Thursday, February 12, 2009


The United Republic of Tanzania
August, 2007
August 2007
i Table of Content
iiList of Tables
ivList of Acronyms and Abbreviations
A transition economy is an economy whish is changing from a planned economy to a free market.
Transition economies undergo economic liberalisation, letting market forces set prices and
lowering trade barriers, macroeconomic stabilisation, where immediate high inflation is brought
under control, and restructuring and privatisation, in order to create a financial sector and move
from public to private ownership of resources. Transition process is usually characterised by the
changing and creating of institutions, particularly private enterprises; changes in the role of the
state, thereby, the creation of fundamentally different governmental institutions; and the promotion of private-owned enterprises, markets and independent financial institutions.
Absolute advantage refers to a situation where by a country’s output per unit of input of particular goods and services produced is higher than that of another country.
Agroprocessing industry refers to the subset of manufacturing that processes raw materials and
intermediate products derived from the agricultural sector. Agroprocessing industry thus means
transforming products originating from agriculture, forestry and fisheries.
Assembly line is a manufacturing process in which interchangeable parts are added to a product
in a sequential manner to create a finished product.
Balance of payments (or BOP) measures the payments that flow between any individual country
and all other countries. It is used to summarise all international economic transactions for that
country during a specific time period, usually a year. The BOP is determined by the country’s
exports and imports of goods, services, and financial capital, as well as financial transfers. It
reflects all payments and liabilities to foreigners (debits) and all payments and obligations received from foreigners (credits).
Balance of trade (or net exports) is the difference between the monetary value of exports and
imports in an economy over a certain period of time. A positive balance of trade is known as a
trade surplus and consists of exporting more than is imported; a negative balance of trade is
known as a trade deficit or, informally, a trade gap.
Business environment is the social, technological, economic and political environment in which
a business functions. The business environment affects organisational decisions, strategies,
processes and performance.
Capacity utilisation measures the rate at which firms make use of their capital productive
capacities, such as factories and machinery. Capacity utilisation generally rises when the economy is healthy and falls when demand softens. As such, it is useful as an economic trend indicator, reflecting overall growth and demand. High rates of capacity utilisation generally exert inflationary pressures owing to scarce resources facing high levels of demand. However, it may also lead to new capital investments (i.e. new factories or plants) which promote future growth.

Foreword by the Minister

This publication shows the performance of industrial sector following an industrial survey that was undertaken by the Ministry of Industry, Trade and Marketing (MITM). It provides industrial statistics that reflect the contribution of the sector to economy. More specifically, the publication evaluates the industry sector by looking at a number of variables, including capacity utilisation, revenue generation, export earnings, employment levels, ownership pattern, size and spatial regional distribution of industries, return on investments, and contribution to corporate social responsibility.
This survey would not have been possible without the strong support and guidance by Dr. S. L. Tax, the Permanent Secretary, MITM, and Dr. F. M. Turuka, the Deputy Permanent Secretary, MITM. The survey team was guided and supervised by Mr. A. A. Nyiti, Director of Industry Development and Ms. E. S. Sikazwe, Assistant Director. The field work, data analysis and report writing was carried out by Mr. E. P. Mhede, Mr. A. K. Likwelile, Ms. A. Z. Kibuga, Mr. E. D. Kitundu, Mr. F. Romani,
Mr. E. Mkandya, Mr. A. Philip, Mr. A. M. Mnyenyelwa, Mr. D. Yohana, Mr. R. Senya, and
Mr. M. Shayo. The Ministry of Industry, Trade and Marketing is indebted to a number of institutions and people who supported the Ministry of Industry, Trade and Marketing in many ways while carrying out the industrial performance survey. Their great support and contributions enables the Ministry to complete the survey successfully.
A special note of gratitude is extended to the National Bureau of Statistics (NBS) for its unfailing
technical support to this survey. Our appreciations go to Ms. A. Chuwa, the Director General for her commitment and guidance during the entire process. We are equally indebted to the members of the Survey Team from NBS particularly Ms. J. Sawe, Mr. A. M. Makbel, Mr. G. Mwiza and Mr. A. Kinyage for their tireless efforts and great contributions at different stages of the Survey.
We are also thankful to the Prime Ministers’ Office through Regional Administration and Local
Government authorities in all twenty one (21) regions in Tanzania Mainland where this survey was carried. Specifically, the Ministry highly appreciates the invaluable support received from the Regional Commissioners, Regional Administrative Secretaries, District Commissioners, Regional Trade Officers, District Trade Officers and Ward Executive Officers for their assistance and facilitation in many ways while undertaking the survey. We also thank the Ministry of Finance and the Ministry of Planning, Economy and Empowerment, the Tanzania Investment Centre (TIC) and Bank of Tanzania for their invaluable inputs and contribution to this report.
We also acknowledge the role played by representatives of the private sector, through their associations such as Confederation of Tanzania Industries (CTI) and Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA), and through individual investors and industrial entrepreneurs, for their inputs that ensured that findings in this report reflect the reality on the ground.
Special thanks are extended to Dr. P. J. Makungu, Director General, CAMARTEC; Dr. J. Kweka,
Senior Economist, World Bank Tanzania; Prof. E.M. Senkondo, Sokoine University of Agriculture
and Mr. B. Lyimo, Chief Executive Officer, Better Regulation Unit, for their invaluable comments
and inputs on the several drafts of this report.
While the inputs and support of each and every individual at different levels are sincerely appreciated, the Ministry of Industry, trade and Marketing take full responsibility for any shortfalls in this report.
Executive Summary
Chapter 1: Introduction

