Africa: As East Africa Grows, Southern Africa Is Being Left Behind

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In: Tanzania Foreign Investment News

Why is Southern Africa’s economic growth the worst of all Africa’s regions, while East Africa is number one?

With an economic growth rate exceeding its population growth, Africa should be achieving economic development advances – but that is not the case. Poverty remains widespread, and there are huge differences in performance between the continent’s five regions. This is influenced by geographic location, structures of individual economies, commodity dependence, regional political dynamics, and resilience to global shocks.

In the African Development Bank’s African Economic Outlook 2023, East and Southern Africa’s economic growth rates stand out (see graph). Over the 2021-25 period, Southern Africa is the continent’s worst regional performer, while East Africa is number one. In fact, projected growth rates indicate that East Africa will accelerate while Southern Africa will continue to underperform

How do these two regions compare? Of the 13 countries in Southern Africa, 69% are middle-income economies. In contrast, only 38% of East Africa’s 13 nations hold middle-income status, with most still classified as low-income. The general notion that low-income countries tend to grow faster than middle-income countries could favour East African economies in their growth trajectory. But that is not enough to fully explain the two regions’ varied performance.

The broad structures of the two regional economies differ. Ten East African countries are non-resource-intensive economies, versus seven in Southern Africa. Both regions have one oil-exporting country – South Sudan in East Africa and Angola in Southern Africa.

Southern Africa dominates with five economies rich in non-oil resources, while East Africa has only two. The fact that East African countries are less exposed to global commodity booms and busts in their economic structure may benefit the region. This is evidenced by the 2023 Macroeconomic Performance and Outlook report, which indicates that from 2021-24, non-resource-intensive economies tended to grow faster than the other categories.

Southern Africa contributes 22% to Africa’s gross domestic product (GDP), while East Africa’s contribution rose from 14% in 2018 to 17% in 2022. A 2023 Euromonitor article reported that East Africa’s contribution to continental GDP is projected to account for as much as 29% by 2040. This projected growth in the region’s GDP depends on a continued high-growth path in this part of Africa.

Apart from the influence of the global economy, shocks and geopolitical events, regional dynamics and neighbouring countries’ performance have strong knock-on effects. In the case of Southern Africa, South Africa and Angola together account for 75% of the region’s output. In East Africa, four economies – Ethiopia, Kenya, Tanzania and Uganda – account for around 84% of the region’s output (see map diagrams).

Even though all the economies are exposed to global geopolitical shocks and continued global uncertainties, East African countries tend to be more resilient than those in Southern Africa in terms of growth.

Underperformance in Southern Africa could predominantly be attributed to the stagnation of South Africa’s economy and its impact on the region. The numerous political, structural, and macroeconomic challenges in South Africa and other countries in the region affect physical and social infrastructure. This reduces productivity and constrains domestic demand.

Botswana and Mauritius have above average long-term growth performances, with higher growth expectations for Mozambique and Zambia. Despite this, Southern Africa’s economic growth is expected to be insufficient to carry the region forward significantly. Moreover, Southern Africa is plagued by high external debt burdens, poverty, inequality, and especially youth unemployment.

In contrast, East Africa’s robust economic performance is driven by the strong showing of seven of the region’s 13 countries. Rwanda, Ethiopia, Uganda, Tanzania, Djibouti, Kenya and Seychelles are the highest performers, with average growth rates of over 5%. Rwanda was one of the key sustainable growth success stories with a growth rate exceeding 7% on average annually. These impressive results benefit the rest of East Africa despite Somalia and Sudan’s political instability.

Several key policy decisions drive economic growth in East Africa: the Look East Policy of embracing China, investment in road and communications infrastructure, support for agriculture, and prioritising connectivity and trade within the region.

