How Tanzania can attain new development levels

Dar es Salaam. Development partners say Tanzania should focus on building inclusive growth for its economy to move from lower-middle income to upper-middle status.

On July 1, 2020, the World Bank announced that the Tanzanian economy had been upgraded from low to lower-middle income status after its Gross National Income (GNI) per capita crossed the required $1,036 mark.

Basically, lower middle-income economies are those with a GNI per capita of between $1,036 and $4,045 while upper middle-income economies are those with a GNI per capita between $4,046 and $12,535, according to the World Bank’s 2021 figures.

Speaking in Dar es Salaam yesterday, the co-chair of Tanzania’s Development Partners Group, Mr David Concar, said to graduate to the upper middle income category and realise inclusivity, Tanzania will have to recognise that low educational standards were a binding constraint on development.

The development path to be adopted, he said, should also recognise the pressing need to invest in human capital through better health, education and jobs.

“We share the assessment that the models for economic growth which served Tanzania well in reaching lower middle income status are unlikely to be sufficient for the next phase of the country’s development,” Mr Concar, who doubles as the British High Commissioner to Tanzania, asserted.

As he addressed the High Level Strategic Dialogue Meeting that brought together government leaders and diplomats yesterday Mr Concar said development partners were ready to help Tanzania tread steadily on its development path.

But for the donors’ help to be meaningful and impactful all donor funding inflows, especially to Non-Governmental Organisations (NGOs) should complement government’s development efforts, the minister for Finance and Planning, Dr Mwigulu Nchemba said at the meeting.

Dr Nchemba called upon the development partners to provide assistance to NGOs that are aligned with National policies and Strategies and ensure full transparency of official development assistance information.

“Currently we are facing a challenge of lack of transparency on some of the assistance channeled through NGOs which undermines mutual and domestic accountability,” said Dr Nchemba during a meeting whose theme was: Achieving Development Visions: Accelerating Resilience and Inclusive Development in Times of Uncertainty.

Dr Nchemba added that the development cooperation framework remains an important feature of Tanzania’s development strategies as it helps in mobilising external resources from development partners.

Mr Concar said development partners want to support Tanzania in the next phase of moving its economy to greater heights.

He added that the Gross Domestic Product (GDP) growth of six to seven percent that Tanzania has achieved over the past two decades has been impressive - but insufficiently inclusive to deliver the reductions in poverty the country will need going forward.

Mr Concar reiterated development partners’ commitment towards working with Tanzania as the government seeks to achieve a model for growth which is inclusive and resilient.

“It is clear that a big part of the answer lies with the private sector, since that is where the jobs will be made and the tax revenues generated to invest in education,” recounted Mr Concar.

Development partners welcomed the President Samia Suluhu Hassan’s consistent statements about the importance of the private sector in driving the country’s economy.

He observed that firms and investors are already responding positively to the Head of State’s pro-business approach.

Going by the World Investment Report, Foreign Direct Investment (FDI) to Tanzania rose by 35 per cent to $922 million in 2021.

Mr Concar said that trend is positive and yet it still reflects only a fraction of the country’s full potential for investment.

Furthermore, he added, it is still the case that nearly all FDIs in Tanzania comes from new investors.

Only a small percentage, according to him, comes from investors already operating here, a trend that calls for improving the business environment to encourage the existing investors to expand their businesses.

“Despite recent improvements, and despite the welcome existence of a ‘blueprint’ for regulatory reform, Tanzania’s business environment continues to be regarded as too difficult and risky by many investors, local as well as foreign,” he said.

“That perception will need to be reversed if Tanzania is to be able to reduce poverty levels and create jobs at the level required to keep pace with population growth.”

According to official data, 25 percent of Tanzanians, which is equivalent to 15 million people, are poor.

The choices the private sector actors make over the next few years, about where in East Africa they should invest or expand investments, will be critical to the country’s development.