Private sector issues in 3rd Five-Year Development Plan

Saturday May 01 2021
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By Honest Prosper Ngowi

Tanzania’s development has been guided by development plans of the early days of independence to their current versions. One of the current versions is the 15-year Long Range Development Plan. This is divided in three 5-year plans. So far, we have seen the first two versions: Five Years Development Plans I and II (FYDP-I & II). The first one elapsed five years ago. The second one is coming to an end in mid-2021. It will have paved the way for the third plan that will see the light of day in the 2021/22 fiscal year - and last till 2025/26. Among the contents of the plans are private sector issues.

On private sector

The private sector in Tanzania as we see it today has come a very long way. From the 1961 political independence until 1967 Tanzania had a somewhat private sector-led economy of the colonial time. The major change in the private sector history in Tanzania came in 1967 with the Arusha Declaration that introduced state-controlled economy. Major means of production in virtually all sectors of the economy were nationalized away from private to public sector.

This epoch lasted till mid-1980s when Tanzania, embraced major and far-reaching reforms in the management of the economy. In this period, the private sector was relatively nonexistent.

The other major U-turn in the private sector journey in Tanzania came in the mid-1980s when Tanzania embraced private sector and by extension market-led economy. What was nationalized in 1967 was privatized in the mid-1980s. Therefore, the private sector we see today in Tanzania basically is the one ‘born’ in the mid-1980s. At global level therefore, Tanzanian private sector is relatively young and in its infancy stage of development.


Private sector composition

Private sector in Tanzania as is the case in many other similar countries is not a homogenious but a heterogenious category. When properly decomposed, one will see various components in it. The major components of a typical private sector include foreign and local private sector; formal and informal sector as well as micro, small, macro and large enterprises. Each of these categories of private sector has many and far-reaching implications in what the FYDP-III states about private sector.

Private sector in FYDP-III

The FYDP-III that was table to the Parliament by the Minister for Finance on April 8, 2021 has just a paragraph on private sector. The key issue in the plan is private sector development, good business environment and investment climate for the private sector and engagement of the sector in implementing the plan including through Public/Private Partnership (P/PP).


P/PP involves a partnership between a public sector authority and a private party. Normally the private party provides a public good or service and assumes substantial financial, technical and operational risks. In some P/PPs, the cost of using the public goods or services is borne exclusively by the users and not by the taxpayer. In other types capital investment is made by the private sector on a contract with government to provide agreed services. The cost of providing the service is borne wholly or in part by the government. P/PPs can be undertaken in various arrangements depending on contexts. P/PP issues include proper implementation of the P/PP legal, policy and regulatory frameworks, understanding the P/PP concept, financial and technical capacity of the private sector as well as public sector understanding of the private sector.

Engaging private sector

The plan to engage the private sector in implementing some aspects of the FYDP-III is very good. This should involve among other things, ‘giving’ businesses to the private sector. These include such businesses as delivery of non-core public goods and services. These include in the construction sector including of various infrastructure projects. It is all about having as much local content as possible in delivering the FYDP-III. However, issues in local content include capacity to deliver quality goods and services. This should be kept in mind when implementing this part of the plan.

Business environment

Businesses and investments of all kinds need friendly, conducive business environment and investment climate. These are very important for not only attracting but also retaining investments and business in virtually all sectors of the economy. Business environment include issues of legal, policy and regulatory frameworks, infrastructure and much more. All these should be taken into account in implementing the FYDP-III.