Economy of Tanzania
Encyclopedia
History
Significant measures have been taken to liberalize the TanzaniaTanzania
The United Republic of Tanzania is a country in East Africa bordered by Kenya and Uganda to the north, Rwanda, Burundi, and the Democratic Republic of the Congo to the west, and Zambia, Malawi, and Mozambique to the south. The country's eastern borders lie on the Indian Ocean.Tanzania is a state...
n economy
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
along market lines and encourage both foreign and domestic private investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
. Beginning in 1986, the Government
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...
of Tanzania embarked on an adjustment program to dismantle socialist economic controls and encourage more active participation of the private sector
Private sector
In economics, the private sector is that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state...
in the economy. The program included a comprehensive package of policies which reduced the budget deficit and improved monetary control, substantially depreciated the overvalued exchange rate
Exchange rate
In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...
, liberalized the trade regime, removed most price controls, eased restrictions on the marketing of food crops, freed interest rates, and initiated a restructuring of the financial sector.
Current GDP per capita of Tanzania grew more than 40% between 1998 and 2007. In May 2009, the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
approved an Exogenous Shock Facility (ESF) for Tanzania to help the country cope with the global economic crisis
Late 2000s recession
The late-2000s recession, sometimes referred to as the Great Recession or Lesser Depression or Long Recession, is a severe ongoing global economic problem that began in December 2007 and took a particularly sharp downward turn in September 2008. The Great Recession has affected the entire world...
http://www.imf.org/external/np/sec/pr/2009/pr09428.htm. Tanzania is also engaged in a Policy Support Instrument (PSI) with the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
, which commenced in February 2007 after Tanzania completed its second 3-year Poverty Reduction and Growth Facility
Poverty Reduction and Growth Facility
The Poverty Reduction and Growth Facility is an arm of the International Monetary Fund which lends to the world's poorest countries. It was created in September 1999, replacing the Enhanced Structural Adjustment Facility....
(PRGF), the first having been completed in August 2003. The PRGF was the successor program to the Enhanced Structural Adjustment Facility
Enhanced structural adjustment facility
The Enhanced Structural Adjustment Facility was a program of financial assistance given to poor countries from December 1987 through 1999 through the International Monetary Fund...
(ESAF), which Tanzania also participated in from 1996-1999. The IMF's PSI program provides policy support and signaling to participating low-income countries and is intended for countries that have usually achieved a reasonable growth performance, low underlying inflation, an adequate level of official international reserves, and have begun to establish external and net domestic debt sustainability.
Tanzania also embarked on a major restructuring of state-owned enterprises. The program has so far divested 335 out of some 425 parastatal entities. Overall, real economic growth has averaged about 4% a year, much better than the previous 20 years, but not enough to improve the lives of average Tanzanians. Also, the economy remains overwhelmingly donor-dependent
Aid
In international relations, aid is a voluntary transfer of resources from one country to another, given at least partly with the objective of benefiting the recipient country....
. Moreover, Tanzania has an external debt
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
of $7.9 billion. The servicing of this debt absorbs about 40% of total government expenditures. Tanzania has qualified for debt relief under the enhanced Heavily Indebted Poor Countries
Heavily Indebted Poor Countries
Heavily Indebted Poor Countries is a group of 40 developing countries with high levels of poverty and debt overhang which are eligible for special assistance from the International Monetary Fund and the World Bank.- History and structure :...
(HIPC) initiative. Debts worth over $6 billion were canceled following implementation of the Paris Club 7 Agreement.
Macro-economic trend
This is a chart of trend of gross domestic product of Tanzania at market prices estimated by the International Monetary Fund with figures in millions of Tanzanian Shillings. See http://www.brad.ac.uk/research/ijas/tazadj2.htm| Year | Gross Domestic Product | US Dollar Exchange |
|---|---|---|
| 1980 | 45,749 | 8.21 Shillings |
| 1985 | 115,006 | 17.87 Shillings |
| 1990 | 830,693 | 195.04 Shillings |
| 1995 | 3,020,501 | 536.40 Shillings |
| 2000 | 7,267,133 | 800.43 Shillings |
| 2005 | 13,713,477 | 1,127.10 Shillings |
| 2010 | - | 1,515.10 Shillings |
Mean wages were $0.52 per manhour in 2009.
