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Saturday, December 03, 2016

UNPACKING TANZANIA'S INDUSTRIALIZATION MOVE


Professor Honest Prosper Ngowi, pngowi2002@yahoo.com, +255 754 653 740


Debates and plans on Tanzania’ s economic future revolve around the axis of industrialization. This is the main economic project plan for the fifth phase government. 


This new industrialization move is packed in various documents. They range from the ruling party’s 2015 election manifesto to President Magufuli’s maiden speech in the Parliament on 20th November 2016 and the Second Five Years Development Plan that will see the light of the day come June 2016 after coming to end of its predecessor on the same date. 

In order to put all the debates on this grand move in the right perspectives, there is a need to unpack the whole industrialization move including but not limited to what it is all about, why it is important and which are the guiding documents that one needs to make reference to.


Unpacking industrialization

At the core of succeeding in Tanzania’s industrialization move lies understanding of what industrialization means and entails by all key stakeholders. This is because a problem known is a problem half solved. 

The dictionary of economics by Pass, Lowes ad Davies describes the term industrialization to imply the extensive development of organized economic activity for the purpose of manufacture.

 It is characterized by inter alia transformation of a primarily agrarian economy into a more specialized, capital – as opposed to labour – intensive economy. It took the form of Industrial Revolution in Western Europe and North America in the 18th and 19th centuries.


Elsewhere in the economic and business literature, industrialization is described as the process in which a country transforms itself from a basically agricultural society into one based on manufacturing of goods and services.

 Whereas manual labor is more often than not replaced by mechanized and automated high tech-mass production, craftsmen are replaced by assembly lines. Industrialization is associated with the growth and development of large urban centers and suburbs. Tanzania may need to adopt its own definition of industrialization but it should not miss out the key components of a true industrialized economy.


Potential benefits of industrialization

There are many potential advantages embedded within industrial economy. 

These include but are not limited to potentials for direct and indirect jobs and therefore incomes creation and improved standards of living. Industrialization also poses potentials for foreign exchange earnings through exports and foreign exchange saving through imports substitution. 

It can also generate government revenues from related taxes and none tax charges. It stands to develop other sectors of the economy through inter-sectoral linkages via both backward and forward linkages that can trigger development of many other sectors through providing them with markets as well as supplying these sectors with factor inputs both intermediate and finished. 

As a country we should not dwell on the potentials only but should make concrete moves to actualize the potentials.



Industrialization in CCM Manifesto

What the fifth phase government is attempting to implement in the bid to industrialize the country is derived from the ruling party’s 2015 election manifesto.

 Among other things, the manifesto aims to accomplish and implement Sustainable Industrial Development Programme (SIDP) Phase Three covering the time period 2010–2020. 

It also aims to attain industrial sector contribution in Vision 2025. The manifesto aims at increasing industrial sector Gross Domestic Product (GDP) contribution from 9.9% in 2013 to 15% in 2020 and to have 40% of employment in the country coming from industrial sector by 2020.



These targets are tall orders. The manifesto also talks about mobilizing the private sector to invest in middle and large industries as well as protecting them against foreign industries. 

Whereas protectionisms may be a good argument for infant domestic industries that cannot withstand competition, it can be a raw deal to consumers by way of reducing their consumption menu. Furthermore, protecting inefficient industries that are not likely to grow is bad economics. 

As if the above were not enough, protectionism in the globalized world of the World Trade Organization and possibilities of retaliations need to be re-thought.


Industrialization in President’s speech

In President Magufuli’s speech in the Parliament on 20th November 2015 the word industrialization appears about 35 times covering five out of 48 pages or 10.4% of the volume of his speech. 

On page 20 of the speech, the President acknowledges that he deliberately dwelt on the matter in length. The speech insisted on the type of industries that the fifth phase government is aiming at. These are mass employment-creating industries; industries for domestic mass consumption goods and industries for export goods. 

Each of these will be interogated separately in coming articles given the weight of each in gold.


Industrialization in the FYDP

The Second Five Years Development Plan (FYDP) that was unveiled in the Parliament in the last week of April 2016 is focusing on industrialization. 

Its theme is ‘Nurturing Industrialization for Economic Transformation and Human Development’. The FYDP will be implemented annually through annual plans that will be funded by annual budgets. 