Chapter 2: Methodology
Chapter 3: Survey Results
There were great
regional differences in
terms of industrial
establishment and
development. About 74
percent of the surveyed
industries were located
in ten (10) regions.
3.1 Spatial Distribution of Industries
This section presents an overview of the spatial distribution and other
characteristics of the surveyed industries and related establishments. Among other
things, the results in this section show the regional distribution of the surveyed
industries in terms of numbers, size, type of industries and ownership patterns.
3.1.1 Geographical distribution of surveyed industries by regions
The survey findings show that there were great regional differences in terms of
industrial establishment and development. About 74 percent of the surveyed
industries were in ten (10) regions (Dar es Salaam, Mwanza, Arusha,
Kilimanjaro, Tanga, Morogoro, Manyara, Mbeya, Singida and Mara); only 26
percent of the surveyed industries were in the remaining eleven (11) regions.
Regions that were found to be least developed industrially were Lindi, Rukwa,
Ruvuma, Pwani, Kigoma and Tabora. Together they constituted only 4.99 percent
of the surveyed industries (Table 4). This indicates that there are factors that
hinder the development of the industrial sector in these regions.
A large proportion of large scale industries (74 percent) dominate and located in Dar es
Salaam, Tanga, Arusha, Mwanza and Morogoro.
Information from other sources shows that Dar es Salaam is the dominant location for Tanzanian industrial sector in terms of number of establishments, employment and MVA (URT, POPP, NBS, 2003). About 45 percent of the total industrial establishments are located in Dar es Salaam, which also contributes around 34.5 percent and 59 percent of the total industrial employments and MVA respectively. The other regions are followed by Tanga, Arusha, Kilimanjaro and Mwanza (UNIDO, 2006). The disparities in these findings are largely explained by the number of industries which responded to the questionnaire. As noted in limitations section, a number of industrial establishments in Dar es Salaam did not respond to the questionnaire.
3.1.2 Distribution of industries by size The Small and Medium Enterprises Development Policy (URT, 2003) defines the criteria for categorisation of industries by size in Tanzania as stipulated 3.1.3 Distribution of industries by type In the course of establishing the different types of industries encountered during the survey, this study categorise d industries into processing, manufacturing and assembling undertakings. Processing industry refers to the subset of
manufacturing that processes raw materials and intermediate products mainly
derived from the agricultural sector. Agroprocessing industry thus means
transforming products originating from agriculture, forestry and fisheries. On the
other hand manufacturing is a mechanical or chemical transformation of inorganic
or organic substances into new products. This transformation can be performed
by power driven machines or hand; and done in a factory or in the worker’s home.
Assembling of the component parts of manufactured products is considered
manufacturing except in cases where the activity is approximately classified in
Earlier findings published by UNIDO in 2001 indicate that Tanzania’s industrial
sector development pattern was dominated by processing industries reflecting the
role of agriculture as the mainstay of the Tanzanian economy. However, findings
from the current study reveal a shift from this pattern. Results show that over the
last few years a gradual growth of the manufacturing sub-sector is occurring and
thus reducing the predominance of processing industries. Out of the 340 surveyed
industries, 52.94 percent were manufacturing industries, 42.94 percent were
processing industries and 4.12 percent were assembling industries (Table 8).
Manufacturing (53 percent) and processing (43 percent) dominate industrial activities.
There are very few assembly and related industries.
3.1.4 Ownership pattern of industries and year of establishmentPrivately owned industries dominate Tanzania industrial sector and constitute97.65 percent compared with the publicly owned industries constituting only 2.35 percent of the industries surveyed. These results verify the positive impact ofmacroeconomic policy reforms and SIDP implementation during Phase I which was characterised by massive privatisation of formerly state-owned industries/enterprises as an instrument for their rehabilitation and expansion of
the installed capacities.
