By Samuel Kamndaya and Bernard Lugongo
Dar es Salaam — The World Bank forecasts Tanzania’s economy as growing at an average rate of seven per cent over the next two years but wants the government to adopt measures that will see the growth translating into reduced poverty levels.
This would entail creating a conducive environment for the private sector to thrive through reducing transaction costs and decreasing the stock of domestic payment arrears among others, the World Bank says in its latest Tanzania Economic Update.
Although Tanzania’s economy has been growing at an average rate of seven per cent for the past decade, it has not translated into a meaningful drop in poverty levels as the country’s population keeps growing thus defeating the registered economic gains.
It shows that about 12 million Tanzanians (25 per cent) continue to live on less than Sh1,300 per day.
“In addition to those living in poverty, a significant proportion of the population live just around the poverty line. Those just above the line are highly vulnerable to falling back into poverty in the case of economic shocks,” the World Bank says in its report titled: “The Road Less Traveled: Unleashing Public Private Partnerships in Tanzania”.
The poverty rate fell from 34 per cent in 2007 to 28 per cent in 2012 but the World Bank says if the proportion is calculated using the new $1.90 per day global poverty line, the poverty rate increases to 46 per cent in 2012.
“Based on this measure, Tanzania ranks in ninth place in terms of the number of its population living in poverty on a global scale,” the World Bank says.
To get things moving, the World Bank wants Tanzania to stop managing economic matters with the business-as-usual approach and seriously look into the private sector as a sure way of finding the much needed finances to spur economic growth.
This is because being a low developed country, Tanzania cannot source all its much-needed finances locally as evidenced by how the country has failed to get enough funds to finance the first Five Year Development Plan (FYDP).
For example, the financing requirement for priority sectors for the period from 2011/12 to 2015/16 was estimated at Sh43 trillion. However, the total actual value of development expenditures stood at about Sh22 trillion, approximately half of the total financing requirement.
As a result, many investments in infrastructure prioritised under the FYDP and the Big Results Now (BRN) were either underfunded or not implemented at all.
“This has constrained economic growth and left a vast number of Tanzanians without access to basic infrastructure services,” the World Bank says.
To inspire the private sector, the government is required to start honouring its debts to businesses and the pension funds which, the World Bank says, are extremely high.
By June 2015, the government had accumulated a stock of arrears to a value of approximately Sh5 trillion with suppliers and pension funds.
The funds are higher than the total annual value of development spending in 2014/15.
“These figures exclude arrears accumulated with suppliers by state owned enterprises such as Tanesco, with the value of this entity’s arrears alone amounting to Sh1 trillion, while the fiscal situation of others, such as Dawasco and REA, remains unclear.
Moreover, China has been one of the biggest trading partners of Tanzania.
In 2014, the total value of Sino-Tanzanian trade surged to about $2.6 billion, up from negligible levels in 2000. In 2014, China contributed more than 10 per cent of Tanzania’s total exports value and was the third major export destination after India and South Africa.
While the increased economic ties have resulted in increased economic growth, they have also increased Tanzania’s vulnerability to downturns in China’s business cycles. The Chinese economy has been slowing down in recent years, partly reflecting a rebalancing towards a consumption-driven services-oriented growth model.
Over the past decade, unparalleled growth in China was mainly driven by an investment boom that led to a soaring demand for commodities. However, the structural shift away from investment-propelled growth has recently began manifesting itself in depressed demand and lower prices for commodities.
Speaking during the launch of the World Bank’s 8th Tanzania Economic Update Yesterday, the Vice President Samia Suluhu Hassan noted that currently the government was strengthening the institutional, legal and regulatory frameworks for Public Private Partnership (PPP).
She stressed that the government would ensure that resources were available to develop high quality PPP projects, including those from the PPP Facilitation Fund and the World Bank.
The permanent secretary of the ministry of Industry, Trade and Investment, Prof Adolf Mkenda, said in uplifting domestic resource mobilisation, the government has been making efforts in terms of taxation.
“Already, the results are promising since the start of this year. We’re going to expand more tax collection, we have a room to improve and look forward to have revenue going up,” he assured.
The director general of the Export Processing Zones Authority (EPZA), Mr Joseph Simbakalia, for his part argued that it was not necessary to have a joint venture between the government and the private sector under thePPP arrangement, but the private sector can have 100 per cent share while the government remains the facilitator.
Dr Samuel Nyantahe, who is the chairman of the Confederation of Tanzania Industries (CTI), commended the government for the work well done in the past 15 years in improving the road networks, but unfortunately, the railway network, which was crucial for transporting cargo was forgotten.
He further criticised the unfortunate trend whereby the government focuses more on encouraging trade but doing little in mephasizing production, something which has been discouraging industrialisation in the country.
However, he was optimistic that with the fifth government’s industrialisation drive, this weakness would be addressed properly.
Earlier, this year, President John Magufuli called on the private sector to cooperate with the authorities and to comply with the requirements of paying taxes.
In his first dialogue with the private sector, through the Tanzania National Business Council, the President emphasized the importance of establishing a stronger partnerships between the government and the private sector, particularly as a means to improve tax collection and thus reduce Tanzania’s dependence on foreign aid.