CHANGE IN MOTION

Tanzania 2017 | ECONOMY | FOCUS: POLITICAL TRANSITION

It is not unusual for a political transition to rewire a country's political system, and Tanzania's recent election is no exception. The East African nation has seen a significant shift in policy priority, implementation, and fiscal strategy that has sent out shockwaves through the region. Business stands to gain significantly from this rejig, but with change comes risk, and Tanzania is no exception.

Under John Magufuli's predecessor, the country saw strong growth, averaging 7% a year for several consecutive years. However, that growth did not trickle down, and Tanzanians grew increasingly angered by what they saw as a corrupt system that posted strong numbers that did not translate into employment opportunities or higher standards of living. That majority spoke out loud and clear when they elected Magufuli on a platform of rigorous anti-corruption and state austerity.

Magufuli's first move was to cut the budget for his own inauguration by USD90,000 to only USD7,000, and then donate the difference to a government hospital in Dar es Salaam. Similar symbolism has abounded in recent months to the delight of the rank and file and some in the business community. Government ministers are no longer allowed to travel abroad at the public's expense, and Magufuli himself has neglected to visit a number of high-level regional and international summits on the grounds that he has important work to do at home.
By most accounts, this has resulted in more accessible government officials and a more accountable civil service, something that businesspeople say the government needed. Concerns remain though, chiefly that by centralizing decision-making in one office and appointing a cadre of loyal but not always experienced heads to agencies and state-owned firms, Magufuli is generating huge expectations of the public sector that it is unable to fulfill, much like performing heart surgery on a patient and expecting him to win gold in a 100m sprint the following day.

Tanzania has elected a reformist president of an incumbent party, and his changes will take time and effort to implement. In this case, laws of physics can also apply to economics. For a time Tanzania has been the object at rest, traveling on a steady trajectory but awaiting an unbalanced force to change its speed and direction. That force has come in the election of Magufuli and his restructuring of the state apparatus.

At the same time, Newton's third law is applicable here too; for every action there is an equal and opposite reaction. Magufuli claims to have already purged 10,000 ghost workers from the government payroll and has re-appropriated land slated for the development of a massive LNG chain in the south. Both moves represent a larger rationalization of the state's affairs that can boost economic growth and opportunities for business in significant ways.

This represents a clear move away from classical laissez faire economics to an increasingly interventionist approach that carves out a much stronger role for the state in the economy. Minister of Industry, Trade & Investment Charles J. P. Mwijage assured TBY that this does not equate to nationalization. “Under our government there is no such nationalization vocabulary… During privatization people were given industries and factories to operate at a profit. They were sold assets at a token price on the condition that they produce goods and services, create employment, and pay taxes. Where they have failed to meet these conditions we are asking them to find someone else who can run the business.”

So far, the government has made the seriousness of its reform agenda clear. It is too early to see if the slowdown that accompanies major change will affect business in 2017, but with strong and clear communication of agenda, it should not. A more disciplined state will benefit investors and citizens alike. As Newton explained in his second law of motion, if a force acts on mass, acceleration is produced.