Cicero
JF-Expert Member
- Jan 20, 2016
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You are on holiday. Perhaps in Kenya’s Maasai Mara game reserve. The thought occurs: How about crossing to the world-famous Serengeti, on the Tanzanian side? Foiled ... The switch won’t be easy, requiring a five-hour detour, another visa and a new set of immigration rules.
For nearly four decades now, Tanzania has maintained a blockade of Bologonja, a border crossing between the Maasai Mara and Serengeti. It claims access for mass tourism could harm the ecosystem of the world heritage site, which “harbors the largest remaining unaltered animal migration in the world,” according to the United Nations Educational, Scientific and Cultural Organisation.
But ever keen to do business and tap its tourism potential, Kenya sees this differently. It argues that its southern neighbor is out to make business unsustainable for Kenyan tour operators who ferry curious visitors eager to witness wildebeests on the march.
What you are witnessing are age-old rivalries, so bitter they have defied a wave of economic integration slowly sweeping across the continent.
And they are just two of many regional disputes involving Tanzania that have earned the country a reputation as a spiky neighbor.
Voicing a popular view, Uganda’s minister for general duties Tarsis Kabwegyere said in February on a television talk show: “The political class in Tanzania is not yet attuned to regional integration.”
‘Coalition of the willing’
During March 2016 talks with Kenya’s President Uhuru Kenyatta, he and Tanzania’s President John Magufuli agreed to form a joint ministerial commission to resolve outstanding issues related to the Maasai Mara-Serengeti conflict. Yet Tanzanian foreign minister Augustine Mahiga, who was selected to chair the commission, has not held a meeting since. “Tanzania is looking beyond traditional tourism,” says Mahiga.
Compounding this has been the ‘coalition of the willing’, the regional grouping of Rwanda, Uganda and Kenya who have sought to fast-track projects including a standard gauge railway linking Mombasa, Nairobi, Kampala and Kigali; a single tourist visa; cross-border movement of East African Community (EAC) nationals; and eliminating roaming fees on mobile phone calls in the region. In 2014, Kenya, Rwanda and Uganda formed the coalition, denouncing what they saw as the plodding leadership in Dar es Salaam.
But is that perception entirely correct? While Tanzania resisted pressure to join those initiatives, the country at the same time liberalized its capital account, permitting free movement of capital across the region well ahead of the bloc’s 2015 deadline.
It has also negotiated a customs union with the Democratic Republic of Congo (DRC), increasing the chances of the former Belgian colony joining the EAC. This year, Tanzania will open up further to the world as it seeks to attract more foreign capital, having “finalized provisions to guard against volatility,” central bank governor Benno Ndulu told reporters late last year.
The country is also looking to allow its pension funds – which mobilize as much as $1bn in annual savings – to invest across East Africa, according to the sector’s regulator.
These regional initiatives have accelerated since President John Magufuli took power in October 2015. In March 2016, Magufuli and Uganda’s President Yoweri Museveni agreed to build a $4bn crude pipeline to pump Ugandan oil to the Tanzanian town of Tanga instead of using Kenya’s Lamu port. The move saw France’s Total outmaneuver Britain’s Tullow Oil, which preferred the latter.
Race for the hinterland
And Magufuli met Kenya’s President Uhuru Kenyatta a day later, adroitly giving back with one hand what he takes with the other. They launched a joint road project to connect the towns of Arusha and Voi via Taveta in Kenya, providing a quicker link for transporters between Mombasa and Rwanda compared to the route through Uganda.
Magufuli also met with Rwanda’s Paul Kagame the following month to hash out plans for a standard gauge railway line from Dar es Salaam to Rwanda – sparking a race for the hinterland with the Kenyan line – and other deals to reduce work permit fees, to allow Rwandan logistical players more access to the port of Dar es Salaam and to increase cooperation in the aviation sector.
