Posts tagged as: lending

Stanchart Post Strong First Quarter Performance

Standard Chartered Bank Tanzania Limited has recorded strong first quarter this year results on the back of effective client relationship management, quality product roll out, efficient cost and loan impairment management. It is the time when the Industry is struggling with tough non-performing loans (NPL) and low revenue growth.

Standard Chartered Bank Tanzania continues to manage customer satisfaction resulting to deposit and profitability growth.

The Bank has also continued to maintain a liquid and well capitalised balance sheet. At the end of the quarter, the Bank’s Capital Adequacy Ratio closed at 18 per cent for tier 1 and 20 per cent for total capital against the current regulatory Limits of 10 per cent and 12 per cent respectively.

Bank’s Chief Executive Officer Mr Sanjay Rughani said the bank’s success is attributed to a continued disciplined and focussed approach of doing business. “As we mark our centenary anniversary this year, our main focus continues to be executing our strategy which is solely centred on supporting our clients as they develop their businesses by introducing new ways of banking,” he said.

“We have continued to enhance Financial Inclusion through leveraging on our State of the Art and Award winning Digital Platforms which are more convenient and secure,” he said. He said in addition the digital platform extends banking services to the online banking services.

The bank’s clients can also perform real time funds transfer processing and can access direct communication from the bank in their mailboxes using their laptops, tablets or mobile phones.

Commenting on the significant decrease in its Loan Impairment line, the bank’s head of finance, Ms Ruth Zaipuna said that the bank has a focussed approach for its lending and recoveries processes noting that the focus has yielded good results.

“We know our Clients well and we came up with a Lending and Recoveries strategy that has resulted to mutual benefits for both the Bank and its Clients.” Ms Zaipuna said.

The Bank’s CEO, Sanjay Rughani, concluded by adding that in the remainder of the year his Bank will increase its activities on funding Government Projects and that it is already in discussion with various key Government Offices on funding a number of projects.

“Standard Chartered Bank Tanzania is keen to contribute to the Government’s key agenda of making the country become semi-industrialised by 2025.

We are aware of the various pipeline projects, some of which have already started. We have catered for similar projects in other countries and we will use both our local and international capabilities to support the Government’s growth agenda.”

Mr Rughani said. Standard Chartered Bank Tanzania is this year marking its centenary anniversary since it opened its operations in Tanzania in 1917.

To mark the official centenary anniversary celebrations the Bank hosted over forty of its Africa and Middle East Top Management Team members in Tanzania in March this year. The members met with some of the Government’s highly ranked Leaders as well as its staff and clients and reiterated the Group’s continued commitment to Tanzania.

Tanzania

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Namibia: Agribank Launches Collateral-Free Loan

By Nuusita Ashipala

Oshakati — Agribank has launched a collateral-free loan to enable working communal farmers with no conventional collateral to access agricultural loans.

The product targets salaried communal farmers who have the ability to repay their loans but do not have property in a proclaimed urban environment.

Speaking at the launch at Oshakati last Friday, Chief Executive Officer at Agribank Sakaria Nghikembua said the “no collateral loan” is in line with the bank’s strategic plan geared towards inclusiveness for all farmers including those in communal areas.

The inclusiveness of all communal farmers will, amongst other factors, increase food production and contribute to household-level food security.

Speaking at the same event, the Vice-Chairperson of Agribank Board of Directors, Michael Iyambo, said the bank will sign agreements with employers to have repayments of the loan deducted from the payroll monthly.

“As a bank we decided to address the gap whilst reasonably mitigating our lending risks; Instead of paying via banking debit orders, we will deduct via payroll to enhance our collections success rate,” said Iyambo.

In addition to the no-collateral loan, the bank has also introduced a credit life to ensure it recovers the loaned money in the event a client passes on whilst still owing the bank.

The bank has also taken a decision to support funding of agro-processing industries in its quest to add value to basic agricultural produce, create employment and aid in expanding production in support of economic growth.

Previously the bank primarily focussed on funding primary production – focussing only on the acquisition of farmland, purchase of livestock, construction or upgrading of farming infrastructure and production inputs for crop production and horticulture.

Iyambo said value addition increase the contribution of agriculture to the country’s gross domestic product (GDP), which has been dwindling over the past years.

