How coal drove Tanzania exports in 2022

Dar es Salaam. The recent rise in demand for coal and resumption of diamond production has sent Tanzanian exports up by 22.7 percent, data from the Bank of Tanzania show.

Tanzania exports of goods and services increased to $11.94 billion during the year to November 2022, from $9.73 billion in a similar period in 2021.

The increase was largely driven by non-traditional goods exports and services receipts, according to the central bank’s monthly economic review for December 2022.

Gold was the largest foreign exchange earner, which generated $2.8 billion, followed by tourism that almost doubled to $2.4 billion and transportation services $1.9 billion.

Exports of goods climbed by 7.5 percent to $7.2 billion and exports of non-traditional goods such as coal, diamonds, iron and steel, textiles, fish products, and fertilisers, increased by 5.7 percent.

Tanzania increased coal exports to $141.6 million in the year ending November 2022, compared to $13.2 million during the corresponding period in 2021, the BoT report indicates, adding that the rise was “largely explained by rising demand for an alternative source of energy following the short supply of crude oil and natural gas” amid the Russia-Ukraine war.

Most of the coal was destined to neighbouring countries including Kenya, the Democratic Republic of Congo, Rwanda and Uganda; and other countries including Poland, Hong Kong, India and Senegal.

The increase in exports was also recorded in exports of diamonds, which rose to $63.1 million from $8.4 million. The increase was explained by the resumption of production at Williamson Mines following a period of closure for maintenance.

Gold exports, which accounted for 46.5 percent of goods exports, also recorded a slight increase to $2.83 billion from $2.82 billion on account of the volume effect.

The traditional goods exports increased to $760.9 million from $628.8 million, supported by the rise in exports of cotton, cashew nuts, sisal and tobacco. While the increase in value of cashew nuts and tobacco was owing to the volume effect, which of cotton was due to a rise in price in the global market. As for sisal, the increase was on account of both volume and price effects.

Rising imports

On the other hand, imports of goods and services amounted to $16.45 billion in the year ending November 2022 compared with $11.21 billion in the year ending November 2021.

White petroleum product imports, which climbed by 81.5 percent to $3.28 billion as a result of both volume and price effects, were a major factor in the increase.

As economic activity improved, so did imports of machinery, industrial transportation equipment, iron and steel, and plastic goods.

With the exception of edible oil, the value of most imports increased. This is partly because import quantities significantly decreased due to supply chain interruptions brought on by the ongoing conflict in Ukraine, which increased costs.

In the year ending in November 2021, services payments grew to $2,385.3 million from $1.55 billion, which can be attributed to greater freight payments in line with the growth in import bills.

What analysts say

Dr Tobias Swai, a financial expert from the University of Dar es Salaam (UDSM), said that encouraging exports should go hand in hand with measures to reduce imports and support indigenous production.

“We should be able to build capacity on small processing industries and stop importing products such as books, shoes, clothes, electric bulbs, small electronics, etc. which we can domestically manufacture if we invest well,” he said.

Dr Swai added that in order for the nation to have an expanding domestic economy and maintain attractive trade conditions, the government can also help the private sector through advantageous financing measures.

“Innovation and creativity are evident in the private sector in the manufacturing of consumer goods, and it is critical that we support them both with favourable policies and financing,” he said.

Dr Daudi Ndaki, an economist from Mzumbe University, credited Tanzania's robust economic growth in 2022 to President Samia Suluhu Hassan's administration's economic diplomacy efforts, which resulted in the adoption of inclusive and resilient economic policies.

He said that in addition to strengthening the private sector, the government supported growth in both domestic and foreign trade.

“The domestic economy was also supported by the relief funds that the country procured from multilateral institutions to support public services and wellbeing,” he said.

Dr Ndaki said it is his view that with more initiative to invite domestic investments, local industrialisation will be pushed up and the country will continue to reduce the deficit in the international trade market.