Tanzania: experts question reliance on foreign investors for economic growth
Written by YAKOBE CHIWAMBO
Friday, 15 July 2011 05:16
TANZANIA’S economy is projected to see strong real growth in the next
two years, growing at 6.5 per cent in 2011 – and 6.6 per cent in 2012.
Apparently, the growth is driven by foreign investments. However,
local economists have thrown a spanner in the works, and warn against
reliance on foreigners as the basis for meaningful ans sustainable
socio-economic development.
Admittedly, Tanzania has been receiving considerable numbers of
investors following its across-the-board economic liberalization which
begun in the late 1980s. But, recent developments have shown that the
impact on the local and national economy is minimal!
It is argued that the social and economic growth of any country can
only have major effects on people’s lives if all the major means of
production – and, mainly, the sectors that create jobs and have proper
economic rent management – are owned by locals!
A new report by Business Monitor International (BMI) says “foreign
investments will be the main drivers of growth as international
investors are incentivized by Tanzania’s rich natural resource base,
attractive demographic profile and a relatively benign political
climate.”
But a University of Dar es Salaam political scientist, Dr Bashiru
Ally, says most of the foreign investors are not creating that many
jobs; nor are they paying direct revenues to the Government!
“There are many foreign investors who have been flocking in Tanzania
since 1985; but the Government’s development budget has wholly
depended on foreign aid, Dr Ally explains.
“All the domestic revenues are mainly for paying (public service)
salaries and allowances, as well as buying expensive official cars. If
the foreign investors were of much help, then Government dependence on
donors would have been very much reduced!”
Noting that the investments were supposed to translate into abundant
public revenues, the creation of decent jobs, and the provision of
better public services, Dr Ally said the situation is different from
what is put in official papers about growth of the economy, and the
real situation on the ground!
“The reality on the ground, from my experience, is that Tanzanian
youths have lost hope; they don’t have decent jobs and those who are
employed are doing jobs that are not worth their educational status,”
he stressed.
According the don, “Tanzania’s economy is no longer ‘national.’ What
the investors have done is simply make it a foreign economy!”
Another University of Dar es Salaam don, Economics Professor Humphrey
Moshi, stated that, as far as the question of foreign investors is
concerned, Tanzania needs to rectify and reform some of its policies
if the investments are to bear much fruit.
“What the country gets from the investments is mere residue, because
the extant taxation systems, public contracts and investment systems
themselves do not favour Tanzania,” We need to promote joint ventures
and do more reforms
in sectors like mining so as to create win-win situation,” Moshi said.
Noting that “most of the foreign investors have rushed
for the booming telecoms sector, mining – and, now, real estate –
Moshi stated that, all this notwithstanding, the
Government is not getting that much from such sectors.
Instead, it is the investors themselves who are benefiting from their
investments, while the country and its people continue to get peanuts
in form of revenues and a few indecent jobs!
Citing the mining sector as an example, Professor Moshi said mining is
contributing a measly 1.7 per cent of the GDP. But, it could have
contributed much more that that if major mining activities were joint
ventures; if there was a good taxation system in place, and contracts
that were not dubious, but provided for a win-win situation between
the parties.
According to the good professor, Tanzania needs to emulate some of the
better clauses in the mining contracts of other countries such as
Botswana where the mining industry
benefits all the parties concerned.
A senior economist with the ministry of Finance & Economic
Affairs, Alfred Misana, agreed with the two varsity dons that there is
a real need for reviewing and reforming the extant laws and policies
guiding foreign investments in Tanzania.
“I see that there are challenges as far as such investments are
concerned and, therefore, we need to have some law and policy reforms
in order to create a 50-50 situation between the Government and
investors,” Misana stated.
However, the senior economist said, if any country is to attract
foreign investors, it cannot avoid giving them conducive incentives.
“One thing that you should ask yourself is: why would a prospective
investor leave his country for another country – and choose Tanzania
of all the countries of the world?” Misana asked in rhetoric.
According to Misana, poor countries attract investors because they
themselves lack the requisite capital to invest in areas like mining
and other capital-intensive ventures. Besides, Misana argued, foreign
investors bring in foreign currency as capital…
Foreign investments apart, the real economic growth forecasts for 2011
(6.5 per cent) and 2012 (6.6 per cent) are still very much vulnerable
to other challenges. These include inflation pressures that are
building up, and escalating prices for food, energy and other basics.
Higher rates of price growth not only threaten Tanzania’s
macroeconomic stability, but also raise the prospect of
political unrest.
Twin deficits in the current and fiscal accounts also pose major risks
to the sustainability of Tanzania’s economic growth.
Asked whether it was possible to attract more foreign investors, the
three experts concurred that it was very much possible for Tanzania to
attract more foreign investors.. But largely if the chronic
electricity shortages are addressed fully and urgently!
“How do you expect to attract more investors with these power outages that
we continue to have? Just imagine what happened last Sunday at the
Nation Stadium in Dar when
Simba Soccer Club played Young Africans in the finals of the
Kagame-Castle Championships – and the lights went out, and the trophy
had to be
presented in darkness,” Professor Moshi lamented.
Noting that the tournament was watched live worldwide, Moshi stated
that no investor worth the name and who watched the proceedings in
darkness, would rightly consider coming to invest in Tanzania where
power supplies can be so unstable!
The ministry economist Misana admitted that power blacks-out were both
a problem and a challenge in Tanzania. Urgent measures need to be
taken if Dar is to attract more foreign investors.
“Generally, investors want to come and invest where the cost of doing
business is affordable,” noted Misana.