Despite these promising developments, Tanzania’s economic recovery has been hindered by several key factors. One of the main challenges facing the country is the lack of infrastructure investment. The World Bank’s ‘Africa’s Pulse’ report highlights that Tanzania’s infrastructure remains inadequate, which limits the country’s ability to attract investment and drive economic growth.
Another hindrance to Tanzania’s economic recovery is the country’s high levels of public debt. According to the International Monetary Fund (IMF), Tanzania’s public debt has been on the rise in recent years, reaching 42% of GDP in 2021. This high debt burden is a cause for concern, as it can limit the government’s ability to borrow for critical investments in infrastructure and social services.
Furthermore, Tanzania’s business environment has been a barrier to economic growth. The World Bank’s ‘Doing Business’ report ranks Tanzania 141 out of 190 countries in terms of ease of doing business. This low ranking is attributed to factors such as inefficient bureaucracy, corruption, and cumbersome business regulations, which make it difficult for businesses to operate and thrive in the country.
Since President Samia Suluhu Hassan took office in Tanzania in 2021, the mining sector has seen significant growth with over $1 billion in mining contracts signed.
However, despite the opportunities for economic development, there have been challenges in the form of poor relations between mining and energy-sector actors and government ministries and regulators.
Shell and Equinor have cautioned the Tanzanian government about the limited time to capitalize on the demand for fossil fuels, specifically natural gas reserves. The initialing of a draft Host Government Agreement in May 2023 has hit a roadblock due to opposition from Energy Ministry bureaucrats who feel excluded from the negotiations.
The Energy Minister confirmed that negotiations are ongoing, but private-sector partners claim they have concluded. This delay has cast doubt on the previously anticipated investment decision and the projected $7 billion annual contribution to GDP from the project.
Tanzania’s reluctance to fully embrace foreign investment and its resource nationalist stance continue to be major concerns for industry stakeholders, hindering the country’s ability to fully leverage its economic potential.
Tanzania’s failure to fully take advantage of opportunities can be attributed to a weak executive, particularly evidenced by the strategic Cabinet reshuffles led by President Hassan. Despite her efforts, the ruling Chama Cha Mapinduzi (CCM) party remains divided.
With the upcoming local elections in December and the Presidential elections in 2025, the political landscape in Tanzania is already heating up. In the latest Cabinet reshuffle, former party treasurer Amos Makalla was appointed as the new CCM secretary for ideology and publicity, replacing the controversial Paul Makonda who was demoted to Arusha’s regional commissioner. Makonda’s tenure as ideology chief was marred by allegations of human rights violations, leading to his blacklisting by the US in 2020.
This move by Hassan was seen as a departure from her predecessor’s policies, which were marked by insular and antagonistic stances. It is speculated that Makonda’s appointment may have been an attempt to placate a faction within the CCM party that advocates for a more nationalist approach, which led to a halt in the mining sector in 2016. As Tanzania navigates its political waters, the impact of these decisions remains to be seen.
Within the political landscape of Tanzania, Makonda is not the only prominent figure aligned with the Magufuli faction, as the resource nationalist stance seems to be widespread.
In a recent development, Gilead Teri, the head of Tanzania Investment Centre, commended the collaboration between Tanzanite Hospital and ES Health Africa, emphasizing the benefits of joint investment projects in promoting growth without relying on government borrowing or foreign investors. However, Teri’s viewpoint overlooks the crucial role of foreign debt and investment in executing Tanzania’s ambitious Mega Projects, essential for the country’s infrastructure development.
The upcoming local and presidential elections have also diverted attention from key projects like the LNG initiative. As the focus shifts towards securing a second term for President Hassan, the future of these projects and the overall economic direction of Tanzania hangs in the balance.
In addition, Tanzania’s economy is heavily reliant on agriculture, which is vulnerable to external shocks such as climate change and fluctuations in international commodity prices. This overreliance on agriculture has hindered the country’s economic diversification efforts, limiting its ability to create new sources of growth and employment.
To overcome these obstacles and achieve sustainable economic recovery, Tanzania needs to focus on addressing these structural challenges. This includes investing in critical infrastructure projects, implementing fiscal reforms to reduce public debt, improving the business environment to attract investment, and promoting economic diversification to reduce reliance on agriculture.
In conclusion, while Tanzania has made significant progress in recent years, the country still faces several challenges that are hindering its economic recovery. By addressing these obstacles and implementing targeted reforms, Tanzania can unlock its full economic potential and achieve long-term sustainable growth.
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