Country FilesEast & HornTanzania Country Profile 2015: Heads turned by the scent of gas

Sat,21Apr2018

Posted on Friday, 20 November 2015 11:00

Tanzania Country Profile 2015: Heads turned by the scent of gas

By The Africa Report

altWith general elections planned for October 2015, the months ahead promise higher political stakes than ever before in a country long dominated by the heavy hand of the former single party, Chama Cha Mapinduzi (CCM).

As President Jakaya Mrisho Kikwete steps down after his two terms in office, the opportunity for political renewal can no doubt be conjured out of the prospects for economic and social change, especially with Tanzania's offshore gas resources on the cusp of development.

However, there is equally a risk of intensified corruption resulting in continued economic exclusion for the majority and widespread political apathy.

Overall economic growth is set to remain strong thanks to a rapid surge in tourist arrivals and increased foreign investment in oil and gas plus the added boon of strong results in the agricultural and construction sectors.

But the past 10 years has seen a widening rural-urban divide, with agriculture tending to lag far behind the rest of the economy.

In the lead-up to elections, the CCM's declarations on policy will be widely questioned in the light of its failure to deliver on promised constitutional revisions and greater transparency in economic management.

Steamrollering

In late 2014 the government forced significant changes to the draft constitution previously tabled by the review commission, so opposition parties boycotted the Constituent Assembly.

The main issue at stake was whether the union government should have two or three tiers; the latter option, which was included in the draft, would pose a clear risk to the CCM's political grip on Zanzibar.

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The CCM steamrollered over the opposition in October 2014 and won the support it needed for watered-down reforms. The government is due to organise a referendum on the constitutional changes in April 2015.

Nonetheless, the opposition will continue to try to secure a truly independent National Electoral Commission, which has always been staffed by presidential loyalists.

Against the established pattern, political competition is intensifying both within and outside the party as an unprecedented number of veteran and younger politicians declare their ambition for high office.

Kikwete has so far refrained from publicly endorsing a successor, but access to substantial financial resources will play a vital part in determining any candidate's ability to sustain a national campaign.

The field will narrow as the polls approach.

The frontrunners for the CCM are former foreign minister Bernard Membe, former prime minister Edward Lowassa, Constituent Assembly chairman Samuel Sitta and defence minister Shamsi Nahodha.

Oppositionists step up

If there is deadlock, a possible compromise candidate is former chief justice Augustino Ramadhani, who hails from Zanzibar and is a practising Anglican Christian – qualifications that could win a him following in both Zanzibar and the mainland.

The standard bearers for the increasingly confident opposition parties will be Wilbrod Slaa from the Chama Cha Demokrasia na Maendeleo (Chadema), Ibrahim Lipumba of the Civic United Front and Zitto Kabwe of the newly formed Alliance for Change and Transparency.

Kabwe has been challenging the grounds of his own dismissal from Chadema's leadership in 2014, but he remains chairman of parliament's influential Public Accounts Committee.

The outward signs for the economy are healthy enough. Finance minister Saada Mkuya Salum is confident that inflation can be contained below her target of 5.2% by the end of 2014.

The International Monetary Fund (IMF) notes that although the current account deficit is one of the largest in the region, at 14% of gross domestic product (GDP) in 2014, Tanzania is at low risk of debt distress. The overall fiscal deficit in 2014/2015 is projected at 4.9% of GDP.

The government plans to undertake a new infrastructure drive after launching its maiden eurobond in 2015. The IMF urges better monitoring and management of fiscal risks arising from public enterprises and social security funds.

In an attempt to force more rigorous investigations into corruption in the power sector, donors withheld budget support of about $500m for 2014/2015.

The harnessing of Tanzania's plentiful offshore gas, promising export earnings estimated at $3bn per year between 2023 and 2050, has become a preoccupation for policy-makers as much as for would-be tycoons.

Exploration companies have discovered nearly 50trn ft3 of natural gas, and four major companies – ExxonMobil of the US, Norway's Statoil, Britain's BG Group and Italy's Eni – are busy developing projects, although final investment decisions are unlikely to be made until after the 2015 elections.

The lack of clarity around government gas policy has been highlighted by calls in parliament for greater transparency.

Opposition MPs have demanded to know whether or not bribes have been paid and whether the government will get a fair share of potential revenues.

In September, the Tanzania Revenue Authority backed down from its demand for the renegotiation of existing production-sharing contracts with investors to ensure an enhanced share of revenue.

Light at the end of the tunnel

Major construction projects currently under way include the 520km Mtwara to Dar es Salaam gas pipeline at a cost of $1.2bn, which is backed by a Chinese government loan. The pipeline and new power plants should lead to a 1,720MW rise in electricity generation by 2016, more than doubling current national production.

More electricity should support the country's economic development as industries that demand more power expand. In that vein, Nigerian billionaire Aliko Dangote's cement plant in Mtwara is due to start production in late 2015.

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Communications are also playing a crucial role in Tanzania's growth.

According to the Tanzania Communications Regulatory Authority, the country's four main mobile phone service companies have a subscription base of more than 20 million people – or around half the population.

Employment opportunities are opening up as new players join the industry and existing ones expand their businesses.

Tigo, a subsidiary of Millicom International, announced plans to invest $104m in 2014 to expand its rural reach. Tigo Pesa, the company's money transfer brand, has signed up an estimated 3.5m subscribers.

Vietnam's Viettel won a licence to operate in 2014. The government is forcing telecoms companies to list on the local bourse, a move expected to be implemented in 2015.

The transport sector will also grow significantly as the government focuses on reviving railways, ports and aviation sectors. Huge port investments and the World Bank-funded Dar es Salaam rapid transit bus service for commuters will play a big role in growth through employment and the reduction of the traffic jams in a city with 300,000 cars.

Tourism is emerging as a major growth area, having expanded at an annual average of 9% over the past four years.

Tourism minister Lazaro Nyalandu promises major investment in hotels and airports with a view to overtaking Kenya and catering for around two million tourists a year by 2017. Tanzania has been able to benefit from the slump in Kenya's industry resulting from terrorist attacks.

Over the past decade, while the economy has grown at an average of 6% per annum, agriculture has recorded growth below 4% and poverty remains widespread in rural areas.

A new agricultural growth corridor should pair more than one million smallholder farmers in breadbasket regions with commercial farmers who are expected to bring in capital and modern technology.

A tale of two ports

Tanzania wants to be a trading hub for the region, and two ports will soon be competing for business.

With Britain and the World Bank promising support for a major $565m expansion of Dar es Salaam port, work is also about to begin on another significant harbour only 70km away at Bagamoyo.

Backed by a proposed $10bn loan from Chinese sources, Bagamoyo is intended to be a major container port, with the capacity to handle 20m containers annually, compared to fewer than 1m at Dar es Salaam.

Retired Lieutenant General Abdulrahman Shimbo promises that the first phase at Bagamoyo will be completed by 2017.

Shimbo, now ambassador to Beijing after retiring from the Tanzania People's Defence Forces in 2013, has denied reports that China will use Bagamoyo partly as a military base.

The government blacklisted two Chinese contractors due to work on the Dar expansion project in 2014 saying their involvement was due to public corruption.

Crowding and inefficiencies at the Dar port led to anchoring and dwell times of up to 20 days in 2013; the international standard is three to four days. Dar es Salaam is the country's main port and deals with about 90% of the country's trade.



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