Prof Ibrahim Lipumba
ANALYSIS: In a rapidly changing world, skills, flexibility, openness and receptiveness to technological change have become very important for promoting sustained economic growth and structural transformations.
In the past 10 years, official statistics show that Tanzania attained an average growth rate of 10 per cent per annum. This is the highest sustained annual growth for any decade since Tanzania Mainland attained its independence.
However, when you talk to citizens about their standard of living, they do not feel that the economy has been growing fast. Many believe that reports of stellar economic performance in the past decade are mere government propaganda.
The high growth rate of the economy has not trickled down to the poor of Tanzania. The majority of Tanzanians live in rural areas and depend on agriculture. Agricultural output has grown by only 4.2 per cent.
The 2007 Household Budget Survey shows that the poverty rate in Tanzania using an austere national poverty line has marginally declined from 35.7 in 2001 to 33.3 in 2007. The number of people in abject poverty has increased from 11.4 million in 2001 to 12.9 in 2007.
The poverty line used in household budget survey is unbelievable. For example, an adult in Dar es Salaam who spends Sh641 or more a day is considered not to be poor. Can any adult survive by spending an average of Sh641 shillings a day?
Using the international poverty line of spending a dollar a day, Tanzania’s poverty rate has marginally declined from 73 percent in 1992 to 68 percent in 2007. The growth trajectory of the past decade has not helped to significantly reduce mass poverty in Tanzania.
Improved economic growth performance has not been associated with a structural transformation of the economy. The share of manufacturing value added in total national output has not significantly increased.
In a country with a labour force of more than 22 million, less than 120,000 are employed in the formal manufacturing sector. The bulk of the labour force is employed in subsistence agriculture and informal sector.
As a nation, regardless of our political affiliation, we should rethink our development strategy and ask what institutions and policies are needed to promote sustainable and inclusive high economic growth of an average of 10 percent per year that will increase wage employment in the next twenty years in a dynamic world economy of the twenty first century.
Tanzania has many advantages in natural resources. The agricultural potential of the country has yet to be fully utilized. A variety of crops can grow well in Tanzania.
We have a comparative advantage in production of not only traditional export crops – coffee, cotton, cashew nuts, tea, tobacco but also, a wide range of food crops, including maize, rice, sorghum and other millets, cassava, oilseeds, including sunflower and sesame, fruits and vegetables.
We are a coastal country surrounded by six land-locked countries. We have world-famous tourist attractions – Serengeti, Ngorongoro Crater, Mount Kilimanjaro and others that have not yet been developed, such as travelling from Morogoro through Mikumi National Park, going through the Kilombero sugar plantation, Udzwungwa Mountain Forest to Ifakara, crossing the Kilombero river valley, climbing the mountain forest going to Mahenge and up to Selous National Park.
The mineral resource potential is also enormous. It includes among others: iron ore, coal, nickel, diamonds, gold, gemstones, uranium and gas. This mineral potential has yet to be utilized to reduce mass poverty.
For Tanzania, sustained economic growth and structural transformation that will eradicate mass poverty must start with an agrarian revolution that will at least double small holder agricultural productivity and commercialize their activities.
Smallholder farmers should be producing a large surplus for the market and not just for their own subsistence. Smallholder farmers are entrepreneurial and efficient given their resource endowment.
For a very long time they have been subjected to a debilitating and unpredictable policy environment, including forced villagisation, inefficient and uncompetitive markets for their products, low prices of their produce, inadequate and unreliable supply of inputs, lack of credit and other financial services, lack of extension services and appropriate technology for agricultural production at the small scale level and poor infrastructure of roads and irrigation.
To promote broad-based development that will eliminate mass poverty, agricultural development strategy should focus on commercializing and increasing the productivity of small holder farmers. The government should ensure macroeconomic stability in the form of low inflation and competitive real exchange rate, improved rural infrastructure, protecting land rights of smallholders, agricultural research and extension services that focus on constraints to increasing productivity of smallholders, quality basic education and health services in rural areas.
Agricultural cooperatives voluntarily organised by small holder farmers can play an important role in transforming and increasing agricultural productivity.
The cooperative movement in Tanzania that was strong in the 1950s and 1960s was destroyed in the 1970s when the government banned cooperatives and introduced elaborate top heavy bureaucratic structures in the name of crop authorities.
When cooperatives were reintroduced in the 1980s, they were not independent voluntary associations but institutions linked to the ruling party. Grassroot-based cooperatives no longer exist in Tanzania.