In October, joint oil exploration deals covering Lake Tanganyika were signed with the DRC’s Joseph Kabila. In November, Magufuli and his Zambian counterpart, Edgar Lungu, ordered changes to the management structures at the struggling Tanzania-Zambia Railway. The two leaders also laid out plans to increase volumes by boosting operations at the Tazama refined oil pipeline that serves Africa’s second-largest copper producer.
On the security front, Magufuli has been less active, however. His government has tacitly endorsed Pierre Nkurunziza’s controversial hold on power in neighbouring Burundi by going along with Tanzania’s former president Benjamin Mkapa, a facilitator of peace talks, who has told the opposition they must recognize the government.
Courting China
But in South Sudan where the United Nations warned in February of worrying levels of fighting, Magufuli, the current chairman of the EAC, has toed the regional line. The EAC backs the peace process under the Intergovernmental Authority on Development, parting ways with Magufuli’s predecessor Jakaya Kikwete, who hosted talks in Arusha to reconcile President Salva Kiir and former vice-president Riek Machar.
And while the countries of East Africa are getting a lot of attention from international partners, Magufuli, nicknamed ‘the bulldozer’, has played host to one of the longest lists of courtiers. That includes India’s Prime Minister Narendra Modi, Turkey’s President Recep Tayyip Erdogan and China’s foreign minister Wang Yi, who said 200 Chinese factories are seeking to relocate to Tanzania, with “which China shares strong history”.
Moses Kulaba, executive director of the Dar es Salaam-based think-tank the Governance and Economic Policy Centre, explains: “Tanzania is attracting interest because of its location but also future potential […] If you look at Tanzania, 50 years from now you will still have things that can be exploited by countries like China, which are looking ahead.”
This has resulted in rising confidence – and the government is now more willing than ever to challenge neighbors. Last year, against Kenya’s desperate wishes, Tanzania forced a postponement of the signing of the EAC’s economic partnership agreement with the European Union, insisting it needed to evaluate how the agreement impacts its new ambitions for an industrial economy. This followed negotiations that dragged for more than 14 years.
“Contrary to the belief that Tanzania is slowing down the process, some of the questions it’s raising are valid. It might be true on the free movement of people, but some agreements – like political federation – were rushed,” Kulaba argues. “Tanzania is buying time for countries to think about the process.”
For all of Magufuli’s attempts to reach out and shape a region in which Tanzania’s voice has been muted, there are some hurdles to be cleared first. Graft, policy choices and competitiveness will remain a drag on any desire to bulldoze East Africa.
Following a rough patch sparring with industrialists like Aliko Dangote, business seems to value Magufuli’s crusade against corruption, thanks to indictments of several officials and efforts to curb resource wastage with a tight fiscal regime.
Jim Kabeho, a director on the East African Business Council says: “He looks like a man we can work with […] You know, for us, if someone is fighting corruption, it’s very good.”
But it is not just corruption that is a problem for the government’s wider ambitions. The administration’s fiscal policies, especially on the taxation of services offered for transit cargo, have been met with criticism because they hurt regional traders port inefficiencies.
About 40% of Tanzania’s estimated 23,000 trucks are idle, with some relocating to Namibia’s Walvis Bay. The country has lost 65% of Zambia’s copper shipments and 50% of Congolese cargo, according to estimates from the Tanzania Private Sector Foundation (TPSF).
“We [Dar es Salaam port] are losing customers because we are not competitive,” says Salum Shamte, TPSF’s deputy chairman. “We are uncompetitive because we instituted value-added tax on auxiliary services,” he says in reference to a levy slapped on cargo-clearing services last year that also applies to transit cargo.
“We should not tax transit trade, period. We should not tax it at all,” says Shamte, whose business interests include one of Tanzania’s largest sisal growers. “Let us use transit trade as a tool for competitiveness, not just for revenue.”
Even as plans to tap regional business hinge on the harbor, the port of Dar es Salaam is already bogged down by inefficiency and is consistently outmatched by Mombasa, Beira and Durban. A report by TradeMark East Africa, a trade facilitation organisation, found it to be the most expensive for importers in the region.
