Wealth Gap worries fast growing Tanzania

Tanzania’s commercial capital looks like a boom town even before cash rolls in from gas discoveries that in the next few years could make the east African nation a major energy exporter. Glass-clad tower blocks pierce Dar es Salaam’s skyline and more are emerging from noisy building sites. Billboards advertise high-definition televisions and other electronics to a new middle class, who crowd brand new shopping malls. Yet for a vast number of poor Tanzanians, these symbols of rising incomes only serve to fuel complaints that benefits from an economy that grew 7% in 2012 are not trickling down. So, too, political enmities are deepening and may slow legislation essential to managing the country’s emergence as a major gas exporter. “Look around, the only people benefiting from economic growth and gas discoveries are government leaders,” said 26-year-old Erik Lawi, who washes cars for a living, standing beneath a towering crane erecting a 30-storey building. “Ordinary people like myself are still stuck in poverty.”

The ruling party, in power for half a century, says it is determined to speed up gas development to cut poverty and reduce dependency on fuel imports. If it fumbles, unrest witnessed in May over a gas pipeline could become more widespread, handing the opposition a welcome fillip before 2015 elections. “It’s especially important to… develop a real national support and consensus for how the natural gas reserves can be used for the development of the economy,” Thomas Baunsgaard, Tanzania’s resident representative of the International Monetary Fund, told Reuters in Dar es Salaam. “There is a risk that things become politicised,” he said. In a continent with some of the fastest expanding economies in the world, grumbles about lop-sided growth are not unique. But in Tanzania and other east African states, expectations of speedy rewards have been raised by big oil and gas finds. Tensions about where the money goes when it starts flowing have already boiled over. In May, residents of Tanzania’s Mtwara region rioted over a planned gas pipeline, saying their community was not going to gain a share of the returns.

*Easy Target*

The challenge facing Tanzania is exacerbated by what experts call a “two-speed economy” where agriculture, vital to 75% of households in the nation of 45 million people, is growing more slowly than less labour-intensive sectors such as mining, manufacturing, construction and telecoms. That is deepening the wealth divide in a nation where a third of the people live below the poverty line, on less than $1.25 a day, offering an easy target for rivals of President Jakaya Kikwete and his Chama Cha Mapinduzi (CCM) party. Responding to concerns, Kikwete called in a statement this month for energy firms to speed up their work. “We want this gas to benefit our people, to lift them out of poverty,” he said. Kikwete’s second and final term ends in 2015, so he will be out of office long before completion of a $10bn liquefied natural gas (LNG) export plant planned by Britain’s BG Group, its exploration partner and Norway’s Statoil. But he does not want the Chadema opposition party to erode CCM’s 70% parliamentary majority or to preside over a party that becomes factionalised about who will replace him, though some jostling for position may have started. “There are indications that some of the players in CCM and Chadema party are exploiting this discontent – that the strong growth rate hasn’t really benefited most people – to strengthen their position ahead of the 2015 election,” said Mark Bohlund, senior economist at IHS Global Insight. Political tensions have been exacerbated by a grenade attack on a Chadema rally in the northern city of Arusha in June, in which three people were killed and more than 50 injured. Chadema boycotted the annual budget deliberations in response to the bombing that it blamed on the government.

*Resource Pitfalls*

The bitter political climate could create hurdles for passing vital legislation, such as a natural gas bill that will outline how the fuel is used and how proceeds are shared out. “A rushed (natural gas) proposal would likely trigger further unrest that the ruling party cannot afford,” Clare Allenson, an Africa associate at Eurasia group, said in a note. Tanzania estimates it has 41.7 trillion cubic feet (tcf) of recoverable reserves. Together with those in Mozambique, it could make the region the world’s third-largest gas exporter. But Africa abounds with examples of how mismanagement of resources has led to corruption, communal tensions and a rich-poor divide. In Nigeria, the public complain of inadequate power supplies, crumbling infrastructure and widespread insecurity after decades of oil production.

Tanzania has a reputation as one of Africa’s more stable democracies, which is why US President Barack Obama stopped in the country this month on his three-nation Africa tour. But that is not enough to stop criticism at home. “They don’t care about us poor people,” said Adrian Ngowi, 50, who sells mobile airtime in Dar es Salaam. “If we change the current government, then things might finally change.” Nevertheless, the economy has been steadily expanding, with another year of 7% growth forecast in 2013. Inflation is running at 7.6% in the year to June after global food and oil price spikes pushed Tanzania’s prices up 20% in 2011. Yet, the International Monetary Fund’s Baunsgaard said economy remains “very vulnerable to any shocks in the food and fuel prices”. Economists say Tanzania needs to haul back state and liberalise the heavily subsidised power sector. But hiking electricity tariffs to reflect real costs could be a hard sell when many are now expecting cheaper, home-grown energy supplies.

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