by Ben Taylor

Government cuts growth forecast, secures IMF loan
In September, the Tanzanian government slashed its growth forecast for 2021 to 4%, down from 5.6% announced in June. This was expressed in a letter to the International Monetary Fund (IMF). The government attributed the lowering of growth projections to the decline in performance of key sectors due to Covid-19.

“Some key sectors have been seriously hit by the third wave of Covid-19 in the first six months of 2021 that has forced us to review projections,” said Emmanuel Tutuba, permanent secretary in the Ministry of Finance and Planning. He noted that the tourism sector in particular suffered in the first and second quarters.

Growth figures and forecasts have been a source of tension in recent years between the government of Tanzania and major development partners including the IMF and the World Bank.

IMF Resident Representative, Jens Reinke, commented that the government has shown commitment for economic recovery following the Covid-19 pandemic. He made the remarks in approving an IMF loan worth USD $567 to help finance the urgent balance of payment needs, stemming from the effects of coronavirus pandemic.

The government also announced it will also table a supplementary budget before Parliament in February 2022, after the disbursement of the IMF funds. “This is a new source of income that will need approval of Parliament in agreed areas,” said Mr Tutuba, describing this as a normal legal requirement.

Later, the Bank of Tanzania’s monthly economic review for the year to October 31, 2021 reported an 11% rise in exports of goods and services compared to the equivalent period 12 months earlier. Exports amounted to USD $9.6 billion in the year to October 31, 2021, up from $8.6 billion in previous year.

This was driven by a rise in exports of manufactured goods and non­traditional goods other than minerals. Exports of goods increased by 10.4%, with non-traditional goods rising by 13.4%.

Analysts attributed the trend both to a recovery from the past impact of Covid-19 and in part to the efforts of President Samia Suluhu Hassan to establish a more supportive business environment.

“The right signals from the President bolster traders and investors’ confidence to invest in the country,” said Prof Abel Kinyondo of the University of Dar es Salaam’s School of Economics. He recommended, however, that these signals needed to be translated into legislative and policy reform in order for the positive trend to be sustained.

New statistical masterplan forthcoming
The World Bank senior economist in Tanzania, Rob Swinkels, has said the organisation is working with the government of Tanzania to support implementation of the new Tanzania Statistical Master Plan (TMSP) 2022-2027. Mr Swinkels gave the assurance after meeting with the National Bureau of Statistics (NBS) on the matter.

He said the bank is the long partner of the government in the development of the statistics system, which among others, is in response to demand for better information on updates in living standards and policy implementation. He added that the Bank has supported the implementation of TMSP 2010-2018, together with other development partners.

Speaking at the meeting, the Director General of the Tanzania National Bureau of Statistics, Dr Albina Chuwa said, “The World Bank project will help us achieve our vision for statistical development to support the government with quicker and better data to underpin the policy process”.

In a separate development, NBS has requested USD $80m financial support from the World Bank to help in conducting the 2022 Population and Housing Census. The request was by Dr Chuwa, saying the support would go into the purchase of more equipment to be used in the census whose preparations are at an advanced stage.

UK government pursues increased trade with Tanzania
November 2021 saw a UK-Tanzania Business Forum held in Dar es Salaam. It brought together government and business to discuss the trade and investment relationship between the two countries, and opportunities for increased economic partnership.

The UK Prime Minister’s Trade Envoy to Tanzania, Lord Walney (John Woodcock), was in attendance as part of his first visit to Tanzania since his appointment to the role in August. He expressed the UK’s commitment to increasing Tanzania’s exports to the UK market, and investment by British businesses in Tanzania.

“Our particular focus will be on supporting quality and sustainable UK investments into Tanzania that create jobs, inclusive economic growth and mutual prosperity,” he said.

UK Trade Envoys are parliamentarians appointed by the Prime Minister, drawn from both Houses and across the political spectrum. The roles are unpaid and voluntary. These new appointments bring the total number of Trade Envoys who help support the UK’s trade and investment agenda to 36, covering 76 different countries.

Currently, trade between the two countries is highly imbalanced, with the value of Tanzania’s exports to the UK reportedly standing at a mere £29 million per year, while its imports are worth £127 million.

To raise Tanzania’s exports to the UK, Prime Minister Kassim Majaliwa urged the UK to bring in capital and inject it into various sectors especially in value addition. Mr Majaliwa also said UK-funded technical assistance and analysis will help to inform the prioritisation of economic reforms that the private sector could benefit from. He said Tanzania will continue to create an enabling business environment to increase investor’s confidence.

Industry and Trade minister Kitila Mkumbo said it was the government’s wish to see more Tanzania’s products sold in the UK market. “The trade volume between Tanzania and the UK is relatively large. But it is one-sided as it favours the UK more. We import more than what we export,” said Prof Mkumbo.

The forum was attended by over 20 companies from the UK, 150 British and Tanzanian (joint ventures) companies attending in-person and a further 300 participating virtually. It was organised by TanTrade, the British High Commission, the Tanzania Private Sector Foundation and Zanzibar National Chamber of Commerce.

UK aid to Tanzania in precipitous decline

Official aid provided by the UK to Tanzania has fallen sharply in the 2021-22 budget, to £28.5m. This represents a 68% drop compared to 2020-21 (£89.2m) and a massive 86% drop compared to 2015-16 (£204.8m), according to figures released by the Foreign, Commonwealth and Development Office (FCDO).

The drop is most directly linked to the UK government’s decision to abandon its commitment to provide 0.7% of GDP in official development assistance, which came into effect in the most recent budget. It is also linked to the incorporation of the former Department for International Development (DfID) within the Foreign and Commonwealth Office (FCO), now renamed as FCDO. However, though these changes have accelerated the decline of UK aid to Tanzania, the decline started several years earlier.
In 2020, Prime Minister Boris Johnson mentioned Tanzania explicitly as an example of a country where too much aid was provided, in contrast to countries in eastern Europe such as Ukraine and the Balkans, which are more strategically important to the UK.

