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Thursday, March 24, 2022

Acknowledging State Effort in Rebuilding the Economy: - Reflections on President Samia’s one year in office.

 By Abdulmajid Nsekela

The last two years have provided a near-perfect test-case for economic resilience for most economies. The COVID-19 pandemic was a least expected occurrence but perhaps; the most disruptive since World War II. Like many nations around the world, the immediate challenge for most African countries was how to manage the spread of the virus to save lives, and ensure their economies continue to function. For many corporations, especially the banking industry, the priority was to safeguard employees and customers and ensure continuity of essential services.  

Tanzania emerged from the crisis more resilient, as evidenced by the rebounded economic growth and stable macros. The latter can be attributed to a supportive business environment, facilitated by the sixth phase of the national government, under President Samia Suluhu Hassan. If anything, the last 12 months have been but defining in terms of economic recovery and building new engines of growth. President Samia has outdone herself in ensuring stability and, more so, in restoring confidence in the investor community in the potential and prospects of Tanzania.  

Facilitating the growth of the banking sector 

The banking sector has witnessed impressive growth, thanks to an array of government initiatives to promote investments in the country. The President’s multilateral engagements with foreign governments and individual investors; have born fruits in increased inflow of FDI, which has improved liquidity in the economy.     

Undoubtedly, the banking sector has been one of the biggest beneficiaries of the sustained government efforts, starting with the mitigating measures instituted to safeguard the industry from the adverse impact of the COVID-19 pandemic. The capitalization of the Tanzania Agricultural Development Bank (TADB), alongside other strategic interventions to ensure sufficient capital to fund key sectors of the economy point to a deliberate effort to strengthen the country’s financial institutions. The multilateral engagements have also yielded improved liquidity, which improved from 4.3% in 2020 to 9.3% at the end of 2021. Credit to the private sector also grew substantially from 3.1% in 2020 to 10% in December 2021, signaling sustained recovery, especially i
n the wake of disruptions witnessed in 2020. 

Laudable effort in reviving tourism 

The tourism industry was among the worst-hit sectors during the pandemic. The travel restrictions curtailed the movement of foreign tourists from our traditional source markets in Europe, the US the UK. With the recent efforts of the government’s mitigation measures, the sixth regime has done fairly well in resuscitating the sector, especially by addressing health concerns and adopting a coordinated approach in dealing with the pandemic with traditional trading partners and other parties.  

More importantly, the President’s gracious effort to market Tanzania as a tourist destination remains one of the boldest moves; which will have a long-term impact on the sector. President Samia's participation in the Royal Tour documentary added impetus to the sectoral efforts to market the various attraction sites, especially in the northern zones of Kilimanjaro and Arusha. With the continued recovery of tourism, it suffices to say that the country is on a slow and steady path towards regaining its share of the market, even as the tourism value chain continues impacts livelihoods. 

For the banking industry, recovery of the tourism sector implies that customers; whose ability to repay their loans had been impaired by the pandemic can now pay. The net result is demonstrated in the improved industry NPL average from 9.3% in 2020 to 8.2% as of December 31st, 2021. We anticipate that more customers will fully recover and return to profitability.   

Increased infrastructure spending is a boon for the economy 

Infrastructure remains a key enabler of economic growth and a factor of consideration by investors looking to invest their capital in any market. Tanzania’s recent success in growing its economy can be attributed to the availability of reliable infrastructure, which has opened up the country both to the internal and external markets. 

The Country’s Vision 2025 blueprint recognizes the need for adequate physical infrastructure capable of supporting all sectors of the economy. President Samia’s continued focus on the mega projects, including the SGR, Julius Nyerere Hydropower Project, and the road network, is commendable and; underscores the importance that Her Excellency’s regime places on infrastructure and elevates the country’s attractiveness as an investment destination. Improving the infrastructural capacity of the country remains critical to the growth of the economy as it will provide the necessary incentive for foreign investments, which translates to increased liquidity and more capital in the economy.

More importantly, infrastructural projects such as the above, provide employment and create demand for services, most of which are rendered by small and medium-sized enterprises. Continued investments, therefore, means that the economy will continue to be a vibrant economy and the country will benefit from sustained growth in the associated value chains. The banking sector, under the auspices of the Tanzania Bankers Association (TBA), remains committed to supporting the government’s agenda, fully recognizing the long-term impact that, the expansion of infrastructure will have on the economy.  

Transparency will build synergies and foster inclusion 

Without a doubt, there’s a paradigm shift in the way public infrastructure projects are being undertaken. In the last year, we have witnessed increased transparency, and wider engagements within the government circles, as well as the private sector. The banking sector, in particular, is increasingly being seen as a key partner in the country’s development agenda, which points to growing stakeholder confidence in its capability to serve the economy. We remain grateful to President Samia recognising the role the banking sector plays in facilitating economic growth. 

Creating an enabling environment for business 

Since taking office, President Samia has had a very inclusive approach in matters of economy and, more so, in addressing impediments to growth. As an industry, we remain upbeat about the economic prospects, knowing that Her Excellency’s administration is committed to creating an enabling environment for business. 

Going by the engagements we have seen in the past year, with regional governments, we do not doubt that the current political administration is indeed progressive. You will agree, that the President’s economic diplomacy approach - in East Africa and beyond - continues to unlock opportunities for intra-regional trade, by addressing both tariff and non-tariff barriers to trade. 

A good example is the effort to address impediments of trade with Tanzania’s traditional trading neighbours such as Kenya, Uganda, Burundi, Rwanda, and the DRC. An illustrative success case was the formation of the Joint Commission on Cooperation (JCC), as a bilateral organ to resolve issues affecting all areas of cooperation between Kenya and Tanzania. The commission reported resolving more than 30 issues with their Kenyan counterparts shortly after the appointment and committed to completing the exercise at the close of the year.  

The multi-sectoral collaboration will transform the economy

Reflecting on the past year of President Samia’s leadership, I am persuaded to say that the current political administration is showing a strong commitment to building an inclusive economy. There’s a recognizable effort, on the part of the government, in supporting private sector initiatives on financial inclusion, such as the Niko Fiti campaign mooted and championed by the banking sector umbrella body, TBA. Looking at it, as an executive in the sector, I acknowledge the state effort, in as far as supporting the growth of the sector, and more so in streamlining the regulatory environment. The latter will go a long way in improving the investment climate and fostering corporate prosperity.    

The Writer is the Group CEO and Managing Director of CRDB Bank Plc, and the current chair of the Tanzania Bankers Association (TBA)

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