March 28, 2008
DAR ES SALAAM – For once the optimists have been proved right – and it’s happening in that “dark, backward” continent, Africa. The ex British colony of Tanganyika and Zanzibar, renamed Tanzania after their union in the 1960s, is exceeding by a significant margin the economic projections of the International Monetary Fund made a mere three years ago. That was towards the end of the term of former socialist journalist, Ben Mkapa, the president who dug Tanzania’s capitalist foundations.
Jakaya Kikwete has been president barely two years but in that time the economy has jumped from an annual growth rate of 6% to 7.5%. David Robinson, the resident head of the IMF, expects it to hit 8% before long, which would be higher than any other country in the world, except China and India (and Angola which is almost exclusively an oil economy). In fact mainstream economic experts here see no reason why it shouldn’t make 10% within three or four years. Thanks to the seeming magical qualities of compound interest that rate of geometric progress should double tax revenues within seven years and triple them within ten.
Combined with the continuous influx of large quantities of aid and the government’s commitment to education and health improvement this should enable absolute poverty – earning less than a dollar a day – to be largely abolished by 2020. Assuming the present government doesn’t lose its way, either because of massive corruption or misplaced policies, Tanzania will probably be the first country on the African continent to achieve this goal.
Tanzania at present is one of the poorest countries in Africa. This growth is starting from a low base. Yet the same could have been said of South Korea or Thailand – the “Tiger Economies”- forty years ago. High growth rates, compounded, work to turn the graph of growth near to vertical after a decade of continuous progress.
Needless to say, “abolishing” absolute poverty by raising the incomes of the poor above a dollar a day is no big deal on its own. But if it is combined with universal primary and secondary education, health clinics, delivery rooms and safe running water in every village, contraception in the 90% range, which are all reasonable and doable goals given the rate of growth, then both the present and the future of the very poor will be very different. There will be still great income inequalities – as there are already only a decade after the rigorous socialism of Tanzania’s founding president, Julius Nyerere, has been shunted aside – but they will matter less if the bottom 30% – mainly peasant farmers- are seeing visible improvements in their quality of life.
Under Julius Nyerere there was little corruption. Today it is a corroding curse. But Kikwete seems to be giving the system a big shake. Recently he sacked the governor of the central bank where an enormous scam involving hundreds of millions of dollars was uncovered. Shortly after the prime minister was asked to resign, leaving under a cloud of suspicion. Auditing across the board is being stepped up and this year the government auditors will present their report on time, a remarkable step forward for Tanzania.
Then there is the “Chinese problem”. Chinese investment and aid is warmly welcomed by Tanzania. So is its hunger – along with India’s – for raw materials that is pushing up the prices of the country’s great variety of crops and minerals. But Chinese and Indian competition in low cost manufacturers is eating a hole in Tanzania’s incipient industrialisation. There is no way now that the country can replicate the success of the Asian Tigers by industrialisation.
My own view is that that need be no barrier to continuous growth. Tanzania’s agricultural growth rate is half that of Nigeria’s and must be improved upon. But now, as commodity and food prices move upward, the terms of trade are shifting for the first time within memory in favour of the farmer. If the government does not try to protect the urban consumer – who is already beginning to shout for help – from this new trend, then the farmers will – and have already started to – produce more maize, cashew nuts, soya, pyrethrum etc. as prices rise in respond to the Asian pull. (The very poor, the bottom 20%, in the towns, can be helped by special subsidised food shops, but they must not be accessible to the majority.)
Tanzania can grow for a long time if it gets its agriculture off the ground. Industrialisation is a false panacea. Australia and Chile proved the point long ago that you don’t need to industrialize to get reasonably wealthy. I can report that a wide range of opinions from the president himself, to the head of the IMF, to aid donors, are increasingly convinced of this point.
If such a policy is implemented then the Tanzanian lion – there are no tigers in Africa – can start to roar.
