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       Chapter IX: Economic Aspects of Capital City Development

National Economic Characteristics

This is a menu of the topics on this page (click on any): NATIONAL ECONOMIC CHARACTERISTICS Imports and Exports    The Parastatal Sector of the Economy    National Economic Development Opportunities   .

NATIONAL ECONOMIC CHARACTERISTICS

Imports and Exports

In common with other parts of Africa, export of raw materials to the world's more industrialized nations characterizes Tanzania's economy. The largest proportion of these exports consists of agricultural products, such as cotton, sisal, coffee, cloves, livestock, hides and meat. As yet, few of the country's known mineral deposits have been exploited, with the exception of diamonds in Mwadui and the industrial base, particularly outside Dar es Salaam, is still very limited.

Most of Tanzania's requirements for manufactured goods, such as industrial equipment and tools, vehicles and spare parts, and the oil and other raw materials it does not produce itself, must be imported. These imports also include a significant proportion of the country's food requirements, particularly after the unusual droughts of recent years.

Because of the world's market, prices for primary products are subject to wide fluctuations; Tanzania's foreign exchange earnings also vary relatively unpredictably. On the other hand, the costs of importing manufactured goods and oil are continually increasing. These two factors, have greatly contributed to the weakening of the economics of Tanzania and most other African countries. And, moreover, the rising import expenditures and the uncertainty of values of export earnings, make it very difficult to project the national financial resources which will be available for development programmes at any one time.

Many African nations, including Tanzania, have begun to process their own raw materials and to develop local consumer goods industries, partly for export, but more significantly as a means of import substitution. During the last decade, considerable progress has been made in this regard and the potential for accelerated growth is significant. However, this is a slow process and the most important stimulus for economic growth still is the export of unprocessed raw materials.

Due to Tanzania's current development efforts and related investment programmes, imports have tended to rise at a higher rate than exports, leading to increasing trade balance deficits. As a result, external financing at present approximates 50% of all development funds. This situation could become worse in the short-term, because the world prices of Tanzania's principal export products are not increasing as rapidly as those of its imports. However, Tanzania's substantial investment in the creation of new infrastructure and the planned village development programme, are on the threshold of generating major production increases.

The Parastatal Sector of the Economy

The primary responsibility for economic development In Tanzania is vested in so-called parastatals. These are companies or institutions, established by Acts of Parliament, in which the Government owns at least 51% of the shares. Parastatal organizations include existing firms which are nationalized, as well as newly established companies. Since the Arusha Declaration, this sector of the economy has grown rapidly, although it is still too early to quantify its real importance precisely, in terms of the total national development programme.

Parastatal involvement in the manufacturing sector is currently the most important area, in terms of the parastatal's contribution to the Gross Domestic Product. Since 1966, at least 50% of all new manufacturing investment was contributed by parastatal organizations and during the period 1964-1970, parastatals contributed 65% of total investment. Thus, the parastatal sector is indeed carrying out its mandate of stimulating dynamic general development.

Unfortunately, however, the parastatal sector, much as it has developed since Independence, is not yet geared to the production of capital goods, such as industrial equipment, machine tools and construction and major manufacturing establishments. A well-developed capital goods sector is the most important factor in contributing to the growth of the economy's industrial component. It possesses the technical knowledge, skills and facilities necessary to produce the machinery requirements of production. Indeed, it is the only sector which can transform the Tanzanian economy from a dependency relationship to one of economic independence. Not only does it create the linkages which stimulate further industrial growth, but it eases the crucial problem of the reliable and affordable availability of spare parts and tools. The present absence of a capital goods sector forces Tanzania to import these essential items and deprives the country of economic independence. In addition, it results in the need to allocate large foreign exchange reserves for this purpose, funds which would otherwise be available for other development projects.

The Government is fully aware of these facts and the Third Five Year Plan promises to intensify the production of capital goods. But thusfar, the parastatal sector has largely concentrated its efforts on the production of consumer goods, even though it has more recently begun to develop intermediate industries which will manufacture such products as fertilizer, chipboard and hardboard. The most difficult decisions, however, revolve around the extent to which the Government will allocate the national income between the consumption and the development investment sectors of the economy; these are planning decisions which will be made at the highest political level and are a major priority for the Government.

National Economic Development Opportunities

Tanzania's population in 1974 was estimated at 14.5 million people. It is anticipated that this number will double to about 30 million people by the end of this century.

The Tanzanian people and their dedication to implement the principles of self-reliance, self-help and hard work, represent the country's greatest opportunity for economic development. Their own efforts and those of their leaders are already increasing agricultural production significantly and are creating new rural infrastructure with a minimum of financial investment. Tanzania's performance of effectively mobilizing its human resources is indeed exceptional and should be an example for other developing nations.

Agricultural and forestry production already represent about 40% of Tanzania's Gross Domestic Product and the opportunity exists to increase this production with better farming methods and by opening up new land for these purposes. The country's total land area comprises almost one million square kilometres, of which vast areas are still uncultivated. It has, for example, been estimated that some 15,000 square kilometres of new agricultural land could be brought under production with suitable irrigation, although its exploitation may prove to be very costly. But the productivity of the presently cultivated areas can be much improved with relatively lower direct financial investment.

The country possesses significant forest resources, with about 35% of the total land area classified as forest and woodland. A preliminary forest products study was recently carried out in connection with the Capital's Master Plan, to determine the opportunities to produce the necessary construction materials. It indicated that the production of timber, plywood and other products in the Dodoma area can be substantially increased with relatively low investment, by improving sawmills and related plant and machinery and with more effective working methods and manpower training. This suggests that a similar programme on a national scale may prove to have significant economic potentials.

Other construction materials, including cement, clay products, rolled steel and other manufactured goods, also offer opportunities for development. In this regard, the establishment of a clay products industry to supply the Capital City's requirements is currently in progress. The manufacture of import-substitution consumer goods continues to grow and will make an increasingly important contribution to the National economy.

Tanzania possesses important mineral deposits, including coal, iron and phosphates. The Government expects that exploitation will start in the near future.

Fishing in the Indian Ocean and the country's inland lakes, is as yet a relatively insignificant component of the economy. It has, however, a considerable potential for growth which should be pursued.

The national production of capital goods is still relatively low, in terms of Tanzania's goal to achieve full economic independence. The Third Five Year Plan, however, is expected to put great emphasis on this sector of the economy, which should result in important improvements.



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Copyright: Project Planning Associates Limited, Toronto, Canada, directed by Mr. Macklin Hancock and recipient "The Government of Tanzania, Capital Development Authority under the auspices of Mr. George Kahama.".