1 February 2013

East Africa: The Investment Destination Challenge


IN August last year, I wrote a piece intended for these pages citing ten issues that in my opinion were holding back Tanzania's performance as an investment destination.

It was motivated by realism of an East African commentator and experiences shared. The piece never saw the light of the day as my Editor questioned my research sources. The right to spike a piece is the prerogative of the Editor and if you want your piece in next time, you do not question that wisdom.

This week, two different researches have pointed out in their own reports what ails Tanzania's business potential. In a report Mastercard Africa Cities Growth Index, Prof George Angelopulo of University of South Africa ranks Dar es Salaam number four after Accra, Lusaka, Luanda but ahead of Addis Ababa and Nairobi.

It is a fairly decent report that deals with potential. Doing Business Report commissioned & published by the Financial Times of London on its part, cites seven areas where Tanzania is seriously challenged in it's quest to become a giant investment destination. The Index is compiled from a range of verified data on variables of city economic growth.

It was supported by historical data from 2009 to 2011 on the GDP Per Capita Growth, household consumption expenditure growth, governance factors as well as the ease of doing business. Other factors considered in the ranking are city population growths, national urbanization and the middle class household growth.

The Financial Times special report, Doing Business in Tanzania, highlights factors that adversely affect Tanzania's business climate. The report, indicates that corruption, bureaucracy, uncertainty over taxation and inadequate skilled labour are likely to have a negative impact on Tanzania's investment climate.

Other factors highlighted in the report include heavy protection of labour and capital account, poor consultation with investors in developing the natural gas policy and poor marketing of the country's massive tourism potential-- all in a country that still has a socialism hangover. The government says it will be able to make a comprehensive statement on the issues raised only after officials at the ministry of empowerment and investment read the articles.

"To be fair, let us first get time to pass through the articles," said the Permanent Secretary in the Prime Minister's office, Mr Peniel Lyimo. "Thereafter, we will tell our side of the story." The report prepared by Katrina Manson, the Financial Times East Africa Correspondent, cites a case in which it took a large US information technology company six months and a call to the office of the vice- president to officially set up in the country. The process reportedly stalled because the company refused to pay any kind of facilitation fee.

"If you're trying to do business ethically here, it's extremely tough," Adam Lovett, director of the law firm Norton Rose, is quoted as saying. He steered the registration. According to the report, this is because officials expect bribes for contracts and even for just doing their job. "The old days of ministers demanding trips to Dubai costing a hopeful company $20,000 just to secure a meeting may have passed, but Tanzania is still drenched in corruption, petty and grand," says a source quoted in the report.

In yet another article, Ms Manson says investors in Tanzania are living in fear of the spectre of resource nationalism as tax collectors squeeze a small group of paying businesses and begin thorny negotiations with exploration companies that are worried about whether their contracts will hold or not. My piece had cited historical injustices from, external, and now, determined, internal forces not to give unity a chance.

Unity they say is strength and a united East Africa with a combination of 150 million people will naturally be a force to reckon with in African and world geopolitics. We only need to realize that fact and it explains why our combined enemies are battling to have us remain divided. Our Politicians in their self interest give the impression to ordinary Tanzanian's that the enemy of our progress is regional integration.

This could not be further from the truth. Migrants cannot be worse than politicians whose sole loyalty has been the battle to continue lining their pockets. On fiscal policies, it is self defeating to deny Tanzanians opportunities to invest abroad and anywhere in East Africa legally. To this day, ordinary Tanzanians are denied the opportunity to buy shares and stocks outside of the country no matter how genuinely they have made their money.

It is preposterous and scandalous considering that a small cream has billions of dollars in Swiss banks according to recent reports. Hubris & chest thumping, that leads to negative perception. Recently when the debate on the Ministry of East African Affairs was held in Parliament, several contributions showed the dangerous path of xenophobia that we are treading. But it is the Malawi/Tanzania border dispute over Lake Nyasa that should inform the East African debate.

In this debacle, Foreign Minister Bernard Membe and Foreign Relations Committee Chairman Edward Lowassa starkly came out to say Tanzania's armed forces was on the ready to go to war to reclaim it's territory from the disputed lake Nyasa. Only dialogue can and should be used to sort out such conflicts and I am glad sense has prevailed.

Copyright © 2013 Tanzania Daily News. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.