Development practitioners within Tanzania responded with dismay to this argument, saying they were “left questioning the UK government’s assessment of what constitutes British interests.”

“We believe the move is short sighted, as there are global benefits to providing humanitarian aid to developing countries like Tanzania. A glaring example of this is the current coronavirus pandemic. A unified global response to the pandemic is in everyone’s interests, including the UK’s.”

A representative of the British High Commission in Tanzania responded that “bilateral aid represents one element of the UK’s contribution to Tanzania’s development. UK businesses and investors are a key source of foreign direct investment. And significant amounts of UK aid are channelled through non-bilateral mechanisms, including through major contributions to International Financial Institutions and multilateral programmes. Taking all channels into account, the UK remains one of the largest providers of aid to Tanzania.”

Some analysts have also linked the specific decline in aid to Tanzania to the country’s recent record on governance and democracy, and even to its unusual response to the Coronavirus pandemic.

“Where we have any such concerns on these issues, we have raised them with the Government of Tanzania,” said the BHC spokesperson. “The UK’s relationship with Tanzania remains vibrant and strong. In the year ahead, we will have a major focus on girls’ education and support for Tanzania’s efforts to improve its business environment and build a resilient and productive economy. We will also be working in partnership with Tanzania on climate change, tackling transnational serious and organised crime, and strengthening democratic institutions and the development of civil society.”

by Ben Taylor

Controversial mobile money tax introduced, partially retracted
The most controversial and headline-grabbing move in the 2021-22 budget was a new tax on sending and withdrawing money on mobile phones. A levy of between TSh 10 and TSh 10,000 was introduced on mobile money transactions.

The effect varies according to the particular network being used and the amounts of money involved, but for example, the cost of a transfer of TSh 15,000 on Airtel Money would rise from TSh 350 to TSh 960, while the cost of a TSh 600,000 transfer on the same network would rise from TSh 1,000 to TSh 7,400.

The government hoped the move would raise a total of TSh 1,254 bn over the course of the year. Framing it as a “Patriotism Levy”, Finance and Planning minister Mwigulu Nchemba said it was important that every Tanzanian took part in it.

Given that 2019 saw mobile money transfers in Tanzania worth approximately $40 billion, representing over 60% of the country’s GDP, this new tax could potentially have a major impact on the circulation of money, on poverty reduction efforts, and on the economy as a whole.

The change prompted a major outcry from economists and citizen groups across the country. Richard E. Ms homba, Professor of Economics at La Salle University, Philadelphia, USA, wrote that “the end does not justify the means”. He added that though this type of levy “may be a convenient tax window, it may also lead to a slowdown in economic activities and exacerbate inequality in the country.”

In previous research, the global association of mobile phone network operators, GSMA, found that taxes of this kind are generally “regressive in nature, undermining the fundamental concept of tax equity.”

The Legal and Human Rights Centre (LHRC) filed a court case challenging the new levies.

A few days after the levy came into effect on July 15, the Tanzania Mobile Network Operators Association (TAMNOA) said the business has dropped drastically, therefore asking government to amend the new charges.

The government responded to these complaints by first announcing in late July that possible changes to the levy were under discussion, and President Samia Suluhu Hassan directed the Minister of Finance and Planning, Dr Mwigulu Nchemba and his Communications and Information Technology counterpart Dr Faustine Ndugulile to review mobile money transaction charges.

Then, at the end of August, the Ministry of Finance and Planning released a statement saying Dr Nchemba had signed the amendments of the Regulations for Electronic Transactions Levy for 2021 with a view to reduce the rates by 30%.

Business leaders welcome 2021-22 budget
Finance and Economic Planning minister Mwigulu Nchemba in June tabled the TSh 36.3 trillion budget before Parliament, with a bundle of fiscal measures that business associations say contain promising prospects. A slightly-revised budget was approved by parliament two weeks later, with a value of TSh 36.6 trillion.

Headline measures in the budget include a cut in PAYE from 9% to 8% for the lowest taxable band, cuts on various import tariffs and abolition of VAT on imported metals and raw materials.

Confederation of Tanzania Industries (CTI) policy specialist Frank Dafa said the budget generally brought relief to the manufacturing sector and the move could boost investment and increase job opportunities.

“There are significant improvements in the taxes and levies of employers and manufacturers. So the relief provided will stimulate industrial growth,” said Mr Dafa, adding that the abolition of the 15% additional import duty on industrial sugar was commendable. The local manufacturers have been complaining about the requirement which left their billions of shillings in the hands of the government due to delayed refunds.

Tanzania Bankers Association (TBA) chairman Abdulmajid Nsekela echoed the sentiments, saying that it was a relief budget. He said if the budget would be implemented accordingly it would create conducive environment for business, translating into more opportunities for banks to provide finance.

Nevertheless, CEO Roundtable chairman Sanjay Rughani said “a deeper look on the impact from the newly introduced taxes on mobile money transactions plus daily levy on SIM card is necessary as it can constrain the financial inclusion agenda and can have other implications.”

by Ben Taylor

A Samia Stimulus
Among the many announcements and shifts in direction brought in by the new President, Samia Suluhu Hassan, is a new focus on encouraging investment and stimulating economic growth. She signalled this first when speaking at the swearing-in ceremony for new permanent secretaries on April 6 and then again in her first State of the Nation address to parliament on April 22.

“We intend to focus more on economic growth,” she told MPs. “We will continue the good work achieved during the previous administrations, change where necessary but with a view to promoting efficiency and productivity, guided by the national, regional and party manifestos.”

“Last year, our nation managed to enter the middle-income category where the per capita income increased to $1,080 from $1,036. It is a great achievement, but more effort is needed to accelerate the economy,” she added.

