Tanzania Industralization leading to development

Posted on : Friday , 30th January 2015

 The performance of the Tanzanian economy has remained strong, recording growth of 6.9% in 2012, driven by a high uptick in manufacturing, agriculture, trade, transport, communications and financial intermediation. Growth was boosted by good weather and a timely supply of subsidized inputs, which supported agricultural production and the normalization of power generation, which in turn buoyed industrial production. Preliminary estimates indicate that the economy grew 7.0% in 2013, having posted growth of 7.5% in the first quarter of 2013 and a further 6.7% and 6.5% in the second and third quarters of 2013, respectively. Growth in 2013 has been driven by robust performance in agriculture, transport, communications, construction, mining and quarrying, electricity, tourism and financial intermediation.

Growth of the agriculture sector is estimated at 4.3% in 2013, driven by increased production of the major food crops, including maize, paddy, millet/sorghum and cassava. Good rains, as well as the government’s provision of subsidized farm implements, have continued to support agricultural performance, but the sector still remains heavily dependent on weather and is poorly mechanized. It is estimated that only about a fifth of the area with high irrigation potential is currently under irrigation. Growth of the agriculture sector also continues to be constrained by existing infrastructure gaps, including poor road transport – especially in rural areas – and lack of storage facilities. Strong performance of the communications and trade sub-sectors resulted from increased use of mobile phone services, the start-up of new trade services and an increase in the trade of domestically manufactured and imported goods. Strong performance of the mining sector (estimated growth of 7% in 2013) resulted from increased production in gold and tanzanite. Financial intermediation continued to perform strongly, growing at about 11% in 2013. Increased levels of deposits, lending by commercial banks, and the services provided by insurance companies all drove this growth.

In 2014 and 2015 the economy is expected to continue on its growth path of around 7%. The projected marginal decline in 2015 is largely on account of possible uncertainties due to elections. Previous elections in Tanzania have been characterized by sharp increases in financial outflows. For instance, according to the recently published report by Global Financial Integrity, financial outflows during the 2005 and 2010 elections were in the order of 6% of GDP. This had an effect on output growth, especially in 2005, when real GDP declined by about five percentage points.

Despite this, the projected growth will be supported by ongoing investments in infrastructure, the recently discovered natural gas reserves and the expansion of related public investments. The latter include the current construction of a USD 1.2 billion gas pipeline from Mtwara to Dar es Salaam, as well as the related investments aimed at stabilizing electricity generation in the country. Tanzania has licensed 16 international energy companies to search for oil and gas. Based on discoveries, recoverable natural gas resources are currently estimated to exceed 43 trillion cubic feet. As oil and gas exploration activities continue to attract foreign investments, it is projected that net foreign direct investment (FDI) to Tanzania could increase from about 6.3% of GDP in 2013 to 7.0% of GDP in 2014. Apart from these investment prospects, regional integration initiatives will also continue to contribute positively to growth through increased exports of manufactured goods and an increase in transport services in the region. Despite the indicated strong economic performance, Tanzania’s growth is not sufficiently broad-based and poverty levels still remain high. According to the recent household budget survey results, 28.2% of Tanzanians are poor, and the poverty incidence is higher in rural areas (33.0%) than in urban areas (21.7%). The high levels of growth have not translated into fast poverty reduction. This is partly because the agriculture sector, which employs about three quarters of the workforce, contributes only about a quarter of GDP, while growing at less than 5% annually. Therefore, the key to achieving broad-based growth lies in the transformation of the rural economy largely through significant improvements in agricultural productivity. Also, with increased employment generation in the non-farm sector, as well as youth employment opportunities in urban areas, growth will become more inclusive.

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