These annual budgets on the other hand will be guided by annual budget guidelines. One therefore need to understand the FYDP, the annual plans for the coming five years, annual budget guidelines and their corresponding annual budgets to unpack and analyze the extent to which the planned industrialization move will be unfolding and seeing the light of the day in the five years of the fifth phase government.


Ngowi is Professor of Economics, Researcher and Consultant Mzumbe University Dar Es Salaam Campus College, pngowi2002@yahoo.com, +255 754 653 740





Interrogation on What It Takes to Attain The Desired Industrialization In Tanzania

Honest Prosper Ngowi, pngowi2002@yahoo.com, +255 754 653 740

The major debates and plans on Tanzania’ s economic future have recently dwelt on industrialization. Among the fifth phase government’s main economic plans is to have industrial economy. This is clear given the many potential advantages embedded within industrial economy. These include but are not limited to potentials for direct and indirect jobs and therefore incomes creation, foreign exchange earning through exports and foreign exchange saving through imports substitution, government revenues from related taxes and none tax charges as well as inter-sectoral linkages both backward and forward that trigger development of many other sectors. For eventual success in the desired industrialization in Tanzania, it is important to interrogate and contribute ideas on what it takes for Tanzanian-type economies to industrialize.

Desired industrialization

Drawing from President Magufuli’s speech in the Parliament on 20th November 2015, there are three main typologies of industries that the fifth phase government desires to attain. These are mass employment-creating industries; industries for domestic mass consumption goods and industries for export goods. On its part, the ruling party’s 2015 election manifesto aims to accomplish and implement the third phase of Sustainable Industrial Development Plan (SIDP) 2010–2020. It also aims at attaining industrial sector contribution in Vision 2015. It desires for construction of agro-processing, middle, large and basic industries and industries that use domestic raw materials.

It also desires to strengthen existing industries and increase industrial sector GDP contribution from 9.9% in 2013 to 15% in 2020 and have 40% of Tanzania’s employment coming from the industrial sector by 2020. It also desires to mobilize the private sector to invest in middle and large industries and protect them against competition from foreign industries. It also desires to increase sub-regional, regional and global preferential markets access. Good as these desires are, there are needs for for critical and construcive interogations on what it takes to attain the desired industrialization above. Selected thoughts are shared in what follows.

Employment creating industries

The desire is to have 40% of employment in Tanzania coming from the industrial sector by the year 2020 although the current percent is not given in the said manifesto or President’s speech. For Tanzania to attain the mass employment-creating industrialization, then it has to opt for labour intensive industrialization if it means jobs coming direct from industries. labour intensive production techniques employ more labour than capital and therefore create more jobs. However, there are several downsides of labour intensive production and by extension labour intensive industrialization. These include limited ability to enjoy economies of scale through large scale production, less speed in production, less efficiency and at times less quality and standardization of products. For this type of industrialization, employment can only be mainly created along industrial value chains nodes through backward and forward integration. It calls for strong inter-sectoral linkages and holistic approach to industrialization. All sectors related to the industrial sector need to be adequately developed.

Industries for mass consumption

The fifth phase government targets industries that will produce goods for mass domestic consumption. They include but not limited to textile, footwear, cooking/edible oil etc. There are many economic advantages embedded in consumption of domestically produced goods and services. They include saving of foreign currency that would have imported the goods, more domestic jobs creation and related individual incomes as well as government revenues through tax and none-tax charges. However, there is a need to interrogate the theory and practices of consumers behavior. Tanzania consumers as are consumers elsewhere, have their tastes and preferences for goods and services. The tastes and preferences may not be necessarily in favour of domestically produced goods. In Tanzanian context, there is emerging and complex high and middle class with by and large tastes and preferences skewed towards imported consumables. This can be attributed to higher quality and better brands of imports. For Tanzanian industries to produce goods and services for mass domestic consumption, there is a need to ensure that they meet the needs of consumers as captured in their tastes and preferences.

