BoT: We`ve no control over earnings by foreign firms
2008-05-09 09:20:15
By Patrick Kisembo
The central bank has said it has no control over the money foreign contractors generate in the country.
Bank of Tanzania Governor Prof. Benno Ndulu told a consultative meeting on Financial Management that it was difficult to control the income of foreign contractors as they won contracts as foreigners.
The meeting, organized by the Contractors Registration Board (CRB), was held in Dar es Salaam yesterday.
Prof. Ndulu said: If a company comes from Britain to work here at the end of the contract it will take back the money it has collected here, he said.
It is believed that foreign companies command more than 70 per cent of construction contracts in the country, a big chunk of whose earnings is remitted outside Tanzania.
Prof Ndulu said Tanzania would only manage to retain the remitted earnings when local contractors attain competence to compete equally with foreign firms.
Local contractors constitute about 97 per cent of all contractors in the country, although they garner only 30 per cent of the market share of the construction business.
The governor said the situation was disheartening for local contractors despite its importance and contribution to the national economy.
He cited lack of funding from financial institutions as one of the biggest challenges facing local contractors.
This is due to the fact that most of the local contractors are small with no tract record and lack collateral to enable them access loans from financial institutions, he said.
Prof. Ndulu said the BoT had taken measures directed at reducing interest rates which were still very high following financial institutions` use of treasury bills rates as a benchmark to set interest rates to bank customers.
The governor said contractors would now benefit following the government`s move to embark on second generation financial reforms including putting in place the Lease Finance Act that would also enable contractors to acquire equipment on lease basis for construction purposes.
He said the government had prepared a bill to amend laws that hinder the development of mortgage finance in the country.
We are currently administering, on behalf of the government, guarantee schemes which contractors can also utilize to access requisite financing from financial institutions, said Prof Ndulu.
CRB Registrar Boniface Muhegi admitted that foreign contractors benefited a lot owing to the fact that they were able to access finance, plant and machinery, as well as support, from their home countries or institutions.
