Here are fastest sectors shoring up Tanzania's economy

Dar es Salaam. Finance, insurance, information, and communication are projected to be the fastest-growing economic activities in Tanzania as policy reforms and the enabling business environment push for economic expansion.

In a review of domestic economic performance, the Bank of Tanzania (BoT) has highlighted that between January and September last year, the financial and insurance sectors grew by 16 percent, while the same sectors recorded 9.3 percent growth during the corresponding period in 2022.

The information and communication sector grew by 7.9 percent last year, compared to the 7.6 percent growth it experienced in 2022.

According to the central bank, based on this performance and other leading economic indicators for the last quarter of 2023, it puts last year’s growth prospects at around 5 percent.

“The growth was reinforced by continued improvement in the business environment through reforms, policies, and public investment, particularly in infrastructure,” the BoT report reads in part.

The banking sector, which constitutes the largest share of the financial sector, was liquid, profitable, and adequately capitalised.

Also read: Tanzania's bank profits jump by Sh400 billion

Deposits, assets, and loans increased. The asset quality also improved, as reflected by the decline in nonperforming loans to 4.3 percent in December 2023 from 5.5 percent in June 2023.

Speaking to The Citizen University of Dar es Salaam (UDSM), Prof Jehovaness Aikaeli said the rapidly expanding sectors are primarily those in the service industry, which plays a crucial role in providing essential services to key production sectors.

He said consequently, their growth serves as an indicator of the overall expansion within primary production sectors.”

It becomes evident that they actively support production activities, including those in industries and agriculture. Therefore, their expansion reflects the increasing demand for services within these fundamental production sectors and contributes to overall economic growth,” he said.

Prof Aikaeli said the correlation between the growth of these service sectors and the positive trajectory observed in Tanzania’s industrial sector over recent years.”

As industries thrive, they require financial support, insurance coverage, and advancements in automation where the information and communication services sector steps in,” he said.

His remarks echoed the data provided by the central bank, which also indicated that manufacturing activities had advanced by 6.3 percent last year, a positive trend compared to the 5.5 percent growth it experienced in 2022.

Agricultural Trade Economist from the University of Dodoma (Udom), Dr Lutengano Mwinuka, said based on these trends and the economic structure of the country, alignment is clear given the growth of the overall service sector on top of manufacturing and agriculture.

“Investment inflows in the top three fastest-growing sectors are likely to increase in Tanzania. This will also be reflected in job creation, though marginally, as these sub-sectors are not employing the majority, and they are mainly technology-intensive,” he said.

Dr Mwinuka said self-employment and the informal sector are likely going to be impacted. Necessary conducive environments for doing business are vital to embracing innovators in these areas.

“Developments of capital markets, intellectual property rights systems, and incubation centres would also add value to support the overall infrastructure,” he said.

On the ICT aspect, the CEO for Hashtech Tanzania Limited, Ms Zena Msonde, said that with advancements in technology, there will be increased connectivity, data usage, and digital transformation across industries.

The expansion of 5G networks, the Internet of Things (IoT), and artificial intelligence (AI) will revolutionise how information is accessed, shared, and utilised.

She said emerging technologies like virtual reality (VR) and augmented reality (AR) are anticipated to become more mainstream, transforming the way people communicate and consume information.

“With this trajectory, there are several opportunities that can be foreseen, such as the demand for faster, more reliable and more secure communication services that will grow and the increasing dependency on data that will create opportunities for businesses involved in data management, analytics, and cybersecurity,” said Ms Nkya, asserting that as the sector expands, there will also be a rise in the need for skilled professionals in the ICT field.

The local techpreneur assessed that one of the major challenges is the need to ensure data privacy and security, and there is a need for regulatory frameworks and industry standards to be developed and implemented to address these concerns.

Ms Msonde said the regulatory environment has a significant impact on the operations and growth prospects of businesses within the ICT sector because it can shape the competitive landscape and affect companies’ ability to expand their operations. Founder and CEO at Tunzaa Fintech Inc.

Mr Ng’winula Kingamkono said ICT has grown, and more growth should be expected, driven by digital transformation and regulatory support.

He said there are opportunities to enhance digital financial services, which is crucial for startups like Tunzaa, and also in providing alternative means of income in the digital economy for the Tanzanian population.

“The central bank and similar organisations can continue to support this growth through positive regulatory frameworks to encourage innovation, attract investments, and create a supportive ecosystem for startups and established businesses alike,” he said.

 Mr Kingamkono said that through innovation, collaboration with regulatory bodies, and a focus on inclusive digital growth, the country can harness the full potential of the sector and beyond.

According to the African Development Bank (AfDB), Tanzania’s economic growth will beat that of Kenya and Uganda in 2024, as East Africa will continue to lead Africa’s growth momentum. In its Macroeconomic Performance and Outlook (MEO), the AfDB predicts the Tanzanian economy to grow by 6.1 percent, ahead of fellow East African countries except Rwanda, which will grow by 7.2 percent.

Tanzania is also ranked ninth among the top 11 African countries projected to experience a strong economic performance forecast behind Niger (11.2 percent), Senegal (8.2 percent), Libya (7.9 percent), Rwanda (7.2 percent), Cote d’Ivoire (6.8 percent), Ethiopia (6.7 percent), Benin (6.4 percent), and Djibouti (6.2 percent).

Completing the list are Togo and Uganda which are projected to grow by 6 percent each.