Key sectors to watch amid upbeat outlook

Dar es Salaam. Despite many countries staring recession in the face in 2023, Tanzania’s macroeconomic variables point to a promising year.

This can be attributed to increased economic activities and reforms, which are expected to have a positive impact on the economy.

International Monetary Fund (IMF) head Kristalina Georgieva recently warned that a third of the global economy would be in recession this year, saying 2023 would be “tougher” than last year due to the slowing down of the US, EU and Chinese economies.

The war in Ukraine, rising prices, higher interest rates and the spread of Covid-19 in China are all weighing the global economy down.

In October 2022, the IMF cut its global economic growth outlook for 2023.

“We expect one third of the world economy to be in recession,” Ms Georgieva said.

In Tanzania, the following are some of the sectors and key projects to watch this year that are expected to give the economy new impetus:

Transport

There are many projects currently going on in the transport sector, with the standard gauge railway (SGR) being the biggest by far.

SGR operations between Dar es Salaam and Morogoro are expected to commence this year after approvals by the relevant regulatory body.

The 300-kilometre SGR section is in the final stages of completion, and the Land Transport Regulatory Authority (Latra) is in the process of setting fares.

Tanzania is building 2,561 kilometres of SGR that will link Dar es Salaam and the lakeside city of Mwanza, with branches to Burundi, Rwanda and Uganda.

President Samia Suluhu Hassan, who recently witnessed the signing of the construction contract for the final section of the SGR, said the railway would be completed in 2026, nine years after work began.

She said Tanzania’s investment in the SGR had now reached $10.04 billion, including the latest contract.

“We have to borrow for this and other important development projects because we don’t have enough domestic resources,” she said, and dismissed criticism that the country was on a reckless borrowing spree.

President Hassan added that the new railway would reduce cargo transportation costs between Dar es Salaam Port and DR Congo from a minimum of $6,000 per tonne to about $4,000 once it becomes fully operational.

Transportation time between the two destinations is expected to be slashed from 30 days by road currently to only 30 hours by 2027.

Education

Education stakeholders are waiting for the adoption of a new education and training policy.

The process of collecting opinions for the improvement of the 2014 Education and Training Policy and curriculum was among notable developments in the sector in 2022.

The process was successfully completed, paving the way for analysis before the new policy is adopted this year.

“Next year (2023), we will have a new education and training policy that will take our education to the highest levels of competitiveness and quality. We are working on the final draft before taking other necessary steps,” Education, Science and Technology minister Adolf Mkenda said towards the end of last year.

The new policy will, among other issues, address the thorny matter of the language of instruction at all levels of education. Tanzania currently uses Kiswahili and English in its education system.

Another expectation is the extension of compulsory basic education to Form Four from Standard Seven.

“This will ensure that students will complete basic education at an age that can guarantee them employment, or self-employment. We will also get to know which language of instruction should be compulsory along with new curricula developments,” Prof Mkenda added.

Energy

A number of energy projects that are expected play a significant role in powering the economy are currently being implemented. These include the mammoth Julius Nyerere Hydropower Project (JNHPP).

Execution of the JNHPP went a notch higher last month when President Hassan officiated at the opening of the diversion channel that will direct water into the dam.

The sprawling 2,115-megawatt station is being built at a cost of Sh6.55 trillion. The diversion is a crucial stage because water channelled into the reservoir is crucial for electricity generation.

Speaking at the project site, Energy minister January Makamba said the dam was 78 percent complete.

In another development, the conclusion of negotiations on the envisaged liquefied natural gas (LNG) project in Lindi Region is expected in February after delays caused by the Christmas holiday.

The talks between the government negotiation team and the multinationals Shell and Equinor and their partners were revived last year after stalling for some time.

The two sides have agreed on key issues, leading to the signing of the initial Host Government Agreement (HGA), and are now expected to conclude the discussions next month before moving on to other stages.

Tourism

The tourism sector, which is currently the second largest foreign exchange earner, is expected to accelerate recovery from the impact of the global Covid-19 pandemic this year.

With the US travel agents naming Tanzania among the best destinations in 2023, stakeholders expect the sector will see more international arrivals, and boost revenue in the hospitality industry.

The sector has seen recovery, with the number of tourist arrivals increasing by 53.4 percent to 1,412,060 in the year to November 2022 according to the Bank of Tanzania’s Monthly Economic Review (MER) for December 2022.

Hotel Association of Tanzania (HAT) chief executive Kennedy Edward told The Citizen that a surge in the number of visitors was expected during the high season in May and June.

“The trend has been good since 2022, and we hope this will continue in 2023 despite existing global tensions,” he said.

Mr Edward said there were fears of recession, inflationary pressures and the re-emergence of the Covid-19 pandemic in some parts of the world that could affect the international travel business.

“However, things are generally looking up. We have been strategising and engaging with the government to set things in the right direction, and this means prospects for the sector in 2023 are encouraging,” he said.

Technology

The digital acceleration is expected to gather momentum after Elon Musk’s internet service Starlink is set to be available in the country in the first quarter of 2023.

Analysts cautiously say the new development will boost the digital economy.

The service, which is owned by the SpaceX Company, has been providing internet connectivity using thousands of satellites in space which communicate with designated ground transceivers.

The new service is expected to stimulate the digital sector if it is reasonably priced and provides fast internet.

Technology entrepreneur Jones Mrusha expects the Artificial Intelligence will reach significant mass consumption in Tanzania especially Natural Language Processing and Synthetic Content. He is also optimistic that 5G utility usage and rollout will gather pace.

“We should anticipate more Small Office and Home Office (SOHO) to make the most of 5G connectivity as only few urban spaces have been connected by fibre,” he said.

Health

The health sector is expected to make progress with the adoption of a law that will make the health insurance compulsory for all Tanzanians. This year, the Universal Health Coverage Bill is expected to be approved by Parliament after it was dropped from deliberations last year.