BUILDING INDUSTRIAL ECONOMY IN TANZANIA OPPORTUNITIES AND CHALLENGES

Transcription

1 BUILDING INDUSTRIAL ECONOMY IN TANZANIA OPPORTUNITIES AND CHALLENGES

2 Introduction Tanzania Development Vision 2025 aim at becoming a middle income country by High quality livelihood ($ 3000, income per head) Peace, stability and unity A well educated and learning society Diversified semi industrialised economy with substantial industrial sector

3 INTRODUCTION Attaining the TDV 2025 vision, requires transforming our economy from low productive activities to higher productive activities. Such transition is possible through industrialisation.

4 Industrialisation Is the process of shifting from traditional agrarian economy towards manufacturing activities. The key indicator being decline in share of primary sector and increased share of manufacturing sector.

5 Tanzania industrialisation drive Industrilisation drive begun soon after independence (1961). By then Tanzania was the least industrialised economy compare to Kenya and Uganda (Ngowi, 2016)

6 Tanzania industrialisation drive Strategies, programs and policies to spur industrialisation: Post independence industrial phase State controlled industrial phase Market liberalisation phase 1987 to present

7 Post independence period ( ) In 1964 a three year development plan centred agriculture as an economic sector to promote industrialisation. Majority of industries established were agricultural processing industries, and Light import substitution industries

8 Post independence period ( ) During the period there were 220 industrial producers contributing approximately 4 percent to GDP.

9 State controlled period ( ) The time period when state took control of the national economy by implementation of Arusha declaration in Most of industries were nationalised and new parastatals created However, few of privately owned companies were not nationalised.

10 State controlled period ( ) Industrial performance during this time was severely affected resulting to significant losses in productivity. This was a contributed by: Lack of managerial skills Corruption Shortage of raw materials due to shortage of foreign currency Unavailability of efficient infrastructure network

11 Liberalisation period (1986 to present) This is the time period marked by shift in ideolog from state controlled economy to a free market economy. The role of government was significantly reduced while that of private sector strengthened as the main driver of economic development.

12 Liberalisation period (1986 to present) In 1969 marked the turning point for industrialisation agenda for Tanzania: On that year the Sustainable Industrial Development Policy (SIDP) (2020) was adopted. The policy aimed at making private sector the main player in the economy by shifting most of productive activities to the sector.

13 Liberalisation period (1986 to present) In 1990 Tanzania Development Vision 2025 was adopted. The vision set the goal to transform Tanzania economy from agricultural economy to a semi industrialised one.

14 Implementing TDV 2025 Strategies, policies and plans to achieve TDV 2025: National trade policy (2003) Small and Medium Enterprise Development policy (2003) Tanzania Mini Tiger Plan (2020) Export processing zones programmes (EPZ)(2002) Long Term Perspective Plan (LTPP) Integrated Industrial Development Strategy (2025)

15 Economic Transition: The evidence Economic growth has been at an average rate of 6.7 percent between 2010 and (NBS, 2015) This is more than that of Sub Saharan Africa (4.9%).

16 Economic Transition: The evidence Between 1990 and 2010: The share of agriculture increase by 0.9% form 30.1% to 31% Share of industry increased from 20.7% to 26.4% Share of services declined from 48.9% to 43.6%

17 Economic Transition: The evidence Increased performance of industrial sector is largely contributed by mining activities. While the rest of the sector is highly undiversified: Predominantly covered by few value added activities in food and beverage production. The rest including, tobacco (7%), non-metalic mineral production(10%), and garment and textile (5%).

18 Economic Transition: The evidence Evidence suggest there is still low industrial performance despite having a number of plans and strategies marks a fresh drive to industrial development Identifying opportunities and challenges of new industrial era becomes imperative.

19 Opportunities for Building Industrial Tanzania

20 Opportunities for building industrial Tanzania Potential from agricultural sector: Tanzania has high potential in expanding agricultural production. SAGCOT partnership plays a key role in attaining such potential. One third of Tanzania mainland has potential for agriculture.

21 Opportunities for building industrial Tanzania Agriculture contribution to industrial sector: A source of raw materials to agro-processing industries. Increase foreign exchange upon export of processed commodities. Provide market to industrial sector Provide food for industrial workers and nation at large Source of revenue for the government to support industrialisation.

22 Opportunities for building industrial Tanzania Large market from regional integration: Regional integration arrangements assure presence of markets beyond country borders with favorable export arrangements. For instance the EAC market size has 150 million people. Signing of Tripartite free trade area between COMESA (450), EAC (150), and SADC (277) would expand this market to 877million people.

23 Opportunities for building industrial Tanzania Discovery of natural gas: Used in generation of electricity, One of forward linkage in natural gas development This would result to lower electricity tariffs, the trickle down effect to consumers would be lower prices on goods and services. Export of surplus gas is the source of foreign currency which can be used to finance industrialisation.

24 Opportunities for building industrial Tanzania Financing opportunities: Financing through pension funds Financing through mutual funds Increased performance of Dar Es Salaam Stock Exchange market

25 Opportunities for building industrial Tanzania Peace and Security A conducive and peaceful investment climate is essential to spur industrialisation.

26 Challenges to Industrialisation

27 Challenges facing industrialisation drive Difficulties in financing SME s engaged in manufacturing: Presence of information asymmetry in financial sector Difficulties in mobilising funds due to limited financial inclusion (8.4% of household have bank account). Difficulty procedural requirement in accessing credits from formal financial institutions.

28 Challenges facing industrialisation drive Limited supply of efficient technology: This is due to lack of innovation and high prices on imported technology. This tends to limits industrial productivity and value addition.

29 Challenges facing industrialisation drive Reliance on non renewable resource: Overdependence on natural resource posses a threaten on developing only few sectors leaving majority of sectors un attended. Discovery of Gas fields and mining of precious metals.

30 Challenges facing industrialisation drive Dependency on external financing: Dependency on external financing to implement industrialisation agenda. Implementation of Mini Tiger Plan 2010 was postponed due to reallocation of funds to implementation of NSGRP (TICR, 2012)

31 Challenges facing industrialisation drive Customer preference on imported goods: Most of Tanzanian consumer preferences are skewed towards imported goods, thus limits market size of domestically produced goods. Hence this required a increased funding on research and development to understand local market preferences.

32 Challenges facing industrialisation drive Difficulty business environment for manufacturers: It takes up to 25 days to start a shareholder companies compared to proprietorship There approximately 49 tax filings a year for an ordinary firm, and total taxes amounting to 43.90% of profit,

33 Challenges facing industrialisation drive It takes 109 days and cost around 1021% of income per capita to get electricity There are 18 procedures, and it takes 205 days to obtain a construction permit

34 Challenges facing industrialisation drive Scarcity of educated industrial labour force: The education system of Tanzania is more skewed towards producing decision makers rather than technical human capital. Thus despite having a large labour force, still were lacking those with skills to participate in manufacturing activities.

35 Conclusion There is still room for growth given industrialisation is properly planned and implemented. Important to note: There has to be clear identification of priority sectors, and agriculture is the way.

36 Conclusion Further, government has to improve climate for doing business by reducing cost and cumbersome procedures required on starting business. Finally investment in human capital is imperative to reap the benefit out of demographic dividend.

37 References WB, (2016); Doing Business 2016, Measuring Regulatory Quality and Efficiency URT (2012); Tanzania Industrial Competitiveness Report NBS (2015); Tanzania in Figures