Export oriented industrialization

The fifth phase government desires to have industries that will export industrial goods. This is a good thing because inter alia, exports earn a country the much needed foreign currencies with the many and far-reaching advantages of this. In order to be able export industrial goods, domestic value addition and a move away from the current predominantly export of unprocessed raw materials is important. Among the key implication here is availability of and access to export markets for the ‘made in Tanzania’ industrial goods. Currently the main industrial goods from Tanzania include agro-processed products. In order to access the export market in a meaningful way, there is a need to meet and adhere to the demanded quality and standards. For food and beverage products for example issues of sanitary and phytosanitary conditions as well as traceability are very important. Important too, in exporting is the ability to meet and adhere to the needed quantity and supply frequencies. Performance of African countries – Tanzania included - in the AGOA market access opportunity should be able to give us lessons.

Ways forward

For the desired industrialization to be attained inter alia, there is a need for very conducive, friendly and supportive investment and business climate. These include issues related to infrastructure both hard and soft; utilities especially electricity; skills and talents; fiscal regime and much more. There is also a need to learn from earlier industrialization moves in Tanzania and elsewhere. The key issue is to learn what works, what does not work, why and what should be done differently this time around.









What Budgetary Measures Will Deliver Industrialization for Mass Employment?

Professor Honest Prosper Ngowi, pngowi2002@yahoo.com, +255 754 653 740

Budgets are for implementing plans, Plans on Tanzania’s economic future revolve around the axis of industrialization. This new industrialization move  is evidenced in inter alia, the ruling party’s 2015 election manifesto, President Magufuli’s maiden speech in the Parliament on 20th November 2015 and in the Second Five Years Development Plan that will see the light of the day come the 2016/17 fiscal year.

The national budgets from 2016/17 therefore have to reflect the envisaged industrialization  in general and in some specific aspects of industrialization in particular. Tanzania aims to have three major kinds of industries. These are industries that will create mass employment, produce for mass domestic consumption and produce for export. To attain each of these specificities, specific budgetary measures are required. In this article the author outlines the kinds of budgetary measures that will deliver industrialization for mass employment in Tanzania. budgetary measures for the other industrialization typologies will be covered in other articles in this series.

Industrialization for employment

A review of the industrialization goals in this new move shows among other things that the government aims at having industries that will create mass employment for Tanzanians. This should be very well understood and a good goal partly given the unfortunate state of affairs of high unemployment especially amongst youth. Unemployment is among the key social, political and economic challenges. The new industrialization move aims at having a whole 40 percent of Tanzanian labour force employment coming from the industrial sector. This is a good goal but must be understood in the correct context and therefore strategies towards this must be correct as well. Among strategies for mass employment include appropriate fiscal measures in the budget.

Budgets for direct industrial jobs

That industries will create jobs, is not a contested territory. The issue is on the number and kinds of jobs to be created directly and indirectly. In order to have mass direct industrial jobs, one needs labour intensive industries. There make use of more labour and human muscles than capital. They are not automated, computerized. Neither are they highly high-tech. if this is what that government means by ‘mass employment’ creating industries (it should not be the case), there are necessary fiscal measures for it.

Fiscal measures for direct jobs

As will be the case with other kinds of industries, dedicated budgetary measures in the shapes of fiscal policy and fiscal policy instruments are needed to attain mass employment in the industrial sector. These measures include but are not limited to targeted tax incentives to attract and retain investments in the industrial sector. Currently the investment incentives regime favours investors with certificates of incentives from the Tanzania Investment Centre (TIC) and Export Processing Zones (EPZs). These apply for both local and foreign investors meeting specific conditions. For TIC incentives the key qualifying criteria is meeting a given investment capital threshold. For EPZs the key qualifying criteria is exporting at least 80 percent of what is produced. In order to attract and retain more jobs creating industries, tax incentives should be linked with the number and quality of jobs created by these industries as well, not just capital and export threshold. Needed too is general fiscal regime that is conducive, attractive , appealing and friendly for industrial investments.

Budget for indirect industrial jobs

Our interrogation of industrialization should subscribe to the naked truth that in modern day industrialization, one is likely to see and embrace more capital intensive than labour intensive industrialization process. Involved here are state of the art, highly mechanized, computerized and high tech driven industries. They are better suited for mass production and therefore enjoyment of economies of scale by captains and titans of the industry whose bottom line is profit.

