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Tanzania

‘A certain president Magufuli’

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Africa’s natural resources have been the bedrock of the continent’s economy and continue to represent a significant development opportunity for her people. In terms of natural resources, it is the world’s richest continent with about 50% of the world’s gold, most of the world’s diamonds and chromium, 90% of the cobalt, 40% of the world’s potential hydroelectric power, 65% of the manganese, millions of acres of untilled arable farmland, as well as other natural resources like salt, uranium, copper, bauxite, silver, petroleum and cocoa beans, woods and tropical fruits.

Despite this vast resource, the bulk of Africans live in unnecessary frustration, hopelessness and poverty, die of preventable disease, or run to the West to gain appreciation! A World Bank study in 2013 identified Africa as the world’s poorest inhabited continent.

The trouble with Africa is simply a failure of leadership. Africans have the capacity to end poverty: what really then is lacking is the will to do so. And that will is largely locked in the hands of our leaders. Africa needs transformational leaders who have the will to bring about change: positive change! Aside the need for transformational leaders, Africans also need to create and empower civil societies that hold leadership accountable.

Citizens must have the power to put pressure on leadership and shape the leaders that best represent their interest. I see traits of such transformational leadership in the recently elected Tanzanian president, John Pombe Joseph Magufuli. Since entering office in November 2015, he has embarked on a number of initiatives and cost-cutting moves designed to stem corruption and unnecessary spending in Tanzania: a country with tremendous potential but one in which the average income is $79 a month (World Bank, 2014).

It may be early days yet and maybe too short a time to start rejoicing but the few reforms he has been able to make in Tanzania already are impressive by African standards, to say the least. Someone has already even coined a verb: to MAGUFULIFY which means “to render or declare action faster and cheaper; to deprive (public officials) of their capacity to enjoy life on taxpayers’ money; to terrorize lazy and corrupt individuals in the society.”

The conspicuous and gluttonous consumption, at the expense of taxpayers, displayed by most African public officials is disgusting. Many public officials convert public funds to private use.

Many of them find it difficult to separate personal money from public funds and hence their reckless extravagance at public expense. All these happen in the face of growing dilapidated public infrastructure, poverty of the people and annoyingly their repeated calls for their citizens to bear with austerity measures, when they themselves continue with their wasteful spending.

In most African countries, public officials spend whopping sums of money (mostly in billions of US Dollars) on foreign and domestic travel in just one year. And one wonders how our foreign donors see us when we keep going abroad for foreign direct investments! In Tanzania, the Controller of Budget’s report for the financial year 2014/2015 shows that the National Assembly and the Senate spent Sh4.14 billion (~US$ 1,894,050) on domestic and foreign travel.

This translates to roughly Sh9.95 million (~US$ 4,552) per member on foreign and domestic travel. An opportunity cost analysis by Nation Newsplex and the Institute of Economic Affairs reveals that the total amount is enough to buy 16 radiotherapy machines (at about US$ 118,950 each) and increase by seven times the number of cancer patients that would have access to radiotherapy treatment in the country.

In Zimbabwe recently, Mugabe celebrated his 92nd birthday with a lavish party and huge cost, all estimated to cost US$800,000 in the drought stricken Masvingo Province; where 75% of staple maize crop failed because of a drought.

The drought has left 3 million people in need and prompted the declaration of a state of disaster in most rural areas in the country. In my opinion, the money for this party could have been used to import maize to avert the impending starvation. In South Africa, President Zuma has been facing mounting pressure to step down after a series of scandals including his use of Euro20.5 million (~US$ 15 million) to upgrade his private home in a povertystricken rural area by installing a swimming pool, chicken run and amphitheatre….all at the expense of the tax payer.

He has since offered to pay back, but on what terms? In Ghana, some popular cases of wasteful spending are on Savannah Acceleration Development Authority (SADA), Ministers and Heads of Governmental Agencies’ importation of luxury cars especially Toyota Land Cruisers (V8) for their official duties and the most recent GHC3.16 million branding of buses; all using the tax payer’s money, while a tax payer at a public hospital dies because of lack of oxygen and another tax payer dies because she has a critical medical condition that requires emergency surgery but the surgery can’t happen any earlier because of infrastructural challenges….the only running Intensive Care Unit in the entire hospital has only four beds and that limits the number of ‘ICU’ required surgeries that the hospital can perform at any time!

So let’s go back to President Magufuli of Tanzania…………Who is he? John Pombe Joseph Magufuli was born on 29th October 1959 and assumed office as President of Tanzania, on 5th November 2015. He stood as the candidate of the ruling Chama Cha Mapinduzi (CCM) party.

He was first elected as a Member of Parliament in 1995, served in the Cabinet of Tanzania as Deputy Minister of Works from 1995 to 2000, Minister of Works from 2000 to 2006, Minister of Lands and Human Settlement from 2006 to 2008, Minister of Livestock and Fisheries from 2008 to 2010, and as Minister of Works for a second time from 2010 to 2015.

During his government post as works minister, he was nicknamed the ‘Bulldozer’. As he began his term as President, Magufuli displayed unusual zeal for austerity and impatience with corruption and waste. Saving money is just part of the 56-yearold president’s agenda. The former teacher and chemist is also battling corruption and trying to improve services in Tanzania.

