93869 ISSUE 6 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Public Disclosure Authorized The Elephant in the Room JANUARY 2015 Unlocking the potential of the tourism industry for Tanzanians AFRICA REGION MACROECONOMICS AND FISCAL MANAGEMENT Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized THE WORLD BANK GROUP http://www.worldbank.org/tanzania/economicupdate TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N PAGE http://www.worldbank.org/tanzania/economicupdate b The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Table of Contents .....................................................................................................v Foreword. Acknowledgments................................................................................. viii Key messages............................................................................................ ix Part I: The State of the Economy............................................................. 1 1.1 ......................... 3 New statistical evidence: A bigger economy and less poverty. 1.2 Recent developments: A positive trajectory with a persistent fiscal weakness........................................................................................................... 7 1.3 Economic Outlook: Positive prospects require managing fiscal risks and optimizing assets.................................................................................................16 Part II: Leveraging Tourism for even Greater Benefits...................... 23 2.1 Five reasons why tourism is not yet generating optimal benefits for Tanzanians...........................................................................................................26 2.2 More tourists and geographical diversification: Managing the impacts carefully......................................................................................................................30 2.3 ..............................................34 Thinking outside the box: Three basic principles. Statistical Annexes................................................................................. 43 1 Key macroeconomic indicators 2010-13.............................................................44 2 Real GDP growth rates 2008-2013, per cent ....................................................45 3 Shares of economic activity in GDP 2008-13 ...................................................46 4 Quarterly GDP growth rates 2002-2013, per cent ...........................................47 5 .........................................................48 Fiscal framework as a percentage of GDP. 6 Balance of payments 2007/8 - 2013/14 ............................................................49 7 Monthly imports of goods and services.............................................................49 8 Monthly exports of goods and services..............................................................50 9 Inflation rates 2011-2014........................................................................................ 51 10 Monthly food crop prices (Wholesale) ..............................................................52 11 Average wholesale prices .....................................................................................53 12 Interest rate structures...........................................................................................54 13 Monetary aggregates.............................................................................................55 PAGE http://www.worldbank.org/tanzania/economicupdate i TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N 14 National debt developments.................................................................................56 15 .............................................................................57 Poverty by geographic regions. 16 ........................................................58 Tanzania national park visitors 2006-2012. 17 Number of tourist arrivals in country specified 2006 - 2012..........................58 18 Total tourism contribution to GDP in country specified 2006- 2012.............59 19 Foreign visitor exports in total exports 2011.......................................................60 List of Figures Figure 1: Tanzania’s economy is bigger than previously measured….............................. 4 Figure 2: With almost half of the change explained by agriculture.................................. 4 Figure 3 and 4: Revised figures suggest agriculture as a % of GDP is increasing but its growth rate remains low....................................................................... 5 Figures 5: Poverty has declined in Tanzania in rural and urban areas.............................. 6 Figure 6: Progress but Tanzania’s income per capita is still lower than the Sub-Saharan African average................................................................................................... 7 Figure 7: Nine out of ten Tanzanians live on less than US$ 3 per day............................. 7 Figure 8: Regional comparison of annual GDP growth rates............................................. 8 Figure 9: Sectoral contribution to GDP growth in 2013...................................................... 8 Figure 10 and 11: Stable inflation, exchange and interest rates with depreciation of the local currency value from January to November 2014..................... 8 Figure 12: Stabilized current account deficit........................................................................11 Figure 13: Shift from aid to private capital flows.................................................................11 Figure 14: Improved overall fiscal deficit…........................................................................... 12 Figure 15: But growing arrears make the deficit higher in reality.................................... 12 Figure 16: VAT Efficiency Rate is very low in Tanzania...................................................... 13 Figure 17: All expenditures have fallen except wages and interest payments............. 13 Figure 18: The decline in the value of released transfers to local governments.......... 14 Figure 19: 2014/15 Budget: Modest increase in revenues to finance a shift toward development expenditures......................................................................................................15 Figure 20: Revenue collection in 2014 Q1 is 10% below target......................................15 Figure 21: Big increase in domestic borrowing to offset the fall in external financing during the first quarter of 2014/15....................................................................................... 16 Figure 22: More tourists, more foreign exchange earnings............................................25 PAGE http://www.worldbank.org/tanzania/economicupdate ii The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Figure 23: Direct and indirect contribution of tourism to GDP – regional comparison....................................................................................................25 Figure 24: GDP is growing faster than the labor force.....................................................27 Figure 25: Poverty remain prevalent in and around main tourism attractions............27 Figure 26: Revenue collected from tourist hunting in game controlled areas.............29 List of Tables Table 1: Tanzania key indicators in 2013 ............................................................................... 6 Table 2: Rapid increase in the domestic credit to the Government in recent months...10 Table 3: Change in exports and imports of goods..............................................................11 Table 4: The generalized under-execution of the budget in 2013/14 ........................... 13 Table 5: Macroeconomic projections.....................................................................................17 List of Boxes Box 1: Pulse of the economy.................................................................................................... 9 ............................................................................ 21 Box 2: Jobs in tourism: some global facts. Box 3: Tanzania: Community-based tourism on Mount Kilimanjaro..............................32 Box 4: Rwanda: Protecting gorillas through securing returns to community land......33 Box 5: Bushman’s Kloof Wilderness Reserve and Wellness Retreat in South Africa....35 Box 6: Successful training programs in Sub-Saharan Africa............................................38 ....................................................................39 Box 7: Promoting linkages with communities. Box 8: Excessive upfront payments kill business................................................................40 Box 9: Electronic payment of National Park fees................................................................ 41 PAGE http://www.worldbank.org/tanzania/economicupdate iii TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N PAGE http://www.worldbank.org/tanzania/economicupdate iv The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Foreword Time goes by…it is three years since the to Tanzania’s drive toward economic World Bank published the first Tanzania emergence. Riding on the country’s Economic Update with the goal of bountiful natural assets, tourism is a fast- stimulating public debate on strategic growing sector that is not only providing economic issues in the country. Since jobs but is also bringing in much-needed then, six Updates have been published. foreign currency. This sector already As the name of the series indicates, the benefits from substantial attention from reports have provided updates on the the country’s leadership, notably in the state of the economy and flagged issues context of the national business council of importance for economic management. that recently prioritized tourism as a high growth industry and a major source of job In addition, each Update has discussed a creation. Nevertheless, more can be done specific topic such as the lack of quality in to increase benefits so they can be felt post primary education; how to transform more broadly across society. This update the agriculture sector; the real cost of the proposes three strategic directions towards inefficiencies at the Port of Dar es Salaam; achieving this goal: (i) the diversification of the role of conditional cash transfers to tourism activities, in multiple dimensions; poor households in helping to reduce (ii) further integration into the sector of extreme poverty; and the potential of stakeholders such as local communities the job market in urban areas. In the and small operators; and (iii) good course of this period, in all these areas, governance in the management of fiscal the Government of Tanzania has taken revenues as well as in the use of natural various policy actions, with the support of assets. Development Partners including the World Bank, showing that knowledge sharing is Beyond the special topic (in this case an effective tool to promote not only ideas tourism), the update also assesses the but also concrete reforms. current state of the Tanzanian economy. While recent developments remain globally The focus of the sixth economic update is positive with high and stable GDP growth the tourism sector, which is clearly central and with the inflation rate currently in PAGE http://www.worldbank.org/tanzania/economicupdate v TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N check, fiscal risks for Tanzania have been appears ready to take the necessary growing. During the last fiscal year, the actions to address these fiscal risks — with Government missed its revenue targets the record speaking in its favor — there and was forced to cut priority expenditures is certainly no room for complacency at a and accumulate arrears with contractors time when the country is preparing for a and pension funds. These problems have national referendum in April 2015 on the continued to mount in the last semester. proposed new constitution and for the Furthermore, recent governance problems general elections in October 2015. in the energy sector have slowed down the disbursement of external aid, with the Government resorting to additional Philippe Dongier borrowing on the local financial market to Country Director for Tanzania, Uganda and cover its needs. And while the Government Burundi PAGE http://www.worldbank.org/tanzania/economicupdate vi The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Abbreviations and acronyms BoT Bank of Tanzania BRN Big Results Now CAG Controller and Auditor General EAC East African Community FDI Foreign Direct Investment GDP Gross Domestic Product GoT Government of Tanzania HBS Household Budget Survey (HBS) IMF International Monetary Fund IPTL Independent Power Tanzania Limited LGAs Local Government Authorities LNG Liquefied Natural Gas MDAs Ministries, Departments and Agencies MoF Ministry of Finance NAO National Audit Office NBS National Bureau of Statistics NGOs Non-Government Organizations NPV Net Present Value PPPs Public-Private Partnerships PSPF Public Service Pension Fund TANESCO Tanzania Electrical Supply Company TRA Tanzania Revenue Authority TZS Tanzanian Shilling US United States US$ United States Dollars VAT Value Added Tax PAGE http://www.worldbank.org/tanzania/economicupdate vii TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Acknowledgment This sixth edition of the Tanzania Economic Update was prepared by Victoria Cunningham (part 1) and Mahjabeen Haji (part 2) under the supervision of Jacques Morisset. The authors acknowledge the contributions of Emmanuel A. Mungunasi, Yutaka Yoshino, Gaurav Nayyer, Hannah Messerli, Richard Damania, Loy Nabeta and Ann Jeanette Glauber. The report benefited from the insights of Wolfgang Fengler and Jos Verbeeck. The team received guidance from Albert Zeufack and Philippe Dongier. Irfan Kortschak edited the report, while Justina Kajange provided invaluable assistance during its preparation. PAGE http://www.worldbank.org/tanzania/economicupdate viii The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Key messages For many fans of the English Premier The State of the Tanzanian Economy League, Tanzania’s world class tourism The traditional view of Tanzania’s economy attractions are well known. Mount has been challenged by the recent rebasing Kilimanjaro, the wildebeest migration in of national accounts and the results of the the Serengeti, and the warm beaches of 2012 household budget survey. On the Zanzibar have all been advertised during basis of this rebasing, Tanzania appears more than 100 games in various British to be close to achieving middle income stadiums. status, with an average per capita income Tanzania attracted more than one million of almost US$ 1,000. It also makes it clear visitors in 2013. The type of high-end that economic growth has trickled down to tourists that Tanzania currently attracts are the poor, including the extreme poor. This is good news for Tanzania’s economy and ready to pay a significant amount of money for its prospects for equitable growth. in order to visit its unique attractions, thereby providing hard currency in a However, this progress needs to be country where approximately one-third qualified. Approximately 40 percent of of the population is still living under the Tanzania’s adult population earns less than national poverty line. Although Tanzania’s US$ 1.25 per day, while nine out of ten tourism sector has grown rapidly over Tanzanians earn less than US$ 3 per day. the past decade, it could be leveraged to provide even greater benefits for a larger The analysis of the recent performance number of Tanzanians. of the Tanzanian economy has not been significantly affected by these new and Like the previous ones, this sixth economic improved statistics. The rate of economic update consists of two parts. The first part growth has continued to range at around provides an assessment of the current seven percent, although this rate of growth state of the Tanzanian economy and its now appears to be more volatile than short- and medium-term prospects, while previously calculated. The annual rate of the second focuses on how policymakers inflation ranges at around 5-6 percent, can achieve even greater benefits from while the balance of payments has tourism. remained relatively stable. PAGE http://www.worldbank.org/tanzania/economicupdate ix TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N The Achilles’ heel of Tanzania’s macro- Fiscal pressures have continued to mount economic management remains its fiscal since the beginning of 2014/15. Revenue policy. While the overall fiscal deficit targets were again missed, by about ten declined significantly in 2013/14, down percent in the first quarter, while the value from the equivalent of five percent of of arrears to pension funds has continued the (rebased) GDP to 3.4 percent, this to increase, pushing one of the larger funds reduction was achieved at significant close to financial distress. In addition, cost. It was only possible through the several Development Partners have significant accumulation of arrears with delayed their provision of budget support contractors and pension funds. The value because they are waiting for clarification of these arrears has now reached alarming regarding the controversial IPTL case, levels. The reduction was also achieved which may involve wrong doing by top by cutting public expenditure in priority government officials. The Government has sectors, as a result of which the highly reacted to these negative developments publicized ‘Big Results Now’ initiative by controlling some expenditures and by received fewer resources than in 2012/13. accelerating its level of borrowing on the Similarly, development expenditures fell domestic market. It has also started to by 1.2 percent of GDP. The total value formulate plans to repay existing arrears of transfers to local governments also with pension funds and contractors declined, putting at risk the delivery of while the findings of the Controller and education and health services. These Auditor General into the IPTL case and the negative trends in the budget undermine recommendation of parliament are also the Government’s ambitious plans to being acted upon. The Government must provide better infrastructure and social also prioritize the rapid implementation services to a rapidly expanding population. of the new VAT Act. In short, it seems that the authorities have recognized the The significant adjustment in the level need to keep the fiscal situation under and composition of expenditures during control at a time when the political cycle is 2013/14 was largely the result of a low accelerating. The referendum for the new level of collection of domestic revenues. constitution is scheduled for April this year, Not only were revenue targets missed by while the national elections will take place a wide margin, but the performance in in October. terms of the collection of VAT has been disastrous, providing revenue to a value Short- and medium-term prospects remain equivalent to only three percent of GDP in positive for the Tanzanian economy. GDP 2013/14. This ratio is one of the lowest in growth is forecast to remain in the range of the world, worse than Madagascar and far seven percent, while the rate of inflation and worse than that achieved by Burkina Faso the balance of payments should stabilize and Mozambique, which are also poor and around their current levels. However, predominantly rural economies. both inflation and external accounts are PAGE http://www.worldbank.org/tanzania/economicupdate x The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region sensitive to variations in international Leveraging tourism for even