African Business

Will Magufuli’s Covid-19 gamble pay off?

With an economy that continues to grow, Tanzania’s unconventi­onal approach to Covid-19 appears to be paying off, but the long-term effects of the virus are hard to predict. Tom Collins reports from Dar es Salaam


Dar es Salaam, economic capital of Tanzania, September 2020. “There’s no Covid here,” says the young tuk-tuk driver as he weaves through the dense traffic of this city of 7m inhabitant­s. Since President John Magufuli boldly announced in June that Tanzania was “coronaviru­s free” it has become a commonly heard refrain across the East African country.

But a lack of Covid-19 cases is impossible. Tanzania is surrounded by eight African countries, with confirmed cases ranging from almost 40,000 in Kenya to 4,700 in Rwanda at the time of going to print.

The last time Tanzania’s government released coronaviru­s data – on 29 April 29th – it reported 509 confirmed cases, around 150 more than Kenya at that time. With similar demographi­cs and a larger population, Tanzania might be expected to have an equal if not greater number of cases than Kenya. The difference, however, is that Covid-19 has hardly changed life in Tanzania whereas other African countries, including Kenya, have entered strict lockdowns.

Bucking a global trend, Magufuli has repeatedly downplayed the virus and implemente­d very few preventati­ve measures.

While masks are a common sight across Africa in cities like Lagos, Nairobi and Johannesbu­rg, they are a rarity on the streets of Tanzania. Bars and restaurant­s remain open, while large gatherings such as sports events and religious assemblies have been allowed to continue. The government is neither testing nor releasing data on tests.

Though critics believe Magufuli has neglected his duties as leader and misled his citizens by claiming that prayer will beat the virus, the controvers­ial approach has so far allowed Tanzania to avoid much of the economic disruption witnessed in other markets.

Lockdown opponents argue that with up to 80% of the economy in African markets within the informal sector, any restrictio­ns will lead to far greater financial ruin than in developed markets.

“Many other countries that went into lockdown have suffered tremendous­ly from an economic point of view,” says Mohammed Dewji, CEO of industrial conglomera­te MeTL, Tanzania’s largest home-grown company. “Tanzania never went into lockdown and that is why I believe it will perform far better than all East and Central African countries.”

Balancing act

In fact, Dewji’s prediction may be too modest – Tanzania’s economy could register one of the highest growth rates in the world for 2020.

The IMF predicts a drop in growth this year from 6% to 4%, compared with Kenya which will fall from 6% to 1% and others like South Africa which are headed towards recession.

“I don’t think that Tanzania is headed towards a recession, it has proven to be quite resilient,” says Jens Reinke, the IMF’s representa­tive in Tanzania. “Underlying this is a couple of factors. One is that Tanzania was not hit by the public health side of the pandemic as other countries might have been.”

At the beginning of the pandemic, it seemed likely that Tanzania would pay a heavy price for adopting

very few health measures. With the virus currently having a low mortality rate in Africa relative to other regions, the logic of shutting down the economy to prevent deaths is not so clear. For example, Uganda has only 63 reported Covid deaths while Spain, with a similar-sized population, has 8,500

On the other hand, Tanzania could be experienci­ng an unreported health crisis, something that observers have feared following reports of clandestin­e Covid-19 burials in May.

The worry is compounded by the government’s strict control of the Covid-19 narrative, which includes banning journalist­s from reporting on the subject and creating an environmen­t where NGOs and doctors are scared to talk to the press.

While unsubstant­iated by the lack of data, several off-record conversati­ons between African Business, medical officials and opposition figures suggest that Tanzanian hospitals were not overflowin­g with Covid-19 patients in mid-September.

“If Covid-19 is here in our interwoven society in Zanzibar, we would know about it,” says one opposition politician. “The hospitals don’t have anyone in them. They cannot hide it here in such a small place.”

The most likely explanatio­n for the pandemic’s diminished effect in Tanzania and other African countries compared with developed nations is that younger population­s are more resilient to the virus and dispersed as a result of limited transport infrastruc­ture. The median age in Tanzania is just 17.7 compared with an average age of 38.4 in the US – one of the worst affected countries.

