Tanzania’s debt profile reflects a balanced approach to managing both external and domestic debt. With a slight reduction in external debt and a growing reliance on domestic borrowing, the country is strategically navigating fiscal pressures. The government's careful mix of external loans and domestic securities, supported by a diverse creditor base, aims to maintain fiscal stability while mitigating risks associated with currency fluctuations and interest payments. This strategic debt management is crucial for sustaining the country’s economic growth and development.

The debt developments in Tanzania, particularly in the context of external and domestic debt, showcase a strategic approach to debt management.

1. External Debt:

• Total external debt has decreased by 1.5%, bringing it to USD 32,976.9 million as of October 2024.
• Monthly changes:
  • External loans disbursed amounted to USD 285.1 million, mainly directed to the central government.
  • External debt service was USD 288.4 million:
    • Principal repayment: USD 200.3 million
    • Interest payments: The remaining balance of USD 88.1 million (288.4M - 200.3M).

2. External Debt Stock by Borrowers:

Central Government:

• Total amount: USD 25,452.9 million (77.2% of total external debt).
• Disbursed Outstanding Debt (DOD): USD 25,208.8 million (76.4%).
• Interest arrears: USD 252.1 million (0.8%).

Private Sector:

• Total amount: USD 7,520.3 million (22.8%).
• DOD: USD 6,191.6 million (18.8%).
• Interest arrears: USD 1,328.7 million (4.0%).

Public Corporations:

• Amount: USD 3.8 million.
• DOD: USD 3.8 million.
• Interest arrears: USD 0.0 million.

3. Domestic Debt:

• Domestic debt increased by TZS 407.48 billion, totaling TZS 33,023.2 billion.
• Main driver: The government's utilization of the overdraft facility.

Breakdown by Instruments:

• Treasury bonds account for 78% of the total domestic debt.
• Government securities represent 84.5% of the total domestic debt (TZS 27,900.1 billion).
• Non-securitized debt makes up 15.5% (TZS 5,123.0 billion).

4. Domestic Debt by Creditor:

• Commercial banks: 28.8% (TZS 9,510.2 billion).
• Bank of Tanzania (BOT): 21.4% (TZS 7,064.7 billion).
• Pension funds: 27.3% (TZS 9,003.3 billion).
• Insurance companies: 5.8% (TZS 1,913.8 billion).
• BOT's special funds: 1.3% (TZS 420.3 billion).
• Others: 15.5% (TZS 5,110.8 billion).

5. Disbursed Outstanding Debt by Currency Composition:

• United States Dollar (USD): 68.0%.
• Euro: 16.2%.
• Chinese Yuan: 6.2%.
• Other currencies: 9.6%.

Key Observations:

1. External Debt:
   • The external debt shows a decreasing trend with a slight reduction of 1.5%.
   • The central government remains the dominant borrower, holding 77.2% of the total external debt.
   • The currency composition of the debt is well-diversified, with USD comprising the largest share at 68.0%.
2. Domestic Debt:
   • The domestic debt is on an increasing trend, mainly driven by the government's overdraft facility.
   • Treasury bonds represent the largest share (78%) in domestic debt.
   • The creditor base is highly diversified, with commercial banks, pension funds, and the Bank of Tanzania being the largest creditors.
3. Overall Debt Management:
   • Strategic mix: Tanzania maintains a balanced approach between external and domestic debt.
   • The currency diversification helps mitigate risks associated with exchange rate fluctuations.
   • Tanzania’s domestic borrowing is supported by a strong institutional framework, including commercial banks, pension funds, and insurance companies.
   • Prudent debt service management is evident, with careful balancing of principal repayments and interest payments.

The debt profile indicates a strategic approach to debt management, with a well-balanced mix of external and domestic debt. The diversification of creditors and currency composition helps manage risks, while prudent debt servicing ensures that the debt remains sustainable. The increasing reliance on domestic debt and the government's use of overdraft facilities should be monitored to ensure continued fiscal stability.

Tanzania's debt developments with valuable insights into the country’s fiscal health and debt management strategy.

1. Decline in External Debt:

• Decrease in External Debt: Tanzania's external debt decreased by 1.5%, indicating a slight reduction in the country’s reliance on foreign borrowing. This could be a result of repayments or a slowdown in new external borrowing. It may also suggest a deliberate effort to manage the debt burden.
• External Debt Service Management: Although the total external debt decreased, the country is still servicing significant debt with monthly repayments (USD 288.4 million), which includes both principal (USD 200.3 million) and interest payments. This shows that while external borrowing is reducing, the debt still needs careful management, particularly regarding interest payments.

2. Dominance of Central Government Borrowing:

• Central Government's Share: The central government accounts for 77.2% of external debt, reflecting the government's dominant role as the primary borrower. This suggests that the government is using external loans for financing projects or covering budget deficits.
• Interest Arrears: The central government has some interest arrears (USD 252.1 million), which could indicate delayed payments, a factor that could affect credit ratings or future borrowing costs.

3. Private Sector Debt and Interest Arrears:

• The private sector holds 22.8% of external debt, and the interest arrears for the private sector (USD 1.3 billion) are relatively high. This could indicate challenges in the private sector's ability to service foreign debt, potentially impacting business operations and investment.

4. Rising Domestic Debt:

• Increased Domestic Debt: Domestic debt rose by TZS 407.48 billion to a total of TZS 33,023.2 billion, indicating that the government is increasingly relying on local sources of financing. This increase is attributed to the government's overdraft facility, which may be a sign of short-term fiscal pressures or a gap in domestic revenue collection.
• Treasury Bonds Dominate: Treasury bonds, which make up 78% of domestic debt, show the government's reliance on long-term debt instruments to finance its budget. Treasury bonds are generally seen as a more stable form of debt because they have predictable repayment schedules.
• Diversified Creditor Base: The domestic debt is held by various creditors, including commercial banks, pension funds, and the Bank of Tanzania. This indicates a broad and strong domestic investor base that is willing to purchase government debt, which can support financial stability.

5. Currency Composition and Risk Management:

• The currency composition of external debt (68% in USD) reflects Tanzania’s vulnerability to exchange rate fluctuations. A heavy reliance on the USD exposes the country to risks from a strengthening or weakening of the dollar against the Tanzanian Shilling.
• Diversified Currency Exposure: The presence of other currencies like the Euro (16.2%) and Chinese Yuan (6.2%) helps mitigate this risk, but the dominance of the USD still signals a potential concern if the exchange rate were to become volatile.

6. Strategic Debt Management Approach:

• Balanced External and Domestic Debt: Tanzania appears to have a strategic mix of external and domestic debt, which helps manage risk. By increasing reliance on domestic debt, the government can reduce exposure to global market fluctuations (e.g., foreign exchange risks).
• Institutional Framework: The strong participation of commercial banks, pension funds, and other institutional investors in the domestic debt market demonstrates confidence in the government's fiscal policies and ensures that the debt is well-supported by domestic capital.

7. Overall Debt Sustainability:

• The analysis suggests that Tanzania is managing its debt carefully, with a mix of external and domestic debt that helps balance foreign exposure and domestic financial sector development.
• While external debt is decreasing, domestic debt is increasing, which may signal short-term pressures. However, the diversity of creditors and instruments (e.g., Treasury bonds) in the domestic debt market provides a buffer.
• The government appears to have a prudent debt service management strategy, balancing principal repayment and interest to ensure continued access to credit.

Conclusion:

The debt developments point to a strategic approach to managing Tanzania’s overall debt profile. However, there are some risks and challenges:

• Domestic debt growth may indicate rising fiscal pressures and reliance on local borrowing.
• External debt servicing remains substantial despite a decrease in the total external debt.
• The currency mix could pose risks to debt sustainability due to exposure to exchange rate fluctuations.

Overall, Tanzania's debt management appears balanced and strategically planned, with strong institutional support for domestic borrowing and an eye on reducing external debt. However, the country must continue to monitor its debt sustainability carefully, particularly regarding domestic borrowing and interest arrears in the private sector.

Tanzania's government demonstrated effective fiscal management in September 2024, surpassing revenue targets and maintaining a strategic balance between recurrent and development expenditures. With total revenue collections of TZS 3,069.4 billion, exceeding estimates by 3.8%, the government has shown improved tax compliance and efficient resource allocation. Despite a budget deficit, the emphasis on sustainable debt management and investment in long-term development underscores the country's commitment to economic growth and stability.

