October 2007


As promised, here is the Tanzania TV commercial produced by Tanzania Tourist Board

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Despite an 18% decline in FDI investments last year compared to the year before, Tanzania once again led her East African neighbours by attracting more foreign direct investments, mostly due to investment for expansion in the mining industry.

 According to UNCTAD’s “World Investment Report” which came out last week, Tanzania’s FDI stood at $377 million in 2006 (down from $448 million realized in year 2005). Uganda trailed at $307m, Burundi attracted $290m, Kenya raked in only $51m while Rwanda managed $15m.

As a sub-region, East Africa saw an increase in FDI from $1 billion in 2005 to $2 billion in 2006. However, this sub-region still ranks lowest compared to other African subregions in attracting FDI.

Tanzania ranked 4th out of 10 major recipients of FDI among African LDCs. Sudan led the list, followed by Equatorial Guinea, Chad, Tanzania, Ethiopia, Zambia, Uganda, Burundi, Madagascar and Mali. Overall (including non LDCs), the report cited top 10 African recipients of FDI (in descending order) as Egypt, Nigeria, Sudan, Tunisia, Morocco, Algeria, Libya, Guinea, Chad and Ghana.

According to the report, the FDI amounts to Africa doubled in 2 years – from $17 billion in 2004 to $36 billion in 2006. The increase is driven by investors seeking new mining locations in response to increasing global demand and rise in commodity prices. However, Africa’s share in global FDI fell to 2.7% in 2006 from 3.1% the year before. FDI outflows also rose from $2 billion in 2005 to $8 billion in 2006.

What are your thoughts about the concentration of FDI that largely goes into mining sector in Africa? Do you think Tanzania and other African countries can successfully leverage this mining and energy boom and translate it into growth in other economic sectors?

Tanzania Petroleum Development Corp (TPDC) recently opened the bidding process for hyrdrocarbon exploration in six blocks situated in the interior of the country. Energy and oil companies are invited to submit their offers to explore these areas by December 3.

The new locations stretch from southeast to northwest of the country, namely Lake Eyasi-Lake Manyara-Lake Natron area; Ruhuhu area; Kilosa-Kilombero area; South Selous area, Malagalasi area; and south Lake Tanganyika area.

So far, oil and natural gas explorations have centred along the coastline, both onshore and offshore, involving about 14 global energy companies such as Petrobras, Shell International and Dominion Oil & Gas. According to Reuters, so far three areas with natural gas deposits have been found.

What are your thoughts about this move to invite more companies to prospect oil and gas in the country? Will the discovery of oil bring more benefits than harm? How can we ensure the “curse of resources” doesn’t befell us?

Click here to read the bid information. The following map shows current and new exploration areas:

Speaking at an African Finance Ministers press conference in Washington DC this past Saturday, the Finance Minister, Hon. Mrs. Zakia Meghji stated that unlike in the past, Tanzanians these days no longer view IMF as an enemy, but rather as an ally in their quest for development.

The Minister said the following in her opening remarks:

Now, on the role of the IMF, if I can just talk quickly, we can say that Tanzania’s relationship with the IMF has gone through swings since we joined the Fund in the 1960s, actually, right after independence. In short, one can say that Tanzania has moved from viewing the Fund as an enemy – previously, when you would talk about the IMF, people on the street would be very negative —through a period which could be characterized as a “reluctant reformer” to the current status now, of a mature stabilizer in implementing an IMF-supported program under the Policy Support Instrument”. 

 Tanzania's Minister for Finance Zakia Meghji joins other African finance ministers for a news conference on issues impacting the continent at International Monetary Fund Headquarters in Washington, Saturday, Oct. 20, 2007. (AP Photo/J. Scott Applewhite)

 Tanzania’s Minister for Finance Zakia Meghji joins other African finance ministers for a news conference on issues impacting the continent at International Monetary Fund Headquarters in Washington, Saturday, Oct. 20, 2007. (AP Photo/J. Scott Applewhite)

When asked to clarify, the Minister added:

When I said that presently, the Fund is looked at as an “ally,” I was comparing it, of course, with a number of years before. And as I said, our contract with the Fund goes way back into the sixties. I remember that time when Tanzania decided to be a member of the Fund, the demonstrations that took place amongst students at the universities–I was in the university at that time. So the way that the Fund was portrayed was as an institution from outside that wanted to tell the Tanzanian people what to do. And having come from an independence period in the sixties, people saw the Fund as another colonial thing.

But things have changed, as I said, and also the policies, which of course, to the Fund and to the leadership, it was important that we have these policies in order to reduce poverty and to have economic growth. So people didn’t like some of them. For example, the question of the cash budget–so there was a situation whereby people would spend money without planning, and at the end of the day, there were problems, of course. But then, later on, people started understanding that actually, what the Fund was talking about was economic growth–poverty reduction and economic growth–put it that way. And, as I pointed out, a number of reforms therefore had to take place. Initially, they were saying that there would be no changes, but when the reforms brought a lot of changes in Tanzania, the people now say that the Fund is an ally”.

While it is true that over the years Tanzania has graduated in her relationship with IMF to the point of currently operating under a PSI and thus driving its own development agenda; and while its true that IMF policies have evolved over the years to a degree where they are more favorable to the LDCs, the argument of whether IMF and World Bank past policies had done more harm than good will continue unabated. Whether majority of Tanzanians view the IMF and World Bank as “allies” is also up for debate since many more still feel that the improved macro-economic environment is largely on paper; that improvements can be seen but it hasn’t significantly changed their daily lives. 