greater commodity prices, particularly food, gold benefits and energy prices. Tourism already provides enormous This positive forecast assumes that the benefits to Tanzania’s economy and could fiscal situation will remain under control, provide even greater benefits in the future with the overall fiscal deficit maintained if managed appropriately. This sector has at the equivalent of around three percent expanded rapidly in recent years, attracting of GDP over the next few years. This an increasing number of visitors each year. will require a strong effort to improve It currently employs around half million revenue collections, especially if the people and is the most significant source authorities intend to implement their of foreign currency. public investment program, which is both Despite the benefits already provided by ambitious and necessary. The authorities the sector, the vast majority of Tanzanians will also need to create enough fiscal space have yet to share in these benefits to the to repay and prevent new arrears and to fullest extent possible. First, while tourists limit their borrowing on domestic and are ready to spend a considerable amount international markets. of money to visit Tanzania, a portion of this There are potential upsides to this spending remains abroad. This has to be forecast to the extent that the country is expected, and Tanzania is not an outlier, as able to maximize its strong comparative most tourists are foreigners and book their advantages. Tanzania is blessed with a holidays through pre-arranged package vast range of natural resources, with these tours. resources including natural gas, minerals, Second, tourism is focused almost fertile soils and rich wildlife. With these exclusively on two areas - the northern resources, Tanzania is ideally positioned circuits around Arusha and the island of to penetrate regional and international Zanzibar - which explains why linkages markets. Furthermore, Tanzania has a have remained limited across the country. comparative advantage in tourism, which could be leveraged to promote a faster Third, even around the most visited areas, economic growth, more fiscal revenues poverty is prevalent, particularly near the and additional foreign exchange earnings. Serengeti National Park, indicating that It is not only a booming sector globally, strong linkages with local communities but also relatively labor intensive and so have yet to be established. capable of creating a large number of jobs. As a result, the development of the tourism Fourth, while the tourism sector has been sector has been at the top of the agendas expanding rapidly, it has not created of the President as well as the Tanzania enough high value jobs for citizens in Business Council. recent years, either directly or indirectly. PAGE http://www.worldbank.org/tanzania/economicupdate xi TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Finally, an unpredictable and complex must consider how best to attract private taxation system has discouraged investors, investment and take measures to establish while non-transparent redistribution a more conducive business environment. mechanisms have made it almost This could be best achieved through the impossible to track the use of revenues establishment of strategic partnerships collected from the tourism sector. and through the development of stand alone projects, as other countries have All these issues explain why the done. development of a new tourism strategy for Tanzania to optimize the benefits of If achieved, the goal of attracting a vastly an industry that is already making a major greater number of tourists to Tanzania will contribution to the economy is essential. create significant tradeoffs that will have This has been widely acknowledged, to be carefully managed. An increased with extensive discussions between number of visitors will place increased stakeholders already taking place. pressure on the natural resources that Stakeholders appear to agree that it is support the country’s tourism. Already, essential to achieve two main objectives: uncontrolled poaching has resulted in (i) an increase in the number of tourists a reduction in the number of elephants visiting the country; and (ii) a delibarate and rhinos in many areas. As one local diversification of tourism activities toward operator succinctly and pithily stated: “No the South. While these objectives are elephant, no tourism.” Also, there will be fundamentally sound, their achievement increased competition for water resources, needs to be managed carefully if they are to with potential conflicts of interest between have positive rather than negative impacts. farmers, hydropower operations, and the natural ecosystems. The tourism industry aims to multiply by eight its revenues by 2025. This target Diversifying tourism circuits toward the would mean that Tanzania receives the South would involve the development of same number of visitors that Morocco or new tourism products in areas such as South Africa currently receive. To achieve Selous Game Reserve, Ruaha National Park this goal, it will be necessary to record an or the beaches along the southern coast. annual rate of increase of about 20 percent, However, while the need to diversify has almost twice the current rate of growth. been recognized and discussed for a long While attainable, the achievement of this time, not much has happened. There are target will require substantial investments still only about 20,000 visitors per year to in infrastructure, the provision of support Ruaha, a mere tenth of the number that to the private sector, and the development visits Serengeti Park. The reasons for the of human capital in diversified geographic lack of progress include lack of access to areas. Because public resources are and infrastructure, high barriers for private will remain limited, the Government investment, the limited availability of the PAGE http://www.worldbank.org/tanzania/economicupdate xii The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region required human resources, and the lack workers. Other forms of tourism that could of a strategy to market attractions beyond be expanded include business tourism in trekking in the Mount Kilimanjaro region, Dar es Salaam and Arusha, cultural tourism witnessing the wildebeest migration in the in locations such as the ruins of Kilwa, and Serengeti, or enjoying Zanzibar’s beaches. trekking in the Usambara and Udzungwa mountains. The combination of all these While increasing the revenues from tourism kinds of tourism is also a possibility and diversifying the range of attractions through packages enabling longer stays offered to them have to be at the center and the dispersion of economic impacts. of any strategy for the development of tourism in Tanzania, there is a need for The second pillar involves the integration policymakers and industry operators of tourism activities in existing locations. to think outside the box and to act Arguably, the tourism industry is not yet innovatively. This will require policymakers creating enough high value, productive to adopt measures under three separate jobs for citizens, nor is it facilitating the pillars. development of forward and backward linkages with local operators to the fullest The first pillar involves diversification. extent possible. For example, the average However, this diversification must not be local worker in the Tanzanian tourism one-dimensional. It must involve more industry earns only a third of his or her than mere geographic diversification; it counterpart in Kenya. Many resorts rely on will also involve meeting the needs of imported materials, equipment, and food. different segments of the tourism market Pro-active policies are therefore needed to by developing new activities that meet the address these two areas. Further synergies expectations of a broader range of tourists. with local communities must also be So far, the emphasis has been meeting encouraged by involving members of these the needs of high-value tourists who can communities in park management and afford to pay several thousand dollars to by using revenues derived from tourism see animals while staying at exclusive activities to build local infrastructure; by resorts. Other kinds of tourism should also supporting local business initiatives; and be developed, including beach activities to by funding direct financial transfers. meet the needs of low to middle budget tourists. Forms of tourism that meet the The third pillar involves measures to improve needs of these markets have already the quality of governance. In particular, this begun to emerge in Zanzibar, which offers will involve the implementation of a fair, inexpensive accommodations and charter business friendly taxation system and the flights, making the destination accessible development of transparent redistribution to a broader range of tourists, including mechanisms. Efforts are vitally required local and regional visitors, and fostering to develop these aspects of the system linkages with local businesses and of governance as the tourism sector is PAGE http://www.worldbank.org/tanzania/economicupdate xiii TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N currently constrained by the imposition of revenues is almost impossible because of multiple taxes and levies that discourage the complexity of rules used to earmark investors, particularly small investors, and these revenues. For example, while increase opportunities for rent seeking revenues from hunting are in theory and corruption. Many redundant levies allocated to the Treasury, the Ministry of could be eliminated or streamlined and so Natural Resources and Tourism, and local increase the competitiveness of the sector. governments, a recent Controller and Auditor General’s report was not able to Paradoxically, in spite of a multitude of verify if those funds had been channeled taxes, the level of tax evasion appears high to their intended beneficiaries. This is with the overall contribution of the tourism hardly a unique case, with the same issues sector to domestic revenues being only a frequently occurring elsewhere due to the third of that of the mining sector, despite large number of agencies involved in the the fact that tourism contributes to a higher collection of taxes and fees. Economic proportion of GDP. To improve its level theory suggests two complementary of revenue collections, the Government possibilities for the Government: (i) it could should focus on improving the rate of centralize collection mechanisms and use collection in this sector, implementing transparent redistribution criteria through sanctions against evaders when necessary. budget procedures when beneficiaries are Generous tax incentives should also be numerous and diverse; and/or (ii) it could reduced, given that their effectiveness is decentralize collection mechanisms to highly debatable. The Government should local governments when beneficiaries are formulate a strategy that aims to simplify local (the subsidiarity principle). the current system, as it is the complexity of this system which is the main complaint Adherence to the three principles of tourism operators and associations. of multidimensional diversification, integration, and good governance would In addition, it should take measures to enable Tanzania to derive even more broaden the tax base. The Government benefits from its tourism resources and should aim to achieve this through assets. If Tanzania is to derive optimal cooperation rather than confrontation with benefits from this industry, it must focus the private sector. not merely on measures to increase tourist To ensure good governance, it is necessary numbers, but on ensuring that the industry to ensure that the revenues collected provides benefits to a greater proportion of from the tourism sector are used in an the citizens and that the wildlife, cultural efficient and transparent manner. At and natural resources are protected so that present, tracking the allocation of these these benefits are sustainable. PAGE http://www.worldbank.org/tanzania/economicupdate xiv The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region 1 The State of the Economy PAGE http://www.worldbank.org/tanzania/economicupdate 1 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Part I: The State of the Economy „„ The rebasing of national accounts and the new household survey show that Tanzania’s overall economic output is almost one third higher in 2013 than had been previously calculated. They also show that the rate of incidence of poverty declined by five percent between 2007 and 2012. „„ The performance of the Tanzanian economy follows recent patterns with the rate of growth of GDP at around seven percent, a stable and relatively low rate of inflation, in the 5-6 percent range, and a stable balance of payments. „„ However, fiscal risks remain prevalent in spite of a lower reported fiscal deficit in 2013/14. The past year has seen a rapid accumulation of arrears, sub-par performance in domestic revenue collection, cuts in public spending on priority sectors and local governments, and governance concerns that have delayed external aid disbursements and forced the Government to borrow significant amounts on the domestic market. „„ Prospects remain positive for Tanzania’s macroeconomic performance, as long the Government remains committed to fiscal prudence. The Government also needs to be more vigilant in collecting domestic revenue (especially VAT) and to pay the accumulated arrears with pension funds and contractors. „„ Tanzania could achieve an accelerated rate of equitable economic growth through the efficient and fair development of the country’s comparative advantages. Such comparative advantages include its tourism. While this sector already provides significant benefits, it could be leveraged to create an even greater number of direct and indirect jobs for Tanzanians. PAGE http://www.worldbank.org/tanzania/economicupdate 2 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region The two most basic statistics required question by reviewing the recent revision to understand a country’s economy are of the national accounts and the new its population and the total value of its poverty numbers and by assessing their economic output. implications. It then examines recent economic developments with a special Without these two pieces of data, it is emphasis on fiscal policy which remains impossible to calculate average per capita the Achilles’ heel of the Government’s income or to gain an understanding of strategy. Finally, the section discusses the the level of poverty in any given country. short-and medium-term prospects for In Tanzania, new evidence has been the Tanzanian economy. In particular, this produced to revise both these statistics, report emphasizes the need for Tanzania to with this evidence being based on a recent better manage its comparative advantages, population census; on the rebasing of especially its tourism. While this sector the national accounts; and on a recent already makes a significant contribution to household budget survey. The new the economy and is continuing to expand, evidence sheds significant new light on it could be leveraged to provide an even the state of the Tanzanian economy. First, greater level of benefit for a significant the total value of the country’s economic By using new proportion of citizens. output appears to be approximately„ and improved data sources and one-third larger than was previously 1.1 New statistical evidence: by updating the estimated, with the current average per A bigger economy and less national accounts capita income at US$ 948, rather than the poverty base year from previous estimate of US$ 695. In addition 2001 to 2007, By using new and improved data sources the rate of incidence of poverty declined Tanzania’s and by updating the national accounts from 34 to 28 percent in the period new GDP base year from 2001 to 2007, Tanzania’s from 2007 to 2012, the first significant series appears new GDP series appears significantly significantly improvement since the late 1990s. higher than the previous one (see Figure 1).1„ higher than the On the basis of this new statistical The upward revision for the base year„ previous one. evidence, the Government can 2007 is 27.8 percent. Similar upward legitimately claim that Tanzania is revisions have been recorded by a number well on its way to achieving its goal of of other African countries, including Nigeria becoming a middle income country and (89 percent), Ghana (60 percent), Kenya of eradicating poverty. (25 percent), and Uganda (17 percent). However, what is the reality behind these Improvements to data related to the numbers? This section of the economic agriculture, construction, mining and update attempts to respond to this tourism sectors explains almost 90 The new series for the period between 2005 and 2013, using 2007 as a base year, was produced by the 1 National Bureau of Statistics, with technical assistance from Statistics Denmark and with the support of other development. PAGE http://www.worldbank.org/tanzania/economicupdate 3 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N percent of the difference between the usage of cell phones and mobile money old and new GDP figures (see Figure 2). or the booming construction sector, all Education and financial services have also of which have had their most significant seen large upward revisions. The revised impacts since 2007. Following international GDP series captures the impact of the best practice and in order to comply with emergence of large mining operations; of commitments made to the East African increased private and public expenditure Community (EAC), the Tanzanian authorities on education; and of the revamping of the need to rebase their national accounts financial sector. However, it fails to capture every five years. If they are to achieve this, the impacts of more recent structural they should maintain momentum and start changes, such as the dramatically increased planning for the next rebase immediately. The rebased series Figure 1: Tanzania’s economy is bigger Figure 2: With almost half of the shows that the than previously measured… change explained by agriculture annual rate of growth of GDP fluctuated between 8.8 percent in 2007 and 5.1 percent in 2012. Source: NBS 2014 While a comparison of the old series with sectors, including in the industrial and the rebased series does not contradict services sectors, with the old series making previously established trends, it does frequent use of extrapolation methods. also show that the economy is more volatile than previously calculated. The The patterns of transformation in the rebased series shows that the annual rate Tanzanian economy that were identified of growth of GDP fluctuated between 8.8 on the basis of the old series, particularly percent in 2007 and 5.1 percent in 2012. the well-publicized steady decline in This higher level of volatility mostly reflects the agricultural sector’s contribution improvements in the methodology to to GDP, is being challenged by the new measure the performance of the agricultural series (see Figure 3). It now appears that sector, which is influenced by variable agriculture’s contribution to the current climatic conditions and price variations on GDP increased from 27 - 32 percent in the regional and global markets. The higher period from 2007 to 2013. However, much level of volatility also reflects improved of this increase is the result of a price data collection methodologies across effect, as the constant price contribution PAGE http://www.worldbank.org/tanzania/economicupdate 4 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region of the agricultural sector to GDP declined sector was lower than that of the overall from 26.8 percent in 2007 to 23.8 percent economy (see Figure 4). A comparison in 2013. The increase also reflects a„ between the old and new series does not one-off increase in levels of production in reveal significant differences in the level of 2008. In the period from 2009 to 2013, the performance of the secondary and tertiary rate of growth recorded by the agricultural sectors. Figure 3 and 4: Revised figures suggest agriculture as a % of GDP increasing but its growth rate remains low The average per Source: World Bank 2014 capita income is approximately The revised national account series affect „„ The tax/GDP ratio is one of the lowest US$ 950, which a number of key economic indicators for on the continent; comes very close Tanzania, including the following: „„ The level of trade openness is lower than to the threshold the average for Sub-Saharan Africa; of US$ 1,045 „„ The average per capita income is that defines a „„ The public debt/GDP ratio is lower than approximately US$ 950, which comes middle income previously estimated, which may suggest country. very close to the threshold of US$ 1,045 that there is greater space for public that defines a middle income country; borrowing. However, the Government’s „„ However, the level of monetization of debt-service capacity is also lower than the economy is extremely low, with a previously estimated due to the fact M2/GDP ratio that is about three times that the tax/GDP ratio is significantly lower than the regional average; lower than previously measured. PAGE http://www.worldbank.org/tanzania/economicupdate 5 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Table 1: Tanzania key indicators in 2013 (% of GDP unless stated) Tanzania1/ Sub-Saharan Old series Rebased Series Average2/ Income per capita (current US$ ) US$ 695 US$ 948 US$ 1,715 Monetization (M2) 23.3 17.0 40.3 Tax Revenues 16.0 12.6 14.3 Trade Openness 72.0 49.0 65.9 Public Debt 41.5 31.2 N/A Source: World Bank calculations and WDI 2014. 