Tanzania's Government Budgetary Operations for September 2024 shows strong fiscal performance, highlighted by above-target revenue collections, disciplined expenditure, and strategic resource allocation.

1. Revenue Collections

Total Revenue: TZS 3,069.4 billion

• Exceeded monthly estimates by 3.8%: This shows an overall positive revenue performance, surpassing expectations for September 2024.

Breakdown:

• A. Central Government Collections: TZS 2,971 billion (104.7% of estimates)
  • Tax Revenue: TZS 2,640.5 billion (Exceeded estimates by 6.9%)
  • Non-tax Revenue: TZS 330.5 billion

Specific Tax Collections:

• Taxes on Imports: TZS 938.5 billion
  • This represents a significant portion of total tax revenue, driven by import duties and taxes.
• Income Tax: TZS 1,144.2 billion
  • Income tax collections are a critical component, reflecting strong economic activity and compliance.
• Local Goods and Services Taxes: TZS 405.4 billion
  • These taxes contribute notably to the revenue stream, supported by domestic consumption.
• Other Taxes: TZS 152.4 billion
  • Includes a range of smaller taxes across various sectors.
• Non-tax Revenue: TZS 330.5 billion
  • Includes income from government-owned enterprises and other non-tax sources.

B. Local Government Authorities Collections:

• These are based on local government own resources, representing a smaller portion of total revenue but important for decentralized fiscal operations.

2. Government Expenditure

Total Expenditure: TZS 3,350.5 billion

• This exceeds total revenue, indicating a budget deficit for September 2024. However, the government has maintained a balanced approach to manage the deficit.

Breakdown:

• A. Recurrent Expenditure: TZS 2,213.5 billion
  • Wages and Salaries: TZS 925.0 billion (This is the largest recurrent expense, necessary for public sector employee compensation).
  • Interest Costs: TZS 327.8 billion (Reflects government debt servicing obligations).
  • Other Recurrent Expenditure: TZS 960.7 billion (This includes operational costs for government functions and services).
• B. Development Expenditure: TZS 1,137.0 billion
  • This is focused on long-term projects, infrastructure development, and capital investment to stimulate economic growth.

3. Performance Drivers

Strong Revenue Performance Due To:

• Enhanced Tax Administration: Efforts to streamline and improve the efficiency of tax collection mechanisms, possibly through digitalization or better enforcement.
• Improved Tax Compliance: Increasing taxpayer compliance through awareness, better collection systems, or stricter enforcement.
• Effective Collection Mechanisms: Strengthened capacity in tax collection, potentially including technology-driven solutions, regional offices, or specialized units.

Expenditure Management:

• The government has aligned spending with available revenue, ensuring that expenditures do not exceed capacity.
• Expenditures are well balanced between recurrent (ongoing government operations) and development (infrastructure and capital projects) needs.
• Prioritization is evident, with key areas such as wages and interest costs being well-managed while maintaining development goals.

4. Budget Balance and Financing

• Revenue exceeded targets, which helped mitigate the budget deficit and kept the government within fiscal discipline.
• The government focused on efficient resource allocation, with particular emphasis on balancing development spending and recurrent expenditures.
• Fiscal discipline is maintained, with efforts to keep the deficit within sustainable levels while focusing on investments that will yield long-term economic benefits.

Key Observations:

• Revenue Collection Exceeded Targets: The government's ability to exceed its revenue targets demonstrates effective tax policy and administration.
• Strong Tax Revenue Performance: The largest contributors to tax revenue, such as income tax and taxes on imports, reflect the government's capacity to capture economic activity.
• Balanced Expenditure Allocation: A good balance between meeting the needs of the public sector (wages) and development investments.
• Fiscal Discipline Maintained: Despite higher expenditure, the government has managed to keep spending within sustainable limits.
• Strategic Resource Allocation: Focus on development expenditure highlights the government’s commitment to long-term economic growth.

Overall Budgetary Performance

The budgetary performance for September 2024 shows that Tanzania has managed its finances effectively with:

• Above-target revenue collections
• Disciplined expenditure execution
• Strategic resource allocation, emphasizing development spending
• Fiscal sustainability maintained despite a small budget deficit

This demonstrates robust fiscal management, positioning the government well to support both short-term operations and long-term development projects that will drive economic growth.

Tanzania's Government Budgetary Operations for September 2024 with key insights into the country's fiscal health and management:

1. Strong Revenue Performance:

• The government exceeded its revenue target by 3.8%, collecting TZS 3,069.4 billion. This indicates effective tax collection mechanisms, improved compliance, and efficient administration.
• Tax Revenue was the largest contributor (over 85% of total revenue), with significant collections from income tax, import taxes, and local goods and services taxes. This suggests a robust economic activity, especially in trade and income generation.

2. Disciplined Expenditure Management:

• Expenditure exceeded revenue, leading to a budget deficit, but the government carefully balanced its spending between recurrent (wages, interest) and development (infrastructure, capital projects) needs.
• The government allocated significant resources to wages and salaries (making up 27.6% of the total expenditure), essential for public sector operations, and to interest costs (9.8%), highlighting the importance of managing public debt.
• Development expenditure (approximately 33.9% of total expenditure) shows a commitment to long-term economic growth and infrastructure development, aiming to stimulate future economic growth.

3. Fiscal Discipline and Strategic Resource Allocation:

• Despite the deficit, the government demonstrated fiscal discipline, focusing on maintaining sustainable debt levels and prioritizing key spending areas.
• Strategic allocation of resources between recurrent and development spending reflects careful planning to support both immediate needs (such as government operations) and long-term investments in infrastructure and growth.

4. Positive Economic Outlook:

• The strong performance of tax revenue and the balanced expenditure allocation indicate a healthy fiscal environment. This sets a positive tone for Tanzania's economic stability and growth potential.
• The government's ability to exceed revenue targets and manage its budget effectively shows an effective approach to managing economic challenges and maintaining fiscal sustainability.

In summary, Tanzania’s September 2024 budget performance reflects effective fiscal management, with strong revenue collections, disciplined spending, and a focus on development. Although there was a budget deficit, the government’s approach demonstrates fiscal responsibility and a focus on long-term growth, ensuring economic stability while prioritizing key areas like wages, debt servicing, and infrastructure development.

In October 2024, the Tanzania Shilling showed signs of stabilization, appreciating slightly against the US Dollar after months of depreciation. This shift can be attributed to improved foreign exchange liquidity from key export sectors such as cashew nuts, gold, and tourism, alongside strategic interventions by the Bank of Tanzania. Despite a gradual depreciation trend over the years, recent developments suggest a positive turn in external sector performance and effective exchange rate management.

1. Exchange Rate Movements:

• October 2024:
  • Average exchange rate: TZS 2,719.91 per USD
• September 2024:
  • Average exchange rate: TZS 2,727.41 per USD
• Annual depreciation rate: 8.98% (improved from 10.11% in September 2024)

The Tanzania Shilling showed a slight improvement in October 2024, appreciating by 0.28% compared to September 2024. This indicates a stabilization trend after several months of depreciation. The depreciation rate over the past year has decreased, suggesting that external pressures on the currency may be easing.

2. Key Factors Affecting the Exchange Rate:

A. Improved Foreign Exchange Liquidity:

Several key export sectors have contributed to increased foreign exchange inflows, which helped stabilize the Shilling:

1. Cashew Nut Exports: This is a significant foreign exchange earner for Tanzania. The increased demand for cashew nuts on the global market likely contributed to stronger inflows of foreign currency.
2. Gold Exports: Tanzania is one of the top gold producers in Africa, and higher gold prices globally have boosted foreign currency inflows.
3. Tourism Earnings: As the tourism sector continues to recover post-pandemic, the influx of foreign currency from tourism has provided additional support to the Shilling.

B. Bank of Tanzania Intervention:

1. Limited Market Participation: The central bank has limited its participation in the foreign exchange market in October, intervening less than in previous months.
2. Net Purchase of USD 4.5 Million: The Bank of Tanzania made a modest net purchase of USD 4.5 million in October, which indicates a targeted, cautious approach to stabilizing the currency without overextending reserves.
3. Purpose: The Bank’s primary objective was to mitigate excessive exchange rate volatility. Their strategy seems to have been effective, contributing to the Shilling’s stabilization in October.

