On Saturday 17th August, Tanzania assumed the chair of the South African Development Cooperation (SADC), amidst disturbing economic figures indicating that the region was facing a serious economic meltdown. Can Tanzania be the ‘German’ of the region, playing the economic big daddy role by calling the other states into political order and bailing out the struggling member states?
By Moses Kulaba, Governance and Economic Analysis Center, Dar es Salaam, Tanzania
The SADC is a 16-member state regional economic block established with among others promoting sustained economic growth and sustainable development amongst its objectives. However, the recent economic data indicates that region is witnessing an economic meltdown with most of its member states, except perhaps Tanzania, positing negative or stunted economic growth over the past years.
According to the economic and social indicators data compiled and released by its secretariat the the SADC region posted an estimated average growth rate of 1.4% in 2016 compared to 2.3% in 2015. At country level Tanzania registered the highest growth of 7% among the member states followed by Botswana with a far below rate of 4.3%[i].
In 2017 Tanzania recorded an economic growth of 7.1% followed by Seychelles (6.3%) whilst Angola registered negative growth for the second consecutive year in order of 2.5%[ii] The region’s growth was increasing at a decreasing rate since the post global period in 2009.
The region’s economic giant South Africa has witnessed rapid economic slowdown, bring along its small neighbors and trading partners under its weight. Countries such as Zimbabwe were collapsing under the weight of economic sanctions, Namibia and Angola recorded negative annual real GDP (at market price) of 10.8% and -2.5% respectively in 2017 due to the slump in commodity prices and other related risks. Botswana at 2.4% did not perform well either. The region posted an overall trade deficit with rest of the world of USD6.7bln.
The AfDB report for 2018 warned that the economic outlook for Southern Africa region was cautious[iii]. Broad based economic activity was expected to recover at slow pace, but the outlook remained modest given the diverging growth patterns for the region’s economies. Upper middle income countries turned in low and declining rates of growth meanwhile lower income transitioning economies recorded moderate and improved growth, albeit at reduced rates.
Despite the improvement, economic performance remained subdued as the region’s economic outlook continued to face major headwinds. High unemployment, weak commodity prices, fiscal strain, increasing debt and high inflation.
Real GDP was estimated to have grown at an average of 1.6% in 2017 before increasing to a projected 2.0% in 2018 and 2.4% in 2019.
The future regional growth was expected to be bolstered with primary expectations of increased investment in non-oil sectors such as electricity, construction and technology in large infrastructure projects, mining as well as continued recovery in commodity prices.
However, the latest figures show that the region was not well on that front either. The decline in commodity prices in recent years reaching the lowest point in 2015 translated into significant income loses for the economies, implying a negative impact on public and private sector spending and therefore growth in employment.
Before the 2008-2009 global recession, the region experienced moderate growth, though individual countries contributed differently. For example, Angola, Mozambique and Namibia exhibited robust growth that collectively outpaced the regional group.
Thereafter, Angola, the region’s foremost oil producer and former raising economic star received the worst bashing with its economy experiencing adverse economic growth effects due to weak oil prices.
Overall the region experienced negative GDP growth with Swaziland (-10.08%), Zimbabwe (-8.38%), and Angola (-6.31%) being among the worst hit[iv] Other Countries such as Zambia, Namibia , Mozambique and Malawi were not performing better either. South Africa reported the highest public debt soaring in billions dollars followed by Angola.
South African Institute of International Affairs observed that intra-regional investment and trade levels had declined markedly since the commodity slump in 2013. Moreover, the trade and economic growth in the region remained imbalanced, exacerbating political strains among member states. Non-tariff barriers and other factors had adversely affected intra-regional trade and investment in recent years.
Assuming the mantle, at the end of its 39th Summit held in Dar es Salaam, Tanzania’ President John Pombe Magufuli was furious with against the Secretariat for having not provided adequate and alert to the political leadership that the region was experiencing an economic meltdown with reduced or stunted growth and an expanding trade deficit.