Framed as a package of measures to strengthen the country’s economic recovery from the effects of the global Coronavirus pandemic, the President spoke at length on the need to regain investor confidence. She noted that investors have been complaining about Tanzania’s unpredictable investment climate, hostile tax collection tactics and bureaucracy, saying the situation would change with her at the helm as Tanzania’s sixth president.

“The government will be taking specific steps to promote investment by looking into investment policies, laws, and regulations, remove clauses that are hampering smooth investments, including unpredictable policies, an unstable tax system and unnecessary bureaucracies,” she explained.
“The sixth phase government will take an uncompromising approach on this, and we will start with the blueprint (for the improvement of Tanzania’s business climate, which was approved in 2018). Issuance of permits and licences will be streamlined, and so will the process of issuance of land to investors.”

Under her administration, President Hassan said, the tax collection would focus on compliance instead coercion and intimidation. In partnership with the Tanzania Private Sector Foundation (TPSF), the government plans to put in place a system through which members of the private sector can forward their complaints directly to the government.

She added that the government will strengthen the Foreign Affairs ministry to drive investment. “Economic diplomacy will be our emphasis,” she stressed, saying the country’s relations with the outside world would now hinge on economic partnerships.

World Bank assesses the economic impact of the Coronavirus in Tanzania
Tanzania’s economy has fared relatively well under the Coronavirus pandemic, but still registered its first decline in per capita GDP for over 25 years, according to the latest Tanzania Economic Update, published by the World Bank in February 2021.

Titled “Raising the Bar: Achieving Tanzania’s Development Vision”, the report noted that Tanzania’s economy had suffered much less than its neighbours under the pandemic, but that it had still suffered. “The real GDP growth rate fell from 5.8% in 2019 to an estimated 2.0% in 2020, and … the global economic slowdown has adversely affected export-oriented industries, especially tourism and traditional exports, and caused a drop in foreign investment.”

A survey of 1,000 small and medium enterprises in Tanzania in June and July 2010 found that an estimated 140,000 formal jobs were lost and another 2.2 million non-farm informal workers suffered income losses. “Tanzanians employed in informal non-farm microenterprises tend to be especially exposed to economic shocks, as they often have limited savings to draw on in a crisis,” said the report. “Firms reported an average decline in sales of 36%, which has jeopardized the solvency of more than three-quarters of small and medium enterprises. Most affected firms have not benefited from any type of government support.”

“Although the government did not impose stringent mobility restrictions, the pandemic prompted firms and consumers to adopt precautionary behaviour, hindering domestic economic activity. Meanwhile, steep declines in production, consumption, and imports have significantly reduced fiscal revenue.” The result, according to the report, is that an additional 600,000 people could fall below the poverty line.

The report’s authors cautioned that the future of both the pandemic and the national economy remain highly uncertain. In particular, they noted that without quality information on the state of the outbreak in Tanzania, it remains difficult to plan and implement effective policies, both in terms of public health and managing the economy.

The report also warned that the country’s much-cherished attainment of lower middle income status (LMIS, officially achieved in July 2020) could be fragile. “Over the past 10 years, 23 countries have fallen from middle- to low-income status or from high- to middle-income status. … As the COVID-19 pandemic continues to depress global economic activity, Tanzania will need to endure an indefinite slump in external demand regardless of the effectiveness of its domestic health response.”

This fragility is also linked to the country’s unusual combination of middle-income status with persistent high levels of poverty. For countries newly achieving LMIS, the average poverty rate based on the international extreme poverty line is 30%, while Tanzania’s extreme poverty rate remains close to 50% percent. “Rapid population growth, slow and uneven job creation, low levels of education, and limited access to educational and employment opportunities, especially among women and girls, have reduced the inclusiveness of Tanzania’s economic expansion, blunting its effect on poverty reduction,” argues the report.

2021-22 Budget
The total value of the national government budget for 2021-22 will be TSh
36.23 trillion (USD $14bn), according to the budget framework present by Finance and Planning Minister, Dr Phillip Mpango to parliament on March 11. This represents an increase of 3.9% (TSh 1.35tn) over the 2020­21 budget, slower than the increase in previous years, and comparable to both the World Bank’s latest estimate of the rate of GDP growth (4.5% in 2021) and to the rate of inflation (3.7%).

Of this amount, TSh 26 trillion will be sourced locally, including TSh 22 trillion raised by the Tanzania Revenue Authority (TRA). Development partners will provide TSh 2.9 trillion in grants and concessional loans, representing 8% of the total. The government will source another TSh
7.3 trillion in form of domestic and foreign loans.

“It is the government’s view that implementation of the 2021/22 development plan and budget will stimulate economic growth, improve delivery of social services, create job opportunities as well as development for people and the nation at large,” said the minister.

The government, according to Dr Mpango, will focus much of the development budget on executing the ongoing priority projects before embarking on new ones. This includes the Julius Nyerere Hydropower Station (TSh 1.3 trillion), currently under construction at Stiegler’s Gorge on the Rufiji River, ongoing construction of the Standard Gauge Railway (TSh 3.2 trillion), and construction of passenger terminals and the purchase of aircraft for Air Tanzania (TSh 1.5 trillion).

by Ben Taylor

President Magufuli’s economic goals, and a charm offensive for investors
President Magufuli emphasised economic matters in his inaugural speech to parliament following his re-election in October. Over half the speech was devoted to economics, reflecting a new emphasis.

The President focussed on the need to manage the economy well so that the country attains higher economic growth, together with an emphasis on ensuring that growth benefits citizens. The aim is to achieve 8% growth, well above historic growth averages in sub-Saharan Africa of 4%, and above 5.5% growth projected for Tanzania in 2021.

Other goals listed by the President include the creation of eight million jobs, stabilisation of the shilling, keeping inflation in single figures, and reducing the interest rate.

