Tanzania: Who’s laughing now?

International confidence boosted
Dr Amit Thakker, Chairman of the East African Health Platform, is more optimistic about Tanzania’s health sector.

“Up until 1992, it was illegal for a doctor to have a private practice in Tanzania,” he said but with the opening of the market, healthcare in Tanzania has seen the entry of large international providers and faith-based organisations such as Aga Khan University Hospitals and the Hindu Mandal Hospital.

“Today the proportion of health services provided by the private sector is well over 30%,” he said, and expects it to reach a 60%-40% split in favour of private providers.

Tanzania’s strong performance has boosted international confidence in the market, and private investment as a proportion of GDP increased from 20% in 2009 to an estimated 30% in 2012.

Faith among local lenders also strengthened and domestic lending to the private sector increased to 17.9% from 15.3% over the same period, with the trade and manufacturing sectors consuming the lion’s share.

But Watson from the Dalberg Group cautions that credit is not as readily available in the market as it ought to be, and that in such a scenario private sector growth cannot be sustained.

“Domestic credit to GDP is still at 24% [in Tanzania] whereas in Kenya, it is well over 50%,” he said, and urges the government to intervene by encouraging banks to lend to critical sectors such as healthcare.

However, it was Tanzania’s construction sector which secured the highest growth in credit issued in 2013 at 22.3%, followed by manufacturing at 18%. Watson also warns that the continued success of private business will be pegged on the availability of skilled labour across all sectors. From the public sector perspective, government needs to build capacity at both a national and a local authority level such that government officials can effectively build public-private partnerships, he said.

It is a concern that also affects the private sector. “The availability of technically skilled manpower will be a defining factor for the growth and success of private sector in Tanzania,” says Shah, and he recommends the establishment of an education system and a knowledge economy if economic growth is to be sustained. And it is here that Kenya’s continued dominance in the Tanzanian market is revealed with top management positions at leading institutions – particularly in the finance sector – being monopolised by Kenyan-trained personnel.

“A high percentage of Tanzanian banks are Kenyan run, by which I mean Kenyan CEOs,” said Watson. And so while increased ties with regional blocs such as SADC, EAC and COMESA would free the movement of people, goods and capital across borders, “the fear on [Tanzania’s] part is if we open up how are we not going to build capacity in our next level of managers”.

Other growth constraints that the Tanzanian economy faces are similar to those hampering its neighbours, such as the high cost of power and reduced international prices of export commodities like tea, coffee and gold.

But none of these challenges has dampened the optimism of the Tanzanian economy, and with its period of social and economic experimentation firmly behind it, it is confident that its star is on the rise.
Certainly enough to give pause to other countries in the region, and put Kenya on notice.