1/ Figures for 2013/14 except M2/GDP for 2012/13. 2/ Figures for 2012. In summary, the new GDP series shows recent economic expansion has benefited that Tanzania has a very low level the poorest segment of the population, of monetization, in which business including those who do not have enough to enterprises and individual citizens pay eat (the ‘extreme poor’). This is significantly a very low level of tax and have only different from the pro-rich growth reported limited interactions with global markets. in the early 2000s, and must be regarded While this conclusion is not new, the as a positive development. The reduction gap between Tanzania and regional and in the incidence of poverty occurred both international standards is certainly bigger in rural and urban areas, although the most than had previously been measured. significant improvements were reported in Dar es Salaam, where the rate of incidence The revision of the national accounts was conducted at the same time as of poverty in 2012 was only four percent new poverty figures were released. compared to 14 percent in 2007. The decline in the national poverty rate was The decline in These figures, which were based on the also associated with an increase in the rate the national 2012 household survey, indicate that the poverty rate was incidence of poverty declined from 34 - of ownership by poor households of assets also associated 28 percent in the period 2007 - 2012 (see such as mobile phones, cooking stoves, with an increase Figures 5). These figures show that the mosquito nets and televisions. in the rate of ownership by Figures 5: Poverty has declined in Tanzania in rural and urban areas poor households of assets such as mobile phones, cooking stoves, mosquito nets and televisions. Source: HBS 2007 and HBS 2011/12. World Bank Poverty Assessment 2014. PAGE http://www.worldbank.org/tanzania/economicupdate 6 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region The decline in the rate of poverty to live on less than US$ 1.25 per day, in Tanzania must be regarded as a while more than 90 percent continue positive development. However, the to live on less than US$ 3 per day (see country remains very poor by regional Figure 7). While it can be argued that and international standards. The revised economic growth has benefited a large average per capita income is still number of Tanzanians, it is still too early significantly lower than the Sub-Saharan for the Government to claim that it has Africa average (see Figure 6). Almost achieved its goal of eradicating poverty half the adult population continues in the country. Figure 6: Progress but Tanzania’s Figure 7: Nine out of ten Tanzanians income per capita is still lower than the live on less than US$ 3 per day Sub-Saharan African average Poverty rate at $3/day =89.5% Almost half the adult population continues to live on less than US$ Poverty rate at $1.25/day = 43.7% 1.25 per day, while more than 90 percent continue to Source: WDI 2014, Source: HBS 2007 and HBS 2011/12. live on less than US$ 3 per day. 1.2 Recent developments: A These two developments negatively positive trajectory with a affected the delivery of infrastructure persistent fiscal weakness projects and social services, which form the core of the Big Results Now (BRN) In 2013/14, the Tanzanian economy initiative. These fiscal pressures have remained on a positive track, recording continued to mount and are present in the a steady rate of growth of GDP and with current fiscal year. the rate of inflation remaining under control. However, there was continued GDP steady growth, controlled inflation stress to fiscal management throughout and improved external balance the year. The Government failed to achieve its unrealistic revenue collection targets, The Tanzanian economy expanded at which forced it to cut expenditure by 17 the rate of approximately seven percent percent relative to its planned budget. This in 2013, considerably faster than the failure to achieve revenue collection targets rate recorded by Kenya and Uganda (see also led to the accumulation of arrears. Figure 8). The revised GDP series shows PAGE http://www.worldbank.org/tanzania/economicupdate 7 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N a different composition of growth sectors communication, health, electricity, than the old series, but in both series, the manufacturing, and other service sectors drivers of growth are the construction, (see Figure 9). Figure 8: Regional comparison of Figure 9: Sectoral contribution to GDP annual GDP growth rates growth in 2013 Source: NBS 2014 & World Bank Since the beginning of 2014, the rate of of the local currency relative to the US dollar The drivers of inflation has remained steady at around depreciated marginally in the period from growth are the six percent, largely due to the stability of January to November 2014, with the rate of construction, food and energy prices on international depreciation accelerating towards the end of communication, markets. Interest rates also appear to have that period due to a shift in the composition health, electricity, remained stable (see Figure 10). The value of monetary growth (see Figure 11). manufacturing, and other service sectors. Figure 10 and 11: Stable inflation, exchange and interest rates with depreciation of the local currency value from January to November 2014 Source: World Bank PAGE http://www.worldbank.org/tanzania/economicupdate 8 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Box 1: Pulse of the economy The views of the managers of the top 100 mid-sized companies in Tanzania have been collected every six months since April 2013. This data is collected by KPMG through electronic questionnaires and responses are anonymous. As of December 2014, only one third of managers forecast a better year for the economy in 2015 than in 2014 against 56 percent in May 2014. The same concerns emerged for their own businesses since only 37 percent expect an improved performance in the next 12 months. These responses indicate growing concerns about the current and future performance of the Tanzanian economy. How do you believe the Tanzanian economy is performing compared to last year? 100% 90% 19 „„ Only 33 percent of managers believed 26 80% 37 32 that the economy performed better in 70% 60% 21 36 2014 than in 2013. 13 Same 50% 34 Worse 40% Better „„ The rate of favorable views declined 30% 20% 50 53 45 by 20 percent between November 33 10% 2013 and December 2014. 0% April 13 November 13 May 14 December 14 How do you expect the Tanzanian economy in the coming year? 100% „„ In December 2014, 32 percent of 90% 80% 37 35 27 34 managers expected the economy to 70% perform better in 2015 than in 2014, 17 60% 10 Same against 55 percent in November 2013. 50% 20 33 Worse 40% Better „„ As of December 2014, 32 percent of 30% 55 56 managers anticipated a deterioration 20% 43 32 of the economic performance over 10% 0% the next 12 months, up from 10 April 13 November 13 May 14 December 14 percent in November 2013. How do you expect your company will perform in the next 12 months? 100% 11 90% 30 4 31 32 80% 70% 2 „„ In November 2013, 85 percent of 60% 20 Same managers expected an improved 50% 31 40% 85 Worse performance of their company during Better 30% 68 49 the next 12 months. This rate fell to 20% 10% 37 only 37 percent by December 2014. 0% April 13 November 13 May 14 December 14 Source: KPMG/World Bank PAGE http://www.worldbank.org/tanzania/economicupdate 9 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N The relative stability in key financial which increased dramatically by more indicators, particularly prices and than 25 percent in the period from June interest rates, is the result of the constant to September 2014. This large increase rate of growth in monetary aggregates. was partly compensated for by a decline Broad money supply (M2) increased in in the value of international reserves and value by approximately 3.6 percent in by slower growth of private sector credit. the period from June to September 2014, This shift in the composition of monetary which is comparable to the rate recorded growth may be temporary, as it has mostly over the same period in the previous been the result of the slowdown in the year (see Table 2). However, this stability disbursement of external financing by masks a large increase in the total value development partners to the Treasury„ of domestic credit to the Government,„ (see next section for details). Table 2: Rapid increase in the domestic credit to the Government in recent months (TZS billion) Jun-14 Sep-14 % variation Jun-13 Sep-13 % variation Broad money supply 13,241 13,721 3.6 11,251 11,746 4.4 (M2) Domestic credit 14,778 15,987 8.2 11,921 12,254 2.8 Private sector 11,559 11,943 3.3 9,526 9,894 3.9 Central government 3,219 4,043 25.6 2,395 2,360 -1.5 This shift in the Source: BoT composition of monetary In 2013/14, the balance of payments construction-related imports. The current growth may be improved due to the good performance account deficit remained steady at a value temporary, as it of the export sector and to increases equivalent to approximately eleven percent has mostly been in the total value of FDI. As a result, the of GDP in 2013/14. the result of the level of international reserves increased by slowdown in the In terms of the composition of capital disbursement of US$ 277 million, reaching the equivalent inflows, an increasingly high proportion external financing of four months of imports cover at the end by development of these inflows was derived from private of June 2014 (see figure 12). The overall partners to the capital, with a correspondingly lower value of exports increased by 9.4 percent Treasury. proportion from official aid (see Figure in the period from 2012/13 to 2013/14, as 13). The value of foreign direct investment increases in the total value of manufactured increased by five percent in the period exports and service exports compensated from 2012/13 to 2013/14, while aid inflows for the decline in the value of traditional represented only 40 percent of total capital agricultural exports (see Table 3). Over inflows in 2013/14, a decline from the 60 the same period, the total value of imports percent recorded in 2010/11. Thus, there increased at a similar rate of 9.2 percent, is a decreasing reliance on aid and a shift in part driven by increases in both oil and towards private financing. PAGE http://www.worldbank.org/tanzania/economicupdate 10 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Figure 12: Stabilized current account Figure 13: Shift from aid to private deficit capital flows At first glance, the Government appears to have Source: BoT demonstrated a strong Table 3: Change in exports and imports of goods commitment to fiscal prudence. Source: BoT, WB calculations Fiscal Policy: The Achilles’ heel of At first glance, the Government appears policy-making to have demonstrated a strong commitment to fiscal prudence, reducing Although the overall fiscal deficit its overall fiscal deficit from a value significantly improved in 2013/14, fiscal equivalent to five percent of GDP in management was challenged by the 2012/13 to 3.4 percent in 2013/14 (see rapid accumulation of arrears owed to Figure 14). This improvement came after the private sector and pension funds; the unexpected slippage in 2012/13, when by the Government’s sub-optimal levels the authorities missed their initial target of revenue collection; and by significant by a wide margin. However, it fails to cuts in priority public expenditure. These account for the arrears accumulated by the issues have continued to mount since the Government with private operators and beginning of the current fiscal year. pension funds. Although detailed figures PAGE http://www.worldbank.org/tanzania/economicupdate 11 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N are hard to obtain, the increase in the a series of painful adjustments total value of arrears is estimated to have during 2013/14 as a result of its weak reached the equivalent of approximately performance in the collection of one percent of GDP during the last fiscal domestic revenues and over ambitious year, suggesting that the overall fiscal deficit revenue targets. The Government initially in 2013/14 was closer to the equivalent of set revenue targets that were 2.3 percent 4.4 percent of GDP than the reported figure higher relative to GDP than in 2012/13. of 3.4 percent of GDP (see Figure 15). However, the actual level of revenue collection remained almost flat as a Not only was the overall fiscal deficit proportion to GDP, with the exception of arguably larger than reported, but the a one-time gain in the taxation of capital authorities were forced to implement gains of one oil company. Figure 14: Improved overall fiscal Figure 15: But growing arrears make deficit… the deficit higher in reality Source: MoF Tanzania’s performance in collecting the value of accumulated arrears and Value Added Tax (VAT) was very weak. through cuts in public expenditure. All expenditure The total value of revenue collected from categories were All expenditure categories were under- under-executed VAT was equivalent to only three percent executed compared to the initial budget, compared to the of GDP, while the statutory rate is set at 18 with the exception of domestic interest initial budget, percent. The efficiency rate (calculated as payments (see Table 4). The overall with the exception the ratio of effective tax rate to the statutory execution rate of the budget stood at only of domestic rate) is one of the lowest in the world, and 84 percent, with a significant decline in interest payments. significantly lower than the levels recorded the levels of development and non-wage by Madagascar, Mozambique, Senegal and recurrent expenditures as a percentage Mauritius (Figure 16). The collection rate of GDP (see Figure 17). While these cuts also declined by 0.5 percent of GDP in the were necessary to keep the fiscal deficit last two fiscal years. under control, they had a negative impact The sub-par performance in terms on the implementation of two important of domestic revenue collection was elements of the Government’s strategy to absorbed through an increase in the accelerate growth and alleviate poverty. PAGE http://www.worldbank.org/tanzania/economicupdate 12 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Figure 16: VAT Efficiency Rate is very Figure 17: All expenditures have fallen low in Tanzania except wages and interest payments The priority sectors identified under the BRN initiative suffered from budget cuts, despite the fact that they Source: World Bank were already underfunded in Table 4: The generalized under-execution of the budget in 2013/14 (TZS billion) the approved budget. Budget Actual % of Budgeted Total Expenditure 16,711 13,958 83.5 Recurrent expenditure 11,066 10,299 93.1 Wages and salaries 4,763 3,969 83.3 Interest payments 998 977 97.9 Domestic 620 743 119.8 Foreign 377 234 62.1 Goods Services and Transfers 5,039 5,352 106.2 Development Expenditure 5,645 3,660 64.8 Source: BoT, MoF The priority sectors identified under the GDP, development expenditures in 2013/14 BRN initiative suffered from budget cuts, were 1.6 percent lower than the peak of 6.6 despite the fact that they were already percent recorded in 2011/12. The actual underfunded in the approved budget. budget expenditures did not support the In 2013/14, the BRN sector execution rate Government’s investment goals and the was only 62 percent for development priorities it had established under the BRN expenditure and 93 percent for recurrent initiative to the extent initially planned. expenditure. This rate for development expenditure was significantly lower than The second element affected by fiscal the 78 percent recorded in 2012/13, while policy was the value of transfers to the rate for recurrent expenditure in the local government authorities (LGAs), same year stood at the slightly higher rate which continued to decline over time of 94 percent. Similarly, in proportion to in proportion to GDP (see Figure 18).