Reshuffle shows Kikwete is now in charge

Monday October 23 2006

The EastAfrican

The Cabinet reshuffle by Tanzanian President Jakaya Kikwete a few months after being elected was aimed at stamping his authority on the government.

This is the verdict of a new analysis of Tanzania by the London-based Economic Intelligence Unit.

It says that ministries and departments seem more dynamic, in line with the new president, and the government is far more media-savvy.

In addition, in late June, Kikwete cemented his influence over the ruling Chama cha Mapinduzi (CCM) when he assumed the party’s presidency and appointed his supporters to key positions.

The report argues however, that even though Kikwete continues to consolidate his political power base, there is still considerable resentment within sections of CCM over the battle that saw him emerge as the party's presidential candidate in mid-2005.

Although this is insufficient to challenge his hold on power, the president will face residual sniping from senior party members, and his ability to implement policy changes as quickly as he would like will be curtailed for some time.

Going forward, the report predicts that Tanzania will maintain good relations with its regional neighbours and with donor countries. Relations with donors will focus on technical matters such as ensuring better accounting and co-ordination of aid flows into the country.

At the regional level, the report says that the implementation of the Customs Union protocol of the East African Community (EAC) – which comprises Kenya, Tanzania and Uganda – will remain a source of political contention as trade barriers between the three countries are slowly reduced.

The situation is complicated by the long-running debate over Tanzania’s membership of regional organisations.

At present, Tanzania is also a member of the Southern African Development Community (SADC), having withdrawn from the Common Market for Eastern and Southern Africa (Comesa) in 2001.

However, some influential voices in the private sector argue that the country would be better off in Comesa. The government seems unlikely to be rushed into a decision on the issue.

Tanzania has seen a substantial pick-up in real GDP growth since 2000 – to an annual average of around 7 per cent in 2002-04 – against a background of low and stable inflation.

The main problem for the government has been how to translate macroeconomic stability and higher donor-supported spending on healthcare and education into an increase in employment and improvements to the welfare of ordinary Tanzanians.

The recent budget and comments from key ministers indicate that no radical alteration in the direction of economic policy can be expected in 2006-07, but policy may become, at least in rhetoric, more nationalistic, with the concept of economic empowerment a clear theme.

Drought, largely in the north of the country, in late 2005 and early 2006 looks set to undermine Tanzania’s growth this year.

As well as the negative impact on agriculture, water levels in the dams that provide the country’s hydroelectric power are very low and hence, since the start of the year, most major cities have suffered from prolonged power cuts, which will impact on overall economic activity even if the power crisis eases in the second half of the year after the long rains and the provision of additional emergency generators.

As a result, the Economic Intelligence Unit forecasts that real GDP growth will fall back in 2006, to 5.8 per cent, from an estimated 6.8 per cent in 2005.

Assuming normal rainfall, and recoveries in the agricultural and manufacturing sectors, real GDP growth should rebound to 6.7 per cent in 2007. The report also expects further growth in construction and tourism, and the mining sector should pick up as new projects come on stream in late 2007.

On inflation, the report says that the Bank of Tanzania did not meet its target of year-on-year inflation of 4 per cent in the year to end-June 2006, despite a sharp fall in the inflation rate in June to only 6.8 per cent.

Before then, inflation had risen sharply with the year-on-year rate reaching 7.7 per cent by May, the highest since June 1999.

The rise was driven by the increase in food price inflation, which rose to 12.3 per cent in May, owing to the drought.

The drought and high world oil prices have also led to sharp increases in prices for fuel, power, water and transport, which have raised the inflation rate.

Although the BoT has indicated that it expects further steep falls in the inflation rate in the second half of 2006, the Economic Intelligence Unit says it believes that the decline will be slower than forecast by the central bank, owing to the ongoing effects of high oil prices and public-sector wage increases, as well as continuing electricity shortages.

As a result, it predicts that annual inflation to average 5.9 per cent in 2006 – its highest level for a number of years.