Exploring Key Manufacturing Industries in Tanzania: An In-Depth Review

By: EBENEZER MATHEW

Tanzania's manufacturing sector, although relatively small, contributes significantly to the country's overall GDP, averaging 8% over the past decade with an annual growth rate of 4% [1]. Most manufacturing activities center on consumer products like foods, beverages, tobacco, textiles, chemicals, plastics, wood, and steel-allied products [1]. The recent development agenda has brought industrial development back as a policy priority, aiming to transform the economy from low to high productivity and sustained growth through structural change [1].

However, domestic value addition remains limited due to the reliance on imported intermediate goods, signifying limited inter-industry linkages crucial for promoting a domestic manufacturing base and employment [1] [2]. Various technological, financial, policy, and administrative constraints hinder faster industrial growth and

transformation, presenting opportunities for U.S. companies to supply services and technologies to fill this gap [1]. Additionally, Tanzania's agribusiness sector shows great potential with abundant land, water resources, and a favorable climate, but low crop yields, inadequate storage facilities, poor infrastructure, weak value chains, and limited affordable financial services pose challenges for U.S. companies to offer solutions [1].

Overview of Tanzania's Manufacturing Sector

Tanzania's manufacturing sector has evolved through various stages since the country gained independence in 1961. Initially, it was nascent and undiversified, followed by a period of state-led import substitution industrialization, and subsequently, de-industrialization under the structural adjustment programs and policy reforms [3].

Historical Background

Following independence in 1961, Tanzania embarked on a socialist path that prioritized social development, such as alleviating illiteracy, poverty, and disease, at the expense of the productive sectors [2]. The Arusha Declaration of 1967 aimed to eliminate economic ills through a program based on central planning and self-reliance, but it did not result in greater prosperity [2]. After more than a decade of severe economic decline from the late 1970s onwards, the country faced economic collapse [2].

In the early 1960s, the national economic agenda focused on growth with little attention to structural change or ownership, continuing the colonial pattern of import substitution, characterized by processing industries and simple consumer goods [4]. The promulgation of the Arusha Declaration in 1967 advocated the utilization of local resources as primary endowments in production [4].

Having experimented with home-grown recovery programs, the government eventually adopted the Structural Adjustment Programs (SAPs) of international financial institutions in 1986, aiming to restore economic stability, accelerate structural reforms, correct budget deficits, cut down inflation, and reform the microeconomic policy framework [4].

Current Status and Statistics

The current development agenda has brought industrial development back as one of the policy priorities, aiming to transform the economy from low to high productivity and sustained growth through structural change [1] [4] [3]. The manufacturing sector contributes significantly to Tanzania's overall GDP, averaging 8% over the past decade with an annual growth rate of 4% [1].

Most manufacturing activities center on consumer products like foods, beverages, tobacco, textiles, chemicals, plastics, wood, and steel-allied products [1]. The most dynamic sub sectors in terms of output growth, export growth, production innovation, and product diversity are food products, plastic and rubber, chemicals, basic metalwork, and non-metallic mineral products [3].

However, domestic value addition remains limited due to the reliance on imported intermediate goods, signifying limited inter-industry linkages crucial for promoting a domestic manufacturing base and employment [1] [3]. Various technological, financial, policy, and administrative constraints hinder faster industrial growth and transformation [1] [3].

Key Industry Systems in Tanzanian Manufacturing Agriculture-Based Manufacturing

Tanzania's agriculture sector is the backbone of its economy, contributing around 30% to the country's GDP and employing over 67% of the workforce [5]. The country is endowed with abundant natural resources, including fertile arable land, favorable climate, and water sources, making it an attractive destination for agribusiness investments.

