THAT ROARS AS IT RISES

THE AFRICAN LION

The true protagonist of the Africa Rising narrative, Tanzania, once stained by the brushes of poverty and foreign aid, is now flourishing and competing amongst the most successful emerging market economies.

Tanzania held an average growth rate of around 7 percent from the period 2011 to 2015, with projections for 2016 and 2017 at 6.9 percent and 7 percent respectively. When many developed countries were picking up the pieces following the global recession at the beginning of the decade, Tanzania was listed as one of the world’s fastest growing economies, and looks to retain this positioning for the foreseeable future.

With a population of is around 55 million, an abundance of natural resources, and unprecedented growth margins: Tanzania is a shining example of economic prowess. It is no wonder that the spotlight is shining upon this East African nation - and what is has to offer the world.

Tanzania’s healthy economic performance is reflected in the growth of its sectors, namely communications, transport, manufacturing, construction and the sophistication of its already buoyant agriculture sector. Resource-rich Tanzania has a wealth of yet untapped potential, particularly in the extractive industries. Tanzania is the third biggest gold producer on the continent and despite having some of the world’s largest deposits of other minerals, the extractives industry, although experiencing high growth, contributes less than five per cent to the country’s GDP. President Magufuli’s new government expects to double this by 2025. In addition to this stock of mineral resources, the recent discovery of around 1.5 m3 of natural gas reserves boosts Tanzania’s economic prospects considerably.

Taking advantage of Tanzania’s natural resources is something that Ineke Bussemaker, managing director and CEO of Tanzania’s National Microfinance Bank (NMB), believes will ensure a sustainable future for the country. Through the development of ports, coupled with the efficient production of raw materials, she believes that Tanzania has the potential to develop into the main trade hub of the region: “Currency will only increase in value if we export more dollars than import, and the only way to do this is to increase our export capacity. This is why we need to increase agriculture, our largest export capacity. In doing so, we would create employment, development - and dollar export, which will strengthen the currency.”

Dr. Charles Kimei, managing director of CRDB Bank explains how the government’s current infrastructure policies, in tandem with the country’s natural resources, will act as an attraction for yet greater FDI, which will then seek to improve the business environment: “We have enough resources, that is what is required for any investment. With the current programs for improving infrastructure, it will become an even better environment for investment. Tanzania is also opening up for labor in neighboring countries, so once you invest here, through the EAC, you can benefit from countries in the region too.” Both Bussemaker and Kimei agree that Tanzania, as the current chair of the East African Community (EAC), can be the business and trade hub of the East African region, especially given its strategic positioning.

BUILDING A BUSINESS FRAMEWORK

While many sectors of the economy are growing at a healthy and expeditious rate, and foreign investment ploughs

“Discover more about Tanzania’s booming economy and bright future in Voices of Leaders’ “interactive Ebook “With a strong concentration of consumers, huge amount of resources, the fact that it is surrounded by a multitude of different countries that can rely on its ports - all this means Tanzania is going to be an important player in East Africa and Africa as a whole. It will be one of the top 3 African countries in the next 15 - 20 years.” Joe Eshun, Partner of Deloitte Consulting Ltd., Tanzania

in, the business environment should match these improvements to facilitate greater, sustainable, growth within the country.

The World Bank Ease of Doing Business 2016 report lists Tanzania as 139 out of 189 countries. While this is an improvement on the previous year’s ranking of 140, this modest achievement does not reflect the growth of other areas of the economy. One of the greatest stumbling blocks the World Bank highlighted for doing business in Tanzania is that of starting a business, which dropped 7 points to 129 from 2015 to 2016. Established Tanzanian companies are willing to use their market experience to assist in the implementation of easing business practices for those looking to bring business to Tanzania. Mansoor Daya Chemicals Ltd. has just celebrated 50 years in the pharmaceutical industry in Tanzania, therefore managing director and founder Mansoor Daya, has had more experience of the business climate than most in the country. He urges foreign investors to come to Tanzania with the intention of establishing a base in the country, and dissuades those simply looking for a quick return on investment. Mansoor Daya desires investors that wish to assist Tanzania in its structural transformation and to thus improve the business environment: “We have a lot of potential here, but of course the country needs expertise, as we would like to be self-sufficient. I would ask investors what they are looking for, to make sure that they look at their business as a Tanzanian company, and a Tanzanian investment.”

Also looking to assist the development of businesses in Tanzania is founder and president of business consultancy Peniel World, Basil Sadindi. He explains his company’s mandate to align public sector initiatives with those of the private sector, in order to streamline business practices. For Sadindi, this will make Tanzania a more attractive environment for establishing a business: “We [Peniel World] are here to change Tanzania for the better, in line with the President’s vision. We also want the private sector aligned with this vision. The government develops policies that enhance goals and it is the role of the private sector to support these initiatives by putting up corporate strategies, which are in line with the government’s.” This continuity between the public and the private sector is something that has posed a challenge in many other emerging economies, yet Magufuli – affectionately called tingatinga, Swahili for ‘the bulldozer’ - may just be the man to lead Tanzania through its structural transformation.

DIVERSIFYING DEMAND

While the LNG sector has enormous potential, alternative sources of energy are gaining weight. By introducing a regulatory framework for small power producers - regulating off-grid energy systems - Tanzania has responded to the growing energy demand and is exemplifying how to tackle energy poverty. Smaller energy companies are now able to take advantage of a growing market, especially renewable energy suppliers. Mollel Electrical Contractors Ltd., chairman Adam Mollel explains how they are responding to this demand: “Currently, electricity is not that reliable here in Tanzania, so we plan to expand our solar energy department to be able to have the usage and the supply.” In this way, Mollel Electrical can be at the forefront of construction in the country, having already collaborated on some of Tanzania’s biggest projects, such as Dar es Salaam’s twin towers.

As the growing youth population delivers an increasing number of consumers in Africa, banking and telecoms are two sectors that would benefit most from solid FDI. CEO of telecommunications service Maktech & Tel Co. Ltd., Basil Sadindi, reflects on the rise of telecommunications and the competitive, and lucrative, environment that this has created in Tanzania: “There is definitely room for additional investors in telecoms. The capital expenditure is minimum because they do not have to build new towers - the infrastructure and fiber optics are already there.” This reflects figures given by Mckinsey, that investment in telecoms infrastructure was around US$15 billion each year until 2010.

Benoit Janin, CEO of Zanzibar’s telecomm giant Zantel, confirms the importance of telecommunications: “The telecommunications sector is one of the key pillars of growth in Africa. The data revolution is a new engine to this development. The fact that we are able to touch so many inhabitants through our services, which are developed here in East Africa, is key to information and communication development.” It is not simply connectivity that consumers receive from this increase in data - it also corresponds with an improved standard of living. Studies have shown that a 10 percent increase in broadband penetration leads to GDP growth of up to 1.5 percent. Janin also sees telecommunications as a way to make Tanzania a regional hub: “Because of Tanzania’s specific geographical location, it can be a major global player.”