Our thoughts

According to the BBC Tanzania is one of the poorest countries in the world. However from 1993 to 2004, Tanzania improved their HDI by 0.1 from 0.3 to 0.4, which means that change is happening. The conditions in Tanzania are still not near optimal but the positive thing is that they are changing. In addition is it very construction that the World Bank is so optimistic about the future of Tanzania, and that there has already been many improvements but there are more to come. The thing that is still worrying is the level of corruption in Tanzania, it is not only the government where there have even been doubt about rigged elections but also other public sector jobs such as teachers and doctors. This mean that it will still be the ones who have more money who will have the power but what would be ideal is if the corruption level went down so that the country could get a better hold of the economy and maybe even one day get completely out of poverty.

The shocking thing was that even though Tanzania seems like an established African country the conditions are still so low and the percentage of people below the poverty line were completely outrages.  In addition it seems like the country really needs to work on the infrastructure as one of the factor in order to become more developed. However as mentioned this have improved and the fact is that things don’t change over night therefore it is possible that if Tanzania keeps going in the same direction is might reach it’s full potential.

To conclude Tanzania is without doubt a poor country but change and development is happening, a lot with help and aid from other countries. The term developing country is what describes Tanzania the best because it is indeed developing.

Reasons for Poverty

A group of Masai children
vijanafm.blogspot.com

Being a complex country ridden by a range of conflicts, there are naturally a great number of reasons for Tanzania’s poverty.

Perhaps one of the most significant reasons for Tanzania’s poverty is corruption. This is especially the case within the government, which as the result leads to shortcomings when it comes to the government of the country. When authorities have the interest and gain of themselves in mind, rather than the development of the country and the good of the people, the money is far from ideally distributed, leading to economic stagnation: poverty. A culture of corruption within the overall population is also an issue. For example, Tanzania has tremendously high interest rates due to the high fraud risk in the country. This makes it difficult to fund new projects that could have provided prosperity for the country.

Education is also in issue, and a contributor to Tanzania’s poverty. Civic United Front national chairperson,

A Tanzanian school class
http://udadisi.blogspot.no/2009/12/what-about-stimulus-package-for.html

Prof Ibrahim Lipumba stated in an interview with Daily News that "Education in our country has become a source of poverty. We have come to a point where we need to think about alternative ways to eradicate poverty in our country," He also emphasized that within Tanzanian society the people have little thinking of self-employment. Instead of looking to start their own businesses they look to the government and private organisations for work opportunities, a situation which creates a passive society and a failing economy. This makes it very difficult to take up loans to fund new project which could have brought prosperity to the country.

On the positive side, Tanzania is not significantly affected by wars and conflicts. The last war in which Tanzania was directly involved was the Tanzania-Uganda war, and although this cased a setback for the Dar es Salaam government due to the expenses related to the invasion of Uganda, it recovered from this in 2007 when Uganda paid back Tanzania’s debt.

The Kagera Region
http://commons.wikimedia.org/wiki/File:Kagera_in_Tanzania.svg#filelinks

Although war is not a major issue for Tanzania, it is a very vulnerable country. Approximately 80% of the Tanzania’s population relies on agriculture for a living. This means that in the case of a natural disaster, the majority of Tanzania’s population would temporarily, in some case permanently, lose their livelihood. On top of this, the effect a natural disaster would have on a country like Tanzania, who is already struggling with poverty and a lack of infrastructure, would be tremendous. In the case of the 2011 drought in the Kagera region in the north-western part of Tanzania, the lack of water resulted in a large amount of the region did not flower properly. The local small farmers rely heavily on the coffee industry since the harsh climate provides little opportunity to grow other crops. When the coffee harvest failed, these farmers could not afford sufficient food anymore, much rather sending their children to school. 

The World Bank

In 2012 Tanzania had a very high inflation rate of 16% according The World Bank, which means that the economy is changing very much however it is not very positive as it makes it difficult for the international market. The government lacking control of the economy often causes high inflation. In only one year Tanzania has changed it economy drastically and the inflation rate has dropped down to 9.8%. This is mainly due to three factors. The first factor being that the gross domestic product (GDP) has increased 60% since 2008, mainly within the communication sector. Secondly the domestic demand has increased firmly over the last years because of huge population growth. The population is increasing by almost 3% every year and it is estimated that the population will double within 25 years. The third factor is that Tanzania has a rather independent economy because it is quite isolated from international markets.