The government, in an effort to revamp facilities at the port, has sought to borrow as much as $690m from the World Bank since 2015. The World Bank instead is planning to release money in phases in a bid to force Tanzania to tighten up the necessary planning for the project.
Bella Bird, the World Bank’s country director for Tanzania tells The Africa Report: “The first phase is expected to involve an International Development Association credit of $345m, together with a [UK] Department for International Development grant of $13m and a Tanzania Ports Authority contribution of $63m.”
Still, some of the port’s largest users are now subjects of constant suspicion by the new government. It has accused large importers of tax evasion and corruption. The government also wants to be sure that it is getting all of the revenue it is due from the mining sector, which accounts for about 4% of gross domestic product and boasts giants like Acacia and AngloGold.
LNG plans stalled
Other areas of the economy are also under pressure. Already falling way behind Mozambique in terms of gas development, Tanzania’s long timelines in the nascent energy sector have left potential investors frustrated despite calls by Magufuli for works to go faster.
Front-end engineering and design is well on schedule but final investment decisions, while eagerly anticipated, are unlikely to be made earlier than 2019. The government expects to commission a planned liquefied natural gas (LNG) plant in 2025. The lack of administrative capacity and other issues have slowed the sector’s development.
“At the moment, we are just waiting for the investment decision either by Statoil and Shell jointly for the LNG plant, or as individual proposals for the respective projects,” says Gulbrand Wangen, director for midstream projects in Africa, Brazil and India at Norwegian Energy Partners. The industry lobby counts Statoil, a key player in Tanzania, among its members.
In Magufuli’s first days, many East Africans took to social media praising Magufuli’s frugal ways and efforts against corruption, asking “What Would Magufuli Do?". Fresh into office, the then-56-year-old received applause when he wore gloves and gum boots to join in cleaning up a shabby Dar es Salaam market.
But he would struggle to get such praise from neighbouring countries today, as the old regional rivalries and perceptions remain. Driving across Nairobi on a sunny Thursday morning, Stephen Mwangi, an Uber driver, asks if the cab-hailing service he works for exists in Tanzania. “Yes, since June,” I respond. “But is it as successful as in Nairobi? You know Magufuli is anti-business,” replies the driver.
For nearly four decades now, Tanzania has maintained a blockade of Bologonja, a border crossing between the Maasai Mara and Serengeti. It claims access for mass tourism could harm the ecosystem of the world heritage site, which “harbors the largest remaining unaltered animal migration in the world,” according to the United Nations Educational, Scientific and Cultural Organisation.
But ever keen to do business and tap its tourism potential, Kenya sees this differently. It argues that its southern neighbor is out to make business unsustainable for Kenyan tour operators who ferry curious visitors eager to witness wildebeests on the march.
What you are witnessing are age-old rivalries, so bitter they have defied a wave of economic integration slowly sweeping across the continent.
And they are just two of many regional disputes involving Tanzania that have earned the country a reputation as a spiky neighbor.
Voicing a popular view, Uganda’s minister for general duties Tarsis Kabwegyere said in February on a television talk show: “The political class in Tanzania is not yet attuned to regional integration.”
‘Coalition of the willing’
During March 2016 talks with Kenya’s President Uhuru Kenyatta, he and Tanzania’s President John Magufuli agreed to form a joint ministerial commission to resolve outstanding issues related to the Maasai Mara-Serengeti conflict. Yet Tanzanian foreign minister Augustine Mahiga, who was selected to chair the commission, has not held a meeting since. “Tanzania is looking beyond traditional tourism,” says Mahiga.
Compounding this has been the ‘coalition of the willing’, the regional grouping of Rwanda, Uganda and Kenya who have sought to fast-track projects including a standard gauge railway linking Mombasa, Nairobi, Kampala and Kigali; a single tourist visa; cross-border movement of East African Community (EAC) nationals; and eliminating roaming fees on mobile phone calls in the region. In 2014, Kenya, Rwanda and Uganda formed the coalition, denouncing what they saw as the plodding leadership in Dar es Salaam.
