How Tanzania Doubled It’s GDP In 5 Years.

Since 2015, the Tanzanian Fifth Phase Government, under reform-minded President Dr. John Pombe Magufuli, has set an ambitious industrialization agenda in pursuit of the goals articulated in its National Development Vision 2025. To achieve that, and in addition to focusing on industrial products, President Magufuli has emphasized the need for attracting foreign investments into the country to drive economic development while implementing the Vision 2025 to become a middle-income nation.

Despite the global COVID-19 pandemic, Tanzania has achieved its middle-income vision five years ahead of schedule. Tanzania achieved the status, with a GNI per capita of USD $1080 up from an average of USD $622 in the previous administration. “I congratulate all my compatriots on this historic achievement. We had envisaged to achieve this status by 2025 but with strong determination, this has been possible in 2020. God bless Tanzania,” Dr. Magufuli posted on Twitter when the World Bank had just announced the new status for Tanzania on 1^st July, 2020.  This development was markedly celebrated by authorities, patriots and the common citizens, an outpour of joy from its ambitious population following years of strong focus on delivery, hard work and determination.

I congratulate all my compatriots on this historic achievement. We had envisaged to achieve this status by 2025 but with strong determination, this has been possible in 2020. God bless Tanzania

President of Tanzania, Dr. John Pombe Magufuli

 

According to the World Bank, Tanzania was among seven countries that moved to a higher category, the lower middle-income level, from the least developed category, demonstrating a definite step forward in the national development process. In five years, Magufuli doubled the national GDP twice to TZS 124.0 trillion (about USD $60 billion), up from an average of TZS 52.4 trillion (USD $25 billion) attained between 2005 and 2015.

MIDDLE-INCOME STATUS HAS ITS BENEFITS

As a coastal economy bordering eight countries, six of which are nearly or completely land-locked, Tanzania is well situated to become a regional economic and transit hub. The country is endowed with rich renewable and non-renewable resources that can power not only its own economic transformation but that of its neighbors as well.

Tanzania’s transition into a lower middle-income status also boosts its credit worthiness, which will ultimately benefit a nation with such ambitious growth plans. The nation’s task ahead is to continue translating that middle-income status into the realities of the lives of the people, something President Magufuli is already doing by focusing on people-centered initiatives such as health, education, water and infrastructure reforms.

The entry into middle-income status was also good news for industrialists and the business community who were part of the success. Confederation of Tanzania Industries (CTI) Director of Policy and Advocacy, Akida Mnyenyelwa said:

“This means that our country’s credit worthiness will improve and industrial investors will get an opportunity to borrow externally. I believe more lenders will trust us, and Tanzania will attract more investors.”

PROJECTIONS AND PROJECTS

While this achievement has done wonders for international credibility, the global pandemic will still have an effect on the economy as many of its economic and development partners still grapple with Covid effect. Currently, the International Monetary Fund (IMF) and the Economist Intelligence Unit (EIU) both assert that Tanzania’s economic growth will slow down to 2% and 2.7% respectively but will rebound and trend upwards in proceeding years.

Tanzania’s projections are however optimistically higher to between 5.5% and slightly above 6% growth as it didn’t lock down most of its economy. The promising prospects are also supported by a growing services sector, planned public investments in infrastructure, staggering gold prices and a tourism sector that is returning to normalcy.

The Tanzanian sky is open with tourist chartered and non-chartered planes rerouting to the country’s unforgettable destinations such as the Kilimanjaro, the Serengeti, the Ngorongoro Crater and the Spice Islands of Zanzibar. Sky giants like Emirates, Fly Dubai, Qatar Air, KLM and Ethiopian airlines are flocking Dar es Salaam, Kilimanjaro and Zanzibar Airports.

During the apex of the Covid pandemic, Tanzania did not act carelessly rather they implemented significant health and other scientific measures plus local experience to curb it. Today, there cases are minimal and the country is close to being declared Covid-free, allowing its strategic economic projects to carry on.