Mega infrastructure projects cover roads, ports, airports, railways, dams, bridges, hydropower projects and crude oil pipelines. Examples include Kenya’s 592km Standard Gauge Railway, a train line between Addis Ababa and Djibouti, Uganda’s Karuma Hydropower Project, Tanzania’s newly planned Bagamoyo Port, the Bugesera International Airport Expressway in Rwanda, and South Sudan’s Juba International Airport.

The region is now reaping the benefits of these infrastructure projects, even though financial arrangements with China remain complex.

A large part of East Africa’s growth is driven by the service sector. Government spending and strategic investments have supported in-country connectivity and intraregional trade. With a rising middle class, regional demand for banking, insurance and healthcare is also increasing. East Africa is known for its agricultural exports, and the modernisation of agricultural production was a crucial part of government spending. Djibouti, for example, improved its transport infrastructure to become an interregional logistics and trade hub.

Although Southern and East Africa are exposed to the effects of climate change, skills shortages and unemployment, continued growth and development in the two will depend on internal and regional growth dynamics.

While East Africa is on a positive, sustainable growth path, Southern Africa is stagnating. Growth and development in these two regions will depend on the extent to which the economies can individually and collectively navigate their growth trajectories. Southern Africa should focus on political and policy certainty, macroeconomic stability and enhanced regional cooperation to address its lagging growth.

This article was first published in the ISS’ African Futures and Innovation blog, Africa Tomorrow.

Elsabé Loots, Professor of Economics, Faculty of Economic and Management Sciences, University of Pretoria

Source: allafrica.com

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Tanzania sugar factory blast kills 11, injures two others

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citizen

By THE CITIZEN

A Kenyan is among those killed in an accident at the Mtibwa sugar factory in Tanzania’s eastern Morogoro region.

The incident occurred after an electrical fault in the heating system, officials from the Fire and Rescue Brigade (FRB) and local police have confirmed.

“We have confirmed that one Kenyan, one Indian and one Brazilian died in the incident which happened in the early hours of May 23 at 1:30 am,” SACP Morogoro Regional Police Commander Alex Mkama told journalists in Morogoro.

He said all the bodies had been preserved in the mortuary at the factory’s hospital.

SACP Mkama said the dead were all electrical and mechanical engineers who were in the control room making final adjustments before the start of the day’s production shift.

“Two injured people have been admitted to Bwagala Mission Hospital in Turiani Ward,” said SACP Mkama.

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Earlier on Thursday, Morogoro Regional Fire and Rescue Commander Shaban Marugujo told Mwananchi newspaper that a team from the FRB was immediately dispatched to the scene of the accident to carry out rescue and evacuation exercises.

He said preliminary investigations indicated that an explosion occurred when the technical team was preparing machinery to start sugar production.

“We will release an official report once the investigation is complete,” he said.

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Tanzania: Tanganyika and Zanzibar – Tanzania’s 60-Year-Old Union May Need a Restructure

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On 26 April 2024, Tanzania celebrated 60 years of the union between Tanganyika and Zanzibar. The union, which created the present-day United Republic of Tanzania, stands out among the longest lasting political arrangements of its kind in Africa, and has shaped the country’s construction of national identity. Nicodemus Minde, who has researched Tanzania’s politics, unpacks the union’s dynamics.

What’s unique about the Tanganyika-Zanzibar union?

The union between Tanganyika and Zanzibar is not the only attempt at political unification in Africa. Previous ones include the Ethiopia-Eritrea Federation (1952-1962); the Ghana-Guinea-Mali Union (Union of African States) (1958-1963); and Senegambia Confederation (1982-1989). Those have been wound up, but the Tanganyika-Zanzibar union has remained intact.

Unification attempts in post-independence Africa have been fraught with challenges. In some cases, nationalist movements wanted to annex territory. In others, countries have split into two, such as Ethiopia-Eritrea (1993) and Sudan-South Sudan (2011).

There are still many active separatist and nationalist movements across the continent.

For six decades, the Union of Tanganyika and Zanzibar has withstood challenges. It has been celebrated as a success of the pan-African vision of a united Africa.

