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Discovering Tanzania’s New Economic Sustainability Model

“Friday’s Independence Day celebrations in Tanzania have been canceled by President Samia Suluhu Hassan, who has instead ordered that the funds be used to construct dormitories for children with special needs.” This is one of Tanzania’s most recent top headlines. This has prompted many responses. But in this case, economic sustainability can be understood as a form of a broad set of decision-making principles.

The concept of sustainable development originated from ecology, but with the progress of related studies, it gradually evolved into a comprehensive concept including economy, society, and environment. Economic sustainability is important because it describes how societies can maintain their current financial structures and what steps might be necessary to improve the system for greater sustainability long term. Understanding sustainability in finance can help you learn more about current systems, how they work and why sustainability is important in many fundamental systems. Creating the infrastructure for economic sustainability is a complex process that involves the full cooperation of both the private and public sectors. The answer to this conundrum is not cut-and-dry.

Tanzania is the largest of the East African countries and sits on the Indian Ocean. Boasting attractions such as Mount Kilimanjaro, Ngorongoro, Zanzibar and the Serengeti National Park, Tanzania is one of the most visited African countries by foreign tourists. Tanzania is among the top 20 biodiverse countries in the world and 43.7% of the total land area in Tanzania is protected or conserved. The country has had sustained growth driven by its political stability, abundant resources and sound economic management. Tanzania is also fortunate to have deposits of copper, silver, diamonds and natural gas. In Tanzania, Sustainable Development Goals (SDGs), backed by a strong political will, collective ownership, integrated planning, and supportive legal frameworks.  A “whole-of-society” approach has been adopted, and a robust national SDGs coordination and monitoring framework, supported by national statistical offices is being developed.

The United Nations International Children’s Emergency Fund, UNICEF, in a report indicated that, nearly one third of Tanzanian children live in income poverty while as many as 74 per cent experience multidimensional poverty, suffering deprivation in three or more areas such as health, nutrition, water, sanitation, housing, education, child protection and access to information. The poverty rate in Tanzania was measured at 26.4 percent in 2018, experiencing a decrease of eight percentual points compared to 2007. In absolute numbers, 14 million people were poor in Tanzania in 2018. According to the source, the individuals are defined as poor when their consumption was below the national poverty line, being therefore not able to meet their basic consumption needs. In 2018, the national basic needs poverty line was 49,320 Tanzanian shillings per adult per month. Tanzania experiences poverty, just like many other emerging countries.

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However, Tanzania has made progress in reducing poverty. The modest reduction in poverty illustrates that economic growth has not been sufficiently broad-based. Growth is concentrated in telecommunications, financial services, retail trade, mining, tourism, construction and manufacturing. While growth was formerly driven largely by public spending and international aid, this is no longer the case. Meanwhile, Agriculture provides a living for around 80% of Tanzanians. The sector accounts for around a quarter of the country’s GDP and about a quarter of all exports. Given Tanzania’s economic structure, it is undeniable that the sector’s growth is directly linked to social progress and poverty reduction.

Tanzania’s budget for the financial year 2022/23 is TZS 41.48 trillion Shillings ($18 billion). The $445,000 that was allocated for the 61st Independence Day celebration will instead be used to construct eight dormitories in primary schools around the nation. George Simbachawene, Tanzania’s minister of state, said on Monday that the money had been disbursed. He stated that the East African country will celebrate Independence Day by having public dialogues on development. Celebrations of Independence Day are typically distinguished by pomp and state banquets.

The East African country has cancelled the festivities before, though not this time. Then-President John Magufuli canceled celebrations in 2015 and used the money instead to build a road in the commercial center of Dar es Salaam. He repeated this in 2020 and instructed that the budget be utilized to purchase medical facilities. An economic trend that is sustainable is evident! John Magufuli, who took office in 2015 and has received criticism from everyone, has also been praised for increasing government revenue and starting mining industry reforms.