He knows where his country’s priorities lie and understands that wastage of public money (especially by a poor country) is the height of stupidity and impunity. The president’s love of austerity has even inspired a hash tag: #WhatWouldMagufuliDo, that is dedicated to cost-saving and anti-corruption measures. Here are some of the things he has done already within his first 100 days of assuming office:

– He cancelled Independence Day celebrations, traditionally a time for the government to spend big on a public display of nationalism. Instead the time was spent on street-cleaning to improve sanitation and arrest the spread of a cholera outbreak. The money saved was to go toward streetcleaning services. He asked all citizens to pick up their tools and clean their backyards.

– He downsized by more than 90 percent the budget for the opulent state dinner that usually marks the opening of parliament and ordered the money saved to be spent on hospital beds and road works. This was after his first official visit to the Muhimbili Hospital, and seeing the horrible state it was in.

This saved the country over Sh200 million and was used to pay for beds for people lying on the floor and sharing beds. A few days’ later 300 beds were delivered. He dismissed the governing board and got a new team in place, and within days the broken MRI was fixed. He also pared down his inauguration party from US$100,000 to US$7,000 and sent the extra money to the hospital.

– Three days into his term, Magufuli announced a ban on all foreign travel by public officials. They have been instructed to instead make regular visits to rural areas to learn and help solve problems facing everyday Tanzanians. All tasks that required officials to travel abroad would instead be done by high commissioners and ambassadors who are already in place. The country could save up to Tsh32 billion (US$51.1 million)

– He banned the purchase of first and business class air tickets by public officials, although the president, his deputy and the prime minister are exempt.

– He ordered that government meetings and workshops be held in government buildings rather than expensive hotels

– He cut a bloated delegation of 50 people set to tour Commonwealth countries to just four.

– He publicly issued a serious warning to the people he will select as ministers that he would not tolerate corrupt and bureaucratic government officials and that the ministers would have to work tirelessly to serve Tanzanians along with him.

– On 10 December 2015, more than a month after taking office, he announced his cabinet, composed of 19 ministries. It had 11 fewer ministries than the previous government; some ministries were merged to save money.

– Shortly after assuming leadership, he plugged revenue loss loopholes at Tanzania Ports Authority (TPA) and Tanzania Revenue Authority (TRA) where several high ranking officials, including the Tanzania Revenue Authority’s chief, were suspended and others taken to court to answer economic sabotage charges. Dozens of other officials from several public institutions have also been suspended pending investigations over misuse of funds allocated.

– When he had to travel 600km to Dodoma, from Dar, to officially open parliament last week, he didn’t order a private jet – instead, he chose to drive.

– At the National Assembly in Dodoma he clearly sent out the message that it will not be business as usual under his leadership.

– He promised to cut public spending, fight corruption and enhance accountability in public service. He said it is time for Tanzanians to walk the talk.

– Magufuli reportedly told parliamentary leaders that the people of Tanzania want him to solve their problems and not make speeches.

President Magufuli has so far shown a no nonsense approach in taming corruption, laziness and the business-as-usual syndrome among public officials. Indeed, he has left many in Tanzania and beyond impressed.

People are beginning to ask, “If Magufuli can do it in Tanzania, then what’s wrong with our politicians?” But what are his chances for success? It remains to be seen if the wonder will last the proverbial ‘nine days’. But reformers have come and gone in Tanzania before. The opposition party has already coined a phrase in Swahili for the presidential reforms: “Nguvu ya soda” meaning “the power of soda”. Opponents are betting that Magufuli’s reforming spirit will fizzle out like an open bottle of soda in the hot African sun.

Critics say the president’s actions are a mere publicity stunt in an attempt to convince Tanzanians that he is all about work. But others still believe his actions are in keeping with the promises he made to boost the economy, create jobs, root out corruption and ensure public sector institutions work to improve the living conditions of citizens. Magufuli’s role in Tanzania will be talked about and debated by all levels of politics, society and business.

Tanzania is widely viewed as the lead contender for East Africa’s next great economy. And due to its large gas reserves, mineral resources and major port projects, it can possibly become one of the leading African nations in the next decade.

Magufuli’s influence will be felt, and one thing is for sure: Some will like it and others will loathe it. In nations such as Uganda, Zambia and Kenya the impact will be felt in their upcoming elections (Uganda and Zambia in 2016 and Kenya in 2017).

Incoming politicians will likely seek to channel the Magufuli vibe and promise to initiate acts of reform and cut back spending. JOHN Pombe Magufuli may have been a compromise candidate, but less than three months after taking over as Tanzania’s president; his radical reforms have the region in awe.

Comparisons are being drawn to the enigmatic Rwandan president Paul Kagame, whose country is seen as a hope of East Africa, calling the latest actions by Magufuli the “Rwandanisation of Tanzania”. President Paul Kagame of Rwanda is also driving change and making things happen in Rwanda.

He is described by the International Telecommunications Union as the “Digital President”, and has invested over $100 million in broadband internet with over 50% of the population using mobile phones and also has a ZERO tolerance for corruption.

AFRICA NEEDS MORE OF SUCH LEADERS! It is clear that what Africa needs is dynamic, creative, focused and disciplined leadership. Countries can and should be run like business organizations with all that goes with responsibility, aims, strategies and envisaged outcomes if they are to have any positive impacts on their citizens.

All the major revolutions, including those in France, Russian, and Cuba, took place because there was a complacent, insensitive, self-absorbed elitist engaged in wasteful spending and vanity projects while the majority of the population lived in poverty. If public officials do not learn lessons from history, they themselves may become mere footnotes in future history books.

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Tanzania

Shilling Fluctuation, a seasonal phenomenon?  

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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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