Last month, a survey by the Delegation of German Industry and Commerce for Eastern Africa showed that business confidence from German companies had declined across the entire region, but nowhere was this decline more evident than in Tanzania.
With a score of only 25%, Tanzania is falling behind its neighbours on every metric, and rapidly so. In stark contrast, Ethiopia and Kenya scored 75% 62% respectively. The metrics used for the survey considered issues including trade barriers, legal uncertainties and skills shortages, but no issue is considered more highly than that of political leadership.
The implications of this survey are severe. This decline in investor confidence will likely see Tanzania miss out on its share of the $1.1 billion Development Investment Fund for Africa established by the German government to ease the entrance of German businesses into Africa.
The Tanzanian economy has been on a downward spiral following a series of economic policy failures brought in by the current administration. Furthermore, according to the latest Freedom House figures, democratic values across the country have mirrored the economy in their mutual decline. This collapse has been underscored by several high-profile cases in recent months, where journalists have been incarcerated without trial and opposition leaders assaulted and, in some cases, shot.
This must then be considered against a backdrop of the rapid population growth that the country, as well as the rest of Africa, faces and the desperate lack of jobs available for the country’s youthful population. This problem was outlined by former Nigerian President Olusegun Obasanjo, when he said, ‘unless there is a major change in the speed of economic development across the continent, we are sitting on a ticking time-bomb.’
Given the economic trajectory Tanzania is on and the clear lack of new investment coming in-to the country, it is falling further and further behind in its ability to handle the impending crisis it faces.
To make matters worse, the current Tanzanian government seem determined to not only damage investor confidence so as to put off any future investors, but also to jeopardise the much-needed private investment already in the country and reinforce the desperately stretched National Treasury.
Last year there was the widely publicised fall out with resources companies, Acacia Mining and Petra Diamonds, which forced both to cease operations and make staff and contractors redundant. The final cost to the Tanzanian economy from the unexpected halting of Acacia’s activities in the country were estimated to be around US$50-75 million.
And now the governments misguided economic policy is threatening another of Tanzania’s most significant assets; its wildlife and the associated tourism industry. From a practical point of view, the government continues to make operations difficult for investors in tourism and wildlife; there have been numerous reports of officials targeting the country’s largest eco-tourism operators and conservationists alike. Officials are said to have seized passports and threatened to jail company directors unless alleged taxes and penalties are paid.
But more than just making business operations hard, the governments’ questionable appetite for risky, large scale infrastructural projects is threatening the very wildlife that many are trying to protect and generate income for Tanzanians from.
Despite several warnings of environmental damage to the precious Selous Game Reserve (a UNESCO World Heritage site), President Magufuli is pushing ahead with plans for Stiegler’s Gorge dam.
Contracts worth US$3.6 billion have been awarded to two Egyptian companies, and despite claims it will increase Tanzania’s electricity generation capacity significantly, international experts have been resolute in their questioning of its economic and environmental viability.
UNESCO Director General Audrey Azouley has also expressed serious concern, noting that progressing will cause ‘devastating and irreversible impacts on Selous’ unique ecosystem and jeopardise the site’s potential as a contributor to sustainable development.’
Without a course correction, this government risks harming one of Tanzania’s most important and sustainable industries—tourism, and potentially impairing its reputation with investors and would-be tourists for years to come. A government that so brazenly ignores the advice of experts and peruses economic policy that is set to cause unprecedented damage does not make for sound investment.
If Tanzania is to have any chance of providing an environment in which there can be sufficient job creation and development to meet the challenges of its rising population then it must start to urgently recognise the need to align public sector actions with private sector concerns, and recognise the value of all its natural assets. Until this happens, the social, economic, environmental and democratic challenges that Tanzania faces are only just beginning.
This article was originally published on The East African Herald.
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