SULUHU’S RESPECTABLE INTERNATIONAL RELATIONS BOOSTING TRADE IN TANZANIA
Tanzania, just like most economies, is gradually navigating its way out of the devastating effects of the pandemic which left major scars on businesses and impacted significantly on lives and livelihoods of the people. Rated as one of the fastest growing economies prior to the outbreak of the pandemic, Tanzania’s GDP growth decelerated to an estimated 2.0 percent in 2020, driven mainly by a decline in the tourism sector from 6.8% in 2019.
The Tourism Sector contracted sharply in 2020, resulting in job losses and business shutdowns which had negative knock-on effects for inter-related sectors. Estimates from the World Bank show that tourism sector revenues dropped by 72% between 2019 and 2020. Over 500,000 Tanzanians have been affected economically by the COVID-19 pandemic outbreak which has led to a massive unemployment crisis, according to a recent World Bank report. "The welfare effects have been dramatic, with over 500k Tanzanians estimated to have fallen below the national poverty line in 2020 on account of the COVID-19 pandemic.
The pandemic continues to weigh heavily on employment and incomes”, said World Bank Africa Chief Economist, Albert Zeufack. Despite a decline in global Foreign Direct Investment (FDI) inflows by 35% in 2020, the United Nations Conference on Trade and Development (UNCTAD)’s World Investment Report 2021, shows that investment flows to Tanzania slightly increased to USD 1.0 billion in 2020 from USD 991 million in 2019.
One of the few countries in the East African region that recorded a positive growth in FDI last year. The prospects for the Tanzanian economy looks bright. The African Development Bank (AfDB) described Tanzania’s economic outlook as positive, with real GDP projected to grow at 4.1% in 2021 and 5.8% in 2022, due to improved performance of the tourism sector and the reopening of trade corridors.
However, the Bank warned that energy and fuel price increases are expected to persist in 2021, raising overall inflation to 3.9% in 2021 and 3.4% in 2022 Already, average prices of goods and services continue to rise just as the AfDB has projected, as the country recorded its highest inflation rate in the past two years in July this year. Annual Headline Inflation Rate increased to 3.8% in July 2021 from 3.6% recorded in June 2021, the highest since December 2019. The inflation was driven mainly by food and non-alcoholic beverages which increased to 5.1% from 4.7% recorded in June 2021. Nevertheless, a partial recovery is under way amid uncertainties of the third wave of the pandemic sweeping through the whole of Africa.
The World Bank stated in July that “while partial recovery is underway, business revenues and derived taxes for government still remain below pre-pandemic levels”. In an attempt to recover stronger from the pandemic, Tanzania’s President, Samia Suluhu is making frantic efforts to improve the country’s international relations with the aim of maximizing the potentials from international trade.
TANZANIA’S EXPORTS TO KENYA IMPROVES
Tanzania has seen its exports to Kenya exceeding its imports from the East African Community (EAC) partner state for the first time in decades, signalling improved trade flows under President Samia Suluhu’s administration. Fresh data by the Central Bank of Kenya (CBK) show that Kenya’s imports from Tanzania grew nearly three-quarters in the six months to June 2021 compared with a year earlier.
The value of goods ordered from Tanzania— including cereals, wood, and edible vegetables — hit a high of Sh18.29 billion in the review period. The CBK data also shows that exports to Tanzania- including pharmaceutical products, plastics, iron, and steel — bumped 21.39 percent to Sh17.27 billion, the highest since the first half of 2016. In May 2021, President Suluhu of Tanzania and her Kenyan counterpart, Uhuru Kenyatta, pledged to end persistent strained trade relations between the two largest economies in the six-nation EAC bloc which have, for years, hindered the smooth flow of goods and services.
The Tanzanian President’s visit to Nairobi — which, among others, saw the two countries sign a deal to build a gas pipeline from Dar es Salaam to Mombasa— touched off a series of joint trade meetings aimed at flattening barriers to the flow of goods. Trade minister Betty Maina and her Tanzanian counterpart, Kitila Mkumbo, led delegations to a four-day meeting in Arusha— the headquarters of the EAC— weeks after the two Presidents met in Nairobi.
