President Jakaya Kikwete said last week that his government was
studying various models for managing revenues from gas production, adding that
they were focusing on those with sovereign wealth funds.
"We have seen that in the mining sector where Currently, profits
realised from the operations go straight into the Treasury or the Ministry of
Finance ,it sometimes creates the sentiment that people don't see where the
revenues from the sector go. So this idea is welcome," said Mr Teweli
Teweli, a consultant with Africapractice.
He, however, cautioned that it was prudent to establish the Fund and
give it mandate by taking off as soon as it is in place. He gave examples of
Trinidad and Tobago which have had very successful SWF for oil and gas sectors.
He said a sovereign fund allows a country to save money for future
generations; stabilises inflows of cash into the economy to ensure
macro-economic stability; while also ensuring balanced national economic
development.
Setting up of a sovereign fund, he noted, also prompts creation of
institutions and systems to account for and allocate revenues. Giving Tobago's
examples, he said best practices on revenue management are available in many
oil producing countries.
The Extractive Industries Transparency Initiative (EITI) is a guiding
protocol on management and accountability of oil and gas revenue. In an
interview, a tax expert with Smile Telecommunications, Mr Boniface Matambula
argued that the policy should be clear on how local businesses will participate
in provision of logistics services, and how local ventures will be protected
from unfair competition from established overseas contractors.
"If we ponder the policies and strategies early enough, we will
avoid delays in gas production development ," he said.
He gave Libya's example,which has recently gone through a tumultuous revolution and in
the midst of jumpstarting its banking sector and trying to restart oil
operations and focusing on tapping from its sovereign wealth fund to tap for
reconstruction and deep reserves of oil underground to continue to fund it.
"For some countries, this is why they created sovereign funds.
Sovereign wealth funds have played the roles of saviour and stabilizer in the
past, just look at Ireland, China and Kuwait as great examples.
A University of
Dar es Salaam don, Dr Lenny Kasoga, said the country can use profits from its
state enterprises to set up its first sovereign wealth fund that will reinvest
the money to advance the country's commercial interests.
The country has recently tripled its estimated gas reserves in June
after offshore finds by Norway's Statoil, US group ExxonMobil and Britain's BG
Group and its partner Ophir Energy. "We want to learn from them by setting
up our own fund to ensure we similarly benefit," said President Kikwete on
the Fund. Nigeria and Ghana are also moving towards the establishment of
state-owned investment funds for revenues generated from the energy sector.
Mr Kikwete said the government's intention was to ensure natural gas
revenues were used to speed up development. "Since 1954 some 61 wells have
been drilled. Out of those, natural gas was found in 22 wells ... We
haven"t been lucky yet to find oil but we have discovered gas in both
onshore and offshore areas," he said.
The recoverable gas reserves stood at 28.9 trillion cubic feet (tcf),
Mr Kikwete added. "Offshore oil and gas exploration started in 2004 with
just one company but we now have 18 companies. Gas exploration has escalated
since the first gas discovery in 2010 ... I believe that a lot more gas will be
discovered," he said.
The World Bank says Tanzania is expected to see an increase in revenue
of up to $3 billion a year following major offshore gas discoveries in the
country. The country needs to strengthen investment in infrastructure, science
and technology, engineering and innovation to harness opportunities and
transform the country into a middle upper income economy by 2040, officials
have said.
Mzumbe's Dr Prosper Ngowi said that the country has huge opportunities
in areas of gas, tourism, minerals, mineral development and ICT which can be
leveraged on to spur faster social-economic development. He said the gas sector
would kick-start growth of the economy but that there is need to develop supporting infrastructure
and legislation.
The National Vision 2025 seeks
to transform Tanzania from a peasant and low income country to a competitive
upper middle income country within 25 years, with a per capita income of
$10,000. According to Simon Johnson , Economic Counselor and Director of the
IMF's Research Department, Sovereign wealth funds are a fairly new name for
something that's been around for quite a while: assets held by governments in
another country's currency.
He says all countries have foreign exchange reserves (these days,
they're typically in dollars,euros, or yen). When a country, by running a
current account surplus, accumulates more reserves than it feels it needs for
immediate purposes, it can create a sovereign fund to manage those 'extra'
resources.
"Sovereign funds have existed at least since the 1950s, but their
total size worldwide has increased dramatically over the past 10-15 years. In
1990, sovereign funds probably held, at most, $500 billion; the current total
is an estimated $2-3 trillion and, based on the likely trajectory of current
accounts, could reach $10 trillion by 2012,"he notes. Currently, more than
20 countries have these funds, and half a dozen more have expressed an interest
in establishing one.
Source: The Daily News, http://www.dailynews.co.tz,
reported by Orton Kiishweko
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