After a period in the investment outhouse, risks are definitely becoming more manageable again. The business environment may still be relatively speaking opaque, but it’s certainly worth getting in early.
COMMENTARY: REFLECTIONS ON TANZANIA
Toby Latta, EAA’s CEO, spent a week in Dar es Salaam in October. Here he comments on what he found.
In conversations with businesspeople in the bars and restaurants of Dar es Salaam, often they still instinctively lower their voices and lean over the table when discussing the situation in Tanzania. It’s only with a margin of exaggeration to say that the pall of fear is just now lifting, an atmosphere created by heavy handed regulators, intolerance to dissenting voices and bureaucratic and judicial harassment that fell on to the business community under the previous Government.
Discussions about the business environment under Tanzania’s new President Samia Suluhu Hassan inevitably start with a therapeutic airing of the challenges under her predecessor John Magufuli, whose untimely death in March, has led to a period of what most describe as welcome change.
Covid denial, outright hostility to foreign business and the private sector, night-time knocks on the door and arrests for tax violations, and bureaucratic obstructionism drove many out of the country. Some diplomatic missions were left completely out in the cold, neighbouring countries and global powers shunned, and the Government refused to engage multi-lateral institutions with any transparency.
That’s not to say that plenty of decent business was not done; and to large swathes of the population the populist President was, well, popular. His push for building much-needed infrastructure, strong year-on-year growth rates, the fight against endemic corruption and the strong-man image went down pretty well. But you would be hard pressed to find cheerleaders amongst foreign trade bodies and the international business community – the EAA included – for investing in Tanzania.
Today the tone from the top could not be more starkly different. President Suluhu, or Mama Samia as she’s (already quite affectionately) known, has set a direction which has acknowledged the pandemic, initiating vaccination programmes and putting in place Covid recovery plans; opened dialogue with neighbours and the international community; and overtly courted private business and international investors. She has instructed her administration to clear the way and enable – rather than obstruct – international investors to come and do what they do well.
“Tanzania is open again for business”, is a refrain I heard more than once during my recent week-long visit to Dar, trying to ascertain how genuine this transformation really was. In many ways the Government is going out of its way to ensure the message is not only heard (and it has been) but also acted on. Some early moves to facilitate visa and work permit applications, a big point of contention under the previous regime, dealing with VAT refund backlogs, restraining the excesses of the Tanzania Revenue Authority and making Government departments accessible and helpful again are there in plain sight to see.
Significantly, some big signature projects, which had run into the sand in recent years such as the Lindi LNG project and Kabanga Nickel, have been fast-tracked as a means of showing that the Government really means what it says.
Lawyers and consultants are observing an uptick in interest; hotels once packed out with visiting business delegations and Dar’s previously over-subscribed upscale expat enclaves in Masaki and Oyster Bay, are slowly beginning to see some action again. The UK High Commission recently co-hosted a well-attended investment forum, and a number of other European countries have done the same. “We’re ready to receive and we’re ready to listen”, said Prime Minister, Kassim Majaliwa at the UK forum. And by all accounts, it’s the case that Ministries and Government agencies, are becoming accessible again.
My own visit, which included meetings with a number of senior Government officials, was heavily facilitated by the Tanzanian High Commission in London and enabled by Ministry desk officers on the ground. “A year ago, you simply would not have been granted the access”, one long-term expat told me, when discussing my meetings.
But amongst the strong notes of optimism that abound, caution still lurks in the offices of Dar. “The jury is still out” is what we also hear, from those who are close to the action on the ground. And that is because, for all the words coming in a remarkably unified way from the administration, actual action to improve the business climate is – perhaps inevitably – slower to come. “There’s a feeling that the Government is overwhelmed with all the things they need to do”, one senior diplomat told me in Dar. Some quick big wins to demonstrate changes to the ease of doing business would go down well, to counter the sense that for all the words, there’s still an entrenched and somewhat hostile bureaucracy in place from the previous regime.
And while the ambiguity at the heart of Government about the role of the private sector reached an apogee during the Magufuli years, in certain regards it has a longer history which may still take some time to overcome. While superficially better, the “state’s ingrained attitude towards the private sector remained one of distrust” as the private sector “can only be out to help itself”, said the head of one business association in Dar. It was time for the Government to fully embrace that “there is a joint and shared responsibility with the private sector to take the country forward”.
Can the President get her own way, given that there are still ranks of Magufuli loyalists within the ruling CCM party, who may not be entirely comfortable with the break from her predecessor? The answer appears to be that she is playing a cautious game, initially having made more cosmetic changes to the Cabinet while keeping the loyalists on side. And then, gradually consolidating her position with her appointees and policies of her own making.
The compromise to maintain a balance is, it seems, on the pace of civil liberties reform, with slower progress so far seen with regard to press freedom, and continued constraints on opposition parties’ activities. Certain lines – for example on calls to change the Constitution – cannot be crossed, for now.
It is however a country that is used to listening to the tone – and taking instructions – from the top. While there are those who oppose the direction Mama Samia is taking the country, the seemingly authentic messages we hear down the chain are genuine reasons for optimism. The recent appointments, notably of January Makamba to the Energy Ministry, amongst others (as we write in our Tanzania country section of this newsletter) are encouraging.
“It is very tangible how the Government is listening intently to the private sector, which is a complete change from what went before – it was very much a one-way street from Government”, said a representative of the Tanzania Private Sector Foundation, which has attempted to maintain a dialogue with the authorities throughout.
Geoffrey Mwambe, the Minister for Investments in the Prime Minister’s office, told me during our meeting in Dar: “The private sector should do what the private sector does well … let it have a big say in production and other sectors, and the Government should not be involved”. The message is clear: the Government should get out of the way.
Mr Mwambe was responding to a question about the ease of doing business, about which he was passionate, and assured me that the new Investment Law, which was “currently on its way through Cabinet committees and could be passed as early as January 2022”, would be nothing less than “a game changer”. He also pointed to the implementation of the Blueprint on Regulatory Reforms, which contains a series of recommendations for improving the business environment, which he said the administration is now committed to embracing.
As we say in the corporate world, the tone from the top is important, but “tone from the middle” more so. And I would warrant it is beginning to filter down.
In the “Perestroika” of President Suluhu’s Tanzania, in bolder tones around the lunch tables we discussed how we have an environment that is becoming conducive to investment again. After a period in the investment outhouse, risks are definitely becoming more manageable again. The business environment may still be relatively speaking opaque, but it’s certainly worth getting in early. And this is a position the EAA very much supports.