August 29, 2003

Economy is growing but the people's purchasing power falling

The purchasing power of Tanzanians has fallen in the last decade amid reported increases in economic growth and money in circulation, Business Times has this to report.

Having grown at 6.2 per cent last year, Tanzania's economy is said to be the third fastest growing in the 14-member SADC bloc. In this, it is beaten only by the economies of Angola (13.8 per cent growth rate) and Mozambique (eight per cent). However, the country's per capita gross domestic product (GDP), measured in purchasing power parity with the US dollar, factually dropped from 620 in 1992 to $523 last year. By comparison, the PPP-US$ for Mozambique rose from 380 to 854 in the same period - while that of Angola skyrocketed from 751 to 2,187!

Therein lies the paradox: falling purchasing power in Tanzania in the face of a 'growing' economy when, with their economies growing, the purchasing power of Angolans and Mozambicans also grew by leaps and bounds! Responding to a Business Times question on the paradox at a press conference in Dar es Salaam last Tuesday, the newly installed SADC chairman and president of Tanzania, Benjamin Mkapa, said "different factors contribute to the situation." The conference came in the wake of the closing ceremony of the SADC annual conference which was held in the city from August 19-26.

According to Mkapa, the apparent economic growth is the result of huge investments in the mining sector, and growth in the tourism industry. However, Mkapa said, the lead sector, agriculture - which employs the majority of Tanzanians - is growing at a snail's pace, with the production system remaining at the subsistence level. Furthermore, farmers face storage problems. More than one-third of their hard-earned produce faces post-harvest spoilage and losses. "While internally our production is not sufficient, externally prices at the world market have fallen drastically coffee prices have fallen by 40 per cent," Mkapa said by way of illustration.

Efforts are being made to improve production patterns, Mkapa noted, adding that the Community (SADC) will do much to consolidate the international markets. Another school of thought, however, argues that the decline in purchasing power is the result of capital flight - especially regarding investments in the mining and tourism sectors.

Leonard Derefa, a member of Parliament for the Shinyanga Urban constituency, is on record as having shown surprise that the purchasing power of Tanzanians has gone down amid increased money in circulation. According to a Bank of Tanzania Economic Bulletin, currency notes and coins in circulation in 1995 amounted to Tsh264.1 billion. Last year, the amount had more than doubled, reaching Tsh546.7 billion: an increase of Tsh282.6 billion. "Yet, the purchasing power has declined," Derefa noted in bewilderment. The MP's interpretation of this paradox is that 'prosperity' in mining and tourism, aided and abetted by wholesale privatisation and liberalisation, encourage capital flight, with foreign investors spiriting their profits out of Tanzania.

Derefa also expressed concern on the growing trend of importing raw materials and other inputs that are readily available in Tanzania. He cited as an example the importation of electricity poles while same are available in the overgrown Sao Hill timber estate. "If all the transmission poles, corks, labels, bottles, barley and other requirements would be sourced locally, our purchasing power would improve," the parliamentarian told Business Times in a subsequent interview. In the past, Tanzania Breweries Limited used to import bottles and other industrial bric-a-brac for their plants. In this regard, Derefa commended the Breweries for their assistance in building local capacity that has enabled it to obtain some of those requirements from domestic suppliers. (Business Times, Dar es Salaam)

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