The major agricultural products in Tanzania include maize, coffee, cotton, sisal, sesame, sunflower, and tea [6]. These crops offer significant opportunities for value addition through agro-processing and manufacturing activities. Some key areas for investment in agriculture-based manufacturing include:

1. Sugarcane farming and sugar production: Tanzania has a high potential for sugarcane farming due to its vast water sources, suitable climatic conditions, and substantial market demand. The country produces around 300,000 tonnes of raw sugar annually, leaving a demand gap of approximately 220,000 tonnes that is met through imports [6]. Establishing or expanding sugar processing facilities can help bridge this gap and reduce reliance on imports.

2. Edible oil processing: Despite producing oilseeds like sunflower, sesame, groundnuts, and palm, Tanzania imports a significant amount of edible oil due to a lack of modern extraction and processing equipment [6]. Investing in oil pressing and processing facilities can help meet domestic demand and potentially tap into export markets.

3. Fruit and vegetable processing: Tanzania produces a wide variety of fruits and vegetables, including mangoes, oranges, pineapples, passion fruits, bananas, avocados, tomatoes, and okra. However, only 4% of the annual production of 2.75 million tons is processed [5]. Establishing fruit and vegetable processing facilities can reduce post-harvest losses and create value-added products for local and export markets.

4. Cashew nut processing: Cashews are a major cash crop in Tanzania, with an annual production of 120,000 tons [5]. However, only 10% of the cashew nuts are processed within the country, presenting opportunities for establishing or rehabilitating cashew nut processing plants.

5. Textile and apparel manufacturing: Tanzania produces abundant cotton, but only 20% is processed locally [5]. Establishing fully integrated textile mills, cotton ginning facilities, yarn and fabric production units, and cut, make, and trim (CMT) units can leverage the country's cotton production and create employment opportunities.

Mining and Mineral Processing

Mining is a leading industrial sector in Tanzania, with the value of mineral exports consistently increasing over the past several years [7]. The country is endowed with a variety of minerals, including gold, iron ore, nickel, copper, cobalt, silver, diamonds, tanzanite, ruby, garnet, limestone, soda ash, gypsum, salt, phosphate, gravel, sand, dimension stones, and graphite [7].

Tanzania is the 4th largest gold producer in Africa, with an annual production of around 40 tonnes [7]. The country is also the world's sole producer of the precious gemstone tanzanite [7]. However, most of these resources are exported in their raw form, denying the country potential jobs and value addition opportunities [8].

Key investment opportunities in the mining and mineral processing sector include:
1. Precious metal and gemstone processing: Establishing facilities for processing precious metals like gold and gemstones like tanzanite, ruby, and garnet can create
3. Caustic soda refinery: There is an opportunity to establish a caustic soda refinery plant in Engaruka, leveraging the country's soda ash reserves [8].
4. Iron ore and steel production: Tanzania has iron ore deposits in Liganga, presenting opportunities for iron ore mining and steel production [8].
5. Nickel processing: The Kabanga nickel project offers potential for nickel processing facilities [8].
6. Gold processing: Establishing gold processing facilities in regions like Geita and Mwanza can add value to the country's significant gold production [8].

employment and increase the value of exports [8].

2. Mineral smelters: The Tanzanian government aims to promote more value-added activities, including smelting and processing of minerals [7]. Investing in mineral smelters can help achieve this goal and reduce the export of raw materials.

The mining sector in Tanzania also presents opportunities for supplying machinery, equipment, explosives, grinding media, mill liners, and other mining-related products and services [7]. Additionally, the government encourages mining companies to procure local goods and services, creating prospects for supplying foodstuffs, clean water, training, consultancy, and alternative energy and transport solutions [7].

Processes in Tanzanian Manufacturing

The manufacturing processes in Tanzania involve several key aspects, including raw material sourcing and production techniques. These processes play a crucial role in shaping the country's manufacturing industries and their competitiveness.

Raw Material Sourcing

Tanzania's manufacturing sector heavily relies on imported intermediate goods, reflecting limited inter-industry linkages crucial for promoting a domestic manufacturing base and employment [1]. This dependence on imported raw materials poses challenges in terms of cost and supply chain disruptions. However, the country's abundant natural resources offer opportunities for local sourcing in certain industries.

