ECONOMIC MADE SIMPLE : At 55, Tanzania’s economy now in two major U-turns

Every December 9, Tanzania marks its Independence Day. It follows independency from Britain on December 9, 1961. The then Tanganyika is now 55 years old Tanzania.

Inter alia, there is a need to look back at the path travelled by this nation since independence to date to identify positive and negative lessons taught throughout this journey in order to inform present and future discourses and decisions.
The author argues that Tanzania has seen two major U-turns in its economy in the past 55 years. The U-turns separate three different epochs. Each of the U-turns brought major changes with far-reaching implications.
The 1961-1967 epoch
The then Tanganyika used the first few years after the December 9, 1961 independence from Britain to cope with the reality of its new status. In economic perspective, the 1961- 1967 period remained more or less the same as it was in the colonial times in some aspects. The economy continued to be owned, controlled and managed by the private sector. The main actors in terms of ownership of the major means of production such as plantations, mines, industries and banks were by and large Europeans and Tanzanians of Asian origin. Sons and daughters of Tanzania remained passive actors in the economy.
The 1967 U- turn
The first U-turn in the economic history of Tanzania was made in 1967. This was the year when the Arusha Declaration saw the light of the day. Along with it came the Ujamaa ideology that is at times seen to be a brand of African socialism. It was the period, when Tanzania nationalised major means of production that were hitherto controlled by the private sector. It was an epoch, when the country embraced a Marxist-Leninist economic philosophy. It was an era of state controlled economy.
State monopoly
This period was characterised, inter alia, by state monopolistic market structure in virtually in all sectors of the economy. Air Tanzania Corporation dominated the sky, Radio Tanzania Dar es Salaam controlled Daily News and Uhuru to list, but a few. The market-oriented and influenced private sector was seen as state enemy. Some politicians would call the private sector such names as exploiters, capitalist and economic saboteurs.
Entrepreneurship suffered
In the period under discussion it was almost sinful and politically incorrect to be a rich person or to be seen attempting to become one. The Ujamaa ideology planted anti-entrepreneurial attitudes and mental framework among most Tanzanians.
As part of this, the education system produced white colour job seekers instead of crafting entrepreneurs, who would be job creators. This is the era in which Keynesian economics was put in action in form of interventionist state having its visible hands fully in the economy.
It planned, owned, produced, distributed and even influenced the consumption of goods and services through its about 400 parastatals. The rather closed economy was locally owned, managed and controlled.
The mid-1980s U-turn
The second U-turn in the Tanzanian economic journey since independence unfolded in the mid-1980s. The U-turn brought Tanzania to the current epoch. It is more or less a mirror image of the Ujamaa era, which lasted between 1967 to the mid-1980s inclusive. It is the Zanzibar Declaration that kissed goodbye the Ujamaa era and embraced this epoch, which is characterised by private-led and market-led economic thinking. It is a an epoch characterised by neo-liberal economics following Structural Adjustment Programmes of the World Bank and the International Monetary Fund.
Foreign economy
As opposed to the era immediately before this, the economy is now largely foreign-owned, managed and controlled through Foreign Direct Investments. The economy is more outward-looking, there is flexible exchange rate regime characterized by, inter alia, exchange rate volatility.
Government as facilitator
Although there is a free interplay of market forces of supply and demand, the government has its hands on the economy. Its role now is that of a facilitator and creator of a conducive business and investment climate. This is done through overseeing policies, laws, rules, regulations, peace, order and tranquility that are essential for a proper functioning market economy.
Although the market rules of the economy, there are various sectoral regulatory authorities. There have the role of ensuring the private sector is not abusing its market power. Ewura and Sumatra are among such regulators. One also sees executive agencies providing non-core public services on commercial basis as agents of the government whose role is one of a principal.
Lessons from the journey
Tanzania’s economic journey since independence is full of events. The more dramatic epochs are those of 1967 to the mid 1980s and the mid 1980s to the current time. Among the lessons that should be learnt include the fact the state controlled economic era was not particularly successful, when one uses such indicators as availability of goods and services.
However, the ideology of the time has been crucial in laying foundations on which the mid 1980s U-turn was built. For future success of the economy, it is very important for the government to do what governments do best in market economies. It has to ensure that there are very attractive and friendly investments and business environment for the private sector to succeed.