Tanzania delays free trade move

Tanzania finds Comesa irrelevant to its economic needs

By Roger Dean in Dar-es-Salaam

Tanzania has quit the regional economic grouping, Comesa, ahead of the long awaited free trade area to be inaugurated in two months time.

Yet, the East African country's withdrawal appears to run contrary to its recent record of trade liberalisation which led it to be dubbed the new "model country" in Africa.

We have a propensity for starting and joining all kinds of organisations, the result was that we were spending more time in conferences than implementing the decisions

President Mkapa

The IMF and World Bank are delighted by the extent to which their suggested reforms have been carried out.

State enterprises and utilities are being sold to the private sector at a terrific rate.

And recently the creaky state telephone operator was part-privatised. Next will be the dilapidated railways.

Relocation

Tanzania's fortunes are also on the up.

Some multinational companies and aid agencies are talking about relocating their regional headquarters from Nairobi to Dar-es-Salaam.

Many multinationals want to relocate to Dar

And 30 years after being nationalised, Barclays Bank returns to Tanzania next month.

Yet in this blur of free-market excitement, the government of President Mkapa has pulled back from making the biggest leap of faith into the free trade zone by abandoning Comesa, which stands for the Common Market for Eastern and Southern Africa.

Tanzania remains a member of both the Southern Africa Development Community (SADC), and the recently revived East African Co-operation (EAC), but their target dates for free trade regimes are still some years away.

Some say that on the eve of an election and with the benefits of reform yet to be felt by most Tanzanians, the 21-member Comesa is politically unpalatable.

Unnecessary

Mr Mkapa accepts that his reforms are painful, but in a recent interview with London's Financial Times newspaper, said that Comesa had been abandoned because it was unnecessary.

"We have a propensity for starting and joining all kinds of organisations," he said.

"The result was that we were spending more time in conferences than implementing the decisions."

The main reason for the withdrawal is likely to be slightly different. At the recent Dar-es-Salaam international trade fair, Tanzanian exporters were almost completely absent.

President Mkapa says there too much talk and little delivery

Importers of South African canned foods and Indian motorbikes dominated the event, and showed up Tanzanian manufacturing as woefully inadequate.

Even Kenya exports 20 times as much to Tanzania as it buys.

With so much of the government's revenue, therefore, coming from import duties on foreign goods, a free trade regime would cause a huge financial shortfall.

Auny Rajabali, a Tanzanian exporter of cashew nuts, sees the move as a delaying tactic but a good idea too.

The cost of production in Tanzania, due to such things as high electricity prices would, he says, make locally-produced goods uncompetitive in a fully free market.

"The whole concept of a free trade block is brilliant," Mr Rajabali says, "but Tanzanian industry needs time to strengthen."

Limited lifespan

It now has time. SADC does not aim to have a completely tariff-free regime in place until 2012 at which point Tanzania is expected to be in a much more competitive position.

Not even an extremely unlikely change of government after October's election will impact much as all the main parties have similar economic policies.

Mr Rajabali sees Comesa as an organisation with a limited lifespan. SADC represents the future, he says.

Crucially, South Africa is a member of SADC, and this economic muscle is attractive to Comesa countries like Uganda, which recently declared its intention to join.

Comesa is important now because it is there, but SADC may make it increasingly irrelevant in years to come.