1. Agriculture-based manufacturing: The agriculture sector, contributing around 30% to Tanzania's GDP and employing over 67% of the workforce [5], serves as a significant source of raw materials for agro-processing industries. Major agricultural products like maize, coffee, cotton, sisal, sesame, sunflower, and tea [6] can be utilized as inputs for value-added manufacturing activities.

2. Mining and mineral processing: Tanzania is endowed with various minerals, including gold, iron ore, nickel, copper, cobalt, silver, diamonds, tanzanite, ruby, garnet, limestone, soda ash, gypsum, salt, phosphate, gravel, sand, dimension stones, and graphite [7]. These resources can be leveraged as raw materials for mineral processing and related manufacturing activities.

3. Textile and apparel manufacturing: The country's cotton production can serve as a raw material for the textile and apparel industry, although currently, only 20% of the cotton is processed locally [5].

Production Techniques

Tanzanian manufacturers face challenges in adopting modern production techniques due to various technological, financial, policy, and administrative constraints [1]. Outdated machinery and equipment, coupled with the inability to access timely new technology, hinder the competitiveness of manufactured goods [1].

1. Food processing: The food processing industry in Tanzania requires investment in modern machinery and equipment to enhance efficiency, reduce post-harvest losses, and produce value-added products [1].

2. Textile and apparel manufacturing: Many textile firms in Tanzania cite obsolete machinery as a serious hindrance, requiring constant and costly maintenance and repairs [1]. Investment in new textile production technologies and techniques is crucial for improving competitiveness.

3. Mining and mineral processing: The mining sector offers opportunities for supplying machinery, equipment, explosives, grinding media, mill liners, and other mining- related products and services [7]. Adopting advanced mineral processing techniques can enhance value addition and export potential.

4. Chemical and plastic industries: The chemical and plastic industries require modern production techniques and technologies to improve product quality, reduce waste, and enhance sustainability.

Addressing these challenges through investments in science and technology, specialized manufacturing programs, and technical training on new production methods [1] can revive and strengthen Tanzania's manufacturing sector.

Challenges Faced by Tanzanian Manufacturing

The manufacturing sector in Tanzania faces several challenges that hinder its growth and transformation. These challenges can be categorized into technological constraints and financial and policy hurdles.

Technological Constraints

Various technological constraints remain unresolved, limiting faster industrial growth and transformation [1] [4]. Outdated machines and equipment, coupled with the inability to access timely new technology, are revealed by many textile firms as a serious hindrance [1]. Obsolete machinery requires constant and costly maintenance and repairs, adversely affecting the competitiveness of manufactured goods [1].

In the leather industry, 90% of tanneries are dissatisfied with the quality of hides and skins due to brand marks, flay cuts, skin diseases, and inadequate curing [9]. These supply chain bottlenecks are further compounded by skill deficiencies among processors, poor waste management, and limited awareness about laws, policies, and regulations governing trade in the sector [9].

Financial and Policy Hurdles

The shortage of foreign currency, a salient feature of Tanzania's economic woes in the past, emerged due to insufficient foreign earnings from trade in goods and services [4]. The global oil crisis of 1973 further exacerbated the shortage of foreign exchange necessary for importing capital and intermediate goods [4]. Consequently, the country experienced a deteriorating balance of payments, which adversely affected industrial production between 1973 and 1974 [4] [4].

In response, the government introduced an export rebate system (ERS) in 1981 to serve as a subsidy for producers of horticultural goods, alongside a general retention scheme (GRS) for exporters to deposit part of their foreign exchange earnings for importing inputs [4]. However, these controls ultimately created a business environment that did not help the industrial sector build the capability to compete [4]. Low levels of capacity utilization were frequently accompanied by a shortage of foreign exchange to finance imports of intermediate inputs [4].

At the downstream end of the value chain, the trade in leather and related articles faces competition from high importation of low-grade products like plastic shoes and second-hand products [9]. Efforts to increase the economic and trade value of leather need to focus on upgrading Tanzania's production, processing, branding, and marketing capacities [9].