But is that perception entirely correct? While Tanzania resisted pressure to join those initiatives, the country at the same time liberalized its capital account, permitting free movement of capital across the region well ahead of the bloc’s 2015 deadline.
It has also negotiated a customs union with the Democratic Republic of Congo (DRC), increasing the chances of the former Belgian colony joining the EAC. This year, Tanzania will open up further to the world as it seeks to attract more foreign capital, having “finalized provisions to guard against volatility,” central bank governor Benno Ndulu told reporters late last year.
The country is also looking to allow its pension funds – which mobilize as much as $1bn in annual savings – to invest across East Africa, according to the sector’s regulator.
These regional initiatives have accelerated since President John Magufuli took power in October 2015. In March 2016, Magufuli and Uganda’s President Yoweri Museveni agreed to build a $4bn crude pipeline to pump Ugandan oil to the Tanzanian town of Tanga instead of using Kenya’s Lamu port. The move saw France’s Total outmaneuver Britain’s Tullow Oil, which preferred the latter.
Race for the hinterland
And Magufuli met Kenya’s President Uhuru Kenyatta a day later, adroitly giving back with one hand what he takes with the other. They launched a joint road project to connect the towns of Arusha and Voi via Taveta in Kenya, providing a quicker link for transporters between Mombasa and Rwanda compared to the route through Uganda.
Magufuli also met with Rwanda’s Paul Kagame the following month to hash out plans for a standard gauge railway line from Dar es Salaam to Rwanda – sparking a race for the hinterland with the Kenyan line – and other deals to reduce work permit fees, to allow Rwandan logistical players more access to the port of Dar es Salaam and to increase cooperation in the aviation sector.
In October, joint oil exploration deals covering Lake Tanganyika were signed with the DRC’s Joseph Kabila. In November, Magufuli and his Zambian counterpart, Edgar Lungu, ordered changes to the management structures at the struggling Tanzania-Zambia Railway. The two leaders also laid out plans to increase volumes by boosting operations at the Tazama refined oil pipeline that serves Africa’s second-largest copper producer.
On the security front, Magufuli has been less active, however. His government has tacitly endorsed Pierre Nkurunziza’s controversial hold on power in neighbouring Burundi by going along with Tanzania’s former president Benjamin Mkapa, a facilitator of peace talks, who has told the opposition they must recognize the government.
Courting China
But in South Sudan where the United Nations warned in February of worrying levels of fighting, Magufuli, the current chairman of the EAC, has toed the regional line. The EAC backs the peace process under the Intergovernmental Authority on Development, parting ways with Magufuli’s predecessor Jakaya Kikwete, who hosted talks in Arusha to reconcile President Salva Kiir and former vice-president Riek Machar.
And while the countries of East Africa are getting a lot of attention from international partners, Magufuli, nicknamed ‘the bulldozer’, has played host to one of the longest lists of courtiers. That includes India’s Prime Minister Narendra Modi, Turkey’s President Recep Tayyip Erdogan and China’s foreign minister Wang Yi, who said 200 Chinese factories are seeking to relocate to Tanzania, with “which China shares strong history”.
Moses Kulaba, executive director of the Dar es Salaam-based think-tank the Governance and Economic Policy Centre, explains: “Tanzania is attracting interest because of its location but also future potential […] If you look at Tanzania, 50 years from now you will still have things that can be exploited by countries like China, which are looking ahead.”
This has resulted in rising confidence – and the government is now more willing than ever to challenge neighbors. Last year, against Kenya’s desperate wishes, Tanzania forced a postponement of the signing of the EAC’s economic partnership agreement with the European Union, insisting it needed to evaluate how the agreement impacts its new ambitions for an industrial economy. This followed negotiations that dragged for more than 14 years.
“Contrary to the belief that Tanzania is slowing down the process, some of the questions it’s raising are valid. It might be true on the free movement of people, but some agreements – like political federation – were rushed,” Kulaba argues. “Tanzania is buying time for countries to think about the process.”
