Tanzania: Need to Bolster Tanzania’s Industrial Development

tanTANZANIA’S industry and trade development remains fundamental in the attainment of sustainable, inclusive and equitable economic growth.

Evidence shows that industrialization, the development of the manufacturing sector in particular, is not only linked to economic growth, but can also play a catalytic role in transforming the economic structure of agrarian societies.

Manufacturing accounts for the bulk of world exports to the tune of about 78 per cent and is less exposed to external shocks, price fluctuations, climatic conditions and unfair competition policies. The price of manufactured goods tends to be more stable than that of commodities.

However, unfair competition policies have distorted prices around the world, limiting the potential for export growth in some commodities. According to Industry and Trade Minister Abdallah Kigoda, the 2011/12 for example has seen fast growing manufacturing sector, which plays a key role in promoting intra-regional trade despite some infrastructural barriers that contribute to increased cost of doing business.

He challenged state and non state actors to participate actively in bolstering industry and trade development because it is through enhanced contribution of the manufacturing sector that poverty will be easily alleviated.

“The government has a strong political will to continue improving conducive and predictable investment environment to attract intensive capital into the industrial sector,” said Dr Kigoda during the last year’s African Industrialisation Day celebrations. Tanzania has performed quite well in capitalizing on the growth of the world’s most dynamic products in the last year.

A high growth rate has been recorded for copper ores, plastic scrap and fertilizers, the products also have a significant export value to the country. Although relatively smaller, sugar, molasses and vegetable oils also displayed encouraging growth and a reasonable export base level.

This trend shows that Tanzania stands a good chance of having the fastest growing industrial sector in the years to come. Private-owned companies that dominate the manufacturing segment by 91 per cent, has ultimately seen the large public-owned enterprises dwindling to 56, which corresponds to around 8 per cent of all manufacturing ventures, with the remaining enterprises being mixed.

The industrial sector contributes enormously to job creation, with small and medium enterprises (SMEs) generating about 23.7 per cent of the jobs. The rate is estimated to grow to between 30 and 40 per cent by 2015. In 2011, the industrial sector contribution to the country’s exports was 19 per cent while contribution to the gross domestic product stood at 9.7 per cent.

Findings by the Tanzania Industrial Competitive Report (TICR) 2012 show that 97 per cent of the country’s manufacturing sector is based on small scale enterprises, with little emphasis put in value addition. TICR report is a significant input that inspires the government to help the industrial sector grow competitively and enhance its contribution to GDP.

The Manufacturing Value Added (MVA) as a share of GDP has mostly stagnated at roughly 9.5 per cent between 2000 and 2010, which is still below the average for the region, making Tanzania one of the least industrialized countries in the world.

In the ten years period, MVA increased from $ 894 million to $ 1,992 million. The growth rates in the first and second half of the decade were above 8 per cent per year, outpaced only by China and Mozambique.

According to the report, Tanzania, Uganda, China and Mozambique had the highest GDP growth rates in the past decade of 7.0 per cent, 7.4 per cent, 10.5 per cent and 7.8 per cent respectively, implying that there is indeed a strong link between industrialization and economic development.

Despite this performance, the relevant question is whether Tanzania can sustain this growth trend, especially if it continues to focus on natural resource based activities. Accordingly, one sensible strategic option that the report suggests for the country is to upgrade within this important sector and thus move into higher value added activities.

This is in line with the idea that the structural change necessary for improving a country’s economic development has to take into account the comparative and competitive advantages of the country. The MVA, according to the report, was highly concentrated in a few low-tech sectors, making the country’s industry vulnerable to international competition and limiting its ability to improve through learning and innovation.

Food and beverages alone account for nearly half of the total MVA, followed by nonmetallic mineral products by 11 per cent, tobacco 7 per cent and textiles 5 per cent. Industrial activities, according to the report, are unevenly distributed where more than half of all large manufacturing establishments are concentrated in Dar es Salaam with a lesser extent in Arusha.

The remaining 14 per cent is spread out between Mwanza, Singida, Tanga, Kagera and Kilimanjaro. In his opening remarks, the Confederation of Tanzania Industries (CTI) Chairman, Mr Felix Mosha, underscored for a swift need to address trade barriers which have been increasing the cost of doing business in the country.

He called upon the government to take stern measures to control the influx of substandard and counterfeit goods, saying that the malpractice would discourage potential investors in the industrial sector.

“Africa is good at exporting raw materials and importing end consumer goods,” said Mr Emmanuel Kalenzi, the United Nations Industrial Development Organization (UNIDO) Country Representative, adding that, “the practice will never foster efforts to realise the dream of alleviating abject poverty, unless the dialogue to boost intra-trade is bolstered.”

He cited an example that Tanzania is third largest livestock producer in Africa and exports hides and skins to India, Italy and China. In Tanzania, a consumer buys a finished product like shoes and jacket by paying all production costs such as transport, labour and electricity to the foreign manufacturers. “How can the continent develop under such deals where a consumer pays for every cost?” he queried.

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