But there are murmurs and disquiet over the nature, structure and the future of the union.

What led to the union?

On 26 April 1964, two independent states, the Republic of Tanganyika and the People’s Republic of Zanzibar, merged to form the United Republic of Tanzania. Tanganyika had gained independence from Britain on 9 December 1961 with Julius Nyerere as its prime minister.

Zanzibar, also a former British colony, had become an independent constitutional monarchy under Sultan Jamshid bin Abdulla on 10 December 1963. The African majority led a revolution against Arab control on 12 January 1964, establishing a new government led by Abeid Karume.

The formalisation of the union was agreed in the Articles of the Union, which outlined 11 areas of cooperation between the two regions. These were the constitution, foreign relations, defence, police, emergency powers, citizenship and immigration, external trade, public service, tax related matters and harbours and civil aviation.

The union was conceived in the midst of debates on pan-Africanism and the politics of the Cold War. After the Zanzibar revolution of January 1964, western powers such as the US and Britain labelled Zanzibar as Africa’s Cuba. This was in reference to Cuba’s proxy role in the rivalry between the US and the Soviet Union.

Nyerere also saw Zanzibar as a security threat and once remarked that if his wish could be granted, Zanzibar would be towed further into the Indian Ocean. There were however socio-cultural and economic ties binding the people of Zanzibar and Tanganyika that justified the union formation.

The union is credited with construction of Tanzania’s national identity. It has enhanced the social, economic and cultural interactions between residents of Zanzibar and the mainland. The constitution requires the sharing of the president and vice-president positions between the mainland and Zanzibar. Tanzania’s current president, Samia Suluhu Hassan, is from Zanzibar. The ruling party, CCM, has often supported the current union format, which favours its continued stay in power. The party’s fear is that democratising the union could result to an opposition win.

Zanzibar is one of the world’s top tourist destinations, and as a result, both Zanzibar and mainland Tanzania have reaped substantial economic benefits from tourism.

Has the union eased tension between the regions?

There are always tensions between the two entities. Between 2011 and 2013 Zanzibari nationalism was at its peak. Sections were calling for secession. They were dissatisfied with the structure of the union and waning sovereignty, especially the mainland’s influence on economic and political affairs in Zanzibar. This cooled down with the elevation of Samia to the presidency.

The ruling party has often ignored calls to deal with the union’s squabbles. Lately, there has been clamour to bring back the government of Tanganyika. The opposition is questioning Samia’s two main decisions that affect mainland Tanzania. The first is the eviction of Maasai people from their ancestral land of Ngorongoro and the second is the decision by the government to enter an agreement with the Dubai based DP World for the management of the Dar es Salaam port. The president being from Zanzibar, the opposition has accused her of auctioning mainland land. These claims highlight the fragility of the union, which the opposition cites as grounds for demanding a new constitution.

From some of the published opinions and several interviews that I have had with political leaders, it appears many Tanzanians feel the union should be reformed to reflect contemporary realities.

A 2014 report by the Constitution Review Commission, set up to collect views and propose a new constitution, outlined emerging political and economic grievances from both entities. For example, many mainlanders see Zanzibar as a distinct entity, with its own president, national symbols like a flag and anthem, and a semi-autonomous government. On the other hand, Zanzibaris have criticised the lack of transparency in union finances and the absence of clear procedures for managing the union. These issues have still not been addressed.

What’s ailing the union?

One of the major issues that has bedevilled the union has been its structure. It is a two-government system consisting of the Revolutionary Government of Zanzibar and the United Republic of Tanzania. Both governments are led by the ruling party, CCM, which has guarded the union as a sacrosanct entity that defines Tanzanian nationhood.

In 1993, a section of mainland legislators known as the Group of 55 (G55) pushed for a return of the government of Tanganyika. They wanted a three-tier government: one for each region and a union government.

A presidential commission had, in 1991, recommended a similar structure. Two other commissions also recommended a three-tier government.

What needs to be done?

