Editorial
Analysis
Formalising
informal sector necessary
Last week’s government announcement by President Benjamin Mkapa on the plans
to formalize the informal sector represents a milestone for a majority of
Tanzanians whose activities are yet to be recognized.
The research to be conducted to assess the real situation of the informal
sector is a good start.
The move is in line with the government’s policy to revive ‘dead’ resources
and to create a favourable environment for most people’s economic activities.
Mkapa’s announcement is a blessing for many Tanzanians who still strive in the
informal sector.
The President expressed his sympathy with the youth and women who despite
their efforts are not recognized or acknowledged for their work. His feelings
are genuine and deserve to be supported if at all the informal sector is to be
absorbed into the mainstream economy.
This is indeed a very positive step as it intends to remove all legal
constraints that have led to the degradation of the sector. The President made
it clear that unless the government understands the constraints and stumbling
blocks that people in the informal sector face, it would be difficult if not
impossible to formalize it.
We sincerely believe that the designated regions in which the research will be
conducted (Dar es Salaam, Arusha, Mbeya, Mwanza and Zanzibar) are able to set
the standards right and determine future actions and plans.
It is however important for the people in the respective areas to reveal
correct information to the researchers. The information will give a fresh
impetus to government initiatives to formalize the sector. Eventually, those
activities, which currently are outside the system, will move into the
mainstream economy.
Opec struggles to set a
sustainable oil price
With all the kerfuffle about the sickly dollar, the markets seem plain to have
forgotten the supposed economic doomsday machine of only a couple of months ago
- the soaring oil price. Since then, the price of crude has unsoared, with the
cost of Opec’s benchmark average falling by nearly a quarter. This is very
welcome news for consumer nations but decidedly uncomfortable for members of
Opec, who also have to reconcile themselves to the fact that the dollar, in
which oil is priced, buys fewer euros, pounds and Swiss francs almost by the
day.
Strange but true for an organisation which was so recently being urged to turn
on the taps of production to ease a crisis in supply, some members are again
arguing for a reduction in quotas. The oddity of their position is that although
the price has fallen a great deal, it is still nowhere near being back in Opec’s
formal target range of between US$ 22 and US$ 28 a barrel. The weak dollar may
have rendered this range meaningless, but for the time being it still stands,
like a rusting old North Sea oil rig, a monument to a bygone era.
Saudi Arabia’s oil minister, Ali al-Naimi, said producers would see a range of
US$ 30 to US$ 34 as fair. Whether this week’s meeting of Opec in Cairo will
confirm these numbers is another matter. Whatever they decide, serious
discussion of production cutbacks seems unlikely.
On the contrary, it is already plain that investment in new production capacity
will have to be increased substantially over the years ahead if we are to avoid
an eventual excess of demand over supply. Spare production capacity is already
at record lows. If the world economy keeps growing at the rate it has done over
the past year, then a long-term shortfall looks all but inevitable. Opec wants a
higher price to compensate for the falling dollar, but it would do itself no
favours at all if the consequence of a higher price is slumping demand. The
world economy is not as sensitive to the ups and downs of the oil price as it
used to be, yet oil still has the power to wreak merry havoc given half the
chance.
Analysis
Privatisation: Not
beneficial for the common man
By Timothy Kitundu
The government of the United Republic of Tanzania embarked upon a
comprehensive programme of economic reforms and policy changes some years back,
intended to bring about rapid economic development.
The thrust of the reforms was necessitated by the quest for the improvement of
economic growth rates, enhancement of investment levels, efficiency and
productivity improvement including the expansion of the export capacity.
The parastatal sector reform policy was first pronounced as a national policy by
the government in January 1992. Its fundamental objective was to give a sharper
focus to the government’s traditional role of maintenance of law and order and
provision of economic and social infrastructure.
The policy of efficient economic management of all commercial enterprises was
intended not only to improve the efficiency of public enterprises but also to
give impetus to the private sector to move into the economic activities, which
were still in the domain of the public sector.
Consequently, the policy paved way for the conception of the Presidential
Parastatal Sector Reform (PSRP), which was vested with the powers of carrying
out the activities of privatisation.
Initially, according to the government, the restructuring of public-owned
enterprises was guided by one strong criterion: all public-owned enterprises
which operate at a loss should go while those operating by making profits should
be spared.
From its inception, the media educated the people on the pros and cons of
privatisation although the government’s impression to this phenomenon is
portrayed as a positive initiative rather than a negative one.
