a tripartite report - Unctad

34 VOLUNTARY PEER REVIEW OF CLP: A TRIPARTITE REPORT ON THE UNITED REPUBLIC OF TANZANIA – ZAMBIA – ZIMBABWE
Arising from the Vision, the United Republic of Tanzania’s
developmental path has revolved around
as Chama Cha Mapinduzi (CCM) Election Manifesto
of 2005 whose main objective is to improve
the quality of life for every Tanzanian; National
Strategy for Growth and Reduction of Poverty;
Sustainable Industrial Development Plan; National
Trade Policy; Tanzania Mini Tiger Plan 2020; and
the Millennium Development Goals. All these are
meant to quicken the attainment of the country’s
Vision 2025 10 .
Three key issues in a political context stand out
today to affect competition policy in the United
Republic of Tanzania. Firstly, traditionally, the
State has been an active participant in economic
activity and took direct control of all the means of
production for almost 20 years. This State control
was eventually relinquished through the structural
reform but there remains a strong regula-
Government departments and Ministries on how
business is conducted in the country. Successful
business growth and development is still linked
to favourable political support. For instance, in
2000, the Government recorded that cashew nuts
were at the time the leading foreign exchange
earning crop for the country. Then President
Benjamin Mkapa directed Government authorities
to give incentives to investors, particularly for
cashew nut processing plants. Arising from this,
only processed cashew nuts, and not raw seeds,
were to be exported. 11 This was a commendable
directive as it facilitated the creation of locally
based processing plants. The only drawback was
that the incentives were given to the processors,
but not the farmers, thereby creating a distortion
in bargaining power and wealth creation as
the processors exercised greater market power in
their vertical relationship with the farmers. Other
industrial sectors such as coffee and tea have
faced similar challenges.
Secondly, there have been criticisms about the
varying investment incentives and other terms
that tend to favour foreign investors to local ones.
While most Tanzanians are operating micro and
SMEs, the blue-chip enterprises are operated by
foreigners, more particularly Kenyans and South
Africans stand out. 12 Where subcontracting with
the big businesses are made, such contracts, if
and well-connected Tanzanians. This again creates
barriers to accessing big business and most probably
has led to a stagnant domestic industrialization
in the face of stagnant and/or perpetual
SMEs. It has been noted that despite recent gains
in economic development, the United Republic of
Tanzania may still have a certain strong political
inclination to State intervention in the economy,
particularly the agricultural sector where the crop
marketing boards (CMBs) have control over key
cash crops. The CMBs are set up by Government
action, with broad responsibilities and powers of
compulsion over producers and handlers of de-
cotton and tobacco. They come in the form of
boards stabilizing prices by trading alongside
other enterprises, export monopoly marketing
boards, and domestic monopoly marketing
boards as. 13
Institutional reforms have well been underway
and observers are optimistic that the country will
continue on this path as it is essential to the development
of a strong private sector. 14 There is a
large informal sector that needs to be incentivized
to be innovative and graduate to the formal
sector. Sanya and Gaertner (2012) study 15 shows
that the United Republic of Tanzania, owing to
its large informal and rural community, has the
highest unbanked community in the EAC, as
shown below:
Formal Informal
Excluded
Entirely
Kenya 40 per cent 27 per cent 33 per cent
Rwanda 21 per cent 26 per cent 52 per cent
United Republic
of Tanzania
17 per cent 27 per cent 56 per cent
Uganda 28 per cent 42 per cent 30 per cent
South Africa 64 per cent 10 per cent 27 per cent
Source: Finscope 2010
Part of the proposed solution was that bank regulations
should continue to promote contestable
different types of banks and the products they offer.
One way of doing this was to address market
segmentation due to large State and foreign
bank presence by privatizing the few remaining
Government-owned banks in favour of domestic
participation.