Fearlessness to change

At just 41 years old, January Makamba already seems to be a veteran of the Tanzanian political circuit. First entering the scene as an aide to President Jakaya Kikwete in 2005, Makamba was later elected as parliamentarian for the Bumbuli district and set about tackling issues of financial access and governance.

Currently Makamba is the Deputy Minister of Communications, Science and Technology, but with national elections fast approaching, he is now vying to lead the country through a new chapter of change and growth.

Makamba sat down with Banker Africa in Dubai recently to discuss what the country needs and the economic challenges ahead.

What would your top priorities be as President?

We want to create an inclusive economy. Tanzania’s economy has been growing at consistent rates over the past ten years, but it’s a growth without jobs, without impact on poverty reduction. We’re going to realign the structure of our economy so that the growth can be inclusive and we can deal with the jobs question, which is a particular challenge given our demographics in the country.

[Other priorities] have to do with governance, corruption and accountability, which are extremely important. Corruption has a direct impact on the economic performance of a country and competitiveness and justice in general in a society. It’s key for me that people feel that they can trust their leaders and business can trust the systems and structure in the country.

There’s also social services for the people and financial inclusion…we are very proud of the progress that has been attained in these areas, but a huge chunk of the economy is still informal, and we believe that the innovations in financial inclusion that have come through mobile telephony can be consolidated and formalised. We want to create an economy that everybody is part of, where everybody is hopeful that their lives will be better.

As the Minister of Minister of Communication, Science and Technology, what role do you see mobile banking playing in the economy?

It is revolutionary—enough cannot be said about this. We feel that it has given us a sense of even the size of our economy, and the size of money movement that we did not know in the past, and now we know the possibilities.

I see other roles such as enhancing financial inclusion, given the reach of mobile telephony, and also reducing the cost of financial transactions and perhaps encouraging saving. Obviously, the innovation went much faster than policy and regulation. So there are two levels of regulation—one is the telecoms regulation and another is the financial regulation—and each is in its own silo. For innovation such as this, we’ve been talking with TCRA, our telecoms regulator, and the Central Bank to create an innovative regulation that is flexible and up-to-date to catch up. My personal general philosophy is that the regulation or legislation should not get in the way of innovation and progress. We don’t want a regulation that slows down this amazing phenomenon.

You said inclusive growth has been a very big challenge. Besides mobile banking, how else can growth be inclusive in the future?

We need to focus on the economic sectors that involve most people. Agriculture would be important; it provides a huge chunk of GDP, but also has been growing at a disappointing five per cent or less over the past 10 years. If agriculture grows at 10 per cent, which is possible, for five to seven consecutive years, we’ll be on a different level. Agriculture, involving 70 per cent of the people, has to grow by at least 10 per cent. So we have plans to make that happen.

Tanzania is also huge in livestock keeping and fisheries…livestock has been growing only 1.4 per cent over the last 10 years. We feel that if we get to five per cent we can lift many people from poverty.

Tourism can involve more people than it is now, can earn us up to $16 billion per year within the next 10 years. Now it’s about $1.4 billion—it can grow 10 more times than it is now and could create multitudes of downstream economic activities that could involve and benefit local communities where attractions are.

What would it take to reach $16 billion in tourism? Where does that number come from?

The infrastructure for tourism. We can have more hotels, more frequent flights into the country, we can ease the way people come into the country. The diversity of our attractions is just absolutely unmatched. We just need more people to get to them and spend more money locally. We need to create forward and backward linkages that tie in local communities. We need better management and governance of the sector. There’s a recent report by the World Bank, Tanzania Economic Update, that talks about how the sector can be a game changer.

 Basically, inclusive growth can come if we focus on growing the labour-intensive sectors. So far, our growth has been driven by mining, telecoms and oil and gas, which are very capital intensive, so you have very attractive numbers but very few people involved.

With that in mind, how do you feel about foreign investment into Tanzania?

I feel that foreign direct investment [FDI] is extremely important in a country’s growth. We need capital, we need technology. As a country, you have to have a vision and priorities for which areas you want to attract investment in…the areas in which foreign capital is much more useful than others. It’s no debate whether FDI is useful, we just have to lead it as a country. It’s just like foreign aid—there’s also debates about its efficacy, and my philosophy is that you have to lead it, you have to tell the donors ‘if you want to help me, these are the three areas’, full stop. These things must be driven by a strategic consideration.

Obviously there is a debate about specific countries and how they come in and invest, whether its debt or pure capital investments—I’m in favour of [the idea that] people have to show faith in the country. We cannot be proud of too much debt.

What role do you see the financial sector playing in increasing inclusion?

I believe some innovations in retail financing would be critical. The Central Bank has a role in putting a regulation that incentivises banks to go into retail and particularly SME financing. So far, if you look at the chunk that goes into SME financing, it is very small. I think that the way we’ve structured ourselves to make it so easy for banks to go to Treasury Bills which fetch decent, comfortable margins, and makes them maybe a bit lazy to innovate with products that will put some stimulus in for small businesses. I see that they have a role to innovate products that bring SMEs into the mainstream economy. SMEs are struggling.

Also, as much as it is difficult to ask people to acquire risk, I believe that the financial sector can adjust its level of acceptability of risk. It seems [financial services institutions] don’t want risk at all, and we as a country, have grown past levels where you are worried about certain things.

What role would you want Tanzania to play in the global economy, and particularly within Africa?

Tanzania has the potential to be an important economic powerhouse in the region. We have almost everything that it takes to be that. We are strategically located in the region, neighbouring eight countries and six of them without access to ports; we are absolutely able to use geography to really be an influential player in the region, but that will require investments in our infrastructure—in the ports, the rail, the entire transit trade system. I understand that our neighbours may be frustrated with the way that we are organised as far as port and rail investments, though I see my country as being a huge logistics and transport hub in the region. In my Government, that’s what I intend to do.

Going back to what you said earlier about minimising corruption—how would you approach that?

Corruption is not fought by speeches and statements. It’s both a cultural thing in a way, and an issue of incentives. If you put system and structures in place that ensure punishment—that ensure the certainty, immediacy, and severity of punishment—you will already be halfway to the end of the problem. It’s a structural issue.

It’s also a culture of accountability that we have to build. People ought to understand that the positions they hold in public offices are positions of privilege, and they have a responsibility to behave in a certain way – to behave ethically. We have to build a culture where corruption is frowned upon. Today, it is not. People celebrate wealth without even thinking about how that was attained. For me, it’s a big problem. We have to celebrate hard work and success, but also, we can’t celebrate thieves as it is today.

So it will be absolutely zero tolerance—and as a leader you ought to be able to easily fire people, put them in court and strengthen the anti-corruption system in the country. It’s institutional and culture building, to sum up fighting corruption.

The full interview was published in Banker Africa Magazine Issue 020