Realizing the capital intensive industrialization reality and its employment implications, appropriate budgetary measures are needed to attract and retain these kinds of industries. However it should be noted that the wished ‘mass employment’ will not come from capital intensive industries. To the contrary, mass employment can come from the many and varied nodes of multiple and long value chains in many sectors related to the industrial sector. These are the nodes and chains in both backward and forward inter-sectoral linkages between the industrial sector on one hand and many other sectors on the other.

Sectors that are in the industrial sector’s backward linkages are those supplying it with factor inputs whether intermediate or finished raw materials. They include the agricultural, fishery, livestock and other sectors. Forward inter-sectoral linkages in the context of this article involve the sectors that become markets for goods produced from the industrial sector. The budget therefore should ensure optimal balance in allocations of financial resources to all sectors that are directly or indirectly linked to the industrial sector. Various fiscal policy instruments including taxation and subsidies should be directed to these sectors if they are to complement the industrial sector thereby creating employment.

Fiscal incentives for labour intensive jobs?

Based on the reality on the ground, ‘mass employment’ industrialization goal of the government will be attained via the route of indirect jobs in industry-related sectors. All the sectors with backward and forward linkages with the industrial sector need to receive adequate budgetary allocations and fiscal incentives. Fiscal incentives should typically include a balanced mix of fiscal policy instruments including those related to tax and subsidies.

Therefore the industrial sector will create mass indirect employment in these related sectors if and only if the sectors get not only adequate budgetary allocation but also timely release and proper use of the same accompanied with some fiscal measures to stimulate the sector and encourage more employment. For those thinking outside the box and beyond the horizon, it is time we interrogate the idea of extending fiscal incentives in the names and shapes of tax incentives and subsidies to investors opting to go labour intensive amidst preference for capital intensive industrialization. The generosity of such incentives, including rates and duration, should however be performance based linking them with the quantity and quality of direct and indirect jobs created inter alia.

Tanzanians skills and talents

If the above pre-requisites for jobs creation through industrialization are fulfilled, there are needs for further interrogation. In the context of globalization and regional economic integration in general and the East African Community (EAC) Common Market Protocol in particular, there is a need to interrogate whether captains and titans of the industry will employ Tanzanian labour force. With the free movement of labour provisions in the common market protocol for example, employees can be recruited from anywhere within the EAC Partner States. This implies among other things that the Tanzanian labour force has to be competitive enough to be absorbed in the industrial and related sectors. Partly there is a need to enhance labour market soft skills such as trust, honesty, hard working, innovation, endurance, team work and much more especially among the youth.

There are budgetary implications in developing and increasing the Tanzanian labour force competitiveness and employability in the industrial sector in the context of globalization and regional integration. Proper budgetary measures including adequate allocations, fiscal policy and its various instruments such as taxes and subsidies should aim at enhancing the skills levels and employability of Tanzanian labour force. Short of that mass jobs may be created but the jobs will be ‘taken’ by foreigners.

Ngowi is Professor of Economics, Researcher and Consultant Mzumbe University Dar Es Salaam Campus College, pngowi2002@yahoo.com, +255 754 653 740



Industrialization for Mass Employment in Tanzania: A Wishful Thinking?

Professor Honest Prosper Ngowi, pngowi2002@yahoo.com, +255 754 653 740

Plans on Tanzania’s economic future revolve around the axis of industrialization. This new industrialization move is is evidenced in inter alia, the ruling party’s 2015 election manifesto, President Magufuli’s maiden speech in the Parliament on 20th November 2016 and in the Second Five Years Development Plan that will see the light of the day come June 2016. As part of putting this grand industrialization move in the right perspectives, critically constructive debates are very important. This article interrogates the wished industrialization for mass employment in the context of the various economic realities on the ground.

Industrialization employment goals

A review of the industrialization goals in this new move shows among other things that the fifth phase government aims at having industries that will create mass employment for Tanzanians. This should be very well understood and a good goal partly given the unfortunate state of affairs of high unemployment especially amongst youth. Unemployment is among the key social, political and economic challenges. The new industrialization move aims at having a whole 40 percent of Tanzanian labour force employment coming from the industrial sector. This is a good goal but must be understood in the correct context and therefore strategies towards this must be correct as well.