According to the Namibian Statistics Agency, the contribution of primary agriculture production witnessed a decline from 5.3 percent in 2007 to 3.5 percent in 2016.

Secondary production on the other hand barely contributed more than 1 percent to the overall GDP.

On average, the meat processing and milling sector contributed about 0.5 and 0.7 percent respectively to the total GDP over the period 2007-2016.

“This is a clear indication that the agricultural sector is mainly driven by primary production. The challenge, however, is that primary agricultural production is seasonal; hence demand for labour is highly variable,” Iyambo said.

Iyambo added that primary agricultural products are susceptible to irregular changes in prices and as such employment in primary agriculture is not a sustainable source of income.

Ngikembua said the loans will range between N$5 000 and N$500 000 and is repayable over a period of 12 to 54 months.

The Governor of Oshana Region, Clemens Kashuupulwa, said the loan will broaden finance access to emerging communal farmers, which the governor reckons will aid in the alleviation of poverty and food security.

Namibia

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Banks Hike Interest Rates to Attract Deposits – Bank of Tanzania

Commercial banks have increased interest rates on time deposits in a bid to fill the gap of acute shortage of liquidity affecting most financial institutions.

According to the Bank of Tanzania (BoT) monthly economic review for March this year shows that the overall interest rate on time deposits rose to around 10.29 percent compared with 8.99 percent in the previous month and 9.14 percent in corresponding period 2016.

Lending rate rose to an average of 17.66 percent compared with 16.01 and percent 16.43 percent, respectively.

The rise in deposit interest rates is associated with the efforts of commercial banks to attract deposits in the wake of transfer of public deposits to the BoT whilst that of lending rate is attributable to an increased risk of premium following a rise in non-performing loans in the recent months.

Consistent with the high demand for treasury bills, the overall weighted average yield fell to an average of 15.02 percent in February 2017 from the 15.27 percent in the corresponding period in 2016. The yield was also lower than 18.52 percent last year.

The overnight inter-bank cash market rate decreased to 7.93 percent in February 2017 from 10.07 percent in the preceding month.

The overall inter- bank cash market rate fell to 8.68 percent from 10.50 percent.

Tanzania

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Uganda: Commercial Lending Rates to Keep Falling – Bankers

Photo: Eronie Kamukama/Daily Monitor

Customers transact business in one of the banks in Kampala. Banks are expected to keep reducing lending rates although at a slow pace.

By Martin Luther Oketch

Kampala — Although the pace at which commercial lending rates are falling is slower than public expectation, Uganda Bankers Association (UBA) is optimistic that rates will continue declining because they are responding to monetary policy directions of the Central Bank.

Interest rate is basically the amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Lower interest rates make it cheap for the general public to borrow. This encourages spending and investment and it leads to higher aggregate demand in the economy and the result is higher economic growth.

In an interview with Daily Monitor on Wednesday, the chairperson of UBA, who is also the managing director of Centenary Bank, Mr Fabian Kasi, said: “We are optimistic that lending rates will come down further. Banks have been reducing their rates since November last year. There are some banks whose prime lending rate at the moment is at 18 and 19 per cent.”

Bank of Uganda (BoU) has sustained reduction in its policy rate since April last year but the pace at which the commercial banks have been lowering their lending rate has been so slow.

Mr Kasi said there is always a lag in interest rate changes in the market and that is the reason why the commercial lending rates have not declined so fast but there is still room for banks to keep reducing their rates. “Although I cannot predict at what level the lending rates will be in June this year and beyond, commercial banks will continue reducing the lending rates,” he said.

Slow paced reduction

Statistics by BoU relating to the current monetary policy shows that lending rates have only reduced by 1.2 per cent over the last one year, which indicates that there has been generally a slow pace compared to reduction in the Central Bank Rate (CBR).

However, broadly, BoU said in its monetary policy report that interest rates declined further in the quarter ending March 2017 in line with the eased monetary policy stance.

“The rate of decline in lending rates remains low recorded at 1.2 percentage points reduction since March 2016 compared to 5.5 percentage points cut in the CBR whereas time deposit rates have declined by 4.7 percentage points since February 2016 to 11.4 per cent,” said the Central Bank. In the foreign currency denominated loans, the rate also declined during the last one year.