The World Bank aids Tanzania in its growth by helping with improving the private sector and infrastructure through policy analysis, grants and credits. In the last years Tanzania’s economy has been steadily growing, mostly because of aid and help. In 2012 the economy expanded by a whole of 6.9%. Nevertheless as previously mentioned the inflation rate is still pretty high but has decreased in the last year. This has caused the prices of products in Tanzania to be significantly higher than in the neighboring countries such as Kenya, Rwanda and Uganda. This mostly effects the poorest population of Tanzania the most. The World Bank has estimated that the forecast for Tanzania’s population is rather positive.  However there are still issues that have to be managed before the economy can improve, one of them being corruption.

Tanzania is one of the largest recipients of aid in the geographical area south of the Sahara. It is estimated that approximately 33% of the government spending’s were funded by international or foreign aid. In Tanzania almost half of the population does not have access to clean drinking water therefore organizations such as Water Aid have tried to help. Water Aid have been in Tanzania for three decades and in that time they have been able to improve drinking water for 64 000 people as well as sanitation levels for the same amount of people.

Norway is a very wealthy country and therefore it tries to give aid and help to several developing countries. As of 2012 Norway used 0.9 % of the total income of the country for aid, which is more than most of the other countries. After the disaster that struck in the Philippines, Norway sent 20 million NOK in immediate humanitarian aid. The money was channeled through the UN and the Red Cross in order to make sure that the money went out to where it was needed the most. In 2012 Norway sent a whole of 540 millions NOK to Tanzania in aid and to help development. Half of the money went directly into helping the country develop economically. 

Norad Statiscis on how Norway's money is distributed

National Debt of Tanzania

Breathless Hope (Photo by Vadim Makoyed)
http://onfrontline.files.wordpress.com/
2009/06/hopeless-hope.jpg?w=207&h=300

As is the case for many countries, National Debt is one of the contributors to Tanzania’s poverty. National debt can be defined as the “Total outstanding borrowings of a central government comprising of internal (owing to national creditors) and external (owing to foreign creditors) debt incurred in financing its expenditure.” (BusinessDictionary, 2013), and the financial obligations that entail when a country borrows money can prevent the country from prospering, seeing as profits have to go to pay off debt.

As of 2013, Tanzania’s national debt was approximately $11.2 billion dollars, 32.1% of Tanzania’s GDP. Although this figure in itself is not greatly alarming, the overall financial situation of the country makes it eligible for receiving public debt relief from the Highly Indebted Poor Countries (HIPC) initiative, where struggling countries can receive assistance from the International Monetary Fund and the World Bank. During the early 1970’s Tanzania experienced numerous setbacks, and the Government deemed it necessary to borrow large sums of money in hopes of spurring economic growth. Between 1986 and 1997, Tanzania’s debt rose from $4.9 to a startling 7.9 billion.

In 2013, a case study of Tanzania regarding the “Impact of External Debt on Economic Growth” was carried out. Using data collected from the Bank of Tanzania, this study investigated to what extent national debt affected the economic growth of Tanzania. The results of this study showed that the high interest payments of Tanzania’s debt significantly impacted Tanzania’s financial situation.

Tanzania’s Finance Minister William Mgimwa on the other hand, claims that these loans can be invested in such a way that there will be a bettering of Tanzania’s infrastructure, which in turn will increase productivity and stimulate the economy.

Overview of Tanzania's national debt
www.tradingexonomics.com

Comparing Tanzania’s figures to Norway, where the National Debt is approximately 55% of the countries’ GDP, Tanzania has significantly less national debt. Still, this is much less of a problem for Norway than for Tanzania. This is due to the overall financial situation of Norway, which is much better than that of Tanzania. For one, Norway has great sums of money stashed away in financial reserves. Norway has also experienced high prices for their natural resources. Øystein Thøgersen, professor at Norges Handelshøyskole, stated in an interview with Dagens Næringsliv that «“Norway is in the world’s luckiest position. We had great fortune because our products have had an incredible price development. Given the way the world is screwed together these days, Norway is in a totally unique position compared to other countries.” This, in addition to Norway’s general infrastructure, puts Norway in a much stronger and more stable position than Tanzania.

Comparison of Norwa's and Tanzania's national debt
www.tradingexonomics.com

Overview of Norway's national debt
www.tradingexonomics.com

Imports and Exports of Tanzania

According to the World Trade organisation, Tanazania's trade, exports and imports were 61.4% of the countrie's GDP between 2006 and 2008.

