In Summary
It is important to heed these examples asi
Tanzanians examine how best to structure an economic empowerment system
that assures them of an inclusive ownership and control of the national
economy.
In this final part of my article, it is
important, before moving on to examine the potential sources of capital
that can enable nationals to enjoy a significant share of ownership of
their natural resources and other strategic sectors of the economy, to
recapitulate the underlying thrust of economic empowerment of nationals.
This is pivotal because I can already see a trend to conveniently
confuse the apparent inadequacy of capital for large investments and the
ideological imperative of empowering nationals.
The Quest for National Interest
In this regard, I could do no better than cite
former President Banjamin Mkapa’s pertinent statement delivered as part
of his address when opening a meeting of the Tanzania Professional Forum
‘On Empowerment of Africans to Own and Control Their Economies’ in Dar
es Salaam on August 14 this year. He posed the question: “If one asks:
Why worry about foreign ownership of our resources or excessive
influence over our development agenda? Or, why are African countries
enacting laws to promote local/indigenous empowerment schemes such as
the proposed ‘national only’ stock exchange in Zimbabwe among others?
What can we learn from what I consider essentially
implementation challenges of Black Economic Empowerment (BEE)
programmes in Southern Africa and the ‘bumiputra’ policies in Malaysia?
My answers to those who ask these questions is simple: for the same
reason that the Europeans are pursuing their various economic
partnerships and trans-Atlantic trade and investment agreements to
protect their vital economic interest. Tanzania must move consistently,
rationally and aggressively in the direction of greater Self Reliance
and National Interest.”
In the conclusion of his speech, Mr Mkapa
powerfully observed that “we shall be missing a great opportunity to
serve our people and our continent if we are not brutally honest with
ourselves especially about what it takes to eventually become key
vibrant players in our own economy. We need to get into the driver’s
seat and stay on it fully prepared and able to drive our nation to
greater prosperity.”
The Political Rub
And here lies the ‘political’ rub. What does it
take for Tanzanians to become the principal drivers of their economy,
evidently in a globalising world where some rules are already drawn on
the sand? In determining this question, one may ask whether a government
that seeks to promote self-reliance and the national interest should
start with the notion that nationals lack the wherewithal to invest in
capital intensive industries like oil and gas or mining and thereby
elects to economically ‘disenfranchise’ them or does it lay down clear
and fundamental principles and rules of the game that underpin and
support its policy thrust?
Clearly, without such clarification, a government
invariably ends up becoming unnecessarily defensive and even offensive,
to national dismay! Indeed, given a state where there is concentration
of enormous wealth in the hands of an ‘outsider’ minority, such
government policy omission or deficiency can fuel what Professor Amy
Chua in her book, ‘World on Fire’ describes as the fomenting of “ethnic
envy and hatred among the chronically poor majorities” with serious
downsides on democracy’s stability.
Government as Enabler and Venture Capitalist
Thus, in determining sources of venture and risk
capital for enabling nationals to become economically empowered to own
and control their national economy, it is critically important to begin
with the government itself as policy enabler and as venture capitalist.
In pursuing public ownership under the framework of the Arusha
Declaration, Mwalimu Julius Nyerere sought to arrest the wealth divide
along racial lines as well as the dangers of income inequalities to
national unity and stability.
In South Africa, the Black Economic Empowerment
Programme which, in theory, was intended to promote broad ownership of
the black population that had been economically disenfranchised during
the apartheid era, has, instead, benefitted the political elite and
thereby delegitimising the original purpose of the programme with
serious downside political consequences. It is important to heed these
examples asi Tanzanians examine how best to structure an economic
empowerment system that assures them of an inclusive ownership and
control of the national economy.
Sources of Capital
Let me now turn to what I consider to be potential sources for raising capital.
Production Sharing Agreements: First of all, the
government as custodian of the national interest can use its state
enterprises to be agents of the people in negotiating with foreign
investors through what are called production sharing agreements or PSAs.
For example, Tanzania Petroleum Development Corporation and State
Mining Corporation do play roles as government vehicles in entering into
PSAs with foreign investors in the oil and gas and in mining projects
respectively. The challenge centres on the leverage such institutions
have in negotiating fair contracts given government’s weak upfront
equity capital injection. The beauty about PSAs is that the foreign
investor absorbs 100 per cent risk on capital injected during the
exploration stage. This also means that nationals can enter into PSAs
without upfront capital if allocated licenses and rights in oil/gas and
mining!
