March 31, 2015    5 minute read

The Chinese Impact on Tanzania

   March 31, 2015    5 minute read

The Chinese Impact on Tanzania

Going back to Dar-Es-Salaam, the biggest city and former capital of Tanzania, after 8 years it was truly unrecognisable. Modern roads without potholes, the addition of some new high-rise buildings, many more boats in the marina and many more expatriates. Tanzania, amongst other nations, has had an incredible influx of foreign inflows, given its abundance of resources and its lack of technology to take advantage of such resources and extract them efficiently. Consequently, large mining contracts are tendered to firms including Rio Tinto, BHP Billiton and many more.

In 2008, there were around the Chinese population in Tanzania was approximately 10,000, but that number has perhaps more than doubled by now. China was Tanzania’s second largest source of foreign investment in 2012 with and influx of around $2.17 billion and Open Data for International Development (AidData) also shows that Beijing has become Tanzania’s largest single trading partner, accounting for 15 per cent of the country’s trade volume in 2012, valued at $2.47 billion.

This money has been used to build railways, ports, buildings, roads and even wind farms. It is estimated by the Tanzanian Investment Centre (TIC) that these projects have created over 150,000 jobs. According to Reuters, one of the biggest deals made at the end of 2013, involved $1.7 billion from Chinese investors who had made large discoveries of natural gas off Tanzania’s southern coast. The government signed seven agreements with six Chinese companies worth a total of $1.7 billion, which will be invested in power plants and construction of residential and commercial housing projects. The deals include a $692.7 million contract, which was awarded to Tebian Electric Apparatus Stock Co Ltd, China’s largest manufacturer of high-voltage transformers, for the construction of a 400 kV power transmission line.

Tanzanian state-run National Housing Corporation signed deals worth $700 million with the China Railway Jianchang Engineering Company Ltd (CRJE) and China Poly Group Corporation to develop residential and commercial property. Tanzania signed a framework agreement in May with China Merchants Holdings (International) Co Ltd for the construction of a new port, special economic zone and railway network that could involve more than $10 billion. In 2011 China’s Sichuan Hongda Co. Ltd signed a $3 billion deal with Tanzania to mine coal and iron ore. This symbiotic relationship is beneficial for the Tanzanian’s who gain invaluable infrastructure to enable future growth and enhance tourism, whilst the Chinese get their resources to fund their rapid rate of growth, which they are achieving already.

Tanzania, being a developing country, does obtain numerous grants and low to zero interest rate loans from the World Bank and various countries including China who agreed a financing deal worth $85 million with them in late 2014.

Tanzania, though it is rich in resources, still is impoverished and has a GDP of $694 per capita, almost half of its neighbour Kenya. There is a simple economic reason for this comes from American economist Robert Solow and his Solow Model for Economic growth. In this model, he says saving is most important for Economic growth, as well as technological progress, both of which Tanzania lacks.

Top officials in senior governmental positions are expropriating cash from large conglomerates with little trickling down to the people; such is the infectious corruption of Africa. The unstable political and legal systems make it easy for corruption to occur, harming economic growth significantly. Particularly in Tanzania, with the Chinese coming in and helping build infrastructure, the laws on elephant hunting have become more lax.

The Chinese have a very high demand for Ivory, which is often being satisfied by the mauling of Tanzanian elephants. According to the Environmental Investigation Agency (EIA) it found that the elephant population of Tanzania had dropped from 70,000 in 2006, to 13,000 in 2013. In its 2013 report Transnational Organized Crime in Eastern Africa: A Threat Assessment, the United Nations found that China’s recent wave of investment in Africa has brought thousands of Chinese executives and workers to the continent, including countries where ivory is openly sold, often carved into items for the Asian market. It may be transported in luggage or by post in small quantities, for personal use or re-sale at great profit in Asian markets. The quantities involved are generally small but, due to the frequency, they could constitute a major source of supply. According to the UN the Chinese demand and Tanzanian supply for Ivory is the biggest harm to the African elephant population. The influx of money also harms the business opportunities for locals as well who want to get into a certain market.

Tanzania has had unprecedented interest from China, and it has definitely helped them develop no end, in a manner by which they could not have achieved in such little time, however, it has come at a cost. Exploitation of its natural resources, people and wildlife are high. The costs of the China’s foreign direct investment could be rationalised if it demonstrated an increased benefit on the population. Whilst the infrastructure generates the capacity for growth, the plight of corruption creates some disdain for the progress and the extent to which poverty is in fact alleviated, especially when it is so predominant from the moment one leaves Julius Nyerere International airport of Dar-Es-Salaam.

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