For the union to continue to exist, recommendations made by different commissions on its nature and structure should be implemented. The proposal for a three-tier government format with executive control in the two entities and a union president would go a long way in easing the union tensions. These recommendations were after all made from popular opinions from both sides of the union.

Alternatively, the union question should be subjected to a popular referendum. Referendums have been done in South Sudan, Catalonia, Quebec and elsewhere to determine people’s views on independence.

Nicodemus Minde, Researcher, United States International University

Source: allafrica.com

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Tanzania: Domestic and Foreign Investments Spur Eco-Growth

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In: Tanzania Foreign Investment News

ACCORDING to the Bank of Tanzania, economic growth in Q1-24 is estimated at 5.1 per cent, backed by increased domestic and foreign investments.

This was underpinned by the notable private sector credit growth which remained in double digits for the last two years. Headline inflation saw a slight increase of 10bps in the year ending April 2024, standing at 3.1 per cent, from 3.0 per cent in March.

Despite the slight increase, inflation remains with the central bank’s target range of between 3.0 per cent and 5.0 per cent. Stable inflation stems from stabilised food prices as the non-core inflation stood at 1.4 per cent, 50bps higher than February.

The Unprocessed Food Index saw a slight annual deflation of 0.5 per cent in April from 0.6 per cent in March and 0.1 per cent in February. However, the index saw a 1.0 per cent inflation on a monthly basis, down from 1.9 per cent for March 2024 due to seasonal movements.

The period between February and April is historically known to have the highest monthly food inflation being far from harvest seasons.

Considering the weight and significance of food products in the consumption basket of the Tanzanian community, along with significance of agriculture as a sector in the balance of payment, employment, and its share to GDP, the government has been taking a number of initiatives to improve the agriculture sector and domestic food security, partially leading to the recent stability in food prices.

Some of government’s initiatives include providing a 1.0tri/- agriculture facility at the central bank available to commercial banks, to lend to the sector at less than 9.0 per cent since 2021. In the same vein, the Bank of Tanzania further waived the statutory minimum reserve requirement for credit extended to agricultural activities.

The government also provided subsidies in agriculture inputs such as fertilizers to alleviate input prices during the pandemic and global supply shock experienced since the end of 2021. Moreover, in 2023, the Ministry of Agriculture oversaw the establishment of the Tanzania Agriculture Insurance Consortium (TAIC) which is a collaboration between the government, agriculture stakeholders, and insurance companies.

The primary objective is to empower farmers against the risks surrounding agricultural activities, while simultaneously attract financing into the sector.

Furthermore, in his budget speech, the Minister for Agriculture hinted on the Ministry finalizing talks with NBC Bank in regards to the National Food Reserve Authority (NFRA) issuing a Food Security Bond so as to ensure sufficient domestic food supply.

Despite this being a notable development for the sector, and a demonstrator of how capital markets can be utilized for economic development, generation of NFRA’s cashflows for debt service is a crucial question to be poised, so as to avoid addition of debt burden. We wait for the final structure of the programme.

While non-core inflation was minimal, energy inflation was flaming as the Energy, Fuel and Utilities Index went up 9.3 per cent in the year ending April 2024, the highest pace among all inflation consumption basket segments. This follows rising fuel prices following geopolitical tensions in the Middle East and Europe. Notably, the index’s annual inflation rose from 5.1 per cent in December 2023.

Energy inflation is backed by the 16 per cent approximated increase of domestic fuel prices as published by EWURA. On a monthly basis prices went up 1.7 per cent and 4.0 per cent since the beginning of the year. The annual increase is echoed by the 11 per cent global crude oil price increase according to Trading Economics.

Global fuel prices have seen slight volatility in the last few weeks as increased global supply suppresses prices, while geopolitical tensions, especially in the middle east push prices higher. Core inflation stood at 3.9 per cent, highly influenced by personal care, social protection, and miscellaneous goods and services segment which was up 7.5 per cent in the year ending April.

