substituted for other crops, which are consumer-friendly. We are told by physicians that tobacco contains about 2,000 toxins – that is why no wonder that tobacco is one of causes of diseases like cancer, diabetes, heart and lung diseases.

Tobacco’s health and economic costs

“Tobacco is a major barrier to development globally;” says Dr Douglas Bettcher, Director of WHO’s Department for the Prevention on non-communicable diseases (NCDs). “Tobacco-related deaths and illness are drivers of poverty, leaving households without breadwinners, diverting limited household resources to purchase tobacco products rather than food and school materials, and forcing many people to pay for medical expenses.”

Studies by Sokoine University of Agriculture (SUA) suggest that the country loses about 61, 000 hectares of forests every year due to tobacco farming. It’s also estimated that about 12,389 cubic metres of trees are felled annually in Tabora Region by tobacco growers/farmers. In terms of economic advantages, it is said that tobacco earns the country of about $150 million per year.

Globally, tobacco costs households and governments over $1.4 trillion through healthcare expenditure and lost productivity. “Tobacco threatens us all,” says WHO Director-General, Dr Margaret Chan. “Tobacco exacerbates poverty, reduces economic productivity, contributes to poor household food choices, and pollutes indoor air.” Dr Chan adds: “by taking robust tobacco control measures, governments can safeguard their countries”.

From these costs, which are detrimental to health, tobacco farming doesn’t pay off. Tanzania is able to substitute tobacco farming for other crops like sunflowers, cotton, maize and save the lives of many people from tobacco related diseases. Since tobacco is a threat to development, it can reasonably be likened to the use of narcotic drugs and negative effects of corruption on the country.

Legal framework in controlling tobacco use

In realising harmful effects caused by tobacco users, WHO in 2005 initiated the Framework Convention on Tobacco to control and reduce the prevalence of tobacco uses and its exposure to tobacco non-smokers. Despite this convention, which requires signatory countries to make sure tobacco use is extremely controlled to reduce its effects, still 600,000 people die each year from exposure to second hand smoke, while only 30 countries meet best practices for pictorial warning against tobacco consumers. This means many countries, including Tanzania, do not adhere to WHO’s convention.

According to the WHO report first ever published, only 16 per cent of the world’s population is protected by comprehensive national smoke free laws. Although tobacco farming and factories processing tobacco, the Tobacco Production (Regulations) Act, 2003, are in the country for many decades before and after independence, Tanzania’s legal framework on controlling tobacco use was enacted in 2003. Ironically, the law is weak and very ineffective, when it comes to tobacco use control in the country.

On World No Tobacco Day, minister of Health Ummy Mwalimu promised us new tobacco control legislation, which will discourage both tobacco farming and use as a way forward to having Tanzania without tobacco. We hope this won’t be a mere political statement. All countries, including Tanzania, have committed to the 2030 Agenda for Sustainable Development (SDG 2030), which aims at strengthening universal peace and eradicating poverty. Key elements of this agenda include implementing the WHO Framework Convention on tobacco control and by 2030 reduce by one third premature deaths from NCDs. Tanzania must comply with the SDG 2030, for the health of its people.

Tobacco threat cuts across all social lives

According to the WHO report, tobacco threatens all people, national and regional development, in many ways, including:

Poverty: Around 860 million adult smokers worldwide live in low- and middle-income countries. Many studies have shown that in the poorest households, spending on tobacco products often represents more than 10 per cent of total household expenditure – meaning less money for food, education and healthcare.

Children and education: Tobacco farming stops children attending school. About 10-14 per cent of children from tobacco-growing families miss classes because of working on tobacco farms.

Women: About 60-70 per cent of tobacco farm workers are women, putting them in close contact with often hazardous chemicals.

Health: Tobacco contributes to 16 per cent of all NCD deaths.

These harmful effects of tobacco also are prevalent in Tanzania as well. While many governments in western countries are taking action against tobacco use, from banning advertising and marketing, to introducing plain packaging for tobacco products, and smoke-free work and public places, but Tanzania has been reluctant to enforce these measures for fearing to lose both political and economic advantages of tobacco. Tanzania’s tobacco use control is in small-scale. Cigarette companies are almost free to brand and market tobacco products. According to WHO, governments worldwide collect nearly $270 billion in tobacco excise tax revenue each year, but this could increase by over 50 per cent, generating an additional $141 billion, simply from raising taxes on cigarettes by just $0.80 per pack (equivalent to one international dollar) in all countries. Increased tobacco taxation revenues will strengthen domestic resource mobilisation, creating the fiscal space needed for countries to meet development priorities under the 2030 Agenda.