The combination of two targets – 8% growth and 8 million jobs – was termed the 8-8 economic agenda by President Magufuli. The President also emphasised the importance of attracting both local and foreign investment in order to achieve these goals. As part of the new emphasis, the ministerial docket with responsibility for promoting investment and the Tanzania Investment Centre (TIC) have both been moved from the Prime Minister’s Office to the President’s Office.

Prof Kitila Mkumbo, the new Minister of State in the President’s Office (Investment), took this as his cue to launch a charm offensive to improve relations with existing investors, and to attract new investors. “It’s a new dawn for investors in Tanzania,” said the Minister. “We will continue to work closely with the private sector in promoting, facilitating, handling and developing investments in Tanzania. We recognise the private sector as an engine for economic growth and a valued and dependable partner in our endeavour to achieve the 8-8 agenda of economic growth and jobs creation.”

“We will seek to constantly and consistently engage and dialogue with members of the private sector and their member-based associations on how best to promote investment in Tanzania. We will openly and transparently listen to and welcome their ideas; and we will implement good and evidence-based ideas with a view to promoting investments in our country. In the same spirit, we express our commitment to continue working responsibly and in a friendly manner with development partners and like-minded civil society institutions in investments promotion and facilitation, fostering business enabling environment, as well as private sector development – and economic development in general.”

Prof Mkumbo tasked TIC to solve issues of nepotism and unnecessary delays when an investor wants to invest in Tanzania. He reiterated President Magufuli’s target that it should not take more than 14 days in enabling an investor to invest in Tanzania.

“We need to change our mindset. Officials working with investment facilitation institutions should not see themselves as bosses to investors, we should look at them as partners and your duty is to facilitate,” he said.

The Minister said the government’s key strategic approach for promoting investments in Tanzania will be based on implementing the Blueprint for Regulatory Reforms to Improve the Business Environment in Tanzania, which has been approved by the government. He promised to “embrace the use of the World Bank’s Ease of Doing Business Reports as one of the key feedback mechanisms on our progress,” aiming to raise Tanzania’s ranking in the World Bank’s Ease of Doing Business Index to at least 100.

Tanzania’s 2020 ranking on the index was 141, just below Zimbabwe. In comparison, Rwanda ranks 38th, Kenya 56th, Zambia 85th and Uganda 116th. Tanzania has never ranked higher than 127th.

“Additionally, we will put a sustainable feedback mechanism with investors and members of the business community so as to garner their views and assessments on how we are doing – and where government action is mostly needed,” said the Minister.

After several years of strained relations between government and business in Tanzania, the business community responded with cautious positivity to the President and Minister’s remarks.

Investors and business operators have complained in recent years that they have been compelled to deal with multiple regulatory bodies and other bureaucracies. This was compounded, in their view, by multiple taxes, inordinately high tax rates and lack of adequate information on investment opportunities, as well as unpredictability of extant policies and regulatory frameworks.

World Bank cautiously optimistic on Tanzania’s economic prospects in 2021
The World Bank has upgraded its projection for Tanzania’s economic growth this year, forecasting that growth would reach 5.5% in 2021, up from its earlier estimate of 2.5% for last year.

Tanzania’s real GDP had been growing at an average of 7% in the last decade. But the government lowered the projections for 2020 to 5.5% from the initial projection of 6.9% due to factors, including Covid-19, heavy rains that resulted in floods and destruction of transportation infrastructure, and delayed implementation of some projects.

Sectors like tourism were hard-hit by the pandemic as countries across the world introduced travel restrictions to control spread of the pandemic. At the same time, however, earnings from mining exports rose due to the rising price of gold in the world market during the pandemic.

Vodacom / Vodafone criticised for conspiring to undermine freedom of speech
Vodacom Tanzania, part of the Vodafone Group, a multinational company headquartered in Britain, has come in for criticism after allegations the company “caved to a government demand to filter and block messages containing certain terms associated with the country’s main opposition party”.

The issue arose when opposition supporters realised that some – but not all – of their text messages were not reaching their intended recipients. They noted that it appeared that messages containing the name of opposition Presidential candidate, Tundu Lissu, were being blocked.

Nic Cheeseman, Professor of Democracy at the University of Birmingham criticised both Vodacom Tanzania and the Vodafone Group for acquiescing in efforts to undermine credible elections. “Despite proudly proclaiming their commitment to promoting ‘inclusion for all’, ‘operating responsibly’ and contributing to the UN SDGs on their website, a Western company aided an authoritarian leader to undermine freedom of speech,” he wrote.

“Despite aiding and abetting an increasingly authoritarian government,” he added, “neither Vodacom Tanzania nor its parent group Vodafone Plc, has been forced to explain its behaviour. Perhaps even more tellingly, they have not even felt the need to apologise.”

“Instead, Vodacom Tanzania recently intensified its efforts to cosy up to the ruling party, appointing Thomas Mihayo –a known Magufuli ally, and a member of the National Electoral Commission (NEC) that just signed off on a flawed election – as its new Board Chairman.”

by Ben Taylor

Tanzania formally attains Middle Income status

In July, the World Bank officially promoted Tanzania to the list of lower-middle income countries, recognising that the country has attained an annual per capita income of above USD $1,035. The World Bank calculation was based on economic data for 2019 and found that per capita GNI had increased from $1,020 in 2018 to $1,080 in 2019.

This is five years ahead of the official government target of achieving middle income status by 2025. According to William G. Battaile, the World Bank’s Lead Country Economist, “the upgrade is the product of the country’s strong economic performance of over 6% real gross domestic product (GDP) growth on average for the past decade”.

Tanzania joins 51 other countries on the lower-middle income list, including Kenya, Zambia, Nigeria, Ghana, Egypt and India, which includes countries with GNI per capita between $1,036 and $3,995.