Other influential segments in the core inflation were Transport (4.35 per cent) lifted by the rise of fuel prices, and Restaurants and Accommodation Services segment (4.05 per cent) as tourism sours following the government’s promotion and continued recovery from the pandemic.

Despite subdued inflation, the Bank of Tanzania raised the central bank policy rate (CBR) by 50bps to 6.0 per cent in April, as a pre-emptive measure against lingering inflationary pressures mostly stemming from persistent foreign exchange challenges facing developing countries.

The Federal Open Market Committee (FOMC) in the meeting held on 1st May 2024, maintained interest rates at 23-year high amid stubborn inflationary data in February and March. This is contrast to expectations in the beginning of the year when markets anticipated at least three rate cuts in 2024.

Despite elevation of the CBR by the Bank of Tanzania, it is still the lowest rate in the region, demonstrating relatively subdued inflation and diversified sources of foreign inflows. Moreover, the central bank has suppressed Treasury yields throughout the month of April, by accepting less than target amounts, despite hefty oversubscriptions, especially in the long-term tenor auctions.

Suppression of Treasury yields is crucial in the maintenance of sufficient liquidity in the banking sector as government’s efforts to encourage investments have elevated the demand for credit, while the overall loans to deposits ratio remains above 90 per cent for the last eight quarters.

The demand for credit is demonstrated by the banking sector performance which saw the overall net loan portfolio grow by 22 per cent y-o-y in Q1- 24 while total assets went up 17 per cent. Similarly, the overall net profit for the quarter grew by 51 per cent compared to Q1-23.

Source: allafrica.com

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Africa: President Ruto Roots for Local Manufacturing of Vaccines in Africa

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In: Tanzania Foreign Investment News

Atlanta, U.S. — President William Ruto is rooting for the local manufacturing of vaccines in Africa.

He said coronavirus pandemic exposed the acute state of the continent’s pharmaceutical production.

President Ruto said during this trying time, Africa was denied timely access to Covid-19 vaccines.

“We suffered (greatly) from this vaccine nationalism,” he stated.

He was speaking on Monday at the Centre for Disease Control (CDC) Headquarters in Atlanta, Georgia, United States of America.

He also witnessed the signing of three key MoUs.

One between CDC and Kenya Medical Research Institute that will deepen partnership on the cutting-edge research to answer the most important public health questions of our time and launch of the Applied Science Hub

The second pact focussed on the collaborative efforts between the Ministry of Health and the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR) in developing a Sustainability Roadmap for Kenya’s HIV Programme which is slated for completion in December.

Also signed was the joint proclamation between CDC and Kenya that ushers in the operationalisation of the Kenya National Public Health Institute to strengthen health security globally.

The President maintained that solid research will boost Africa’s capacity to locally produce vaccines.

He lauded the United States of America for being Kenya’s true ally in healthcare.

He said Kenya will broaden its partnership with the U.S. beyond health infrastructure, research and the tackling of infectious diseases.

“We want to work closely, transform the U.S.-Kenya health cooperation, for the wellbeing of everyone.”

The President, who is America for a three-day State Visit, earlier spoke at the Jimmy Carter Library and Museum and toured The Martin Luther King, Jr. Centre for Nonviolent Social Change.

He paid homage to Martin Luther King Jr. and Jimmy Carter, stating the two left behind a lasting legacy.

“We are reminded of the impact that individuals can have in shaping history and advancing democracy and justice.”

Later on, the President met the Kenyan Diaspora where he insisted that the Government will keep engaging with Kenyans abroad.

He pointed out that the Government has intensified diaspora registration and mapping for skills and expertise.

“We are developing the Global Labour Market Strategy that targets safe, secure and orderly placement of Kenyans in employment opportunities abroad,” he said.

He argued that the Government is fast-tracking Bilateral Labour Agreements to expose Kenyans to a diverse and broad range of opportunities.

Source: allafrica.com

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