Economy Continues Impressive Performance: Tanzania, Once the 'Poor Man' of East Africa, Continues to Chalk Up Impressive Economic Growth Rates on the Back of a Boom in Gold Mining. Neil Ford Argues That Being Broad-Based, Tanzania's Growth Level Is Likely to Be Sustained over the near Future
Ford, Neil, African Business
The Tanzanian economy continues to perform impressively. GDP growth fell only slightly during the 2003-04 financial year, to 5.6%, down from an average of 6% since the turn of the millennium. While oil-rich countries are able to register double digit growth, these figures may not be particularly impressive, but in a more broadly based African economy, such results are certainly welcome.
Economists agree that growth in excess of 5% a year is required if real improvements are to be made in living standards, particularly as many parts of Africa continue to experience population growth of 2-3%.
More importantly, Tanzanian growth is based on a wide range of sectors, from tourism to mining. The 2003-04 figure is even more remarkable given the impact that a severe drought had upon agricultural output and electricity generation.
Growth is not based on a rapid increase in the price of a single commodity, so the current rates of growth are unlikely to be followed by a period of deep-seated recession. Relentless growth of 5-6% a year over five to 10 years will go a long way towards improving the living standards of many Tanzanians.
The government of President Benjamin Mkapa is thankful that the benefits of the long years of reform are finally beginning to trickle through. Following over 20 years of the African Socialism of founding father Julius Nyerere, Tanzania embarked on a process of economic reform and liberalisation towards the end of the 1980s. This process was speeded up during the latter half of the 1990s as the government sought to retreat from wealth creation and the private sector was given a much bigger role in the economy. However, the economic benefits of reform were reluctant to materialise during the first 10 years of change, while many feared both the threat to jobs in state-owned companies and the national cohesion that had been the main benefit of Nyerere's policies.
Indeed, it appears that the incomes of the poorest half of society actually fell during the early 1990s, although the IMF insists that this trend has been reversed and that the economic reforms have had a "notable impact on poverty". Moreover, growth began to pick up towards the end of the 1990s, partly on the back of increased tourist revenues.
IMF REPORT UPBEAT
The IMF's 2004 report on Tanzania concluded that it had "continued to maintain macroeconomic stability and to make substantial progress", with growth driven by improvements in total productivity.
Moreover, the Fund commented that external support has "virtually eliminated the government's need for domestic financing in recent years", as the government has brought expenditure under control at the same time as revenues have increased and rates of revenue collection have improved. However, the report warns that: "Tanzania's high aid dependency makes its success in macroeconomic stabilisation vulnerable to sudden withdrawals of aid." Financial support from most donor organisations to Zanzibar was halted following political violence on the islands and this has had a lasting impact. A similar occurrence in mainland Tanzania would have a similar effect on the entire country: not only would work on many projects be halted, but it could also upset the macro-economic stability that the government had created over a long period.
The IMF report concludes that Tanzania should view its prospects with optimism, "provided that the authorities continue to pursue sound policies and market oriented structural reforms", although it underlined the importance of "early finalisation of a new anti-corruption law which would provide a comprehensive framework for effective prosecution of corruption cases."
The mining sector has become a more important engine of growth in recent years. Although some mining has taken place in Tanzania for many decades, the sector did not assume its current importance until the economic reform programme of the 1990s was in full swing. …