3. Historical Exchange Rate Data (2017-2023):

A look at historical data reveals a gradual depreciation trend of the Tanzania Shilling over the years, but with some periods of relative stability:

• 2017: TZS 2,228.9 per USD
• 2018: TZS 2,263.8 per USD
• 2019: TZS 2,288.2 per USD
• 2020: TZS 2,294.1 per USD
• 2021: TZS 2,297.8 per USD
• 2022: TZS 2,303.1 per USD
• 2023: TZS 2,382.1 per USD

From 2017 to 2023, the Shilling depreciated steadily, with the rate increasing by about TZS 150 per USD over the period. This is consistent with inflationary pressures and a growing trade deficit.

4. Interbank Foreign Exchange Market (IFEM) Activity:

The Interbank Foreign Exchange Market (IFEM) activity shows significant changes in the volume of transactions:

• October 2024: USD 50.7 million in transactions
• September 2024: USD 8.35 million in transactions

The sharp increase in market activity reflects growing demand and supply for foreign exchange in the market, indicating heightened foreign exchange transactions. This could be tied to the improved liquidity from exports and the increasing demand for USD in the economy.

5. Summary and Key Insights:

1. Gradual Depreciation Trend: Over the past few years, the Tanzania Shilling has faced a consistent depreciation trend against the US Dollar. However, the pace of depreciation has slowed in recent months, particularly in October 2024.
2. Recent Improvement in Exchange Rate Stability: The exchange rate improved in October 2024, with the Shilling appreciating slightly from September, signaling a positive shift in external sector performance.
3. Reduced Depreciation Pressure: The improved foreign exchange liquidity from key exports like cashew nuts, gold, and tourism earnings helped ease pressure on the Shilling. This has reduced the depreciation pressure that has been prevalent over the past several years.
4. Effective Market Management: The Bank of Tanzania’s careful intervention in the market (with a net purchase of USD 4.5 million) and its efforts to reduce volatility appear to have been effective in stabilizing the Shilling.
5. Growing Market Activity in IFEM: The notable increase in IFEM transactions, from USD 8.35 million in September to USD 50.7 million in October, indicates a more active foreign exchange market. This may suggest more participation by businesses and financial institutions in currency transactions, potentially contributing to exchange rate stabilization.

6. Conclusion:

The recent appreciation of the Tanzania Shilling and the improved annual depreciation rate suggest that external sector performance is improving. Factors such as strong export performance, particularly in cashew nuts, gold, and tourism, have bolstered foreign exchange liquidity. Additionally, the Bank of Tanzania's careful market interventions have contributed to the exchange rate’s stability, easing pressure on the Shilling.

Tanzania’s interest rates in October 2024 reflect a strategic approach to balancing economic growth, inflation control, and financial stability. With lending and deposit rates showing slight upward adjustments, the monetary policy focuses on managing liquidity while encouraging savings and investments. These changes highlight a dynamic financial environment shaped by rising demand for credit, competitive banking practices, and government financing needs.

1. Bank Lending Rates

Overall Lending Rate:

• 15.67%, increased slightly from 15.53% in September.
• Reason: Reflects marginal tightening in credit access to manage inflation while supporting economic growth.

Negotiated Lending Rate:

• 12.93%, unchanged from September.
• Explanation: This stability shows that banks maintain tailored rates for prime borrowers, reducing volatility.

2. Deposit Rates

Overall Deposit Rate:

• 8.25%, up from 8.20%.
• Implication: Encourages savers by providing higher returns amidst inflationary concerns.

Negotiated Deposit Rate:

• 10.27%, increased from 9.12%.
• Impact: Attractive terms for large depositors.

Savings Deposit Rate:

• 2.85%, a relatively low rate for standard savings accounts, ensuring liquidity for short-term savers.

3. Time Deposit Rates (TDRs)

TDRs reflect variations by term maturity:

• 1-month: 9.49%
• 2-months: 8.55%
• 3-months: 8.68%
• 6-months: 9.30%
• 9-months: 9.30%
• 12-months: 10.41%
• 24-months: 8.44%
  Insight:
• Short-term rates (1–3 months) are slightly lower to maintain liquidity.
• Long-term rates (12–24 months) reflect investor risk-reward dynamics.

4. Money Market Rates

Rates for short-term interbank lending:

• Overnight: 7.74%
• 2–7 days: 8.17%
• 8–14 days: 8.81%
• 15–30 days: 9.00%
• 31–60 days: 9.46%
• 61–90 days: 9.50%
• 91–180 days: 10.96%
• 181+ days: 10.93%

Observation:

Rates increase with tenure, reflecting higher compensation for longer-term liquidity risks.

5. Government Securities Rates

Treasury Bills:

• 35 days: 5.93%
• 91 days: 5.94%
• 182 days: 8.17%
• 364 days: 11.66%
• Overall T-bills Rate: 11.55%
• Trend: Higher rates on longer tenures (364 days) attract investors seeking stable returns.

Treasury Bonds:

• 2-years: 11.64%
• 5-years: 12.41%
• 7-years: 9.71%
• 10-years: 13.26%
• 15-years: 15.76%
• 20-years: 15.76%
• 25-years: 15.42%

Analysis:

Long-term bonds (15–25 years) offer premium rates to compensate for inflation and credit risk.

6. Policy Rates

Key Central Bank Rates:

• Central Bank Rate: 6%
• Discount Rate: 8.50%
• REPO Rate: 5.30%
• Reverse REPO Rate: 8.00%
• Lombard Rate: 8.00%

Role:

These rates steer monetary policy, controlling inflation and supporting financial stability.

7. Interest Rate Spread

• Current: 5.65 percentage points, narrowed from 7.02 in October 2023.
• Reason: Reflects tighter spreads due to competitive deposit rates and cautious lending by banks.

Monetary Policy Context

1. Economic Growth: Lending rates are kept relatively stable to support borrowing for businesses and individuals.
2. Savings Incentives: Rising deposit rates ensure savers benefit in a tightening liquidity environment.
3. Liquidity Management: Money market rates are calibrated to address short-term needs while ensuring interbank confidence.
4. Government Financing: Treasury instruments provide consistent funding for public spending.
5. Stability: Central Bank policy rates reflect a balanced approach to inflation and growth.

Overall Trend:
The upward movement in rates signals tighter liquidity in the banking system while still providing opportunities for investment and savings.

The breakdown of Tanzania's interest rates as of October 2024 provides valuable insights into the economic and monetary policy environment.

1. Tightening Liquidity Conditions

• Lending Rates Rising: The overall lending rate increased slightly (from 15.53% to 15.67%). This indicates banks are cautious in extending credit due to tighter liquidity or inflationary pressures.
• Deposit Rates Increasing: The rise in deposit rates, especially the negotiated deposit rate (up from 9.12% to 10.27%), suggests banks are competing for deposits to improve their liquidity positions.

2. Balanced Monetary Policy Approach

• Central Bank Actions:
  • The Central Bank Rate remains relatively low at 6%, indicating a focus on maintaining credit flow to stimulate economic growth.
  • Higher discount and Lombard rates (8.5% and 8%) aim to prevent excessive borrowing while managing liquidity.

This balance shows the central bank's dual objective: controlling inflation without stifling growth.

3. Encouragement of Savings

• Attractive Deposit Rates: The increase in overall deposit rates (8.25%) and negotiated rates (10.27%) encourages households and businesses to save, which helps stabilize the financial system.

4. Government Borrowing Trends

• Treasury Instruments:
  • Treasury bill rates (e.g., 364-day at 11.66%) and long-term bonds (e.g., 15-year at 15.76%) show that the government is willing to pay higher yields to attract investors.
  • This reflects possible higher public financing needs or a response to investor demand for better returns in a higher-risk environment.

5. Encouraging Short-Term Investments

• Money Market Rates:
  • Rising rates across short-term maturities (e.g., overnight at 7.74%, 31–60 days at 9.46%) incentivize liquidity management and provide attractive short-term investment options.

