BUSINESS AND THE ECONOMY

Exchange Rates: £1 = Shs 1,400. US$1 = Shs 990

KEY ECONOMIC DATA
At a recent Britain-Tanzania Society Seminar on development Ronald Fennel provided some useful economic data as an introduction to his presentation:

‘The population of Tanzania has increased fourfold since independence 40 years ago. At 32 million it compares with Kenya’s 28 and Uganda’s 20 million.

Tanzania is endowed with a rich resource base, easy geographical access to international markets; it has a peaceful and politically stable environment and has been able to forge a cohesive national identity. And yet it is among the 10 poorest countries in the world. GNP per capita is $280, compared with Kenya $360, Sub Saharan Africa average of $500 and East Asia and Pacific $970.

Yet there are encouraging signs in macroeconomic performance particularly since Mkapa’s presidency has built on earlier gains. Inflation is down from 30 percent in 1996 to 5 percent last year. Foreign Exchange Reserves have grown from the equivalent of 6 weeks imports in 1998 to 20 weeks in 200 1. Tourism has grown from 1.8% of GDP in 1997 to 7.6% in 1999 worth just under $600 million. Exports stand at $937 million but the trade gap is large with imports at $1.57 billion -including donor funded imports ….. .

Social statistics are not so encouraging. Tanzania’s place on the UNDP Human Development Index has slipped from 127th in 1991 to 156th in 1999 out of 174 countries. Real income per head is only thirty percent higher than at Independence. 50% of the population live on less than $1 a day. Life expectancy at birth is 45, compared with 48 for Kenya and 69 for East Asia and the Pacific.

Tanzania has been the largest recipient of donor aid in sub Saharan Africa in absolute terms: $16.8 billion between 1970 and 1996. Starting with $38 million in 1970 it reached $1.2 billion in 1992, fell to $830 million in 1996 when ‘policy reform wavered’ and is back up to $1.1 billion this year. This amounted to almost $40 per capita in the 80s and 90s, well above the average’ for Sub Saharan Africa and above the ‘successful reformers’ Ghana and Uganda.

These inflows have to be set against the debt burden, the present value of which was $4.9 billion in 1999. As the IMF reported Tanzania has established a solid record of economic performance over the past several years, thereby enabling it to access substantial debt relief. Annual debt service has fallen from $303 million in 1989 to $116 million in 2001, i.e. about 12 percent of current exports.

In a general sense Tanzania’s popularity with the donor community over the years and its recent willingness to engage in economic policy reform has resulted in a favourable flow of aid. There continue to be concerns about the reality of self-reliance, but we all live in a ‘joined up world’ as some leaders of the industrial world continually assert.

Compared with these aid flows, the impact of increased foreign direct investment has been much less significant in financial terms, although it has brought with it entrepreneurial skill and some training that can double the benefits. Foreign direct Investment in 1999 was $183 million and $193 a year later. Yet this investment has been focussed on three main areas -mining, tourism and services/consumption such as breweries and telecommunications. Some investors fear the lack of institutional infrastructure in the legal and fiscal areas. Some Tanzanians on the other hand perceive the infusion of Gulf capital and South African investors as infringing on their sovereignty. Both recognise the need to improve physical infrastructure, an area where the government with donor help is likely to bear the principal responsibility to introduce a maintenance culture.

There is little doubt that many of the economic policy prescriptions adopted by Tanzania over the last two decades (and even before that) have been prompted by the fashions of donor development economists. Tanzania has benefited from intensive study by highly qualified economists of differing political persuasions . …… Ujamaa villages tried to change society too fast. The move to effective privatisation in the 90s was too slow …… ‘

COAL MINING
Development of a $600 million surface coal-mining operation in Ludewa district, Iringa region, close to the border with Malawi, is expected to commence at the end of 2003 following successful negotiations with investors. After commissioning in 2006 or 2007 it will have a production capacity of 1.5 million metric tons and is expected to generate 400 MW of electricity. It may also provide energy to a proposed iron ore project in the same district which will process vanadium and titanium concentrates for export and iron and steel products for local and international markets -East African.

NEW SHIPPING BILL
Government has stopped issuing licences to clearing and forwarding agents, pending new shipping legislation. The agencies will be allowed to work until 30 June, after which the work will be taken over by the National Shipping Corporation (NASACO). The attorney general’s chamber is now preparing a bill to be tabled before the parliament -Mwananchi. (The Shipping Bill when it was presented to Parliament in April came under heavy fire from MP’s and had to be substantially changed NASACO was heavily criticised The Bill was still being debated when this issue of Tanzanian Affairs went to press -Editor)

TANZANIA A FRENCH PRIORITY

France has added Tanzania to the list of 40 countries in its ‘priority zone’ in a strategy to gain more influence in East Africa. Tanzania will now be eligible for more grants than loans. As the first example of this there have been joint army operations in Tanzania financed by and participated in by French forces -East African.

SOUTH AFRICA
Philip Magani, a CCM MP, has said that it was a well-known fact that Britain and India were the leading trade partners of Tanzania, yet South Africa now ‘determined the country’s economy.’ He said this was probably due to most of the gold going to South Africa. At a meeting of the Parliamentary Finance and Economic Committee, the Permanent Secretary to the Ministry of Finance said that the Tanzania shilling had been declining due to the recent decline of the South African rand by more than 40% -Mwananchi.

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