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Tanzania is one of the few countries that did not go on lockdown as a measure to stop the spread of the novel coronavirus. Despite the outbreak of Covid-19 in 2020, the country was one of the few countries in the world that had positive economic growth. In 2020, Tanzania’s GDP was 4.8% compared to 7.0% in 2019. The sectors that contributed significantly to the high growth rate included the construction sector at 9.1%, information and communications 8.4%, transport and conservation which registered 8.4%, administrative services 7.8%, technical activities 7.3%, minerals and gemstones 6.7%, health and social services 6.5%.

The government of Tanzania has encouraged foreign participation to promote economic growth and social development, and policy reforms have led to the country having one of the most liberal telecom sectors in Africa. According to data released by British technology research firm Cable in 2021, Tanzania is the country in East Africa where you will pay lowest to access the internet on your smartphone at $0.75 for every gigabyte of data. The report indicated that Tanzania is followed by Rwanda in $1.25, Uganda ($1.56) and Burundi ($2.10) while Kenya, which was second in East Africa (2020) charging $1.04, now charges $2.25 per gigabyte (GB).

Tanzania’s president, Samia Suluhu Hassan. Photo: Unknown

Samia Suluhu Hassan was sworn in as Tanzania’s president at State House in Dar es Salaam last year, making history as the first woman to hold the top job in the East African country. The 62-year-old’s inauguration comes two days after she announced the passing of President John Magufuli. She is expected to remain in power until 2025, and is likely to be voted back into office that year.

Her unexpected rise to the presidency led to questions around real change and Tanzania’s democratic future. How would President Hassan handle Tanzania’s reputational fallout from five years of Magufuli’s rule, a weakened regulatory environment, and a botched response to Covid-19? Within the first few months of Hassan’s presidency, journalists repeatedly used the term “cautious optimism” when describing the positive changes Hassan was promising and—in some cases—implementing.

Trading Economics global macro models and analysts expectations noted that GDP in Tanzania is expected to reach 62.00 USD Billion by the end of 2022. In the long-term, the Tanzania GDP is projected to trend around 62.00 USD Billion in 2023, it econometric models added.

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The East African country’s population grew from 44.9 million in 2012 to more than 60 million, according to the census carried out earlier this year, with Hassan saying the numbers reflected an annual increase of 3.2 percent. With a larger population, more efficiency is needed to match “with the current challenges and current numbers” the president said.

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Despite the spillover effects of the war in Ukraine and lingering impact of Covid-19, Tanzania’s economy grew by an impressive 5.4 percent in the first quarter of 2022. This puts the country on track to achieving its 2022 growth target of 4.7 percent. Initially, the government had set itself a target of boosting economic output by 5.5 percent. The increase was seen in Zanzibar where its economy hiked by 5.1 per cent below a target of 5.4 per cent.

However, with the Ukraine war, which saw prices of fuel, cooking oil, wheat and fertiliser, among other essential items, rise due to disruptions of supply chains after the US and its allies imposed sanctions on Russia, Tanzania reviewed its GDP growth targets. More so, by the end of August this year, the country’s foreign reserve reached 5,092 million US dollars, amount that is enough to cater for importation of goods and services for about 4.6 months.

Total trade in goods and services (exports plus imports) between the UK and Tanzania was £227 million in the four quarters to the end of Q2 2022, an increase of 5.6% or £12 million from the four quarters to the end of Q2 2021. Tanzania was the UK’s joint 121st largest trading partner in the four quarters to the end of Q2 2022 accounting for less than 0.1% of total UK trade. In 2020, the outward stock of foreign direct investment (FDI) from the UK in Tanzania was £155 million. In 2020, the inward stock of foreign direct investment (FDI) in the UK from Tanzania was £4 million.

In a bid to shape the country’s economy for the current and next financial years, Minister Nchemba said the government would keep the momentum going when it comes to creating an enabling business and investment environment. Policy under Ms Samia will continue to be geared towards improving the business environment to unlock investments and drive growth. Economic growth in 2023-27 will remain brisk and broad-based, with services and industry being core drivers. A cross-border oil project with Uganda will progress after delays. No doubt, due to its robust regulatory environment, solid macroeconomic fundamentals, and thriving financial sector, Tanzania has been named one of the finest investment destinations in Africa.

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