“Rates on foreign currency loans and time deposits also declined by 1.8 percentage points and 1.4 percentage points to 8.3 per cent and 3.0 per cent respectively,” said the Central Bank’s current monetary policy.

BoU remains optimistic that lending interest rates are expected to decline going forward on account of advice by commercial banks that they would lower prime lending rates would take effect in March 2017.

Uganda

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Islamic Banking Faces Tax Hurdles in Uganda

By Bernard Busuulwa

Issues of taxation, manpower and marketing have hampered the rollout of Islamic banking products in Uganda, as technocrats struggle to finalise regulations for the new products.

While regulations to guide the use of agency banking have been finalised and are scheduled for issuance after April 19, issues surrounding taxation of Islamic banking products remain unresolved.

Under Islamic banking rules, no interest is charged on loans to borrowers; profits and losses realised from a business are shared equally between lenders and borrowers, and lending is restricted to morally acceptable ventures: Lending to alcohol firms, tobacco producers and gambling companies is prohibited.

Concerns over how much tax should be applied to Islamic financial products and the elimination of double taxation have slowed consultations on the matter.

For example, a mortgage transaction arranged between a bank and a client under Islamic banking would require the two parties to make equity contributions towards the deal without charging the home buyer any interest.

The client would instead be obliged to buy out the bank’s equity share in order to achieve full ownership of the house or piece of land in question. Recent proposals in favour of taxing the banks’ contribution have raised questions about the competitiveness of Islamic banking products when compared with conventional financial offerings.

In contrast, mainstream mortgage products require clients to make reasonable equity contributions towards the purchase of real estate, disbursement of a bridging loan facility by a commercial bank, and repayments that carry annual interest charges. Withholding tax is levied on interest earned from the mortgage, while the value of the loan is exempt from taxes.

A shortage of specialised Islamic banking professionals has also slowed down the rollout of Islamic financial products. Due to the sensitive nature of Islamic banking operations, use of qualified Shariah professionals is considered essential in regulation, selling and distribution of financial services.

However, according to research data, there are only 10 qualified Shariah professionals on the local market.

This is in a business environment with 24 commercial banks and a small pipeline of specialised Islamic banking players who have shown interest in the market but are yet to obtain commercial licences.

“Taxation of Islamic banking transactions seems complex because it is difficult to determine the exact point of taxation, and also minimise the risk of double taxation. But the UK has already come up with useful tax guidelines that define the degree of taxation for Islamic banking transactions, involving both physical assets and direct cash, which would be compatible with our environment. The human resource gap experienced among local Shariah professionals in Uganda could be filled by foreign manpower previously nurtured by big banks like Standard Chartered, Barclays and KCB in their native markets. In addition, there are overseas players in big Shariah markets like Malaysia that are capable of providing outsourced compliance services for Shariah boards,” said Abubaker Mayanja, the managing director of ABL Dunamis Ltd, a financial advisory services firm.

Uganda

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Bank Tips Traders On ‘Loans to Invest’

By Bernard Lugongo

Mwanza — Tanzania Postal Bank (TPB) yesterday again appealed to entrepreneurs and investors to come forward and take loans from it and investment on ‘flourishing opportunities’ in Mwanza City.

The remark was made here by Tanzania Postal Bank (TPB) Chief Executive Officer, Mr Sabasaba Moshingi, saying the bank is in a good position financially, and only what they require are investors processing their papers effectively and getting funds to invest in the city.

He urged traders and investors to see the importance of exploiting the chance in order to transform the economy from solely relying on agriculture to industries by 2025.

While making a presentation on the importance of loans from the financial institutions at the Mwanza Business Forum, he said NMB bank will soon list its shares in the Initial Public Offering (IPO), and urged the residents of Mwanza to buy them, when listed as part of investment.

He pointed several benefits from the institution, including marketing a number of its products on ‘Group Lending’ which has been designed to financially support Small Scale Entrepreneurs (SSE) to grow in the business.

On his part, NMB bank’s Acting Head of Corporate, Mr Nsolo Mlozi, said the Business Forum will continue to enlighten the public on the role of financial institutions in the country. He said his bank is fully prepared to ensure that business and investment flourish in the area with their support, besides opening up other branches there.