„ PAGE http://www.worldbank.org/tanzania/economicupdate 13 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N This negative trend increasingly puts at„ of released transfers by the central risk the capacity of LGAs to fulfil their government was equivalent to only 4.6 mandated responsibility to deliver key percent of GDP in 2013/14, a decline public services, including educational, from the figure of 4.8 percent recorded in health and water services. The value 2012/13 and five percent in 2009/10. Figure 18: The decline in the value of released transfers to local governments Source: MoF and World Bank In 2013/14, the Government was able Implementation of the 2014/15 budget, to limit the use of non-concessionary which was approved by Parliament in borrowing to finance its deficit. The level late June 2014, has proved challenging of external non-concessional borrowing in the first quarter of 2014/15. The was 20 percent lower than in 2012/13, overall fiscal deficit was set at the even though aid financing also declined by equivalent of 3.4 percent of GDP, with the 6.5 percent in the same period. In terms Government’s ability to control the deficit of domestic borrowing, the authorities to be supported by an expected increase stayed within the ceiling of one percent in domestic revenues (of 0.3 percent of GDP agreed upon with the IMF. Overall, in proportion to GDP relative to the the public debt to GDP ratio reached 31.2 levels collected 2013/14). This expected percent in 2013/14, a modest increase increase in domestic revenue collection compared to the figure recorded in was intended to enable the Government 2012/13. These figures do not include to allocate an increased proportion of the value of arrears, which are a form of its two development expenditures (see non-contractual debt accumulated by the Figure 19). While these revenue targets Government. were initially perceived as being more PAGE http://www.worldbank.org/tanzania/economicupdate 14 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region realistic than those set in the recent the delayed action on recommendations past, the authorities have fallen short by made by Parliament on the IPTL case has almost ten percent in the first quarter„ slowed down the disbursement of budget (see Figure 20). The total value of arrears support, with only approximately US$ owed to pension funds has also continued 60 million out of around US$ 600 million to grow, placing increasing pressure on having reached the Treasury by the end of one of the major funds. Last but not least, October 2014. Figure 19: 2014/15 Budget: Modest Figure 20: Revenue collection in 2014 increase in revenues to finance a shift Q1 is 10% below target toward development expenditures Source: MoF, World Bank The Government is taking measures additional revenue to the Treasury. As The total value of to address these fiscal pressures. An these corrective measures will take time arrears owed to action plan is being prepared to facilitate to become fully effective, the Government pension funds has the payment of arrears owed to private has also increased its level of borrowing on also continued contractors and policy options are being 2 the domestic financial market. to grow, placing considered for the purpose of restoring increasing PSPF’s financial viability in both the short To finance the budget, in the first pressure on one of and longer terms. The IPTL case was quarter of 2014/15, the Government the major funds. audited and discussed in Parliament with has placed an increased emphasis on recommendations made some of which domestic borrowing relative to external have been acted on by the President. borrowing. While the total value of The implementation of the new VAT external financing (grants and foreign Act will broaden the tax base and bring loans) amounted to almost TZS 800 billion The Ministry of Finance has taken initial steps to combat arrears including emphasising in the 2014/15 budget 2 guidelines the priority to clear existing arrears before entering into new commitments and also conducting a sample survey to test the reliability of reported arrears. However, there is still much more to be done. The recent public expenditure review on arrears makes a number of suggestions to modernise the public financial management framework, improve the reporting and monitoring of arrears, prevent the build-up of future arrears and proposals for reducing the current stock of arrears. PAGE http://www.worldbank.org/tanzania/economicupdate 15 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N in the first three months of the last fiscal first quarter of 2013/14. This shift should year, the value stood at only TZS 148 billion be closely monitored, as higher domestic in the period from July to September 2014. borrowing will automatically increase the This significant decline was compensated Government’s debt-service payments, since for through domestic borrowing, with the a large portion of external financing is in total value of domestic loans reaching the form of grants and non-concessionary TZS 873 billion during the first quarter, loans. If sustained, it may also lead to the a figure 10 times higher than during the crowding out of private sector credit. Figure 21: Big increase in domestic borrowing to offset the fall in external financing during the first quarter of 2014/15 Over the next two Source: BoT„ Note: External financing is defined as grants and concessionary as well as„ to three years, non- concessionary financing. the construction, communication 1.3 Economic Outlook: based on the optimization of Tanzania’s and transport Positive prospects require advantages, especially in the tourism sectors should managing fiscal risks and sector. continue to be the optimizing assets main drivers of Short to medium term projections growth. The short and medium term prospects for Assuming no unforeseen events or the Tanzanian economy remain positive, exogenous shocks, the Tanzanian economy despite the increasingly significant fiscal is projected to achieve a rate of growth of challenges faced by the Government. approximately seven percent in 2014/15, First, this section of the report discusses with this rate gradually accelerating over macroeconomic projections for the next time (see Table 5). Over the next two to„ few years, following which it provides an three years, the construction, communi- assessment of the main risks faced by the cation and transport sectors should Tanzanian economy. Finally, it proposes continue to be the main drivers of growth. a series of potential options to stimulate It is also expected that the emphasis on a higher rate of growth and job creation, public investment and investment through PAGE http://www.worldbank.org/tanzania/economicupdate 16 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region PPPs under the Big Results Now initiative potentially driving up the GDP growth rate will stimulate even more construction by 1-2 percent in the medium-term. Finally, and public works. Starting in 2016 or the rapid demographic growth and the 2017, massive investments in the natural process of urbanization should result in gas sector (potentially as high as US$ 4-5 increased demand for both education and billion per year) should lead to another health services and electricity and water boom in construction and related services, services. The current account deficit Table 5: Macroeconomic projections (% of revised GDP unless otherwise indicated) will continue to 2014/15 2015/16 2016/17 be financed by 2012/13 2013/14 (p) (p) (p) a combination Real GDP Growth 6.2 7.3 7.1 7.1 7.5 of aid and commercial loans, Inflation (CPI, %) 7.6 6.3 5.0 5.0 5.0 with a greater Overall fiscal balance -5.0 -3.4 -3.7 -2.9 -3.1 shift towards FDI Current account balance -10.3 -10.9 -9.5 -8.3 -8.0 inflows. Gross official reserves (US$ mn) 4,357 4,634 5,143 5,692 6,350 Source: World Bank The rate of inflation should remain manufacturing and agricultural exports steady at approximately five percent, should increase relative to their recent so long as the Tanzanian economy historical levels, driven by an increase in is not affected by large variations in the volume of regional trade.3 The level food and energy prices. However, it of imports should stabilize, with a decline remains essential that the Central Bank in the value of fuel imports resulting from continues to follow a prudent monetary a shift from fuel to gas energy sources policy, especially by limiting the domestic and possibly from lower imported prices financing of the fiscal deficit. A steady„ being offset by an increase in the value rate of inflation also assumes stability of imports of capital goods and materials in the external environment and in the required for the construction of LNG plants exchange rate. in the gas sector. The current account On the external side, the current deficit will continue to be financed by a account deficit is expected to remain combination of aid and commercial loans, at a level equivalent to 8 - 9 percent with a greater shift towards FDI inflows of GDP. Assuming commodity prices whose value is expected to increase in the remain relatively stable, the value of coming years as extractive industries make International gold prices have been relatively stable in 2014, around USD1200, after a severe decline in 2013. For 3 the main agricultural commodities exported by Tanzania, prices have fluctuated depending on the commodity. According to IMF and World Bank’s projections, most commodity prices are expected to slightly decline in the next couple of years. PAGE http://www.worldbank.org/tanzania/economicupdate 17 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N an increasingly significant contribution to criteria for the EAC monetary union, which the overall economy. consists of the following four elements: (i) a maximum ceiling on headline inflation of The fiscal deficit will consolidate at a level eight percent; (ii) fiscal deficit (including equivalent to approximately 3.7 percent grants) equivalent to three percent of GDP; of GDP in 2014/15, with this figure (iii) a ceiling on gross public debt of 50 declining to approximately three percent percent of GDP in net present value (NPV) in future years. At these levels, the value of terms; and (iv) international reserves cover public debt will stabilize at the equivalent of of 4.5 months of imports. approximately 31 percent of GDP. However, these ambitious targets are subject to the Managing external and fiscal risks Government improving revenue collection Despite these positive prospects for through the implementation of the VAT Tanzania’s economy, significant risks Act and a range of administrative and remain, with the major ones relating policy reforms. The authorities must focus to exogenous shocks and fiscal on broadening the tax base, which is management. The economy remains surprisingly flat considering the robust rate vulnerable to exogenous shocks, including of growth of GDP. In terms of expenditure, shocks related to adverse climatic conditions the Government is expected to address and volatile international commodity the existing gaps in infrastructure and prices. The revised GDP series shows that social services by improving the allocative the economy is more volatile than was and financial efficiency of the budget. previously determined, partly as a result This will require improvements in cash of changing climatic conditions. A good management, including the payment rainy season boosts farming production of arrears; better and more transparent and enables the use of hydropower, which procurement practices; and stronger is a cheap source of energy. However, a internal and external controls. bad rainy season produces the opposite The economy results. While these shocks are hard to remains Tanzania’s commitment to entering into vulnerable to manage, their impact can be reduced a monetary union with other East African exogenous by diversifying the sources of energy Community members is an additional (as is currently being achieved through shocks, including incentive for the adoption of a prudent shocks related to the use of natural gas); by developing macroeconomic policy stance. In adverse climatic modern irrigation schemes; and by conditions November 2013, the Government signed a promoting the use of insurance by farmers. and volatile protocol to establish a monetary union with international the goal of introducing a common currency The external balance is also vulnerable commodity prices. in 2024; a timing that coincides with the to variations in commodity prices, potential commencement of offshore particularly gold and energy prices. natural gas production. The protocol Since its peak in 2012, the international sets out the process and convergence price of gold has fallen by more than 20 PAGE http://www.worldbank.org/tanzania/economicupdate 18 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region percent. As a result, the value of gold by pension funds to ministries over the past exports from Tanzania has declined by decade, where the total value is estimated 17 percent, totaling US$ 1,734 million in to reach approximately US$ 1.3 billion as of 2013 and accounting for 37 percent of June 2014. The Government will also need total merchandise exports. Fuel imports to find ways to finance payments to future accounted for 39 percent of the total value pensioners, with this fill continuing to grow of goods imported in 2013, increasing if no action is taken.4 Eliminating arrears slightly from US$ 3,386 million in 2012 to should be a priority for the Government, US$ 4,309 million in 2013 - the increase which must demonstrate its commitment The resolution being driven by higher volumes but lower to meeting its financial obligations in order of the arrears accumulated with prices. Given their potential impact on the not to break its trust with the private sector pension funds is balance of trade, the authorities must pay and citizen. both a past and close attention to gold and oil prices over future problem. In addition to arrears, the budget is time. exposed to the implicit risk of contingent Risks on the fiscal front persist. In liabilities. While the Government is not particular, to address these risks, the directly responsible for the debt or arrears Government must address the issue of accumulated by public agencies and public the accumulation of arrears with a sense enterprises, it becomes partly responsible of urgency. The current arrears owed to in case of their failure to pay these arrears. private contractors should be paid, which, In many cases, the central government with improved cash management to prevent provides an explicit guarantee, making it the accumulation of additional arrears, responsible upon default. The most recent will reduce the total value of arrears over example has involved the accumulation of time. However, at present, the total value arrears by TANESCO, which has required of these arrears amounts to approximately substantial transfers from the central US$ 700 million. Payment of these arrears Government over recent years. At the end will absorb a significant amount of public of 2012, the total amount of contingent resources over the next few years, reducing liabilities was estimated at TZS 7 trillion, the fiscal space for additional investments with the main contributors being social in basic services. The resolution of the security funds (TZS 4.1 trillion); one-off arrears accumulated with pension funds government guarantees to MDAs (TZS 1.8 is both a past and future problem. The trillion); on lent loans (TZS 664 billion); Government needs to repay the existing and Government guarantees to public and stock of arrears accumulated on the„ government institutions (TZS 418 billion).„ pre-1999 pensions and on loans provided The Government is legally obliged to The payments of the pensions to pre-1999 retirees is the legal responsibility of the Government, but was almost 4 paid in full by PSPF since 2004. As a result, the Government has accumulated almost US$ 1 billion in arrears with PSPF. Looking forward, the annual payments of pre-1999 payments to retirees will continue due to the demographic profile of PSPF members, and will reach a peak of TZS 500 billion in FY2027. PAGE http://www.worldbank.org/tanzania/economicupdate 19 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N repay guarantees to the lender when the Making the most of your assets: The borrower defaults or cannot repay the opportunity presented by the tourism sector whole amount. To achieve a higher rate of economic There is also a growing risk associated growth and to ensure that this growth with Government meeting its financing generates optimal benefits, Tanzania gap through the use of non-orthodox should consider measures to maximize means, such as the accumulation of the growth of sectors where it has arrears or excessive domestic borrowing. comparative advantages. It is an axiom Over the past couple of years, the level of basic economic theory that a country of arrears has increased significantly, should not attempt to produce all products. reaching the equivalent of more than five Rather, it should focus on those areas in percent of GDP by mid-2014. There have which it has a comparative advantage. also been at least two episodes of massive Since Adam Smith and David Ricardo, it domestic borrowing. The first of these has been argued that a certain degree of episodes occurred during 2012-13, when specialization is needed for any particular the authorities exceeded the target agreed country to build and consolidate its upon with the IMF by the equivalent of 1.3 strengths and to accelerate its economic percent of GDP; while the second occurred development. While these economists in the first quarter of this fiscal year, when believed that these advantages would the total value of domestic credit to the emerge automatically from free competition Government reached almost TZS 900 and trade between countries, the most billion. These developments require close recent trend has been to promote the use These monitoring because of their potential of more pro-active policies.5 Therefore, in developments negative impact on macroeconomic and require close most countries in the world, policy makers fiscal frameworks. The rise in the value monitoring have often promoted specific products because of their of accumulated arrears has the potential or industries in which their country has a potential negative to damage the relationship between perceived edge. impact on the Government and its suppliers and macroeconomic to increase the cost of future borrowing For Tanzania, an increased emphasis and fiscal on both the domestic and international on promoting growth in a few priority frameworks. markets. On the other hand, the excessive sectors could make a difference, driving use of domestic credit has already increased both economic growth and employment the Government’s debt service (which is creation. In particular, it is accepted that close to ten percent of total expenditures, economic performance will largely depend while it was only three percent five years on the country’s capacity to optimize the ago) and sent negative signals to markets, use of its natural resources, ranging from crowding out private credit. food to natural gas, livestock, and tourism 5 This trend is well identified by 2008 Nobel Prize winner, Paul Krugman. PAGE http://www.worldbank.org/tanzania/economicupdate 20 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region attractions. This convergence is intuitive, One of the greatest benefits associated but it is also confirmed by economic theory with the development of the tourism and lessons learnt from international industry is the creation of jobs. Today experience as recently articulated in around half a million workers are directly the Country Economic Memorandum involved in tourism activities in Tanzania. published recently by the World Bank. This is in line with international evidence that also shows that the tourism sector The tourism sector has the potential to is relatively labor intensive, directly Today facilitate both the achievement of an employing a large number of people around increased rate of economic growth and half a million (see Box 2). It can also create jobs the creation of an even more significant workers are number of productive job opportunities. indirectly through its interactions with directly involved the rest of the economy and through Tanzania’s tourism sector has almost in tourism multiple backward and forward linkages. doubled over the past decade, bringing activities in up to US$1.4 billion of foreign currency For example, tourism creates jobs in Tanzania. to the country in 2013 from $824mn in„ construction during the period when 2005. This sector has also helped to„ hotels, restaurants and other facilities stabilize the country’s balance of payments are being developed. Further down due to its resilience to external shocks over the line, the influx of visitors creates a time, notably during the 2008/9 global demand for a range of services, including financial crisis. Lastly, tourism has and transportation, telecommunications and can bring tax revenues, and thus create financial services. The sector’s potential additional fiscal space for the Government. to create jobs is in part due to the fact that Indeed, visitors are paying fees and taxes, it