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‘A certain president Magufuli’ – Part II

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I t has been about five months since I first wrote about President Magufuli. Even as I sang his praises in my previous article, I still wondered what his chances for success were. Till this day his good name still resonates across Africa since he continues to extraordinarily take bold steps in his governance of Tanzania (something most African leaders fail to emulate); and so I feel even more confident and empowered to continue singing his praises.

For the benefit of readers who didn’t get the opportunity to read my previous article, I will do a brief recap of President John Magufuli. He is the current president of Tanzania, having taken office in November 2015. Ever since he did so, he has been intensively cracking down on government wastage, inefficiency and corruption; and ultimately driving efficiency in Tanzania.

I am focusing on him because I believe to be elected as a leader comes with huge responsibilities and great influence. I believe there is a lot more elected African leaders can do to help Africa rise to its potential. Over the years, Africa has been ‘cursed or blessed’ with leaders who are filled with greed and who come in to seek the welfare of themselves at the expense of the people who voted them into power and ultimately, the land of the their birth.

Africans troop into Europe and the Americas to enjoy the ‘civilized’ system and facilities of those countries. Is it that Africa cannot rise to that level and above it? If our elected leaders are prioritizing accurately and being efficient in the management of the countries resources prudently; being accountable to their people; electing competent people to head public institutions and holding them accountable; seeking to transform their countries for the better; seeking to empower the indigenes of their countries in all ways; I believe Africa will be a different story.

Unfortunately, there haven’t been many such stories to write about over the years and while the situation seems to be getting darker by the second, it is refreshing and encouraging to see the likes of President John Magufuli doing what he is doing.

Since writing about him, he has embarked on a few more money-saving measures, and I highlight a few:

  • President Magufuli has fired several more government agency heads for unsatisfactory performance or corruption or tax evasion allegations, including the Head of the Tanzania Communications Regulatory Authority and its board for weak management and incompetence which had cost the nation about 400 billion Shillings (US$181.7million) annually); the Head of the country’s anti-corruption body, Prevention and Combating of Corruption Bureau (PCCB), for failing to tackle highlevel corruption in Tanzania and the Chief of Tanzania Railways to pave the way for a thorough investigation into gross violations of procurement procedures for the construction of a $14.2 billion rail line.
  • In January 2016, he banned all senior public officials from using high-fuel consuming vehicles. This is to take effect in 2017. He ordered that all 4x4s and other luxury cars be seized and sold in a public auction and the proceeds used to provide public goods & services. All Ministers, the Chief Justice, Ambassadors and senior state officials have been ordered to choose between a specified range of cars (Probox, Passo, Platz, Vitz, Duet) or any car that is less than 1400cc. Anyone who doesn’t conform to this directive will be prosecuted. He said “We are not here to rob the average Tanzanian but to make his life better”
  • In March 2016, he criticized the concept of receiving aid after the Millennium Challenge Corporation decided to halt its funding of a US$472 million Tanzanian electricity project following flawed elections in the nation’s Islands of Zanzibar. He said “We (Tanzanians) need to stand on our own…..work hard so that Tanzanians can get rid of donor dependence”.
  • In May 2016, he fired a Cabinet Minister, Charles Kitwanga, for going to parliament while under the influence of alcohol. His sacking came as a big surprise as he was widely viewed as being close to Magufuli.
  • In May 2016, he announced a cut in Employee Income Tax from 11% to 9%, saying “while businessmen have been evading taxes, workers have been faithful in paying the tax because it was directly taken from their salaries”. “It’s true we want to collect tax, but we must also understand what the working class takes home”.
  • In July 2016, it was officially announced that the retirement packages of the President, Vice President, Prime Minister, Cabinet Ministers, Speaker & Deputy Speaker of Parliament and other top government officials will be taxed. President Magufuli took the decision after Members of Parliament demanded equality among all senior officials during debates on taxes in Parliament. By deciding to tax his own retirement package also, President Magufuli borrows heavily from President Julius Nyerere who in 1966 reduced his salary by 20 percent in a confrontation with some university students who had marched to the State House in protest against government’s decision to pay them 40 percent of what they would earn in civilian life in a compulsory National Service scheme that had just been introduced. They demanded full payment or a reduction in the salaries of senior civil servants to bring equality in treatment. President Julius Nyerere did the latter, including his own salary, because he understood the direction he wanted to take the country! They say “if you want to chart a new course of direction you have to show an example”.
  • In March 2016, Magufuli promised to cut the salaries of senior civil servants by almost two-thirds. He found it shameful that while some were earning as much as US$18,000 a month, others earned as little as US$140. He advised officials not ready to accept the new US$7,000 monthly wage to start looking for alternative jobs. He also promised that junior civil servants would see their salaries increase as part of the new policy. These were to be effective in July.
  • I particularly revere the courage and boldness with which he cancels rather extravagant (and to some extent unnecessary) government expenditures and channels the funds into more useful and beneficial activities. These include:
    • Cancelling the 2016 Union Day Celebrations (celebrated every 26th April) and recommending that the funds for the celebrations be channeled into road construction.
    • Cancelling celebrations marking World AIDS Day (celebrated every 1st December) and ordering the money saved to be used to purchase drugs. » Cancelling the printing of Christmas and New Years’ cards by government officials and ordering the funds to be diverted to ‘serious national businesses’.
  • Tanzania has passed a provision, which stipulates that men who impregnate or marry schoolgirls will face 30 years imprisonment as part of government commitment to fight and prevent child marriage. The country has one of the highest child marriage prevalence rates in the world, and to eliminate the scourge, the government has resolved to take tougher measures in the form of lengthy jail terms to protect school-girls.