Unpacking jobs-creating industries

That industries will create jobs, is not a contested territory. The issue is on the number of jobs to be created directly and indirectly. Implications of the wished ‘mass-employment’ creating industries is that there industries have to be labour intensive. There are the ones that make use of more labour and human muscles than capital. These are industries that are not automated, computerized and highly high-tech. This will be the case if by ‘mass employment’ creating industries one means direct jobs from industries.

Reality on the ground 

In modern day  industrialization, one is likely to see and embrace more capital intensive than labour intensive industrialization process. Involved here are highly mechanized, computerized and high tech driven industries. These present a more transformative industrialization than their labour intensive counter parts. They augur well with modern day industrialization in which state of the art, high tech, capital intensive, mechanization and automation are key words. These are industries for with bigger competitive edge than labour intensive ones. They are better suited for mass production and therefore enjoyment of economies of scale by captains and titans of the industry whose bottom line is profit. These types of industries are more likely to produce higher quality and standardized goods and services and at a bigger speed than labour intensive ones.

Capital displaces labour

On employment creation however, capital intensive industries will not create as many direct industrial jobs as will their labour intensive counter parts. This is because in capital intensive production technique, capital in the shapes of machines displaces labour. What could be done by a dozen of labour is done by just one person who presses machines buttons on and off as required. Therefore capital intensive industries will not create direct mass industrial employment. There is therefore a need for all stakeholders in the new industrialization move to understand this reality on the ground correctly in order to manage expectations and avoid unnecessary surprises when the true employment colours are seen.

Potentials for indirect jobs

The uncomfortable truth that capital intensive industries will not create mass direct industrial jobs should not be the end of mass employment creation through industries goal. Ceteris paribus (all other things being equal), employment through industrialization can be created along  the long and many industrial value chains nodes. Through the backward forward integration in the context of inter-sectoral linkages and the associated multiplier effects, many indirect jobs can be created. These will be jobs created by the sectors that supply factor inputs of all kinds to the industrial sector through backward integration as well as those that save as markets for the same through forward integrations. This calls for strong inter-sectoral linkages and holistic approach in the new industrialization move. All sectors touched by and touching the new industrialization move should be optimally developed to absorb and support what comes from the move. When sectors such as agriculture, fishery, livestock, infrastructure, financial services, education and much more are optimally developed to support the industrial sector then mass employment can see the light of the day. Short of that the mass jobs creation goal through industrialization will remain a wishful thinking.

Will they employ Tanzanians?

If the above pre-requisites for jobs creation through industrialization are fulfilled, there are needs for further interrogation. In the context of regional economic integration in general and the East African Community (EAC) Common Market Protocol in particular, there is a need to interrogate whether captains and titans of the industry will employ Tanzanian labour force. With the free movement of labour provisions in the common market protocol for example, employees can be recruited from anywhere in the regional economic block such as EAC comprising Tanzania, Kenya, Uganda, Rwanda, Burundi and the new entrant in the EAC family which is South Sudan. This implies among other things that the Tanzanian labour force has to be competitive enough to be absorbed in the industrial and related sectors. Partly there is a need to enhance labour market soft skills such as trust, honesty, hard working, innovation, endurance, team work and much more especially among the youth. Short of that mass jobs will be created through the new industrialization move but the jobs will be ‘taken’ by foreigners at the expense of country becoming a laughing stock of the world in this area. Great as Tanzania is supposed to be, this should not happen. Necessary preparations should be undertaken because things do not happen but are made to happen.

Ngowi is Professor of Economics, Researcher and Consultant Mzumbe University Dar Es Salaam Campus College, pngowi2002@yahoo.com, +255 754 653 740



Role of Interns in Tanzania’s Industrialization: Lessons From Mzumbe – UNIDO Project

Honest Prosper Ngowi, pngowi2002@yahoo.com, +255 754653 740

Plans on Tanzania’s economic future revolve around the axis of industrialization. Among the fifth phase government’s main economic plans is to have industrial economy. Potential advantages of industrial economy include but are not limited to direct and indirect jobs and by extension incomes creation. It can also generate foreign exchange through exports and foreign exchange saving through imports substitution. The government stands to get revenues from related taxes and none tax charges as well as inter-sectoral linkages both backward and forward that trigger development of many other sectors.

