BUSINESS & THE ECONOMY

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.

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