COMING INTO FOCUS
Tanzania's long-term focus is to foster homegrown skill, while also raising its game in infrastructure through the slow and steady implementation of the Five-Year Development Plan.
According to the 2016-2017 Global Competitiveness Report of the World Economic Forum, Tanzania is the 116th most competitive nation in the world. It also languishes at 132nd among 190 countries in the World Bank's Ease of Doing Business annual study. As Toufiq. S Turky, CEO of Turkys Group, said to TBY, “…while taxation tariffs in Tanzania are fairly similar to other countries within the East African Region, the interpretation of legislation has differed from that of, say, Kenya, (where) the actions of the Kenya Revenue Authority have pushed the country to 80th in the world in terms of ease of doing business, while Tanzania lags behind at 132nd."
The Fund
In June 2017, the IMF completed its sixth review of Tanzania's economic performance under the Policy Support Instrument (PSI) program, a scheme to determine the most pragmatic direction for economic policy. Back in January, the IMF had warned the government not to fail in its commitment to capital investment—budget permitting—in economy-driving infrastructure supportive of economic growth. Macroeconomic performance is deemed strong, and the medium-term outlook favorable, where the “2017/18 budget reaffirms the authorities' objective of scaling up public investment, while preserving fiscal sustainability." For its commitment to enhancing the business environment conducive to foreign investment, the IMF has approved a six-month extension of the PSI arrangement. In a TBY interview, the IMF's Resident Representative Bhaswar Mukhopadhyay explained how one dilemma faced by Tanzania, namely an FX inflow shortage, was a burden faced throughout East Africa. “The government," he notes, “has worked to mitigate a noticeable decline in inflows causing a slowdown in the growth of monetary aggregates by reducing the statutory minimum reserve requirements at the banks."
FDI
Notably, in July of 2017, President Magufuli signed off fresh mining legislation granting the state a minimum 16% stake in related projects, boosting royalties and enabling the government to renegotiate natural resource contracts. Tanzania's GDP contribution from mining actually fell to TZS486,728 million in 1Q2017 from TZS509,033 million QoQ, having averaged at TZS293,667.04 million from 2005 to 2017. Available data for 2015 puts total FDI net inflows as a percentage of GDP at 4.3%, largely reflecting the discovery of 45 trillion cubic feet of natural gas reserves. The leading five sources of FDI were South Africa, the UK, Kenya, Canada, and China. Another interested party is Oman, and Mohamed Al-Tooqi, Country Manager for Tanzania of the State General Reserve Fund (SGRF) of Oman, explained how the nation was 20% invested in Tanzania's strategic Bagamoyo Port. The port, a special economic zone, is a litmus test of national commitment to “a business-oriented development strategy (to) tap into the country's potential resources (and) spearhead industrialization." Corporate tax in Tanzania is 30%.
MACRO OVERVIEW
The government's 2025 Vision anticipates Tanzania attaining middle-income status by that year, which would require a GNI per capita of USD1,045-12,736 by the World Bank's reckoning. Annual GDP has averaged 7% over the past five years, ranking the nation among the world's swiftest-growing 20 economies, exceeding the Sub-Saharan Africa average growth rate of 4.4% during the period. The IMF forecasts 7.1% growth for 2017 (World Bank Sub-Sahara average estimate is 5.1%). Inflation, essentially food driven, at low double digits in 2011, was brought to manageable single-digit territory in 2016 as per the goals of the central bank, the Bank of Tanzania. As of June 2017 it had climbed 5.4% YoY, down from 6.1% in May.
A DEBT OWED...
Central bank data puts the domestic debt stock at TZS11,353.8 billion at end-May 2017, up TZS223.7 billion MoM and TZS1,434 billion from May 2016. The proportion of long-term debt grew, confirming the government's medium-term policy of stretching the overall maturity profile to facilitate debt service. Government debt equated to 39% of the GDP in 2016. The ratio had averaged at 34.9% from 2001 to 2016, having seen a high of 50.2% in 2001 and low of 21.5% in 2008. Meanwhile, external debt for May 2017 stood at USD17,907.2 million, up MoM from USD17,802.6 million.
