Economists propose key areas to spur Tanzania’s economic growth

Economists have proposed some critical areas to spur economic growth in the country. The target areas include human capital development, changing the organisation of production, formalising the currently large informal sector, as well as augmenting labour with innovation and technology to reach larger markets.

Other areas include improvement of trust between the public and the private sector to spur growth, and capitalise on the available savings to fund investments.

This was discussed during the 27th Annual Research Workshop held in Dar es Salaam from 8-9 November 2023 under the theme of Promoting Inclusive and Sustainable Economic Growth through System Change.

The workshop also saw the launch of REPOA’s 5-year Research Programme on Structural Transformation & Development Trajectory in Tanzania – and was organised by REPOA in collaboration with the Central Bank of Tanzania (BOT), President’s Office – Investment & Planning, and Gatsby Africa.

Presenting on the first day of the workshop, the World Bank Africa Region Chief Economist, Andrew Debalen, emphasised that African countries should invest more in human capital.

“To attain real transformation in Africa, the organisation of production has to change. Economies of skills are lacking. Large firms have to augment labour with innovation and technology to reach larger markets,” he says.

He also said that the infrastructure sector, which includes electricity, roads, railways, and enhancement of economic corridors while reducing connectivity costs are key.

“In relation to digital economy, there should be facilitation and expansion of digital infrastructure and requisite skills. Value addition is vital together with the goal of creating a free trade area in the mineral market,” he says.

Regarding markets, Debalen further emphasized the need for an institutional framework that could make the market more competitive than it is.

“Authorities should make systemic changes and remove all barriers for the private sector to make it easy for goods and service delivery.

“There should also be regional cooperation to help seize opportunities within the African Continental Free Trade Area (AfCFTA). Remove tariff barriers and implement trade facilitation agreements,” he said.

Debalen also praised Tanzania’s relatively high domestic savings (higher than in other Sub-Saharan African countries) as a glaring opportunity to fund investments.

Second keynote speaker, Prof. Jakkie Ciliers from the University of Pretoria in South Africa emphasized on further investment on the human capital whilst, recommending formalisation of the informal sector to help contribute fully to the national income and growth. “Tanzania has to find a way to formalise its large informal sector. Having a very large informal sector is a big constraint to growth. Leveraging on technology can help address,” he said.

“The informal sector needs to be formalised to effectively contribute to the government’s coffers – and this could be done through the digital means,” she stated.

Role of the government

During the opening, and on behalf of Vice President Dr. Philip Mpango, the Minister for State in the Prime Minister Office (Labour, Youth, Employment, and People with Disabilities) Professor Joyce Ndalichako said that the government has taken bold steps to strengthen the workforce by investing in education from early ages.

“The government has increased the education budget and stepped-up enrolment to ensure that all children have access to education. We have built more classrooms, hired more teachers, and allocated more funds to the Higher Education Student Loans Board to enable more students to pursue higher education,” she says.

She added that the government has sought to make available health centres, district hospitals while availing equipment to improve the health services. And that, clean and safe water availability is top priority for the government.

“We have facilitated the Tanzania Social Action Fund (TASAF) program, which has reached to over one million households in 10,000 villages since its inception in 2000 has since been lifting households out of poverty,” she says.

Lawrence Mafuru, the Executive Secretary of the Planning Commission, stated that the goal is to focus on sectors that employ large workforce, especially on agriculture to achieve sustainable outputs and ensure sufficiency in the crop markets.

“We have to be vigilant about climate change, especially in relation to the agricultural sector. When planning for development, we have been reminded to plan for the environment too,” he says.

Dr. Donald Mmari, the Executive Director of REPOA, in his opening remarks, said: “To accelerate structural transformation, we believe that targeted research, dialogue and policy actions will be needed to remove constraints that slow the growth in productive capacities and labour productivity in Tanzania.”

“As a think tank, we at REPOA are prepared to undertake more analytical work in the areas highlighted to inform the government and other stakeholders as part of the collective efforts to accelerate growth and structural transformation in Tanzania, and to promote effective regional integration,” says Dr. Mmari.

Harnessing Public-Private Partnership (PPP)

Adam Zuku, the Chairman of the Tanzania Garment and Textile Manufacturers Association (TEGAMAT), suggested improving such partnerships to require foreign investors to work with local stakeholders.

“Currently, the law doesn’t require a foreign investor to create a partnership with the government, and as a result, when they leave, they take their skills with them. Most foreign investors tend to fill their key positions with their own people, but not largely with the locals. But with partnerships, it means the government is also on the board,” he said.

The government should ensure that locals are partnered in strategic sectors such as mining, coal, gas, or deep-sea fishing.

“Bahrain for example, requires all foreign investors interested in investing in the country to team up with available local investor to guarantee technology transfer. Profit flight is also curbed,” he says.

Mr Zuku also suggested the need for a system that enables farmers to invest in crop value addition to prevent their downward spiral in times of price fluctuation.

The former Chief Secretary, Ambassador Ombeni Sefue avers that despite Tanzania’s move towards the market economy, some Tanzanians still hanker on the past, hence emphasised on galvanising the public/private partnerships.

“Our entering into the market economy notwithstanding, we are still embracing the past economic model. We forget that this economy can grow through cooperation between the private and public sectors. This is where we should be heading,” says Ambassador Sefue.

He decried mistrust between the government and private sector.

“If the government doesn’t trust the private sector and vice versa, there can never be a conducive environment to build collaborations. We’ve always said that there ought to be channels for each party to listen to the other,” Ambassador Sefue emphasized.

Ambassador Sefue says the systems used by sugar factories for sustainable sugarcane production should also apply to cotton production.

“Why for example have we succeeded in sugar but still face challenges in cotton? What I know is that the systems applying to Kilombero is a good example of partnership between the private and public sector,” he concluded.