When good intentions turn bad: The unintended consequences of the 2016 Tanzanian coal import ban

Abstract

In August 2016, Tanzania imposed a ban on coal imports, forcing all consumers to procure coal locally. The ban was designed to protect TANCOAL, a joint venture company in which the state-owned National Development Corporation has a stake. For state officials, the rationale behind this move was that cheap coal imports posed a threat to Tanzania’s re-emerging coal industry. It was hoped that the ban would increase demand for Tanzanian coal, foster domestic linkages, boost TANCOAL and encourage other pending coal projects. In this viewpoint, I discuss the ban and find that, irrespective of the government’s good intentions, the ban did not reflect the realities on the ground. While it gave TANCOAL a market monopoly, the company was overwhelmed by the demand from local consumers, leading to acute shortages. Far from promoting national interests in the coal sector, the ban severely affected various sectors of the economy, especially cement and steel manufacture. It led to decline in cement production and sharp increase in prices, even forcing some cement-makers to close operations. The aftermath of the 2016 ban calls for careful and thorough analysis before deciding whether such bans can be effective policy instruments to boost local content and domestic linkages.