Private sector’s role in industrialising Tanzania

Wednesday June 12 2019

 

Speaking at a meeting that brought together private sector traders and businesspeople from across mainland Tanzania last Friday (June 7, 2019), President John Magufuli said that “hakuna nchi inaweza kuendelea bila sekta binafsi, hakuna” [No country can develop without the private sector, there’s not]. Reacting to this statement, renowned businessman and former chairman of the CEO Roundtable of Tanzania Ali Mufuruki tweeted that it’s the “Best message of the day, or maybe of [Dr Magufuli’s] presidency so far…”

Right now, I think it’s fair to say there is great hope amidst challenging times in Tanzania. At no time in Tanzania’s recent history of economic development has a cross section of private sector traders and businesspeople drawn from 139 districts of the mainland territory to discuss the business environment and vent their frustration at a meeting televised live with the head of state and government.

Besides that, in all fairness, we must admit that in the face of insistent gloom among Tanzania’s business community, President Magufuli encouraged the traders and businesspeople who attended the meeting with him to freely share their views on the difficulties they were facing when doing business in the country. And they did just that openly.

The Tanzania Development Vision 2025 was launched in the year 2000, amidst the failure of the three-decade-long Arusha Declaration policies, when the country needed a new sense of direction marvellously exemplified in the drive towards industrialisation.

The drive was reinvigorated by President Magufuli when he took power in November 2015 in quest for sustainable growth and development that promotes, inter-lia, job creation.

Several initiatives

Despite several initiatives by the State to improve the business environment and promote investment, manufacturing industry performance remains low; “the share of manufacturing in Tanzania’s GDP has been declining in the recent past – from a peak of 7.6 per cent in 2011 to 4.9 per cent in 2016, although this share was up to 5.5 per cent in 2017” (see, Mbelle, Amon and Kabanda, H. “Recent progress towards industrialisation in Tanzania”. Economic and Social Research Foundation). So, why is growth and competitiveness in Tanzanian manufacturing and progress towards industrialisation slow?

Several challenges and problems are making the business environment unfriendly and inhibiting the attainment of industrialisation in Tanzania.

They include high compliance costs in starting and operating businesses; cumbersome pre-approval procedures; multiplicity and duplicity of regulatory processes; loopholes in some laws and regulations which are easily exploited by public officials who take bribes; and multiplicity of taxes, charges, and levies.

But this is by no means exhaustive of all possible challenges and problems in the Tanzanian business environment.

Another major fetter to industrialization is the misperception amongst private foreign entrepreneurs and investors about the risk of doing business or investing in Tanzania.

These bottlenecks galore are unconducive to private investment and have made it nearly impossible to build a vibrant and competitive private sector that can accelerate Tanzanian industrialisation.

A quick scan of economic history research reports suggests that an industrialized economy needs active public-private sector linkages; therefore, the private sector should be a high priority for government policymakers.

Bearing in mind that agriculture and agribusiness will still be crucial sources of livelihoods in Tanzania and a linchpin to food security and improvement in the quality of life of Tanzanians, diversifying agriculture and allying it with industry, manufacturing and processing competency is so important in helping to fight poverty in the country.

Yet, as retired civil servant and politician Mr Chrisant Mzindakaya told President Magufuli at the State House meeting, agriculture was one massive trough of disillusionment.

The private sector in Tanzania should play a big role in developing and taking to scale contemporary innovative technologies and business practices in agriculture and other sectors of the economy, but government support in correctingmarket failures, ensuring financial stability and protecting human health and the environment is fundamental. Tanzanian SMEs make up the vast majority of all Tanzanian businesses, providing jobs in the formal and informal sectors.

Therefore, it’s indispensable for the government to formulate the right policies that create a favourable environment for SMEs, including enacting reasonably clear and ascertainable legal rules and providing adequate finance.

Important ways to support Tanzanian private businesses and industries include crafting a national programme to proselytise a manufacturing mindset (improved productivity, efficiency and quality) amongst Tanzanians; providing expert knowledge and technical assistance necessary for local manufacturers to comply with standards in this era of heightened global competition; encouraging technology transfer from universities and institutes to the private sector; and developing a grassroots network of traders and businesspeople across every district and region of Tanzania to educate them on domestic and overseas marketing opportunities in the manufacturing industry and on the strategies to exploit those opportunities.

Other important ways entail involvement of the private sector in reviewing, formulating and implementing Tanzania’s policies in order to win the sector’s commitment; and respect by the government and the people for the rule of law.

These public-private sector initiatives would portend well for the industrialisation of Tanzania.

Paul Kibuuka is the managing partner of Isidora & Company Advocates.