Graduating to middle income status does not mean Tanzania will necessarily lose access to concessional financing from the World Bank. GNI per capita informs the decision on whether or not a country is eligible for loans from the World Bank’s concessional lending arm, but it is not the only indicator. Other factors, such as a country’s macroeconomic prospects, creditworthiness, risk of debt distress, vulnerability to shocks, institutional constraints, and levels of poverty and social indicators are also used to establish a country’s eligibility.

“I congratulate all my compatriots for this historic achievement. We had envisaged to achieve this status by 2025 but, with strong determination this has been possible in 2020,” wrote President Magufuli in a tweet.

Hassan Abbasi, the chief government spokesperson, explained that “discipline in financial expenditure and the prevailing peace and tranquillity also helped the country to earn the middle-income status.”

Economic data questioned
The Economist magazine published an article in July that questioned whether Tanzania’s economic data could be relied on. “The growth numbers do not stack up. From about 2017 several other indicators, from tax revenue to lending to the private sector, have slowed sharply. The IMF raised doubts last year when it said there were ‘serious weaknesses’ in the growth data. It pointed out that public-sector wages, lending to the private sector and imports were all falling while tax revenue was growing only weakly. The authors made it clear that the official 6.8% growth figure for 2017 was not credible. Publication of the report was blocked by the Tanzanian authorities. (The Economist has seen a copy.)

The IMF did later back down. It now reports Tanzania’s growth as 6.8% in 2017, 7% in 2018 and 6.3% in 2019.

However, The Economist notes that the IMF’s concerns have not disappeared. Performing their own analysis of official Government of Tanzania data, the magazine found several grounds to question official growth rates that have remained very steady at 6-7% in recent years. According to the magazine, tax revenue has shrunk in real terms, public-sector wages “crept up” by 2% in 2019, lending to the private sector by just 4%, the amount of money circulating edged up by only 2% in 2019, foreign direct investment has almost halved since 2013, exports and imports both fell between 2012 and 2018, and imports of machinery and construction equipment fell between 2015 and 2018.

“The growth numbers are out of line with almost everything else we are seeing out of Tanzania,” says Justin Sandefur of the Centre for Global Development, a think-tank.

The government says the economy will grow by 5.5% in 2020. That would, according to The Economist, “probably make Tanzania the best-performing economy in the world”. The IMF predicts 1.9%. [See below]

Covidonomics
With the true impact of Coronavirus on Tanzania remains impossible to verify, the likely economic impact is also uncertain. The discrepancy between the IMF and government growth projections in part reflect this uncertainty.

The African Development Bank (AfDB), lowered its growth forecasts for Tanzania as a result of the pandemic, though only from 6.4% to 5.2%. In contrast, the bank reduced growth forecasts for other east African countries by a much greater extent: from 6% to 1.4% in Kenya, from 6.5% to 2.5% in Uganda, and from 3% to -5% in Burundi.

“Real GDP growth in Tanzania will benefit from increased prices of gold, a major national export,” said an AfDB the report. Gold prices have reached above $1,900 an ounce, up 50% from May 2019, with the precious metal benefitting from its ‘safe haven’ status as the coronavirus outbreak triggered global economy fears.

The price surge partly contributed to making gold Tanzania’s leading foreign exchange earner, overtaking tourism which has been hit hard by the Covid-19 global pandemic.

According to the Bank of Tanzania, gold export earnings increased by 47% to $2.5 billion in the year to 31 May 2020. This in part relates to the long-awaited resolution of the dispute between Acacia/Barrick and the government of Tanzania that had slowed production and exports from some of Tanzania’s biggest gold mines. (See Energy and Minerals section).

The Minister for Finance and Planning, Dr Philip Mpango has also argued that the government’s decision not to impose any form of lockdown in response to the Coronavirus pandemic will lessen the economic impact.

“The country’s decision to keep the economy open has offered a major relief to the private sector in terms of business resilience”, said Peter Mathuki, Executive Director of the East African Business Council.

A budget for complicated year, and for managing debt
With an election due in October and a global pandemic causing havoc to lives and livelihoods across the globe, government budget calculations have been even more complicated than ever this year.

Nevertheless, the main headline in the budget presented to parliament in June is that the government plans to spend 30% of the annual budget on debt payments – a total of TSh 10.5 trillion (approximately USD $4.5bn) over the next year. These figures represent a considerable increase over 2019, when budgeted debt payments totalled TSh 6.2 trillion, or 18.7% of the total budget.

The parliamentary budget committee acting chairman, Mr Mashimba Ndaki, said the committee’s opinion was that despite commendable efforts to service verified debts, payment should be expedited to avoid expensive penalties. “Servicing the debts will enable service providers to clear loans secured from financial institutions in order to provide services to the government. This is mostly important at these moments of Covid-19,” he said.

Beyond this headline, the budget continued to extend a package of measures aimed at promoting investment and spurring economic growth, building on a business environment improvement plan that began in FY-2019/20.

Under the theme “Stimulating the economy to safeguard livelihoods, jobs, businesses and industrial economy,” the government foresees a rise in spending and the budget will likely have a deficit of 2.6% of GDP in FY-2020/21. It is also projected that in FY-2020/21 tax revenues will account for 12.9% of GDP from 12.1% in FY-2019/20. These targets call for reforms to improve tax administration.

Reforms included in the budget include creating a business-friendly environment for taxpayers, enhancing the capacity of tax adjudication forums and improving the ability to enforce tax laws. These reforms are in part a response to a common complaint amongst businesspeople that some officials of the Tanzanian tax administration were treating businesses unfairly. They also include the abolishment or reduction of sixty (60) fees and levies that were charged by Ministries Departments, Agencies and Regulatory Authorities.

“The year 2019/20 is ending with unexpected circumstances resulting from the destruction of transport infrastructure caused by heavy rains/floods across the country as well as the Covid-19 pandemic. The government will allocate more resources to the health sector in order to fight against the Covid-19 and support other most affected sectors,” told Parliament.

