Tanzania: Key Agents of Industrial Growth
By Alawi Masare
Tanzania Citizen
Dar es Salaam — The Fifth Phase Government wants a new direction for the economy. It has pledged to commit its resources to inclusive economic growth - and this the new administration will achieve via an ambitious industrialisation drive.
Already, the stage has been set. On the campaign trail, the then presidential candidate, and now President John Magufuli promised to breathe new life into failed industries, and help develop others. The end-game is having Tanzania on the list of the world's middle-income economies come 2025. This is also spelt out in the National Vision 2025.
Tanzania targets to raise the contribution of the manufacturing sector to at least 40 per cent of the Gross Domestic Product (GDP) from the current nine per cent. However, for the government to go smooth in its plan, make industrialisation meaningful to Tanzanians and contribute to the economy, several issues need to be addressed, members of the business community have said.
The Confederation of Tanzania Industries (CTI) has presented its proposals to Industry, Trade and Investment minister Charles Mwijage. Meanwhile, the Tanzania Private Sector Foundation (TPSF) says it's preparing its own National Business Agenda for President Magufuli.
There is likely to be myriad issues on the table as the administration sets out on this mission. So, here we take a look at some of the issues the key partners, CTI, TPSF and Tanzania Chamber of Commerce, Industries and Agriculture (TCCIA), have put forward as major factors in the country's fledgling industrialisation drive:
Protecting local industries
Even though Tanzania produces a variety of products like sugar, cement and garments, these items are still being imported and then sold at much lower prices than locally-manufactured goods. Apparently, local manufacturers are annoyed; somehow feel betrayed by the authorities' failure to rein in tax evasion syndicates benefiting importers.
The existence of porous borders, hence, enhances unfair business competition, which mostly affects local industry. "This is actually what might have killed privatised industries in the country," says TPSF executive director Godfrey Simbeye.
Once upon a time, Tanzania had over 20 garment manufacturing industries. Today, only five remain. Cheap imports have, for years, made it difficult for local industries to keep their heads up, says CTI director of policy and advocacy Hussein Kamote.
Stakeholders want the government to put in place a stable and efficient tax system to support industrial growth and attract investment.
Reliable infrastructure
At the moment business is battling to survive in the absence of reliable energy and transport infrastructure. Poor infrastructure makes it very expensive to produce in Tanzania.
According to a 2016 World Bank report on the ease of doing business, Tanzania is ranked 139 out of 189 countries sampled. In East Africa, it trails Rwanda, which is ranked 62, Kenya 108 and Uganda, which is at position 122.
Doing Business focuses on regulation and other key factors that affect domestic small and medium-size enterprises, operating in the largest business city of an economy. This year, it included, among other things, reliability of electricity supply, transparency of tariffs and price of electricity and time and cost to export the product of comparative advantage and import auto parts.
The CTI says government needs to strengthen transport network to reduce the cost and period of transporting goods. On top of that, for a country to be industrialised, it must have sufficient electricity, water and communication facilities that meet industry needs - of course at an affordable rate.
Easy access to capital
Even though the country has over 50 banks, only two are development lenders - TIB Development Bank and the Tanzania Agriculture Development Bank. TIB is a development financier but the private sector says it does not offer start-up loans.
Under the current situation, manufacturing stakeholders want the government to put in place an enabling policy for financial institutions to enable producers, especially SMEs, to access loans at affordable interest rates.
However, Mr Simbeye says it would be a good idea if Tanzania starts a specialised Industrial Development Bank like in some other countries such as China.
Reduce bureaucracy and costs of starting a business - because there has been too much complaining among key industry stakeholders over the country's regulatory inefficiency.
Getting a business licence is a tall order in Tanzania, a fact that explains its current world rankings on the ease of doing business. And stakeholders say there are too many regulatory authorities, which is an added tax burden on industry. From experience, some players claim that it may take up to six years before a business starts due to delays caused by time-consuming regulatory compliance measures.
Focus on agro-processing
The country's economy heavily depends on agriculture and the majority of people live on agriculture. But despite the huge tracts of arable land, agriculture has not done much to improve the lives of people. To make industrialisation more inclusive, focus must be on processing of agricultural products.
"This is the way to go if we are to touch the life of ordinary Tanzanians and consequently revolutionise the agriculture sector," says TCCIA executive director Daniel Machemba. Government intervention - because analysts and industry players believe that unfriendly regulatory machines could force investors to back away from key activities that help fuel economic growth.
The government must ensure an enabling business environment by ensuring proper policies. It must also remove all Non-Tariff Barriers that have been hindering the development of trade and industries.
A stable taxation system, predictable fiscal policies and a few regulatory authorities make investment also stable, according to industry players. Tanzania has 50,776 industries country-wide as listed in the 2015 industrial census, according the National Bureau of Statistics (NBS). Manufacturing sector grew at the rate of 3.6 per cent in the third quarter of 2015 compared to 6.3 per cent in the third quarter of 2014.
And in its bid to revive failed industries, the CTI says transparency will be key. The government should put in place a fair and competitive process of acquiring reliable investors to take over the failed privatised firms or to consider repossessing them to boost the industrial sector.