Also, the media has reported on some of the public–owned enterprises which were
too sensitive as their privatisation could mean denial of essential services
that were rendered to the people; these include utility companies and some of
the banks.
Viewed as a positive move, privatisation has been cited by some media in the
country as a job-creating course. However, one could also argue that it means
the reduction of employment. Yet, many workers lost their jobs even before the
privatisation policy was introduced.
About 78 parastatals were closed before the privatisation programme began,
forcing their employees to be sent on leave without pay for indefinite periods.
Some of these parastatals have now been revived after being privatised and they
have employed workers afresh.
The media has reported some good examples: Blankets and Textiles Manufacturers
Limited, Bora Shoes Company Limited and Sabuni Detergents Limited just to
mention a few.
Other privatised companies were forced to retrench workers because it was
established that they had more workers than their actual needs. At present,
employment in privatised companies is sustainable and realistic.
Similarly, more employment opportunities have been created outside privatised
factories and companies, which are now operating efficiently and profitably. A
good example is the many cement factories that have increased efficiency and
overall production.
This has greatly contributed to the growth of the construction sector, making of
cement blocks for sale, transportation and so on. All these activities,
according to the media, have generated more employment opportunities.
Sugar factories have also increased employment opportunities through engaging
sugar-cane cutters, out growers, producers of various products whose major
ingredient is sugar.
Produces of other agricultural products such as tobacco, tea, coffee, sisal have
also increased production after being assured of a market in the processing
factories which have been revived and modernized after privatisation.
Now, it is estimated that the livelihood and income of more than 300,000
Tanzanians very much depend on the transportation and distribution of products
from Tanzania Breweries Limited (TBL), and the Tanzania Cigarette Company
Limited (TCC) alone. Before privatisation, the figure stood at around 100,000.
Moreover, the inspiring performance of the majority of the privatised companies
has attracted world-class investors to Tanzania, which has created more direct
employment opportunities for the local people.
On another positive note, the media reports have also indicated that the
exercise has played a vital role in the economic development of the country.
The first objective of the exercise was to increase the efficiency and
production in various sectors so that they can meaningfully contribute to the
GDP and reduce the burden on the state and taxpayers to give subsidies and loans
to parastatals.
At present, the growth rate of Tanzania’s economy stands at 6.2 per cent, making
the country third among the 12 Southern African Development Community (SADC)
countries for 2003. Inflation has drastically fallen and the government revenue
has increased from Tsh. 25 billion (before privatisation) to over Tsh. 100
billion per month at present.
The media also reports of an increase in taxes paid to the government whereby
privatised firms now pay taxes to the government instead of the government
dishing out subsidies to keep the ailing parastatals working.
Sixteen privatised firms within the “100 Large Tax Payers” bracket paid a total
of Tsh. 54.5 billion in various taxes in 2000/2001 financial years and Tsh.
129.25 billion in the financial year 2001/2002.
Before privatisation, the government used to spend Tsh. 100 billion annually to
subsidise parastatals, which also had accumulated losses amounting to over Tsh.
300 billion. In 2001, the government received in taxes Tsh. 800 million from
Mtibwa Sugar Company with a tax arrears of Tsh. 400 million during its
privatisation in 1998.
In 2002, TBL paid Tsh. 43.5 billion in various taxes and a dividend of Tsh. 34.5
billion to its shareholders. Before privatisation in 1993, TBL’s annual revenue
had never exceeded Tsh. 15 billion, which shows that it was taxed too low.
Further reports by the media also show that privatisation has given significant
benefits to local Tanzanians. A decade after the exercise commenced, which is
now nearing its end, most of the parastatals have been sold.
Tanzanians own 100 per cent of the 134 privatised firms, 17 are owned by
foreigners and the rest are owned jointly by the Tanzanians through share
purchasing at the Dar es Salaam Stock Exchange (DSE) and foreign investors.
The government realized a total of Tsh. 60 billion from inside the country; Tsh.
25 billion from foreigners and more than Tsh. 400 billion from those which were
sold under joint venture.
Such quantifications have been emphasized by the media as a remedy to some
arguments raised by the opposition leaders saying that the country has been sold
to foreigners through privatisation.
Over the course of the privatisation program, the country’s media has been open
and transparent. It has been able to report what has been going on.
A number of arguments have been raised if it is true that foreign investors who
are operating with the objective of making the highest profits are concerned
with the true growth of the economy of Tanzania and the well being of
Tanzanians.
To be continued.
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