The Tanzania Swot Analysis Economics Essay

INTRODUCTION

Tanzania is an East African country with a surface area of 94.3 million hectares (ha) of which 22 million hectares (23%) is allocated to reserves which includes National Parks (4.2 million hectares) Game Reserves (7.7 million hectares) and Forest Reserves (10.1 million hectares). Tanzania has the largest share of land resources allocated as reserves of any country in sub-Saharan Africa.

The gross area cultivated/planted annually is only about 5.1 million ha which is only about 5% of surface area Tanzania. The other arable land but not cultivated is 10 million ha, much of it used as pasture. Within the reserves, there is an additional 4 million ha suitable for cultivation.

Agriculture in Tanzania is dominated by small holder farmers (peasants) cultivating an average farm sizes of between 0.9 hectares and 3.0 hectares each. Taxes from these farmers contribute very little to the total annual revenue.

Tanzania’s first comprehensive tax legislation came at the start of the Second World War which defined real property income as income from dividends or interest, royalty or rent. It is nevertheless remarkable to note that prior to 1958, the Act imposed a tax rent minus any expenses incurred in the production of the income. The law has undergone several amendments concerning taxation of land rents.

Tanzania in the 1920s had a very high standard of surveying and registration thereby making statutory taxation of property rates possible. Between 1959 and 1964, records show that average land rent contributed 4.1% to Tanzania’s GDP. This gain was however reversed when Tanzania adopted Socialism in 1967 which brought the nationalization of all private property. Section 8 of the Act under which rents were brought into the concept of income was abandoned.

In 1955, site-value rates were introduced in Dares-salaam and the eleven autonomous urban councils while rating in other parts of the country was conducted by government appointed councils. Each of these autonomous councils including Dares-salaam city council was required to set up its own rate applicable to the unimproved land values only but subject to approval by the minister of the local government. The rates ranged from 2.5% to 3.5% while certified government valuers were to undertake revaluations every five years.

The need to formulate a new economic and social development vision for Tanzania emanated from the outcomes of economic reforms – especially those which were pursued since 1986. These social and economic reform measures were taken in response to the economic crisis that had persisted in the country and the world as a whole since the early years of 1980s. Secondly, the government had realised that those earlier development policies and strategies were not in consonance with the principles of a market led economy and technological development occurring in the world. The government therefore started preparing three year reform programmes with strategies, generally, focusing on only a few economic and social areas, and the areas of focus changing frequently. These structural adjustment programmes, have been followed for a long time, about fifteen years. Over this long period, the whole philosophy of working for the country’s development and that of its people started losing direction and as a result the country lost its vision which had originally been based on long-term development objectives. The government and the society in general realised that the nation lacked direction and a philosophy for long-term development.

Recent economic data presents a mixed picture in Tanzania of improving economic growth while poverty persists and aid dependency is high. Some experts remain concerned about the lack of progress with poverty reduction despite improved economic growth. With poverty reduction as a key objective, the Tanzanian government has embarked on a set of ambitious reforms, dealing with the political and economic constraints on development. The government’s poverty reduction strategy now provides the policy framework for all. Consequently, there have been some positive trends in economic growth and poverty reduction.

STRENGTHS

DEMOGRAPHY AND ENVIRONMENT

Tanzania’s population is estimated at 36.6 million people (2006). The population growth rate has been decelerating steadily, to an estimated 1.9 percent per year in 2008-09, on par with the regional average of 2.1 percent, and Kenya’s growth rate of 1.8 percent. This deceleration will contribute to more rapid growth of per capita income over the next two decades, while also helping to ease the growth of demand for public services, including education and health.

At the same time, the working age population is steadily becoming better educated, with the adult literacy rate reaching 77.1 percent in 2002. This is much better than the 59.8 percent average for LIC-Africa.

Tanzania was one of the first countries to complete a Poverty Reduction Strategy Paper, in October 2000. The poverty reduction strategy has focused on rural development, promotion of microfinance, development of the infrastructure, and facilitation of private investment in order to foster rapid economic growth to benefit the poor. The PRSP progress report also emphasizes a pressing need to improve governance, as a foundation for poverty reduction.

Tanzania is clearly moving in the direction of gender equality. One basic indicator is the gender gap in adult literacy. This gap has an important effect on growth potential, because maternal education is strongly related to children’s health, education, and nutrition. In Tanzania, the male literacy rate (85.2 percent) is 1.23 times higher than the female rate (69.2 percent). Five years earlier the ratio was 1.29, indicating considerable progress, since this figure changes only gradually over time. In comparative terms, the gender literacy differential in Tanzania is considerably better than the average ratio of 1.44 for LIC-Africa.