6. Competitive Banking Landscape

• Narrower Interest Spread:
  • The spread between lending and deposit rates narrowing to 5.65 percentage points (from 7.02 in 2023) suggests increased efficiency and competition in the banking sector. Banks are focusing on offering better rates to attract both depositors and borrowers.

7. Support for Economic Growth

• Stable Lending Rates: The central bank's cautious approach to keeping lending rates stable ensures that businesses and consumers still have access to credit for growth and consumption despite slightly tighter conditions.

Conclusion

The data reflects a cautious yet supportive monetary policy environment in Tanzania. The central bank is working to balance inflation, liquidity, and economic growth. Higher deposit rates, coupled with stable lending rates, aim to encourage savings, support investments, and manage liquidity. Meanwhile, the competitive banking sector and government securities market provide diverse opportunities for savers and investors alike.

The upward trend in most rates suggests careful management of tighter liquidity conditions, hinting at economic resilience and stability despite potential external pressures like global interest rate hikes or inflation risks.

Tanzania Vision 2050 outlines an ambitious roadmap to propel the nation into a high-income economy by 2050, anchored on transformative sectors such as industry, agriculture, energy, infrastructure, ICT, and human capital development. By leveraging its resources, enhancing innovation, and addressing systemic challenges, Tanzania aims to achieve inclusive growth, sustainability, and global competitiveness, setting a precedent for African development in the 21st century.

Tanzania Vision 2050: High-Level Targets with Figures

Tanzania Vision 2050 outlines a transformative agenda aimed at achieving a high-income status and sustainable economic and social development by 2050.

1. Economic Transformation:
   • Aim for an average annual GDP growth rate exceeding 8%.
   • Increase GDP per capita from the current levels to $12,000 by 2050, classifying Tanzania as a high-income country.
2. Industrialization and Employment:
   • Transition from an agriculture-dominant economy to an industrialized one, with industry contributing over 40% to GDP.
   • Create 30 million jobs, targeting skilled and technology-oriented sectors.
3. Agricultural Modernization:
   • Achieve 100% mechanization in agriculture, reducing reliance on manual labor.
   • Increase agricultural productivity to ensure self-sufficiency and export competitiveness.
4. Infrastructure Development:
   • Establish Tanzania as a regional transport and logistics hub by developing modernized ports, airports, and rail systems.
   • Target an investment of over $200 billion in infrastructure projects by 2050.
5. Energy Access:
   • Expand electricity access to 100% of the population.
   • Shift to renewable energy sources to provide 50% of energy needs, promoting environmental sustainability.
6. Human Capital and Social Development:
   • Raise the literacy rate to 100% through universal education.
   • Increase life expectancy to 80 years, supported by comprehensive healthcare reforms.
7. Digital Economy:
   • Ensure 90% internet penetration and build a robust digital ecosystem to support innovation and technology-driven growth.
   • Achieve a 15% contribution of the ICT sector to GDP.
8. Environmental Sustainability:
   • Plant over 10 million hectares of forests to combat deforestation.
   • Reduce carbon emissions by 50%, in line with global environmental commitments.

These ambitious targets reflect Tanzania's aspirations to be a prosperous, inclusive, and sustainable nation by 2050.

How transformative sectors could contribute to Tanzania's Vision 2050 targets and What will be potential challenges.

1. Contribution of Transformative Sectors to Vision 2050 Goals

The transformative sectors include industry, agriculture, energy, infrastructure, human capital development, and ICT. Their potential contributions to the Vision 2050 goals can be estimated as follows:

a) Industry (40% GDP Contribution by 2050)

• Current Contribution: Industry contributes 28% to GDP as of 2024, primarily through manufacturing, mining, and construction.
• Potential Contribution: With strategic investments in industrial parks, export zones, and skills development, this sector could contribute 35%-40% to GDP by 2050.
• Enablers: Modernizing industrial processes, attracting foreign direct investment (FDI), and leveraging regional markets like the East African Community (EAC).

b) Agriculture (100% Mechanization and Productivity Growth)

• Current Contribution: Agriculture accounts for about 24% of GDP but employs 65% of the workforce.
• Potential Contribution: Modernization and mechanization could increase agricultural GDP contribution to 30%-35%, supporting exports and reducing rural poverty.
• Enablers: Access to mechanized tools, irrigation infrastructure, and extension services.

c) Energy (100% Access and 50% Renewable Energy)

• Current Status: Only 42% of the population has access to electricity, with renewables making up about 14% of the energy mix.
• Potential Contribution: Universal access to energy could add 5%-7% to annual GDP growth by powering industrial and ICT sectors.
• Enablers: Expanding solar, wind, and hydropower investments, reducing dependency on fossil fuels.

d) Infrastructure (Regional Hub Development)

• Current Status: The logistics performance index (LPI) ranks Tanzania at 95th globally (2023), with ongoing improvements in the Dar es Salaam Port and Standard Gauge Railway (SGR).
• Potential Contribution: Modern infrastructure could improve trade efficiency, contributing 10%-15% to GDP by 2050.
• Enablers: Continued public-private partnerships (PPPs) and infrastructure financing.

e) ICT (15% GDP Contribution by 2050)

• Current Contribution: The ICT sector contributes 7% to GDP, driven by mobile banking and telecommunications.
• Potential Contribution: The sector could grow to 15% with widespread internet penetration and digital services.
• Enablers: Expansion of fiber optic networks and policies supporting tech startups.

f) Human Capital Development

• Current Status: Literacy stands at 78%, with skills gaps in technical and vocational areas.
• Potential Contribution: Investments in education and healthcare could raise GDP productivity by 20%-25%.
• Enablers: Universal primary and secondary education, technical training, and healthcare access.

2. Challenges in Achieving Vision 2050 Targets

a) Financing Gaps

• Estimated investments of $200 billion for infrastructure, energy, and industrial development may face financing shortfalls.
• Current annual FDI inflows (~$1.2 billion) need to increase significantly.

b) Governance and Policy Coordination

• Weak institutional capacity and bureaucratic delays can hinder project implementation.
• Corruption and inconsistent policy enforcement remain critical risks.

c) Technology Adoption

• ICT adoption is constrained by low internet penetration (45%) and high costs of digital devices.
• Limited digital skills among the workforce slow progress.

d) Climate Change

• Vulnerabilities in agriculture due to erratic rainfall and rising temperatures threaten food security.
• Dependence on hydropower exposes the energy sector to drought risks.

e) Demographic Pressure

• Tanzania’s population is projected to exceed 85 million by 2050, increasing demand for jobs, education, and services.

f) Inequality and Inclusion

• Regional disparities in development could limit rural areas' contributions to Vision 2050.
• Gender inequality and youth unemployment (over 12%) present barriers.

Conclusion

With robust policy implementation and investment, the transformative sectors could collectively contribute 70%-80% of the economic and social targets by 2050. However, addressing challenges such as financing, governance, technology adoption, and climate resilience is crucial. Success will require multi-stakeholder collaboration, including government, private sector, and international partners, to build a sustainable foundation for Vision 2050.

As of October 2024, Tanzania's financial markets have exhibited mixed but resilient performance. The government securities market showed a preference for long-term bonds, while short-term Treasury Bills faced under subscription. Meanwhile, the interbank cash market saw increased turnover, and the foreign exchange market benefited from improved liquidity driven by strong export earnings. Despite some liquidity tightness, particularly due to crop purchase demands, the overall market conditions remain stable, supporting Tanzania’s broader economic growth and monetary policy objectives.

1. Government Securities Market:

Treasury Bills (T-Bills):

• Tender Size: The combined total for two auctions was TZS 253.3 billion.
• Bids Received: A total of TZS 118.4 billion in bids was received.
• Bids Accepted: All bids were accepted, indicating strong interest despite the under subscription.
• Weighted Average Yield: The yield for T-Bills increased to 11.55% from 10.85% in the previous month. This increase reflects rising investor demand for higher returns, possibly due to inflationary pressures or market uncertainty.
• Performance: The T-Bills market was undersubscribed, suggesting a preference among investors for longer-term government debt instruments such as bonds.