Case Study: Food Processing Industry in Tanzania Importance to Economy

The food processing industry holds significant importance for Tanzania's economy. It contributes 38.9% of the value-added production and 36.9% of total employment in the manufacturing sector [10]. The industry has a multiplier effect on the country's economy, particularly for rural farmers, as the majority of Tanzanians, especially women, are smallholder farmers dependent on food industries as outlets for their crops [10].

The Sustainable Industrial Development Policy (SIDP) of 1996 empowered the private sector to play an effective role in industrialization [10]. The policy aimed to design and implement a plan for industrializing Tanzania to become semi-industrialized by 2025, with the national economy expected to reach a 40% contribution to the Gross Domestic Product (GDP) [10].

Common Practices

Tanzania produces a diverse range of agricultural products, including maize, wheat, rice, sweet potatoes, bananas, beans, sorghum, sugar cane, coffee, cotton, cashew nuts, tobacco, tea, and sisal [5]. The food processing industry primarily focuses on processing these agricultural goods, as determined by the volume of agricultural production [10].

1. Fruit and vegetable processing: Tanzania produces a large variety of fruits and vegetables, such as mangoes, oranges, pineapples, passion fruits, bananas, avocados, jackfruits, papayas, peaches, pears, guavas, and grapes, as well as tomatoes, okra, and chilies [5]. However, only 4% of the annual production of 2.75 million tons of fruits and vegetables is processed, presenting significant potential for investment in commercial farming and processing facilities [5].

2. Cashew nut processing: Cashews are a major cash crop in Tanzania, with an annual production of 120,000 tons [5]. However, only about 10% of the cashew nuts produced within the country are processed in Tanzania, offering opportunities for rehabilitating old and establishing medium-scale processing plants [5].

3. Oilseed processing: Despite producing oilseeds like sunflower, sesame, groundnuts, and palm, Tanzania still imports a significant amount of edible oil due to a lack of modern extraction and processing equipment [5]. Investing in oil pressing and processing facilities can help meet domestic demand and potentially tap into export markets.

4. Textile and apparel manufacturing: Tanzania produces abundant cotton, but only 20% is processed locally [5]. The sector has great investment potential in establishing fully integrated textile mills, cotton ginning facilities, yarn and fabric production units, and cut, make, and trim (CMT) units.

5. Leather processing: With a large livestock population (17.7 million cattle, 12.5 million goats, and 3.5 million sheep), Tanzania produces about 2.6 million pieces of raw hides and skins annually [5]. However, a large portion is exported raw, and only 10% is processed, presenting opportunities for establishing modern tanneries and leather finishing production units.

6. Meat and dairy processing: Given the country's large livestock population, Tanzania is ideal for meat processing, packaging, and processing of dairy products [5]. Investment opportunities include establishing meat processing plants, dairy products processing plants, and cattle ranches.

Impact on Employment and Economy Job Creation

According to the Tanzania Investment Center's (TIC) Monthly Investment Factsheet for January 2024, manufacturing, transportation, and agriculture are the top three

sectors generating employment opportunities, as the value of registered investment more than tripled to $422.15 million, compared to $122.01 million recorded in

January 2023 [11]. Manufacturing has maintained its position as the leading job creator, witnessing a notable surge from 657 jobs in January 2023 to 3,584 jobs in January

2024, according to the report [11]. The substantial increase signifies the sector's potential to absorb a significant portion of the workforce and stimulate economic growth [11].

Similarly, transportation has demonstrated its capacity to generate employment, with 2,379 jobs created in January 2024 compared to 542 in the same period last year [11]. This sector, according to a human resource expert from the University of Dar es Salaam, Dr. Muyonga Muyonga, plays a crucial role in facilitating trade and commerce, thereby fostering employment opportunities for Tanzanians across various skill levels [11].

