Industrialisation could be elusive, warns new study

Saturday November 11 2017


By By Alex Malanga @ChiefMalanga

Tanzania should increase its range of manufactured goods for export to widen the scope of benefiting and attaining its industrialisation goal, a new report recommends.

It cautions that depending on only a few products will make industrialisation just a pipe dream.

Tanzania mainly exports metal products, and food and beverages, with textiles, petroleum and chemicals coming next.

However, the report, funded by the United Nations Industrial Development Organisation (Unido), shows that most of the EAC partner states have fairly diversified manufactured products for export except Rwanda.

Burundi and Kenya mainly exports chemical and plastic products, followed closely by food and beverages.

The head of the Industrial Intelligence Unit in the Ministry of Industry, Trade and Investment, Mr Valency Mutakyamirwa, said yesterday during the launch of the East African Community (EAC) Industrial Competitiveness Report here that depending on a few products was risky in case demand for such commodities fell.

“We should diversify manufacturing for export so that we don’t experience shocks in case things change in the global markets.” He said the manufacturing sector was expected to create the strongest inter- and intra-sectoral linkages by demanding inputs from the primary and secondary sectors and by exploiting the services sector.

That would create a positive spiral effect where sectors reinforce each other.

In the case of EAC, according to the report, this has not yet taken place.

The manufacturing sector has particularly weak links with other sectors, in terms of forward and backward linkages.

The EAC’s capacity to export manufactured products is just above half of its capacity to produce such products, implying that most of its production caters for its own markets.

Industry, Trade and Investment permanent secretary Elisante ole Gabriel, said the industrialisation policy had set the target of diversifying the manufacturing base and raise local value addition to 40 per cent from the current 8.62 per cent. The plan is to increase the manufacturing value addition per capita to $258 (Sh575,340) in 2032 from the current $69 (Sh153,870).

Prof ole Gabriel said there was a need to create a world-class business environment and make East Africa “the Singapore of Africa”, in terms of competitiveness.

The move, he said, would positively profile the region and enable it to attract the critical mass of investment needed to support the industrialisation process.

The partner states also need to make the environment easier for investors, according to him. “In this regard, the availability of ‘value addition’ in information is critical ... we need to have dedicated resource centers that can provide a wide range of information and technical support services that investors need to make quick decisions.”

Furthermore, there is a need to use the EAC dynamic regional context which provides the greatest opportunities for regional firms to expand their production capacity and test their ability to compete in the international markets.

The chairman of the EAC Council of Ministers, Mr Maganda Wandera, believes that for the bloc to realise its goal of becoming a hub for manufacturing and gateway to investing in Africa, industrial policies should promote structural change -- from agriculture to labour-intensive or resource based- manufacturing at an early stage of industrialisation.

That can be possible through upgrading and diversifying manufacturing at a later stage and through technological innovation at an advanced stage, according to him.

“To maximise the benefits of industrialisation, labour markets have to generate more and better jobs, which in turn, will increase real incomes and take people out of poverty,” noted Mr Wandera.

The Unido representative to Tanzania, Mauritius and EAC, Mr Stephen Kargbo, warned that the region’s manufacturing firms risked losing their market shares to other competitors unless the challenges impeding the sector were addressed. “Coordination of industrial policies and related instruments within the member states, while ensuring their harmonisation with other policies, in particular trade, becomes the overarching policy recommendation,” said Mr Kargbo.

“EAC firms would need favourable conditions to be able to exploit their own regional market as well as compete on a wider international market.”