You can read the entire transcript of the African Minister’s press conference here.

What is your opinion on Minister Meghji’s statement? Do you agree that Tanzanians these days no longer view IMF as an enemy?

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Recently, there has been intense media reports (mostly coming out of Kenyan media and bloggers) pressuring Tanzanian government to ditch SADC (Southern Africa Development Community) in favor of EAC (East African Community).

Tanzania is also being pressured to rejoin COMESA (Common Market for Eastern and Southern Africa) after they pulled out in 2000 to avoid what it termed as duplication of efforts that consequently led to high membership costs. Recently, some industrialists and traders in Tanzania were also reported as advocating for the country’s return to COMESA. 

Observing few responses from Tanzanians to such pressures, I engaged in a friendly and healthy debate with a Kenyan blogger from Business in Focus in an attempt to outline Tanzania’s position (my views are strictly personal). The Kenyan blogger, going by the name “branded”, had posted a stinging article claiming that Tanzania’s negative public opinion against fast-tracking East Africa Federation was “diminishing chances of regional cooperation”. He made further incendiary accusations, claiming that “having strong ties with SADC makes TZ unlikely to represent the interests of the EAC region” and went on blame Tanzania for pretty much everything under the sun when it comes to regional cooperation issues.

The discussion with the blogger started under this link and later continued here as well.

What is your take? Do you think Tanzania should quit SADC and rejoin COMESA?

Prominent Chief Executive Officers in the country last week presented their vision of how to position Tanzania to achieve hyper-growth over the next 20 years.

The presentation was made to President J. Kikwete at the annual CEO Roundtable held in Dar es Salaam last week. It aims to create a $176 billion dollar economy for 58 million people with a GDP per capita income of $3,000 by year 2025. (Currently, the size of the economy is $12.4 billion, population of 39 million with a per capita of $340 dollars, according to World Bank statistics).

To achieve this, it means the economy needs to grow at an exponential rate of 15.8%per annum over the next 18 years (in the past 5 years or so, the economy has been growing at a range of 6-7% annually). They argued that even though this may look challenging, but its not unprecedented. Angola’s economy, for instance, grew at 18% rate in 2005 and is projected to grow at 38% in 2008.

They advised Tanzania to focus on 5 key sectors to bring this hyper-growth:

a) Commodities, particularly minerals – The country has estimated mineral potential valued at $1.28 Trillion. Mineral processing and refining industries (value addition) need to be encouraged. Develop secondary industries out of mining boom by using earnings from the commodity boom to diversify to other industries.

b) Energy (oil, gas, hydro and bio-fuels) – Develop reliable sources of energy. A level playing field is needed as well as a sound regulatory framework (smart mineral policies).

c) Retail economy, particularly Tourism – Need to transform from heritage tourism (sight-seeing) to “lifestyle tourism” (e.g spa and recharge holidays) where tourists engage in activities. Focus should be to encouraged few tourists to spend more money; rather than increasing the number of tourists visiting the country to earn more money.

d) Financial services, particularly Housing financing – Strong demand for housing, population growth and migration all provide opportunity for hyper growth through construction and mortgage lending services. Build a country of home-owners, producers and consumers.

e) Infrastructure development –Needed  to support all of the above. Also, develop IT, telecomm and mega projects such as developments of waterfronts and marinas, casino cities and weekend gateway areas. Aim to develop Tanzania into an international financial center and a trade gateway to the Far East.

In addition to the above, development of human capital is key to higher productivity. To this end, investment in education should be escalated. The public service also needs to transform its mindset to be able to deal with globalisation.

What do you think? Do you think these CEOs are dilusional in thinking that we can have this level of hyper-growth in Tanzania?

It can be done. Play your part! ~ Mwalimu Julius Kambarage Nyerere.

Happy Nyerere Day!

This year, Kenya replaced Tanzania in the list of Top 10 reformers out of 178 global economies, according to the recently released World Bank’s ‘Doing Business 2008’ report. African countries that featured in this year’s “Top 10 Reformers 2006/07” survey were Egypt (1), Ghana (3) and Kenya (8). Last year (2005/06),  Tanzania ranked number 10 in the list, while Ghana, the only other African country in last year’s survey, stood at 9. Therefore, not only did Ghana remain in the list, it also improved her status significantly to 3rd position this year. 

It is easier to start a business in Rwanda compared to her East African neighbours. For instance, there are 9 procedures and takes 16 days to set up business in Rwanda while in Tanzania there are 12 procedures and takes up to 29 days to do the same.  In the “Starting a Business” category,  Rwanda scored 63, Tanzania 95 (up 6 places from last year’s 101 position), Kenya scored 112, Uganda 114 and Burundi 124. 

Tanzania still remains a notable reformer in Africa. She significantly cut the cost of starting a business in the past year, making her and Mauritania two of the cheapest places to register a business in Africa.

In East Africa, it is easier to do business in Kenya (72), compared to Uganda (118), Tanzania (130), Rwanda (150) and Burundi (174).   

Click here for complete economic rankings of “Doing Business 2008” report. Click here for information on notable reformers this year.

What are your thoughts on Kenya’s impressive showing this year as a top 10 reformer?

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