Treasury Bonds (T-Bonds):

• Total Tender Size: TZS 395.6 billion was offered.
• Bids Attracted: The market saw TZS 354.6 billion in bids, a healthy demand.
• Successful Bids: TZS 310.6 billion worth of bids were accepted.
• Weighted Average Yields:
  • 5-year Bond Yield: 12.41%
  • 15-year Bond Yield: 15.76%
  • 20-year Bond Yield: 15.76%
• Key Insights: Investors showed a preference for long-term bonds with high yields, particularly the 15-year and 20-year bonds, which both had a yield of 15.76%, reflecting the demand for long-term investments amidst current inflationary trends.

2. Interbank Cash Market (IBCM):

• Market Turnover: The total turnover in the IBCM increased to TZS 2,093.7 billion, up from TZS 1,564.7 billion in September, showing increased trading activity.
• Overnight Transactions: 39.1% of the total market turnover consisted of overnight transactions, indicating a strong short-term borrowing and lending activity.
• 7-Day Transactions: 20.6% of the market turnover was related to 7-day transactions, showing a preference for slightly longer-term liquidity management.
• IBCM Interest Rate: The average interest rate for the IBCM stood at 8.04%, down slightly from 8.16% in September. This indicates a minor improvement in liquidity conditions, possibly due to lower demand for immediate liquidity.
• Liquidity Conditions: The market was characterized by a decline in liquidity due to higher demands from crop purchases, particularly in the agricultural sector.

3. Interbank Foreign Exchange Market (IFEM):

• Market Performance: There was a significant increase in market activity, with transactions rising to USD 50.7 million from USD 8.35 million in September. This increase suggests a surge in demand for foreign currency.
• Bank of Tanzania's Net Purchase: The Bank of Tanzania purchased USD 4.5 million to stabilize the exchange rate and address exchange rate volatility.
• Exchange Rate:
  • The average exchange rate was TZS 2,719.91 per US dollar, which is an improvement from TZS 2,727.41 per US dollar in September.
  • Annual Depreciation: The Tanzanian Shilling has depreciated by 8.98% year-on-year, an improvement from 10.11% depreciation in the previous month. This improvement reflects the stabilization efforts in the foreign exchange market.
• Foreign Exchange Liquidity: Liquidity improved due to strong export earnings from:
  • Cashew nut exports
  • Gold exports
  • Tourism earnings

Key Market Characteristics:

1.  Improved foreign exchange liquidity supported by strong export revenue.
2.  Slight appreciation of the Shilling, indicating improved market conditions and investor confidence.
3.  Under Subscription in government securities, particularly in T-Bills, reflecting a shift towards longer-term investments.
4. Active interbank cash market, showing increased turnover and liquidity activity.
5. Minimal intervention by the Bank of Tanzania in the IFEM, with their intervention limited to stabilizing volatility.

• Mixed Performance: The financial markets showed a mixed performance in October 2024:
  • The interbank cash market was strong, reflecting solid liquidity management but facing some liquidity tightness due to crop purchases.
  • The foreign exchange market saw improved liquidity and a slight appreciation of the Tanzanian Shilling, largely supported by export earnings.
  • Government securities, however, faced undersubscription in the T-Bills market, with investors preferring long-term bonds.
• Resilient Market: Despite some liquidity constraints, particularly in short-term markets like T-Bills, overall market conditions were stable, with resilience in the broader financial markets.
• Monetary Policy Support: The Bank of Tanzania's monetary policy appeared effective in maintaining market stability, addressing exchange rate volatility, and promoting growth while keeping inflation in check.

Tanzania's financial markets as of October 2024 provides insights into the overall health and performance of key market segments, including government securities, interbank cash, and foreign exchange markets.

1. Government Securities Market:

• T-Bills and T-Bonds Performance:
  • Undersubscription in T-Bills indicates that investors are increasingly seeking longer-term investments, possibly due to concerns about inflation or a desire for higher yields. This suggests that short-term instruments are less attractive compared to the stability offered by longer-term bonds.
  • The strong demand for Treasury Bonds, particularly the 15-year and 20-year bonds with yields of 15.76%, highlights a preference for higher yields, signaling confidence in the government’s long-term fiscal management and a search for safer, more rewarding investments.

2. Interbank Cash Market (IBCM):

• The increase in market turnover to TZS 2,093.7 billion suggests more trading activity and a higher demand for liquidity. This could be linked to the need for short-term financing in the economy, likely due to cash flow demands in various sectors (e.g., agriculture).
• The decline in liquidity driven by crop purchase demands shows that there are seasonal pressures on cash flows, but the market remains active and responsive.

3. Foreign Exchange Market (IFEM):

• The increase in foreign exchange transactions and the Bank of Tanzania's net purchase of USD 4.5 million signal that there is a proactive effort to manage exchange rate volatility and stabilize the Shilling.
• The slight appreciation of the Tanzanian Shilling (from TZS 2,727.41 to TZS 2,719.91 per USD) and improved foreign exchange liquidity point to better export performance (e.g., cashew nuts, gold, and tourism), which is strengthening the country's foreign currency reserves and stabilizing the currency.
• The 8.98% annual depreciation of the Shilling, which improved from 10.11% in September, suggests that the currency is stabilizing but is still under pressure due to global economic conditions and domestic challenges.

4. Market Summary:

• Mixed Market Performance:
  • The markets were generally stable but faced some challenges:
    • Government securities showed moderate performance, with preference for longer-term bonds.
    • Foreign exchange and interbank cash markets showed resilience, benefiting from exports and market interventions.
  • Overall Stability: The financial markets remain resilient, supporting Tanzania’s economic growth while maintaining price stability, which is the key objective of the central bank’s monetary policy.
• Investor Sentiment: Investors seem cautious about short-term instruments (T-Bills) but are confident in the long-term outlook, as reflected in the demand for long-term bonds.

5. Broader Economic Implications:

• Liquidity Tightness: While liquidity tightness due to crop purchases may be a short-term issue, the increase in market turnover suggests that there is still confidence in short-term lending and borrowing within the banking system.
• Monetary Policy Effectiveness: The Bank of Tanzania’s actions—particularly in the foreign exchange market—show its ability to intervene and manage exchange rate volatility effectively. It also indicates a balance between addressing liquidity challenges and supporting economic growth.
• Stable Economic Environment: Despite the undersubscription in T-Bills, the overall stable performance of the financial markets suggests that Tanzania is navigating global economic pressures while maintaining a healthy domestic economy.

In summary, the analysis tells us that Tanzania’s financial markets are currently facing mixed conditions, but overall, they are demonstrating resilience, with strong export performance and improved liquidity conditions. The government’s fiscal and monetary policies appear to be effectively supporting stability and growth

Tanzania's monetary policy in the fourth quarter of 2024 demonstrated a strategic approach to sustaining economic growth while maintaining price stability. The Bank of Tanzania (BoT) maintained a stable policy stance, supporting key sectors like agriculture, manufacturing, and construction through robust private sector credit growth. Effective liquidity management and moderate adjustments in interest rates highlighted the central bank’s commitment to fostering macroeconomic stability and inclusive economic activity.

Central Bank Rate (CBR) and Policy Stance

• CBR: The Bank of Tanzania (BoT) maintained the Central Bank Rate at 6%, demonstrating a stable monetary policy stance.
• 7-day Interbank Cash Market (IBCM) Rate: This rate was expected to fluctuate within ±200 basis points (bps) of the CBR, indicating the BoT's tolerance for short-term liquidity variations while ensuring stability.

Liquidity Conditions and Interbank Markets

1. Bank Liquidity

• Liquidity was tight in October 2024 due to increased demand for cash for seasonal crop purchases, especially cashew nuts.
• The 7-day IBCM rate averaged 8.48%, slightly exceeding the BoT's policy corridor, but declined from 8.58% in September 2024.

2. Monetary Injections

• To manage liquidity, the BoT scaled up injections through reverse repurchase agreements (reverse repos):
  • October 2024: TZS 2,887.9 billion,
  • September 2024: TZS 2,160 billion.
    This significant increase in reverse repos reflects the BoT’s active role in maintaining liquidity.

Monetary Aggregates Growth

1. Extended Broad Money Supply (M3)

• Growth in M3 accelerated:
  • October 2024: 14.6%,
  • September 2024: 11.4%,
  • October 2023: 12.4%.
    This rise indicates expanding financial activity, supported by robust monetary policy transmission.