Low income earners will have a reason to smile as Dr Mpango is raising the Pay-As-You-Earn threshold from TSh 170,000 to TSh 270,000 so as to give employees some disposable income. And savings groups will now only be required to pay income tax when their gross revenues exceed TSh 100 million per year, up from TSh 50 million.

by Ben Taylor

World Bank highlights poverty reduction
The Tanzania Mainland Poverty Assessment Report, published by the World Bank, found that the national poverty rate fell from 34.4% to 26.4% between 2007 and 2018. The report attributed the trend to gradual improvement in living conditions and human capital.

The report also noted, however, that this success is not unmitigated, as poverty was not reduced as much as the population grew. This resulted in an increase in the absolute number of poor people, with 14 million in 2018 living below the poverty line, up from 13 million people in 2007.

Nor has poverty reduction kept pace with economic growth, with the result that inequality has worsened. According to the report, this is due to the concentration of employment in slow-growing sectors and the slow transformation of the economy. Industry and services – with fewer, better educated workers – are growing faster than agriculture, driving the growth and transformation of the economy.

“Vulnerability is still high, with findings showing that for every four Tanzanians who moved out of poverty, three fell into it,” according to the report. “A large number of non-poor people living just above the poverty line are at risk of slipping below it.”

However, the report also noted that country’s strategy to diversify toward solar energy has started to pay off, particularly in rural areas, where 33 percent of households use solar energy for lighting compared to 14 percent in urban areas.

The findings prompted the World Bank to call for more attention for agriculture, which it says offers opportunities for accelerating poverty reduction.

“Since agriculture already accounts for a quarter of total GDP and two-thirds of jobs, enhanced agricultural growth must be part of the strategy to create more and better jobs and alleviate poverty,” said World Bank country director Bella Bird during the report’s unveiling.

The World Bank said Tanzania’s economy will grow by 5.8% in 2020, up from 5.6% forecast for 2019, and growth will rise to 6.1% in 2021. These forecasts are lower than the government’s official estimate of 7.1%.

International concern over national debt
The International Monetary Fund (IMF) and the Brooking Institute have separately expressed concern at rising public debt in East Africa, including Tanzania.

The IMF, in its regional economic outlook report for sub-Saharan Africa, highlighted surging public debt-to-GDP ratios for Uganda, Burundi, Kenya, Rwanda and Tanzania. “An over-reliance on commercial public debt exposes sovereign balance sheets to greater rollover and exchange rate risks,” said the report. “An increase in debt from domestic creditors could crowd out financing for private sector projects,” the report also noted.

According to Brookings, these countries are shifting away from official multilateral creditors to non-concessional, commercial debt with relatively higher interest rates and lower maturities. The trend is raising concerns around debt sustainability given the possibility of higher refinancing risks and foreign exchange risks.

The region’s economies have fallen into a financial fix as they attempt to fund persistent budget deficits and implement mega infrastructure projects. As a result, the economies have resorted to massive borrowing from both domestic and international markets.

Tanzania’s public debt stood at $36.78 billion in February 2019, according to the Bank of Tanzania, representing 37.7% of GDP.

The country’s Finance Minister, Philip Mpango, attributed the increase to new loans secured to fund infrastructure projects such as construction of the terminal III of the Julius Nyerere International Airport, power generation projects, and the construction of roads, bridges and the standard gauge railway line.

CRDB Bank secures green finance accreditation
CRDB Bank has been accredited by the United Nations Green Climate Fund (GCF) for the implementation of green financing in Tanzania. CRDB Bank becomes the 3rd commercial bank in Africa to obtain this accreditation, after Ecobank Ghana and Attijariwafa Bank of Morocco.

The objective of the Green Climate Fund is to “support projects, programmes, policies and other activities in developing countries using thematic funding windows”. It is intended that the Green Climate Fund be the centrepiece of efforts to raise Climate Finance under the UN Framework Convention on Climate Change (UNFCCC).

Accreditation followed an extensive due-diligence assessment, conducted by GCF to ascertain the bank’s preparedness in managing climate change programmes. It means CRDB Bank will be able to finance multiple large-scale projects with high impact to the social and economic development of Tanzania.

Tanzanian bureaucracy drove VW to Rwanda?
A former Minister, Charles Kitwanga, told parliament in November that Volkswagon, Europe’s biggest carmaker, decided to invest in Rwanda after attempts to set up a car assembly in Tanzania failed due to ‘deep­rooted bureaucracy.’

Mr Kitwanda urged the current administration to urgently address bureaucracy to attract more investors as the country gears for industri­alization. “The bureaucracy we have in our system is so bad,” he said. “VWs are now made in Rwanda, they were to be assembled here.”

Last year, Rwanda’s first domestically built car rolled off the assembly line at Volkswagen’s new factory in Kigali. Mr Kitwanga says he wasn’t happy with the fact that a neighbouring country was making strides with a business that should have been put up in Tanzania.

In the latest World Bank ‘Doing Business 2020’, Rwanda maintained its position as the leading country in East Africa on the ease of doing busi­ness. Tanzania came a distant 141 out of the 190 countries in the index.

Tigo-Zantel merger
A merger between Tigo Tanzania and Zantel was recently concluded. In a joint interview with Forbes Magazine, the directors of the two companies said customers had expressed concern about the merger and its benefits but were assured that due to the strong integration of the companies the customers will enjoy services of the highest quality.

They said the merger brings together the strengths of both companies as well as providing the best of both Mainland and island, urban and rural areas.

Tigo Tanzania Executive Director, Simon Karikari, said he believes that the merger will create the best cellular telecommunications sector in Tanzania now and in the future, adding that a market with such integrated companies will drive creativity.