‘In the near future, the bank eyes to open at least 10 more branches in the Lake Zone,” he pointed out. Mr Mlozi hinted that they want to bring their services close to the residents and provide them with more loans to start up small business in their midst.

He advised the residents to think of businesses and projects which are likely to increase their incomes and share their ideas with the bank if they really want to ‘address poverty’ in the region.

Presiding over the occasion, TIB Development Bank Director of Strategic Planning and Corporate, Mr Patrick Mongella, said his bank was also ready to provide loans to the residents, traders and entrepreneurs to reduce poverty in the region.

He hinted that Mwanza City has many opportunities to exploit including collecting revenues from Busisi Bridge, the Great Lakes ferries, and Industrial Parks as well as the Mwanza Airport to improve its economy.

Tanzania

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Rwanda Bourse Moves to Boost Trade Volumes, Infuse Liquidity

By Kabona Esiara

The Rwanda Stock Exchange has said it will introduce a market makers scheme in an effort to infuse liquidity in the bearish market and boost volumes traded.

Market makers buy shares of a listed company, warehouse them and sell them to the public when prices appreciate, creating a balance in the market.

“The legal framework is in place,” said Robert Mathu, executive director of the Rwanda Capital Markets Authority, adding that the RSE has also been pushing for the scheme to be adopted by its regional peers.

The Nairobi Securities Exchange, which has had a difficult run in recent months, is understood to be implementing the market makers scheme. The capping of the lending rate at four percentage points above the Kenya Bank Reference Rate has reduced investors’ appetite for listed companies, reducing their earnings.

In 2015, NSE chief executive officer Geoffrey Odundo said the bourse was working with various stakeholders to develop a framework and regulations to enable market makers, short sellers and stock lenders to operate in the capital market.

Optimism

The EastAfrican understands that while the market making system is operational in Kenya, the big capital requirement has locked out many brokerage firms.

Davis K Gathaara, general manager of Baraka Capital, a brokerage firm in Kigali and Kampala, has advised the RSE to first extend trading hours and bring down the settlement time.

The RSE trading floor opens at 9am and closes at 12pm while the settlement time take two days.

Mr Gathaara is optimistic that the market makers will improve turnover on regional equity capital markets, which have suffered partly due to continued outflows as investors shift capital to more advanced economies in search of a lower risk profile.

In 2016, the turnover on the Rwanda bond and equity markets declined by 55.6 per cent to Rwf17.1 billion ($20.7 million), due to underperformance of most listed companies compared with the same period in 2015.

Kenya’s equity market also performed dismally in quarter four, recording Ksh25.39 billion ($246.5 million) in 2016 compared with Ksh46.10 billion ($447.5 million) in the same period in 2015.

Bond market

The Rwanda bond market has not kept up, as it is dominated by government bonds. The corporate bond market, in addition, has remained under-tapped, with only I&M Bank Rwanda and IFC trading.

The challenge cited by the National Bank of Rwanda (BNR) is that secondary market bond trading is not buoyant, partly because investors are holding on to their bonds till maturity.

“The Rwandan capital market still lacks corporate bonds while most investors in government bonds tend to hold the securities up to maturity. These are big challenges to the development of the country’s capital market,” said BNR.

The volume of bonds traded on the secondary market increased by 85 per cent to Rwf1.63 billion ($1,9 million) in 2016 from Rwf0.88 billion ($1 million) in 2015 while the number of transactions increased by 230 per cent — from 30 transactions in 2015 to 99 transactions in 2016.

Most local debt markets in Africa were buoyant in 2016, driven by relatively low levels of activity in the Eurobond market by African issuers.

Kenya: Mixed Fortunes for Banking as Kenya, Rwanda Vote in August

By Moses K Gahigi

With elections on the horizon and the effects of interest rate caps kicking in, the region’s banking sector is facing mixed fortunes, as analysts warn of stormy times ahead.

Kenya, the region’s biggest economy and Rwanda, the bloc’s star business reformer, will both hold presidential elections in August this year, events that are expected to stimulate liquidity but also minimise investor appetite.

Although both countries will hold elections, the impact on the sector is expected to be slightly different.