Some major projects under the transformation-minded President Magufuli include the construction of the USD $2.9 billion Julius Nyerere Hydropower Project, Africa’s fourth largest dam, the construction of the first two lots of the USD $3.0 billion Standard Gauge Railway (SGR), East Africa’s longest and ultra-modern speed train lane, the expansion of the Dar es Salaam, Tanga and Mtwara ports and a new liquefied natural gas plant at Likong’o-Mchinga worth over USD $30 billion.

Tanzania is also partnering with neighbor Uganda to realize another remarkable dream; construction of the 1,443 USD $3.5 billion East Africa’s Crude Oil Pipeline plus a new electric railway line between Dar es Salaam and Dodoma, where a new international airport is being built.

MINING REFORMS THAT WORKED WELL

Mining is among the key sectors that have been touched by reforms which have contributed to the growth of Tanzania’s economy during Magufuli’s first term. The National Bureau of Statistics (NBS) showed that mining contributed 15.3% to the country’s GDP in the first quarter of 2020.

Ultimately, these reforms have benefitted small-scale miners, especially as a recent law enactment relieved them of the burden of paying the withholding tax of 5% and 18% VAT. Choosing to shift towards national small-scale miners, Magufuli withdrew licenses belonging to few non-performing investors to allow more than 5000 small-scale miners to gain access.

Magufuli also built a wall around Mirerani, the Tanzanite mining and marketing small town. The results in the growth of national gross mining revenues and personal earnings among small minors speak for themselves with gross national revenues from mining doubling in size. Of course, the tale of a small Tanzanite minor, Saniniyu Laizer, who became a multi-billionaire, speaks volumes on the Magufuli transformation effect in the sector.

CLOSING THE GAP

While other sectors are currently booming, Tanzania’s agriculture remains a weak spot. The agriculture sector which largely remains underdeveloped provides livelihoods directly to about 55% of the population. Three quarters of Tanzania’s poor subsist in agriculture, while a further 15% is indirectly related to the sector through value chain functions such as traders, transporters and processors.

President Magufuli has stated recently that the situation was caused by shortage of processing industries in Tanzania as is the case for the most of the African countries. Now, with a booming manufacturing sector, Tanzania will work to close the gap and help take the rural Tanzanian to the next level.

DIVERSIFICATION IS KEY

The home of the Serengeti and the Kilimanjaro, Tanzania continues on its path to become an African economic giant, partly due to its strategic location, diverse resources and political stability.

Its significant progress over the past half-decade can be directly attributed to its current leader, President John Pombe Magufuli, a scientist who turned into politics. His consolidation of several national resources combined with economic diversification has been the key to achieving his 2025 vision, five years ahead of planned schedule.

So far, during his tenure, Tanzania has become one of the top five gold producers in Africa. Manufacturing has gathered momentum after years of decline resulting now in the production of cement, textiles, ceramics, tools, and simple machinery.

The country has attracted about USD $1 billion in foreign direct investment (FDI) in the past five-years, specifically geared towards the manufacturing sector. Due to significant improvements in processing and the delivery of goods to countries like Burundi, Rwanda, Democratic Republic of Congo, Uganda and Zambia, Tanzanian ports became a relevant source of income.

As a result of expansion in these sectors, financial services, telecoms and construction have experienced impressive growth, coinciding with Dar Es Salaam becoming the largest city in Eastern Africa.

For its 55+ years, Tanzania has always been a peaceful country with a predilection for political stability. The Bulldozer, as Magufuli is affectionately known, has taken great strides and achieved much during his tenure. Up for re-election in October this year, the country’s goal will be to maintain and exceed its 2025 vision.

While the nation is certainly ahead of schedule in transforming from a quasi-socialist to a market economy, now is not the time to rest on laurels. Rather, Tanzania should choose Mt. Kilimanjaro as its point of reference and move unrelentingly until the country reaches the apex of the African economy.