For all of Magufuli’s attempts to reach out and shape a region in which Tanzania’s voice has been muted, there are some hurdles to be cleared first. Graft, policy choices and competitiveness will remain a drag on any desire to bulldoze East Africa.
Following a rough patch sparring with industrialists like Aliko Dangote, business seems to value Magufuli’s crusade against corruption, thanks to indictments of several officials and efforts to curb resource wastage with a tight fiscal regime.
Jim Kabeho, a director on the East African Business Council says: “He looks like a man we can work with […] You know, for us, if someone is fighting corruption, it’s very good.”
But it is not just corruption that is a problem for the government’s wider ambitions. The administration’s fiscal policies, especially on the taxation of services offered for transit cargo, have been met with criticism because they hurt regional traders port inefficiencies.
About 40% of Tanzania’s estimated 23,000 trucks are idle, with some relocating to Namibia’s Walvis Bay. The country has lost 65% of Zambia’s copper shipments and 50% of Congolese cargo, according to estimates from the Tanzania Private Sector Foundation (TPSF).
“We [Dar es Salaam port] are losing customers because we are not competitive,” says Salum Shamte, TPSF’s deputy chairman. “We are uncompetitive because we instituted value-added tax on auxiliary services,” he says in reference to a levy slapped on cargo-clearing services last year that also applies to transit cargo.
“We should not tax transit trade, period. We should not tax it at all,” says Shamte, whose business interests include one of Tanzania’s largest sisal growers. “Let us use transit trade as a tool for competitiveness, not just for revenue.”
Even as plans to tap regional business hinge on the harbor, the port of Dar es Salaam is already bogged down by inefficiency and is consistently outmatched by Mombasa, Beira and Durban. A report by TradeMark East Africa, a trade facilitation organisation, found it to be the most expensive for importers in the region.
The government, in an effort to revamp facilities at the port, has sought to borrow as much as $690m from the World Bank since 2015. The World Bank instead is planning to release money in phases in a bid to force Tanzania to tighten up the necessary planning for the project.
Bella Bird, the World Bank’s country director for Tanzania tells The Africa Report: “The first phase is expected to involve an International Development Association credit of $345m, together with a [UK] Department for International Development grant of $13m and a Tanzania Ports Authority contribution of $63m.”
Still, some of the port’s largest users are now subjects of constant suspicion by the new government. It has accused large importers of tax evasion and corruption. The government also wants to be sure that it is getting all of the revenue it is due from the mining sector, which accounts for about 4% of gross domestic product and boasts giants like Acacia and AngloGold.
LNG plans stalled
Other areas of the economy are also under pressure. Already falling way behind Mozambique in terms of gas development, Tanzania’s long timelines in the nascent energy sector have left potential investors frustrated despite calls by Magufuli for works to go faster.
Front-end engineering and design is well on schedule but final investment decisions, while eagerly anticipated, are unlikely to be made earlier than 2019. The government expects to commission a planned liquefied natural gas (LNG) plant in 2025. The lack of administrative capacity and other issues have slowed the sector’s development.
“At the moment, we are just waiting for the investment decision either by Statoil and Shell jointly for the LNG plant, or as individual proposals for the respective projects,” says Gulbrand Wangen, director for midstream projects in Africa, Brazil and India at Norwegian Energy Partners. The industry lobby counts Statoil, a key player in Tanzania, among its members.
In Magufuli’s first days, many East Africans took to social media praising Magufuli’s frugal ways and efforts against corruption, asking “What Would Magufuli Do?". Fresh into office, the then-56-year-old received applause when he wore gloves and gum boots to join in cleaning up a shabby Dar es Salaam market.
But he would struggle to get such praise from neighbouring countries today, as the old regional rivalries and perceptions remain. Driving across Nairobi on a sunny Thursday morning, Stephen Mwangi, an Uber driver, asks if the cab-hailing service he works for exists in Tanzania. “Yes, since June,” I respond. “But is it as successful as in Nairobi? You know Magufuli is anti-business,” replies the driver.