The statistics in Appendix 3 show that 180 (more than 52.9 percent of surveyed industries) were established between 1996 and 2005 as private entities. The broader economic reforms which also redefined the fundamental role of the private sector as the main actor in production and commercial activities is one of the important factors responsible for this change in the industrial ownership pattern. As a result the positive outcomes resulting from the policy and paradigm shift, the Government has deepened implementation of its mandates in promoting
industrial growth and performance by putting in place and operationalising policies and strategies for creating conducive business environment and for the private sector to invest in new industries and participate in developing the requisite physical infrastructure.
The distribution of privately owned industries across regions shows that some regions have not been able to attract private investment in industries. Out of 332 private industrial establishment surveyed, the five regions of Lindi, Pwani, Kigoma, Rukwa and Tabora have the aggregate share of only 8.13 percent which is less than that of Mwanza region alone with a share of 11.45 percent. These differences can be attributed to, among other things, the relative differences in level of infrastructure development between the two groups of regions given in the example above. Another example is that of Dar es Salaam, Mwanza, Arusha, and Mara which have relatively good infrastructure and which presumably as a result have the aggregate share of 36.74 percent of total surveyed private industries.
3.1.5 Public-Private Partnership (PPP) Public-Private Partnership (PPP) is a model of development co-operation focusing on collaboration between the public and the private sector. PPP recognises the importance of the private sector in fighting poverty and reaching other development goals by promoting business, creating income, providing jobs as well as developing a sense of corporate social responsibility. At an advanced level, PPP for economic development is a more formal relationship between the Government, the business community and civil society, including the academic institutions and other support institutions (UNIDO, 2001).
For sustainable PPP, each of the partners should develop mutual trust through continuous and
transparent dialogue. Partners should be willing to share information freely, contribute time and
resources to ensure sustainability. With time both the public and private sector would be responsive to each other’s needs and the population at large would benefit through a vibrant economy. A low level of policy awareness to development stakeholders is one of the stumbling blocks towards an equitable and efficien t public-private partnership (Todaro, 2005).
Public owned industries constitute only 2.35 percent, largely as result of broader economic reforms which redefined the fundamental role of the public sector in production and commercial activities with many industries having been established between 1996 and 2005.
Average capacity utilisation was about 36.6 percent and 42.6 percent in 2005 and 2006
respectively. But there are wide variations in capacity utilisation between regions, sectors
as well as size of industries. Large scale industries exhibit relatively large capacity
utilisation. 3.2 Capacity Utilisation and Labour Productivity 3.2.1 Installed capacity and capacity utilisation Generally capacity utilisation of the surveyed industries indicated that, the capacity utilisation falls short of the installed capacity to a very great extent. Average capacity utilisation of the surveyed 340 industries was 36.55 percent in 2005 and increased slightly to 42.56 percent in 2006 (Table 12).
3.2.2 Labour productivity Annual labour productivity varies by industrial sub-sector as well as by firm size within a particular sub-sector as shown in Table 15 and Table 16. Overall, labour
productivity increased between 2005 and 2006. Large scale industries have higher labour productivity than other industry categories on average which rose from TZS 74,097.01 in 2005 to TZS 81,710.62 in 2006. Labour productivity show wide variation between regions, sectors and industrial scale with large scale industries showing higher labour productivities compared to small, medium types.
On average, the fishery sub-sector emerged with the largest annual labour productivity in 2005 while textile sub-sector was leading in 2006 (Table 16). Sub-sectoral annual labour productivity is closely associated with levels of capital investment per size of industrial firm. This trend is partly attributed to the fact that large industries employ advanced technology that significantly reduces human labour.
On the other hand however, large industries that were using poor technological production techniques also recorded low productivity levels.