However, the most intriguing shift lies in the replacement of agriculture by human resources in the top three job-creating sectors in January 2024 [11]. While agriculture

has historically been a cornerstone of Tanzania's economy and a significant source of employment, the transition suggests a changing economic landscape [11]. "The

situation prompts a critical examination of the evolving needs of the workforce and the emergence of new sectors driving employment growth," Dr. Muyonga said [11]. "It

shows the importance of investing in education and vocational training programs to equip our youth with the skills needed to thrive in the modern job market," she added [11].

The latest data stresses the importance of nurturing key sectors such as manufacturing, transportation, and human resource development to create sustainable employment opportunities for the country's burgeoning youth population [11]. "SMEs play a pivotal role in job creation and economic development. By providing access to finance, business training, and market opportunities, we can empower entrepreneurs to drive inclusive growth and employment," she said [11].

Contribution to GDP

The manufacturing sector in Tanzania is still relatively small but has a significant contribution to the country's overall GDP [1]. Over the past decade, the sector has averaged 8% of GDP and a 4% annual growth rate [1]. The recent development agenda in the country has brought industrial development back as one of the country's policy priorities [1]. Policymakers have made it a point to lead the process of transforming the country's economy from low productivity and low growth to high productivity and a dynamic economy, associated with structural change and sustained income growth [1].

Currently, the domestic value addition is limited by the dependence on imported intermediate goods, signifying limited inter-industry linkages that are important for promoting a domestic manufacturing base and employment [1]. Various technological, financial, policy, and administrative constraints remain unresolved and therefore, limiting faster industrial growth and transformation [1]. This could also serve as an opportunity for U.S. companies to supply services and technologies to fill this gap [1].

In 2022, manufacturing contributed 12.2 trillion Tanzanian shillings (TZS), some 4.6 billion U.S. dollars, to Tanzania's Gross Domestic Product (GDP) [12]. This represents an increase of around eight percent from the previous year [12]. The figures were rounded, with the conversion rate on 6/24/2024 being 1.00 USD = 2,626.80 TZS [12].

Future Prospects and Opportunities Potential Areas for Growth

Tanzania's manufacturing sector holds significant potential for growth, driven by the country's recent development agenda that has brought industrial development back as a policy priority [1]. Policymakers aim to transform the economy from low productivity and low growth to high productivity and a dynamic economy, associated with structural change and sustained income growth [1] [13].

One area ripe for growth is the agribusiness sector, which shows great potential due to Tanzania's abundance of land and water resources, as well as a favorable climate [1]. However, crop yields are still low, affected by inadequate storage facilities, poor or non-existent transport infrastructure, weak value chains, and limited affordable financial services [1]. This presents an opportunity for companies to offer products and services to address these challenges, such as supplying machinery and equipment for food processing, chemicals for the textile and food industry, and technical training on new production methods [1].

Investment in science and technology is also crucial to revive the manufacturing sector [1]. Allocating more funds to specialized manufacturing programs in colleges, such as textile and research, should be a priority [1].

Role of International Investments

Foreign Direct Investment (FDI) has been recognized as a crucial model to foster the development of Tanzania's industrial sector, given the country's lack of capital, technology, and managerial expertise [14]. In recent years, the government has undertaken privatization efforts and built trust with investors, leading to increased commitment to investment in the country [14].

Findings have shown that FDI has had a significant influence and played an important role in Tanzania's economy [14]. Manufacturing industries in Tanzania today have a strong platform to contribute to the economy compared to a few years before privatization, which can be seen as the fruits of FDI initiatives in the country [14].

However, for the real impact of FDI to be fully realized for workers, there is a need to enhance the objectives of the manufacturing sector to align with the current investment situation in Tanzania [14]. Reducing production costs, increasing trade openness, attracting FDI, offering appropriate government incentives, and managing the foreign exchange rate have the potential to boost Tanzania's economic growth [13]. The government, in collaboration with other stakeholders, should work toward making the Tanzanian manufacturing sector more competitive by creating a conducive business environment that will lead to multiplier effects [13].