Agriculture
Cash crop
In agriculture, a cash crop is a crop which is grown for profit.The term is used to differentiate from subsistence crops, which are those fed to the producer's own livestock or grown as food for the producer's family...
s, including coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...
, tea
Tea
Tea is an aromatic beverage prepared by adding cured leaves of the Camellia sinensis plant to hot water. The term also refers to the plant itself. After water, tea is the most widely consumed beverage in the world...
, cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
, cashew
Cashew
The cashew is a tree in the family Anacardiaceae. Its English name derives from the Portuguese name for the fruit of the cashew tree, caju, which in turn derives from the indigenous Tupi name, acajú. It is now widely grown in tropical climates for its cashew nuts and cashew apples.-Etymology:The...
s, sisal
Sisal
Sisal is an agave that yields a stiff fibre traditionally used in making twine, rope and also dartboards. The term may refer either to the plant or the fibre, depending on context...
, cloves, and pyrethrum
Pyrethrum
Pyrethrum refers to several Old World plants of the genus Chrysanthemum which are cultivated as ornamentals for their showy flower heads. Pyrethrum is also the name of a natural insecticide made from the dried flower heads of C. cinerariifolium and C...
, account for the vast majority of export
Export
The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer"...
earnings. The volume of all major crops—both cash and goods, which have been marketed through official channels—have increased over the past few years, but large amounts of produce
Produce
Produce is a generalized term for a group of farm-produced goods and, not limited to fruits and vegetables . More specifically, the term "produce" often implies that the products are fresh and generally in the same state as where they were harvested. In supermarkets the term is also used to refer...
never reach the market. Poor pricing and unreliable cash flow to farmers continue to frustrate the agricultural sector.
Industry
Accounting for 22.6% of GDPGross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
, Tanzania's industrial sector is one of the fastest growing in Africa
Africa
Africa is the world's second largest and second most populous continent, after Asia. At about 30.2 million km² including adjacent islands, it covers 6% of the Earth's total surface area and 20.4% of the total land area...
(2010 rankings). Though it has been hit hard recently by persistent power shortages caused by low rainfall in the hydroelectric dams catchment areas, a condition compounded by years of neglect and bad management at the state-controlled electric company. Management of the electric company was contracted to the private sector in 2003. And power production countrywide is currently undergoing various diversification projects.
The main industrial activities include agricultural processing (sugar, beer, cigarettes, sisal twine), diamond-, gold-, and iron mining, oil refining, wood products, salt, soda ash, cement, shoes, apparel and fertilizer productions.
Foreign exchange shortages, bureaucracy and corruption continue to deprive factories of much-needed spare parts and reduces industrial capacities.
Mining
The Ministry of Energy and MineralsMinistry of Energy and Minerals, Tanzania
The Ministry of Energy and Minerals , Wizara Ya Nishati Na Madini in swahili, is a government ministry responsible for managing and governing the mining industry and the energy industry, in Tanzania. The current Minister of Energy and Minerals is William Ngeleja. Its offices are located in Dodoma...
is responsible for the management and governing the mining and energy industry in Tanzania.
Gold
Gold mining in Tanzania in modern times dates back to the GermanGermany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
colonial period, beginning with gold discoveries near Lake Victoria
Lake Victoria
Lake Victoria is one of the African Great Lakes. The lake was named for Queen Victoria of the United Kingdom, by John Hanning Speke, the first European to discover this lake....
in 1894. The first gold mine in what was then Tanganyika
Tanganyika
Tanganyika , later formally the Republic of Tanganyika, was a sovereign state in East Africa from 1961 to 1964. It was situated between the Indian Ocean and the African Great Lakes of Lake Victoria, Lake Malawi and Lake Tanganyika...
, the Sekenke Gold Mine
Sekenke Gold Mine
The Sekenke Gold Mine was an underground gold mine in the Shinyanga Region of Tanzania.In the era before the Second World War, Sekenke was the largest single producer of gold in present-day Tanzania, then the colony of Tanganyika...
, began operation in 1909, and gold mining in Tanzania experienced a boom between 1930 and World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
. By 1967, gold production in the country had dropped to insignificance but was revived in the mid-1970s, when the gold price rose once more. In the late 1990s, foreign mining companies started investing in the exploration and development of gold deposits in Tanzania, leading to the opening of a number of new mines, like the Golden Pride mine
Golden Pride Gold Mine
The Golden Pride Gold Mine is an open pit gold mine located in Nzega district of the Tabora Region of Tanzania. It is operated by Australian mining company Resolute Mining Limited....