Governments need to ensure that expenditures are under control! In Africa, governments tend to rely so much on foreign aid and external borrowing.

For how long will ‘we’ budget for monies we do not earn? We may need some aid in order to carry out developmental projects, but can we use these monies prudently and for their stated purposes? Can we ‘tame’ our over-reliance on foreign aid and external borrowing? Can we put expenditures under control, particularly the unnecessary and rather extravagant ones? Can we manage the public purse as though it was our personal purse?

Thanks to Magufuli’s cost saving measures, Tanzania’s Treasury Department in Q1 2016 was able to spend monies that weren’t previously available (37.5billion shillings on school grants; 46.3billion shillings on water projects and 80billion shillings on an electricity plant).

These and more have endeared President Magufuli to Tanzanians and his popularity has soared.

It still remains to see how far President Magufuli will go to bring change, how sustainable his measures will be and for how long he can remain firm and unstoppable in his quest to bring sanity into the Tanzanian system. We are all hopeful that the measures being undertaken will have a significant positive impact on the economic indicators of Tanzania as well as neighbouring countries.

This may be an encouragement for other leaders to emulate and even ‘open the eyes’ of citizens to the fact that it is possible to find such transformational leaders who can turn the tables around in this age for Africa.

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Tanzania

Tanzania Economy to decline to 6.6% in 2019

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Tanzania’s economy remains buoyant, thanks to the stability of major macroeconomic indicators, according to a Bank of Tanzania report. Inflation remained in single digits, while money supply in the economy rose during the year ending May 2019, the BoT says in its Monthly Economic Review (MER) for June 2019. Another notable development during the period was the rise in the importation of capital goods for ongoing mega infrastructure projects.

This is in line with President John Magufuli’s endeavor to build world-class infrastructure, which is expected to greatly reduce the cost of doing business in the country. The projects include the 2,100-megawatt Stiegler’s Gorge hydroelectricity station and standard gauge railway. With the government embarking on various measures to improve liquidity in the economy, the cost of borrowing also went down, BoT figures show, while food prices were generally stable.

These positives outweighed the impact of a fall in exports of goods and services, as well as shrinking foreign exchanging reserves and increased national debt, among others. The review shows that the annual inflation rate remained at 3.5 per cent, which was below the targeted five per cent, and this helped to maintain the stability of prices of goods and services.

Tanzania is also currently food sufficient, although increased demand for maize in neighboring countries is putting pressure on prices of the commodity in the domestic market. According to the review, the extended broad money supply growth jumped to 5.8 per cent in May this year from 4.8 per cent recorded during the year ended in May 2018.

