JPM’s phase more bound to bankruptcy than JK’s

01May 2016
Our Reporter
Guardian On Sunday
JPM’s phase more bound to bankruptcy than JK’s

WITH the grace period accorded to fifth phase president Dr John Magufuli still near its apogee as a vast operation to take down plundering in various government agencies and parastatal organisations continues, verbal excesses or conceptual extremism is being noticed among commentators.

Former President Jakaya Kikwete

There is a feeling that the country had crept to its lowest ebb, and now a patriotic shift has taken place and the road to recovery is being charted out and implemented.

This sense of euphoria contrasts with sharp dejection and depression elsewhere.

Euphoric commentary is aware of a creeping sense of dejection and largely attributes it to those who used to cheat in taxes or help themselves to public funds with ease, or lost privileges related to travel, perks, emoluments like allowances and workshops.

So far it is hard to detect an awareness of such credibility of economic dejection from a strictly technical point of view for instance as diminishing opportunities, declining investments and lower credit circulation or disbursement. The potential is high for such discrepancies.

The problem at hand is how far the breadth of undeniably negative practices during the fourth phase government were placing economic health in peril, and even moving towards bankruptcy as a section of commentators had lately asserted.

There are both valid points and exaggerated sense of change, and a sense of oblivion about dangers of the current outlook, that is replete in how euphoric commentary presents issues. The trouble is that Dr Magufuli is part of this euphoria, preparing far less for reform and merely seeking prayers.

In the first place the big problem about current changes is continuity, as all of it depends on the leader maintaining course, and feeling vindicated in what he is doing on a day to day basis.

As the strategy seems entirely based on a simple idea that the more taxes are collected the quicker the pace of growth, it can face problems in that direction as higher taxes might not lead to the sort of results expected.

Taxes are only an input in a wider assortment of growth agency functions, including credit to the private sector or to individuals and economic entities. Taxes are vital for welfare needs and infrastructure, now that private investment in infrastructure is precluded by law and monopoly.

That is the first point of departure, that current euphoric commentary is one sided in seeing tax collection as the alpha and omega of economic management and growth prospects, owing to the mentality of dependency on government action per se.

A certain discussant, who was not an analyst was saying in a forum that the rising population was a problem for the government to feed them, and one wonders when least one saw government feeding people. Initiatives like Tanzania Social Action Fund (TASAF) at times beg questions. Was it an issue of aiding households facing poor soils, elderly retirees or merely drunkards?

The notion of bankruptcy for instance is question begging, as all indications on economic trends during the last years of the fourth phase was inequality being on the rise, and that was likely to be the case owing to gross abuses of privileges.

But the idea that this was consequently leading to economic ills and growth patches is unfounded, as inequality is often a key ingredient in economic growth. A person obtaining three or four ghost workers' salaries builds houses for rent, a private secondary school; all that propels growth.

When it comes to the bigger picture, there is a danger that bankruptcy as a concept is a greater threat for this phase than the previous, in terms of how the government will extend its energy in all directions, take out money from its coffers too quickly, to meet all sorts of commitments.

What it is expected to deliver outpaces its ability to collect more taxes, while amounts that the public coffers are going to lose from declining business initiative are not yet being factored into economic growth. There is stagnation on the horizon now.

Owing to relative discontinuity in how the public digests economic figures, data or statistics, not much is noticed in the fact that the hoopla about two thousand containers whose taxes were not paid at the port amounted to an income of Sh80bn.

Compared to the monthly collection of Sh900bn at the time JK was leaving office, it is less than 10 per cent of one month's collection. Obviously later collections were much higher, to Sh1.4trn which is now being projected as the model, or even up to Sh1.7trn as budgeted.

All that looks rosy and salutary until one starts looking at another facet of reality, namely scaled down business expansion, limited take up for instance of plot purchasing or construction projects for the simple reason that the near future policy or administrative outlook is cloudy.

Staff reductions in various business entities are a bit of an alarm which euphoric commentary ignores.