How social security Funds can aid Tanzanian industrialization?

NSSF Director General Professor Godius Kahyarara 

Christian Gaya

The Director General of National Social Security Fund (NSSF), Professor Godius Kahyarara says that social security institutions in Tanzania are among financing options that are readily available for industrialization.

Noting that other sources could be such as development banks, capital markets, private equity funds and fiscal system –taxation  

However he elaborates that, nearly all these sources have problems; because the Government budget is inadequate, capital market is still infant and illiquidity and private equity is very limited.

He reminds that, the support of industrialization by pension funds comes way back in 1990 whereby loans for the expansion of Aluminum Africa, Kwanza Bottlers Limited (1995), Phantom Limited, and Mbeya Cement Company Limited (1998) were issued by defunct National Provident Fund (NPF).

He furthermore adds that, in 1990’s PPF also issued loans for the expansion of Kijenge Animal Feeds and Phantom Limited.

He reveals that, between year 2004 and 2007 NSSF invested a total of USD 22.15 million and Shs. 29.39 billion to partly finance development and expansion of below industries: Meditech (2004), General tyre (2005), Katani Limited (2006), Kiwira Coal and Power Limited (2007), Kagera Sugar (2004), Tanzania Pharmaceuticals Limited (2004), 21^st Century Limited (2006), and Dar Es Salaam Cement Company (2007).

On the other hand he also reveals that, Tshs 12.5 billion was invested by PPF to partly finance the expansion of Kagera Sugar and 21^st Century Limited.

“Social security institutions continued to invest in companies listed under the Dar Es Salaam Stock Exchange. As of September 2016, a total of Tshs 339.44 billion was invested by NSSF, PPF, LAPF and GEPF. These investments were made in Tanzania Breweries Limited, Tanzania Cigarette Company, Tanzania Portland Company, Tanzania Oxygen Limited, and Tanga Cement” the director general says.

He reminds that economic reforms towards industrial sector especially privatization of 1990 has not been successful. The local productive capacity has fallen so deep that to date Tanzania is a major of supermarket of cheap products including nearly all that was self sufficient in 1970s.

“Even where local production is visible they heavily depend on imported products, for example Dodoma wine is manufactured using imported grapes juice from South Africa. We have textile manufacturers who import nearly 100 percent of raw materials. Consequently we have major problems of development in agriculture sector, because it is not linked to the market (the factories)” Kahyarara reveals.

“The earlier expectations that once you separate Government from business, automatically you will observe high productivity, efficiency and industrialization via private sector has mixed defense,” Prof notes.

He says that while privatization has been a success in some areas, it has been equally been disastrous in other areas.

“Evidence that government cannot do well in business is disapproved by reality that today out of five major companies in the world, four are state owned,” he mentions.

He cautions that, though we are not advocating for state owned enterprises, the point is that care must be taken especially in areas where market failure is likely to avoid a vacuum observed.

Misconception and unfound claims that government should not do business especially reform extremists and market fundamentalists still exist.

However,  limited success of liberalization along with experience of China, Taiwan, Singapore, Chile, Qatar, Emirates, Oman, Malaysia and a few emerging economies disapprove this

Furthermore, he says the traditional guidelines of investments by the regulators do not yet fully provide for flexible and direct participation. Industrialization is all about business decision which need to be made faster accurate and in an intergraded manner. Competition from especially private sector-both domestic and foreign

He concludes that, the issue of industrialization in Tanzania is no longer debatable. This is already the expectation of the Government and majority of Tanzanians who are poor, looking for jobs, reliable market of their agriculture produce and stable income.

“Yes there are risks but we need to work on how to mitigate the risks and not to turn risks into excuses of doing nothing to this development issue. And provided social security institutions are part of Tanzania economy we ought to play a major role. The benefits are immense especially through increase of members, creation of employment and increase of income” the NSSF boss emphasizes.

He reveals that social security funds own Azania Bank. This can be used along with flexible special purpose vehicles/joint ventures to insulate the risk and take part.

He said, following implementation of industrialization by mid 1970 Tanzania attained sufficiency and reliable in all major industrial goods. It was during those days of Kiltex Arusha, Kiltex Dar es Salaam, Mwatex, Sungura Textile,   Musoma Textile,   Mbeya Textile,  Tabora Textile,   Ubungo spinning and others hence making Tanzania a major source of Khitenge and other textile goods.

“Leather industry was also at pick via Mwanza Tanneries, Morogoro Tanneries, Moshi Tanneries. Shoes and leather industries of Bora, Morogoro shoes and others company

It remains well documented in history that Tanzania had major paper mills SPM Mgololo, Morogoro Canvas, Tanzania Cigarette Company, Tanzania Breweries, Aluminum Africa, Tanganyika Packers –Dar es Salaam, Tabora and Mbeya, Tanzania Fishnets and Ubungo Maziwa.

Other industries were NMC, TES, Machine Tools, General Tyres, and Kibo Matches. There were industrial clusters in Kihonda, Morogoro Tanga, Mwanza, Moshi, Mbeya, and Pugu/Nyerere Road” the NSSF director general reminds.

He explains that major economic shocks of 1980s-both global and local had adverse effects on industrialization. Since most of the industries were state owned they suffered a great deal because government fiscal systems could not afford to pay for working capital, replacement of worn out machineries, purchase of raw materials and further expansion of the sector.

Ultimately productivity started falling sharply and some industries were shut out.

“Shock Therapy” advice and Washington Consensus led to the emergency market economics fundamentalism and ultimately a Rule that Government shall not do business and must surrender all state owned enterprises to private sector. A few countries led by china refused the consensus and adopted an alternative strategy termed “Grasp the Large and let the Small Go” he elaborates.

He concludes that, the Fifth Phase Government led by his Excellency Dr John Joseph Magufuli the President of the United Republic of Tanzania has made it very clear and categorical that industrialization is the pace of development that will occupy major national goal

The Government Goal is also supported by the Second Five Years development plan of 2016-2021 which aims at ensuring that by 2025 Tanzania will be a semi industrialized country and middle income.

“Election Manifesto of the ruling party which currently lead all development policy formulation of the Government insist on industrialization and National Budget Guidelines of 2016/17 is aligned towards industrialization,” Prof pinpoints