Soma na hapo basi
Tanzania set to surpass Kenya as East Africa's economic giant
Business | 26 August 2016, 06:00am
Mnaku Mbani
Tanzania’s economy has been growing at an average rate of 7 percent annually over the past decade – a trend which economists predict will turn the country into the eastern African economic powerhouse by the year 2022.
Kenya is ranked as the regional economic powerhouse with a gross domestic product (GDP) of $55.2 billion. Tanzania’s GDP is $45bn, while Uganda’s is $30bn.
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Tanzania can achieve her vision of accelerated and shared growth through fiscal prudence; cost-effective reforms in the education sector; and smart policies aimed at promoting the transformation of firms, the World Bank says.
According to its analysis, Tanzania's economic performance has remained strong. Preliminary estimates suggest that GDP grew by 7 percent last year, with activity particularly buoyant in the construction, communication, finance and transport sectors.
The strong growth is supported by stability in power supply, moderation in oil prices and high growth of credit to the private sector. The highest growth rates last year were registered in construction (16.8 percent), information and communications technology (12.1 percent), finance and insurance (11.8 percent).
The strong performance in construction was attributed to increased real estate development for residential and non-residential purposes and building of road networks.
Less than a year after President John Pombe Magufuli took office, Tanzania is gaining influence among its neighbours and moving away from its reputation as a lone ranger in the region. But since Magufuli’s surprise election win last October, it seems Kenya could be losing its grip on East African politics as Tanzania increasingly presents itself as a viable alternative for regional co-operation.
Magufuli’s pragmatic, hands-on approach is making this possible.
He is changing the way business is done: making it more efficient and effective.
One of his key policies is clamping down on corruption.
What is endearing him to his own people and perhaps what is making sense economically for the region, is that business can be done in cheaper ways; it can be done by minimising corruption.
But it's believed that Tanzania’s recent political gains are not only down to Magufuli’s leadership style. The country has enjoyed a steady growth rate of 6-7 percent over the past decade and is already starting to overtake Kenya economically.
“You can decide to look at Kenya as a powerhouse maybe on the economic side, but you've got to accept that Tanzania is a powerhouse in terms of stabilising these countries,” said Richard Shaba, programme co-ordinator at the Konrad Adenauer Foundation in Tanzania.
Another measure taken by the new government is that of modernising agriculture. The government believes that improving the agriculture sector will raise rural incomes and reduce poverty.
TradeMark East Africa chief executive Frank Matsaert believes Tanzania has the potential to become the economic powerhouse in East Africa, given her natural wealth and strategic geographical positioning, but first there are challenges to overcome.
Huge growth potential in land, water bodies, minerals, and the strategic positioning of the country, were enough to make Tanzania the economic giant in the region.
Matsaert said TradeMark East Africa was keen to help Tanzania use her potential to become the leading economic powerhouse in East Africa. Kenya’s GDP still accounts for 40 percent of the region’s GDP, followed by Tanzania at 28 percent, Uganda at 21 percent, Rwanda at 8 percent, and Burundi at 3 percent.
World Bank officials believe vigorous reforms will be needed to foster further structural transformation of the economy and sustain high productivity gains and investment. It would also free up labour resources for other sectors of the economy and could foster the development of certain industries, such as food processing.
The economy continues to flourish as the government focuses on industrialisation and infrastructure development.
Following a $4bn oil-export pipeline agreement with Uganda in April, the country signed a deal regarding a $900m railway project that will connect Rwanda’s rail links to Tanzania's main port.
The Central Corridor railway project, one of Tanzania’s major infrastructure projects, is set to receive $6.8bn in foreign investment by Chinese authorities to implement the first phase of the project, which will establish a railway connection from Dar es Salaam to Mwanza, at the north-west border.
The 2016/2017 budget aims to further increase funding for development projects while addressing the need for fiscal consolidation.
If fully implemented, the budget promises to support growth and promote macro-economic stability.