According to the WHO’s report, tobacco-related illness is one of the biggest public health threats the world faces, killing more than 7 million people a year. But tobacco use is one of the largest preventable causes of NCDs. Tobacco control represents a powerful tool in improving health in communities and in achieving the SDGs. SDG target 3.4 is to reduce premature deaths from NCDs by one third by 2030, including cardiovascular and chronic respiratory diseases, cancers, and diabetes.

Another SDG target 3.a. calls for the implementation of the WHO Framework Convention for Tobacco Control (WHO FCTC). The WHO FCTC entered into force in 2005 and its parties are obliged to take some steps to reduce demand and supply for tobacco products. Actions addressed in the convention include protecting people from exposure to tobacco smoke, banning tobacco advertising, promotion and sponsorship, banning sales to minors; requiring health warnings on tobacco packaging, promoting tobacco cessation, increasing tobacco taxes; and creating a national coordinating mechanism for tobacco control. There are 180 parties to the WHO Convention.

From what the convention highlights, it is my belief that Tanzania has no reason to continue and promote tobacco farming, rather our politicians must now change their mindset in persuading tobacco farmers to substitute tobacco farming for other crops. Health is source of wealth.

A farm workers union has warned of anarchy in the agriculture sector if some black politicians who took over commercial farms continue to use their power to intimidate farm workers who they are paying slave wages.

General Secretary of the Progressive Agriculture and Allied Industries Workers Union of Zimbabwe, Raymond Sixpence, said a section of the new black farmers had become anti-people and were working in cahoots with the few remaining white farmers to oppress workers.

“We defeated white monopoly capitalists and now we have black monopoly capitalists. It is now black on black with these guys using their political muscle to pay workers a pittance,” Sixpence said.

Sixpence, whose union is aligned to the ruling Zanu PF party, said some black farmers were also using the system to protect white farmers because they had positions of power, with some acting as fronts.

He said the recently gazetted minimum wage for farm workers, set at a measly $75 per month, smacked of connivance by government officials, who were also farmers in their own right and did not want to pay workers a living wage.

Sixpence said his organisation was being side-lined from participating in the National Employment Council for the Agriculture Sector although they were duly registered with the Ministry of Public Service, Labour and Social Welfare.

He said the union had a membership of more than 6,000 but was being undermined by employers who were diverting their union dues against the wishes of members, who he claimed were being threatened with dismissal by the farm managers.

“We cannot represent our members fully yet they are paying to the NEC and we are now contemplating withholding our members’ subscriptions from the NEC or forming our own NEC with friendly indigenous farmers,” he said.

“There will be anarchy in the agriculture sector; command agriculture will not work because there will be war as our members will refuse to have their money deducted. They have a constitutional right to strike.”

He said the NEC had promised to accept them during the next Annual General Meeting to be held this September.

Sixpence accused some farmers of deliberately directing their membership dues to a rival union, which he claimed was dining with the employers at the expense of the suffering farm workers.

“The composition of the current NEC is suspect and is full of sell-outs who are sacrificing workers. The Collective Bargaining Agreement (CBA) OF 2014 is still in force without any amendments. It is old wine in a new bottle,” he said.

Sixpence said farm workers had been neglected for too long and were being denied services such as access to health and clean water.

ANALYSISBy Jonia Kashalaba

Small and medium enterprises (SMEs) play a crucial role in the economy of developing countries like Tanzania. According to the Tanzania Chamber of Commerce, Industry and Agriculture, more than 95 per cent of businesses in Tanzania are SMEs which together contribute 35 per cent of the country’s Gross Domestic Product (GDP) and generate up to 40 per cent of total employed workforce.

Despite their contribution to the economy, SMEs in Tanzania face a number of challenges affecting their growth and profitability. One of the major ones is compliance with tax regulations with regular complaints on multiplicity of taxes and high tax rates.

Additionally, most SMEs lack experience with regards to tax matters making the cost of complying with tax regulations high. As a result, most of their revenues go into paying taxes and complying with tax regulations. The consequence of this is that the SMEs either close due to lack of profitability or hide in the informal sector.

Although taxation of businesses is a necessity as a source of the government’s revenue, in my view, reducing the tax burden for SMEs would have a positive impact on the country’s economy. For example reduction of payroll taxes (e.g. removal of requirement to pay SDL) would encourage SMEs to employ more people. Furthermore, reduction of tax rates would encourage more small businesses to operate in the formal sector and thus increase the tax government collections.

So what can be done to improve the tax environment for SMEs? My suggestion would be measures to reduce the tax burden on such SMEs both in terms of administrative cost and actual tax cost, by special measures for SMEs that reduce both the number of taxes paid (and therefore the administrative burden) and tax rates.

