Tanzania At 58: How The Country Is Turning The Tide To Give Its Economy A New Lease Of Life

Tanzania, the most peaceful African country once known for embryonic development, is turning things around. For up to a decade, the poverty rate in the country has been falling, marking significant progress since its 58 years of Independence.

While concerns were raised regarding the correlation between economic growth and poverty reduction rate, a new survey has shown that things have been better than ever. 

It is not Africa’s best economy or the poster child for improvement in East Africa. But the Tanzania Mainland Assessment Report by the World Bank reveals that the Swahili-speaking country’s national poverty rate fell from 34.4 percent to 26.4 percent between 2007 and 2018. The newly-realized improvement is attributed to the gradual improvement in living conditions and human capital. 

Last week, the World Bank said the nation’s economy would grow at a rate of 5.8 percent in 2020 with an estimated 5.6 percent this year, while a 6.1 percent rise awaits it in 2031. While the World Bank’s 2019 forecast is lower than the 7.1 percent which the Tanzanian government has projected, it is not the first time both entities are producing varying figures. 

The Secret Formula

The administration of President John Magufuli has pumped billions of American dollars into driving Tanzania’s industrialization.

For one, Prime Minister Kassim Majaliwa has been walking the talk as he’s in business understanding with Russian partners to better the railway system in the country. The ambition is to carry out an overhaul on all the routes all of the country’s six major cities to facilitate transport for the growing urban populations. 

July 2019, the government made known its plans to buy two new Airbus jets and a plane from De Havilland Canada. The move formed a major part of the plans to revive and expand the fleet for the national flag carrier.

Though the actual cost of the deal remains an inside knowledge, it makes sense to assume hundreds of millions of dollars have been involved in purchasing eight new airplanes since 2016 to turn things around for loss-making state carrier Tanzania Company Limited (ACTL). 

Buying new airplanes is hardly only a plan to keep the skies busy. The administration hopes that expanding air services will go a long way to improve Tanzania’s tourism sector.

The country’s biggest foreign exchange earner, the revenues from tourism leaped more than 7 percent last year to around USD 2.4 Bn. This was assisted by a proliferation of foreign visitor arrivals, per government-obtained data. 

In October, Tanzania took delivery of its second Boeing 787-8 Dreamliner for its national carrier. The development made the number of new aircraft delivered to the country 8, which is ever since Magufuli took office in November 2015.

The administration plans to take total to 14 new flyers for ACTL, as the remaining 4 will be received before 2021. If things go according to plan, passengers arriving on the plane will be able to whizz across the on high-speed trains. They may also be able to visit Mt. Kilimanjaro on a cable car service.

Going Hydro

The East African country is not left behind in the power plants. According to the United Nations Development Program (UNDP), only 10 percent of Tanzanian households currently have access to the national grid electricity.

Amidst criticism from environmentalists, the President inaugurated in July, a new hydroelectric power unit in Selous Game Reserve – a world heritage site. Expected to generate an extra 2,100 MW, the project will more than triple the country’s installed hydropower capacity, which currently stands at 562 MW.

The project is a joint venture of two companies, from Egypt – an African country that seems to be at the forefront when it comes to clean energy.

Under the expert eye of Arab Contractors and Elsewedy Electric, the contract was awarded for USD 2.9 Bn in December 2018. While Elsewedy Electric holds a 45 percent stake in the projects, the remaining 55 percent contract value share is held by Arab Contractors. 

Africa’s sixth most populous country, Tanzania, faces major and relentless power deficit, with only 40 percent of the country’s 59 million people having access to electricity.

The gross electricity generation as of 2016 was an estimated 6.448 GW, while per capita consumption was 137 KW per year. The nation’s energy ministry plans to increase the total installation to a capacity of 5GW by 2021. What’s more, it wants to kick it up to 10GW by 2025. 

No Recession

Tanzania’s economy managed to escape imminent recession alarm in the third quarter of 2017. It also yielded gap returns to normal after the country’s apex bank cut key rates.

In an interview from November with Daily News, Orbit Securities Market Analyst, Imani Muhingo, theorized that the economy of Tanzania is on the right path because it is unlikely to face a recession in the near future. “The longer-term yields are above shorter-term ones showed a low risk of uncertainty in the future,” he said. 

Nevertheless, all is not heavenly in Tanzania. In the report, The World Bank warned that spending pressures expected as a result of next year’s elections mean the country needs to strengthen its fiscal management.

“Revenue forecasting is weak, undermining budget credibility and resulting in accumulation of arrears and commercial, domestic debt,” the bank said in its report.

“The ambitious revenue target of 17.1 percent of GDP (in the previous fiscal year 14.0 percent was actually collected) and the higher budgeted spending may make it difficult to achieve the fiscal deficit goal of 2.3 percent of GDP in 2019/20,” the bank said.

The poverty rate is not any less than the government wants it to be, although things are in place to further make it better. 

Image Courtesy: African Budget Safaris