There are many success factors for this grand industrialization mission. Among these include the role of interns in industrial Small and Medium-size Enterprises (SMEs). Emerging pieces of evidenced from the internship project by the United Nations Industrial Development Organization (UNIDO) and Mzumbe University Dar Es Salaam Campus College (MUDCC) show that graduate interns can play key role in industrialization. They have been among the key catalysts in the development of industrial SMEs. They therefore have noble roles in the country’s industrialization.

Mzumbe – UNIDO Internship

Under the United Nations Joint Programme for Youth Employment (JPYE), UNIDO and MUDCC are jointly implementing a project on “Enhancing Youth Employability and Entrepreneurship in Tanzania”. The project aims at increasing employability of young Higher Learning Institutions (HLIs) graduates by placing them as interns in SMEs in particular in productive sectors such as manufacturing and agro-processing. The internship is taking place between March and May 2016 but preparations began well back in December 2015. Having been in action in industrial SMEs since early March 2016, interns have demonstrated that they can play crucial role in developing these SMEs thereby contributing in the country’s grand industrialization move.



On the interns

In the context of the Mzumbe – UNIDO project, interns are young men and women who have graduated from HLIs. They are working in SMEs to practice what they have learnt from school. They are not in field attachments neither are they in part time jobs. A total of 409 graduates applied to be in the internship project in the pilot regions of Dar Es Salaam,  Arusha, Mwanza, Mbeya and Zanzibar. The applicants came from a background of 77 different courses of study and from 61 different HLIs both local and foreign. Those who applied to be considered graduated between the year 2016 and 2000. A whole 80.9% hold first degrees, 13.7% hold diplomas and 5.4 hold masters degrees.

On the involved SMEs



The involved SMEs are from the manufacturing sector in the five pilot regions. The majority of SMEs interested in interns are located in Dar Es Salaam (35.6 percent) followed by Mbeya (29.8 percent), Mwanza (17.1 percent), Arusha (14.1 percent) and Zanzibar (3.4 percent). Knowing the potential value and contribution of interns in SMEs development, these enterprises have demanded 53 various kinds of skills from the would-be interns. The main skills demanded are marketing (27.3 percent), accounting (8.8 percent), machine operators (4.2 percent), Information and Communication Technology (3.9 percent) and design (3.5 percent). Percentage share of the other skills range from 0.2 percent to 3.2 percent.

What have interns done?

Since early March 2016 the interns have done tremendous work in the development and transformation of the SMEs. There are cases where they have conducted market research for SMEs thereby increasing possibilities of more sales and associated revenues, profits and general growth. They have also assisted SMEs to reach more and new markets, putting their accounts in better shape, structuring better the human resources systems, improving procurement procedures, enabling leveraging of ICT and much more.

Role played by quantity surveyor

There are numbers of success stories that can be narrated on what interns have done for development of the industrial sector SMEs thereby contributing to the country’s industrialization plan. A female quantity surveyor is placed at a metal fabrication SME at SIDO Vingunguti in Dar Es Salaam. The company is a subcontractor of many big companies. It has no permanent quantity surveyor expert but uses services of a part time one. The intern was given Job Description (JD) and practical example and manual of how to make quantity survey when tendering for various bids.

The company owner guided her few times but now she is doing very well. She is now doing all the quantity survey works in tendering. According to the SME, the intern came in with theories without practical experience. But now she is increasingly becoming more practical and hands-on. She has contributed substantially in the SMEs’ quantity surveying work.

Role by electro-mechanics

Another success story of contribution by an inter in SMEs development is that of an electro-mechanics intern. He is placed at a plastic manufacturing SME at SIDO Vingunguti in Dar Es Salaam. Among other things, he is using his university education in servicing machines. He also inspects and maintains machines and has installed computer systems to update the machines. He has educated the colleagues he met at the company operating machines the theories of why machines operate the way they do.



Ways forward

Preliminary findings from the Mzumbe – UNIDO project have produced pieces of evidence showing among other things that interns can potentially contribute a lot in Tanzania’s grand industrialization move. They have contributed in the improvement and development of manufacturing SMEs in the five pilot regions. Stakeholders including the government, private sector organizations, parents and guardians need to support and sustain internship interventions.

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