When Tanzania’s ‘bubble’ resembles ‘shock’

13Jan 2018
Francis Semwaza
The Guardian
When Tanzania’s ‘bubble’ resembles ‘shock’

FORMER President Jakaya Kikwete policies could possibly be the direct opposite of today’s President John Magufuli, with the latter controlling monetary flows through, among other measures,

Stricter fiscal policies that have resulted in having all the government money deposited at the country’s central bank, the Bank of Tanzania (BoT).

The new economic policies may not have changed much but the implementation has, as exemplified by such policies, including free education and many others that the outgoing BoT governor has defended as being the ones benefitting the majority of citizens even as the people are complaining of increased economic hardship.

The alleged economic hardship reminds people of the Kikwete era when they think and maintain that they had more money in their pockets than now.

The majority of people currently admit that they cannot afford the ‘luxuries’ they used to enjoy before Magufuli took office in November 2015, a clear sign that the ‘bubble’ that existed a few years ago has been replaced by ‘shock’ following the Magufuli era.

This rhetoric has become more of a bandwagon, with everyone jumping on, even including the low-income earners whose lives have not changed much in the last five years or so. It can be said that people have rather become copycats, swinging between political statements whose intentions and meanings are barely known to them.

While Kikwete’s perceived slackened regulation and policy implementation is believed to have destined some people to what others would call ‘undue’ wealth that they currently struggle hard to maintain, Magufuli’s strict fiscal discipline makes the same people feel that the country is going awry, possibly due to the decline in personal well-being and fulfillment of their greed.

The praising of Kikwete against the implementation of the same policies during the Magufuli era could then be said to be largely informed by egoism and self-interest rather than the greater good of the society that any government, including that of Tanzania under any phase, is tasked with and should work to guarantee for its people.

In fact, the bubble and the shock, as they are currently conceived by some in Tanzania’s local context, could be viewed just as an ill-construction to make things look worse than they actually are for the lack of fulfillment of individual interests at the expense of better provision of public goods such as education and healthcare.

All in all, the irony is that while economic bubbles are a product of mismanagement, the misconceived ‘shock’ in Tanzania’s respect emanates from better management of the economy. Surprisingly, the former is liked more than the latter.

Using this analogy, the ‘bubble’ and the ‘shock’ as conceived in Magufuli’s Tanzania both prove to misrepresent the socio-political and economic realities of the nation.

Tanzania’s current development statistics do not show any major differences, at least in the second five year term of Jakaya Kikwete where the annual economic growth rate was pegged at around 7 per cent.

It is therefore no wonder that the bubble and shock represent the reality since those constitute the ways that global economies under a free market economy tend to function: a bubble produces shock, which may even lead to depression, as was the case a few years prior to the Great Depression which lasted between 1929 and 1933.

The unfolding of such steps leading to shock and later to depression, if left uncontrolled, is unlikely to happen in economically immature countries such as Tanzania and many others owing to the lack of two dependent but necessary conditions of industrial overproduction and a market plunge following each other - in that order.

In order for words to signify meaning, maybe calling the current situation an economic shock owing to the government’s move to control the proliferation of and the consequent abuse of money into people’s pockets, could then equal an overstatement: the situation may not even qualify to be regarded as a slowdown since statistics suggest that nothing significant has changed in the accounting period.

Like many other developing countries, Tanzania has never been an industrial giant or even attained significant production status leading to boom that would later collapse and subject the country into depression, a slowdown or a shock, for that matter.

Falling prices of agricultural products in the 1970s may not qualify for such categories because of their being caused by other uncontrollable factors, including fluctuation in the products and competition from other countries producing the same products, such as Vietnam’s production of bumper harvests of cashew nuts from the 1970s to the present.

Since the economy remains small in size, both the effects and the recovery should then not be as painstaking as compared to developed countries, although it could be slow and complex due to poor sectoral coordination and the lack of resources in most economically poor countries such as Tanzania.

Whatever stage it might reach, the cycle would eventually come to the recovery stage and later to stability, with all the steps proving necessary, and of course normal, despite some of them having a bitter taste in the lives of the majority of people who would become victims of increased unemployment, inflation, slowed and compromised social services and numerous other detrimental effects.

The praising of Kikwete for user-friendly economic policies could also be considered as a calculated move, and perhaps overdue given the denouncing of his efforts during his ten-year rule, during which he, paradoxically, won numerous accolades from international investment forums for sustaining good policies and bettering the country’s investment climate.

However, while Kikwete was being praised by international state and non-state bodies, he was facing huge criticism at home allegedly for his being slack on many issues, with some people going to the extreme of considering him unfit for the position and for taking the country into deeper economic troubles.

Now that Magufuli proves some difference in implementing nearly the same policies he inherited from his predecessor, the presiding alter ego is considered just another misfit, probably only to win praise after stepping down, be it after five or ten years of his presidency.

As President Magufuli has been reiterating on numerous occasions, economics and general administration are a matter of choosing one over the other: then, both Kikwete and Magufuli have chosen the paths they would take the country to minimize the demerits of their choices that ordinary people would experience.

Moreover, it could be the opinion of some analysts that every new approach introduced deems necessary in consolidating the previous legacy, including fixing mistakes, if any. President Magufuli’s Keynesian approach that focuses on creating jobs through embarking on large infrastructural projects such as the standard gauge railroad (SGR), among many others, is praiseworthy despite the numerous challenges facing their implementation.

As Member of Parliament for Kigoma Urban Zitto Kabwe once opined, the raw materials for the SGR construction should have been sourced from within the country if it is proved that they are locally available so that money should be circulating in the hands of local businesses than shipping it to Turkey where the contractor and part of project’s financing come from.

However, these few and other unmentioned areas may not suggest significant differences between the alleged bubble that President Kikwete created and the consequent shock that his successor, John Magufuli, created deliberately or accidentally in his efforts to fix the economy and service sectors that contribute a significant portion of Tanzania’s tax and non-tax revenues.

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