AfDB report blows hot and cold on Tanzania’s 2020 prospects

Wednesday February 26 2020

To support Tanzania’s industrialisation drive, the African Development Bank is financing various projects including those covering cross-border trade.

To support Tanzania’s industrialisation drive, the African Development Bank is financing various projects including those covering cross-border trade. PHOTO | FILE | NMG 

BOB KARASHANI
By BOB KARASHANI
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The African Development Bank has painted a generally rosy economic picture for Tanzania despite it being an election year, but with caveats on youth employment, education sector priorities and government-private sector relations.

In its 2020 Economic Outlook report, AfDB says youth unemployment is rising despite robust economic growth figures, while declining secondary education enrolment is threatening the availability of competitive skills for the emerging local and international job markets.

"Government policy towards improving the country's business and investment climate also remains a work in progress, particularly in tax policy and administration, access to affordable finance and bureaucratic processes," the AfDB report says.

AfDB is among supporters of Tanzania's industrialisation drive, financing a wide array of projects covering infrastructure, agriculture, water and electricity supply, transport and cross-border trade.

These include a $55 million facility approved in December last year to boost reforms in Tanzania’s economic competitiveness through private sector participation.

Incumbent President John Magufuli, a favourite to win a second term in the October election, is set to pursue his industrialisation agenda despite growing donor apathy brought on by some of his administration's controversial and hardline policies.

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But even being one of his strongest backers, AfDB could not resist a few criticisms.

THE PROS

The report cited East Africa as economically the fastest growing region on the continent in 2019, with an estimated growth of five per cent with Tanzania, Rwanda and Ethiopia among the world’s 10 fastest economic growers.

Tanzania registered a 6.8 per cent real GDP growth (down slightly from seven per cent in 2018) against Rwanda's 8.7 per cent and Ethiopia's 7.4 per cent.

The report attributed the positive outlook for Tanzania on a "markedly diversified economy, characterised by robust private consumption, substantial public spending, strong investment growth and an upturn in exports."

Tourism, mining, services, construction, agriculture, and manufacturing were cited among sectors boosting growth, which is projected to be broadly stable at 6.4 per cent in 2020 and 6.6 per cent in 2021.

"(This is) subject to favourable weather, prudent fiscal management, mitigation of financial sector vulnerabilities and implementation of reforms to improve the business environment," the report notes.

THE CONS

On the downside, the report highlights key challenges like low total factor productivity growth, a substantial infrastructure deficit, considerable poverty, and "a skills mismatch in the labour market."

"Tanzania lacks access to the development finance required to bridge the enormous infrastructure gap that comes with its size. Poverty, inequality, and youth unemployment persist despite recent robust growth," the report notes.

While youth unemployment rose to 7.3 per cent in 2016 from 5.7 per cent in 2012, secondary school enrolment declined to 24.7 per cent from 30 per cent.

According to the report, surveyed employers in Tanzania, among other countries, had identified insufficient work skills among applicants as the reason for being unable to fill 40 percent of professional jobs and 17 percent of managerial jobs.

Just 30 per cent of Tanzanian companies were found to be offering formal training in 2019 — less than all the other East African Community member states except South Sudan, but more than the likes of Ethiopia. Rwanda topped the regional bloc in this regard at over 50 per cent.

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