2. Private Sector Credit

• Credit growth to the private sector remained strong:
  • October 2024: 17%,
  • September 2024: 17.5%,
  • October 2023: 17.9%.
    While slightly lower, this consistent growth reflects ongoing support for economic sectors.

Sectoral Credit Distribution

1. Agriculture:
   • Recorded the highest growth in credit at 44.7%, reflecting strong support for rural and agricultural activities.
2. Manufacturing:
   • Credit growth reached 18.7%, aiding industrial expansion.
3. Building and Construction:
   • Growth at 18.6%, indicative of sustained infrastructure investment.
4. Personal Loans:
   • Comprising 38.2% of the total loan portfolio, largely benefiting SMEs.
5. Trade:
   • Represented 12.7% of the loan portfolio.
6. Agriculture (overall share):
   • Accounted for 12% of total loans, emphasizing its importance in Tanzania’s economy.

Interest Rate Developments

1. Overall Lending Rate:
   • Increased to 15.67% from 15.53%, signaling slight tightening.
2. Negotiated Lending Rate:
   • Remained stable at 12.93%, aiding business planning.
3. Overall Deposit Rate:
   • Increased to 8.25% from 8.20%, enhancing savings attractiveness.
4. Negotiated Deposit Rate:
   • Rose significantly to 10.27% from 9.12%, reflecting better returns for large depositors.

Key Observations

1. Price Stability:
   • Despite tighter liquidity in October, the monetary policy maintained overall price stability.
2. Support for Growth:
   • The growth in M3 and private sector credit illustrates that monetary policy supported economic activity effectively.
3. Balanced Approach:
   • The policy successfully managed liquidity and ensured sufficient credit flow, particularly to productive sectors like agriculture and manufacturing.
4. Macroeconomic Stability:
   • BoT’s monetary policy ensured stable inflation, sustainable economic growth, and reasonable interest rates.

This multi-dimensional approach highlights the effectiveness of Tanzania’s monetary policy in fostering both macroeconomic stability and sectoral growth.

Tanzania's monetary policy in the fourth quarter of 2024 with key insights about the country's economic environment and the effectiveness of its central bank actions.

1. Policy Stability and Support for Economic Growth

• The stable Central Bank Rate (CBR) at 6% indicates a commitment to fostering economic growth while maintaining inflation within a manageable range.
• Despite seasonal liquidity tightness, the monetary policy stance was accommodative, ensuring adequate support for economic sectors.

2. Effective Liquidity Management

• Tight liquidity in October was managed through increased monetary injections (reverse repos). This intervention highlights the Bank of Tanzania's flexibility in responding to short-term economic demands (e.g., seasonal crop purchases like cashew nuts).
• The slight decline in the 7-day interbank cash market (IBCM) rate signals gradual easing of liquidity pressures.

3. Strong Credit Growth

• Robust credit growth of 17% in the private sector reflects a healthy financial sector capable of supporting businesses and households.
• Sectors like agriculture (44.7%), manufacturing (18.7%), and construction (18.6%) benefited significantly, showcasing targeted resource allocation to productive and growth-enhancing areas.

4. Interest Rate Dynamics

• The rise in lending and deposit rates indicates moderate tightening of monetary conditions, potentially to control inflation or stabilize the currency. However, negotiated rates remain competitive, supporting business borrowing and savings.
• The increase in the negotiated deposit rate (10.27%) suggests banks are competing for large deposits, possibly due to higher demand for liquidity.

5. Expansion in Monetary Aggregates

• The strong growth in the money supply (M3) to 14.6% and private sector credit underscores:
  • Economic confidence, with businesses and individuals accessing financing for growth.
  • An effective monetary transmission mechanism, where policy changes successfully impact financial flows.

6. Focus on Key Sectors

• The priority for agriculture reflects Tanzania's reliance on this sector for economic stability and employment. The highest credit growth in agriculture indicates significant support for rural economies and food security.
• The dominance of personal loans (38.2%) highlights the importance of SMEs and individual businesses in Tanzania's economic framework.

7. Macroeconomic Balance

• The policy achieved a delicate balance between:
  • Inflation control (via tight liquidity management and slightly higher rates),
  • Credit expansion (to productive sectors),
  • Economic growth support (through liquidity injections and targeted sectoral credit).

Conclusion

Tanzania's monetary policy in Q4 2024 reveals a proactive central bank addressing both short-term challenges (like seasonal liquidity tightness) and long-term goals (sectoral growth, price stability, and financial inclusion). It highlights an economy growing steadily, with sound monetary management ensuring stability and opportunity for diverse sectors.

Tanzania has successfully sustained inflation below the medium-term target of 5%, reflecting strong economic policies and favorable supply conditions. Headline inflation eased to 3.0% in October 2024, supported by declining energy costs, stable food prices, and prudent monetary management. This stability highlights Tanzania's resilience to global shocks and its commitment to fostering a predictable economic environment for growth and investment.

Headline Inflation

• Trend:
  Headline inflation in Tanzania remained below the medium-term target of 5%, reflecting overall price stability.
  • October 2024: 3.0%
  • September 2024: 3.1%
• Implication:
  This indicates effective inflation control through stable prices in both food and non-food items. A 0.1 percentage point drop signals a steady, controlled environment for inflation management.

Energy and Fuel Inflation

• Trend:
  • October 2024: 9.7%
  • September 2024: 11.5%

A notable decline of 1.8 percentage points in energy and fuel inflation due to easing pump prices in the domestic market.

• Drivers:
  • Global energy price reductions during July–September 2024, leading to lower import costs.
  • Domestic adjustments in fuel prices influenced by global trends.
• Example (Domestic Fuel Prices):
  • Average pump price for petrol:
    • August 2024: 2,600 TZS/liter
    • October 2024: 2,500 TZS/liter

Core Inflation

• Definition: Excludes volatile items like fuel and unprocessed food, reflecting underlying inflation pressures.
• Trend:
  • August–October 2024: Steady at 3.2%
  • Previous peaks:
    • March–April 2024: 3.9%
• Implication:
  The sustained moderation (down 0.7 percentage points from earlier peaks) signifies improving control over cost pressures in non-volatile goods and services.

Food Inflation

• Trend:
  • October 2024: 2.5% (unchanged from September 2024).
  • Year-on-Year Comparison: Lower than 2023

Factors Supporting Stability

1.                Improved Production:

• Good weather led to higher yields.
• Enhanced use of inputs like fertilizers, quality seeds, and pesticides.

2.                Price Trends:

• Decreasing costs for staple foods (examples):
  • Maize: 750 TZS/kg (October 2024) vs. 800 TZS/kg (October 2023).
  • Beans: 2,000 TZS/kg (October 2024) vs. 2,200 TZS/kg (October 2023).
  • Rice: 1,500 TZS/kg (October 2024) vs. 1,600 TZS/kg (October 2023).

3.            Global Wheat Prices:

• Reflected in local market trends, easing bakery and flour prices.

Contributing Factors for Low Inflation

1. Good Food Supply Conditions:
   • Favorable weather and input supply ensured adequate harvests.
2. Moderation in Global Commodity Prices:
   • Decline in crude oil prices:
     • Brent Crude: $85/barrel (Q3 2024) vs. $90/barrel (Q2 2024).
3. Prudent Monetary Policy:
   • Bank of Tanzania maintained a neutral stance to prevent inflationary pressures.
4. Stable Exchange Rate Management:
   • Exchange rate stability against the USD (approximately 2,350 TZS/USD) prevented import cost escalations.

Overall Inflation Trend

• October 2024: Inflation remained well below the 5% medium-term target, showcasing:
  • Successful implementation of monetary policy.
  • Favorable domestic supply conditions.
• Implication: Price stability contributes to economic confidence, promoting investment and consumption.

Tanzania's inflation developments reveal the following insights:

1. Economic Stability and Effective Policy Management

• Key Indicator: Headline inflation consistently below the medium-term target of 5%.
• Implication: This highlights the success of Tanzania's monetary policies and economic strategies, ensuring a stable macroeconomic environment.

2. Control Over Volatile Sectors

• Energy and Fuel: The sharp decline in inflation for energy and fuel reflects Tanzania's responsiveness to global market trends and its capacity to translate these into lower domestic prices.
• Food Sector: Stable food inflation at 2.5% signifies strong agricultural performance, supported by favorable weather and policy measures that enhance input availability and reduce food costs.