Speaking at the SADC People’s forum on the sidelines of the main summit in Dar es Salaam, the South African Professor, Patrick Bond, described the situation as alarming, catastrophic and turbulent and yet no one was bold enough to speak about it.
He was perhaps communist in view and radical in approach, blaming what he described as the capitalistic enterprise and its puppeteers for under mining economic justice, risking lives of by putting profit before the people and causing climate change whose effects were ravaging SADC but remained quite revolutionary in suggesting that the ordinary people perhaps needed to send a clear signal to its political leadership that all was not okay. The economic fundamentals were tattered and the regional leaders needed to wake, Prof. Bond lectured.
Can Tanzania emerge and become the ‘German’ of the region?
With this state of the Union, the question therefore arose can Tanzania emerge and become the ‘German’ of the region, playing the economic messiah role by providing both political leadership and economic bail out to its neighbors.
In 2013 up to 2015 when the European Union experienced economic turbulence, Brussels turned to German to liberate it from the gigantic economic Dracula which was tearing down its economic block and leaving some of its small states indebted and facing bankruptcy. German wrote cheques in financial bailouts, provided guarantees and political prop up for economically struggling states such as Greece, Portugal and Italy.
German relied on its economic prowess and its political might as the industrial central pillar of the European Union. The charismatic leadership of its Chancellor, Ms Angela Merkel, was a distinct asset. Even at the risk of her own political career and constant onslaught from the German far right, Merkel could not tolerate any nonsense and was not ready to allow Europe to fall back.
In the face of the similar economic doldrums which seems now to face SADC, can Tanzania afford such muscle or a German equivalent?
Tanzania has done it before. In the 1960’s until 1990’s when the region was facing serious political, Tanzania pulled up its resources and committed it to the liberation struggle. It hosted training camps and provided pupilage to thousands of liberation fighters. Dar es Salaam became to the political headquarters of Frontline States where the idea of SADC in its current form was initiated and a spring for independence for many of the current South African states. For some, therefore SADC at 39 years, just came back home.
In assuming the SADC Chairmanship, President Magufuli warned the Secretariat that it will not be business as usual as of now and for the next one year his interest would be to see that resources placed at the disposal of the Secretariat were not spent on conferences but on meaningful tangible projects which benefited the people. Could this be the kind of approach that region needs to take in order to deal with its increasing economic challenges.
An agile kind of leadership which places the people at the heart of politics and fights with cunning shrewdness against corruption, public waste, nepotism and personal drive to accumulate wealth by those in power.
Over the years these have been some of the vices which have dogged the region and bringing the much needed progress to stagnation and ultimate halt in some member states. Comparatively, perhaps the SADC is the largest economic group in Sub-Saharan Africa. With over an estimated population of 337.1 million people in 2017, is larger than its western equivalent, the Economic Community of West African States (ECOWAS) and obviously bigger than the European Union has a just a fraction of the SADC population yet somehow progress has been considerably steady in the other regions.
According to experts the region was faced by multiple non trade barriers and low intra region trade which still at around 20%. Technically, speaking, the members are happy to do business with other countries outside the region rather than their economic neighbors partners in SADC. The member states are living alongside each other but not fully economically and trade integrated.
Political uncertainties which has dogged the former economic giants of the region such as South Africa, Zimbabwe, Mozambique and Angola created fertile conditions negative to investment and economic growth. The governments lost grip on the economic mantle and directed attention towards managing internal politics and mechanics for political survival.
Xenophobic attacks in South Africa could have also created a sense of fear and caused disarray in a fragile informal sector which was quietly the driving factor or fulcrum on which the South African economy relied. Crushing cost of electricity, turmoil in the extractive sector and stalemate in the platinum industry in 2016 perhaps were also a contributory factor to South Africa’s political woes.