Tanzania Citizen
Dar es Salaam — The Fifth Phase Government wants a new direction for the economy. It has pledged to commit its resources to inclusive economic growth - and this the new administration will achieve via an ambitious industrialisation drive.
Already, the stage has been set. On the campaign trail, the then presidential candidate, and now President John Magufuli promised to breathe new life into failed industries, and help develop others. The end-game is having Tanzania on the list of the world's middle-income economies come 2025. This is also spelt out in the National Vision 2025.
Tanzania targets to raise the contribution of the manufacturing sector to at least 40 per cent of the Gross Domestic Product (GDP) from the current nine per cent. However, for the government to go smooth in its plan, make industrialisation meaningful to Tanzanians and contribute to the economy, several issues need to be addressed, members of the business community have said.
The Confederation of Tanzania Industries (CTI) has presented its proposals to Industry, Trade and Investment minister Charles Mwijage. Meanwhile, the Tanzania Private Sector Foundation (TPSF) says it's preparing its own National Business Agenda for President Magufuli.
There is likely to be myriad issues on the table as the administration sets out on this mission. So, here we take a look at some of the issues the key partners, CTI, TPSF and Tanzania Chamber of Commerce, Industries and Agriculture (TCCIA), have put forward as major factors in the country's fledgling industrialisation drive:
Protecting local industries
Even though Tanzania produces a variety of products like sugar, cement and garments, these items are still being imported and then sold at much lower prices than locally-manufactured goods. Apparently, local manufacturers are annoyed; somehow feel betrayed by the authorities' failure to rein in tax evasion syndicates benefiting importers.
The existence of porous borders, hence, enhances unfair business competition, which mostly affects local industry. "This is actually what might have killed privatised industries in the country," says TPSF executive director Godfrey Simbeye.
Once upon a time, Tanzania had over 20 garment manufacturing industries. Today, only five remain. Cheap imports have, for years, made it difficult for local industries to keep their heads up, says CTI director of policy and advocacy Hussein Kamote.
Stakeholders want the government to put in place a stable and efficient tax system to support industrial growth and attract investment.
Reliable infrastructure
At the moment business is battling to survive in the absence of reliable energy and transport infrastructure. Poor infrastructure makes it very expensive to produce in Tanzania.
According to a 2016 World Bank report on the ease of doing business, Tanzania is ranked 139 out of 189 countries sampled. In East Africa, it trails Rwanda, which is ranked 62, Kenya 108 and Uganda, which is at position 122.
Doing Business focuses on regulation and other key factors that affect domestic small and medium-size enterprises, operating in the largest business city of an economy. This year, it included, among other things, reliability of electricity supply, transparency of tariffs and price of electricity and time and cost to export the product of comparative advantage and import auto parts.
The CTI says government needs to strengthen transport network to reduce the cost and period of transporting goods. On top of that, for a country to be industrialised, it must have sufficient electricity, water and communication facilities that meet industry needs - of course at an affordable rate.
Easy access to capital
Even though the country has over 50 banks, only two are development lenders - TIB Development Bank and the Tanzania Agriculture Development Bank. TIB is a development financier but the private sector says it does not offer start-up loans.
Under the current situation, manufacturing stakeholders want the government to put in place an enabling policy for financial institutions to enable producers, especially SMEs, to access loans at affordable interest rates.
However, Mr Simbeye says it would be a good idea if Tanzania starts a specialised Industrial Development Bank like in some other countries such as China.
Reduce bureaucracy and costs of starting a business - because there has been too much complaining among key industry stakeholders over the country's regulatory inefficiency.
Getting a business licence is a tall order in Tanzania, a fact that explains its current world rankings on the ease of doing business. And stakeholders say there are too many regulatory authorities, which is an added tax burden on industry. From experience, some players claim that it may take up to six years before a business starts due to delays caused by time-consuming regulatory compliance measures.
Focus on agro-processing
The country's economy heavily depends on agriculture and the majority of people live on agriculture. But despite the huge tracts of arable land, agriculture has not done much to improve the lives of people. To make industrialisation more inclusive, focus must be on processing of agricultural products.
"This is the way to go if we are to touch the life of ordinary Tanzanians and consequently revolutionise the agriculture sector," says TCCIA executive director Daniel Machemba. Government intervention - because analysts and industry players believe that unfriendly regulatory machines could force investors to back away from key activities that help fuel economic growth.
The government must ensure an enabling business environment by ensuring proper policies. It must also remove all Non-Tariff Barriers that have been hindering the development of trade and industries.
A stable taxation system, predictable fiscal policies and a few regulatory authorities make investment also stable, according to industry players. Tanzania has 50,776 industries country-wide as listed in the 2015 industrial census, according the National Bureau of Statistics (NBS). Manufacturing sector grew at the rate of 3.6 per cent in the third quarter of 2015 compared to 6.3 per cent in the third quarter of 2014.
And in its bid to revive failed industries, the CTI says transparency will be key. The government should put in place a fair and competitive process of acquiring reliable investors to take over the failed privatised firms or to consider repossessing them to boost the industrial sector.
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