This was followed by a three-day investment forum of manufacturers from both countries in Dar es Salaam from July 7, 2021 where the Kenya Association of Manufacturers (KAM) and the Confederation of Tanzania Industries resolved to jointly lobby authorities to end crippling non-tariff barriers. “Kenya and Tanzania have the capability and capacity to add value to the wide array of resources that both countries have for export markets.
However, achieving this is hindered every time the business community encounters impediments to trade, consequently impacting the benefits of trade to the entire [EAC] region” - KAM Chairperson, Mucai Kunyiha The strained trade relations between the two countries resulted in massive protectionism and retaliatory measures being implemented by both countries. For instance, Kenyan manufacturers had in recent years protested “discriminative” duties and non-tariff barriers such as double inspection of goods for standards by Tanzania which made supplies such as meat, milk, and related products to the neighbouring country uncompetitive.
According to Kenyan Manufacturers, the protectionist fees were against the EAC Common Market Protocol, which requires member states to open up borders to facilitate free movement of goods, labour, services as well as capital. In response, Kenya also banned maize imports from Tanzania and Uganda, citing a higher level of aflatoxin than the required minimum of 10 parts per billion, sparking protest from Dar es Salaam and Kampala less than two months to Ms. Suluhu’s visit.
The lifting of the ban saw maize imports from Tanzania shoot nearly six and a half times to 118,329 90kg bags in May from 16,137 90kg bags a month earlier, according to Kenya’s Agriculture ministry.
NEW MOBILE MONEY TAX CRIPPLING TANZANIAN BUSINESSES
There is recent public outcry from Tanzanians following the introduction of a new government levy on WE mobile money in July as a way of boosting revenues. According to the citizens, the levy has resulted in significant increase in costs of mobile money services in the country. The tax, which has increased the cost to send, withdraw, and transfer money to the bank is biting hard on mobile money users, almost half the country’s population.
As a result, Dr. Mwigulu Nchemba, the Finance and Planning Minister indicated that the President has called for a review of the new tax but no changes have yet been made as some government officials described the negative effects of the tax as “minimal”.
A THREAT TO THE TELECOM INDUSTRY
Tanzania’s telecom companies are also being affected as patronage of mobile money services have seen a nosedive just after the new levy took effect. “Our revenues are dropping drastically because consumers are not using the service,” says Hisham Hendi, Chairman for Tanzania Mobile Network Operators Association and Vodacom Chief Executive.
“The situation is not good at all. Mobile money is an ecosystem. This tax will have unintended consequences along the supply chain for value-added services like micro-insurance and payGo (pay as you go) services which are not possible without mobile money wallets”, says Mrusha Jones, Founder at Innovation Hub255. He added that “the mobile money agents—wakala—will also be affected.
They will get lower commissions if there are fewer transactions”. Before the tax was introduced, Tanzania’s mobile money industry was booming. In 2019, a total of 9.5 trillion shillings ($4 billion) was transacted through the system. The number of mobile money accounts stood at nearly 26 million in December 2019, while the market size has been valued at US$45.5 billion. Until recently, mobile money was used to send and receive money, but has since become the backbone of a broad range of public services, including health, education, and social protection.
However, as a result of the devastating effects of the COVID-19 pandemic on Tanzania’s economy, the government introduced the tax in an effort to raise additional revenues to finance the 2021/2022 national budget. The levy increase prices between $0.0043 and $4 on mobile money transactions, depending on the amount sent and withdrawn.
GOV’T TO BOOST GRAPES PRODUCTION
The government has echoed its commitment to promote grape farming for the crop to bring tangible benefits to farmers and the economy at large. Prime Minister Kassim Majaliwa urged farmers to consider mass production that would expand their market apart from the industrial need for wine making.
Also, Mr. Majaliwa instructed the Executive Director of Dodoma City Council, Mr Joseph Mafuru to put in place arrangement for constructing irrigation schemes for the Bihawana grape farms.
According to the Prime Minister, grapes produced in Dodoma are the best in making wine compared to those being produced in other parts of the country. Grape farming has a greater contribution in boosting living standards for farmers in Dodoma, he said, asking residents of Dodoma to make better use of the opportunity.
"President Samia has instructed all farmers to be provided with all the support from the beginning to the end to ensure productivity and contribution of the crop to the national development," he added.
According to the Prime Minister, farmers have to be assisted from early stages that involve preparation of farms, seed accessibility, the needed agricultural inputs as well as search for markets.