-when opening the preliminary conference of industrial and business delegates, the wider theme of industrialization more or less overtook doing business issues.
That is how the country’s development financial institutions (DFIs) moved to show, demonstrating readiness to continue supporting the country’s pace on industrialization that aims at becoming a semi-industrialized and middle-income economy as envisioned in National Development Vision 2025. It is a vision shared across the board, in all sectors.
Expressly making this commitment was TIB Development Bank Managing Director Charles Singili when presenting a paper on ‘Challenges in Financing Industrialization and the Role of Local DFIs’ during the 4th SADC Industrialisation Week (SIW 2019) at the Julius Nyerere International Convention Centre.
The effort on his part was affirmative and bold to a considerable extent, saying that local DFIs are best placed to provide both medium and long term financing in greenfield projects in their localities that can catalyze economic development.
He declared that local DFIs are known by their strength in financing and support towards implementation of infrastructure, mining projects and industrialization, not quite admitting gaps.
For instance he told the delegates that local DFIs “have the local knowledge, they can offer technical assistance and provide capacity building aiming at promotion of industrial development,” on the basis of a leading report on his presentation.
Yet for those familiar with foreign direct investment mechanisms, it is clear that the idea of local knowledge embedded in these remarks is somewhat marginal compared with that it ordinarily carries when investment doors are wide open and foreign companies can actually buy out local firms. That is where ‘local knowledge’ comes in, at the service of higher, regional or global strategy.
One specific assertion that raised attention was that through local DFIs governments can propel industrial development and achieve higher economic growth.
Yet there was a time that the matter was debated at a conclave of heads of commercial banks meeting with the Bank of Tanzania and top officials of the capital markets authority and stock exchange, where the issue was by and large settled.
It was outgoing NMB managing director Irene Bussmaker who focused on that issue, and affirmed that long term projects that require large amounts of funds cannot be sourced from the country’s commercial banks. If the opposite is true for development finance institutions, what it means is that the government finances industrialization.
There were some technical points the TIB director was mentioning, for instance that “the uniqueness of industrial financing by local DFIs relies on their understanding of the local environment and ability to focus on areas where there will be significant economic impact.”
When note has already been taken that this prerogative is tied to the fact that the bank is a public sector organization, ‘impact’ many not in the final analysis coincide with return on assets or profitability in the short and medium term, and it more likely to be tuned to sensitivity of a project to the locality, how it affects approval ratings for elected representatives and through that prism, loyalty to top authorities generally. It is a conveyor belt for policy.
Rhyming into the exhibition’s theme, “A Conducive Business Environment for Inclusive and Sustainable Industrial Development,” he said it reflects TIB’s principal objective that is to offer medium and long term funding, technical assistance and funds management for development projects.
The question rather is how such financing can be integrated regionally or even locally with the private sector in a level playing field. The key is that it can’t have the same standards that led Bussmaker to a totally different calculation.
The core issue was that development finance entities located in the public sector have a mandate to support the government in attaining national development goals of eradicating poverty and becoming a middle income country as indicated in the country’s Vision 2025.
That vision is at times taken by a breadth of experts to indicate a particular way of managing the economy, in the sense that it is a method which actively seeks those results – of shared progress, poverty alleviation.
Yet there is plenty in the history of economic development to show that economic results don’t coincide with stated goals, for the simple reason that public platforms are filled with collective goals but individuals pursue private interests.
That is why the most performing economies worldwide are also those which are crudely individualistic in character, as there is far less contention between public platforms, intentions of policy, and private action, a malady that has crippled socialism even to its collapse; SADC has plenty of examples to show for.
In Tanzania the payment of external debt hovers at around half of total revenue collection annually, at least on the basis of data by the International Monetary Fund (IMF) that has some variations from budgetary data at the local level.
In South Africa the incoming head of the country’s public sector (state owned) power company Eskom chilled business observers regionally and far beyond recently, saying that Eskom was on its ‘death spiral,’ and it is undeniable that a dysfunctional power sector is an economic morass.