Could you give a brief insight of the main characteristics of the development in the Tanzanian financial sector in the last couples of years?
As you may know, we were a country which was running on socialist lines for many years. After independence in 1961, in 1967 we nationalised most of the commanding heights of the economy. Before the government was earning and running everything. In the mid ages we decided like everybody else to change, to open up the economy and to liberalize. By the early 90s we decided to reform the financial sector. We opened up the financial sector to private investors and more and more private banks have come in. We have now about 15 banks including the big ones like Standard Chartered, Stanbic, City Bank, and Barclays Bank is coming as well. Indigenous banks have also been formed in the country. Only last week we privatised our biggest bank, the National Bank of Commerce which was 100% owned by the government, covered the whole country and controlled 60-70% of the business. We privatised it by selling 70% of the shares to APSA, a South African banking group.
We established a new Stock Exchange, the Dar Es Salaam Stock Exchange, which is still very new but it is taking route. Insurance business has also been opened up, we have private insurance companies operating in the country now. So the sector is growing, opening up and slowly getting out of our hands as a government and is open to everyone who sees a future in this country.
Can you tell us more about your monetary policy?
Our monetary policy is guided by our determination to have a stable but growing economy. When President Mkapa's government came into power in 1995, we had already started opening up the economy and handing over most of the activities to private investors. But the Central Bank's and the Treasury's job is to make sure that the economy is running on an even keel. The inflation is under control, the budget deficit is not out of hand and we try to balance our budget as much as we can. We try to make sure that our reserves, small as they are, grow and that the economy generally grows and it has been growing fairly stable. This requires a sound monetary policy. We have managed to do quite a lot in that respect if you consider that inflation, three years ago was at 25 - 30% and we brought it down to 6.2%. So the monetary policy is in the hands of the Central Bank and the Treasury and is guided by those fundamental principals.
We are also working very closely with IMF and a program called EFA which is now going to change. It will be called "Poverty Reduction and Growth Facility". But we also work very closely with the World Bank and the international community in general. In order to stay within these programs, you have to have a very sound monetary policy. Monetary-, credit-, taxation-, and fiscal policies have to be sound.
The inflation has come down to 6.2%. What are your expectations for the future in terms of inflation control?
It is very difficult to hold it down there. The temptation is to expand a little bit, to give some blood transfusion into the economy and let it grow. The debate is, should we open up a little bit which means allow inflation to go up a little bit? The answer is No. For the time being, the thinking is, we should keep it there or even lower if we can. As long as we don't starve the economy of the blood that it requires to keep it ticking. You have to have money, especially in an economy like this one. You can't be too dry, too slim. This economy needs a bit of both: Price stability as well as stimulation. So we will make sure that inflation does not go too far but certainly not at the expense of starving the economy of growth.
How would you describe the development of the quality of services in the banking and financial sector since the opening up of the sector?
There was a time when we only had one commercial bank, one investment bank and one insurance company because everything was state owned and those institutions were monopolies. Now that the competition is here, we hope that it will bring efficiency and that the services will be much better than they were, because they were definitely not very good. When these institutions were monopolies, everybody could sit back and wait for the customer to come to them and when customers came in they kept them waiting too long. Nowadays the competition is out there and that is improving the services which are being offered to the public. It is not yet as good as it should be but it is improving.
What would you say are the main advantages for foreign investors to come and start business in Tanzania and what are still grey areas the government will have to work on to attract more foreign investment?
This country is rich, is endowed with a lot of resources, minerals, land , the people are welcoming and we are surrounded by many countries, therefore the market is big and now we are building the infrastructure. Whoever wants to make quick and clean money should come to Tanzania and invest in any sector; agriculture, communication, fishing, mining, etc. There is room for financial institutions to come in and do business here as well as for those who want to go into industry of any kind, into services of any kind. It is an open economy. We say in Kiswaheli "Karibu" which means "welcome" to anyone who wants to seriously invest here.
| In terms of grey areas, we still have a little bureaucracy here. We came from an environment where the government did everything for everybody. It was a command economy where you follow the leader and you don't worry about tomorrow because the government was there taking care of everything. You will still find a little bit of that attitude here, but don't give up, just push and the rewards will worthwhile.
Which are the foreign banks that recently announced that they want to come to Tanzania to invest in the near future?
There are about 15 which are already settled here. All the big names are here. We have Standard Chartered, City Bank, Stanbig from South Africa, etc. Barclays Bank are about to come in as well. The door is still open for more to come in and we are looking forward to receiving them.
Could you describe your relationship with your neighbouring countries.
We are part of three groupings. We have the East African Corporation. Kenya, Uganda and Tanzania. We have always been like a big family. We are the same people, we speak the same language and we share many things. We read our budget at the same day. So we do a lot of things together because of our historical background and our geographical proximity.
There are other neighbouring countries like Rwanda, Burundi and Congo which should be natural allies but now with the difficulties there, sometimes we appear like natural enemies. When the borders are going up and we are facing each other, we are not sure how much business we should do with them. It's a pity because they are potential markets. We are on the sea and they would need us.
South Africa, which is now flexing their muscle because they are free and really coming up, is a new partner. We corporate under COMESA (Common Market for Eastern and Southern Africa) and under SADC (Southern Africa Development Community) which are organisations bigger than the East African Corporation. The potential is there and we are trying to build it up and exploit it together for projects we can not do on our own. For instance, if you want to build a big railway line from here to Rwanda or Congo, you may want to pass through Uganda, so we corporate and do it together. We are working together with Mozambique on common projects like bridges.
I have to say that in all this region there is no place like Tanzania. This is the harbour, the place where investors should come and make it a base and move around to do business with anybody else.
How do you see the development of the banking sector within the next 3 years and what will be your priorities for future?
We still have a long way to go. Tanzania is a big country, over 30 million of population, over 1 million square kilometres in area with 25 regional capitals and provinces. Big Banks that are here like City Bank are present in only 2 or 3 cities. They are expanding, but very slowly. So there is room out there and we are telling the Banks to go out there to the people and do business where the majority of people are, in the rural areas and small towns. This is what we are looking forward to by way of banking services in the future. There is room in insurance. We don't have many foreign insurance companies here. There are just about five. But we expect more coming in which will increase competition. Our Stock Exchange will grow slowly and within the next three years we will have much more companies joining the Dar es Salaam Stock Exchange due to increased privatisation and more companies being established. We have only about 2 at the moment.
Could you tell our readers more about your background and what would you say has been your biggest achievement since you are the Minister of Finance?
I started in the Central Bank, the Bank of Tanzania for about 6 years and then I went into the private sector from 1980 to 1995. That's when I went into politics. I started as a Minister of Economic Planning for one year. Now this is my 4th year as Minister of Finance. As far as my achievements are concerned, I have been a member of a team, I worked hard with my colleagues and we established macro economic stability in this country and a sense of seriousness in government business. In terms of tax collection, we now collect much more than we used to collect in the past. We brought the inflation down and people now with their little salaries are sure they can buy bred today at a fixed price and they don't have to worry about price fluctuation. We still have a long way to go though. We still haven't achieved enough to be proud of.
What would be your final message to our readers who are potential investors in the whole world?
"Karibu Tanzania", "Welcome to Tanzania". I think it is an investor friendly country, a destination which has a lot of potential and we are getting better and better all the time. The potential is here, the climate is here , we are a listening government, we can sit together and make live comfortable for you. Whoever wants to invest in Africa, I would say Tanzania as an investment destination is number one. Start from here and spread out to the other places around us. |