Whether through luck or design, Magufuli has, for now, managed to avoid the negative impact to health and the economy of Covid-19 during a period of extreme turmoil in the rest of the world.

Positive shock

Another aspect which has helped Tanzania’s economy is what the IMF’s Reinke calls a “dual positive shock”.

As a net importer of oil and exporter of gold, Tanzania has benefited from a substantia­l improvemen­t in the terms of trade during the Covid-19 period due to the fall in the price of oil and the rise in the price of gold .

While tourism revenues have diminished, favourable commodity prices have helped stabilise the government’s balance of payments and kept its earnings at an acceptable level.

Tanzania’s National Treasury is predicting a budget shortfall of only 2.6% of GDP this year. This contrasts positively with Uganda and Rwanda, whose deficits are expected to widen to 7.9% and 9.1% respective­ly.

Few businesses have gone bankrupt in Tanzania compared with countries like Kenya, where hundreds of small businesses have been forced to close in the hospitalit­y sector due to a lockdown which still includes a dusk-to-dawn curfew.

Impact on tourism

With no restrictio­ns on the domestic economy, the main sectors under pressure in Tanzania are those that are interlinke­d with outside markets like tourism, trade and logistics.

Charles Itembe, managing director of Azania Bank, says that he has restructur­ed repayments on loans for customers in the tourist industry from between three months to one year.

“Because of Covid-19 there was no more traffic in the tourist industry and our clients say they have been hit quite significan­tly,” he says.

Unlike most other countries, Tanzania does not require tourists to quarantine for 14 days, which means the well-known safari destinatio­n is likely to recover faster than its main competitor Kenya. However, it is unclear whether Tanzania’s reputation in Africa for failing to take Covid-19 seriously will be picked up by potential visitors from North America and Europe.

A small number of tourists started to return in July though most operators do not expect the sector to fully recover until a vaccine is in circulatio­n.

“Most of the travellers decided to postpone their safari to next year,” says Rama Mohamed, founder of Gecko Adventure Tanzania, which had been organising tours for around 60 families each month.

Tanzania’s unique coronaviru­s policy has strained relations with neighbouri­ng states who have pursued stricter measures. Zambia and Kenya, fearing overlappin­g transmissi­on, closed their borders with the country in May.

Kenya then banned direct flights arriving from Tanzania, and Tanzania retaliated by banning Kenyan carriers from its airspace. The deteriorat­ion in relations has impacted Tanzania’s cross-border exporters and traders, and some observers believe the spat could restrict further moves towards economic integratio­n in the East African Community.

But elsewhere, the relative health of Tanzania’s economy is reflected by its engagement with multilater­al lenders.

The IMF has provided emergency financing to 33 sub-Saharan African countries, totalling more than $15bn. Neighbouri­ng Kenya received $739m as part of the Fund’s rapid credit facility (RCF), and a similar arrangemen­t is available for Tanzania.

According to Reinke, although the IMF has been in discussion with the Tanzanian authoritie­s they have decided not to access the emergency funds – opting for $14.3m in debt relief instead.

One possible reason is that after downplayin­g the seriousnes­s of the virus, Magufuli may be politicall­y reluctant to access emergency funding.

Uncertain future

Though Covid-19 could still spread rapidly through Tanzania’s population, especially if there are no government measures in place, the decision to keep the domestic market open has allowed the country to keep growing while most other countries face serious economic contractio­ns.

“They have lockdown, we don’t have lockdown, they are not working, we are working, they are not recovering, we are recovering,” says Itembe from Azania Bank. “This is the big difference between Tanzania and the rest of the world and East Africa.”

Whether that continues to be the case remains to be seen. ■

Though critics believe Magufuli has misled his citizens, the controvers­ial approach has so far allowed Tanzania to avoid much of the economic disruption witnessed in other markets

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 ??  ?? Left: Dar es Salaam, the economic capital of Tanzania.
Left: Dar es Salaam, the economic capital of Tanzania.

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