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Tanzanian markets react to economic change

Opinion
Tanzania is once again showing that radical economic transformation is not as wishy-washy as we might be making the concept seem in our current political tension, writes Victor Kgomoeswana.

This past week, President John Magufuli did what most African leaders ought to do to make radical economic transformation a reality, something all African countries should have been doing for ages.

The man nicknamed The Bulldozer has reportedly unnerved the markets with his ban on copper and gold concentrates.

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Tanzanian President John Magufuli (2nd R, front) inspect the parade of honor to mark the 55th anniversary of independency of Tanzania mainland at Uhuru Stadium, in Dar es Salaam in December 2016. File picture: Mroki Mroki/Xinhua

A report in The East African links the announcement by the head of state to the 95% drop in the weekly turnover at the Dar es Salaam Securities Exchange to “$813128 (R11million) last week, from $1.43m the previous week; itself 90% down from $14m a week earlier”.

Why would the so-called market react so frantically to an announcement by a president who has been credited with turning the governance picture of Tanzania since assuming office in November 2015?

Dr Magufuli not only introduced much-needed austerity to the business of government in the east African country, he restored dignity to Arusha as the capital of the East African Community (EAC) by doing what all of us Africans desperately desire but are lazy to put our heads on the block for.

Tanzania is a top producer of gold, along with South Africa and Ghana, among others. It is a mining powerhouse, a fast-growing economy and a stable democracy, which is a good combination for foreign investors.

Yet it is reactions such as the steep drop in the revenue at the Dar es Salaam Securities Exchange that often cows African leaders into submission - while creating the impression among the greedy in the investment community that they can dictate to mineral-rich Africans how they must manage their natural resources.

Over the past few months Dr Magufuli has tackled exports of raw minerals, in keeping with his attitude from when he was still campaigning in 2015.

In naming eight economists and lawyers, sixteen professionals in all, to special committees to probe the mineral content in the copper concentrate, Magufuli proved that what he said before his election was not mere electioneering.

There is a video clip doing the rounds in which he is seen in a heated argument over the urgency of processing minerals in Tanzania, instead of shipping everything abroad.

When told that Tanzania did not have local capacity to process copper, his retort was that "all that is required is to heat the metal at 1500°"! Simple. Why not invest in furnaces to process Africa’s abundant minerals? Why, indeed? Nobody can answer that convincingly, except to say that they do not want to.

For all its gamut of minerals, Africa still depends on foreign investors to extract resources from its mines, while the financiers keep refined gold and cut diamonds in their vaults in London and Belgium.

Whenever an African country tries to add value to its minerals, the so-called markets overreact like they are doing in Tanzania. For fear of getting downgraded or being dumped by investors, leaders like Magufuli often back down, betraying their own people to please foreigners.

In the context of the ongoing downgrades by Standard & Poor’s and Fitch, this might sound like one is promoting policy recklessness. Far from it.

The argument, rather, is that it is wrong for Europe to own the technology, intellectual property and the profits for making auto-catalytic converters out of platinum mined in Africa, or for Switzerland and France to make billions from jewellery manufactured with African gold, while Africa struggles to keep investors happy by shying away from building its own downstream capability.

If that means a 95% drop in revenue on the Dar es Salaam Securities Exchange, then so be it.

It would be cowardly for Magufuli to retreat now, when his case is so solid - and when by standing his ground he would provide current proof that it is not too far-fetched an idea to process our own minerals here at home.

* Victor Kgomoeswana is the author of Africa is Open for Business, a media commentator and public speaker on African business affairs, and a weekly columnist for African Independent - Twitter: @VictorAfrica

** The views expressed here are not necessarily those Independent Media.

The Sunday Independent

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