1998 SOUTHERN AFRICA ECONOMIC ... - National Treasury

TA N Z A N I A
possesses an unspoilt 800km stretch of the Indian Ocean
c o a s t l i n e, as well as the ‘spice islands’ of Zanzibar and Pe m b a .
The government encourages private investment in ‘ u p - m a r ke t ’
tourist deve l o p m e n t s ,including joint ve n t u res with the Ta n z a n i a
Tourism Board .Tanzania re c e i ved 310,000 visitors in 1996 and
tourism curre n t ly accounts for about eight percent of GDP, b u t
the sector needs a substantial amount of investment befo re it
can reach its full potential.
T h e re is also potential for oil mining and exploration off the
Tanzanian coast,as well as certain inland are a s .Drilling for oil has
been taking place since 1952. One project which will soon be
u n d e r w ay is the Songo Songo gas to electricity pro j e c t ,l o c a t e d
on Songo Songo island.T h e re are special incentives available fo r
companies planning to invest in oil exploration in Tanzania (see
section on investment incentive s )
I n f r a s t r u c t u re
The national Urban Water Authority administers urban water
s u p p ly, and regional water engineers service the rural systems
t h rough local/village gove r n m e n t s .The UNDP estimates that
about 38 percent of all Tanzanians have access to safe water and
86 percent to sanitation.
Pe t roleum meets nine percent of energy needs, w h i l e
hy d roelectricity and coal provide the balance. Pe t roleum has to
be imported thus absorbing large amounts of the country ’s
fo reign exchange. T h e re is great potential for deve l o p i n g
a l t e r n a t i ve sources of energy, n o t a b ly hy d roelectric powe r, c o a l ,
natural gas and solar energy. Restrictions on power use are
applied in drought times, reducing the efficiency of Ta n z a n i a ’s
m a nufacturing sector. The privatisation of the Ta n z a n i a n
Electricity Supply Commission should improve the reliability of
p ower supply.
Tanzania is well served by international, l a n d , sea and air
t r a n s p o rtation ro u t e s . In most parts of the transport sector,
major rehabilitation works are being undert a ke n .The size of the
c o u n t ry and its low population density make maintenance and
expansion of the transport infrastructure ve ry costly. A ro a d
n e t work connects Tanzania with Ke ny a ,M a l aw i ,Z a m b i a ,U g a n d a ,
Burundi and Rwanda, and any part of the country can be
reached by the existing compre h e n s i ve road network of almost
82,000 km of which 3,200 km are asphalt. M a ny roads are
c u rre n t ly in poor condition and a major rehabilitation pro j e c t
began in 1990.
Tanzania Railw ays Corporation runs the 2,600 km system
linking Dar es Salaam with the central and northern re g i o n s .
The Tanzania-Zambia Railw ay Authority (TAZARA) operates
1,860 km of track, 976 km of it in Ta n z a n i a ,which links Dar es
Salaam with Kapiri Mposhi in Zambia’s Copperbelt. It is mainly
used to transport Zambian copper to Dar es Salaam port and
Zambian imports in the opposite dire c t i o n .The principal coastal
p o rts are Dar es Salaam,Ta n g a ,L i n d i , Mtwara and Zanzibar. A l l
p o rts are managed by the Tanzania Harbour A u t h o r i t y, e x c e p t
for Zanzibar which is managed by the Zanzibar Po rt s
C o r p o r a t i o n .
International airlines operate in and out of Tanzania through Dar
es Salaam and Kilimanjaro airport s . T h e re is a third international
a i r p o rt on Zanzibar. T h e re are also several regional airports and
nu m e rous landing strips for use by charter planes. Air Ta n z a n i a
operates regular services to most regional towns and has
scheduled flights to neighbouring countries and to the Midd l e
E a s t .
Te l e c o m munication facilities are available in most parts of the
c o u n t ry, and Tanzania has an average of three telephones per
1000 persons (1994), although the aim is to increase it to one
per 100 persons by the year 2000. The telephone system in Dar
es Salaam is being rehabilitated in a five year project due to end
in 1998 and curre n t ly there is a surplus of exchange lines.
