Gas: Skills, Jobs and Investment Potential in

TanzaniaKeynote address at Mpingo Business Summit -Arusha

14th September 2013Prof. Samuel Wangwe

Executive Director REPOA

swangwe@repoa.or.tz

Outline

• Introduction

• Socioeconomic Transformation

• Natural Resources and Transformation

• Gas and transformation

• Business Environment

• Conclusion and Way Forward 2

Introduction

• This presentation is going to highlight the participation of Tanzanian businesses including SMEs in the anticipated gas economy.• The participation of the business sector is to be seen in

the context of the big picture of contribution gas and other natural resources to socioeconomic transforming the economy.• It is argued that action is needed on the part of

government to improve the business environment and the business sector to position itself to take advantage of the opportunities presented by the gas economy.

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Socio-economic Transformation• Growth has continued to be strong but it has not been

sufficiently poverty reducing through employment creating and productivity enhancement.

• Case for enhanced participation of significant sections of society including SMEs in the growth process.

• The business environment to target to harness the growth potential of MSMEs to generate productive employment and decent incomes and productivity enhancement for poverty reduction.

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Natural Resources and Transformation of the Economy• Management of natural resources to transform the

economy to achieve inclusive development whereby the majority of the citizens benefit now and in future.

• Evaluation of the potential of the natural resource: This may involve exploration related decisions such as geological surveys, allocation of exploration rights, issues of investments in exploration and evaluation.

• Investing in exploitation: • upstream services • value addition (downstream and midstream) • diversification of the economy (to avoid dutch disease)

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Natural Resources and Transformation of the Economy-2

• Economic, social and environmental impacts and regulation:

• Nature of impacts: economic (e.g. employment, infrastructure, markets for goods and services), social (e.g. social services) and environmental impacts.

• Local level planning: to address necessary adjustments and adaptations to enable productive linkages.

• Encouraging positive development impacts: fostering local development benefits and mitigating negative effects, esp. the environment.

• Participation and consultation: Local communities and the wider public should be informed and consulted prior to development.

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Natural Resources and Transformation of the Economy-3

• Institutional and Human capacity: • Industry expertise: • develop an integrated strategy for national capacity

development at all levels of expertise in the industry and • encourage training institutions to engage in appropriate

generic and tailor made training programmes to cope with human capacity requirements.

• Institutional capacity: enabling regulatory framework, infrastructure and investment capacity especially of SMEs as integral players to engage proactively in national investment in supplier industries and services (for example drilling equipment maintenance and component fabrication, geological surveys)

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Natural Resources and Transformation of the Economy-4

• Diversification and sustainability:

• Diversification: invest outside the resource sector to achieve diversification and transformation of the economy. strengthen the productive base of agriculture. Job creating manufacturing

• Raising the absorptive capacity: human capital, administrative capacity, infrastructure: raising return on private investment and stimulating activity.

• Employment and incomes created in various sectors: largely by the private sector facilitated by government. Harnessing opportunities to invest in downstream processing and value-added, supplying inputs to resource extraction (upstream investment) .

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Natural Resources and Transformation of the Economy-5

• Local content: adopting policies to harness opportunities for maximization of local content, overcoming existing local capability barriers and encouraging citizens to play a significant role in the economy.

• Economic empowerment: • promoting domestic investment in exploration and development

of supply chains through joint ventures and direct domestic investments by SMEs;

• to ensure their participation in the investment in the supply chain;• design incentives to encourage joint venture arrangements

between national and foreign companies; • facilitate skill and technology transfer; and • access to capital and specialized services in the national and local

economy. 9

Gas: opportunity for jobs and investment • The Natural Gas Policy provides a comprehensive

framework for maximization of benefits through the optimization of the value chain which consists of upstream, midstream and downstream activities. • Upstream activities include promotion, licensing, exploration,

development and production of natural gas.• Midstream and downstream activities include transportation,

refinery, processing, and conversion of natural gas. • Power generation (saving million of dollars from heavy oils)• gas as feed stocks to petrochemicals and fertilizer industries • Transportation and distribution of natural gas from a central

aggregation stations in the form of CNG to industrial estates, commercial transporters, and domestic users (residence & vehicles)

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Gas: opportunity for jobs and investment -2

• Corporate social responsibility: Execution of community development (e.g. water, health, education, infrastructure)

• Jobs: quantity and quality• Employment seeking and employment creating

• Quantity• Productivity and remuneration• Skills• Job security• From underemployment in the informal sector to fuller and productive

employment.

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Business Environment

• Competitiveness • Building the capacity to compete • Investing in technology, • Skill development, • Marketing (own capabilities or engaging marketing agents),• Networking e.g. Clusters: critical mass of interlinked

businesses.• Business environment to support competitiveness

• Legal and regulatory framework• Infrastructure• Property Rights: land and business premises

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Business Environment-2

• Access to financial services• Support and Development services• Investing in skills and human capital• Education and training to inculcate entrepreneurial

attitudes and competencies, • Higher learning institutions to better prepare

graduates for jobs and self employment,• Vocational and other technical skills to improve

employability.• Investment: Access to financial services • Start-up capital and growth funds, • Delivery of financial services to the business sector esp.

MSMEs. 13

Business Environment-3

• Bridging the gap between financial service providers and users (MSMEs)• Facilitate financial service providers to reach MSMEs• Formalisation of informal enterprises, • National identification, • Strengthening credit guarantee schemes, • Consideration of the actual needs and contexts of

MSMEs.• Support MSMEs to qualify for financial services• To prepare bankable projects: capacity and cost, • Develop managerial capacity, financial

management and managing accounts,• Inculcate repayment culture.

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Business Environment-5

• Business Environment with special attention to MSMEs- Prioritization • Improve the Legal and Regulatory Framework• Improve Infrastructure: especially roads, energy and ICT • Expand and improve property Rights: land and business premises

registration • Enhance access to financial services• Encourage investment in skills and human capital including

entrepreneurship and Enterprise Culture• Enhance capacity to support and development services

– Improved Governance and Strengthening Institutions dealing with Corruption

– Promote the development of the BDS market

• Accelerate Implementation of the Road map for Improving the investment Climate 15

Business Environment-6

• Support and development services• Public service: • Institutional capacity and • Governance challenge• Transition from controlling and policing attitude to a leading

role PSD and MSME development agenda• Need for greater support for business development. • Government and private sector strategic partnership.• Building capacity of institutions responsible for supporting MSMEs

through adequate training, advisory services, marketing, networking and exposure.

• Support development of the market for BDS e.g training, marketing, etc.

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Conclusion and Way Forward• Management of gas and other natural resources must aim

to transform the economy to achieve inclusive development.• Conditions need to be created for the majority of the

citizens to benefit now and in future.• Government to develop a comprehensive framework for

the optimization of the value chain which consists of upstream, midstream and downstream activities. • Business Environment to promote broad participation of

domestic business including SMEs.• The business sector to track closely government actions to

make the opportunities available for domestic businesses and to harness those opportunities.

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Thank you for your attention

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