by Dr Hildebrand Shayo

Tanzania has launched a more modern passenger and cargo fleet to compete in the sky race
Many readers will remember that eleven years ago, British Airways (BA) discontinued direct flights from London Heathrow to Dar es Salaam, due to what was then described as an inability to operate profitably. This marked the end of nearly forty years of BA flight services to Tanzania.

If the agreement to fly to London is successful and Air Tanzania (ATCL) begins operating direct flights from Dar es Salaam to UK airports – ideally London Heathrow or Gatwick – will travel agencies and the business community be able to profit from the direct flight to Tanzania at a competitive rate?

British Airways (BA) was the most dependable passenger airline for diplomats, government officials and intellectuals flying through Heathrow to the UK and the US for nearly forty years. According to statistics, the United States and the United Kingdom are among the leading countries where tourists arrive in Tanzania yearly.

The relevant inquiry is whether the acquisition of a more modern passenger and cargo fleet and the potential for direct flights from Tanzania to the major airports in the United Kingdom will support the economies of these two historically significant countries. Can Tanzania, through market-driven competition, close the 13-year-old gap created by British Airways’ (BA) withdrawal of flight services between London Heathrow and Dar es Salaam?

In this analysis, I’ll examine the main factors driving this expansion and any potential financial effects on Tanzania’s aviation sector. Such discussion could signal what would keep ATCL competitive nationally, regionally and internationally.

After a history that is well known, ATCL now operates a fleet of sixteen aircraft, comprising three widebody Boeing B787-8s, one widebody freighter B767-300F, two narrow bodies B737-9, four Airbus A220-300s, six regional turboprops DHC-8-Q300 and five HDC-8-Q400s.

According to the ATCL route plan, the national carrier presently offers 13 domestic services and 11 international destinations. With further fleet expansion, it plans to add flights to other destinations including Kinshasa, N’Djili Goma, Lagos, and Muscat.

Economic benefits from fleet expansion will have a substantial financial impact, especially on revenue and tax contributions. They will increase Tanzania’s regional influence while at the same time increasing ATCL’s operational capacity. Tanzania continues to be a centre for our economic region. Improved business class seats with better cushions and a premium economy cabin on an extra new aircraft with a 262-seat capacity that can load 20 cargo tonnes on ATCL flights will put the ATCL fleet in a more competitive market.

Looking at the areas where ATCL can resist competition in African aviation, most countries, including Tanzania, with national airlines, strive to maintain their competitiveness through market protection, preferential treatment, and incentives.

Therefore, ATCL operators must pay close attention to how State-owned airlines in Africa and the Middle East manage to maintain a lopsided competitive advantage and continue to provide high-quality services. It is crucial to remember that the free market economy in the airline sector has not historically performed as predicted in countries attempting to resurrect their national carriers.

Competitors from other areas, for example, have different strategies and often do not subscribe to the same school of economic thought. It is absurd to believe that ATCL can successfully compete with heavily subsidised regional airlines that are well-known in the industry and dominate long-haul travel.

One important thing to remember as Tanzania expands its fleet to compete in the sky race is that the continent’s airline market structure differs significantly from other regions, such as the US, where the deregulation of the aviation industry has been a significant driver of the industry’s expansion. In specific markets, the one-size-fits-all approach is inapplicable, and replicating it would be detrimental to Tanzania’s long-term investment goals.

Building a sustainable enterprise requires certain fundamental principles, which the government is putting in place as it prepares to strengthen ATCL. The reciprocity principle is the first. ATCL must have an equivalent chance back home in regions around Tanzania where international airlines are permitted to operate.

Some airlines prefer to fly during the day into the nation, but on their soil, ATCL might only be permitted to utilise the airports during times that would be detrimental to the airline. Although open skies imply a mutual connection, certain airlines have often taken advantage of it. Tanzania shouldn’t fall into that trap with our ATCL.

Similarly, cargo is one of airlines’ primary sources of income. This corporate sector should support ATCL, just as other nations do. Rather than importing specific goods from Europe for the continent’s emerging industries sector, Tanzania should go in the same direction as the African Continental Free Trade Agreement (AfCFTA), cultivate relationships with African producers to import the raw material directly.

The new aircraft would improve trade potential. The efficiency and capacity of the B787-8 would enable improved trade connections, which will help industries like manufacturing and agriculture by giving them better access to international markets.

For airlines operating in Tanzania to genuinely establish Dar es Salaam and Tanzania as the primary hub of East Africa’s aviation sector, the airline must support its long-haul operations to reach global market destinations while simultaneously expanding service quality rapidly domestically and regionally.

By synchronising essential sectors and generating more economic value, ATCL should catalyze trade connections throughout Africa. It’s a chance to expand both intra-African trade and the airline. To establish Julius Nyerere International Airport and Amani Karume International Airport as the principal hubs of Africa’s aviation sector, ATCL should vigorously expand locally and regionally while supporting the airline’s long-haul operations.

Tanzania’s aircraft fleet is expected to boost air travel, demonstrating the aviation industry’s exceptional growth potential, which Tanzania, led by President Samia, has in this sector. In my view, expansion points to a bright future for the aviation sector in Tanzania that is driven by several causes, including the country’s strong economic growth, rising demand for air travel, government efforts, infrastructure development and fleet upgrades.

The enlarged fleet brings the potential for improved connection, job creation, economic growth, and tourism, all of which contribute to the nation’s overall development. To facilitate the smooth integration of the expanding fleet into the aviation ecosystem, industry stakeholders must prioritise environmental sustainability and tackle infrastructure issues that, if not well managed, could be a constraint in achieving ATCL’s full market potential.

by Ben Taylor

Strong growth recorded, and projected
Tanzania recorded economic growth of 5.1% in 2023, according to the latest government figures. This was stated by the Minister of Planning and Investment, Prof Kitila Mkumbo, in his National Economic Status Report for 2023, presented to Parliament in Dodoma in June.

