9 November 2017

Tanzania: Volatile Global Commodity Prices Threaten Tanzania

Dar es Salaam — The Tanzanian economy will continue to remain volatile on account of global economic shocks - mainly in the commodity prices stakes. Indeed, Tanzania is listed among the countries in the world that are heavily dependent on commodity exports for their economic growth.

According to a report on the 'State of Commodity Dependence' published recently by the United Nations Conference on Trade and Development (UNCTAD), Tanzania's share of commodity exports as a share of total merchandise exports increased to 85 per cent in 2014/2015, rising from 83 per cent in 2009/2010.

UNCTAD defines a country as being 'dependent on commodities' when its commodity exports account for more than 60 per cent of its total merchandise exports in value terms.

Tanzania's total commodity export earnings during the 2014/15 financial year were $4,888 million (Sh8.8 trillion). This was higher than the $2,912 million (about Sh5 trillion) earned during the 2009/2010 financial year.

That rising trend started in 1995 - and there is no likelihood that it will be reversed any time soon.

Major destinations of Tanzania's exports are India, the European Union, China, the United Arab Emirates - and its fellow member-states of the East African Community

Ore, metals, precious stones and non-monetary gold together account for 42 per cent of the export earnings. Exports of food items account 50 per cent, while agricultural raw materials and fuels account for five and three per cent of commodity exports respectively.

Mining, ore concentrate and tobacco were among of the listed commodities upon which Tanzania is highly-dependent.

All in all, however, volatility of prices in the world's markets increases risks to the country's economy.

Tanzania is also projected to become among the world's major exporters of natural gas in a decade or so to come - and the impact of that on the economy is yet to be determined with any degree of certitude.

UNCTAD says in its report that commodity dependence can negatively affect human development indicators like life expectancy, education and per capita income.

"In the context of dramatic volatility in commodity prices, developing countries will struggle to achieve the Sustainable Development Goals -unless they break the chains of commodity dependence," UNCTAD Secretary-General Mukhisa Kituyi said in Geneva ahead of the report's release.

"Many developing countries have been commodity-dependent for the past three decades, and it is worrying to see that the numbers are going up," Dr. Kituyi said.

Between 1990 and 2015, the United Republic of Tanzania's Human Development Index (HDI) value increased from 0.370 to 0.531. This increase of 43.4 per cent ranked the country at the 151st position out of the 188 countries and territories surveyed.

Tanzania's 2015 HDI was above the average of 0.497 for countries in the low human development group - but was above the average of 0.523 for countries in sub-Saharan Africa.

From sub-Saharan Africa, countries which were ranked close to Tanzania in the 2015 HDI - and, to some extent: in population size - were Côte d'Ivoire and Uganda, which were ranked at 171 and 163 respectively on the HDI listing.

According to the UNDP report, Tanzania's life expectancy-at-birth increased by 15.5 years - to 65 years in 2015, up from 50 years in 1990.

Mean years of schooling increased by 2.2 years, while the expected years of schooling increased by 3.4 years.

Tanzania's gross national income (GNI) per capita increased by about 74.1 per cent between the years 1990 and 2015.

"About two-thirds of commodity-dependent developing countries recorded a low or medium human development index in 2014-2015", the report says - adding that the country's commodity exports as share of gross domestic product (GDP) increased by 0.7 per cent in that half-decade, rising to 10.2 per cent in 2014/15 from 9.5 per cent in the year 2009/2010.

UNCTAD presented the report at the ninth session of the multi-year expert meeting on commodities and development, convened in Geneva in October 2017. The rise in commodity dependence was most noticeable in Africa, where seven new countries entered the category in 2014-2015, bringing the total to 46.

Over the same period, the number remained stable, at 17, in Latin America and the Caribbean, while the Asia and Oceania region saw its total go up by two, to 28 countries.

Regarding the type of exports, dependence was predominantly on agricultural products. This was the case for 41 per cent of the countries, while 30 per cent depended on fuel exports and 23 per cent on minerals, ores and metals.

More than a half of the countries depending on agricultural commodity exports - and two-thirds of the countries relying on minerals - are African.

Asia and Oceania were home to almost a half of the countries that are heavily dependent on fuel exports.

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