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AfricaJuly 1 2004

Shortcomings are being identified and addressed

Tanzania’s finance minister Basil Mramba talks to Steven Timewell about moves to secure natural resources and update land legislation to free up domestic financing.
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The finance minister of Tanzania, Basil Mramba, has clear ideas on what his country can achieve and is equally clear on its financial shortcomings. Speaking to The Banker recently at the African Development Bank annual meeting in Kampala, the charismatic Mr Mramba said that Tanzania is the most peaceful and politically stable country in Africa. But despite its GDP growth rate of over 8%, he is critical of the financial infrastructure and the country’s inability to take advantage of its opportunities.

“Tanzanians are asleep compared with others in the region,” he says bluntly. “We are behind Kenya and Uganda, we are improving, we need to open up our agriculture. Tanzania has more land and we need to utilise it,” he says. “We can feed East Africa and we can export a lot but we are not producing these exports and smaller countries are doing better than us.”

Raw materials

Mr Mramba is not necessarily complaining about access to European markets, which has been an issue for many African states. He is more concerned about changing the country’s export strategy.

For example, he complains that Germany is the biggest exporter of coffee in the world and wonders how Tanzania can add value on its raw materials rather than letting non-producers cream off the value added profits. “Our problem is the bureaucracy and getting the right people involved.”

What is the solution? Mr Mramba promised a revolutionary budget for agriculture and in his June 10 Budget speech, he kept his word. He proposed exemption from duty on locally manufactured tea, wine and brandy in order to expand local markets and increase production. The exemption of locally packaged black tea is meant to enhance competitiveness following the liberalisation of the tea market in the East African Community. “The main objective is to protect incomes for small and medium-scale farmers in tea production,” he said.

Microfinancing

On financing, Mr Mramba notes that the biggest banks have been privatised and that there are opportunities for microfinance operations such as Microfinance Bank.

However, for Mr Mramba, the key issue is “banks don’t lend” and hence do not provide the stimulus for the economy. Like other countries in Africa, Tanzania is hindered by the lack of land legislation which enables banks to lend against genuine (land) collateral, which can be called if necessary.

Land legislation

Without such land legislation, bank lending is stymied and economic growth stunted. Mr Mramba says he is trying to introduce an informal property system based on a model which is working in Lesotho, but progress still needs to be made.

Foreign aid

In terms of foreign aid, Tanzania still relies heavily on foreign support. Mr Mramba is keen to improve relationships with donors and improve the predictability of donor contributions. Three years ago, 47% of his budget came from external sources but now this has been reduced to 41%, he says. He emphasises the importance of timing in donor aid and the benefits of having reliable and timely funding.

“More than half the budget funds from donors come up front.” says Mr Mramba. “We want predictability in when the aid is received and the UK is leading the way in this among the donor community.”

Government revenues

He is also keen to boost tax revenues and induce compliance by taxpayers. Tax revenues have risen significantly in recent years. Mr Mramba notes that in 1995, total tax revenues amounted to TSh25bn ($22.2m) per month but this year the figure has risen to TSh130bn per month.

Mr Mramba sees this five-fold increase as a good start and intends to further strengthen the tax authority and introduce additional taxes, such as a value added tax. Tanzania, which was granted highly-indebted poor country status in 2001, has recently had $11m in debt waived by Japan and more debt relief could be at hand.

Tanzania is making moves in the right direction and its energetic finance minister is implementing reforms that are slowly and steadily revamping the economy.

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Read more about:  Africa , Tanzania