This represents a small improvement in growth rates compared to recent years. Tanzania was among a small number of countries to maintain economic growth throughout the Coronavirus pandemic, though growth slowed from 6.9% in 2019 to 4.5% in 2020, 4.8% in 2021 and 4.7% in 2022.

According to Mkumbo, the growth in 2023 was driven by the arts and entertainment sector, which expanded by 17.7%, followed by the finance and insurance sector at 12.2%, and mining at 11.3%. The accommodation and food services sector grew by 8.3% and the information and communications sector by 7.6%. Prof Mkumbo noted that sectors that had traditionally provided substantial employment saw slower growth rates. He noted particularly that agriculture, which is vital for the majority of Tanzanians, grew by only 4.2% while manufacturing and trade expanded by 4.3% and 4.2% respectively. The result, he said, was that the benefits of growth have not been evenly distributed, particularly among the nation’s poorest citizens

Nevertheless, the Minister also explained that the agriculture sector continued to make the largest contribution to GDP, accounting for 26.5%. This is followed by construction (13.2%) and mining (9%).

Prof Mkumbo told Parliament that the types of goods that Tanzania exports have changed over the past two decades. “In the 2000s,” he explained, “57% of Tanzania’s export goods involved agricultural products sold to markets in Europe, the United States, and Africa. However, twenty years later, Tanzania’s exports are now dominated by minerals, with many products being sold to markets in Asia and African countries.”

In 2023, 49% of exported goods were minerals, followed by manufactured goods (17%), with agricultural products (12%) coming in third, said the Minister.

Moreover, the country still continues to face a significant trade imbalance. The value of the country’s exports was $8.2 billion in 2023, while imports amounted to $13.7 billion. “This indicates that we are still spending a considerable amount of foreign currency on importing goods that could be produced domestically,” the minister told Parliament.

Going forward, Prof Mkumbo said the government’s target was to achieve 5.4% GDP growth in 2024.

Later in the same month, the IMF suggested that this target was in line with their projections. In a report, they predicted growth in Tanzania would pick up to 5.4% in 2024 and 6.0% in 2025, respectively, supported by improvements in the business environment and subsiding global commodity prices.

Njombe, Simiyu, Dodoma, Coast and Kagera regions experience growth spurt
Njombe, Simiyu, Dodoma, Coast and Kagera regions recorded the fastest economic growth at the regional level from 2018 to 2022, according to data from the Bank of Tanzania’s 2023 Consolidated Zonal Economic Performance Report. Despite having lower GDP figures than Dar es Salaam and other major urban centres, these regions posted notable growth during the five-year period.

Njombe’s GDP surged 48%from TSh2.1 trillion to TSh3.1 trillion, Simiyu’s jumped 45%, Dodoma and Coast regions both grew by 43% and Kagera by 39%.

In contrast, Dar es Salaam’s GDP grew by 34% during the same period, the second slowest rate in the country. It should be noted, however, that Dar es Salaam has continuously retained its status as Tanzania’s biggest and most important economic hub, with a regional GDP worth TSh29 trillion in 2023. “It’s the norm that the larger the economy, the slower the growth,” said Dr Daudi Ndaki of Mzumbe University. “That’s why you will see that Tanzania’s economy, for instance, is growing much faster than the GDPs of many developed countries,” Dr Ndaki said.

University of Dar es Salaam Business School assistant lecturer Godsaviour Christopher said the five regions’ economies are growing fast due to increased investment and untapped potential for growth.

“These regions still have many investment opportunities, while big cities such as Dar es Salaam have already used up a great deal of available resources and are approaching full capacity,” he said.

There is plenty of arable land available for investment in Njombe for the cultivation of maize, tomatoes, potatoes, beans, pineapples, avocados, tea production, flowers and timber. And Coast Region has in recent years emerged as a key destination of strategic projects such as the Julius Nyerere Hydro Power Project (JNHPP).

Common East African currency postponed
Secretary General of the East African Community (EAC), Ms Veronica Mueni Nduva, said in August that the process for monetary union and a single East African currency has been pushed back to 2031. Previously, EAC member states had committed to launching the currency in 2024.

“The Monetary Union was expected to be established in 2024 as per the Monetary Union Roadmap” she explained. “However, it has not been realised and the timeline was therefore revised to 2031.”

She said that so far, some aspects of the roadmap have been imple­mented even as members remain divided on several other aspects. She noted that central banks within the EAC have established the East African Payments System (EAPS), a multicurrency platform that ena­bles settlements in the local currencies of the partner states, facilitating currency convertibility across the region, and said that partner states have signed and are implementing an MOU on currency convertibility and repatriation.

There have, however, been delays in obtaining a consensus on which country should host the East African Monetary Institute (EAMI), a precursor to an East African Central Bank, and member states have not yet managed to agree on the criteria to effectively converge the four macroeconomic fundamentals.

These include a headline inflation rate of 8%, a foreign exchange reserve cover equivalent to 4.5 months of imports, a ceiling on the overall fiscal deficit set at 3% of gross domestic product (GDP), and a limit on gross public debt capped at 50% of GDP for all partner states.

For context, Tanzania currently meets or is very close to meeting all four of these targets, with headline inflation at 3.1%, foreign exchange cover at 4.4 months of imports, an overall fiscal deficit at 3% of GDP and gross public debt at an estimated 38% of GDP.