BUYING & SELLING
Tanzania's current account virtually halved YoY to a deficit of USD1,508.9 million for the year ending in May 2017. And while export earnings fell, a slimmer import bill enabled this improvement. The month of May saw a trade deficit of USD132.8 million.
EXPORTS
Exports rose to USD608.2 million in May from USD583.5 million in April 2017, having averaged USD550.21 million from 2006 to 2017, peaking at USD956.5 million in December 2015 and troughing at USD228.7 million in March 2006. For 2016 the top-five export commodity groups were pearls, precious stones, metals, and coins on USD1.72 billion; tobacco and manufactured tobacco substitutes on USD370.41 million; edible fruits and nuts on USD359.16 million; ores, slag, and ash on USD323.43 million; and coffee, tea, and spices on USD208.97 million. The GDP contribution from agriculture grew to TZS2,929 million in 1Q2017 from TZS2,268 million QoQ.
IMPORTS
In May 2017 imports rose to USD741 million from USD672 million MoM. The print averaged at USD833.75 million from 2006 to 2017, peaking at USD1,399.3 million in December 2011 and troughing at USD89.3 million in March 2006. For 2016 the leading five categories were mineral fuels, oils, and distillation products on USD1.43 billion; machinery, reactors, and boilers on USD936.23 million; vehicles other than railway/tramway on USD757.14 million; electrical and electronic equipment on USD616.26 million; and plastics on USD405.78 million.
SWEET DIVERSITY
Edwin Rutageruka, Acting Director General of the Tanzania Trade Development Authority (TanTrade), pointed out certain products that call for commercial processing. “Tanzania is the second-largest country in Africa in terms of livestock population, with 25 million cows (to name just one item)." Meanwhile, the annual capacity of honey is estimated at 240,000 tons, and when Zanzibar's products are included the spice trade becomes a viable money-spinner.
THE LION'S SHARE
Tanzania, on the Indian Ocean, offers more than safaris. And tourism, with 1,284,279 visitors in 2016 up 12.9% YoY, generated revenues of USD2 billion in 2016, up from USD1.9 billion in 2015. The Ministry of Natural Resources and Tourism's program for 2017/2018 earmarks a budget of TZS148.6 billion, with TZS51.8 billion going to development projects. PWC research puts compounded growth in available rooms at 2% annually, estimating available rooms climbing from 7,700 in 2016 to 8,500 in 2021, while guest nights rise from 1.6 million to 1.8 million. Moreover, the average daily rate of hotels (ADR) is forecast climbing from USD140 to USD174, with total room revenue appreciating by a compounded annual 6.9%, to USD371 million in 2021.
AND FOR 2017?
Focus Economics foresees slight economic deceleration on slack private-sector credit growth; the latter a domino effect of the banking sector's higher non-performing loans. Meanwhile, the external sector is being buttressed by rising tourism and gold exports. GDP seems set to grow 6.3% this year, rising to 6.6% in 2018. The IMF's Bhaswar Mukhopadhyay expects sustained execution of policy set in the previous budget “to continue (building) infrastructure, reallocating spending toward development needs, and improving revenue collection domestically."
Tanzania is finding its focus economically to better benefit from the FDI it seeks to attract. Its longer-term job now is to foster home-grown skills, while also raising its game in key infrastructure.
COMING INTO FOCUS
TABLE OF CONTENTS
Guest Speaker
Hon. Patricia Scotland, Secretary General, Commonwealth of Nations
TBY talks to Hon. Patricia Scotland, Secretary General of the Commonwealth of Nations, on the advantages of being a member of the Commonwealth, the need to celebrate diversity, and Tanzania's war against corruption.
read articleGuest Speaker
Libérat Mfumukeko, Secretary-General, East African Community (EAC)
TBY talks to Libérat Mfumukeko, Secretary-General of the East African Community (EAC), on Tanzania's importance to the EAC, the major achievements of regional integration, and obstacles ahead of a monetary union.
read articleInterview
Raymond P. Mbilinyi, Executive Secretary , Tanzania National Business Council (TNBC)
TBY talks to Raymond P. Mbilinyi, Executive Secretary of Tanzania National Business Council (TNBC), on its work to support the private sector in the country, tackling challenges in the economy, and clamping down on corruption.