3. Underlying Inflation Pressures are Contained

• Core Inflation Stability: Steady at 3.2% over recent months, showing that non-volatile components of the economy, such as housing, education, and healthcare, are not facing sharp price pressures.
• Significance: This stability underpins consumer and business confidence in the economy.

4. Benefits of Global Market Dynamics

• Tanzania's inflation benefited from:
  • Lower global fuel prices, reducing import costs.
  • Falling global wheat prices, easing food-related inflation.
• Implication: The ability to leverage favorable external conditions shows Tanzania's integration into the global economy and effective exchange rate management.

5. Favorable Domestic Conditions

• Strong Agricultural Sector: Adequate food supplies due to good weather and input availability reduced reliance on imports and mitigated price shocks.
• Policy Success: Prudent fiscal and monetary measures, such as stable exchange rate policies, prevented inflationary pressures from external factors like currency depreciation.

6. Positive Signals for Growth

• Low Inflation Environment: Encourages investment and consumer spending due to predictable price levels.
• Attractiveness for Investors: A stable inflation rate below the regional average makes Tanzania an appealing destination for foreign and domestic investment.

Conclusion

Tanzania's inflation trends in 2024 demonstrate a well-managed economy with robust mechanisms to ensure price stability. This reflects:

1. Effective policy implementation.
2. Resilience to external shocks.
3. Sustained growth potential through stable economic conditions.

A Pathway to Sustainable Growth

Africa holds a treasure trove of mineral wealth, producing 80% of the world’s platinum, 67% of its cobalt, and leading in gold, diamonds, and bauxite. Mining contributes significantly to economic growth, accounting for over 20% of total exports in many countries like the DRC (81%) and Botswana (92%). With untapped reserves, such as Guinea’s 1.8 billion tons of iron ore, and growing demand for minerals in renewable energy, Africa is poised to be a global powerhouse. However, challenges like 250% higher logistical costs and environmental concerns underscore the need for sustainable strategies to fully harness this potential.

Trends, Opportunities, Challenges, and Strategies" provides an extensive analysis of Africa’s mining sector, emphasizing its role in economic development and the opportunities and challenges faced.

Key Highlights:

1. Resource Contribution:
   • Africa produces 80% of the world’s platinum, 50% of manganese, and two-thirds of cobalt, essential for clean energy technologies like batteries and solar energy.
   • In 2019, 42 out of 54 African countries were classified as resource-dependent:
     • 18 countries on non-fuel minerals.
     • 10 on energy/fuel exports.
     • Remaining on agricultural exports.
2. Exports and Employment:
   • Mining accounts for 20% of total merchandise exports on average in Africa.
   • In some countries:
     • Botswana: Minerals and metals constitute 92% of exports (2013–2017).
     • DRC: Represents 81% of exports during the same period.
3. Investments:
   • Over $18 billion in new mining projects were expected by the end of 2018, with much concentrated in West Africa (e.g., Ghana, Mali).
   • $50 billion in mining-related infrastructure projects were projected between 2003 and 2030.
4. Economic Impacts:
   • Mining has driven significant GDP growth:
     • In Sierra Leone, iron ore production led to 20.1% GDP growth in 2013.
     • South Africa’s mining companies raised market capitalization in gold and platinum sectors from 22% (2014) to 48% (2016).
5. Challenges:
   • COVID-19 Impact:
     • Disruptions led to sharp declines in commodity prices, except for gold which rose as a safe-haven asset.
     • Labor restrictions varied, with automated mines like Syama (Mali) remaining operational.
   • Infrastructure Gaps:
     • Mining logistics costs in Africa are 250% above the global average due to poor transport and energy networks.
6. Opportunities:
   • Growth in minerals critical for renewable energy, like cobalt and lithium.
   • Underexplored reserves in regions like Burkina Faso (e.g., gold in the Birimian Greenstone Belt).
7. Technology:
   • Use of AI, automation, and big data is reducing costs and improving productivity:
     • The Syama mine’s autonomous operations are an example.
     • Adoption of renewable energy like solar panels at Essakane Gold Mine (Burkina Faso) to cut costs.
8. Sustainable Development:
   • Mining investments have led to improved infrastructure and economic opportunities, such as:
     • Electricity for rural areas.
     • Roads and communication networks in mining regions.

List of the top ten African countries for mining potential, supported by figures:

1. South Africa

• Key Resources: Gold, platinum, coal, and iron ore.
• Gold Production: Former world leader; now the second-largest in Africa.
• Platinum: Produces 80% of global supply.
• Mining’s GDP Share: Contributes approximately 8% of GDP and 45% of exports.
• Market Size: $15 billion annual mineral exports.

2. Democratic Republic of Congo (DRC)

• Key Resources: Cobalt, copper, diamonds.
• Cobalt Production: Supplies 67% of the global demand.
• Copper Reserves: Estimated at 75 million metric tons.
• Mining Exports: Accounts for 81% of total exports.

3. Ghana

• Key Resources: Gold, bauxite, manganese.
• Gold Production: Africa’s largest producer; contributes 95% of mineral revenues.
• Export Revenues: Mining contributes 41% of export revenues and 5% of GDP.
• Annual Gold Output: Around 130 metric tons.

4. Botswana

• Key Resources: Diamonds, nickel.
• Diamond Exports: Contribute 92% of exports.
• World Ranking: Leading supplier of diamonds, with 35% of Africa’s diamond output.
• Mining Revenue: Accounts for more than 20% of GDP.

5. Zambia

• Key Resources: Copper, cobalt, emeralds.
• Copper Output: 6th largest globally, producing 880,000 metric tons annually.
• Cobalt Reserves: Over 2 billion tons.
• Mining Revenue: Contributed $1.6 billion to government revenues in 2016.

6. Guinea

• Key Resources: Bauxite, iron ore.
• Bauxite Reserves: Largest untapped globally; Simandou region holds 1.8 billion tons of high-grade iron ore.
• Mining Exports: Contribute 90% of total exports.
• Annual Bauxite Production: Over 82 million metric tons.

7. Namibia

• Key Resources: Uranium, diamonds, zinc.
• Uranium Output: Fourth-largest producer globally, contributing 7% of global output.
• Diamond Industry: Contributes 10% of GDP.
• Mining Investments: $5 billion in infrastructure projects.

8. Mali

• Key Resources: Gold.
• Gold Production: Among Africa’s largest producers, contributing 70 metric tons annually.
• Export Revenues: Mining accounted for 25% of GDP in recent years.
• Investment Growth: Attracted $3 billion in new gold projects between 2015-2020.

9. Tanzania

• Key Resources: Gold, tanzanite, diamonds.
• Unique Resource: Home to the only Tanzanite mines globally.
• Gold Exports: Contributed over $3 billion in revenues annually.
• Mining Share: Contributes 6% of GDP.

10. Mozambique

• Key Resources: Coal, natural gas, graphite.
• Coal Reserves: Among the world’s largest untapped deposits; produced 15 million metric tons in 2019.
• Graphite Potential: Accounts for 13% of global supply.
• Mining Growth: Annual investments of over $1 billion in exploration and processing.

The strategic importance of Africa’s mining sector as a driver of economic growth, investment, and development while underscoring the continent's potential and challenges in harnessing its rich mineral resources.

1. Vast Resource Endowment

• Africa is a global leader in the production of critical minerals:
  • 67% of cobalt, 80% of platinum, and 50% of manganese.
  • Key suppliers of gold, diamonds, bauxite, and copper.
• This abundance makes Africa central to global supply chains, particularly in renewable energy technologies.

2. Economic Contribution

• Mining constitutes a significant share of GDP, exports, and government revenues in resource-rich countries:
  • Botswana: 92% of exports from diamonds.
  • DRC: 81% of exports from copper and cobalt.
  • Ghana: 41% of export revenues from gold.
• The sector is critical for job creation, infrastructure development, and foreign exchange.

3. Opportunities for Growth

• Untapped Resources: Large reserves remain underexplored, such as iron ore in Guinea and gold in Burkina Faso.
• Renewable Energy Demand: Rising demand for cobalt, lithium, and platinum positions Africa as a global supplier for clean energy technologies.
• Technology and Efficiency: Investments in AI, automation, and renewable energy systems are transforming mining operations, reducing costs, and increasing sustainability.