, which opened in 1999 as the first modern gold mine in the country, or the Buzwagi mine
Buzwagi Gold Mine
Buzwagi Gold Mine is an open pit gold mine in the Shinyanga Region of Tanzania, located 6 kilometres southeast from the town of Kahama. It is operated by African Barrick Gold....
, which opened in 2009.
External trade and investment
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
. Government steps to improve that climate include redrawing tax codes, floating the exchange rate, licensing foreign banks, and creating an investment promotion center to cut red tape
Red tape
Red tape is excessive regulation or rigid conformity to formal rules that is considered redundant or bureaucratic and hinders or prevents action or decision-making...
. Tanzania has mineral
Mineral
A mineral is a naturally occurring solid chemical substance formed through biogeochemical processes, having characteristic chemical composition, highly ordered atomic structure, and specific physical properties. By comparison, a rock is an aggregate of minerals and/or mineraloids and does not...
resources
Natural resource
Natural resources occur naturally within environments that exist relatively undisturbed by mankind, in a natural form. A natural resource is often characterized by amounts of biodiversity and geodiversity existent in various ecosystems....
and a largely untapped tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
sector, which might make it a viable market for foreign investment.
The stock market capitalisation of listed companies in Tanzania was valued at $588 million in 2005 by the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
.
Zanzibar
ZanzibarZanzibar
Zanzibar ,Persian: زنگبار, from suffix bār: "coast" and Zangi: "bruin" ; is a semi-autonomous part of Tanzania, in East Africa. It comprises the Zanzibar Archipelago in the Indian Ocean, off the coast of the mainland, and consists of numerous small islands and two large ones: Unguja , and Pemba...
's economy is based primarily on the production of clove
Clove
Cloves are the aromatic dried flower buds of a tree in the family Myrtaceae. Cloves are native to the Maluku islands in Indonesia and used as a spice in cuisines all over the world...
s (90% grown on the island of Pemba
Pemba, Tanzania
Pemba Island, known as "The Green Island" in Arabic , is an island forming part of the Zanzibar archipelago, lying off the east coast of Africa in the Indian Ocean. It is situated about 50 kilometres to the north of the Unguja . In 1964 Zanzibar was united with the former colony of Tanganyika to...
), the principal foreign exchange earner. Exports have suffered from the downturn in the clove market. Tourism is an increasingly promising sector, and a number of new hotels and resorts have been built in recent years.
The Government of Zanzibar has been more aggressive than its mainland counterpart in instituting economic reforms and has legalized foreign exchange bureaus on the islands. This has loosened up the economy and dramatically increased the availability of consumer commodities. Furthermore, with external funding, the government plans to make the port of Zanzibar a free port. Rehabilitation of current port facilities and plans to extend these facilities will be the precursor to the free port. The island's manufacturing sector is limited mainly to import substitution industries, such as cigarette
Cigarette
A cigarette is a small roll of finely cut tobacco leaves wrapped in a cylinder of thin paper for smoking. The cigarette is ignited at one end and allowed to smoulder; its smoke is inhaled from the other end, which is held in or to the mouth and in some cases a cigarette holder may be used as well...
s, shoes, and process agricultural products. In 1992, the government designated two export-producing zones and encouraged the development of offshore financial services. Zanzibar still imports much of its staple
Staple food
A staple food is one that is eaten regularly and in such quantities that it constitutes a dominant portion of a diet, and that supplies a high proportion of energy and nutrient needs. Most people live on a diet based on one or more staples...
requirements, petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
products, and manufactured articles.
See also
- Economy of AfricaEconomy of AfricaThe economy of Africa consists of the trade, industry, and resources of the people of Africa. , approximately 922 million people were living in 54 different countries. Africa is by far the world's poorest inhabited continent...
- List of companies of Tanzania
- Taxation in TanzaniaTaxation in TanzaniaIn Tanzania the Income Tax Act, 2004 came into effect in July 2004. This act restructured the income tax system in line with modern requirements and repealed the previous Income Tax Act, 1973. Tax is levied on income from employment, income from business and income from investment. Taxable...
External links
- Tanzania Economic Forum
- Confederation of Tanzanian Industries
- CIA World Factbook Tanzania economy
- Tanzania latest trade data on ITC Trade Map
Government ministries, agencies and sites