Plea bargains encouraged for economic crimes
The Director of Public Prosecutions (DPP), Biswalo Mganga, has announced that the government has opened a special bank account to enable those who are accused of economic sabotage and have sought amnesty to return the money to the government. According to Mr Mganga, the account has been opened at the Bank of Tanzania following a government directive.

Mr Biswalo told reporters that people accused of economic sabotage related offences, who seek to be pardoned, will have to deposit the money to the account upon approval by the court.

by Ben Taylor

Parliament passes TSh 33 trillion annual budget
MPs overwhelmingly endorsed the TSh 33.1 trillion budget for the 2019/2020 Financial Year, a slight increase from 32.4 trillion in 2018/19. All CCM MPs endorsed the budget while the majority of opposition MPs voted against. Government expenditure is expected to reach 22.7% of GDP in 2019/20 estimates, up from 22.3% in 2018/19.

Of this amount, TSh 11.7 trillion is allocated for development projects. The minister said the development plan focuses on attaining 7.1% growth of Gross Domestic Product (GDP) in 2019 compared to 7.0% in 2018. The budget also aims to maintain inflation at between 3% and 4.5% and increase national revenue collection to 13.1% of GDP in the 2019/20 fis­cal year from this year’s 12.1%.

According to the Minister, Tanzania cemented its middle-income status last year by raising its per capita Gross Domestic Product (GDP) to $1,090, and noted that a strong year for agriculture had kept inflation down at 3.5%, the lowest level in 40 years.

Dr Mpango said the government seeks to put emphasis on the establish­ment and development of industries, especially those exploiting domes­tically produced raw materials. He said the focus will be on development of industrial clusters, Tanzania Automobiles Manufacturing Company Ltd (TAMCO) in Kibaha, Coast region, hide industry in Dodoma and special investment zones in Bunda, Dodoma and Benjamin William Mkapa in Dar es Salaam.

The budget also includes plans to spend TSh 9.7 trillion to service the public debt, which reached over TSh 51 trillion as of April, up from 49.9 trillion a year earlier. The Minister of Finance and Planning, Dr Philip Mpango, assured MPs that the debt remains manageable, according to the recent assessment by the ministry. He added that the present value of external debt against GDP is 22%, well below the allowable maxi­mum of 55%.

The Minister attributed the debt increase to the new loans that the coun­try acquired for execution of various development projects. These pro­jects include construction of Terminal III at Julius Nyerere International Airport (JNIA), upgrading the central railway to standard gauge, implementation of power projects as well as construction of roads and major bridges.

The Minister further announced that the country’s foreign reserve stood at US$ 4.4 billion, equivalent to 4.3 months of imports, as of April 2019. The amount exceeds the government target of four months’ worth of imports, according to Dr Mpango.

The budget also presented an opportunity for the government to refute claims by a section of MPs that business in the country was struggling due to poor business and investment climate. Dr Mpango and his Deputy Dr Ashatu Kijaji said the business environment in the country was superb and that more investors were willing to start businesses in Tanzania.

“Some MPs have been providing unrealistic statistics on business in the country, but the current statistics in the ministry show that businesses which are being shut are 16,252 while new businesses that are estab­lished are 147,817,” said Dr Kijaji. According to her, closing business was a normal practice worldwide and that some of the reasons for that were change of business, failure to compete with others, huge debts and accumulated taxes, among others.

As he presented the budget to parliament, Dr Mpango said the govern­ment was proposing to review 54 different fees and levies with a view to reduce and abolish some of them. “This is the first phase of implemen­tation of the blueprint for regulatory reforms to improve the business environment,” he said. The minister added that apart from the review of fees and levies, the review will also address the elimination of the existing duplication of responsibilities among the ministries, regulatory authorities and institutions.

Pauline Gekel (Babati, CCM) described it as “a special budget for Tanzanians”, that “has touched every mwananchi, poor, ordinary and big traders.”

Julius Karanga (Monduli, CCM) called it a win-win budget. “We hope people are going to receive it well because it is friendly budget that will help people generate income,” he said.

Opposition MPs were less positive, however. Acting Shadow Minister for Finance and Planning David Silinde said it was sad to see that 40% of the 2019/20 development budget had been directed to three projects namely Stiegler’s Gorge, the standard gauge railway and the revival of the Air Tanzania Company Limited (ATCL), instead of investing more on projects that touched directly on people’s lives.

He told the national assembly yesterday that despite the various changes in economic systems that the country has undergone, it has failed to remove the country and its people from abject poverty. He added that the government has failed to stick to its own five-year devel­opment plan, which states “that commercially viable projects should be left to the private sector, unless there is strong justification for doing otherwise”.

He said the opposition would have allocated 20% of the total budget to agriculture, 20% to education, 15% to industrial development and 10% to the water and health sectors respectively.

ACT Wazalendo leader Zitto Kabwe said the new budget is set more “to develop things rather than people” – infrastructure projects rather than public services. He also said that implementation of the budget is challenging because budgeted funds are not released in time or in full.

Beyond parliament, Honest Ngowi, an economist from the University of Mzumbe, cautioned against unrealistic budget that cannot achieve the intended revenue targets. “The government has collected only 87% of its revenue target in the current budget. And yet, it has increased projected collections to TSh 19 trillion in 2019/20,” he said. “The budget for 2019/20 is to a tune of TSh 33.1 trillion, more than what we can raise. It is so unrealistic, it would be good to use what we have.”

Tax authority chief demoted amid business complaints
In June, President John Magufuli unexpectedly sacked TRA commis­sioner general Charles Kicheere, and appointed Mr Edwin Mhede to head the tax agency. Mr Kicheere was demoted to the position of Regional Administrative Secretary of Njombe Region.

Sacked along him was the Trade and Industry minister, Mr Joseph Kakunda, who was replaced by Mr Innocent Bashungwa.

