7. State-Owned Enterprises
Public enterprises do not compete under the same terms and conditions as private enterprises because they have access to government subsidies and other benefits. SOEs are active in the power, communications, rail, telecommunications, insurance, aviation, and port sectors. SOEs generally report to ministries and are led by a board. Typically, a presidential appointee chairs the board, which usually includes private sector representatives. SOEs are not subjected to hard budget constraints. SOEs do not discriminate against or unfairly burden foreigners, though they do have access to sovereign credit guarantees.
Relevant ministry officials usually appoint SOEs’ board of directors to serve preset terms under what is intended to be a competitive process. As in a private company, senior management report to the board of directors. Summary financial results for fiscal year 2017 of SOEs are included in the GoT’s consolidated financial statements (CFS) which are available online. This year, however, the National Audit Office issued an adverse audit opinion, calling CFS accuracy into question.
The government retains a strong presence in energy, mining, telecommunication services, and transportation. The government is increasingly empowering the state-owned Tanzania Telecommunications Corporation Limited (TTCL) with the objective of safeguarding the national security, promoting socio-economic development, and managing strategic communications infrastructure. The government also acquired 51 percent of Airtel Telecommunication Company Limited and became the majority shareholder. In the past, the GoT has sought foreign investors to manage formerly state-run companies in public-private partnerships, but successful privatizations have been rare. Though there have been attempts to privatize certain companies, the process is not always clear and transparent. In some instances, the GoT took back control as was the case in 2009-10 when the government nationalized formerly-privatized Tanzania Railways Limited, General Tyre, and Kilimanjaro International Airport based on mismanagement.
In 2010, the GoT enacted the Public Private Partnership (PPP) Act. According to the act, any ministry, government department or agency, or statutory corporation may act as a PPP procuring authority. The 2014 amendment of the PPP Act created a new PPP Center to be incorporated in the Office of the Prime Minister through merging the Coordination Unit and the Finance Unit. It also set up a PPP Technical Committee to recommend PPP projects for approval by the National Investment Steering Committee. In spite of these developments, Tanzania’s Five Year Development Plan (2016-2021) (FYDP II) recognized weaknesses in the PPP legal framework and inadequate understanding and operationalization of PPP concepts as impediments to private sector financing. As a result, FYDP II calls for an expanded role of the private sector through PPPs. Despite this goal, little progress has been made in this area.
In August 2017, President Magufuli instructed the Minister of Industry, Trade and Investments to revisit the terms of privatization and the ensuing performance of previously privatized companies/assets – most of which took place during the 1990s. According to the Minister, of 156 privatized companies, 62 were operating normally, 28 were under-performing and 56 were no longer in operation. The GoT, in turn, has implemented a plan to repossess and subsequently retender idle companies/assets. As a result, according to the Treasury Registrar Office, three companies were repossessed and an additional 12 companies are being considered for similar action by the Attorney General.