Thursday marked the 16th anniversary of the bombings of the U.S. embassies in Kenya and Dar Es Salaam, Tanzania. In prepared remarks, Secretary of State John Kerry called the occasion “a somber reminder of the continued terrorist threat that we face” in Africa and around the world. Kerry also noted that this week’s now-concluded U.S.-Africa Leaders Summit “confirmed our shared commitment” to global security. But officials in Africa, Washington, and in the business community hope that that shared commitment also extends to the world of global capitalism. And the summit showed that they have every reason to be optimistic.
On Tuesday, President Barack Obama announced $14 billion of trade deals between the United States and Africa. The targeted sectors include clean energy, aviation, and infrastructure. The White House is also kicking in another $12 billion to boost PowerAfrica, Washington’s signature electrification initiative for the continent.
Deals like these were the chief purpose of this week’s U.S.-Africa Leaders Summit in Washington, D.C. Tanzania, for one, intends to transform its rural economy and develop its natural gas sector -- and make American investors rich in the process. That’s the vision its trade ministers laid out during their trip to Washington.
At an invitation-only breakfast, Tanzanian trade ministers met an eager coterie of U.S. government officials and business executives eager to plant the seeds of lucrative partnership. There are plans to increase iron-ore exports, boost on- and off-shore oil and gas exploration, and build more energy pipelines. Perhaps the most aggressive salesman for the country’s future was Dr. Adelhelm Meru, the director general of Tanzania’s Export Processing Zones Authority. His plan: special economic zones (SEZs), districts where business regulations are light, licensing is easy, and corporate taxes are nonexistent -- for the first 10 years at least.
The 2,000 hectares worth of zones are spread across Tanzania and host some 118 companies, many of which peddle in agribusiness such as cotton, coffee, cashews, and oilseeds. Meru estimates that 44 percent are homegrown companies while 42 percent are foreign owned. Most of the rest are joint ventures in which foreign companies partner with local entities. The Japanese textile company Sumimoto, for example, makes malaria-preventive mosquito nets and employs some 8,000 Tanzanians.
A largely agrarian country, Tanzania’s economy is vulnerable to both shifting winds and turbulent markets where rising prices for basic supplies, such as seeds and fertilizer, regularly imperil its food security. This is a place where only 14 percent of the population has access to electricity, thanks to a combination of insufficient infrastructure and sometimes-unreliable governance. About half of Tanzania’s 48 million raise livestock for a living, a risky proposition for a country prone to droughts like the disastrous one of 2009 and 2010 that killed some 65 percent of central Tanzania’s commodity animals. As Mwangi S. Kimenyi and Josephine Kibe wrote for FP in 2013, the country is full of mineral and natural gas wealth. But foreign investors were scared off by the socialist policies of Tanzania's first president, Julius Nyerere, who advocated collective land ownership. But Tanzanian industries were largely privatized in 1992, albeit with government financing.
After the get-to-know you breakfast Tuesday, some of the delegation headed to “Doing Business in Tanzania,” a standing-room only seminar convened by the Corporate Council on Africa, a nonprofit that regards itself as a key interlocutor between U.S. businesses and African countries. Its members include Coca Cola, General Electric, and Proctor and Gamble.
Meru was introduced at the event as a key figure in Tanzania’s trade relationship with China, who is now eager to bring the U.S. in on the fun and traveled to Washington “to tell American investors how easily they can get rich” in Tanzania. He pitched the SEZs as “bureaucracy-free zones” where companies receive investment incentives, such as cost sharing for water, seeds, and fertilizer, and, of course, those coveted 10-year tax breaks.
Some of that sounds a bit too good to be true, particularly when one considers how desperate the Tanzanian treasury is for new tax revenue. Not to mention stability is still far from a given. Just last May, violent protests broke out over the government’s allocation of mineral revenue in the historically underdeveloped, neglected Mtwara region. President Jakaya Kikwete seems to have made amends but the region’s gas-extraction sector is still dominated by international behemoths such as Stavanger, Norway-based Statoil and ExxonMobil.
Will international investment trickle down to Tanzanians? Meru promises that his government will look out for local farmers and ensure that his people are not exploited. His plan aims to get domestic companies independent of foreign partnerships over the next 25 to 30 years. For now: as the Wall Street Journal reported, foreign investments include more than $5 billion from Coca-Cola over six years, $2 billion from General Electric by 2018, and about $300 million from Proctor and Gamble.
If capitalism driven by and benefiting locals can emerge and flourish in Tanzania remains to be seen.