The move came a day after the president met with business leaders from various parts of the country. The hundreds of traders spent more than 10 hours at State House, complaining vehemently about the dif­ficulties they were facing doing business: an “unfair” taxation regime, “harassment” by security and regulatory agencies, “bureaucracy”, and “corruption” dominated cries from the traders.

The meeting echoed the apparent gloom among the business commu­nity that has persisted for some time now, even as the government was trying to restore confidence and push positive reforms.

Mr Kichere, who was at the meeting, found himself in a tight spot as TRA received most of the flak, roundly accused of harassing traders through over-estimation of taxes and threats. “Many of TRA workers who deal with tax do not know what they are doing. They have turned themselves into the law,” complained Francis Noni, a businessman from Kondoa District.
The President appointed Mr Edwin Mhede as the new head of the tax agency. Mr Mhede becomes the fifth Commissioner General to serve since the election of President Magufuli in October 2015.

“If the systems and institutions are functioning properly, then he (the president) wouldn’t have to convene such meetings,” said Prof Haji Semboja, a former lecturer at the University of Dar es Salaam. “The President is supposed to make sure the systems work so that he gets ample time and energy to implement major national programmes like the industrialisation drive,” he added.

Professor of economics, Honest Ngowi, says the causes of the mess that businessmen exposed before the president should be looked at beyond TRA and individual capabilities. “It is the question of the whole institu­tional and legal framework in creating a favourable business environ­ment and investment climate,” he said. “Issues of ethics, the fear of God, bribes and over-estimations of taxes go beyond TRA. If we don’t touch on the kernel of the matter we may keep on changing individuals a thousand times without results.”

Small fall in national poverty rate
The poverty rate dropped from 28.2% in 2011/12 to 26.4% in 2017/18, according to the latest survey by the National Bureau of Statistics (NBS). This was the headline finding of the government statistics agency’s lat­est Household Budget Survey. 14 million Tanzanians spend less than TSh 49,000 each a month, putting them below the official basic needs poverty line.

The report also concluded that TSh 161 billion is needed each month to enable the total population to meet life’s basic needs, the National Bureau of Statistics (NBS) says. The amount has increased from the TSh 103 billion estimated in 2011/12, partly due to inflation and partly to the country’s growing population.

Three out of ten (31%) rural dwellers live below the basic need poverty line compared to 16% of those living in urban areas. The rates had dropped from 33% in rural areas and 22% in urban areas in 2011/12.
Poverty remains most prevalent in Rukwa Region, where about 45% of its residents live below the accepted poverty line. Other areas with high poverty rates are Simiyu (39%), Lindi (38%), Geita (38%), Mwanza (35%) Kigoma (35%), Tabora (35%) and Singida (34%).

Aside from basic needs poverty, 8% of the Tanzanian population spends less than TSh 34,000 monthly. This means that they fall below the food poverty line.

The food poverty line increased from TSh 26,000 per month in 2011/12 to TSh 34,000 in 2017/18. The basic needs poverty increased from TSh 36,000 to TSh 49,000 per adult per month, in the same period.

Compared to the 2011/12 survey, there is a change in the distribution of poor people. The proportion of poor population in rural areas decreased from 84% in 2011/12 to 81% in 2017/18, while the proportion of the poor who live in Dar es Salaam doubled from 1.5% to 3.0%, and the propor­tion in other urban areas rose from 14% to 16%.

Harsh economic realities for female-headed households
An increasing number of families across Tanzania are now being headed by a woman, a recent national survey has revealed. According to the 2017/18 Household Budget Survey (HBS), the proportion of female-headed families increased from 25% in 2011/12 to 28%, having already increased from 18% in 1991/92.

The survey also found that poverty among such households has also jumped from 20% to 27%. Previously, female-headed households had been richer, on average, than male-headed households, but this no longer applies.
The Household Budget Survey was conducted by the National Bureau of Statistics (NBS), in partnership with the World Bank, UN Women, Unicef and Global Affairs Canada (GAC).

Ms Mwajuma Hamza, director of the Tanzania Women Chamber of Commerce, says development interventions should focus on ensuring equal opportunities for women and men in all sectors. “Tanzania needs to wisely carve a future where both women and men can thrive even in the event that one has to assume the responsibility of taking care of the family,” Ms Hamza said.

The Statistician General at NBS, Dr Albina Chuwa, said the rise in female-headed households is not peculiar to Tanzania, but a global trend that is most pronounced in Southern Africa. (The Citizen)

British High Commissioner shares concerns on the business climate
The British High Commissioner to Tanzania, Sarah Cooke, said in May that British investors yearned for policy predictability, less bureaucracy and faster approval of new investments or projects. Speaking at a Tanzania-Britain business dialogue forum in Dar es Salaam, she said there could be a severe lack of business confidence in Tanzania over the next few years if nothing is done to improve business environment predictability.

The event brought together government officials, British investors and UK government representatives to discuss the business environment in the country. The UK is the second biggest investor in Tanzania after China with investments valued at $5.64 billion (TSh12.9 trillion), accord­ing to Ms Cooke. “Investors plan for the long term,” she said. “They need to know the rules of the game will not change abruptly without consultation.”

However, the Minister of State in the Prime Minister’s Office (Investment), Ms Angellah Kairuki, said policy reforms were inevitable, and urged investors to be ready to adopt to policy changes so that they could make good decisions on investing in Tanzania.

“Changing policy has its challenges, and everybody should understand that the government’s intention is to strike an appropriate balance between the rights and obligations of investors,” she said. “We need to provide sufficient protection to foreign investors while at the same time ensuring that legal obligations are upheld.”

Over 900 British companies are operating in Tanzania, with the British High Commission stating that nearly 300,000 jobs were created in the past 15 years. British investors have invested in diverse sectors, includ­ing energy, infrastructure and construction, manufacturing, tourism, agriculture and agri-business, consumer goods, financial services and telecommunications. (The Citizen)