Overall, according, to Professor bond, the region was just poorly governed and a new leadership impetus led by the people was necessary to bring back the declining glories
For many years SADC was so much preoccupied on political stability. With good success, it has managed to tackle conflicts and bring peace amongst its member states. Overall, political conflict in the form of civil wars in the region has been declining with all except the DRC reporting any semblance of a conventional Civil war in recent years.
Even, this has significantly been downgraded in recent years. Currently, there is no severe risk of any threat from any member state to destabilize any other through an arms insurrection. The ongoing conflict in the Eastern DRC is largely a war of survival for the remaining tribal and ethnic elements rather than a fully-fledged military configuration to overall and capture power in the DRC. If it can be dealt with, then perhaps the war in the DRC will be over or significantly reduced to minimal levels in many decades.
The future wars of the SADC will therefore be largely economic and perhaps resource based on key issues such as land, water and control of the real means of production and profit. Acute poverty could be the other driver of the masses towards insurrection. For Tanzania therefore, to take up the German challenge will be a touch endeavor.
Tanzania’s economic benefit or contribution to the region is too minimal. According to trade statistics, Tanzania is among the least exporters to SADC and its overall trade balance with its SADC neighbors was still low. It therefore lacks the economic might of German stature.
Over the past three years Tanzania’s political leadership has commitment itself to building its economy first before looking outside. Cutting back on public waste and flogging its population into line to start paying up taxes to finance its public service and infrastructure ambitions, Tanzania is building its economy from within.
Throughout the 1960s to the 1990s Tanzania sacrificed a lot in order to politically liberate virtually all the SADC member states and yet gained very minimal in return. Political historians have even have even argued with some level of confidence that Tanzania under developed itself in sacrifice for others to develop. Tanzania would be therefore quite cautious in economic diplomatic terms and perhaps uncomfortable at this moment in giving out too much of what it has acquired over the years to salvage its economic neighbors.
The conditions in the region appear to have turned so bad in the past few years with persistent drought raving across the region only to be replaced by wrecking floods leaving behind famine and death in communities along its way. Approximately over 1000 people dies in the last floods in Mozambique and Malawi caused by cyclone Idai and Keneth. Millions at a risk of starvation. Essential infrastructure such as road and bridges connecting rural areas to urban centers and across countries such as the port of Beira are badly battered and incapable of supporting economic productivity.
The region has not been able to attract in Foreign Investment into its natural resource wealth and flagship infrastructure projects such as the Mighty Inga dam electro power project in the DRC which would have brought life into the SADC power master plan have remained incomplete for many years now. The region is badly in need of both reconstruction and reconfiguration to sustain itself and its ambitions.
At the end of the summit Tanzania’s former President Benjamin Mkapa advised that SADC member states should stop relying heavily on foreign donors for aid to support or finance their development agenda. Building internal capacity through a reliable market for products from the block, investment in education, technology, domestic revenue collection and unlocking the potential amongst its budging population to drive the economies forward would be a better option. Perhaps the SADC leadership should fine tune an ear to the wisdom of its elders.
The meeting concluded with signing off of three development cooperation programs worth 47 Million Euro deal with the European Union under its European Development Fund (EDF) 11 financing round. According to official statement, the funds will be used over the next five-year period to support improvement in the Investment and Business Environment (SIBE), Trade Facilitation Program (TFP) and Support to Industrial Productive Sectors (SIPS) three programs to be implemented by the SADC over the next five-year period
The SIBE program aims at achieving sustainable and inclusive growth and job creation by transforming the region into an investment zone, promoting intra-regional investments, foreign Direct Investment and a focus on Small and Medium Enterprises. The TFP will contribute to enhance inclusive economic development in the region through deepened economic integration while the SIPs aimed at contributing to the SADC industrialization agenda, improving performance and growth of selected value chains. How this EU injection translates into lifting the region from its economic downward spiral will yet to be found out at the next summit when SADC turns 40. What is clear is that something has to be done.
[i] SADC: Selected economic and social indicators, 2016
[ii] SADC: Selected economic and social indicators, 2017
[iii] AfDB: Southern Africa Economic Outlook, 2018