is not a single activity involving a single while operators are subject to numerous sector. Rather, it involves a combination licenses, fees and taxes. of activities in a range of different sectors. Box 2: Jobs in tourism: some global facts „„ In 2012, at a global level, tourism provided employment for more than 260 million individuals, equivalent to about 8.7 percent of the overall number of jobs (direct and indirect) worldwide, or one in every 11 jobs; „„ With regard to the supply chain in tourism, one job in the core tourism industry indirectly generates 1.5 additional jobs in the related economy; „„ Women represent the majority of the workforce in many countries; „„ Youth employment is significant in the sector. Half of the tourism workforce is under 25 years old. Source: ILO. http://www.ilo.org/wcmsp5/groups/public/---ed_dialogue/---sector/documents/ publication/wcms_159257.pdf PAGE http://www.worldbank.org/tanzania/economicupdate 21 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Looking forward, the global demand for expand Tanzania’s tourism sector and to Tanzania’s tourism products has excellent capitalize on the country’s comparative prospects for growth in both the medium advantage in a way that maximizes the and longer terms. The second section of number of jobs created and other positive this update will therefore discuss how to effects for the economy and Tanzanians. PAGE http://www.worldbank.org/tanzania/economicupdate 22 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region 2 Leveraging Tourism for even Greater Benefits PAGE http://www.worldbank.org/tanzania/economicupdate 23 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Part II: Leveraging tourism for even greater benefits „„ Tourism is a booming sector in Tanzania, with the country attracting more than one million international visitors in 2013; bringing in more than US$ 1.5 billion in foreign currency to one of the poorest economies in the world; and employing approximately half a million people. „„ However, gains from the industry could benefit an even greater number of Tanzanians. At present, the benefits derived from the industry are not optimal due to the following reasons: (i) foreign visitors come to Tanzania through pre-arranged packages booked abroad; (ii) over 90 percent of tourism activities are concentrated in two geographical areas; (iii) the sector has become less labor intensive over time; (iv) there are weak linkages with local communities and businesses; and„ (v) inefficient tax systems with complex and non-transparent mechanisms prevent the optimal redistribution of rents from tourism. „„ Attracting more tourists and enabling geographical diversification in the south of the country are two legitimate objectives. But this will require heavy investments in infrastructure, reforms in the business environment, and smart management of emerging trade-offs. These trade - offs include the competitive use of public resources (water, land) and natural assets, as well as balancing pressures on local communities and the environment. „„ The equitable development of the tourism sector can be accelerated in three ways: (i) diversification, not only by location, but also by the type of tourism that the country wants to promote (ii) intensification of linkages in existing locations; and (iii) good governance. In 2012, the New York Times ranked one million tourists came to Tanzania Tanzania, the seventh preferred tourist in 2013, primarily to visit the Serengeti, destination in the world. Approximately 6 Mount Kilimanjaro and the beaches of 6 New York Times, The 45 Places to Go in 2012, accessible here: (http://www.nytimes.com/2012/01/08/ travel/45-places-to-go-in-2012). PAGE http://www.worldbank.org/tanzania/economicupdate 24 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Zanzibar, with this number growing annually„ into account, this figure might be as high (see Figure 22). Furthermore, Tanzania as ten percent (see Figure 23).7 In addition, tends to attract high spending tourists, with the tourism sector has contributed more to each spending on average about US$ 3,000. foreign exchange earnings over the past five years than mining or any other sector. The tourism sector has flourished in Tanzania, with an average annual rate of The contribution of the tourism sector is growth of approximately twelve percent broadly recognized, with its development in the period 2000 - 2012. This sector high on the agenda of the Tanzanian directly contributes to approximately 3.4 President as well as the National Business The contribution percent of the total GDP. However, if the Council. With this support and recognition, of the tourism sector’s indirect impact on other sectors, the sector has the potential to grow even sector is broadly such as transportation and food, are taken further over the next decade. recognized, with its development Figure 23: Direct and indirect high on the agenda Figure 22: More tourists, more foreign contribution of tourism to exchange earnings of the Tanzanian GDP – regional comparison President as well as the National Business Council. Source: (1) National Bureau of Statistics, Tanzania Tourism Sector Survey, April 2014 (2) World Travel & Tourism Council, Economic Impact 2014. Tanzania figures have been adjusted to reflect new rebased GDP. However, despite Tanzania’s popularity clearly provided some benefits to a few local with tourists, it remains unclear whether communities, it has not done so at the level the tourism sector is making a significant that has been achieved by several other contribution to poverty alleviation, job countries. For example, the poverty level creation and fiscal revenues. In terms of in and around the Serengeti National Park these three aspects, Tanzania’s tourism is still amongst the highest in the country. industry has the potential to grow. While And while the tourism sector currently its development of tourism attractions has provides jobs to approximately 500,000 7 Direct contribution of sector is measured by GDP generated by industries that deal directly with tourists, including hotels, travel agents, airlines, restaurant and leisure industries for tourists, and passenger transport services. Indirect effects include wider effects from investment, the supply chain and induced income impacts. (Source: World Travel & Tourism Council, Economic Impact 2014). For Tanzania, figures have been adjusted to new rebased GDP. PAGE http://www.worldbank.org/tanzania/economicupdate 25 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Tanzanians, the dramatic increase in the relatively low volumes. The average tourist number of tourist arrivals in recent years spends approximately US$ 290 per day for has not translated into a proportionate an average stay of 11 days.8 However, all increase in the number of high and mid- these payment are not all going to local levels jobs. Lastly, even though operators operators and suppliers. Approximately in this sector are in theory subject to high 80 percent of tourists in Tanzania arrive rates of taxation, the sector’s contribution from either Europe or the US, with about to the budget has remained limited due to 64 percent subscribing to package tours ineffective and inefficient administration organized through travel agencies located and collection. abroad.9 Therefore, only a portion of the spending remains in the host country. This 2.1 Five reasons why tourism is is usual in countries like Botswana, Namibia not yet generating optimal or Kenya, which rely on a high proportion benefits for Tanzanians of foreign tourists.10 In Tanzania, for the tourism sector to Second, tourism activities are highly make an even greater contribution concentrated in two locations: the to successful economic growth, it is Northern circuit, which includes necessary to ensure social inclusion and Serengeti, Ngorongoro, and Mount ecological sustainability. As the tourism Kilimanjaro; and the beaches of sector grows, it becomes increasingly Zanzibar. The national parks of Serengeti As the tourism important to understand why it has not and Kilimanjaro generate 85 percent of sector grows, generated optimal benefits for a greater it becomes the country’s total national park revenues. number of ordinary Tanzanians. The increasingly Clearly, tourism is underdeveloped in the explanation for this involves five different important to rest of the country. For example, in 2012, factors: understand only 21,000 tourists visited Ruaha National why it has not First, while tourists spend a lot of money Park, an under-explored gem in the south.11„ generated optimal during their visits to Tanzania, this Most beaches on the mainland, such benefits for a generates benefits for a relatively small as South Beach and Pangani, are also greater number relatively infrequently visited. Given that of ordinary number of parties in the country. This Tanzanians. is partly the result of the kind of tourism large areas of the country still remain that a country like Tanzania is attracting, relatively unexplored and underdeveloped i.e. predominantly high-value tourists in for tourism, the linkages between the 8 National Bureau of Statistics, Tanzania Tourism Sector Survey, April 2014. This proportion excludes international travel cots. 9 National Bureau of Statistics, Tanzania Tourism Sector Survey, April 2014. 10 www.southafrica.info/business/economy/sectors/tourism-overview.html 11 From 2006 to 2012, key national parks along the Northern circuit hosted on average between 48,000 and 322,000 visitors per year, while national parks such as Ruaha in the South, as well as Katavi in the West received between 3,000 and 20,000 visitors per year during the same time period (National Bureau of Statistics, Tanzania Tourism Sector Survey, April 2014). PAGE http://www.worldbank.org/tanzania/economicupdate 26 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region sectors activities and the rest of the that during this period, the ratio of labor economy have been limited at the national to GDP in the tourism industry declined level. from 55 to 33 percent, in a sector that is known to be labor intensive. Furthermore, Over the past Third, the tourism sector has created in Tanzania, the average annual income decade, the some new job opportunities for per worker in the tourism industry is only tourism sector Tanzanians but not in proportion to the US$ 3,500. While this figure is considerably has grown sector’s growth. In particular, it is failing higher than the general average income of by a factor of almost 300 to create additional high value jobs. Over a worker in Tanzania12, it is lower than the percent. the past decade, the tourism sector has annual income from tourism in comparable grown by a factor of almost 300 percent. countries — tourism workers earn almost By contrast, the number of jobs provided US$ 5,000 in Uganda, and US$ 9,000 directly and indirectly by this sector has in Kenya.13 This gap reflects not just the only slightly doubled, from 546,000 to differences in skills, sets between the 1,200,000 workers over the same time different countries, but also the limited period (see Figure 24). While this is still a ability of the tourism sector in Tanzania to significant number of jobs, it also means foster inclusive growth at scale. Figure 24: GDP is growing faster than Figure 25: Poverty remains prevalent the labor force in and around main tourism attractions Source: World Travel & Tourism Council, Economic Impact 2014 and World Bank’s Tanzania’s Tourism Future, draft, 2014. Fourth, tourism in Tanzania has not major attractions. It is often argued yet optimally enhanced economic that tourism can help stimulate local opportunities for members of local development. It is indeed true that if the communities in areas surrounding the industy is well managed linkages with The average earning per worker in Tanzania is around US$ 1,200 per year. World Development Indicators 2014. 12 World Travel & Tourism Council, Economic Impact 2014. 13 PAGE http://www.worldbank.org/tanzania/economicupdate 27 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N local communities can be fostered by income tax, municipal service levies, involving members of these communities employers’ contributions, and safety in the development and management inspection fees.14 The complexity of of local attractions and in the delivery of the system translates into numerous traveler associated goods and services. inspections and visits by tax inspectors This can happen through co-management and collectors, which are time arrangements with local communities and consuming and provide opportunities through the building of a supply chain from for corruption and the underreporting agricultural produce to hotels; by creating of collected revenues. The unclear jobs for locals as employees or guides; and uncertain tax system also creates and by promoting a market for traditional barriers to entry for new and small handicrafts, among other economic investors, who cannot survive in the activities. Where such a strategy is in place, current business environment. This more needs to be done to exploit it by reduces the opportunity for a viable The unclear capitalizing on local talents and resources. tourism sector and decreases its overall and uncertain As it is today, local communities adjacent to level of competitiveness. tax system also major tourism attractions remain among the creates barriers to „„ High evasion rate: The overall fiscal entry for new and poorest in the country (see Figure 25). revenue generated by the tourism small investors, sector is estimated to reach the value who cannot Lastly, the Government has failed to of US$ 185 million per year, equivalent survive in the capture all returns from the tourism to approximately twelve percent of current business sector due to an inefficient tax system environment. tourism GDP.15 However, 15 hotels and non-transparent redistribution account for about one quarter of mechanisms. The multi-sectoral nature of those revenues. This means that other the tourism industry combined with lack tourism operators are either paying of transparency, fragmented reporting, much less in taxes and fees, or the and the general lack of reliable data is amount collected is not included in symptomatic of three main problems official records. Either way, it is clear that that deserve attention. These include the what is officially circulated back into the following: system is disproportionately lower than „„ Fragmentation of the tax system: expected for an industry that makes Tourism operators are subject to more such a significant contribution to the than 20 taxes and fees, including VAT, Tanzanian economy. BRN Labs Report on Taxation, Multiplicity of Taxes, Levies and Fees, March 2014. 14 This figure includes VAT, income tax, revenues generated by visas, national park fees. Data sources include 15 publicly available information from the Tanzania Revenue Authority and the National Audit Office, as well as hotel surveys, and a study on NTR potential in Tanzania (Tanzania Ministry of Finance, ‘Study on Integration and Harmonization of Non-Tax Revenue Collection Systems for Ministries, Departments and Agencies (MDAs)’, March 2014). PAGE http://www.worldbank.org/tanzania/economicupdate 28 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region „„ Non-transparent use of collected protection efforts as stipulated by the resources: A significant share of revenue Law.17 is collected by government agencies The combined impact of these three that operate outside of the budget. factors helps to explain why the overall As tourism The complexity of revenue collection contribution of the tourism sector to fiscal operators have and management systems can be revenues is equivalent to only a third of frequently stated, seen from the example of revenue what is generated in the mining sector.18 the costs imposed by taxes are not as flows in hunting, a sub-sector of As tourism operators have frequently much a problem as tourism (see Figure 26). Not only is the stated, the costs imposed by taxes are not the opportunities system complex and the flow of funds as much a problem as the opportunities created by a redundant, but also, if the revenue created by a complex taxation system for complex taxation flows are accurately captured, then the rent-seeking and harassment. Additionally, system for system simply does not work well. 16 the revenue management systems are rent-seeking and For example, a 2013 NAO performance characterized by cumbersome processes. harassment. audit could not verify whether any of As a result, they do not work well. There the funds allocated to local government are clear opportunities for enhancing were indeed distributed or used for efficiency and transparency by simplifying the purpose of community-led wildlife the structure of revenue flows. Figure 26: Revenue collected from tourist hunting in game controlled areas Sources: (1) Tanzania National Audit Office, Performance Audit Report on Management of Wildlife in Game Reserves, December 2013; (2) Tanzania Natural Resources Forum, Brief 3: Maximizing Revenues from Sustainable Wildlife Utilization, 2008; (3) R.D. Baldus & A.E Cauldwell (GTZ) , Tourist Hunting and It’s Role in Development of Wildlife Management Areas in Tanzania, 2004. Problems of revenue collection and In Tanzania, the Government is expected management also translate into to play a central role in the redistribution reduced benefits for local communities.„ of revenues amongst local communities 16 The revenue flows in Figure were put together by authors from several sources noted, and have not been verified by the parties represented. 17 Tanzania National Audit Office, Performance Audit Report on Management of Wildlife in Game Reserves, December 2013. 18 Total receipts from tourism were US$ 185 million in 2012, while receipts from mining in 2012 amounted to approximately US$ 470 million (Extractive Industries Transparency Initiative, Tanzania 2012 EITI Report). PAGE http://www.worldbank.org/tanzania/economicupdate 29 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N through fair and efficient tax revenue of each tourist remains the same, this mechanisms. This is particularly important would involve 8 million tourists visiting given that the country attracts high-end the country. This is not impossible, with tourism, which requires specific skills for some major tourist destinations attracting the provision of high quality goods and an even greater number. For example, services. In this regard, linkages with local Morocco or South Africa currently attract communities have remained weak, partly more than 10 million tourists each year. due to mismatches in the skillset needed However, for Tanzania to achieve this goal, to cater to the high-end market segment. it would require a sustained rate of growth Here, government supported redistribution in the number of visitors of 19 percent per programs become more important to year. This is almost twice the annual rate sustain local communities. of growth recorded over the past decade. Thus, the achievement of this goal would 2.2 More tourists and require innovative marketing strategies, geographical new investments in infrastructure such diversification: Managing as better road networks and a strategic the impacts carefully airport, together with the consistent and reliable provision of electricity. At present, The achievement There is general agreement among private and public stakeholders in travel by road to Ruaha National Park takes of this goal would 11 hours from the closest international require innovative Tanzania that the development of airport. It is possible but expensive to fly marketing tourism will involve: (i) an increase in to Ruaha from Dar-es-Salaam, with flights strategies, new the number of visitors and earnings; and investments in costing approximately US$ 300 each (ii) the expansion of tourism activities infrastructure way. By comparison, a round trip flight to towards the south of the country. These such as better Mwanza, which is more than twice the road networks and two options are well accepted, but merit further consideration. distance, costs only about US$ 150. Unless a strategic airport, the costs of reaching destinations in the together with the Taking measures to increase the south of Tanzania are reduced, attractions consistent and number of visitors to Tanzania is such as the Selous and the Udzungwa reliable provision of electricity. arguably a justifiable goal. Key players mountains will continue to be less optimal in the industry have stated the objective options for travelers looking to maximize of multiplying earnings from tourism value for money. Failure to improve access by 8, up to US$ 16 billion by 2025. 