4. Investment Attractiveness

• Countries like South Africa, Ghana, Zambia, and Guinea offer favorable regulatory frameworks and infrastructure, attracting billions in investments.
• West Africa is emerging as a hotspot due to unexplored reserves and improving business climates.

5. Challenges

• Infrastructure Gaps: High transport and energy costs (250% above global average) limit the sector's profitability.
• Political and Economic Risks: Resource-dependent economies face vulnerability to price fluctuations, governance issues, and the "resource curse."
• COVID-19 Impact: The pandemic disrupted operations, reduced demand, and increased costs.
• Environmental Concerns: Mining contributes to deforestation, pollution, and social displacement.

6. Strategic Recommendations

• Infrastructure Development: Investments in transport and energy networks to unlock inland resource deposits.
• Value Addition: Promoting local mineral processing to increase revenues and diversify economies.
• Governance and Transparency: Strengthening institutions to ensure equitable resource distribution and reduce corruption.
• Technology Adoption: Leveraging automation and renewable energy to boost efficiency and reduce environmental impact.

Overall Insight Africa's mining sector holds immense potential to transform the continent economically. However, to fully capitalize on these resources, there is a need for targeted investments, stronger governance, and sustainable practices. By addressing its challenges, Africa can position itself as a global leader in resource-based industries while driving inclusive growth and development.

In 2023, Tanzania’s Local Government Authorities (LGAs) disbursed TZS 43.94 billion in loans to women and youth, benefiting over 23,000 recipients. This funding, part of a government initiative to promote financial inclusion, is aimed at empowering underserved groups and fostering local entrepreneurship. However, there was a 60.8% decline in women recipients and a 57.0% decline in youth recipients due to a shift from direct lending to bank-managed loans. Despite these challenges, the loans have contributed to economic empowerment, especially in rural and marginalized regions, as reflected in the increase in loan disbursements in Zanzibar to TZS 16.83 billion for 16,432 beneficiaries.

Local Government Authorities (LGAs) in Tanzania have played a pivotal role in providing financial support to underserved groups, particularly women, youth, and people with disabilities. These loans are part of the government's broader financial inclusion efforts, aimed at empowering vulnerable populations and promoting small-scale entrepreneurship:

Key Statistics

1. Total Loan Disbursement in 2023:
   • LGAs in mainland Tanzania disbursed TZS 43.94 billion in loans to women and youth in 2023. This funding aimed to promote financial independence and economic empowerment within these groups.
2. Disbursement by Gender:
   • Women received TZS 24.02 billion across 16,724 loan recipients in 2023.
   • Youth (primarily young entrepreneurs) received TZS 19.92 billion across 10,032 loan recipients.
   • This reflects a strategic focus on empowering women and youth, who often face greater challenges accessing formal financial services.
3. Loan Distribution in Zanzibar:
   • In Zanzibar, the Zanzibar Economic Empowerment Authority (ZEEA) also facilitated access to loans for local businesses, with 16,432 beneficiaries receiving TZS 16.83 billion in 2023, up from TZS 7.32 billion in 2022.
   • This significant increase in loan disbursements in Zanzibar reflects the government's ongoing push to improve financial access for entrepreneurs and small businesses in the region.

Key Programs and Impact

1. Government Loan Schemes:
   • LGAs allocate 10% of their own-source revenues to be used for loans to women, youth, and people with disabilities. This 10% loan allocation is divided as follows:
     • 4% for women
     • 4% for youth
     • 2% for people with disabilities
   • These allocations ensure targeted support for vulnerable groups that may face barriers in accessing credit from mainstream financial institutions.
2. Empowerment through Financial Support:
   • These loans have been crucial in enabling small-scale businesses, particularly in rural and underserved areas, to grow and expand.
   • The funding has supported entrepreneurial initiatives, ranging from agriculture to small retail businesses, allowing beneficiaries to improve their livelihoods and contribute to the local economy.

Challenges and Trends

1. Challenges:
   • Declining Loan Access: There was a 60.8% decrease in the number of women accessing loans in 2023 compared to 2022, from 69,926 to 33,485 beneficiaries. Similarly, youth beneficiaries also decreased by 57.0%, from 69,926 in 2022 to 33,485 in 2023.
   • This decline is primarily due to changes in the loan distribution model, where LGAs shifted from direct lending to bank-managed lending processes, aimed at increasing transparency, loan recovery, and accessibility. However, this shift may have caused delays or complicated loan access for some beneficiaries.
2. Opportunities:
   • The new bank-managed model could improve loan sustainability and collection efficiency, ensuring more responsible lending practices.
   • The increased focus on Zanzibar and the expansion of funding to MSMEs there offer opportunities for regional development, which could have a positive impact on the island’s economy.

Impacts of LGA Loans

1. Economic Empowerment:
   • These loans have played an instrumental role in providing economic opportunities to marginalized groups, especially women and youth, who traditionally face difficulties accessing finance.
   • By supporting local businesses, these loans contribute to poverty reduction, job creation, and the expansion of the informal sector.
2. Social Inclusion:
   • The targeted approach to lending, focusing on women, youth, and people with disabilities, enhances social inclusion and encourages equal participation in economic activities, helping to bridge the gender and generational gap in business ownership.

The local government authority loans in Tanzania, with TZS 43.94 billion disbursed to women and youth in 2023, are a vital component of the country’s financial inclusion strategy. Although challenges like a decline in loan access due to changes in loan management exist, the increased focus on vulnerable groups continues to drive economic empowerment and social inclusion. The shift towards bank-managed processes is a positive step toward sustainable financial support, which can strengthen Tanzania's economy and create more equitable opportunities for underserved populations.

Loans from Local Government Authorities (LGAs) in Tanzania (2023)

The data on loans from Local Government Authorities (LGAs) in Tanzania in 2023 reveals several key trends and insights:

1. Targeted Financial Inclusion

• The loans allocated to women and youth highlight Tanzania's commitment to promoting economic empowerment and financial inclusion for underserved groups. With TZS 43.94 billion disbursed to over 23,000 beneficiaries, this initiative is key in fostering entrepreneurship and job creation, particularly in vulnerable sectors like women and youth-owned businesses.

2. Regional Disparities and Focus

• The increase in Zanzibar loan disbursements to TZS 16.83 billion for 16,432 beneficiaries reflects a focused effort on regional development, targeting small businesses and entrepreneurs in Zanzibar, which often face greater barriers to financial access.
• This targeted support indicates that the government is recognizing the importance of regional economic development and ensuring that financial services reach beyond urban centers.

3. Shift in Loan Distribution Model

• The decline in the number of women and youth receiving loans due to the shift from direct lending to a bank-managed model shows a change in the distribution process. While the aim is to improve loan recovery and transparency, this shift appears to have led to temporary setbacks in accessibility, particularly for those who are less familiar with the banking system or face barriers in navigating it.
• The decreased number of loan recipients (60.8% fewer women and 57.0% fewer youth) suggests that some beneficiaries might have faced challenges in adapting to the new loan process, affecting overall loan uptake in the short term.

4. Economic and Social Empowerment

• Despite the challenges, these loans are having a positive social impact. By targeting women, youth, and people with disabilities, these schemes help bridge social gaps, ensuring that traditionally marginalized groups have access to resources needed for economic participation.
• This financial inclusion effort contributes to poverty reduction, business growth, and increased productivity, supporting the broader national goal of inclusive economic growth.

5. Long-Term Sustainability and Efficiency

• The shift to bank-managed loans may improve loan sustainability and recovery rates, making the program more efficient in the long term. Although there may be short-term access issues, this approach could lead to better financial discipline and more effective allocation of resources in the future.

The local government loans in Tanzania for 2023 highlight significant strides in financial inclusion and economic empowerment for vulnerable groups, particularly women and youth. However, the shift in the loan distribution model has created some temporary barriers, limiting access in the short term. Despite these challenges, the focus on marginalized populations and regional development reflects a commitment to equitable economic growth and the creation of a more inclusive financial ecosystem.

The long-term impact of these efforts will depend on how the new distribution model evolves and how the accessibility barriers for underserved groups can be addressed moving forward.