Tanzania’s Economy Under Suluhu Hassan
Tanzania is one of the few countries in the world with a sitting female Head of State. Shortly after she assumed office following the demise of Former President John Magufuli, H. E. Samia Suluhu Hassan urged fellow Tanzanians to work together to develop the country. She outlined the priorities of her administration for the next five years, targeting an 8% real annual GDP growth rate. Her priorities were in tandem with Ex-President Magufuli’s plans to focus on agriculture, livestock, fisheries, industry, mining, trade, and tourism in the next five years, but for his untimely demise.
Currently, H. E. Suluhu Hassan is engaging with the private sector players to discuss ways of harnessing the potentials of the private sector to improve trade and investment as well as broaden the tax base to boost domestic revenue mobilization. The private sector, tagged as the engine of growth, has a vital role to play in Suluhu’s administration especially at a time when government plans to finance a chunk of its budget with domestic resources.
Economic Outlook For 2021
Before the outbreak of the coronavirus pandemic, Tanzania was one of the fastest growing economies in the world with growth averaging 6.3% between 2010 and 2019. However, COVID-19 has disrupted the constant growth trajectory with growth projected at 2.5% in 2020, according to the World Bank. Nonetheless, the Bank of Tanzania (BOT), estimated growth at 4.8% in 2020 and is expected to improve marginally to 5.6% in 2021.
The current projections are far below Tanzania’s Five-Year National Development Plan spanning 2016 to 2021 which targeted an annual real growth rate of 10% by 2021.
Meanwhile, just like most developing economies, the services sector accounts for the largest share of the Tanzanian economy contributing 40% to the country’s GDP, according to data from the National Bureau of Statistics of Tanzania. Also, the Industry & Construction sector accounts for 31.1% whilst Agriculture, Forestry & Fishing contribute 28.9% to GDP.
General Average price movements in Tanzania have been relatively stable as compared to its peers. As of May 2021, annual inflation was 3.3%, same as in April. Very much below inflation rates of Nigeria, South Africa, Kenya, and Ghana.
The external sector has been greatly impacted by the supply chain disruptions and travel restrictions. As a result, the value of exports of goods and services declined to USD 8,415.2 million at the year end March 2021 from USD 9,619.1 million recorded in the corresponding period of 2020. The BOT attributed the decline to a decrease in services receipts, mainly tourism.
Parliament Approves TZS 36.68 Trillion 2021/2022 Budget
Tanzania is set to spend TZS 36.68 trillion for the financial year 2021/2022, after 94% of the Members of Parliament voted in favor of the proposed Central Government Budget. The current budget represents a 5% increase over the TZS 34.88 trillion allocated in the 2020/2021 budget.
Interestingly, the government plans to finance the budget with domestic revenues to the tune of TZS 26.0 trillion, representing 71% of the approved budget for the fiscal year. This is very commendable since debt has become a major problem during this era of the pandemic-induced crises.
Also, grants from development partners will amount to TZS 2.9 trillion, 8% of the total budget for the 2021/2022 fiscal year. With regards to borrowing, the government plans to raise TZS 5.0 trillion through domestic loans, accounting for 14% of the overall budget. Only 7% of the entire budget will be financed by conditional external commercial loans of TZS 2.4 trillion.
Unsurprisingly, about 63% of the budget will be allocated for recurrent expenditure, while the remaining 37% will be used for development projects. Government’s capital expenditure will be geared towards key economic sectors such as construction, energy, and infrastructure. Flagship projects to be financed include the construction of the standard gauge railway (SGR), the construction of Julius Nyerere Hydropower Project (2,115 MW), strengthening the national air carrier– Air Tanzania, and the construction of the Uganda-Tanzania crude oil pipeline.
In addition, the government plans to spend TZS 571.6 billion to revamp the once vibrant tourism sector and TZS 233.3 billion in the health sector for the purchase of medicines.
Drilling Tower Of Helium One Company Ltd.
On June 12, 2021, Helium exploration company, Helium One, announced the commencement of its exploration drilling program at the Rukwa Project in Southwestern Tanzania. The company plans a three-well program targeting shallow structures in close proximity to the Itumbula Helium Seeps.
Each well is planned to test a different trapping style, therefore, providing information essential in de-risking the company’s portfolio of prospects across the basin. Drilling of the first well is expected to take approximately one month to complete and will produce valuable information about the sub-surface.
Helium detection will be constantly monitored during drilling to identify helium gas shows from mud logging. On completion, wireline logs will be run to measure formation properties downhole, as well as identifying any pay zones in the success case. Any discovery will be tested with a drill stem test to attempt to flow a sample of gas to surface for grade analysis.
The exploration program is the culmination of five years of dedicated work. Each well will take roughly one month to complete with lessons learned from the first well applied to refine and de-risk drilling of subsequent wells. We look forward to announcing results of our first well at what is a potentially transformative time for the company
” - David Minchin, Helium One CEO
The Rukwa Helium Project is a large-scale, high-grade, primary helium project covering an area of approximately 3,590 km2 in Southwestern Tanzania. It has the potential to become a strategic asset in resolving a supply-constrained market.
The new drilling will further add to the mineral deposits of the country. Tanzania is one of the countries that is heavily endowed with mineral resources and their extraction will contribute significantly to national development. Some of the major minerals include gold, iron ore, nickel, copper, cobalt, silver, diamond, tin, coal, and uranium.
The mining sector constitutes one of the significant sectors in the Tanzanian economy with its value increasing yearly. The sector expanded 10% and 15.3% in the first quarters of 2019 and 2020 respectively.
President Suluhu Inaugurates Mwanza Precious Metal Refinery
President Samia Suluhu Hassan on June 13, 2021, inaugurated the Mwanza Precious Metal Refinery (MPMR), the first in the country. The MPMR is located in the port city on the Southern shore of Lake Victoria in North-Western Tanzania.
With regard to the source of raw materials, the Refinery is expected to obtain precious metals from qualified sources approved by the Ministry of Minerals and from neighboring countries. It has the capacity of extracting 480 kilograms of gold per day and 60 kilograms per day of silver. The Refinery is one of the legacies left behind by late President John Magufuli.
As part of his vision, late President John Magufuli insisted on the critical need for mineral processing industries in the country to add value to the country’s abundant mineral resources. Through this, the country can increase its mining revenues whilst reducing mineral smuggling.
The Refinery, established in January 2020, is a joint venture between the Tanzania State Mining Corporation, ACME Consultant Engineers of Singapore, and Rozella General Trading of Dubai. It, however, commenced its operations in April 2021.
Gold refined at MPMR will be sold as bullion bars to international markets, especially in the Middle East. In addition, the factory is expected to attract more investment by providing an opportunity for neighboring countries to refine their minerals. Tanzania is expected to refine 960 kilograms of gold per day once the construction of the other two refineries in Geita and Dodoma are completed, the Minister of Minerals of Tanzania, Dotto Biteko said during the inaugural ceremony.
Tanzania’s gold exports amounted to USD 2.2 billion in 2019, but rose to USD 2.9 billion in 2020, representing more than 90% of the country’s mineral exports. Data from the Bank of Tanzania show that gold exports increased by USD 701.3 million to USD 3,025.4 million this year as of End-March 2021.