19 If results in a slow pace of development or the average level of holiday spending expansion to these attractive sites. Tanzania Tourism Task Force Report for the 8th TNBC Meeting. 19 PAGE http://www.worldbank.org/tanzania/economicupdate 30 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region In addition, an unrestrained increase few years, the extent of irrigated land in the number of tourists may have utilized for the production of rice has a number of undesirable impacts. increased tenfold. The result is that the Therefore, measures to achieve this goal once perennial river now runs dry for should be carefully evaluated by decision several months of the year. makers: „„ Cultural tensions: An increasing number of tourists, while possibly „„ Deterioration of natural assets: The providing economic benefits to local required investments in infrastructure communities, also has the potential (road, hotels) to support such an to create or exacerbate social and increase in the number of visitors economic pressures. must be carefully implemented to An increased ensure that their development does Any strategies to attract more tourists number of visitors will have to manage the conflicting not compromise the fragile ecological will intensify interests related to the competing uses balance in protected areas such as the competition for Serengeti. Development planning must of natural assets carefully. Regarding the use of land ensure that infrastructure investments the competition between agriculture and water. in sensitive habitats do not lead to and tourism for the use of land, a recent negative impacts on wildlife, and thus World Bank study shows that Tanzania’s on sustainable tourism. most productive lands are located largely „„ Increasing competition for the use outside protected areas.20 In light of this, of land and natural resources: An there are opportunities to minimize trade- increased number of visitors will offs between agricultural development intensify competition for the use of land and the conservation of water resources and water. A high level of competition in protected areas by targeting high is already clearly apparent in the Ruaha productivity areas for agricultural National Park, where there is a conflict development. between the needs for water for However, some decisions may create upstream agriculture for downstream hydro-electricity production; the more costs than gains over time. In preservation of both the fauna and flora particular, large infrastructure investments that form one of the main attractions must be carefully designed and located of tourists. The Great Ruaha River to ensure that they do not lead to originates in the Kipengere Highlands, irreversible ecological damage. Ecological flowing into the Usangu plains and then distress is also evident as a result of the through Ruaha National Park to feed rise of poaching. With the existing laws two hydropower plants that generate being poorly implemented, two-thirds of more than half of the country’s hydro- Tanzania’s elephant population has been electricity. However, over the past depleted in less than a decade, declining Damania, R. (2014), ‘Tanzania’s Tourism Future’, Draft, World Bank. 20 PAGE http://www.worldbank.org/tanzania/economicupdate 31 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N from 142,000 elephants in Tanzanian game local communities to preserve their reserves in 2005 to only 55,000 today. „ 21 environment. The good news is that there This has rightfully attracted the attention of are integrated solutions that can transform both the Government and the international trade-offs into opportunities. If local media and NGOs. Consistent and severe communities, private sector organizations punishments and sanctions must be and even government agencies benefit imposed along the illicit trade value chain. materially from the preservation of wildlife, In order to control and eliminate the illegal they are likely to be highly committed to trade in ivory, it is necessary to punish not If local achieving this goal. Mount Kilimanjaro only poachers, but even more importantly, communities, National Park is an example of an area private sector the traders that benefit from the illegal trade. that has successfully implemented organizations and While the consistent imposition of benefit-sharing schemes involving local even government sanctions is a vital measure, these communities. Such schemes should agencies benefit be emulated in other protected areas materially from sanctions need to be accompanied the preservation by the provision of incentives for throughout the country (see Box 3). of wildlife, they are likely to be Box 3: Community-based tourism on Mount Kilimanjaro highly committed to achieving this Tourism activities around Mount Kilimanjaro showed how tourist sites in Tanzania goal. could be managed better to generate revenue both for the park and members of local communities. While issues related to environmental degradation and lack of adequate infrastructure to accommodate the increasing number of visitors still need to be addressed, the Kilimanjaro National Park Authority (KINAPA) and TANAPA have demonstrated commitment to ecotourism and to local community involvement. Of the total revenue derived from the sale of tourism packages in this area each year, about 28 percent (or US$ 13 million) is used for pro-poor purposes. Mount Kilimanjaro supports members of local communities through the creation of employment opportunities, the development of integrated agricultural supply chains, and the creation of institutions such as the KGA and KPAP, which are self-regulatory bodies that represent their members’ interests in complaints to employers. At present, Kilimanjaro employs approximately 400 guides, 10,000 porters, and 500 cooks, with the area having the highest school enrollment rate (100 percent) and literacy rate (85 percent) in the country. Source: World Bank, ‘Tourism in Africa: Harnessing Tourism for Growth and Improved Livelihoods’, 2013. See: Environmental Investigation Agency Report, ‘Vanishing Point’, November 2014. 21 PAGE http://www.worldbank.org/tanzania/economicupdate 32 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Biodiversity is often underpriced and to the users of natural resources for their under-valued. This often results in a participation in environmental service market failure, since there is little incentive schemes, with these users being paid to for those whose activities impact on conserve natural resources or to manage biodiversity to take this impact fully into them more sustainably. However, a lack account in their decision making processes. of enforcement and political will often In economics parlance, the incentives need means that such regulatory activities to be realigned to ensure development is are not effective. Regulation needs to be based on the sustainable use of resources. complemented by policy measures which One way to achieve this is by regulating the provide incentives to all stakeholders to use of biodiversity. For example, this could conserve biodiversity and to promote involve the banning of trade in certain sustainable development. One country that animal species products, with rigorous has managed wildlife and environmental enforcement, extensive socialization, and resources, through a system involving„ the consistent imposition of sanctions in well-aligned incentives, is Rwanda, which the case of infringements. Another option has implemented such measures to protect would be to provide financial incentives its gorillas (see Box 4). Box 4: Protecting gorillas through securing returns to community land Regulation Rwanda’s approach to ensuring the conservation of its mountain gorillas involves needs to be a public-private partnership that secures community land ownership, protects complemented by biodiversity and enhances the welfare of local communities. Accommodation in the policy measures Virunga Mountains, home to Rwanda’s endangered gorillas, is limited and relatively which provide incentives to all expensive, creating an exclusive and high-end product. The 16-bed lodge is a stakeholders conservation enterprise on Kiningi community land, from a deal brokered by the Africa to conserve Wildlife Foundation for the lodge’s development. biodiversity and to promote To minimize the community’s financial risk, the Foundation helped structure a loan sustainable in which interest payments are triggered only by income, and interest accrues only development. when the community realizes commensurate income. This partnership has yielded substantial environmental benefits, while the limited luxury accommodation has generated funds for the management of protected areas. Source: World Bank, ‘Tourism in Africa: Harnessing Tourism for Growth and Improved Livelihoods’, 2013. Another frequently discussed option for penetrating the high-end market through the development of tourism in Tanzania its endeavors to attract high spending involves the expansion of tourist activities tourists, it has been less successful in into the south of the country. While developing the middle-income market, Tanzania has already been successful in despite significant opportunities to attract PAGE http://www.worldbank.org/tanzania/economicupdate 33 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N this segment. If Tanzania can develop and Attracting a greater number of tourists market a full range of tourism products and expanding the country’s attractions in addition to those located along the across the full tourism value chain Northern Circuit, then there will be ample constitute a vital component of any Tanzania needs opportunities to diversify the tourism strategy aiming at enhancing tourism to refrain from product while maintaining the high yields activities in Tanzania. However, a ‘business as and exclusivity in high-end destinations measures to achieve these goals must usual, but more such as the Serengeti. be carefully implemented in order of it’ approach to ensure that they have the optimal and to develop The idea of developing the tourism impact. Merely achieving an increase in innovative industry in the south by offering tourist solutions to the number of tourists is unlikely to be a build its tourism products associated with wildlife, good solution, with potentially disastrous industry so trekking and beach activities is not ecological and social outcomes. Similarly, that it is both new. In fact, such proposals have been promoting the expansion of tourism into competitive and discussed for more than a decade. The currently underdeveloped regions of the sustainable. question is why such development has country without careful management not yet taken place. There are three of all the factors that underlie such plausible explanations. The first is that developments will not work. Tanzania such geographical expansion would be needs to refrain from a ‘business as usual, costly, as infrastructure in the south of the but more of it’ approach and to develop country is not well-developed. Will tourists innovative solutions to build its tourism travel approximately 600 miles from Dar industry so that it is both competitive and es Salaam on a poor road to visit Ruaha or sustainable. This will involve a combination Katavi and Kitulo? The second explanation, of approaches, including the diversification linked to the first, is that hospitality and protection of tourism products; infrastructure is also underdeveloped, sustainable integration of tourism with only rudimentary camps and a few activities; and better governance to ensure luxury lodges. There is a lack of capacity the equitable distribution of revenues. and very limited mid-range options. The 2.3 Thinking outside the box: third and more controversial explanation Three basic principles is that tourism attractions in the south are perhaps not unique or developed enough The development of the full tourism value to attract tourists from around the world. chain could have a significant positive While the peaks of Mount Kilimanjaro and impact on Tanzania’s effort to achieve an the wildebeest migration in the Serengeti even higher level of rapid, sustained and are sights that cannot be seen elsewhere, equitable economic growth. As examples it is arguable that the attractions in the around the world show, tourism can south are less unique and do not have the contribute significantly to the creation of same pulling power. employment opportunities, particularly for PAGE http://www.worldbank.org/tanzania/economicupdate 34 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region traditionally disadvantaged groups such as Pillar 1: Multidimensional Diversification women and youth. Examples of countries So far, in the development of Tanzania’s that have successfully implemented tourism industry, the emphasis has been measures to achieve this goal include on expansion through the development Mozambique, which transformed its of new destinations. As stated earlier, most tourism industry through the formulation tourism activities are concentrated in two and implementation of a well-formed areas, with many other potentially attractive strategic plan, regulatory reforms and areas currently underdeveloped. In this the easing of visa restrictions; and Cape context, the development of new destinations Verde, where one in five workers are now makes sense. However, as discussed in employed either directly or indirectly the previous section, there are substantial in the tourism industry. Tourism can costs and potentially negative impacts enhance multiple-linked activities through associated with such a strategy. One means its interactions with the transportation, of achieving this expansion could be through the use of public-private partnerships to agricultural and traditional handicrafts Tourism can develop a number of strategic locations, as enhance multiple- sectors, significantly benefiting a large has been achieved elsewhere. An example of linked activities range of local businesses. In addition, a a PPP which created an extremely positive through its well-developed tourism industry has some impact involved a seemingly simple road interactions subtle benefits. By raising the global profile infrastructure development project, involving with the of a country, it can generate an increased a provincial government and a private transportation, awareness of that country’s natural, human hotelier in South Africa (see Box 5). Such agricultural and other assets, which could play a role in partnerships can also be promoted through and traditional handicrafts attracting foreign investors. the establishment of linkages with large sectors, investments in other sectors, such as mining To derive maximum benefits from the significantly or agriculture, through the development of benefiting a large exceptional opportunities that tourism joint infrastructure that can also support range of local offers, Tanzanian policy-makers should tourism activities. However, as previously businesses. focus on three complementary pillars: stated, competing interests will need to be (i) diversification; (ii) intensification; and managed if other sector partnerships are (iii) improvements to governance. promoted. Box 5: Bushman’s Kloof Wilderness Reserve and Wellness Retreat in South Africa Bushman’s Kloof Wilderness Reserve and Wellness Retreat in South Africa faced series challenges in the development of its resort due to guests being forced to travel a 50km stretch of a cliff-side road which was very unsafe and uncomfortable during the rainy season. However, with the establishment of a PPP with local government agencies and the neighboring community, the road was paved. This resulted in dramatically decreased travel time for resort guests, while at the same time opening up the area for more tourism activities and enhancing the quality of life of members of local communities. Source: COMPASS, Insights into Tourism Branding, Partnering for Tourism Growth, November 2010. PAGE http://www.worldbank.org/tanzania/economicupdate 35 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N The diversification of Tanzania’s the influx of business visitors from recent tourism industry should also involve the discoveries of vast natural gas reserves in development of attractions beyond the the south of the country could be further nature-based. Clearly, there are significant explored. Business tourism could also be benefits for maintaining exclusivity in the developed in Dar es Salaam and in Arusha, management of natural assets that could be two fast growing cities. In Dar es Salaam, damaged through mass tourism activities, the number of business hotels is limited, as this may serve to maintain revenue levels with most always fully occupied. Thus, there while controlling negative environmental is clearly a demand. Kenya has managed impacts. As a result of its development of to develop business tourism facilities very a high-value, low-volume market, Tanzania successfully, and now ranks only second generates higher levels of revenue per behind South Africa as a venue for business visitor than do its regional competitors meetings in a market worth approximately such as Botswana, Kenya, Namibia and US$ 24 million.23 Not only would the Uganda.22 However, this strategy may not development of such facilities in Tanzania work for all forms of tourism, particularly generate revenue directly, it clearly has the for beach tourism where competition from potential to create positive spillover effects, around the world is high and tourists are with the availability of business tourism less prepared to pay a high premium for facilities potentially making Tanzania a their experiences. more attractive proposition for foreign investors. Tanzania could diversify its tourism industry through the development Lastly, it is possible to combine these of a range of new tourist activities. different kinds of tourism by offering Tourism related For example, it may be appropriate to packages and circuits. This is already to the influx of happening to some extent in Arusha, where business visitors develop mass tourism in beach areas from recent along Tanzania’s vast coastline. In fact, business visitors frequently take a few days discoveries of such developments are already evident to visit adjacent national parks. New circuits vast natural gas in Zanzibar, with relatively inexpensive can be better developed in Dar es Salaam reserves in the beach resorts and frequent charter flights by linking the city with national parks South of the from Europe. Cultural tourism could be (such as Mikumi, Selous); beaches (such country could be further developed through the promotion as South Beach, Bagamoyo, Mafia Island); further explored. of specific attractions such as the ruins of and cultural attractions (such as Kilwa, Kilwa in the south or the old Swahili trading Zanzibar, Bagamoyo). These attractions towns of Mikindani, all of which have a are well known by local residents, but are rich history that make them potentially currently not yet sufficiently developed to attractive to tourists. Tourism related to attract international visitors. 