The government should establish an institutional and policy environment that allows the private sector to invest in providing inputs to smallholder farmers and purchasing their output at competitive prices that make farming profitable and increases the income of smallholder farmers.
The government has adopted Kilimo Kwanza, which essentially aims at encouraging large scale commercial farmers to invest in agriculture and provide technological and marketing services to small and medium-scale local farmers to increase their productivity and market sales of their output.
This strategy ignores the inherent conflict between large scale farmers and smallholder producers. Large-scale farmers want smallholder farmers to be their labourers and not their partners; they want their land and control of any available water for irrigation.
Successful implementation of Kilimo Kwanza strategy can only lead to long-term social conflict and polarization between large scale farmers and peasants who may end up losing their land.
What Tanzania needs is an agricultural development strategy that empowers smallholder farmers to increase their productivity by having access to local markets through improved infrastructure, having access to improved seeds and agricultural inputs, extension services that improve farmers’ knowledge on how they can increase productivity in a sustainable way while protecting their environment.
The smallholder-based agriculture development strategy was responsible for increasing agricultural productivity in Japan after the Meiji Restoration that facilitated industrialization and economic transformation.
The economic success of Taiwan started with a smallholder agrarian revolution. The dramatic reduction of poverty in China after the Deng reforms starting in 1978 emanated from the introduction of the Household Responsibility System that allowed individual farming families to sell their surplus produce to open markets where they fetched higher prices.
Structural transformation and significant job creation in the manufacturing sector has not occurred in the past two decades. Tanzania needs to create enough jobs to absorb 800,000 young people that enter the job market each year.
Subsistence agriculture and hawking in the informal sector do not offer decent incomes. Lack of wage employment is a major socio-economic challenge. Self-employment of young people in the informal sector that offers very low income is a survival necessity and not a solution to the lack of wage employment.
Tanzania urgently needs an industrialization strategy that will create many jobs for the young people. The strategy should focus on creating manufacturing clusters that can produce goods for the local, regional and export markets.
There is no doubt the world’s centre of economic gravity has shifted to Asia particularly China and other East Asia countries and India.
Tanzania needs to examine opportunities and threats of this shift and design strategies that will take advantage of this shift. China has become the workshop of the world but its manufacturing costs are increasing. It is estimated that China will lose 90 million manufacturing jobs in the next decade.
Can Dar es Salaam, Tanga or Mtwara be transformed into a manufacturing hub for exporting to the regional market and the rest of the world?
Special Economic Zones should have adequate infrastructure, particularly electricity and water supply, telecommunications, fast transport to ports and airports, easy access of workers to the facility.
The Benjamin William Mkapa Special Economic Zone in Dar es Salaam is too small to become an important manufacturing cluster and does not have adequate infrastructure.
To achieve an inclusive ten percent economic growth rate, Tanzania needs a capable state with a visionary leadership that will institute stable, well-informed policy frameworks anchored in a broad political consensus around a strategic vision for growth.
In a rapidly changing world, skills, flexibility, openness and receptiveness to technological change have become very important for promoting sustained economic growth and structural transformation.
One major weakness is weak human resource development. The shameful results of Form 4 examinations is only a symptom of a weak and dysfunctional education system.
We cannot attain sustained inclusive growth without adequate investment in human resources. We should revamp the education system and improve the quality of teachers through rigorous selection and better training.
Teachers should be motivated and given incentives that are linked to education outcomes of their students they teach. Rigorous inspection of teachers’ performance in schools should be instituted. Vocational training should be revamped and promoted. If there is something good and memorable from the German colonial period, it is the importance they placed on vocational training.
A larger share of public resources should go to primary education and vocational training. In poor economies like Tanzania, the government has an indispensable role to play. Mass poverty cannot be eliminated by just allowing the market to play its role.
The government should maintain macroeconomic stability and invest in infrastructure to ensure the provision of quality and universal basic education and access to basic health services.
The government has many policy documents, including Tanzania Vision 2025, the country’s National Strategy for Growth and Reduction of Poverty, the Tanzania Five Year Development Plan, the Tanzania Long-Term Perspective Plan, the Big Results Now and many sector policy documents.
There is more confusion than coherence in government policy document. There is no clear link between MKUKUTA II supposed to explain policies and programmes that will be implemented between 2010 and 2015 and the Five Year Development Plan 2011 – 16. The government budget is not guided by the policy document. Moreover, the cash budget system that continues to be used by the government makes the budget that is passed by the Parliament different from what is implemented by the government.
In future columns I will expound on the building blocks of a coherent development strategy that can lead to an annual growth of 10 per cent to ensure inclusive growth and poverty eradication.
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