Tanzania has enjoyed some progress on the road to attaining a middle income status, a central goals of the National Development Vision for 2025. With only five years remaining, however, time is running out to make key changes on agriculture, education and the development of human capital.
Agriculture is generally acknowledged as the backbone of the economy and requires greater investment, and the education sector needs revamping to boost the needed human capital. Overall, annual economic growth must increase from around the current 6-7 to at least ten percent.
Development researchers, planners and analysts say the government must double efforts in modernising the education curricula and agriculture in particular, as well as significantly increasing economic growth.
Five-Year Development Plan
The ministry of Finance and Planning’s National Five-Year Development Plan 2016-2021 on Nurturing Industrialization for Economic Transformation highlights lessons from countries such as Malaysia, Singapore, China, India and Vietnam on the importance of taking deliberate measures aimed at promoting industrial development and economic transformation.
China, for example, had a breakneck industrialization programme titled ‘The Great Leap Forward’ (1958-1962) which was designed to transform the country from an agrarian economy into a communist society through the formation of People’s communes.
India progressively oriented industrial production primarily to satisfy the huge and diverse domestic demand for basic needs.
Hence, industrialisation was considered essential to fostering development.
These countries embarked on industrialisation programmes that opened up and integrated their domestic production with global markets, but with variations that factored in the local conditions.
Investments were made to ensure strong linkages between industry and other sectors of the economy.
The board chairman of the Fair Competition Commission, Prof Humphrey Moshi – who is also an economist at the University of Dar es Salaam (UDSM) – says the President John Magufuli government has succeeded in constructing appropriate infrastructure.
“Infrastructures are the blood vessels of the economy: in the Health, Education and Transportation (roads, ports and air transport) because they not only boost the economy, but also reduce the cost of doing business – and attracts investors,” he said.
While Tanzania is on the right track in the health sector, there’s a need to redouble efforts in the education sector: changing the current curricula to go with the country’s actual needs, Prof Moshi said.
Tanzania needs to adopt the Science, Technology, Engineering and Mathematics (Stem) combination, and adopt a special system that would encourage students to match with the country’s current needs.
Furthermore, he said, “Currently, the industrial sector contributes 8-to-9 percent of the gross domestic product (GDP), it needs to contribute by up to 15 percent,” he said.
The professor also said that there’s a need to modernize Agriculture and increase productivity by increasingly adopting irrigation farming.
Irrigation farming can be done throughout the year, and would develop symbiotic relationships with industrialization.
Noting that more than 60 percent of the population depend on Agriculture, Prof Moshi said if and when Agriculture is modernized only 20 percent of the working population would be needed in the sector – with the rest being fully engaged in industrial activities, thereby consolidating symbiotic relationships.
He noted that the government’s decision to expand and/or revamp infrastructure–ports, air, road and railway transport–are catalytic to economic growth.
Another UDSM economist Abel Kinyondo, said Tanzania is on the right track to a semi-industrial, middle income economy.
He said a middle income status roughly means on average an annual per capita income GDP of $1,500. However the government needed to work hard to end income inequalities whereby the rich were given more and the poor denied even the little that they have!
He noted that there has been a huge number of new buildings in urban centres; but many of them are of questionable quality.
The country now has many schools, but the quality of laboratories and the education being provided is also questionable.
In the Health sector, the government has put up more health centres. But the number and quality of medics and healthcare equipment do not meet standards, he lamented.
The executive director of the Policy Research for Development (Repoa), Dr Donal Mmari, also agreed that Tanzania is on the right track. This is especially taking into consideration that the GDP has been sustaining momentum with a positive growth of 6-7 percent per annum.
However, he said, the President Magufuli government needs to pay more attention in promoting investment by improving the business climate.
“There is huge competition globally for capital and investments. We, therefore, need to improve our economic growth to eight percent — and sustain it if we are to be able to effectively compete at the global level,” he said.
“You know, neighbouring Kenya and Uganda are also promoting industrialization and, therefore, there is a real need to build a foundation and strengthen capacity competitiveness in the services and products markets,” he said.
He further noted that there is a dire need for inclusive economic growth which is currently tinged with inequality.
According to him, the government should promote human capital development in skills, education and health.
Promoting industrial production
Tanzania Private Sector Foundation (TPSF) executive director Godfrey Simbeye said it was imperative to promote industrial production – as China did – if Tanzania is to attain a middle income economy in the foreseeable future.
According to him, the government needs to empower Small and Medium Enterprises (SMEs) to be more productive on a sustainable basis – and be competitive in international markets.
“Tanzania should be a production and productivity country,” he said, somewhat enigmatically.
Noting that Agriculture was currently growing ay only 3.4 percent annually, compared to Ethiopia which is growing at ten percent, Mr Simbeye stressed that the sector should be promoted – if only because only 2.6 million Tanzanians were currently in the formal sector of the Economy, with the rest generally active in the informal sector.
Tanzania is nearing lower middle-income status
According to a June 2019 World Bank report, Tanzania Economic Update, Tanzania’s Gross National Income (GNI) per capita is expected to cross the threshold for lower middle-income country (LMIC) status in the next 1-2 years – and ahead of the National Development Vision-2025 (NDV-2025).
In fact, NDV 2025 envisions Tanzania as a middle-income country by 2025, characterized by high-quality livelihoods, peace, stability and unity; good governance; a well-educated and learning society; and a competitive economy capable of sustainable growth and shared benefits.
This is due both to the country’s growth performance of over six percent real GDP growth on average for the past decade – as well as several data and methodology issues.
The latter most notably includes lower population figures released by the UN, down by 4.5 percent for 2017 compared to previous figures.
In addition, the GNI per capita is measured in US dollar terms and is directly affected by exchange rate movements.
Investing in both human development and physical capital is key to ensuring high quality socio-economic development while remaining in the middle-income country (MIC) status. Tanzania needs to sustain its growth momentum to remain in LMIC status.
There have been 23 cases in the past ten years of countries slipping back from MIC status to LMIC, or from upper-income status to MIC.
This has occurred for a variety of reasons.
Some are exogenous – like natural disasters and conflicts.
But, a significant number are also due to macroeconomic instability from high reliance on natural resources (commodity price shocks) or weakened debt sustainability due to mismanagement of macroeconomic policies.
Hence, continued prudence on macroeconomic management should be a priority for Tanzania even after reaching the MIC milestone.