Where to improve our economic management following CAG report
by Shirumisha Kwayu on 04/11/19
Tanzania economic outlook is less than impressive. The International Monetary Fund (IMF) has projected the economic growth of 4% from an estimate of 6.6% last year. On the other hand, the Control Auditor General (CAG) report for 2017/2018 shows that Tanzania’s national debt has increased by 10.5%. Applying the rule of 72 (estimation formula to determine when will investment double), this means that the national debt will double in the next 7 years. That might be before the end of President Magufuli’s administration - if he wins the second term in 2020 elections. The IMF outlook and CAG report prompt a reflection on current economic management.
The slow economic growth can be associated with crowding out of the private sector. The current administration has preferred government control over the economy. This can be traced back with the 2016 directive for all public enterprises to bank with the central banks consequently reducing liquidity to commercial bank. In addition, the government has preferred to use its own agency rather than private sector. In the current administration, unconventional intervention to the economy such as using the army on economic activities such as in buying cashew nuts (Mtwara) and forex (Arusha) trade has undermined the private sector contribution. Likewise tensions with investors such as ACACIA/Barrick has potentially hardened the business environment and perhaps hampered FDI.
The CAG report highlights an increase of 8595% in tax disputes in 2017/18 fiscal year. Though this spike is mainly associated with the ACACIA issue, there anecdotes that many businesses are shut out due to unbearable tax and fees from different agencies.
Another factor that might have led to economic slowdown and increased national debt is the increasing government spending. The current government has embarked on big projects including the standard gauge railway, purchasing airlines in cash, constructions and Stiegler’s Gorge Hydroelectric Power Station. These are flagship projects of the current administration in which their return on investment will be years to come. While these flagship projects might be the reason for increased national debt they are also overwhelming to the economy. The government has, further, committed itself in providing free education. Such commitments can erode government’s ability to control and provide utilitarian needs in effective and efficient ways.
The CAG’s report also shows that 14 public parastatals are loss making. This means that they are consuming the public money. Public ownership of corporations such as airlines and telecom, which private organisation can substitute is an opportunity cost for better public services such as health and education.
Although CAG report indicates maladministration in different areas of the economy, it significantly shows the areas for improvement. The current government can improve their revenue (tax and debts) in areas that the CAG report identifies. Also, importantly, the current government can improve accountability and discipline in some of its agencies such as the police force and procurements. Furthermore, the economy will benefit more with a keen eye on the following ministries: home affairs, water and irrigation, TAMISEMI and the ministry of health and social welfare.
Lastly, the CAG report has indicated some challenges with Information Systems (IS) within the government. IS failures in implementation are common. The best way is for the government to learn from its failures on this and to implement the e-GOV in a gradual way so that people can be able to understand, communicate and implement new systems in place. The losses incurred by investment on IS projects shouldn’t be regarded as a loss but as a learning process. Nevertheless, in evaluating failures, the government should not tolerate theft such as failure to deliver procured IT equipment.
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