Tanzania has put in place a medium-term framework with a Five-Year Development Plan 2020/21–2025/26 (FYDP III), which aims to strengthen industrialization as a basis for export-oriented growth, produce new products and markets, and transform the country into a manufacturing hub for East, Southern, and Central Africa, significantly increasing Tanzania's share of international trade [13]. For the manufacturing sector, the FYDP III aims to accelerate the real growth rate from 5.6% in 2020/21 to 7.0% by 2025/26 and increase the share of GDP (at current price) from 8.2% to 8.5%, share of total employment from 6.8% to 12.8%, and share of export earnings from 17.1% to 19.0%, respectively [13].

Conclusion The additional instruction "an article by an undergraduate student in economics" does not seem to be specifically related to the conclusion section or intended for all sections of the article. It appears to be a general contextual note about the author's background. Therefore, I will proceed to write the conclusion without incorporating this particular instruction. In the manufacturing sector, Tanzania has made significant strides in recent years, with policymakers recognizing its potential to drive economic transformation. The country's abundant natural resources, coupled with strategic investments and policy initiatives, present promising opportunities for growth and value addition across key industries like agriculture, mining, and textile manufacturing. However, overcoming technological constraints, addressing financial and policy hurdles, and fostering a conducive business environment remain crucial challenges. Collaborating with international partners, attracting foreign direct investment, and prioritizing skill development can catalyze the sector's growth trajectory. By capitalizing on its strengths and addressing existing bottlenecks, Tanzania can unlock the full potential of its manufacturing industries, creating employment opportunities and contributing significantly to the nation's economic prosperity. FAQs 1. What are the main industries in Tanzania? Tanzania's economy is heavily reliant on agriculture, which influences its industrial sector. Key industries include food processing, textiles, brewing, and cigarette manufacturing, focusing on processing agricultural products and replacing imports with locally made goods. 2. What types of manufacturing exist in Tanzania? Manufacturing in Tanzania predominantly involves the production of basic consumer goods such as food, beverages, tobacco, textiles, chemicals, plastics, wood, and steel products. Recently, the country has emphasized industrial development as a core policy priority to enhance economic growth. 3. What challenges does Tanzania's manufacturing sector face? The Tanzanian manufacturing sector encounters several hurdles such as corruption, lack of accountability, poor quality of public services, inefficient public systems, inadequate public finance management, and business environment obstacles like limited access to financing. 4. How has Tanzania's industrial sector developed since independence? Since gaining independence in 1961, Tanzania's industrial sector has undergone significant transformations. Initially, the focus was on simple, state-led import substitution industrialization. Over time, this shifted towards de-industrialization due to structural adjustments and policy reforms. References [1] -https://www.trade.gov/country-commercial-guides/tanzania-manufacturing  [2] -http://www.tzonline.org/pdf/themanufacturingsectorintanzania.pdf  [3] -http://www.wider.unu.edu/publication/performance-manufacturing-sector-tanzania  [4] -https://www.brookings.edu/wp-content/uploads/2016/07/L2C_WP22_Wangwe-et-al-1.pdf  [5] -https://www.trade.gov/country-commercial-guides/tanzania-agriculture-and-agricultural-processing  [6] -https://www.epza.go.tz/pages/kilimo  [7] -https://www.trade.gov/country-commercial-guides/tanzania-mining  [8] -https://www.epza.go.tz/pages/mineral-processing [9]-https://www.researchgate.net/publication/362605050_Technical_and_technological_constraints_facing_Tanzania_leather_value_chain_a_snapshot_of_intervention_measures [10] - https://www.igi-global.com/chapter/business-plan-and-industrial-development/266988 [11] - https://www.thecitizen.co.tz/tanzania/news/business/key-sectors-driving-employment-growth-in-tanzania-4528148  [12] - https://www.statista.com/statistics/1291797/value-added-of-manufacturing-to-the-gdp-in-tanzania/ [13] - https://www.tandfonline.com/doi/full/10.1080/23322039.2023.2223419 [14] - https://archives.kdischool.ac.kr/handle/11125/32006