The improvement of broad money supply was a result of the growth of domestic credit to both the government and private sector. The recovery of the domestic credit market indicates increased lending to the private sector. The BoT review shows that credit to the private sector grew by nine per cent from 2.9 per cent, indicating borrowers’ increased confidence in the banking industry.

This was experienced as individual banks were lowering their interest rates as part of implementing an accommodative monetary policy by the BoT. The review shows that the average interest rate dropped to 17.17 per cent from 17.53 per cent, thus stimulating borrowers’ appetite. A decreased was also recorded in gross official reserves, which amounted to $4.3billion, covering about 4.2 months of projected imports of goods and services.

However, this was above the country’s benchmark of not less than 4.0 months, but below the East African Community’s 4.5 months. Another indicator which fell slightly during the period under review was exports of goods and services, which dropped to $8, 514.4 million from $8, 578.7 million.

Exports of traditional crops declined to $533.9 million from $1,140.3 million, manifested in all traditional crops, except coffee and cotton. However, non-traditional goods exports, which account for 78.9 per cent of goods exports, increased to $3, 499.2 million from $3, 142.7 million, largely driven by gold exports.

The value of gold– which accounted for 38.6 per cent and 48.9 per cent of total goods and non-traditional exports, respectively – grew by 15.4 per cent to $1, 716.7 million on account of increased volume. Domestic revenue realized by the government in May 2019 amounted to Sh1.28 trillion from Sh1.30 trillion. Out of the collections, Sh1.2 trillion was collected by the central government and Sh50.4 billion was local government authorities’ collections from own sources. Tax collections amounted to Sh1.1 trillion, accounting for 87.4 per cent of domestic revenue.

In May 2019, expenditure amounted to Sh1.8 trillion, of which recurrent expenditure was Sh1.06 trillion and development expenditure was Sh741.7 billion. The level of external debt stock, comprising public and private sector debt, amounted to $21.6 billion, having increased by $1.07 billion from May 2018. The increase was mainly on account of new disbursement, with recent sustainability reports indicating that Tanzania’s debt is still stable.

Tanzania’s economic growth slowed to 6.6% year on year in the first quarter of 2019 from 7.5% in the same period a year earlier, official data shows, weighed down by softer construction, agriculture and manufacturing activity.

A leaked report from the IMF said earlier in 2019 that Tanzania’s economy has not been expanding as fast as official figures suggest. It said lower growth was partly due to President John Magufuli’s “unpredictable and interventionist” policies.

In the first quarter, construction, the biggest driver of GDP, grew 13.2%, compared with 15.6% a year ago, the state-run national bureau of statistics said.

However, growth in the mining sector, which has been the target of repeated government interventions, rebounded to 10.0% from a 5.7% decline during the same period in 2018. Tanzania is Africa’s fourth-largest gold producer.

“The growth of the mining sector was mainly due to an increase in production of gold, coal and diamonds,” said the bureau.

Magufuli embarked on an ambitious programme of industrialisation after coming to power in late 2015, investing billions of dollars in infrastructure, including a new rail line and a major hydropower plant and reviving the national airline.

But critics say government intervention in mining and agriculture have discouraged investment. Foreign direct investment has slumped and private sector lending growth dropped below 4% in 2018, from an average of 20% from 2013-2016.

Agriculture, which accounts for about a third of economic activity, also slowed in the first quarter of 2019, with crop production growing 6.0% compared to 8.9% in the same period in 2018, the statistics bureau said.

In 2018 the government sent the military to seize the cashew harvest, the main export crop, after complaints by farmers that prices offered by brokers were too low. Manufacturing, another key GDP contributor, grew 4.8% in the first quarter compared with 5.3% a year earlier.

Tanzania’s economy grew 7% in 2018, according to the government, which has forecast 7.1% growth in 2019. Earlier in July, however, the World Bank released its own estimates that said Tanzania’s economy grew 5.2% in 2018.

Following the World Bank report, Tanzania said it might revise its 2018 GDP growth rate after meetings in August. In April, a leaked report from the IMF predicted lower growth of about 4%-5% in the “medium term”. The IMF report said there were serious weaknesses in Tanzania’s official data.

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