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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’s economy to grow by 6.8% in 2019

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The World Bank suggests Gross Domestic Product (GDP) growth in Tanzania to likely slowdown to 6.6% for the year 2018 from a 7.1 per cent expansion in 2017.

This year 2019, the Bank estimates that Tanzania’s economy will grow by 6.8 per cent and rise to 7.0 per cent in 2020.

But the government expects Tanzania’s economy to grow by 7.2 per cent in 2018 and accelerate to 7.3 per cent in 2019, despite a slowdown in credit to the private sector and rising bad loans in the country’s banking sector.

The state-run National Bureau of Statistics (NBS) said in December that Tanzania’s GDP grew by 7.0 per cent in the first half of 2018 from a 6.7 per cent rise in the same period a year-ago, while the country’s inflation rate dropped to a 10-year low in November, helped by slower rises in food prices.

National Bureau of Statistics – Tanzania

“In fast-growing countries, such as Rwanda and Tanzania, the (economic) expansion will be supported by public investment in infrastructure and strong agricultural growth,” said the World Bank in it 264-page report.

“Inflation is expected to pick up across the (Sub-Saharan Africa) region in 2019, reflecting the pass-through of currency depreciations during 2018 and domestic price pressures among metals exporters and non-resource-intensive countries … price pressures are likely to intensify in Kenya, Tanzania and Uganda.”

Tanzania’s annual headline inflation rate rose marginally to 3.3 per cent in December from 3.0 per cent in November, the lowest inflation in a decade.

The International Monetary Fund (IMF) warned last month that a credit squeeze coupled with a slowdown in government spending could dampen prospects for faster economic growth in Tanzania.

The lender, which warned that nearly half of Tanzania’s 45 banks are vulnerable to adverse shocks and risk insolvency, forecast the economy by 6.8 per cent this year.

The government plans to raise spending by 2.4 per cent in the 2018/19 fiscal year with the fiscal deficit expected to increase on the back of higher infrastructure spending.

The fiscal deficit is seen reaching 3.2 per cent of GDP in 2018/19 fiscal year (July-June), up from around 2.1 per cent in 2017/2018, according to data from the Ministry of Finance and Planning.

Elsewhere, the growth of the global economy is expected to decelerate to 2.9 per cent this year compared with the three percent in 2018, the World Bank said in the report, citing elevated trade tensions and international trade moderation.

A slump in the global economy will continue in the coming year, with 2020 growth estimated at 2.8 per cent, according to the report.

“Risks to the regional outlook are tilted to the downside. On the external front, slower-than projected growth in China and Euro Area, which have strong trade and investment links with Sub-Saharan Africa, would adversely affect the region through lower export demand and investment,” the World Bank said.

“Moreover, Sub-Saharan African metals producers would likely be among the hardest hit by escalating trade tensions between China and the United States, as metals prices would fall faster than other commodity prices as a result of weakening demand from China.”

Sharp currency declines would make the servicing of foreign currency-denominated debt, already a rising concern in the sub-Saharan African region, more challenging, the Bank said.

Overall, real GDP growth is estimated 6.6% in 2018, down from 7.1% in 2017. The services sector was the main contributor to GDP (39.3%). Private investment was the main demand-side contributor (63.9%). The external sector stymied economic growth as the current account deficit increased (despite the real depreciation of the Tanzanian shilling), due to a higher volume of imports in 2018 than in 2017. The increase is due largely to increased imports of transport equipment, building and construction materials, industrial raw materials, and petroleum products for large public investment projects, such as the Standard Gauge Railway. The import bill also increased as a result of the rise in the price of key commodities, such as crude oil.

The fiscal deficit increased to an estimated 3.9% of GDP in 2018, due to increased capital spending on infrastructure projects. Public debt increased to an estimated 39.3% of GDP in 2018 from 38.2% in 2017. External debt accounted for about 74.9% of total public debt in 2018. The risk of debt distress remains low because public external debt, at 34.5% of GDP, is mostly concessional.

Monetary policy was more accommodative in 2018 than in 2017. This increased domestic liquidity and reduced lending rates, leading to greater private credit supply. Due to improved food supply, inflation eased to an estimated 3.5% in 2018.

Tailwinds and headwinds

The medium-term outlook is positive, with growth projected at 6.8% in both 2019 and 7.0 in 2020, supported by large infrastructure spending. Headline inflation is projected to marginally increase to 5.2% in 2019 and 5.1% in 2020 due to increased government spending.

But the positive outlook faces several downside risks: growing private sector concerns about economic policy uncertainty and increased domestic arrears that could derail the government’s fiscal consolidation and harm the private sector.

Key economic development challenges include slow progress towards inclusive growth, infrastructure bottlenecks, and vulnerability to climate change. Poverty and income inequality remain high despite high economic growth. Infrastructure bottlenecks are most notable in the transport and energy sectors. Reliance on rain-fed agriculture has exposed farmers to income shocks. And inefficient public enterprises present a fiscal risk. One of the development challenges on the social front is youth unemployment, which increased to 7.3% in 2016, compared with 5.7% in 2012.

Key opportunities include peace and political stability, abundant natural resources, a strategic geographic location, and immense development potential for tourism. The Export Zone Processing Agency established in 2008 to accelerate manufacturing exports and help the country achieve structural transformation has helped attract close to $1 billion in foreign direct investment and revive the manufacturing sector into one of the fastest growing in Africa.

 

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