TZ@60: Why transport is key to economic growth

Dar es Salaam. The economy of the future will be almost entirely buoyed by the services industry, experts say. Countries that will fail to adequately invest and put in place strategies to shore-up their services industry will remain mere consumers of services from others, experts add.

In fact, the advanced economies have already moved to the service industry, leaving behind less advanced economies in Africa and elsewhere. The Tanzanian economy is still largely characterised by the goods, but the service industry shows amazing potential. Data from the current account show that Tanzania’s service economy consists almost entirely of transport and travel. Travel is normally referred to as tourism, but the two are so closely linked that they are referred to interchangeably. In addition, travel and transport sectors are also tightly linked. In the year ending August 2021 Tanzania earned $2.4 billion from transport and travel, according to the monthly economic review of the Bank of Tanzania. The foreign currency inflows through transport and travel was only about 26 percent of total export receipts, but it used to be higher in the pre-pandemic period when it accounted for 40 percent of total foreign currency earnings. In the year ending August 2019, Tanzania earned $3.8 billion, which is equivalent to 41 percent of total earnings.

The potential of the transport and travel sector comes from the fact that in the current account it has a surplus of more than $1 billion compared to the deficit of more than $2 billion of the goods account. In other words while Tanzania imports more goods than it exports, it receives more money in the service sector that it pays to acquire services from outside. This would have been game-changing had the services sector been significantly higher than it currently is. But if Tanzania wants to join the world’s race toward supremacy in the service sector, the place to start with is the transport and logistics sector. This is the sector where Tanzania has a natural, God-given geographical advantage that cannot be taken away. But, to be able to benefit, Tanzania must plan well, using the right strategies. It will be unfortunate if Tanzania will sink billions of US dollars in developing infrastructure- estimates of investments in ongoing transport and utilities infrastructure projects is $19 billion - then sit back and watch land-locked countries reaping all the benefits. That has been the case in the past few years when prohibitive regulations were adopted that reduced the competitiveness of local players in the transport sector. Fortunately, President Samia Suluhu Hassan has made decisions and taken actions that have started to reverse the trend.

Tanzania has been performing badly in global infrastructure competitiveness in spite of its geophical advantage as an international gateway for the eastern, central and southern Africa. And, since 2015, its performance has been further declining. The World Economic Forum (WEF) global competitiveness report, 2015 ranked Tanzania 102 out of 140 countries surveyed in infrastructure competitiveness. In the 2016/2017 survey Tanzania’s competitiveness in the WEF’s survey fell to 118th position out of 138 countries surveyed.

The 2017/2018 WEF Survey in which Tanzania ranked the 114th position in infrastructure competitiveness out of 137 countries surveyed was more elaborate. In quality of overall infrastructure Tanzania was placed in the 92nd position. In the quality of its roads, the country was put in the 90th position; in the quality of railways infrastructure, it ranked 68; in the quality of ports infrastructure, it ranked 95; and in the quality of air transport infrastructure it ranked 114.

There was another survey in 2018 where Tanzania was placed in the 119th position in infrastructural competitiveness. And, in 2019, Tanzania’s transport infrastructure competitiveness was ranked at 110th out of the 141 countries surveyed.

This year, the report was more elaborate. Tanzania scored fairly in road connectivity and was ranked in the 86th position. In quality of road infrastructure, it ranked 65 globally; in efficiency of train services it was ranked 60; in efficiency of air transport services Tanzania was ranked 98; and in efficiency of seaport services the country was ranked at 71st position. Notwithstanding this dismal performance in global competitiveness reports the future is bright. Not least because Tanzania now has a President who understands that an economy does not grow automatically but is built and nurtured.

The existing political will, however, should not be a reason for complacency. Tanzania needs to put forward a transport and logistics master plan and implementation strategies to ensure that Tanzanian transport operators offer competitive prices and that the transport sector is linked to other sectors of the economy such as manufacturing, agriculture, fishing, re-exports. It is not enough to bask in the prestige of being the gateway to several land-linked (popularly known as ‘landlocked’) countries. Tanzania must reap the benefits. For example, currently several landlinked countries that use the Dar es Salaam port - such as Rwanda and Uganda - have created logistic hubs that serve other countries further beyond, something that could have been done more effectively by Tanzania.

Efficiency

The matter of life and death as far as Tanzania’s marine transport is concerned is efficiency. The current multi-billion dollar investments in upgrading the ports will go down the drain unless a zealous and no nonsense strategy is created to ensure Tanzania ports are the most efficient in the region. The ports have, in most cases, been less efficient than ports in neighbouring countries. Some of the challenges that the government needs to take care of to increase efficiency include multiplicity of government agencies involved in the certification, verification and processing of goods that creates duplication, inefficiencies and opportunities for abuse of office; the presence of corrupt practices and extortion in some instances; and heavy terminal congestion due to over-administration and the poor intermodal interface with road and railway transport links, which has a knock-on effect on quayside and shipping operations. Others include lack of private sector consultation and involvement in decisions around port sector reform and planning; an over-zealous inspection regime and non-acceptance of the pre-declaration of the value of cargo by regulatory authorities.

Rail transport

The major challenge in rail transport in Tanzania is operational. Solving this challenge is crucial to achieve the adequate density and economic benefits. The government must prepare thoroughly to ensure that after the current railways update is concluded the infrastructure is put to maximum use. One best way that could be considered is allowing private train operators to deploy trains in a competitive manner.

Another best way to fully exploit railways is to tie it tightly with the ports and the wide road network to create the fully-integrated intermodal transport system. This system should be linked with production centres to guarantee the load (freight) to and from various destinations within and outside the country, experts say. This should be done through creation of development corridors, according to some suggestions.