On 8 June, the 2016/2017 National Budget was announced, the first by the government of President John P. Magufuli. The budget has been noted for its austerity measures. These include a hike in taxes on drinks and sugar, as well as on imports of cement and corrugated iron to help with Tanzania’s industrialization aims.
Minister of Finance and Planning Dr. Philip Mpango asked Parliament to grant TZS8 trillion (US$3.7billion) to be used to reduce public debt, which increased 6.01%, from US$16.92 billion in June 2015 to US$17.93 billion in June 2016. The significant increase in public debt can be attributed to money spent on large scale infrastructure projects, including the expansion of Julius Nyerere International Airport and the Bus Rapid Transit System.
Meanwhile, the government is proposing to get rid of certain tax exemptions which are thought to cost countries in East Africa US$2.8 billion annually. With the budget, an income tax has been introduced on the gratuity that Tanzanian Members of Parliament (MPs) receive after five years in office. Mpango has also discussed value-added tax (VAT) exemptions on aviation insurance charges, which will help Tanzanian airlines. The National Budget will also get rid of taxes that impact on small-scale farming and workers on low salaries.
On 20 June, the Parliament passed the 2016/17 Budget. The government will now begin to put in place the TZS29.5 trillion (US$14 billion) revenue and development expenditure plan. The budget has been met with a mixed reception. It is hoped that it will help to achieve the country’s predicted 7.4 percent economic growth in 2017. President Magufuli said that he hopes the budget will foster fiscal equality in the country.
In politics, there is greater tension brewing between ruling CCM and opposition parties, after the police banned political rallies. President Magufuli said that parties should deliver their policy ideas in government or at other official political venues, rather than in organized party rallies. Opposition party Chadema said that the decision was an “outright violation of freedom of expression”. Since 30 May, around 70 MPs from the opposition have refused to engage in debates, and have boycotted all National Assembly sessions which are overseen by Dr Tulia Ackson, Deputy Speaker. The opposition claims that she is biased against them.
There is no sign that the standoff will be resolved soon, as President Magufuli reconfirmed the ban at a launch event in Dar es Salaam for a new system of police surveillance. AML political sources in Dar es Salaam say that political tension is likely to increase in the short to midterm. They add that the country has an increasingly “repressed” political space under President Magufuli’s leadership. One incident was cited where on 21 June a Tanzanian citizen, Leonard Mulokozi, was charged for insulting President Magufuli on Whatsapp. Mulokozi was that latest civilian to be punished for contravening the controversial Cybercrime Law introduced in 2015.
In regional news, President Paul Kagame and President Magufuli continue to strengthen the relationship between Tanzania and Rwanda. On 1 July, President Kagame made a state visit to President Magufuli, as Tanzania and Rwanda bolstered relations in aviation and transport. President Magufuli committed Tanzania to ensuring that Dar es Salaam port was efficient. Many Tanzania watchers draw comparison between the two East African leaders and terms such as “Kagamecracy” and “Rwandanization” have been used across social media to describe characteristics of the current Tanzanian administration.
President Magufuli is not just seeking to improve cooperation in the East African Community. On 10 July, he will welcome Prime Minister Narendra Modi of India to discuss how the two nations can collaborate on areas of shared interest. AML sources confirm that President Magufuli is committed to building strong South-South relationships, which according to one source “fits with his values”. This is a departure from his predecessors’ focus on relations with Europe and the US. Nevertheless, we expect President Magufuli will not turn away from these important relationships as he recognizes the meaning of collaboration with these global powers to his reputation within his own party and for Tanzania’s development.
In other news, significant quantities of helium have been discovered in Tanzania’s Rift Valley, which is encouraging news for scientists who feared the gas could run out by 2035 or 2040. This is particularly alarming for the health sector which uses helium for numerous purposes, such as MRI scans. Helium One, an exploration company headquartered in Norway, was supported by academics from the Universities of Durham and Oxford. Professor Sospeter Muhongo, Tanzania’s Minister for Energy and Minerals, said that Helium One could commence drilling operations at their plant in Lake Rukwa. On 28 June, President Magufuli said that he hoped “such rare resources help in building our country”.
In energy news, the Tanzanian and Ugandan governments are trying to speed up the timetable for the crude oil export pipeline running from Hoima in Uganda to Tanga port in Tanzania, but the three oil companies involved are calling for a more patient approach. Although the governments previously estimated that construction would begin in August 2016, this date is probably too early, according to the three oil companies working on the project – Total, Tullow Oil and the China National Offshore Oil Corporation (“CNOOC”). On 5 and 6 July, Ugandan and Tanzanian Energy Ministry representatives – led by Ugandan Minister of Energy Irene Muloni and Muhongo from Tanzania –meet in Hoima to discuss how the project is currently progressing.
To conclude, President Magufuli’s government announced its first National Budget that has introduced austerity measures, while alleviating taxes on some low income groups. The government will need to address Tanzania’s rising public debt as a matter of priority. Political tension in Tanzania rises as opposition political rallies were banned last month and Tanzania watchers express concern about the increasingly restricted political freedom in the country. Tanzania has made a significant discovery of helium, which the government in conjunction with Norwegian company Helium One will seek to develop. Meanwhile, Tanzania and Uganda are trying to accelerate the crude oil export pipeline construction – despite partner oil companies urging patience. Technocrats from both countries have met in Hoima to discuss the project’s progression. Our view is that a good deal more work will be required to get the project fast tracked.
Chiara Van Oekel is Manager at Africa Matters Limited (AML) with responsibility for Kenya, Tanzania and Ethiopia.
