When state of economy and cost of living are at odds

19Apr 2016
Our Reporter
The Guardian
When state of economy and cost of living are at odds
  • The position of corporate Tanzania on the current state of the economy is mixed with some quarters quite downbeat, saying mainstream business activities have so far been lacklustre

GOVERNMENT fiscal planners and growth strategists are optimistic that the economy is hitherto healthy and way better off when compared to the same period last year, with robust performance prospects for the whole of 2016.

A grains market in Mbalali District, Mbeya Region.

This positive economic outlook is shared by most local and foreign experts, who forecast that the economy will perform well this year than the 7.0 per cent growth that was recorded in 2015.

But to some, the country is not out of the woods yet. The position of corporate Tanzania on the current state of the economy is mixed with some quarters quite downbeat, saying mainstream business activities have so far been lacklustre.

To the average folks, and most generally businesses, so far there has been nothing to write home about. It is business as usual with the juicy macroeconomic figures as always never telling their story.

“Nothing much has changed, save for the slight reduction of prices of fuel and sugar. The only difference is that we have a new government in which the commoners are optimistic it might better the economy,” noted media consultant John Daniel of Dar es Salaam.

“For economists and other corporate stakeholders, the coming national budget will give a clear direction of President Magufuli’s government’s plan,” he added.

Like many ordinary citizens, Denis Njunwa of Mwanza said the expectations of the people on the new regime for good times ahead are high going by its performance so far.

However, he said the results of the good work the government has been doing was yet to be felt in the pockets of people and what many bread earners bring on the table.

Stationery supplier Gidius Elisha said he was yet to see any difference in life and business since the cost of both was still high despite the National Bureau of Statistics (NBS) saying the rate of inflation had eased in March.

He said prices of many consumer goods have remained the same while others for key items such as rice and beans are on the rise. To make matters worse, he says the liquidity crunch created by the fiscal indiscipline of the previous administration still persists.

“Business is dull and the prices of most food items are up compared to what we were paying for them from wholesalers,” shopkeeper Saduni Issa of Makuburi in Dar es Salaam said on Sunday noting that only the prices of beans has changed only slightly.

He said a 20-litre can of cooking oil is now sold at 53,000/- compared to the previous price of 45,000/- while the 50-kg bag of sugar has risen to 96,000/- from 85,000/-. Maize flour is 51,000/- for a 50-kg bag instead of 48,000/- while a 100-kg sack of quality rice has shot up by 20,000/- from 200,000/-.

An insurer, who spoke on condition of anonymity, said clearing the mess around and bettering things will take time and wishes the government’s current momentum to rectify the situation does not slow down.

He spoke of one of the company’s suppliers complaining of monthly sales plummeting to US$50,000 from the previous level US$200,000. According to him, it was high time for the government to give realistic and timely figures of the economy noting that the current Bank of Tanzania monthly economic review portrays the January situation.

“Since being sworn in almost three months ago, new Tanzanian President John Magufuli has made impressive and publicly-visible efforts aimed at tackling corruption and government waste, reinforcing his reputation as a hard-working technocrat,” BMI Research notes in its new update of the economy.

“While the Magufuli presidency is still in its infancy, the early signs are encouraging and, if sustained, bode well for the country's relationship with its donor partners following a fractious 18 month period,” it adds in the Tanzania Country Risk Report.

The Filch Group firm, which provides macroeconomic, industry and financial market analysis, covering 24 industries and 200 global markets, see two major risks to the economy’s fortunes this year.

Bad weather and the political stalemate in Zanzibar would be the devastating factors, it says. Generally BMI has it that the economy will perform superbly in 2016 but sees the two factors adversely affecting its buoyancy.

“Political risk is set to increase over the near term, which could provide a sterner examination of Magufuli's leadership credentials. The controversial decision to annul and re-run the Zanzibar election has stoked popular discontent on the semi-autonomous island, and it promises to be a tense few months,” the report reads.

The IMF and World Bank said the economy did well last year and will more vibrant in 2016. BMI says the new growth momentum will lead to national output (GDP) bulging to US$45.5 billion this year compared to the 2015 level of US$43.3 billion and reach 49.3 billion in 2017.

BoT Governor Benno Ndulu said nothing better tells the improvement of the economy than the reduced pressure on the shilling and the low rate of inflation. He recently told Smart Money that another good indicator was the reduced current account deficit, which has decreased by over 30 per cent from what it was during the first quarter of 2015.

The managing director of Songas, Nigel Whittaker, said first quarter of 2016 has been mainly better for mostly three major reasons as far as the electricity sector was concerned. He said unlike last year, there is currently no power crisis which had emanated from the drought that affected power production in the Tanesco dams.

“We have had good rains this time around and more gas is now available for generation of electricity. Tanesco is no longer using expensive diesel to produce power and the price of crude oil has also gone down,” Whittaker said on Friday.

For him, what was currently amiss in the economy were incentives to attract capital for investment in the various sectors to help invigorate growth, create opportunities and unlock the country’s resourceful potential.

On Wednesday last week, the Tanzania Chamber of Minerals and Energy called for immediate strategic corrective interventions to lure investors to the country. Its chairman Ami Mpungwe said inflows of mining capital, which totalled US$4.5 billion during 1997-2015, has now stagnated spelling an uncertain future for the industry.

“The future of the mining industry is at a watershed marred with great uncertainty unless urgent strategic interventions are made in the macroeconomic and sectoral environment that would enable Tanzania to reclaim its competitiveness and attractiveness as an investment destination of choice that it once was, not too long ago.”

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