22 Damania, R. (2014), ‘Tanzania’s Tourism Futures’, Draft, World Bank. 23 World Bank, ‘Tourism in Africa: Harnessing Tourism for Growth and Improved Livelihoods’, 2013. PAGE http://www.worldbank.org/tanzania/economicupdate 36 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Pillar 2: Integration: generating a higher The challenge is to build the capacities of level of benefit from tourism activities in local communities so that their members existing locations are able to provide goods and services to different segments of the market, This pillar should involve the development particularly the high-end segment that of a higher level of integration between currently comprises the bulk of tourism the tourism industry and other local in Tanzania. Two programs need to be businesses. If well managed, tourism further developed in order to enable local provides multiple opportunities for communities to participate more fully in economic development and employment the tourism market. One component is to growth through the establishment of Tourism revenues strengthen skills and training for workers, linkages within and between sectors. For are released into while the other is to build better linkages the local economy example, tourism revenues are released between the tourism industry and local when hotels or into the local economy when hotels or business enterprises. The latter is perhaps lodge operators lodge operators buy goods and services more challenging for Tanzania. buy goods and from local suppliers. This impacts the services from agricultural and fisheries sectors, enabling Tanzania has a great number of local suppliers. them to serve as suppliers to the tourism vocational tourism training programs. industry. It also breeds an entrepreneurial However, many of these programs suffer market for goods such as traditional from underdeveloped linkages with handicrafts. In addition, hotels use a the industry. The country has a multi- portion of their revenues to pay wages sector training institution that offers a to workers, who may come from local two-year associate degree housed in the communities. Tourism industry workers, business school with courses in culinary particularly if they come from local and catering management, leisure and communities, will spend their wages to resort management, and hospitality the benefit of the surrounding community. and tourism management. Recently, a In many countries, local suppliers provide culinary academy was also established. basic building materials to the tourism The institution has campuses in a number industry, spurring growth in construction of locations across the country, including services and light manufacturing. Dar es Salaam, Arusha, and Mwanza. Currently, in Tanzania, most hotel and However, these programs have yet to lodging furniture is imported from China, achieve a sufficient level of integration with showing that trade linkages between the industry to enable an agile response to tourism and local industries have yet to be the industry’s human resource needs. To firmly established. 24 ensure better matches between the skills Ibid. 24 PAGE http://www.worldbank.org/tanzania/economicupdate 37 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N developed by these institutions and those visitor needs and expectations, customer demanded by industry, it is important for service, and online communications.25 the private sector to partner with tourism Delivery of effective training should be programs and for training institutions the responsibility of both the private and to offer skills development aligned public sectors. In this regard, Tanzania can with competitive sector offerings. For emulate lessons learned from places such example, service standards are identified as the Gambia and South Africa, which as a critical constraint to operations in have managed to successfully implement Tanzania. Specific weaknesses noted training programs that meet the needs of Delivery of include business skills, understanding the industry (see Box 6). effective training should be the responsibility of Box 6: Successful training programs in Sub-Saharan Africa both the private International Partnerships in the Gambia: The Institute of Travel and Tourism of the and public sectors. Gambia offers professional courses in all sectors of the tourism industry, with special emphasis on travel agencies, accommodation, tour operations, tour guiding, group operations, event management, and general tourism business management. Close links with the University of Amsterdam in the Netherlands and South Nottingham College in the United Kingdom have resulted in course improvements and visiting lecturers. The Institute is also supported by the Center for Responsible Tourism in the United Kingdom which enables it to promote the teaching of responsible tourism as a core activity. The Institute also hosts professional and college groups from developed countries who study issues related to pro-poor and responsible tourism, using the Gambia as a case study. Private Sector Training in South Africa: Examples of private sector tourism training programs that have worked in South Africa include Accor Academy and Sun International’s training center for its staff. Accor Academy trains 135,000 students a year using video game modules. The innovative, job-specific content of their training has been found to enhance employee loyalty and pride. The Sun International program supports continuous development from tertiary education through to job-specific training, foundation training for managers, elective training, and targeted development for promising potential employees. Source: World Bank, ‘Tourism in Africa: Harnessing Tourism for Growth and Improved Livelihoods’, 2013. Direct economic linkage programs can establishment of linkages with local also be developed through cooperation business enterprises depends on the size between tourism operators and local and capacity of the domestic economy, communities. While the ability of it is important to take advantage of tourism sector operators to support the backward linkages that tourism typically 25 Ibid. PAGE http://www.worldbank.org/tanzania/economicupdate 38 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region has with sectors such as agriculture, as homestay programs are offered construction and light manufacturing. by citizen-funded organizations, with For example, in Peru, the Orient Express proceeds going directly to members of Hotels group reached out directly to communities. Other partnerships, such fishing communities to create a local as the community conservancy program supply chain. In more developed tourist in Namibia, were established through a economies, linkages can also be made joint government and private sector-led from the supply side. For example, in initiative to strengthen partnerships with Nepal, cultural tourism services such local communities (see Box 7). Box 7: Promoting linkages with communities Peru’s hotel scheme: The Peru Orient Express Hotels chain has corporate social responsibility programs that reach out to local communities to establish supplier relationships. The chain has considered and implemented the programs that involve linkages with community initiatives from a number of sectors, including dance and folklore groups, and producers of lamb, potatoes and trout. While not all these initiatives were successful, successful linkages were established with fishing communities for the contractual supply of freshly farmed trout to the hotel. As a result, farmers increased their output, as the hotel provides a ready market for the trout. Nepal’s community-run initiative: The ‘Explore Village’ non-profit organization is a private citizen-funded organization that offers tourism services such as homestay programs and hiking, cultural, festival and pilgrimage tours in several villages. Approximately 25 percent of the revenues accrued from these programs go towards improving literacy among women, improving educational services, and providing support for agricultural and health services, while the rest support service provision and meet the running costs of the organization. Namibia’s conservancy program: In Namibia, the conservancy program established in 1996, uses land tenure and responsibility for wildlife as a mechanism for financial and economic growth. Conservancies are established and registered with Namibia’s Ministry of Environment and Tourism, after which they receive technical advice and support from the Namibian government and NGOs. Community business ventures between private tour operators and the local community work by subleasing community-reserved land to private tourism investors in return for direct payment to local community institutions. With incentives for communities to conserve biodiversity, the program has led to an increase in local incomes and to the conservation of wildlife. There are currently 79 registered conservancies in Namibia, with these currently occupying approximately 20 percent of the total land area of the country. Source: (1) World Bank, ‘Tourism in South Asia, Benefits and Opportunities’, 2000; (2) World Bank, ‘Tourism in Africa: Harnessing Tourism for Growth and Improved Livelihoods’, 2013. PAGE http://www.worldbank.org/tanzania/economicupdate 39 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Pillar 3: Governance and redistribution levies and taxes within the tourism sector are unpredictable, uncertain and often In general, the implementation of fair duplicative. For example, the number of taxation collection and redistribution tourism licenses, levies and fees can range systems is crucial to the development and from 10 for travel agencies, to 115 for air implementation of effective policy. This operators.26 This is inefficient and creates is particularly true for the tourism sector, rent-seeking opportunities, and reduces where the rent is concentrated in a small Tanzania’s ability to compete with the number of locations, particularly with the tourism industry in neighboring countries, high-end nature of tourism in Tanzania. It some of which have already established a is essential to establish a level playing field better environment for their tourism. Tax where both local and foreign investors feel incentives in Tanzania can be revoked at a secure to invest and where taxes and fees moment’s notice, creating an environment are established on a rational basis and they of uncertainty and distrust, preventing It is essential are collected efficiently to ensure equity businesses from being able to plan for to establish a among taxpayers. Importantly, transparent their future costs or operate effectively. level playing This hinders both new investments and„ field where both redistribution mechanisms are necessary local and foreign to optimize the use of those resources. re-investment by current operators. investors feel Because Tanzania has been failing in these Measures to address this have been secure to invest areas, the authorities should consider extensively analyzed through the and where taxes implementing the actions described below. ‘Big Results Now’ lab on the business and fees are environment, which recommended the established on a Foster a better business environment: streamlining of taxes and fees collected rational basis and The business environment in Tanzania on tourism operators (see Box 8 for an they are collected is currently neither conducive to the example). However, it is not sufficient efficiently to development of productive partnerships merely to enact the appropriate legislation, ensure equity among taxpayers. and viable business operations nor as multiple previous experiences show. The amenable to investment. In particular, real challenge lies with implementation. Box 8: Excessive upfront payments kill business To register as a tour operator in Tanzania, an investor must make upfront payments of up to US$ 5,000 for the tourism license (TALA) and own a minimum of five vehicles. In comparison, the equivalent license fee in Kenya costs only USUS$ 200, with a requirement that the operator own only a single vehicle. With such high entry barriers, it is no surprise there are about 60 percent more registered tour operators in Kenya than in Tanzania.27 Source: Tanzania Tourism Task Force Report for the 8th TNBC Meeting. 26 Tanzania Tourism Task Force Report for the 8th TNBC Meeting. 27 Tanzania has 230 registered tour operators, while Kenya has about 360. Source: Tanzania Association of Tour Operators website (www.tatotz.org), Kenya Tanzania Association of Tour Operators website (www.katokenya. org). PAGE http://www.worldbank.org/tanzania/economicupdate 40 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Improve tax collection efforts: As incentives and sanctions. Sanctions discussed above, the tax system is involve stricter penalties for tax evaders. fragmented with high rates of evasion and Incentives can focus on reducing the cost non-transparent use of collected resources. of paying taxes and fees by operators. In this context, improving tax collection Clarity in tax and fee regimes includes does not imply an increase in current tax rational programs that are communicated rates, nor does it imply creating new taxes. with adequate notice. For example, the In this context, This simply involves better methods of implementation of electronic payment improving tax collection from existing operators. Tax systems has already produced significant tax collection does not imply administration needs to be improved by the gains for the collection of National Park an increase combination of clarification of tax regimes, fees in Tanzania (see Box 9). in current tax rates, nor Box 9: Electronic payment of National Park fees does it imply TANAPA installed a Point of Sale (POS) system in 2008 at all park entrance gates. This creating new system is connected to the bank, and all payments are made by bankcards, allowing for taxes. This instant credit to the bank account. Each park gate is responsible for reconciling its own simply involves better methods bank receipts, which can be viewed online with types and number of permits issued. of tax collection This innovation is reported to have significantly contributed to increases in revenue from existing collection, with approximately 68 percent of the increase directly attributed to the POS operators. system of fees collection. Source: Tanzania Ministry of Finance, ‘Study on Integration and Harmonization of Non-Tax Revenue Collection Systems for Ministries, Departments and Agencies (MDAs)’, March 2014 Measures should be implemented to through budget procedures for the benefit ensure that the equitable redistribution of all citizens. of revenues to promote pro-poor growth. The main problem with the current Economic theory presents two competing system in Tanzania is that it uses hybrid options: one is that the responsibility for collection should be close to the users collection and redistribution methods, (the subsidiary principle). For example, making the system excessively complex an entry park fee should be collected by and inefficient. The VAT is collected by local authorities, if this fee is to be used TRA, as it should be. Some local fees are to fund infrastructure in the district. The collected locally, which also makes sense. other option is that collection is centralized However, there are many agencies and and placed under the control of a national ministries that also collect fees and licenses agency to realize economies of scale, that are used for multiple purposes, making with collected revenues being distributed it extremely difficult to trace the collection to a wide range of beneficiaries. A good and use of funds by these agencies. This example is the VAT that should be collected lack of transparency is exacerbated by by national authorities and allocated the existence of the very large number of PAGE http://www.worldbank.org/tanzania/economicupdate 41 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N agencies and ministries related to tourism exclusively by local governments in a activities. These agencies and ministries coordinated manner. The proximity of include the Ministry of Natural Resources local governments to users will increase and Tourism, the Tanzania National Parks accountability and improve monitoring; Authority, the Wildlife Division, the Tanzania and Forest Service Agency, the Tanzania Wildlife „„ Streamline all other fees and levies Protection Fund, the Tanzania Wildlife collected by agencies and ministries by Research Institute, and many others. Even eliminating duplicative fees, allocating the most efficient, proactive audit agency the use of fees to a simple set of would be challenged to check all of these activities, and reducing fees that limit entities on a regular basis. In fact, even barriers to entry for smaller investors. when accounting anomalies are identified, sanctions and corrective measures are Adherence to the three principles weakly applied. of multidimensional diversification, Considering this multiplicity of agencies integration, and good governance would and associated fees and taxes, the enable Tanzania to derive an even higher best solution may be to implement a level of benefit from its tourism resources comprehensive simplification of the and assets. If Tanzania is to derive the entire system. In practice, this translates optimal benefits from its tourism industry, to the following actions: it must focus not merely on measures to increase tourist numbers, but ensure that „„ Centralize the collection of indirect taxes the industry provides benefits to a greater (VAT) through the TRA and use budget proportion of citizens and that the country’s procedures to allocate them; wildlife, cultural and natural resources are „„ Decentralize responsibility for the protected to ensure that these benefits are collection of all local taxes that are used sustainable. PAGE http://www.worldbank.org/tanzania/economicupdate 42 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Statistical Annexes PAGE http://www.worldbank.org/tanzania/economicupdate 43 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Annex 1: Key macroeconomic indicators 2010-13 (based on revised GDP numbers) Note /1 Fiscal year is used, and it ends June 30th of the mentioned year /2 Calendar year is used, and it ends in mentioned year December 31st. Source: IMF and Tanzania Authorities (MoF, BoT, NBS,). PAGE http://www.worldbank.org/tanzania/economicupdate 44 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Annex 2: Real GDP growth rates 2008-2013, per cent (based on revised GDP numbers) Economic Activity 2008 2009 2010 2011 2012 2013 Agriculture and Fishing 7.5% 5.1% 2.7% 3.5% 3.2% 3.2% Crops 7.8% 5.5% 3.7% 4.8% 4.2% 3.5% Livestock 8.1% 5.3% 1.4% 1.6% 1.8% 2.0% Forestry and Hunting 3.8% 5.1% 3.4% 3.3% 3.5% 4.7% Fishing 7.2% 0.5% 0.9% 2.6% 2.9% 5.5% Industry and construction 6.6% 3.3% 9.1% 12.1% 4.1% 11.4% Mining and quarrying -9.5% 18.7% 7.3% 6.3% 6.7% 3.9% Manufacturing 11.4% 4.7% 8.9% 6.9% 4.1% 6.6% Electricity 8.1% 4.3% 13.4% -4.3% 3.3% 13.0% Water 2.3% 4.6% 2.2% -1.2% 2.8% 2.7% Construction 9.7% -3.8% 10.3% 22.9% 3.2% 18.9% Services 4.2% 5.8% 7.8% 8.4% 7.3% 6.3% Trade and repairs 6.8% 2.8% 9.9% 11.4% 3.9% 5.3% Hotels and restaurants 3.3% 1.0% 3.7% 4.1% 6.7% 2.8% Transport 1.8% 6.9% 10.7% 4.4% 4.2% 5.6% Communications 11.9% 26.6% 24.4% 8.6% 22.2% 13.3% Financial