Tanzania: Magufuli's challenge - African Business Magazine
Tanzania: Magufuli’s challenge

Tanzania: Magufuli’s challenge

Since his election in October, Tanzania’s President John Magufuli has continued to burnish his no-nonsense reputation for asceticism and getting things done. Having beaten Edward Lowassa, a former heavyweight of the president’s ruling Chama Cha Mapinduzi (CCM), to the top post on an anti-corruption ticket, Magufuli spent his first day in office paying a surprise visit to the finance ministry, where he publicly berated officials.

Since then, he has been seen cleaning the streets outside State House as part of a public clean-up operation and in October cancelled Independence Day celebrations in an effort to save money. Public officials have meanwhile been banned from flying first class on trips abroad, or even sending Christmas cards at the expense of the taxpayer. This has been backed up by a widely publicised anti-corruption drive that has already led to the dismissal of several high-profile figures.

Nicknamed “the Bulldozer”, Magufuli has been hailed as a fresh start for his party, which came under growing criticism during the administration of his predecessor, Jakaya Kikwete, for corruption and inertia. In contrast, Magufuli earned himself a reputation as an effective technocrat during his years in various ministerial roles at the Ministry of Public Works. In choosing his cabinet, Magufuli selected just 19 ministers, almost half that of his predecessor, marking a further sign of his commitment to a leaner and more efficient way of governing.

This has resonated well with both businesses and the electorate, which have grown increasingly frustrated with the lavish lifestyle of Tanzania’s public servants. His reputation for austerity has even inspired the Twitter hashtag #WhatWouldMagufuliDo to promote posts mimicking the president’s cost-saving initiatives.

But as Tanzania faces growing economic headwinds with the fall in global commodity prices and rumbling political disputes within the CCM, it remains to be seen how well Magufuli will navigate the course that now presents itself. Revenues from Tanzania’s most precious export, gold, fell 7% to $1.3bn in the year through to October 2015, according to the central bank, and the government is under pressure to find new sources of income. If he is to build the foundations of the modern economy he has promised the electorate, much will depend on his ability to crack down on corruption and boost tax revenues, without unsettling his party’s old guard in the process.

Anti-corruption drive

At the top of the agenda is a widely publicised anti-corruption drive that has already claimed several prominent scalps. In November Magufuli suspended the head of the Tanzania Revenue Authority (TRA), Rished Bade, alongside five top customs officials over the disappearance of 349 shipping containers from the TRA’s records after they had arrived at Dar es Salaam port. The containers had been transferred to an inland container terminal without paying import duty at a cost of $37m in lost tax revenue, according to the government. The dismissal was followed in December by the sacking of the head of the anti-corruption bureau Edward Hoseah on the grounds of “poor performance and irresponsibility” in relation to corruption at Dar es Salaam port.

“There is no doubt he is determined,” says Donald Mmari, who heads REPOA, a Dar es Salaam-based think-tank. “But I hope he understands the need for institution building if he is to really tackle corruption. This is not a war that one man can win.”

To make a lasting difference, Mmari argues, Magufuli will need credible individuals to run the country’s anti-corruption agencies with the right powers to hold both public servants and powerful business tycoons to account.

This will not be easy. The investigation into the missing containers has underscored the depth of the corruption problem, implicating a number of high-profile and powerful individuals. Among those are Said Bakhresa, one of Tanzania’s wealthiest men, whose company, Azam Inland Container Depot, is under investigation by tax authorities in relation to the missing containers. Bakhresa’s corporate representatives have denied any wrongdoing.

Accusations have also surfaced in local media that Magufuli’s predecessor, Kikwete, and his family were among those who benefited from tax evasion at Dar es Salaam port, claims the former president has vigorously denied. Kikwete remains chairman of the CCM and analysts warn that too zealous a crackdown risks provoking a rift in the party that could undermine Magufuli’s position in the long run.

Tax generation vital to growth

The focus of the anti-corruption drive on Tanzania’s customs and tax agencies is part of a wider initiative to reform those institutions and boost domestic revenues to support long-term economic growth. Tanzania has consistently fallen short of tax collection targets set by the IMF and a streamlining of these institutions will be vital to Magufuli meeting his ambitious campaign pledges. These include increases in social spending, particularly on education and healthcare, while simultaneously investing in major road construction and hydropower projects designed to end Tanzania’s perennial power shortages.

The government has already claimed some progress, attributing improvements to tax-collection systems to an increase in domestic revenues to Tzs1.4 trillion ($640m) in December, up from Tzs900bn ($404m) when Magufuli was elected in October. Minister for Finance and Planning Minister Philip Mpango went so far as to claim on 6th January that, by sealing tax loopholes and making the wealthy meet their tax obligations, monthly tax receipts would soon rise to Tzs2 trillion ($900m).

This has drawn scepticism from both independent and official analysts. The governor of the Bank of Tanzania, Benno Ndulu, has noted that many major companies pay their taxes in December and collection rates would likely drop again in January.

“The jury is still out on whether the government will come up with an effective tax reform programme”, says Angus McLaren, a Dar es Salaam-based analyst with the British risk management company Protection Group International. “No concrete steps have yet been announced beyond plans to tax the rich, which could bring him into confrontation with his party’s wealthy financial backers. Without an overhaul of the tax collection system, the current activity is unlikely to amount to more than window dressing.”

While doubts hang over tax revenues, much hope still rests on the highly anticipated development of Tanzania’s vast natural gas reserves to boost the economy. However, delays in passing vital legislation to govern the upstream sector and ongoing uncertainties surrounding the construction of a liquid natural gas export terminal, have meant no companies operating in Tanzania have yet announced final investment decisions. At this rate, production is not expected to begin until the early 2020s at the earliest and many believe low world oil and gas prices could see this date slip further. Meanwhile, Magufuli has to manage the hopes of an expectant public in tough economic conditions. This will be no easy task.

Charles Pembroke

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Written by African Business Magazine

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  • Unleash Africa

    The emphasis on anti-corruption is certainly encouraging, the president would do well to divert some time and energy into thinking about industrial growth. Natural gas is all fine and good, but with a sophisticated petro-chemical industry we’ll still be a slave to fluctuating commodity prices. Let’s use our imaginations and think about what we already have: a huge labor force. Textiles, cosmetics, shoes….the opportunities are boundless.


    • kebo

      well said and also for the time being we should focus on modern day agricultural and try to help and develop our farmers and village.. also to provide land to people by Law …

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