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Deepening Tanzania-South Africa economic, trade relations

2017-05-10 12:30:41

By Paul Kibuuka

As the second largest economy on the African continent after Nigeria, South Africa is on the economic radar of Tanzania. And that’s why Tanzania’s President John Magufuli is today holding talks with his South African counterpart Mr Jacob Zuma as he begins a three-day state visit to Tanzania, signaling the growing strategic ties between the two countries.

Increased bilateral cooperation between Tanzania and South Africa in the economic field has gone hand in hand with a flurry of diplomatic activity over the past years.

All post-apartheid leaders of South Africa have stepped onto Tanzanian soil. The first was the late anti-apartheid icon Nelson Mandela, followed by Mr Thabo Mbeki, and currently is Mr Jacob Zuma.

Similarly, all post-independence leaders of Tanzania, namely the late father of the Nation Mwalimu Julius Nyerere, Mr Ali Hassan Mwinyi, Mr Benjamin Mkapa, and Mr Jakaya Kikwete stepped onto South African soil.

Pledges of mutual cooperation accompanied these high-level visits. Both Tanzania and South Africa have grown faster than the world economy. For example, in the first quarter of 2016 gross domestic product (GDP) grew by 5.5 per cent in Tanzania, 3.3 percent in South Africa, and 3.1 per cent globally.

Policymakers in Dar es Salaam today view the state visit by President Zuma with significant importance, more especially in relation to the incredible economic growth of 6.2 per cent that Tanzania recorded in 2016 and to the strategic infrastructure investments that President Magufuli has prioritized for the country, not forgetting his push for the industrialization agenda. They also view South Africa as a major economic and trading partner.

Both Dar es Salaam and Pretoria have an interest in reviewing the status of the bilateral relations with a view to strengthen the same and in adopting strategic interventions to further promote mutual understanding and bilateral economic and trade cooperation.

More specifically, this particular state visit aims to operationalize and launch the South Africa-Tanzania Bi-National Commission (BNC). According to the media statement issued by the South African Presidency three days ago on 8 May 2017, the BNC is the highest mechanism regulating bilateral relations between the two countries.

On the sidelines of the visit, President Zuma and his host President Magufuli are also expected to address the South Africa-Tanzania Business Forum (STBF) at the Julius Nyerere International Convention Centre here in Dar es Salaam.

The BNC and STBF are useful forums for creating business confidence and helping deepen the existing bilateral economic and trade relations between Tanzania and South Africa that date back long before 1994, when South Africans enjoyed the hospitality of the Tanzanian people as they fought to free themselves from apartheid.

Indeed, we should expect Presidents Magufuli and Zuma to paint an upbeat picture of the Tanzania-South Africa relations at their joint press conference and at the STBF. 

In a fast changing and dynamic continent, the two countries share increasingly common economic interests. Together with 13 other countries, both Tanzania and South Africa are members of the Southern African Development Community (SADC), an inter-governmental organization whose objectives include, among others, the promotion of policies that aim to eliminate obstacles to the free movement of persons in the SADC region.  

Trade figures between the two countries last year (2016) indicated that South African exports to Tanzania were valued at R6.5bn (sh1.6tr/-), whereas imports from Tanzania amounted to R3.5bn (sh572bn/-). Several factors underpin recent trade growth between South Africa and Tanzania, namely falling trade barriers and South Africa – Tanzania Double Taxation Agreement (DTA) have fostered market access and business confidence; a significant and expanding market for South African industrial goods and foreign direct investment (FDI); and advances in ICT have supported cross-border- and inter-regional trade.

South African FDI can help transform the Tanzanian economy. South African firms can provide valuable capital and expertise to upgrade Tanzanian infrastructure—a key priority area for the Magufuli presidency. Technology transfer and marketing connections from South African firms can foster Tanzanian firms joining global value chains and promote internationally competitive industrialization.

In addition, small and medium enterprises (SMEs) in both countries can benefit as suppliers, sub-contractors, and service providers to multi-national or world-wide corporations.  

Until new data is released, the Tanzania Investment Report 2014 shows that FDI inflows from South Africa into Tanzania were second to Canada at $437.8 million in 2013. And in terms of the stock of FDI, South Africa maintained the lead with a total of $3658.8 million in the same year.

Firms from South Africa’s economy are prominent in a broad range of Tanzania’s economic sectors, including mining, financial services, tourism and hospitality, automotive, machinery, ICT/electronics.

To attract higher levels of FDI from the South African private sector, the domestic regulatory framework in Tanzania needs to be further improved. This should involve cutting redundant and/or cumbersome regulations.

It takes an average of 26 days to start a business in Tanzania compared to 14 days in South Africa, according to the latest World Bank Doing Business Report 2016. In addition, it takes an average of 205 days to deal with construction permits in Tanzania compared with 141 days in South Africa.

Of course, much more needs to be done for South Africa and Tanzania to reach their full trade and investment potential in this era of slower world growth. As the two countries seek to strengthen bilateral cooperation, they should implement economic reforms to boost growth and express interest in attracting more processing and manufacturing investments for agriculture products value addition in their export processing zones and special economic zones.

They should also be as open as the outward-oriented, market-friendly Asian economies of Singapore and Malaysia.

The South African private sector should lead the way to expand the manufacturing sector and build up a high-tech industry in Tanzania.  By remaining engaged in Tanzania, South African companies will help to smooth the integration of Tanzania’s economy into the global supply chain, and considerably boost the quality of the country’s workforce.

This will bring economic benefits to both countries and help diversify sources of African growth.

People-to-people ties constitute an area of enormous potential in the Tanzania-South Africa relations. It’s an open secret that the majority of Tanzanians has a favourable view of South Africa and hold South African businesses, education, and science and technology in high regard. Education and training have emerged as critical links between Tanzanians and South Africans.  

These people-to-people efforts should help Presidents Magufuli and Zuma to ensure that the growing partnership between Tanzania and South Africa has a solid foundation at the grassroots level, while simultaneously boosting South Africa soft power in Tanzania--a country that’s increasingly important to Pretoria’s economic and foreign policy.

In an effort to support the development of the Tanzania-South Africa relations, my projections of the effect of mutual understanding and economic cooperation within the strengthened partnership point to the attainment of sustainable development for the two countries.

Finally, I join President John Magufuli and all Tanzanians in welcoming President Jacob Zuma to Tanzania once again!

Paul Kibuuka is the Managing Partner of Isidora & Company Advocates. E-mail: Twitter: @isidoralaw

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