An increase in the annual VAT threshold (from Sh100m (approximately $45k) to say Sh200 million (approximately $90k) is one of the changes that could be made. This would free many SMEs from the administrative challenges of VAT accounting. Many might say that this is a significant jump considering that the threshold was only recently increased to Sh100 million from Sh40 million. However, the point is that most VAT revenues are generated from a narrow band of goods and services on which most of the budget of the ordinary consumer is spent – for example, telecommunications, electricity, soft drinks, alcohol and tobacco products, sugar and cement.

So such a change is unlikely to lead to any significant loss of tax revenue. Indeed such a change may instead result in a positive contribution to tax revenue based on (a) certain taxpayers declaring higher revenues so as to be able to remain VAT registered and thereby offset VAT inputs; and (b) other taxpayers being deregistered (resulting in a revenue gain if VAT on inputs (no longer claimable following deregistration) exceeded the additional VAT they accounted for on their margin (prior to deregistration)).

Although the threshold in our neighbouring countries is not dissimilar (Kenya Ksh 5 million, c. $50k; Uganda UGX 150 million, c $45K; Rwanda RWF 20 million, c. $31k)), it is clear from PwC’s recent “VAT in Africa” publication that there are a number of other African countries with much higher VAT registration thresholds – including Botswana (c. $92k), Gabon (c. $122k), Lesotho (c. $70k), Zambia (c. $80k), Zimbabwe ($60k). Accordingly, a move to a threshold equivalent to $90k would not be unreasonable.

Indeed I would argue that one could even contemplate a move to a much higher figure of Sh500 million than Sh200 million that I propose but I assume that this would be a step too far for the policy makers.

The inability to claim input tax for those below the VAT registration threshold could in fact represent a tax increase from some businesses, and so another proposed change is a reduction of the income tax rate (from 30 per cent to 15 per cent) for companies with annual turnover below the VAT registration threshold. Given the likely increased tax burden resulting from inability to reclaim VAT inputs, it is not unreasonable to reduce the income tax rate. In addition, such a change is more likely to encourage compliance.

I also propose that skills and development levy (“SDL”) should not apply to companies with turnover below the VAT registration threshold. Currently, all companies with more than four employees are required to pay SDL at a rate of 4.5% of payroll costs and file monthly SDL returns. This risks discouraging small businesses from hiring many employees and in some cases also discourages compliance.

The proposed change (which could alternatively be linked to headcount rather than turnover) would reduce the payroll tax burden and thus encourage formalisation of businesses, hiring of more employees, and compliance by businesses that are currently not complying. Perhaps this would also improve Tanzania’s Paying Taxes ranking (as excessively high payroll taxes are a key contributor to our poor ranking in the Paying Taxes indicator of the World Bank “Doing Business” publication).

Most of you may ask what would be the economic impact of the proposed tax changes. The answer to this is that the impact (if any) will not be significant as tax collection statistics show that most of revenue collections are either from (i) large taxpayers department or (ii) taxes on imports.

In particular, based on the TRA revenue collections report for the six months to December 2016, 80 per cent of the revenue collections are from imports and large taxpayers. This does mean that the revenue risk of tax reductions targeting SMEs is relatively little. In addition, as noted above, the potential upside from increased taxes resulting from increased compliance could be significant.

Ms Kashalaba is a tax manager at PwC Tanzania. The views expressed do not necessarily represent those of PwC.)

Maputo — The Mozambican government has banned the import of all birds and their derivatives from Zimbabwe, following an outbreak of avian flu in that country.

The measure, announced on Monday by the National Veterinary Directive (DINAV), covers all domestic poultry, wild birds, day old chicks, hatching eggs, fresh meat from birds, and all derivatives intended for use in animal feed.

The ban follows an outbreak of avian flu, notified on Thursday, on a poultry farm in the Zimbabwean province of Mashonaland East, which led to the destruction of 715,500 chickens.

There are various strains of avian flu, and the one discovered in Mashonaland East, according to a report in Tuesday’s issue of the Maputo daily “Noticias”, is the most damaging type. This strain, known as H5N8, is highly contagious and lethal to poultry, with a mortality rate of 100 per cent.

Mozambique’s National Veterinary Director, Americo Conceicao, said the avian flu virus is easily transmitted from one poultry farm to another by contaminated equipment, vehicles, clothing and chicken feed.

“Wild birds are a source of transmission of this flu”, he said, “We, and mainly our poultry producers, must step up our vigilance in our production units. All cases of mortality must be notified immediately, so that we can take measures in good time”.

Producers should also notify the veterinary authorities if they notice problems with their birds’ breathing or nervous system, and outsiders should be banned from poultry farms, in case they are unwittingly carrying the disease.

So far there have been no cases of H5N8 registered in humans, said Conceicao, “but bio-safety measures must be observed to avoid risks of contamination”.

This strain of the avian flu virus has not yet been observed in Mozambique.