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‘A certain president Magufuli’ – Part II



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… 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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Shilling Fluctuation, a seasonal phenomenon?  



The debates about the depreciation of shilling against the US dollar are unprofessional, as the fluctuating dollar exchange rates are global and seasonal.

Contrary to what analysts and a section of the media argue or wish the public to believe, experts in economics and financial matters hint that there are well balanced reasons to that.

Having analyzed such baseless debates, I argue that this situation needs to be explained scientifically and economically rather than being blown up unnecessarily.

It should be noted that not only the Tanzanian shilling has slightly depreciated against the US dollar but also other currencies in the world.

Why? Did they fail to export cashew nut as some would argue here? Why the US dollar outperforms other currencies?

According to the ET Markets (2018), in this year (2019), the US dollar was forecasted to outperform many other currencies because of the interest hike.

The ET Markets report which is also supported by the Bank of Tanzania (BOT), states that last year, the US economy continued to strengthen.

This strength caused the US Federal Reserve to increase interest rate in December 2018. The US Fed increased 25 basis point hikes in December, so interest rate differential widened further to 2.65-2.90 per cent.

Euro and US inflation stabilized nearly 2 per cent, but there was a difference in GDP growth and unemployment rate.

GDP growth is higher in the US and unemployment rate is lower compared with the euro, which naturally makes the dollar stronger against the euro and other currencies in the world, including Tanzania.

Economically and financially, this development has contributed to rise in demand for the US dollar from investment side, consequently causing the US dollar to appreciate against most currencies, including the Tanzanian shilling.

The US Dollar is the benchmark pricing mechanism for most commodities which are global assets.

Base Metals that trade on the LME and precious metals such as gold, silver and energy including oil and natural gas use the dollar to price.

The rising dollar has significant consequences on commodities, as higher dollar tends to weigh on commodity prices.

Production cost of raw material in other countries, including Tanzania rise because of a strong dollar and weighs negative on demand.

In the stock market, a higher US dollar weighs on US multinational companies, as they have to compete globally with strong currency.

According to the latest forecasts from Barclays (2019), the dollar will remain the dominant force in the currency market this year and the pound sterling will succumb to another dose of ‘Brexit uncertainty’ while the euro will reach new lows.

Barclays says in its 2019 outlook that as the Fed drives the dollar to new levels of overvaluation and political factors keep Sterling and the Euro on the proverbial back foot, the Fed will go on raising its interest rate in a sustained manner this year, contrary to what other forecasters have begun to anticipate.

The strength of the US dollar against others as said above, the interest hike by FED has depreciated other currencies in the world, including the Tanzanian shilling.

The Bank of Tanzania (BoT) report indicates that from 22nd February 2018 to 21st February 2019 (one year period), the value of the shilling against the US dollar declined by 3.8 percent.

The BOT reports that the value of the US dollar on Developed Market currencies was also put in pressure in the same period.

The British Pound against the US dollar declined by 6.7 percent, the euro by 8.1 percent, the Australian dollar by 9.6 percent and the Chinese Yuan by 6.4 percent.

Moreover, the emerging markets (EM) have been badly affected by the strength of the US dollar. the Brazilian Real is down 18.4 percent, the Russian Ruble is down 14.75 percent, the Pakistan Rupee is 9.7 percent and the Indian Rupee by 8.9 percent year-to-date (YTD) against the dollar.

The Turkish Lira and Argentinian Peso have been the biggest losers, both down close to 40 percent since the beginning of the year.

Comparative analysis in the African region also provides a gloomy picture. Are measures taken by BOT commendable?

Despite the FED factor, I agree with BoT report (2019) indicating that the current movement in the exchange rate in Tanzania is a seasonal phenomenon related to low foreign exchange earnings from tourism and export crops.

This is true because currency hike may be mitigated by a number of facts. “Customarily, from January to May each year, it is a low tourist season and export crops where the country receives low exchange earnings. This is a common trend that usually normalizes in the second half of the year when earnings from tourism and exports pick-up,” states the report.

I commend BOT, for among other things, implementing monetary policy aimed at maintaining price stability and ensures that inflation remains within the target of single digit intended at stabilizing the value of the shilling.

This can be achieved through maintaining the appropriate level of liquidity in the economy. I understand that BOT is also participating in the interbank foreign exchange market (IFEM), in order to smoothen excessive volatility of the exchange rate.

In doing that, the Bank of Tanzania sold USD 528.6 million in 2018, which is more than double the amount sold in 2017.

In 2019, the Bank of Tanzania continued to sell the foreign exchange in order to reduce its shortage in the economy.

Moreover, the BOT must monitor foreign exchange business in order to ensure that rules and regulations are adhered to, including maintaining foreign currency Net Open Position of commercial banks equivalent to 7.5 percent of core capital.

Factors that could lead the dollar to collapse/depreciate more so to what BoT is mitigating, two conditions must be in place before the dollar could collapse.

First, there must be an underlying weakness. Between 2002 and 2018, the dollar has declined 6 percent according to the U.S. Dollar Index.

This is because the U.S. debt almost more than tripled during that period, from $6 trillion to $22 trillion.

The debt-to-GDP ratio is now more than 100 percent. That increases the chance the United States will let the dollar’s value slide as it would be easier to repay its debt with cheaper money.

Second, there must be a currency alternative for everyone to buy. The dollar’s strength is based on its use as the world’s reserve currency.

The dollar became the reserve currency in 1973 when President Nixon abandoned the gold standard.

As a global currency, the dollar is used for half of all cross-border transactions. That means central banks must hold the dollar in their reserves to pay for these transactions.

As a result, 61 percent of these foreign currency reserves are in dollars. The two situations above make a collapse possible.

But, it won’t occur without a third condition. That’s a huge economic triggering event that destroys confidence in the dollar.

Altogether, foreign countries own more than $6 trillion in U.S. debt. If China, Japan or other major holders started dumping these holdings of Treasury notes on the secondary market, this could cause a panic leading to collapse.

China owns $1 trillion in U.S. Treasury’s. That’s because China pegs the Yuan to the dollar.

This keeps the prices of its exports to the United States relatively cheap. Japan also owns more than $1 trillion in Treasury’s.

It also wants to keep the yen low to stimulate exports to the United States. These facts considered, I reiterate the possibility of a conspiracy theory on the dollar-shilling debate in Tanzania.

The hikes are normal and seasonal, but you still find some people raising unnecessary alarm into markets.


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