Concern as manufacturing exports fall to five-year low

Dar es Salaam. Manufacturing exports dropped to a five year-low during the year ending May 2017.

Industrialists attribute the trend to low production caused by financial crunch as illiqudity bit lenders.

The value of exports of manufactured goods reached $1.037 billion from $861 million in 2011.

It rose to $1.23 billion and $1.36 billion in 2014 and 2015 respectively before dropping to $1.09 billion in 2016, according to Bank of Tanzania (BoT) figures.

BoT says in its June 2017 economic review that the value of exported manufactured goods dropped by a cool 46.5 per cent to $811.4 million (about Sh1.8 trillion on the prevailing exchange rate) during the year ending May 2017 from $1.516 billion (about Sh3.3 trillion) recorded during a similar period last year.

Earnings from total exports fell by six per cent during the same period.

“Earnings from export of goods and services amounted to $8,774.9 million in the year ending May 2017 compared with $9,357.0 million in the year ending May 2016. The decline was on account of lower export value of manufactured goods, which outweighed the improvement in earnings from exports of traditional goods, gold, and travel,” the BoT says. Manufacturers say credit woes hit them.

They also pile the blame on what they term as ‘unfavorable tax regimes’ and, high numerous fees and charges levied by regulatory bodies among others.

“This could be a result of a lack of funds among manufacturers as they grapple with tight liquidity in commercial banks…with tight liquidity, manufacturers cannot increase production,” said the Confederation of Tanzania Industries (CTI) chairman, Dr Samuel Nyantahe.

The Tanzania Private Sector Foundation (TPSF) executive director, Mr Godfrey Simbeye, shared similar sentiments. “Low money circulation in the economy forced some manufacturers to reduce production and hence exportation,” he told BusinessWeek. The Industry, Trade and Investment minister, Mr Charles Mwijage asked for time to comment on the issue.

“I am in my constituency right now and I can only explain extensively on the issue if I get back to my office,” he said over the phone.

However, Mr Mwijage told The Citizen in February - when such the BoT also reported a massive drop on exports of manufactured goods - that the situation displays a global trend whereby various countries are reporting decreases in exports of their various products.

“Data on exports are always changing. They depend on the global situation whereby at times, they go up and sometimes, they go down,” he said in February, assuring the public that the government’s industrialization agenda remained intact.

Country on transition

However, there could be new hope, with the BoT showing that during May 2017, credit to manufacturing activities grew at a relatively higher rate than in the year ending May 2016.

And, Dr Nyantahe sees the move as welcoming move, saying it only shows that the country is on transition

“The drop does not send a poor signal to the implementation of the industrialization agenda as outlined in the Second Five-Year Development Plan (FYDP2) which runs from financial year 2016/17 to 2020/21…It only shows what happens when the country undergoes a transition period…It will take three to five years before we start enjoying the fruits of the ongoing industrialization drive,” he said.

What the government was doing, he said, was creating a more solid economic base. Dr Nyantahe banks his arguments on the ongoing ‘war’ on wasteful spending and corrupt public officials.

Indeed, the BoT shows that the liquidity situation is now improving, with figures showing that extended broad money supply increased by Sh1.1 trillion to Sh23.4 trillion during the year ending May 2017.

“The increase is equivalent to an annual growth of 5.2 per cent, which is higher than 3.8 per cent in April 2017. Nonetheless, the growth rate was still far below the 12.0 per cent realized in May 2016,” the BoT says.

In economics, broad money is a measure of the money supply that includes more than just physical money such as currency and coins (also known as narrow money). It generally includes demand deposits at commercial banks, and any monies held in easily accessible accounts.

Like Dr Nyantahe, Mr Simbeye also sees the future as promising in the hope that commercial banks’ credit to the productive sector will soon increase.

“In my recent meeting with bankers, I was told that the problem will become a thing of the past by October this year,” said Mr Simbeye.

Taxes

A CTI expert in business environment, Akida Mnyenyelwa says to attract new investors, the government will have to revisit its tax rates so they can be friendly to investors.

“There are numerous tax and charges, emanating from the presence of multiple regulatory bodies like Tanzania Bureau of Standards (TBS) and Tanzania Food and Drugs Authority (TFDA),” noted Mr Myenyelwa.

He said the 10 per cent import duty on crude palm oil imposed during the 2017/18 budget is also bad, saying it would make edible oil too expensive for local consumers.

But the Finance and Planning Minister, Dr Philip Mpango said in June that the tax seeks to protect local edible oil manufacturers from imports and simultaneously motivate local farmers to produce more oil seeds.

However, industry players say the new tariff arrangement will hurt refineries, which have invested billions of money to modernise their factories and increase their refining capacity.