When it comes to imports, these totalled $5.545 billion in 2009, compared to $7.08 billion in 2008. Major imports include machinery and transportation equipment, industrial materials, and crude oil; resources that Tanzania has difficulties producing itself.

A Tanzanian farmer
in2eastafrica.net

In 2009, Tanzania's exports totalled $2.744 billion, $2.413 billion more than the previous year. Its main exports are gold, coffee, cashew nuts, manufactured products and cotton. Seeing as 80% of Tanzania work within agriculture, it is easy to see how exports are a vital part of Tanzania’s people’s welfare. Still, Tanzania’s exports can be unpredictable. In the case of agricultural products, a World Trade Organisation (WTO) report mentions that food shortages caused by environmental disasters such as droughts and floods makes Tanzania’s export earnings varying and unpredictable.

There are also issues related to the gold industry. Even though the report notes that export of gold poses a great opportunity for economic growth for Tanzania, fluctuations of international gold prices makes also this export uncertain.

A worker at the Norwegian Flakstadvåg Laks
ndla.no

Tanzania’s lack of infrastructure also causes problems for Tanzania’s trade. According to the World Bank’s most recent Tanzania Economic Update, Tanzania misses out on significant trade profits due to inefficiency at the Port of Dar es Salaam, where 90% of Tanzania’s trade passes through.The report states that Tanzania could increase their GDP by $1.8 billion annually by taking measures such as preventing the delays of ships.

Norway, on the other hand, is a lot more established with regards to trade, imports and exports. For instance Norway has the fourth largest shipping fleet in the world. In addition to shipping, other major export sectors include fishing and other seafood, oil and gas, industrial machinery, timber and food processing. Accounting for over half of Norway’s exports and 25% of its GDP, the oil and gas export is vital for Norway’s economy. Although not a sustainable source of income on a long-term basis, this export is quite reliable, especially due to Norway’s restriction on oil usage, as well as it oil fund.

The Norwegian Troll A platform
en.wikipedia.org

In 2008, Norway’s exports were worth approximately $1.5 billion, whereas imports totalled 40 billion. Imports include fuels, industrial supplies, machinery, transportation and metals.

In a way, Tanzania and Norway are similar in that they both export a lot of natural resources, and import includes products such as machinery and industrial supplies. The countries’ situations are, however, greatly different due to the countries’ infrastructural and financial situation.

The rich and the poor

Norway and Tanzania are located at two completely different parts of the world. Norway is located in the north of Europe and has the world's highest Human Development Index (HDI) of 0.94 out of a total of 1.  Tanzania is a country on the East coast of Africa and is ranked as the 152nd country according to the HDI with a score of 0.46. HDI is an index calculated based on factors such as life expectancy, education, literacy and GDP per capita to range the countries on more than just an economical basis. From this we can see there is a clear distinction between the two countries with one being very rich while the other very poor. The difficulty with terms like this is to be able to define them, because what is poor and what is rich?

Tanzanian women in the countryside

According to the UN the definition of poor is when one cannot cover one's basic needs such as habitation, food and clean water. The definition of extreme poverty is often defined as living for less than 1 dollar a day (6 NOK). We live in Norway and for us it is absolutely impossible to imagine how it would be because one would not be able to survive with that amount. In Norway poverty is often referred to as not being able to have a certain standard of living, for example this includes not having enough money to send your kids to after school activities that all the other's can afford. This causes the topic of poverty to be very difficult because how can we really set a line for how much people should have and where does the line go between what we want and what we need?

Two small children in the Arusha slums 

The condition in the slums

According to AllAfrica 65% of Tanzania's population live under the poverty line. With a population of 44 million people, this means that almost 29 million are living in poverty. Tanzania has Africa's third largest slum population, only 5% of the population attend secondary school and there are only three state universities in the whole of Tanzania. In addition a whole of 80% of the population depend on agriculture and live in rural areas. In Norway all state education is free, as well as the health service until your 18th birthday. The literacy rate in Norway is 100% compared to 69% in Tanzania. These facts show the reality of how different the two countries are and makes us question how it is possible that one country is so poor when the other has so many more resources. Is there something wrong with the world's distribution of resources?

The landscape in the middle of Norway

The question is how have the two countries ended up to be so different and what are the causes of poverty? 

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