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Industrialization in Tanzania

June 16, 2018

Photo courtesy of Club of Mozambique

The United Republic of Tanzania was founded on April 26, 1964 after two countries,Tanganyika and the islands of Zanzibar, joined into a federation, calling themselves the United Republic of Tanzania. While the union was being formed, both countries were mainly rural with agricultural based economy, with cloves in Zanzibar and coffee, tea, sisal, pyrethrum and gold in Tanzania Mainland.

Mindful of the fact that any country’s development would be slow without modernization of their economies, Tanzania set to deliberately industrialize after the re establishment of the National Development Corporation (NDC) in 1965 that set out to speed up the economic growth of all sectors of Tanzania’s economy. However, it was only after Tanzania’s switch of the economic system from a planned to a market economy in 1986 that truly set the country onto a path of industrial growth. The state-run corporation had a huge responsibility to promote, develop and manage state-owned enterprises in areas of agriculture, mining, manufacturing, tourism and transport across the entire productive sector of the economy. Industrial bases were mainly focused on the primary processing of agricultural products. The Sustainable Industrial Development Policy (SIDP) declared in 1996 allowed the country to become less dependent on agriculture by enabling the economy to move from a public sector to a private sector to catalyze its economic growth.

 

The first epoch of Industrialization in Tanzania was during the first phase of government from 1961 to 1967 after Tanzania gained its independence. This was mainly led by private sectors that introduced importing goods where consumer goods such as fabric and textiles were the main products made. However, the government had felt that this economy was growing too slow and that it did not reflect the country’s essence of independence. The second attempt at industrialization was when the Washington Consensus influenced the IMF, demanding that all state owned enterprises were privatized and government was to stay out of conducting business. The nation was badly in need of capital and finance. The only way was to attract Foreign Direct Investment (FDI) under a newly established Investment Promotion Centre in 1990. The Centre was to help modernize the economy through private sector infusion of much needed capital and innovation. This second epoch of industrialization through FDI fortunately worked. Manufacturing grew but still remained below satisfaction. However, there were more factories established in metal works, car tires, cement factories, vehicle assembly plants and more.
 

The third and most current attempt to industrialize started with the Fifth Phase Government. The government resolved to modernize and build road and rail infrastructure such as dual carriageways and Standard Gauge Railways. Plants producing products such as gas and electricity were built to bring about cheaper and more affordable power for industries so that products and goods would be cheaper for consumers. Infrastructure development therefore became a priority of the Tanzanian government. Ports and harbors were expanded and modernized. In 2006, Tanzania’s employment distribution was 76.5% from agriculture, 5% in industry and 20.3% in from the services sector. Since 2014, the employment in agriculture has decreased to 66.9% with the industry sector increasing to 6.4% and the services sector increasing to 26.6%.

 

The Government of Tanzania has planned to spur Tanzania into a middle income country by 2025. In an attempt to do this, the government has taken steps to build and improve power and transportation infrastructure, as well as encourage the private banks through its financial sectors to lower its interest rates so more Tanzanian investors and businesses could borrow money to use towards manufacturing and building factories.The goal is to have industry-based economic growth as opposed to the traditional agrarian-led economic growth of selling commodities and primary goods. The government wants the economy to have value added production of secondary and capital goods for export that would also help in its balance of payments position and turn trade deficits into trade surpluses.


 

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