Te l e p h o n e, f a x , t e l e x , expedited mail serv i c e, private couriers
and cellular phones are av a i l a b l e.T h ree private companies have
been granted licences as providers of cellular phones, w h i c h
h ave proved ve ry popular. Tanzania has two earth satellite
stations situated in Dar es Salaam.
ECONOMIC OV E RV I E W
Recent Ma c ro-Economic Deve l o p m e n t s
M a c roeconomic performance in Tanzania for 1997 has been
re l a t i ve ly satisfactory, despite the seve re drought and powe r
s h o rtage experienced during the second and third quarter of
1 9 9 7 , and the El Nino-induced floods in the latter part of the
ye a r. Fo reign exchange re s e rves incre a s e d ,inflation dro p p e d ,t h e
rate of GDP growth declined and the reve nue collection
c o n t i nued to improve. Despite substantial pro g ress made in
restructuring and stabilising the economy, the future outlook of
the country ’s economy for 1998 is bleak given the effects of the
o n going El Nino weather conditions being experienced
t h roughout the country.Serious flooding has washed aw ay many
roads and bridges, t h e re by seve re ly damaging the
c o m munication netwo r k ,to the extent of halting movements in
some areas of the country.As a consequence, the 1997/98 cro p
is expected to perform far below targets.
The overall real GDP growth for 1997 has been estimated at 4.0
p e rc e n t ,c o m p a red with 4.2 percent growth re c o rded in 1996.
G rowth in agricultural and manufacturing sectors for 1997 has
been projected at 3.1 and 3.0 percent re s p e c t i ve ly, c o m p a re d
with the previous ye a r ’s growth of 4.5 percent in the agricultural
sector and 4.8 percent in the manufacturing sector.
The Bank of Tanzania re c o rded considerable success in the
pursuit of its monetary policy objectives during the first half of
1 9 9 7 / 9 8 .On an annual basis, the money supply growth (M3)
decelerated to 13.3 percent by December 1997 compared with
18.1 percent re c o rded in Ju ly 1997.During the re p o rting period,
net domestic assets of the banking system declined by TZS 7.5
bn (USD11.6m), on account of a decrease of TZS 38.6 bn
(USD59.9m) in domestic cre d i t ,coupled with an increase of T Z S
31.1 billion (USD48.3m) in other items net.The decline in cre d i t
was caused by considerable re p ayment to the banking system,
by both the Government and the private sector.
S i m i l a r ly, inflation exhibited significant improvements during the
first half of 1997/98. Despite the food shortage experienced
during the second half of 1997 when the road haulage system
was brought to a standstill, inflation dropped to 15.2 percent by
December 1997, c o m p a red with a high of 17.8 perc e n t
re c o rded in Ju ly 1997.
The overall weighted average annualised yield for all maturities
fell from 14.8 percent in August 1997, to 10.5 percent in
N ovember 1997, b e fo re picking up again to 11.4 percent by
December 1997.This was attributed to increased competition
in the marke t , and decline in tender size. M e a n w h i l e, t h e
S t a t u t o ry Minimum Reserve Ratio of 12.0 percent that prev a i l e d
t h roughout 1997 was reduced to 10.0 percent with effect fro m
N ovember 1997.
The government fiscal performance for the second quarter of
1997/98 was satisfactory. R eve nue collections amounted to T Z S
163.2 bn (USD266m) equivalent to 99.0 percent of the
estimated reve nue collection for the period. S i m i l a r ly, t h e re was
an increase in re c u rrent expenditure to TZS 161.2 bn
(USD263m) resulting in an increase in expenditure on other
goods and serv i c e s . The improvement in the fiscal position
w a s m a i n ly attributed to the increased reve nue collection fro m
enhanced corporate tax collection effo rt s , and from parastatal
d i v i d e n d s .
Net international re s e rves of the Bank of Tanzania increased and
by December 1997 had reached USD 272.6 m. The Bank of
Tanzania has targeted to build-up re s e rves equivalent to 20
weeks of import re q u i rements by June 1998.With re g a rd to the
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