Mkapa’s policies were key in attracting investors By Ami Mpungwe
When President Mkapa came into power, in October 1995, he took over from President Mwinyi who had, during his 10 year-tenure since 1985, begun the process of opening, both the economy and politics of Tanzania. President Mwinyi assumed office in 1985, under one-party system and found the economy, very much socialist and over controlled with all the major means of production, distribution, and exchange, under strict ownership and control of the state,” he says.
President Mwinyi had started the liberalization and privatization processes, through World Bank and IMF-led programs and also opened up politics because it was during his time that multi-party politics were re-introduced in Tanzania.
I had served under Mkapa as Foreign Minister twice before he became President, I was confident that he would make the necessary changes to modernize and bolster the economy, with profound level of conviction and commitment.
When he assumed power, President Mkapa did not only sustain President Mwinyi’s reform programs, but he further deepened that process of liberalization and modernization of the Tanzanian economy.
He started by first strengthening and deepening the macro-economic fundamentals, in such areas like, appropriate exchange rates, interest rates and taming inflationary drivers. He further took measures to save the economy from the unmanageable and unsustainable debt levels, through the World bank sponsored HIPIC (Highly Indebted Poor Countries) programs.
As build up to his macro-economic policies he also, determinedly addressed micro-economics related issues in various sectors. For example, in the mining sector, he started with the Mining Policy of 1997, backed by the mining Act of 1998.
This kick started and modernized the mining sector and others, such as tourism and manufacturing sectors, which were determinedly opened up as way to push for sustainable growth in Tanzania. He also intensified the privatization process, therefore, giving the private sector a key role in the growth of the economy, through appropriate policy framework as well as supportive, legal, fiscal, and regulatory regimes, across all sectors, all geared to establish a modern and competitive economy in Tanzania,” he says.
As part of the drive to mobilize FDI (Foreign Direct Investments) inflow, President Mkapa introduced a lot of clarity on incentives and protective measures that were managed by the Tanzania Investment Centre (TIC) not just to stabilize the policies and make them predictable, but also to give assurance to the investors’ expectations, both local and foreign.
The stabilization of policies and assurances to the investors was a key component for an economy that was not only making a transition from state owned, to liberalized economy but also set to become competitive against its immediate neighbours and the region at large.
Let me take the mining sector as an example, up to that point, apart from Mwadui Diamonds which also had foreign ownership, there was literally no modern mining and zero exports of minerals, such as gold. Now as you can see the measures taken by the New Mining Policy of 1997 and Mining Act of 1998, Tanzania moved from zero exporter of gold and by 2001 it became number three largest exporter of gold in Africa, after South Africa and Ghana.
This was one of the demonstrations that President Mkapa’s interventions in stabilizing the macro-economic fundamentals and stimulating sectoral growth, not only stimulated significant macro and sectoral growth but also attracted a lot of investments both local and foreign. Success builds success!
Privatisation of certain areas in the manufacturing sector also yielded significant results, for instance, in the turn-around and expansion of such entities like, the Tanzania Breweries Ltd (TBL), Kilombero Sugar, Kagera Sugar, TPC, Banking and other Financial Services Sectors, Telecommunications, etc., that had changed hands from government to private.
All this led to the turnaround of fortunes of these key sectors which were ailing under government ownership.
In the case of Kilombero, for instance, its installed capacity was 90,000 tons of sugar but by the time it was privatized in 1998, it had deteriorated to 28,000 tones and employees were on half pay. Today, it has turned out to be the leading sugar manufacturing entity it the country, with annual production averaging 130,000 tons per year!
Apart from the regulatory frameworks President Mkapa also pushed for the creation of private sector advocacy institutions such as the Tanzania Private Sector Foundation (TPSF), Confederation of Tanzania Industries (CTI), the Tanzania Chamber of Mines (TCM), Agricultural Confederation of Tanzania (ACT), Tourism Confederation of Tanzania (TCT) and the CEO Round Table.
The president would sometimes spend a whole day or two with CEOs of major entities where the private sector would be raising their issues and their concerns and possible recommendations on how to strengthen policies and regulatory frameworks.
However, even with this goodwill that the president had put in, there were times that he was misunderstood by the public.
Remember, we were still very socialist in our approaches and thinking, but he had to deal with it within his own party CCM who had to buy into it. And as far as the general public was concerned, he used to have monthly addresses to the nation where he would clarify some of these issues. But President Mkapa also took measures to address issues of unsustainable poverty levels in Tanzania through the creation of a specific Ministerial portfolio for Poverty Alleviation as well in formulating such interventions like, the National Strategy for Growth and Reduction of Poverty, (MKUKUTA) and MKURABITA which was aimed at formalizing the informal sector and mainstreaming it into the modern economy!
As diplomat in South Africa, Mkapa made light of our work because the fundamentals were being established and deepened at home, so it was easy to mobilize FDI in flow into Tanzania because the facts and statistics were there to back this up.
As a result, for me it was much easier to get the likes of SAB Miller to invest in Tanzania Breweries, in the Banking Sector we managed to get both Stanbic and Absa, in the tourism sector we had Holiday Inn, Royal Palm and other high end entities such as the Conservation Cooperation Africa (CCA), now known as and Beyond, which had invested in Serengeti, Manyara, Ngorongoro and Zanzibar and many others in host of sectors like Mining, Agriculture, Construction etc.
This was not an isolated case because this scenario played out across the world, and therefore, diplomats were properly armed with economic diplomacy that had hinged on strong policies as well as clear and predictable legal frameworks that were quite attractive to FDI.
The regulatory frameworks were quite transparent and predictable, so it was a very conducive for foreign investors to come to Tanzania.
The strong foundations were laid during his period, it was now upon his successors to carry forward because the trust and the confidence of the investor community had already been sufficiently won under President Mkapa’s leadership!