“In Kenya, there is a wait-and-see attitude by investors This means they will not be dispatching new investments so this is likely to depress the sector. In Rwanda, it could be a bit different because Rwanda’s elections are not normally disruptive, but an election year is one of anxiety nonetheless,” said Maurice Toroitich, managing director of KCB Rwanda could and head of the Rwanda Bankers Association.

Kenyan banks are struggling to cope with interest rate cap measure taken by the government to reduce the cost of borrowing for the country’s private sector, with some experts terming it as “a massive own goal.”

The caps were fixed at a maximum of 4 percentage points above the Central Bank’s base-lending rate, bringing the maximum lending rate to 14 per cent.

Consequence

As a consequence, 11 listed Kenyan bank stocks have plunged by an average of 14 per cent, with further stock falls expected to happen in the coming months. “Wait until they release numbers for 2016, dividend cuts, single digits growth,” noted a financial commentator on Twitter.

Although Kenya’s economy has been reported to have been spared the effects of the slump in commodity prices that ravaged commodity based economies, the cap is proving to be the Achilles heel for its growth this year, expected to slow to 5.7 per cent or lower in 2017.

Reports indicate that KCB fell 2 per cent on Wednesday to push losses over the past 12 months to 37 per cent, while Equity Group rose 0.9 per cent, but its 12-month decline still stands at 32 per cent.

The volatility in the financial sector cut across the region, with Rwanda grappling to stem a growing trend of non-performing loans — expected to grow by 8.5 per cent in 2017, while lenders in Uganda are faced with high lending rates.

“With the lending rate cap in Kenya and high interest rates in Uganda, banks will have to adopt more technology based delivery options to make banking affordable to the consumer, and also cut costs”

“Banks are cutting branches and reducing human resource,” said Mr Toroitich. Players are casting a positive forecast for Rwanda’s banking sector, predicting more growth in the coming months, coming from the expected surge in liquidity as a result of increased election spending.

Kenya

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Mixed Fortunes for Banking as Kenya, Rwanda Vote in August

By Moses K Gahigi

With elections on the horizon and the effects of interest rate caps kicking in, the region’s banking sector is facing mixed fortunes, as analysts warn of stormy times ahead.

Kenya, the region’s biggest economy and Rwanda, the bloc’s star business reformer, will both hold presidential elections in August this year, events that are expected to stimulate liquidity but also minimise investor appetite.

Although both countries will hold elections, the impact on the sector is expected to be slightly different.

“In Kenya, there is a wait-and-see attitude by investors This means they will not be dispatching new investments so this is likely to depress the sector. In Rwanda, it could be a bit different because Rwanda’s elections are not normally disruptive, but an election year is one of anxiety nonetheless,” said Maurice Toroitich, managing director of KCB Rwanda could and head of the Rwanda Bankers Association.

Kenyan banks are struggling to cope with interest rate cap measure taken by the government to reduce the cost of borrowing for the country’s private sector, with some experts terming it as “a massive own goal.”

The caps were fixed at a maximum of 4 percentage points above the Central Bank’s base-lending rate, bringing the maximum lending rate to 14 per cent.

Consequence

As a consequence, 11 listed Kenyan bank stocks have plunged by an average of 14 per cent, with further stock falls expected to happen in the coming months. “Wait until they release numbers for 2016, dividend cuts, single digits growth,” noted a financial commentator on Twitter.

Although Kenya’s economy has been reported to have been spared the effects of the slump in commodity prices that ravaged commodity based economies, the cap is proving to be the Achilles heel for its growth this year, expected to slow to 5.7 per cent or lower in 2017.

Reports indicate that KCB fell 2 per cent on Wednesday to push losses over the past 12 months to 37 per cent, while Equity Group rose 0.9 per cent, but its 12-month decline still stands at 32 per cent.

The volatility in the financial sector cut across the region, with Rwanda grappling to stem a growing trend of non-performing loans — expected to grow by 8.5 per cent in 2017, while lenders in Uganda are faced with high lending rates.