intermediation 18.1% 18.4% 12.6% 14.8% 5.1% 2.8% Real estate 1.7% 1.8% 1.8% 1.9% 2.0% 2.1% Professional, scientific & technical services 30.6% 15.8% 29.9% 4.8% -5.8% 5.4% Administrative and support service activities -1.8% 0.4% 8.6% 5.1% 23.8% 12.2% Public administration & defence -6.3% -0.7% -5.0% 15.9% 9.1% 7.8% Education 9.5% 9.2% 6.4% 5.6% 7.4% 4.3% Health 5.5% 7.4% 3.3% 5.3% 11.4% 8.8% Arts 6.4% 3.0% 7.3% 7.7% 11.0% 5.7% Other social and personal services 5.1% 4.6% 5.6% 5.9% 6.5% 5.7% Activities of households as employers 2.6% 2.7% 2.6% 2.7% 2.6% 2.7% FISIM 6.8% 20.0% 7.9% 22.6% 1.2% 0.1% Net taxes 5.0% 12.8% 3.8% 12.2% 0.4% 15.0% Total GDP 5.6% 5.4% 6.4% 7.9% 5.1% 7.3% Source: NBS PAGE http://www.worldbank.org/tanzania/economicupdate 45 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Annex 3: Shares of economic activity in GDP 2008-2013, per cent (current market share based on revised GDP numbers) Economic Activity 2008 2009 2010 2011 2012 2013 Agriculture and Fishing 28.9% 30.2% 30.1% 29.6% 31.1% 31.7% Crops 15.4% 16.0% 16.7% 16.6% 18.0% 17.8% Livestock 9.4% 9.7% 9.1% 8.7% 8.5% 8.4% Forestry and Hunting 2.3% 2.3% 2.2% 2.2% 2.5% 3.1% Fishing 1.9% 2.2% 2.1% 2.1% 2.2% 2.4% Industry and construction 20.1% 18.6% 19.8% 22.1% 21.6% 21.7% Mining and quarrying 3.0% 2.8% 4.1% 5.1% 4.9% 4.3% Manufacturing 7.0% 6.9% 6.9% 7.7% 7.2% 6.9% Electricity and water 1.7% 1.6% 1.5% 1.0% 1.3% 1.2% Electricity 0.9% 0.9% 0.9% 0.6% 0.9% 0.8% Water 0.8% 0.7% 0.6% 0.5% 0.4% 0.5% Construction 8.4% 7.3% 7.2% 8.3% 8.2% 9.3% Services 45.1% 45.6% 44.5% 43.1% 41.9% 41.5% Trade, hotels and restaurants 11.5% 11.8% 11.9% 12.1% 11.9% 11.9% Trade and repairs 9.8% 10.0% 10.2% 10.7% 10.5% 10.6% Hotels and restaurants 1.7% 1.8% 1.7% 1.4% 1.4% 1.3% Transport and communication 8.2% 8.5% 8.4% 7.6% 6.9% 6.3% Transport 6.0% 6.1% 5.8% 5.2% 4.5% 4.0% Communications 2.2% 2.4% 2.6% 2.4% 2.4% 2.3% Financial intermediation 2.9% 3.1% 3.2% 3.4% 3.4% 3.2% Real estate and business services 9.3% 9.0% 8.6% 8.0% 7.9% 7.6% Public administration 7.0% 6.7% 6.1% 6.4% 6.6% 7.1% Education 3.1% 3.2% 3.2% 2.8% 2.6% 2.7% Health 1.6% 1.8% 1.7% 1.6% 1.5% 1.5% Other social and personal services 1.5% 1.5% 1.4% 1.3% 1.3% 1.2% FISIM -0.9% -0.9% -0.9% -1.1% -1.0% -1.2% Net taxes 6.7% 6.6% 6.5% 6.2% 6.3% 6.4% Source: NBS PAGE http://www.worldbank.org/tanzania/economicupdate 46 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Annex 4: Quarterly GDP growth rates 2002-2013, per cent (old GDP numbers) Source: NBS PAGE http://www.worldbank.org/tanzania/economicupdate 47 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Annex 5: Fiscal framework as a percentage of GDP (based on revised GDP numbers) 2011/12 2012/13 2013/14 2014/15 Budget Actual Budget Actual Budget Actual Budget Projected Total domestic revenue 12.2 12.7 13.8 12.9 15.6 13.8 14.3 13.9 Total expenditure 22.2 18.9 20.9 20.6 22.7 18.9 20.4 20.4 Overall deficit before grants -10.0 -6.2 -7.1 -7.8 -7.0 -5.1 -6.1 -5.5 Grants 4.8 3.3 3.1 2.6 3.2 2.2 2.6 1.8 Overall deficit after grants -5.2 -3.6 -4.0 -5.0 -3.8 -3.4 -3.4 3.7 Overall primary balance -5.2 -3.6 -4.0 -5.0 -3.8 -3.4 -3.4 -3.7 Financing 5.2 3.6 4.0 5.0 3.8 3.4 3.4 3.7 Foreign (net) 4.2 3.0 5.5 4.1 3.8 3.3 3.2 4.8 Domestic (net) 0.7 0.6 -1.4 1.1 0.0 0.3 0.3 -0.7 Source: Ministry of Finance, IMF, World Bank Note: Budget estimates are calculated using the budget figure over the actual revised GDP figure. PAGE http://www.worldbank.org/tanzania/economicupdate 48 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Annex 6: Balance of payments (percentage of GDP unless other indicated) 2007/8 - 2013/14 (GDP data based on revised numbers) 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 1. CA balance (including transfers) -8.5% -7.6% -6.7% -6.8% -13.3% -10.3% -10.9% Exports of Goods 11.8% 11.7% 12.4% 15.1% 15.6% 13.0% 12.0% o/w Gold 4.2% 3.3% 4.9% 5.5% 6.4% 4.6% 3.7% Import of Goods -24.4% -22.3% -21.5% -24.6% -29.7% -25.3% -25.1% Services ( net) 1.6% 0.6% 0.5% 0.5% 0.2% 1.3% 1.7% Trade balance -11.0% -10.0% -8.5% -9.1% -13.9% -10.9% -11.4% Income ( net) -1.2% -1.0% -1.0% -0.8% -2.0% -1.3% -1.1% Current transfers ( net) 3.6% 3.4% 2.9% 3.1% 2.6% 1.9% 1.7% 2. Capital and financial account 10.7% 8.3% 8.9% 8.7% 11.8% 11.8% 11.5% Capital account 2.8% 1.4% 1.7% 1.7% 2.2% 1.8% 1.5% Financial account 8.0% 6.9% 7.2% 7.0% 9.6% 10.0% 10.0% o/w Direct investment 3.7% 4.0% 3.2% 3.1% 4.4% 4.4% 4.5% 3. Overall balance 2.0% 0.1% 1.6% 0.3% 0.8% 1.1% 0.6% Gross international reserves ( Mil USD) 2660 2930 3483 3610 3797 4357 4643 In months of imports (current year) 4.2 4.5 5.0 4.3 3.5 4.1 4.0 Source: BoT, IMF, World Bank Annex 7: Monthly imports of goods and services (US$ mn) USD mn 2012 2013 2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Total Imports of Goods and Services 1112.1 987.7 982.5 955.8 1037.8 1065.0 1062.6 1118.3 1107.2 1139.2 1041.1 1070.9 1052.2 1023.3 1232.3 874.8 897.9 1249.3 1089.5 1255.8 1,401.1 1,142.3 1,305.6 1,081.1 1,200.0 1,098.0 1,257.7 990.8 1,066.9 1,165.0 1,026.3 Imports of goods (f.o.b.) 907.1 798.8 791.5 776.4 869.2 878.7 874.4 921.5 901.4 921.6 828.6 854.8 845.1 820.5 1022.1 713.8 728.8 1049.3 878.2 1032.7 1,151.1 892.3 1,051.5 843.6 969.3 883.6 1,037.4 787.9 865.8 953.6 916.3 Capital goods 276.2 283.5 275.9 259.8 338.9 330.9 300.7 319.7 358.5 352.4 303.6 286.6 273.8 241.0 246.7 253.7 273.0 246.3 321.4 334.6 331.1 274.2 381.6 282.8 309.9 255.5 295.3 261.6 280.3 247.7 275.0 Transport equipment 68.4 85.6 83.7 76.4 97.9 105.8 91.0 91.3 128.5 98.9 123.9 106.8 89.4 74.2 75.4 86.9 87.1 79.3 89.7 101.7 120 84.1 167.1 105.4 89.0 94.5 118.7 91.4 96.5 92.2 97.1 Building and construction 61.4 65.4 60.7 50.2 78.6 69.9 54.8 71.2 84.5 81.6 64.6 62.8 77.3 62.6 66.2 70.0 67.6 62.0 115.2 100.0 98.7 73.9 104.2 62.0 110.0 71.1 72.2 70.1 87.6 72.2 80.5 Machinery 146.3 132.5 131.5 133.1 162.4 155.2 154.8 157.2 145.5 171.9 115.1 117.0 107.2 104.3 105.1 96.8 118.4 105.0 116.5 132.9 112.4 116.2 110.3 115.4 110.9 89.8 104.5 100.1 96.2 83.3 97.4 Intermediate goods 402.5 333.4 325.0 340.6 336.9 340.3 398.1 406.3 357.5 363.8 337.0 384.4 386.6 400.5 583.5 272.6 266.5 605.2 362.9 508.5 572.2 426.1 441.3 379.3 425.9 430.8 508.7 311.3 350.5 465.9 415.5 Oil imports 321.5 249.6 271.3 239.5 264.1 279.4 329.7 315.7 282.5 271.1 257.8 304.2 331.4 342.6 532.2 224.4 211.0 520.3 283.7 400.2 472 337.2 353.5 300.1 343.6 342.7 437.6 251.6 277.4 409.2 343.7 Fertilizers 12.1 16.6 2.3 3.1 3.0 1.8 4.1 16.1 11.7 22.4 25.7 15.0 1.8 11.0 3.8 2.4 4.9 21.5 8.1 35.0 29.2 17.6 10.0 14.8 6.0 1.9 5.6 0.5 1.5 0.2 2.6 Industrial raw materials 68.9 67.2 51.4 98.0 69.8 59.1 64.4 74.6 63.3 70.3 53.5 65.3 53.5 46.9 47.5 45.8 50.5 63.4 71.1 73.3 71 71.3 77.8 64.4 76.3 86.3 65.5 59.3 71.5 56.5 69.3 Consumer goods 228.2 181.9 190.6 176.1 193.4 207.5 175.5 195.2 185.3 205.2 187.7 183.6 184.5 178.8 191.6 187.3 189.1 197.7 193.7 189.4 247.8 192.0 228.6 181.5 233.5 197.3 233.4 214.9 235.1 240.1 225.7 Food and foodstuffs 87.0 50.1 55.7 64.3 59.2 55.0 33.4 52.5 62.6 39.5 40.8 56.5 65.1 46.7 76.1 73.8 44.1 64.5 20.5 42.4 57.9 30.5 69.2 55.7 54.1 44.4 56.7 42.5 53.9 81.4 55.5 All other consumer goods 141.1 131.8 134.9 111.8 134.3 152.5 142.0 142.8 122.7 165.7 146.9 127.2 119.3 132.1 115.6 113.6 145.0 133.2 173.2 147.0 189.9 161.5 159.4 125.8 179.4 153.0 176.7 172.5 181.2 158.6 170.2 Miscelaneous 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.0 0.0 0.0 0.0 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Imports of services 205.0 188.8 191.1 179.4 168.6 186.3 188.2 196.8 205.8 217.7 212.6 216.0 207.1 202.8 210.2 160.9 169.1 199.9 211.3 223.1 250.0 250.0 254.1 237.5 230.6 214.4 220.3 202.9 201.1 211.4 216.3 Transportation 92.2 79.8 79.3 78.1 87.1 92.4 87.4 91.4 90.7 91.8 83.0 88.5 84.5 84.3 102.8 72.2 75.5 106.5 90.9 105.6 118.2 92.2 107.8 88.0 100.8 91.3 103.9 81.9 88.8 100.1 95.0 Passenger 4.8 3.0 2.5 2.6 2.7 2.6 2.7 2.1 3.2 3.0 3.1 3.1 3.4 4.8 4.4 3.7 5.5 5.8 6.3 5.9 6.2 6.5 6.2 6.3 7.6 6.0 4.3 6.2 5.7 8.0 7.0 Freight 87.0 76.7 75.9 74.5 83.4 89.0 83.9 88.4 86.5 88.4 79.5 84.8 81.1 78.7 98.1 68.5 69.9 100.7 84.2 99.1 110.4 85.6 100.9 80.9 93.0 84.8 99.5 75.6 83.1 91.5 87.9 Other 0.4 0.1 0.8 1.0 0.9 0.7 0.9 0.8 1.0 0.3 0.4 0.6 0.1 0.8 0.3 0.0 0.0 0.0 0.4 0.7 1.6 0.1 0.8 0.8 0.2 0.6 0.0 0.1 0.0 0.6 0.0 Travel 91.3 79.6 78.3 63.5 57.9 66.5 72.4 76.7 86.4 98.9 97.3 98.2 97.9 85.4 84.0 68.2 62.1 71.4 77.2 81.8 92.1 105.5 103.7 104.7 104.4 91.0 89.6 72.7 66.2 76.1 82.3 Communications services 2.9 3.2 3.6 3.7 3.5 3.7 2.2 2.4 2.3 2.5 2.6 2.6 2.7 3.5 2.9 2.9 1.4 3.1 5.9 3.1 3.2 3.2 3.1 3.2 3.5 3.4 3.9 3.8 3.9 3.8 2.8 Construction services 0.0 0.1 0.2 1.1 2.4 0.2 1.5 1.7 1.3 1.4 1.6 1.5 1.7 1.2 1.1 1.3 2.3 1.4 1.0 0.2 0.6 0.3 0.4 0.4 0.1 0.9 2.0 0.4 2.7 0.1 0.0 Insurance services 7.0 6.6 6.2 6.6 6.9 7.1 6.8 5.3 6.1 6.4 4.9 5.8 2.5 2.9 2.7 2.5 5.5 5.8 5.3 6.1 6.3 5.3 5.9 5.8 3.8 3.6 3.8 2.9 2.8 3.3 5.5 Financial services 0.4 0.3 0.6 0.4 0.4 0.5 0.4 0.6 0.6 0.0 0.4 0.3 0.6 0.7 0.5 0.7 0.6 0.4 0.4 0.4 0.6 0.6 0.5 0.6 0.7 0.5 0.4 0.3 1.9 0.4 0.9 Computer and information services 1.1 1.5 1.8 1.3 1.1 1.4 1.3 1.0 0.8 1.6 1.5 1.3 1.3 0.8 0.6 0.5 3.5 0.6 0.9 0.0 0.7 0.6 0.4 0.6 0.8 0.8 0.5 0.6 1.0 0.4 0.7 Other business services 9.2 12.1 19.9 21.1 8.3 8.5 12.6 12.4 14.0 11.4 13.7 13.0 13.4 20.9 10.8 6.4 12.2 7.2 23.1 16.5 22.0 27.6 22.0 23.9 16.5 22.8 16.3 40.5 33.7 27.2 29.2 Source: BoT PAGE http://www.worldbank.org/tanzania/economicupdate 49 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Annex 8: Monthly exports of goods and services (US$ mn) USD mn 2012 2013 2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Total Exports of Goods &Services 588.5 594.7 619.4 557.5 626.9 683.1 648.2 758.8 664.9 637.1 706.2 683.8 632.7 596.4 493.5 536.8 556.9 592.7 693.1 706.2 700.9 760.7 811.8 730.3 713.9 586.4 610.0 584.8 610.8 703.8 699.9 Exports of goods 383.9 415.2 442.6 370.3 436.1 467.9 401.8 506.0 425.8 399.3 449.3 438.8 397.2 373.1 299.0 309.0 345.3 359.3 379.0 410.8 373.0 464.4 511.2 420.4 451.6 331.9 387.3 363.1 405.6 463.3 382.8 Traditional exports ( values) 92.6 99.0 76.4 74.6 64.4 48.8 19.5 78.0 89.2 100.7 104.7 108.7 99.8 87.6 40.7 52.2 22.4 16.3 23.3 70.7 91.0 120.5 129.6 110.5 121.9 71.2 43.5 26.9 13.6 9.5 28.3 Coffee 18.5 18.1 24.4 14.3 7.8 5.5 3.8 7.8 16.9 23.4 25.9 20.2 21.4 33.9 15.1 19.7 9.8 6.8 3.8 4.2 5.8 9.5 20.8 20.2 16.8 14.3 10.3 11.1 6.0 3.8 3.2 Cotton 3.9 6.3 6.0 9.9 3.8 2.5 8.0 22.0 28.4 30.4 27.3 16.5 13.5 7.7 3.6 0.7 0.6 0.6 1.0 13.1 20.7 20.3 13.6 16.3 3.1 0.5 1.1 1.6 0.7 0.1 4.3 Tea 6.3 4.7 4.6 5.6 7.8 4.3 3.2 2.8 3.2 4.0 4.2 5.3 6.0 8.1 4.8 5.8 6.5 4.1 3.7 5.0 1.6 1.4 4.5 5.3 5.4 5.1 4.8 4.3 3.3 2.5 4.2 Tobacco 33.7 47.3 31.1 17.0 8.8 19.6 2.2 39.9 35.8 41.5 43.0 30.0 19.1 7.3 1.8 1.8 1.4 3.7 10.2 45.9 55.9 82.4 50.7 26.7 50.1 19.3 12.3 0.6 2.0 1.6 14.3 Cashewnuts 13.8 14.8 6.1 22.3 32.6 14.9 0.0 0.5 0.1 0.2 2.6 34.6 34.2 23.5 13.4 22.9 3.0 0.0 3.5 0.0 0.0 0.0 27.2 34.6 30.9 18.4 12.1 6.5 0.1 0.0 0.9 Cloves 14.9 6.4 2.2 4.2 1.6 0.6 0.4 3.3 3.3 0.0 0.3 1.1 4.8 6.1 1.1 0.3 0.0 0.1 0.0 1.5 6.0 5.9 11.8 5.5 14.2 12.7 1.2 1.3 0.0 0.0 0.3 Non-traditional exports 291.3 316.1 366.1 295.7 371.7 419.1 382.3 427.9 336.6 298.6 344.6 330.1 297.3 285.6 258.4 256.8 322.8 342.9 355.7 340.0 282.0 343.9 381.6 309.9 329.8 260.7 343.8 336.2 392.0 453.8 354.4 Minerals 157.6 181.7 231.4 123.9 165.6 228.2 169.5 212.8 165.4 138.3 201.1 208.2 146.3 158.9 131.2 126.5 181.8 162.5 126.0 163.1 119.9 174.4 176.8 187.9 182.0 126.6 157.8 134.5 158.7 161.8 153.6 Gold 153.7 180.3 227.7 115.1 159.0 221.4 160.0 199.6 162.3 127.2 196.3 204.8 138.6 152.6 118.8 115.5 168.6 143.9 121.0 152.6 116.3 161.1 171.6 172.4 160.2 121.2 145.3 126.3 153.1 145.5 141.9 Diamond 0.0 0.0 0.0 5.4 0.0 4.6 0.0 8.6 0.0 6.3 0.8 0.4 4.4 0.1 6.2 6.4 7.7 0.1 0.0 0.0 0.0 9.5 0.0 0.0 13.3 0.6 8.6 0.7 0.0 12.9 6.0 Other minerals 3.9 1.4 3.7 3.4 6.6 2.2 9.5 4.6 3.1 4.9 4.0 3.0 3.3 6.2 6.3 4.7 5.5 18.6 5.1 10.5 3.6 4.1 5.2 15.5 8.5 4.8 3.9 7.6 5.6 3.4 5.6 Manufactured goods 83.7 62.2 69.3 88.0 107.0 98.4 127.9 119.4 79.3 67.1 83.2 61.7 93.9 67.7 67.3 80.6 73.9 83.9 135.0 84.6 86.6 93.7 140.7 64.2 72.1 72.9 96.5 132.0 130.7 186.3 115.1 Cotton Yarn 0.6 0.3 0.1 0.5 0.5 0.2 0.2 0.7 1.3 0.6 0.5 0.2 0.8 2.9 0.7 0.7 0.4 0.9 0.4 1.1 1.6 0.7 0.6 0.2 0.9 0.7 1.1 1.3 1.9 0.8 1.1 Manufactured Coffee 0.2 0.0 0.0 0.1 0.2 0.0 0.1 0.1 0.0 0.0 0.1 0.1 0.0 0.1 0.0 0.1 0.1 0.1 0.0 0.0 0.2 0.2 0.1 0.1 0.0 0.1 0.0 0.3 0.0 0.0 0.1 Manufactured Tobacco 1.7 1.2 2.1 2.0 2.2 1.3 12.3 2.8 2.2 1.9 2.3 2.6 1.4 2.3 3.0 2.1 2.0 2.5 2.8 2.8 3.6 2.9 4.2 2.6 1.3 2.7 2.3 3.0 2.7 3.0 2.5 Sisal Products 1.0 0.6 0.5 0.8 1.0 0.5 1.2 0.9 0.8 0.6 0.6 0.6 0.9 0.9 0.9 0.8 1.0 0.6 0.7 0.7 0.9 0.8 0.8 0.6 0.7 0.9 0.9 2.2 1.1 0.4 1.0 Other manufactured goods 80.2 60.1 66.6 84.7 103.2 96.4 114.1 114.8 75.0 63.9 79.6 58.3 90.9 61.5 62.6 76.9 70.4 79.9 131.0 79.9 80.3 89.1 135.0 60.7 69.2 68.5 92.3 125.2 125.0 182.1 110.4 Fish and Fish Products 13.3 14.6 14.9 17.0 15.9 13.2 11.2 11.8 12.6 14.0 10.7 11.2 11.0 13.8 11.5 10.1 13.1 9.2 11.8 8.1 11.0 11.2 8.6 11.2 12.7 14.7 29.3 16.6 16.8 15.7 17.6 Horticultural Products 2.8 2.7 2.6 2.0 2.2 2.0 2.0 1.8 26.6 2.2 2.1 2.2 2.7 3.0 2.5 2.9 2.3 2.1 2.2 1.9 2.0 2.4 2.1 2.2 2.9 2.8 2.7 3.7 2.6 2.3 2.8 Other Export Products 21.8 28.8 32.5 56.8 63.2 58.4 44.9 69.7 45.4 55.5 41.4 37.2 29.0 28.1 29.8 30.5 42.5 68.6 54.5 62.0 49.9 49.7 38.3 34.8 49.0 32.2 33.0 38.1 73.4 81.3 51.2 Re-Exports 12.1 26.1 15.4 7.9 17.8 18.8 26.7 12.5 7.3 21.4 6.2 9.6 14.4 14.1 16.1 6.2 9.3 16.6 26.2 20.4 12.6 12.2 15.1 9.6 11.0 11.5 24.4 11.2 9.7 6.5 14.1 Services receipts 204.6 179.5 176.8 187.2 190.8 215.2 246.4 252.9 239.0 237.9 256.9 244.9 235.5 223.2 194.4 227.8 211.7 233.4 314.0 295.4 327.9 296.3 300.6 309.9 262.3 254.5 222.7 221.7 205.2 240.5 317.1 Transportation 49.2 47.8 46.5 47.3 54.2 54.6 51.7 54.3 56.6 55.7 57.4 57.1 60.2 59.1 58.0 64.1 63.2 65.8 65.6 62.9 66.6 68.4 66.0 67.0 73.5 72.6 64.0 58.2 51.8 52.9 48.5 Passenger 2.4 2.6 3.7 2.9 3.1 3.2 3.1 3.2 4.1 3.9 4.2 4.6 5.9 6.1 4.2 4.1 4.8 5.4 3.0 4.3 4.5 3.9 4.2 3.4 3.9 2.4 4.3 1.4 2.4 1.2 Freight 40.4 39.0 35.2 37.7 45.1 43.0 40.5 42.8 44.4 42.6 43.3 43.4 45.5 43.9 46.7 49.3 47.5 50.2 48.0 49.2 49.2 48.8 49.1 49.0 49.9 49.5 48.9 49.4 48.2 46.2 45.3 Other 6.5 6.2 7.6 6.7 6.1 8.4 8.1 8.2 8.1 9.2 9.9 9.1 8.7 9.1 11.3 10.7 11.5 10.8 12.2 10.7 13.2 15.2 13.0 13.8 20.3 19.2 12.8 4.5 2.2 4.4 2.0 Travel 128.3 116.5 97.9 102.5 105.5 114.8 156.6 159.9 150.6 142.2 143.4 145.6 136.5 129.0 108.4 113.5 116.8 127.1 205.5 198.6 193.8 179.2 184.6 187.5 153.7 145.3 122.1 127.8 131.5 143.1 224.7 Communications services 3.3 3.5 3.7 3.8 3.9 3.7 3.8 2.9 3.0 2.5 2.8 2.2 3.7 3.7 3.8 4.7 4.3 5.7 4.9 5.0 4.8 4.4 4.8 4.7 4.9 5.1 4.6 3.1 2.8 2.7 3.0 Insurance services 1.9 2.0 2.8 2.9 3.4 3.9 3.4 3.6 3.4 3.4 4.3 3.5 3.6 4.0 3.1 4.3 3.5 0.8 1.6 2.5 3.4 3.3 3.1 3.3 1.7 4.1 3.2 4.5 2.6 2.5 1.9 Financial services 0.9 0.9 1.0 0.9 0.6 0.8 0.8 1.2 1.0 0.6 1.2 0.9 0.7 2.3 1.4 1.7 3.0 3.4 2.4 1.7 2.0 2.5 2.1 2.2 2.1 2.9 2.7 1.3 2.7 0.0 0.1 Computer & information services 0.5 0.1 0.9 1.0 0.1 0.5 0.5 0.9 0.8 0.8 0.5 0.7 0.9 0.3 0.2 0.3 0.3 0.2 0.2 0.0 0.4 0.1 0.2 0.2 1.1 0.8 0.0 0.0 0.0 0.0 0.5 Other business services 18.7 7.8 20.9 26.5 18.3 34.0 26.3 26.7 20.5 27.2 45.0 30.9 27.6 22.8 15.7 36.6 16.1 28.2 28.1 17.5 49.9 34.9 34.1 39.6 25.1 23.8 26.1 26.9 13.8 39.2 38.4 Source: BoT PAGE http://www.worldbank.org/tanzania/economicupdate 50 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Annex 9: Inflation rates 2011-2014 Source: BoT PAGE http://www.worldbank.org/tanzania/economicupdate 51 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Annex 10: Monthly food crop prices (Wholesale) Tanzania Shillings per 100kg Source: Ministry of Industry, Trade, and Marketing PAGE http://www.worldbank.org/tanzania/economicupdate 52 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Annex 11: Average wholesale prices: Tanzania shillings per 100kg Round Month-Year Beans Maize Rice Potatoes Sorghum Jan-12 132,641.5 44,259.4 175,178.1 67,193.2 45,585.9 Feb-12 126,981.7 42,449.1 178,627.8 60,939.2 55,956.3 Mar-12 121,523.1 42,919.4 191,719.2 60,079.6 55,387.4 Apr-12 120,567.1 46,934.9 204,025.4 62,383.3 63,629.9 May-12 128,112.8 52,440.3 183,585.5 70,651.3 60,627.3 Jun-12 129,574.6 52,326.0 165,444.2 69,924.5 65,201.0 Jul-12 130,789.9 52,071.6 160,325.4 79,904.4 58,974.9 Aug-12 126,322.8 50,311.1 158,089.2 69,914.6 57,378.6 Sep-12 126,923.2 54,291.1 163,317.9 67,353.8 61,793.2 Oct-12 123,121.1 54,879.9 163,039.9 67,434.9 53,238.6 Nov-12 135,724.2 65,340.6 176,828.6 96,841.5 65,089.4 Dec-12 139,497.6 72,880.4 185,619.9 85,499.2 75,584.3 Jan-13 144,225.0 76,740.0 188,418.0 82,023.3 75,278.5 Feb-13 136,129.4 77,393.4 182,480.2 76,765.4 85,059.5 Mar-13 126,420.9 72,966.3 175,430.1 68,324.3 88,903.2 Apr-13 124,975.2 66,273.4 159,200.1 64,973.3 82,143.4 May-13 123,689.8 55,949.3 139,257.6 65,567.1 93,086.6 Jun-13 127,741.7 49,486.3 131,541.7 65,769.5 85,444.4 Jul-13 125,467.5 50,113.3 128,382.4 67,660.5 105,733.3 Aug-13 123,313.3 52,107.8 123,407.5 68,823.2 86,053.9 Sep-13 121,427.0 53,095.0 120,391.0 66,017.0 73,765.0 Oct-13 131,525.1 53,252.0 117,913.9 65,684.0 74,869.2 Nov-14 135,023.0 53,242.4 120,073.1 66,896.2 76,770.4 Dec-13 136,601.1 54,648.8 121,897.8 69,589.4 74,456.0 Jan-14 137,264.5 56,152.2 124,104.1 72,145.3 75,424.5 Feb-14 137,264.5 56,152.2 124,104.1 72,145.3 75,424.5 Mar-14 141,476.6 50,631.8 128,952.7 69,177.7 70,264.0 Apr-14 138,796.2 49,970.1 135,418.1 67,985.9 68,285.4 May-14 141,766.7 48,110.6 134,265.6 69,550.7 74,421.2 Jun-14 139,048.5 48,098.8 123,059.6 62,664.0 69,972.3 Jul-14 130,471.5 44,931.7 116,644.3 63,838.5 64,965.8 Aug-14 130,655.8 41,414.1 113,291.4 68,420.5 55,512.1 Sep-14 133,969.9 40,551.8 115,674.8 67,112.0 56,082.5 Oct-14 142,283.3 39,020.0 123,561.7 68,639.3 62,631.2 Nov-14 146,785.5 38,189.5 135,062.1 69,846.3 58,266.1 Dec-14 148,541.0 38,781.3 141,923.1 73,360.5 66,382.6 Source: Ministry of Industry, Trade and Marketing PAGE http://www.worldbank.org/tanzania/economicupdate 53 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Annex 12: Interest rate structures Source: BoT PAGE http://www.worldbank.org/tanzania/economicupdate 54 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Annex 13: Monetary aggregates (based on revised GDP numbers) Source: BoT, IMF, NBS, World Bank PAGE http://www.worldbank.org/tanzania/economicupdate 55 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Annex 14: National debt developments Source: BoT PAGE http://www.worldbank.org/tanzania/economicupdate 56 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Annex 15: Poverty by geographic regions Source: NBS 1/ Monthly expenditure per adult PAGE http://www.worldbank.org/tanzania/economicupdate 57 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Annex 16: Tanzania national park visitors 2006-2012 Source: (1) World Travel & Tourism Council database; (2) National Bureau of Statistics, Tanzania Tourism Sector Survey, April 2014 Annex 17: Number of tourist arrivals in country specified 2006 - 2012 Source: (1) World Travel & Tourism Council database; (2) National Bureau of Statistics, Tanzania„ Tourism Sector Survey, April 2014 PAGE http://www.worldbank.org/tanzania/economicupdate 58 The World Bank Group Macroeconomics and Fiscal Management Global Practice Africa Region Annex 18: Total tourism contribution to GDP in country specified (2011 US$ bn) 2006- 2012 Source: World Travel & Tourism Council database Note: This database uses old GDP numbers. PAGE http://www.worldbank.org/tanzania/economicupdate 59 TA N Z A N I A E C O N O M I C U P D AT E • J A N U A R Y 2 0 15 , 6 T H E D I T I O N Annex 19: Foreign visitor exports in total exports 2011-US$ bn Source: World Travel & Tourism Council database PAGE http://www.worldbank.org/tanzania/economicupdate 60 TA N Z A N I A E C O N O M I C U P D AT E „ • „ J A N U A R Y „ 2 0 15 , „ 6 T H „ E D I T I O N„ http://www.worldbank.org/tanzania/economicupdate