read articleReview: Banking
The Quest for Depth
If Tanzania is to meet its 2025 vision of attaining middle-income status, it will need to corral its bank-centric financial and capital markets for greater depth by extending participation and rendering credit more accessible to SMEs, women, and the young to spur economic growth.
read articleInterview
Dr. Baghayo A. Saqware, Commissioner , Insurance, Tanzania Insurance Regulatory Authority (TIRA)
TBY talks to Dr. Baghayo A. Saqware, Commissioner of Insurance, Tanzania Insurance Regulatory Authority (TIRA), on achieving universal healthcare coverage, the brilliance of microinsurance, and how to partner with public and private entities to increase the industry's penetration.
read articleReview
Legal Thunder
With the stepping down of Minister of Energy and Minerals Sospeter Muhongo in May 2017 over transparency issues and the introduction of three new laws that give the government the right to renegotiate or revoke existing mining and oil and gas rights, private players in the country are unsure of what future lies ahead. On the other hand, project-specific developments bode well for a sector in need of a breakthrough.
read articleInterview
Kapuulya Musomba, Managing Director, Tanzania Petroleum Development Company (TPDC)
TBY talks to Kapuulya Musomba, Acting Managing Director of Tanzania Petroleum Development Company (TPDC), on the planned expansion of the Mtwara-Dar es Salaam natural gas pipeline, entering northern industrial hubs, and empowering nascent industries.
read articleInterview
Marc Den Hartog, Managing Director, Shell/BG Tanzania
TBY talks to Marc Den Hartog, Managing Director of Shell/BG Tanzania, on the critical need for economies of scale, the importance of developing LNG for export, and why renewables must be taken into account in any long-term plan.
read articleInterview
Hon. Charles Mwijage, Minister, Industry, Trade and Investment
TBY talks to Hon. Charles Mwijage, Minister of Industry, Trade and Investment, on how to reach middle-income status, employing the private sector toward this end, and what sets the country apart from the rest of East Africa.
read articleFocus: Helium
Discoveries of Magna-tude
Despite being the second most common element in the universe, helium is in short supply on earth. With global reserves of the gas steadily dwindling, and demand steadily increasing, the discovery of a whopping 1.53 billion cbm of helium in underground chambers in Tanzania could not have come at a better moment.
read articleInterview
Gilliard W. Ngewe, Director General, Surface and Marine Transport Regulatory Agency (SUMATRA)
TBY talks to Gilliard W. Ngewe, Director General of Surface and Marine Transport Regulatory Agency (SUMATRA), on transportation budget allocation and cross-sector dialog and partnerships.
read articleInterview
Jared H. Zerbe, CEO, Tanzania International Container Terminal Services Limited (TICTS)
TBY talks to Jared H. Zerbe, CEO of Tanzania International Container Terminal Services Limited (TICTS), on regional trade flows and Tanzania's potential to take a leading role in orchestrating cargo movement.
read articleFocus: Tanzania Strategic Cities Project (TSCP)
East Africa’s “Geneva”
If Rome wasn't built in a day, it is not surprising that Tanzania's project to revamp eight of its largest cities is entering its eighth year of implementation. A release of further funds from the World Bank has given the project a new lease of life.
read articleReview
Lost in the Maize
Agriculture accounts for 30% of Tanzania's GDP, and the sector has experienced above-average output in recent years compared to the rest of the African continent. However, the sector's development is held back by poor rural farming practices and general infrastructure bottlenecks.
read articleInterview
Fred Kafeero, Tanzania Representative, Food and Agriculture Organization (FAO)
TBY talks to Fred Kafeero, Tanzania Representative of the Food and Agriculture Organization (FAO), on the organization's long-term support for Tanzania's development, recent initiatives in agriculture, and financing.
read articleFocus: 2020 Irrigation Target
Reap What You Sow
In 2006, the Tanzanian Ministry of Water and Irrigation set a target for Tanzania's agriculture sector: to irrigate 1 million ha of land by 2020. More than 10 years on and moving ever closer to the deadline, this target has not yet been met, though the first seeds are being sown.
read articleFocus: Southern Circuit Tourism
Hidden Gems
Tourism is frequently described as the jewel in Tanzania's economic crown. In 2016 alone, the industry contributed over USD2 billion in revenues. However, for at least three years, the government has expressed concern that tourism is not well distributed across the country.
read article