“With the lending rate cap in Kenya and high interest rates in Uganda, banks will have to adopt more technology based delivery options to make banking affordable to the consumer, and also cut costs”

“Banks are cutting branches and reducing human resource,” said Mr Toroitich. Players are casting a positive forecast for Rwanda’s banking sector, predicting more growth in the coming months, coming from the expected surge in liquidity as a result of increased election spending.

Kenya

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Africa: Tazara Railway Shows Benefit of Chinese Aid

The 1,860.5 kilometer-long Tazara railway spanning from Tanzania’s commercial center Dar es Salaam to Zambia’s Central Province represents one of China’s largest foreign aid projects. A tripartite agreement was signed in September 1967 to build the railroad and construction began in 1970. The railway opened in 1975 and in July 1976 was officially transferred to the governments of Tanzania and Zambia, with the Tanzania-Zambia Railway Authority undertaking operations. Over the past four decades, the railroad has helped boost agricultural production and urbanization along its route.

Despite sustained operational woes, the governments of China, Tanzania and Zambia actively strive to explore ways to revitalize the railroad and enable profitable operations, spotlighting the spirit embodied by the Tazara railway. This will take Sino-African cooperation in development to a new level as well as foster a shift in China’s role as a force in advancing global governance from primarily promoting South-South Cooperation.

The decision to fund and build the railroad dispels accusations of China’s neocolonialism. China faced natural disasters in the 1960s and the country’s industrialization was still in its infancy at the start of the project. As such, the country had no need to exploit African resources or develop local markets. As Tanzania’s and Zambia’s efforts to seek help from Western countries and the former Soviet Union were repeatedly rejected, Chinese leaders didn’t take economic losses into account and resolutely decided to build the Tazara railway out of benevolence to help Africa’s newly independent countries develop their economies and stand on their own feet. African leaders also put a premium on China’s decision. Lending a helping hand to third world countries and promoting joint development was the fundamental starting point of Chinese aid in Africa, while the West’s claims of neocolonialism by China is utterly groundless.

The recollection also highlights the international spirit of China’s aid teams which sets an example for Chinese businesses operating in Africa. Along with growing economic and trade ties, China’s economic activity in Africa has been seen to feature a mix of good and bad. Some Chinese enterprises came across as violating business ethics and treating local employees unlawfully, resulting in rebukes about a lack of corporate social responsible as well as subjecting Sino-African ties to latent political risks. A look back at the efforts of Chinese railway experts and workers in building the Tazara railway, however, reveals how China taught techniques to its African brothers and how countries along the rail route were impressed with Chinese staffers’ devotion to duty. The intangible assets, as such, could be tapped as tutorials for Chinese enterprises with operations in Africa to regulate their business activity and benefit local society.

Furthermore, a comprehensive model in foreign aid is needed in guiding large infrastructure projects in Africa. While helping build the Tazara railway, the Chinese government paid special attention to fostering management talents in Tanzania and Zambia. China helped develop around 200 overseas students and a large number of mid-level technicians in both countries and established a school for studying railway technology in Zambia. As the project moved forward, the cooperation model among China, Tanzania and Zambia evolved, shifting from one where Chinese experts provided technical support and trained railway management talents to one with comprehensive participation from all sides in local railway management. Such a comprehensive model that combines project construction and technological cooperation is of profound guiding significance to Chinese aid projects of large cross-regional infrastructure and landmark buildings in Africa today.

Last, China needs to help solve the current predicament in the operation of the Tazara railway. Since the 1990s, an improved political environment in southern Africa has led to an increase in export channels for Zambia, which has caused a severe diversion of supplies. The joint management for the Tazara railway also resulted in insufficient management, in which both sides focused on running the railway but overlooked maintenance and relevant input. In addition, the Tanzania-Zambia Railway Authority adopted unrealistic welfare policies, which have pushed up operation costs. These factors have pushed the Tazara railway to the verge of bankruptcy. This also reflects some drawbacks on the Chinese side. Some African projects have proven to be unsustainable after China handed over the reins. For example, farms China helped build vanished within several years. In this respect, China should start from the commercialization of the Tazara railway, and push forward comprehensive reforms in the railway, for instance, by applying for joint support from the governments and banks, and by adopting a franchise model to qualified enterprises in the running of the Tazara rail line.

The author is an associate researcher with the Chinese Academy of International Trade and Economic Cooperation.

Africa

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