Tanzania’s
very decent annual growth rate masks many ills. At 7 per cent this
year, and on average throughout the past decade, it is hard to complain
about the economy.
The future looks ever brighter, with an impressive series of offshore
gas discoveries as explorers confirm new finds, coal and nickel to mine
besides gold, a growing population, vast arable land and the launch of
its maiden bond within the next three months, which is likely to be a
billion-dollar offering.
Banks
praise Tanzania as one of the world’s rapidly growing regions;
economists like its robust macroeconomic stability, budget controls and
rising revenue collection, and growing consumer demand.
East Africa’s biggest country is the darling of donors. And the presidents of China and the US have both visited this year and delivered rousing verdicts on the country’s future.
Lu Youqing,
China’s ambassador to Tanzania, says: “I predict that this year, in
terms of attraction of foreign direct investment, Tanzania will be
number one in the east African region.”
But the great promise mixes with a lacklustre picture heavy on
bureaucracy and corruption in a country held back by an inexperienced,
undereducated workforce and startling underperformance.
Most business leaders and economists say the country ought to be
growing at double-digits, even without the promise of a natural
resources bonanza several years away.
“If something becomes successful, the government interferes,” says a leading businessman.
When exports of flowers and food via a new air link did well, the
government taxed it so heavily that the line shut down and now
everything is trucked overland to Kenya and exported from there.
The government has this year introduced a tax on SIM cards just as
mobile communications were growing at 20 per cent. Campaigners say 8m
people cannot afford the tax, penalising a tool that helps spark small
business, reduces the cost of transactions and is among the main
contributors to economic growth rates.
Tanzania is also taking on an increasing volume of commercial loans, only a few years after donors cleared its debts.
A report from the World Bank this year says: “Economic growth will
remain constrained by Tanzania’s weak performance in policy areas,
including the business environment, human development, and government
effectiveness.”
In addition, the impact of that 7 per cent annual growth is hard to
see. Poverty is entrenched. More than a third of the 45m people live on
less than $11 a month. There are too few jobs and it seems unlikely the
target to become a middle-income country by 2025 will be reached.
“Tanzania needs to accelerate growth of the formal sector and needs
to maintain it for 20 years before it makes a difference at scale,” says
Philippe Dongier, head of the World Bank in Tanzania.
The government is beginning to acknowledge the problems in public.
“We have not created the speed of economic transformation [we need],”
says William Mgimwa, finance minister. “Between 2001 and 2012, poverty
was only reduced by 2.1 per cent, despite all this good GDP growth.”
Besides gold, agricultural crops led by tobacco, coffee, cashews,
cotton and tea drive exports, but farmers – who make up three-quarters
of the population – are especially poor.
Growth in the agriculture sector lags behind that of communications,
financial services and construction, manufacturing and retail, which
have expanded by 30 per cent in the past five years and together
delivered 60 per cent of Tanzania’s economic growth since 2008.
Mr Lu says: “There is still a long way for the country to go to
realise industrialisation. It is still short of electricity supply.”
The government’s latest response to this barrage of complaints is
“Big Results Now”, a donor-backed unit that aims to speed progress in
several key areas. The greatest spur to action may come from an
electorate that is finding its political voice.
A small section of the population, perhaps 12 per cent according to
the African Development Bank, is now defined as middle class.
The political opposition is small but growing, and political tensions
have turned violent several times in recent years, a shock for a
country used to peaceful continuity.
Elections scheduled for 2015 will prove the first real test of
Africa’s longest ruling party, as opposition parties elicit greater
followings and organise themselves better.
The very structure of the country, still wedded to socialist values
despite its capitalist-friendly veneer, has hitherto accounted for the
lack of reform, says an international adviser.
He adds: “It’s effectively a very centralised one-party system with the trappings of democracy around the fringes.”
Even the reform agenda is modelled on Malaysia, although the UK and China both back it.
Those close to President Jakaya Kikwete
describe him as a good tub-thumper for the country who has delivered
investment and international regard, but who remains in the words of one
person familiar with him, indecisive and “a little leftist – as much as
he thinks he’s a capitalist, he’s not”.
Observers in business and policy are sceptical whether the
government’s “Big Results Now” framework will deliver, but the biggest
hope may come from the rise of a consumer class.
Tanzania was late to adopt mobile phone innovations embraced by its neighbour Kenya but they have spread rapidly.
Now 45 per cent of people send and receive money via mobile
transfers. There are more than 20m cell phone customers, compared with
14,000 five years ago.
“There’s enough demand for four or five shopping malls here,” says Jayesh Shah, chief executive of local Sumaria Group, noting that cement consumption is also far below that of regional leaders.
Dar es Salaam, the commercial capital, really only has one mall at
present, though several projects are under way, including one from Mr
Shah.
Cranes and scaffolding shape much of the skyline as a small building
boom takes hold, partly to feed the nascent oil and gas industry as
expatriates move in.
Mr Mgimwa, the finance minister, says: “There is no clear evidence
that the emergence of a middle class will be sustainable unless we
create economic undertakings.”
He cites the need to create more industries, more employment and reduce the cost of doing business.
As the nation becomes more inquisitive, faultlines are increasingly exposed.
For the first time, people worry about divides between Christians and
Muslims entrenching in a country used to unity. The local population in
Mtwara, the site that supplies a new Chinese-built natural gas
pipeline, worry that they will not benefit from their own resources, but
police quelled riots with fatal results.
Unknown assailants threw acid at two British volunteers on holiday in
Zanzibar, hurting the tourism industry and highlighting the spectre of
Islamist fundamentalism.
The Zanzibar archipelago continues its clamour for greater autonomy,
but neither it nor the mainland has found a workable model. Some fear
this could lead to a democratic impasse, even postponing elections. The
answer, for the sake of political stability as much as economic
development, could be for the government to produce results. “We all see
these reforms are not happening fast enough,” says one diplomat. “To me
it’s a constant puzzle.”
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