The water factor in Tanzania’s economy

Economics

The last part of 2021 was characterised by a relatively huge water shortage in Tanzania. This was caused by a number of factors, including - but not limited to - climate change and some human activities. It has resulted into less than demanded water for various uses such as for generating electricity, irrigation, domestic and institutional uses. The shortage has reminded us as a nation on the centrality of water resources in our economy. This is briefly narrated in what follows.
Water/inflation nexus
Inflation is the rise in general price levels over time in the economy. The policy goal for Tanzania is to tame inflation at single digit. It has been a success of taming it just below four percent in the recent past. This is good compared to double-digit inflation given the negative implications of high inflation rates. Inflation in Tanzania is by and large structural as opposed to monetary. It is generally water-driven. This is because the major factor that triggers high inflation rates in this Republic is food. This is due to its high share in the Consumer Price Index (CPI) which is over 40 percent. The supply side economics of food in Tanzania on the other hand is a function of water availability, accessibility and affordability. Ours is rain-fed agriculture. In times of rain shortage, food supply – which is mainly produced by smallholders farmers in general, and women in particular – drops. Econometricians can show that there is a close correlation between Tanzania’s inflation and water availability.

Water/electricity nexus
The connection between water on one hand and electricity availability on the other is very clear in Tanzania. This is due to the rather high hydropower dependency. Even with some diversified sources of electricity in Tanzania, the supply side economics of electricity is still moved and shaken by water availability. When the level of hydro dams goes down the result can be reduced supply of electricity. Therefore the nexus between electricity and water in Tanzania is very obvious. That is why it is very important to protect water supply at various sources and manage demand at destinations. There is a need to interrogate for example, the extent to which the increased demand for water in agriculture, mining, industry and other sectors impacts water availability for electricity production.
The water/electricity nexus needs to be clearly understood because of the role of electricity in the economy. The economy revolves around the axis of electricity. All production of goods and services by and large depends on availability and affordability of this important factor of production in appropriate quantities and quality. Electricity and therefore water that produces it is among the main sources of the economy’s competitiveness.

Economics of sanitation
Economists in general and health economists in particular can show close relationship between economic growth and development on one hand and sanitation on the other. Sanitation is essential for good health and good health is good for performance of the economy. Sanitation is a function of, inter alia, the quantity and quality of water. That is why there is huge need to see the relationship between economic performance and sanitation. If the country’s labour force is of ill-health due to bad sanitation, then the economy will be troubled. A sick labour force cannot contribute optimally to the economy. By extension, resources (financial, time, human, etc.) used on treating the sick could have been used in more productive areas had there not been sickness due to bad sanitation conditions.

The water factor in Tanzania’s economy

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