IPOs as Funders: Second, the government can
establish a special purpose vehicle for floating Initial Public
Offerings or IPOs to raise capital from the capital market such as the
Dar es Salaam Stock Exchange which can leverage its equity wherewithal
for going into PSA value chain from a stronger angle. By doing so, the
government would be broadening the ownership of an economic enterprise
away from dominance of a foreign investor.
Social Security Funds: The third innovative
mechanism for capital mobilisation and which has nothing to do with the
State directly, lies in the area of maximising available capital
resources under the control of Social Security Funds. These funds are
not government funds as such; they are workers’ funds and could
prudently be utilised to create the wherewithal for nationals to own and
control a significant share of strategic sectors of the economy. Social
security funds presently control a huge portfolio of investible
resources. For example, the National Social Security Fund, NSSF, the
largest, as at June 2011 had total assets worth Sh1.446 trillion. Its
investment portfolio, on the other hand, was Sh1.216.6 trillion.
However, social security funds are highly
susceptible to decisions driven by a risk-reward equation and actuarial
determinants. Prudential oversight focused on rigorous solvency
requirements militate against a more liberal investment posture of
social security funds. In sum, the expectation that social security
funds could provide a viable financial source for promoting economic
empowerment of nationals in the ownership and control of the economy may
not be realistic and would need careful prudential financial
engineering.
Collective Investment Vehicles: The fourth avenue
is the Unit Trust which, in recent years has also developed a
comfortable financial muscle. As at December 31, 2012, the Unit Trust of
Tanzania (UTT) had total assets valued at Sh120 billion with an
investment portfolio of Sh101.9 billion. However, the risk factor posed
in respect of social security funds also applies to the UTT.
The point is this: Tanzania is yet to reach a
mature stage of the mutual funds -type of investments of the US, Europe
and South East Asia to qualify as robust player in investing in risk
businesses where huge exposures are involved. It should also be noted
that people’s own collective financial vehicles for capital accumulation
that have been tried in Tanzania in the past decade, such as those
under the National Investment Company (NICO) have not performed as
creditably as had been envisioned. This is not to say, however, that
where better managed, collective investment vehicles cannot become
strategic drivers, both in growing SMEs and in creating innovative
financial instruments that can serve the goal of economic empowerment
and generally in enhancing viable partnerships between nationals and
foreign investors.
Diaspora Funds: Fifthly, I think it is also
possible for the government to float diaspora bonds that target the
Tanzanian emigrant population to raise capital for investing in
exclusive national greenfield economic ventures, in existing listed
national companies and in greenfield projects that involve foreign
investors. India and Israel have powerfully used such bonds to leverage
billions of dollars. Based on Bank of Tanzania estimates, the current
Tanzania diaspora remittances stand at $400 million a year and rise at
about six per cent per annum. Given such receipts, the special diaspora
bond project could be worth pursuing.
Conclusion
National Economic Empowerment is an imperative
much as the economic conditions in Tanzania do not offer brilliant
prospects for raising capital from the national market. Unfortunately,
the government remains quizzical about its commitment in terms of
mind-set, policies and in the regulatory framework to support and
catalyse the emergence of a capitalist class in Tanzania- a class that
can become the game changer in promoting the aspired national ownership
and control of the Tanzanian economy.
Tanzanian nationals face innumerable regulatory
obstacles and frustrating decision making delays when they pursue
investment opportunities. How could one explain, in this context, the
irrational and punitive fiscal measures, from land rents to mining
licence fees effected in 2012 and 2013, as examples, which are making it
financially challenging for nationals to invest in large scale
agricultural projects and undertake mining prospecting and exploration
activities?
Paradoxically, this overall pessimism is
contradicted by the buoyant foreign investment interests in Tanzania in
spite of the difficult doing business environment captured in the World
Bank Doing Business reports consistently in the past six years. The
reason is simple. Tanzania, like Ghana and Mozambique, possess
attractive strategic natural resources in the mining and oil and gas
sectors and foreign investors correctly balance their costs of investing
and the lucrative returns they secure from their investments. It is
clear that they know which side of their bread is buttered. The same
does not apply to Tanzanian investors. It is in this area that the
government is yet to prove its economic nationalism in spite of having
an economic empowerment policy and law in place since 2004.
SOURCE: THE CITIZEN
SOURCE: THE CITIZEN