3.3.2 Sales revenue The statistics from the surveyed industries showed that non-metallic and
mineral products sub-sector, brewing and sugar sub-sectors have recorded comparatively high sales performance in the country (Table 18). The dominance of the non-metallic sub-sector in the local sales can be attributed to the booming construction sector which recorded a growth of
10.0 percent in 2006 (NBS, 2007). A large proportion of the industries serve the local (domestic) market. Export oriented industries surveyed are linked to traditional export and new non-traditional exports such as in the commodities fishery sector. Large scale industrial establishments are more likely to produce for export than the other categories.

Just like the gross margins returns to investment vary between sectors and industrial sizes. Large scale industries exhibit high levels of returns to investment, presumably due to ttainment of economies of scale. 3.3.4 Returns on Investment The industrial sub-sectors were generally characterised by low returns on industrial investment indicating that many industries had effective but not efficient resource combination and utilisation pattern. This had a variety of causes. Some arose from high costs of utilities, poor infrastructure, a low level of entrepreneurial, management and technical skills. High levels of returns on investment were depicted in large
industries which have already attained economies of scale in the industrial processes. For example, sugar sub-sector industries recorded highest returns on industrial investment worth TZS 70,311.20 in 2005 and TZS 62,361.49 in 2006 (Table 22). 20 3.4 Economic Analysis
3.4.1 Revenue generation buy industrial sub-sectors2 The amounts of tax revenue contributed by the surveyed industries were TZS 367,849.98 millions in 2005 and TZS 309,890.77 millions in 2006 (Table 23). The observed decline in the amount of revenue could be explained by the associated decline in the revenues generated by these entities during the same period. Dar es Salaam region was the largest tax revenue contributor as expected. Other significant contributors to the government revenue vide tax are Mwanza, Arusha, Tanga, Kilimanjaro
and Morogoro (Appendix 4). In both 2005 and 2006, VAT accounted for more than 75 percent of the government revenue from the surveyed industries. Based on the size of industries, the large scale industries contributed more to the government revenue than other category of
industries (Table 24). Value added tax constitutes the largest source of government revenue paid by industrialists, with large scale industries paying more than the other
21 By April 2007, the surveyed industries had employed 97,130, of whom about 28 percent
were females and non- Tanzanians accounting for 1.4 percent.
3.4.2 Employment Survey results show that a total of 97,130 employees were employed in
the surveyed industries up to April 2007 (Table 25) compared with 88,713 employees in 2006 (NBS, 2007), an increase of 8.7 percent. This increase in number of employment opportunities was partly attributed to the commissioning of new industrial projects.
22 employed to cover management posts. The statistics from the surveyed industries
show that foreigners constitute only 1.36 percent of the total employees.
3.4.3 Corporate Social Responsibility While Corporate Social Responsibility (CSR) does not have a universal definition, many regard it as the private sector’s way of integrating the economic, social and environmental imperatives of their activities. The idea of CSR goes beyond what the
corporate bodies and companies are statutorily required to do by law. It incorporates moral and social obligations by the companies to communities concerned. Also, it involves creating innovative and proactive solutions to societal and environmental challenges, as well as collaborating with both the Government, and internal and external stakeholders to improve CSR performance. In the survey, participation of industries in community development aspects through CSR revealed that 61.14 percent of the privately owned industries and 75.0 percent of public industries wereparticipating in community development in the years 2005 and 2006 (Table 26). Participation in Corporate social responsibility among industrialists cover largely
education sector, presumably due to the recent drive by the government to build more primary
and Secondary School classrooms.

3.5 Challenges Facing the Industrial Sector The constraints and obstacles to industrialisation for a low income country like Tanzania are many and structural in nature. Some of the constraints
require long term solutions while others need short to medium term solutions. The major challenges facing the development of the industrial sector in Tanzania have been summarised in Table 30. Whereas these challenges face the industrial sector in general, the binding nature of these constraints depends also on the sector and in some cases the region on the survey (Tables 31 and 32): A wide range of challenges face the industrial sector including power, technology,
infrastructure, legislation and related challenges. However, technology and related challenges seem to affect more publicly owned industries compared to other types of industrial ownerships.
Chapter 4: Conclusion and the Way Forward
Permanent Secretary
Ministry of Industry, Trade and Marketing
NSSF Waterfront Building, Sokoine Drive
P. O. Box 9503, DAR ES SALAAM,
Tel: +255 22 2127898
Fax: +255 22 2125832

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