GROWTH PERFORMANCE

Since the 1990s, per capita GDP in Tanzania has been on the rise. Tanzania’s growth trend has been impressive; annual GDP growth has averaged 6.4 percent over the last five years, exceeding seven percent in 2008 and 2009. Tanzania’s growth rate of 6.3 percent in 2010 is well above the rate achieved in Kenya (3.1 percent) and in South Africa (3.7 percent). It is also higher than the regression benchmark for countries with Tanzania’s characteristics (5.2 percent). This strong growth performance reflects the fruits of responsible monetary and fiscal policy, concerted reforms, rapid export growth, and significant debt relief.

Basic indicators of productivity are signaling excellent growth prospects. Growth in labor force productivity averaged 3.2 percent per year from 1999 to 2003, and exceeded 4.5 percent for the last two years of the period. Current labor productivity growth is more than double the average for LIC-Africa (1.9 percent), and far better than the figures for Kenya (-0.9 percent) and South Africa (0.9 percent). Investment productivity has also been strong, and improving. The incremental capital-output ratio (ICOR), which is the amount of capital investment needed per unit of extra output, averaged 3.0 for the period 1999-2003. A sustained value below 4.0 is a hallmark of efficient investment. Bearing in mind that lower values represent higher efficiency, the ICOR for Tanzania is better than the LIC-Africa average (4.7) and performance in South Africa (3.5), and far superior to efficiency levels in Kenya.

FISCAL AND MONETARY POLICY

Tanzania’s macroeconomic policy has been solid in recent years. Budget deficits have been low, signaling sound fiscal management. The overall deficit, inclusive of grant receipts, has been below 3.5 percent of GDP for the past five years, averaging 2.1 percent; this is well below the LIC-Africa standard of 4.6 percent.

AQUACULTURE

Over recent years, annual production of aquaculture has leveled‐off at around 350,000 tonnes of which some 290,000 tonnes (85 %) originates from the great lakes, 50,000 tonnes (15 %) from the relatively unproductive inshore marine fishery and the balance from smaller lakes and reservoirs.

These figures make Tanzania the second largest producer of fish from inland capture fisheries (particularly Lake Victoria) in Africa and the eighth in the world after China, India, Bangladesh Indonesia and Uganda. Current aquaculture initiatives include; donor‐funded development initiatives promoting small‐scale or SME‐based and community based aquaculture for subsistence and local markets; small‐holder seaweed farming under contract arrangements for export by international processors; and large‐scale commercial aquaculture operations targeting international export markets. Tanzania is the main exporter, producing some 24,000 tonnes of fillets from Lake Victoria, worth EUR 210 million in 2007, equivalent to 3 % of national GDP.

TOURISM

Tanzanians are well known for their hospitality, open and jovial sense of humour, friendly approach and generosity to foreigners. The people are endowed with a wealth of culture, history and artistic talent that has put Tanzania on the world map as one of the leading nation in that respect.

The Government of Tanzania views tourism as a significant industry in terms of job creation, poverty alleviation, and foreign exchange earnings. Tourism today is receiving a greater attention than ever before from international development agencies and from national governments. To many countries, tourism is the highest foreign exchange earner and an important provider of employment.

According to the World Tourism Organization, in 2000 there were 698 million tourist arrivals worldwide that generated 478.0 US $ billion. According to the statistics in 2000, Africa region showed average annual growth rate of 4.5% in arrivals. Statistics available also indicate that, Africa’s market share in 1999 was 2.0%. Given the size of their continent, the beauty of Africa, the diversity and uniqueness of tourism attractions in Africa, there is stillroom for a bigger growth in both tourist arrivals and receipts. Tanzania is therefore determined to have its fair share in this important industry.

Tourism in Tanzania plays a vital role in the country’s economic development. It is one of the major sources of foreign exchange. The industry is also credited for being one that offers employment opportunities either directly or indirectly through its multiplier effect. The sector directly accounts for about 16% of the GDP and nearly 25% of total export earnings. It directly supports the estimated 156,050 jobs (2000). Foreign exchange receipts from tourism grew from US$ 259.44 million in 1995 to $ 729.06 million in 2001. These receipts were generated by tourists’ arrivals in the stated years, which have shown a steady growth from 295,312 in 1995 to 525,000 in 2001.

COTTON PRODUCTION

Cotton was introduced to Tanzania by German settlers in 1904, but the initial crops failed. Reintroduced in 1920s by the British; significant growth was achieved after local research developed pest resistant strains in 1930s. Cotton is grown on farmland on around 560,000 hectares by between 350-500,000 small holding farmers. It is estimated that 50 percent of Tanzania’s population is to some extent dependent upon revenue from cotton.

When considering cotton output, it touched 44,000 tons in 2006-07, 67,000 tons in 2007-08 and nearly doubled to 124,000 tons in 2008-09. These figures accounted for 49, 51 and 75 percent, respectively, when compared with cotton output of East African countries and constituted for 3.6, 6.1 and 12.2 percent, when corresponded with cotton production for the whole African continent.