A 13.5pc surge in investment in SOEs, driving efficiency

TANZANIA: THE recent 13.5 per cent increase in the government’s investment in Public and Statutory Corporations (PSCs) marks a pivotal moment for Tanzania’s public sector, signalling a determined effort to reform and revitalise its public entities.

As recently announced by the Treasury Registrar, Mr Nehemiah Mchechu, the capital invested in these corporations has surged to 86tri/- up from 75.8tri/- the previous year.

This significant boost in investment highlights the government’s ongoing commitment to modernising and improving the efficiency of its public sector, which in turn is expected to play a crucial role in advancing the country’s broader economic ambitions.

The strategic role of PSCs

The government oversees 309 public entities, divided between 253 PSCs and 56 minority interest corporations.

Out of the total PSCs, 35 are commercially run. The remaining 218 PSCs are non-commercial, focusing primarily on service delivery in sectors such as education, health and regulation.

PSCs are critical to Tanzania’s economic framework, as they span across vital sectors such as energy, infrastructure, education and healthcare. The expansion in investment is indicative of the government’s recognition of the essential role these entities play in national development.

These entities are expected to generate revenue, contribute to economic growth and provide employment opportunities.

Their success directly impacts the country’s fiscal health. These entities, while not profit-driven, remain vital to maintaining the country’s public welfare.

“The government’s increased investment in both commercial and non-commercial PSCs shows a comprehensive approach to transforming both profit-oriented and service-oriented public entities,” said Mr Mchechu.

The nature of the investment growth

A 13.5 per cent increase in public sector investment is significant in itself, but a deeper examination is required to understand what this growth represents.

“This investment is not simply an allocation of funds; it is part of a broader strategy aimed at improving governance, efficiency and accountability within Tanzania’s public sector,” Mr Mchechu explained Commenting on the government’s approach to improving State-Owned Enterprises (SOEs), Prof Aurelia Kamuzora, an economist from Mzumbe University explained that the government’s strategy is twofold: Increasing financial investment while also ensuring that these entities operate more effectively.

Prof Kamuzora says she believes that the additional financial resources will help fund restructuring efforts, including upgrading infrastructure, modernising management systems and enhancing the skills of personnel within the SOEs.

“This move will pave the way for greater efficiency and, ultimately, foster growth within these entities,” underscored Prof Kamuzora.

The larger capital base can also help public corporations absorb the pressures of market competition, particularly for those PSCs that are commercially run.

However, some analysts are of the view that the true measure of success will depend on whether the capital infusion translates into tangible improvements in productivity, governance and public service delivery.

The importance of governance and transparency

Prof Haji Semboja, an economist from the University of Dar es Salaam supports the 13.5 per cent increase in investment, calling it a positive move. However, he said while increased investment can bring about short-term gains, the sustainability of this growth depends heavily on how the capital is managed.

“The government is heading in the right direction, but for this investment to yield results, SOEs must think globally, but act locally,” Prof Semboja remarked.

“Aligning SOEs with global standards is crucial for their competitiveness.” On the same vein, efficiency and performance cannot be achieved without strong governance and transparency.

This is where the government’s ongoing reform agenda, through the Office of Treasury Registrar, plays a crucial role. Improved oversight mechanisms, stricter accountability measures and enhanced management practices must accompany the investment to ensure that funds are utilised effectively.

Transparency is particularly important, given the potential for inefficiency, corruption and mismanagement within state-owned entities.

The government’s approach should include clear performance benchmarks, regular audits and a transparent reporting structure to prevent the misallocation of resources.

Strengthening the governance framework will ensure that these public corporations do not just consume public funds but also provide real, measurable returns in terms of service delivery, economic growth and job creation.

The impact of minority interest corporations

In addition to the 253 PSCs, the 56 minority interest corporations also represent a strategic part of Tanzania’s investment portfolio.

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While the government’s investment in minority interest corporations is often seen as a means of diversifying its holdings, these entities can also provide substantial opportunities for international collaboration and market access.

With 46 of these minority corporations based in Tanzania and 10 located abroad, the global spread suggests that the Tanzanian government is looking beyond its borders for growth and economic expansion.

International investments, particularly in foreign minority interest corporations, can offer access to global markets, technology transfers and international expertise.

However, the government must ensure that these investments align with national economic priorities and that the benefits are felt locally. Whether these minority interest corporations contribute positively to Tanzania’s economic growth will depend on the balance the government strikes between domestic and international investment.

Challenges and future prospects

The increase in investment presents both opportunities and challenges. One of the primary concerns is the operational effectiveness of non-commercial PSCs.

While the government’s aim is to enhance the efficiency of both commercially and non-commercially run entities, the latter often face challenges related to financial sustainability. These entities, which often serve essential public services such as education, healthcare and regulation, may struggle with balancing public service goals and financial constraints.

If not properly managed, non-commercial PSCs could become a drain on resources rather than a vehicle for social development.

Furthermore, as Tanzania continues to modernise its public entities, it must be cautious about the pace of reform. Rapid restructuring, if not carefully managed, could lead to unintended disruptions, particularly in critical public services.

Strategic planning, longterm vision and phased implementation will be essential to minimise risks and ensure that public entities continue to meet the country’s development goals.

A long-term vision for Public Sector transformation

The 13.5 per cent rise in investment in Tanzania’s PSCs is a strong indicator of the government’s commitment to transforming its public sector.

However, this increase in investment must be viewed as part of a broader, long-term strategy that prioritises efficiency, transparency and accountability.

The government’s ability to manage this transformation effectively will determine the extent to which public entities contribute to sustainable economic development.

As Tanzania moves forward, the success of these reforms will ultimately hinge on whether these public entities can balance their dual mandate: Serving the public while remaining financially viable and competitive in the global market.

This article is prepared by The Office of the Treasury Registrar