Towards achieving industrialization and Sustainable Development Goal Number 9 adopted by the United Nations Member States in 2015 (based on three interconnected pillars that are, infrastructure, industry, and innovation), Tanzania aims to become an economy with a broad and diverse base of manufacturing, processing and packaging industries that will lead both the productive as well as the export trade sector. It is thus Tanzania’s objective through Vision 2025, to become a semi-industrialized country and a middle-income country with the transformation of agriculture and industrialization[1].
To get a glimpse of the strength of the industrial sector when President John Joseph Pombe Magufuli took power in November 2015, it contributed just 6.48% in employment, meaning that as an economic sector, it was still undersized. On the other hand, the agricultural sector contributed 67.77% and the service sector contributed 25.75%.
Thus, in his inaugural speech at the 11th Parliament in Dodoma on 20 November 2015, President Magufuli laid down his government’s priorities, sending out a strong statement that under his leadership, business will not be the same. He made it clear in his speech that one of his priorities would be industrialization, which he emphasized would be key to his plans and hoped that the manufacturing sector will account for 40% of all new jobs by 2020. To reach this goal, industries producing goods for mass consumption such as clothes, textiles, and edible oil would be encouraged and he would also focus on the production of reliable electricity, which is a lifeline for achieving industrialization[2].
Fast forward to 2020, the industrial sector contributes 7.13% in employment, which shows marginal growth compared to the figures in 2015. This nonetheless, is partially attributed to the fact that during these first five years of the 5th administration, the economic environment has been improved to allow the macro-level processes to develop and flourish. This conducive environment is evidenced by, among others; (1) improved road network infrastructure in most parts of Tanzania, (2) improved rural electrification (access and use) through Rural Energy Agency (REA), (3) improved aviation services with the national carrier, Air Tanzania having a fleet size of more than 10 airplanes and flying to 16 destinations, (4) improved water distribution (access) in the country, (5) improved water (sea and inland waterways) transportation, and (6) financial deepening policies which have improved access to financial products by different socioeconomic groups in the country.
In view of the above macro-level achievements, many Local Government Authorities (LGAs or LGA) in Tanzania can now competitively position themselves and fully participate in the industrialization drive instigated by President Magufuli.
LGAs are established under two pieces of legislation, namely; (1) Local Authorities (Urban Authorities) Act, Chapter 288, Revised Edition 2002 of the laws of Tanzania as amended from time to time, which establishes urban authorities, and (2) Local Authorities (District Authorities) Act, Chapter 287, Revised Edition 2002 of the laws of Tanzania as amended from time to time, which establishes district authorities.
The basic functions of LGAs are to (a) maintain and facilitate the maintenance of peace, order, and good government within its jurisdiction; (b) to promote social welfare and economic well-being of all persons within its area of jurisdiction; and (c) subject to the national policy and plans for rural and urban development, to further the social and economic development of its area of jurisdiction.
Based on the primary functions above, LGAs are primarily responsible within their areas of jurisdiction for delivering a broad range of public services, such as roads, water, housing, economic and community development recreation, environment, fire services, among others.
Additionally, the Local Government Finance Act, Chapter 290, Revised Edition 2019 of the laws of Tanzania, empowers an LGA to invest its funds into any venture or undertaking that it deems fit. An undertaking in this case may be in the form of a company. This means that LGAs can set up properly structured commercial entities such as special purpose vehicles (SPVs), with the requisite investment and commercial capacity(ies), to spearhead industrialization within their areas of jurisdiction, which would enable them to focus more on the provision of public services only.
Coupled with an enabling environment, many, if not all LGAs, have adequate local natural resources within their area of jurisdictions, such as, water (sea and freshwater), land, rocks, fish, domestic and wild animals, minerals, forestry, arable land, agricultural produce, rivers and lakes, mountains and hills to mention but a few, which can be exploited for economic gain. LGAs can transform these natural resources into income-generating assets to drive industrial resurgence. It is worth noting that many of the challenges that impacted industrial growth in Tanzania have now been addressed. For instance, the road network infrastructure has improved considerably, such that, markets are now reachable, and electricity accessibility and reliability have also significantly improved.
There are two (2) primary reasons why all LGAs should now emulate the few (such as Maswa District Council through their special purpose vehicle, Ng’hami Industries Company Limited), who have seriously embarked on the industrialization drive by establishing small, medium and large industries through commercial entities.
First is that LGAs will be able to generate income which will allow them to deliver social services effectively and efficiently, and also curb budget deficits from the central government. Currently, resources generated by LGAs are inadequate to support their recurrent expenditures, and intergovernmental transfers (funding) from the central government are also insufficient.
Second, LGAs will also be able to support the central government through income generated from their areas of jurisdictions, similar to government corporations/institutions' annual dividend payments to the central government. In addition, it will give money to the central government through a reduced portion of their intergovernmental transfers.
In order to take advantage of the grants or funding given to support local government initiatives/development around the world, LGAs can seek assistance from international agencies that provide financing (either through grants or blended finance) to LGAs towards the improvement of public services or support LGAs investment through commercial entities. United Nations agencies such as United Nations Development Programme (UNDP) or United Nations Capital Development Fund (UNCDF) provide such assistance, particularly in undertaking feasibility studies that would determine the commercial viability and sustainability of an investment intended to be pursued by an LGA.
In view of the above, it is our
general opinion that LGAs are now better positioned to propel President
Magufuli’s industrialization drive, which in turn, would accelerate and have a
huge positive impact on the local economic development at the micro-level, and
further, oust the misplaced narrative that natural resources found in Africa,
including Tanzania, are a curse.
[1] As we write this article, we acknowledge and applaud the fact that on 1 July 2020, Tanzania joined a limited list of countries in the world who are lower-middle-income economies as classified by one of the Bretton Wood Institutions, the World Bank. It should be noted that the World Bank assigns the world’s economies into four income group categories, that is, low, lower-middle, upper-middle and high-income countries, and every July 1, the World Bank reclassifies these categories based on those economies which have moved to a higher or lower category
[2] Today, this is evident by the on-going construction of the Julius Nyerere Hydropower Station (Stigler’s Gorge dam), which will boost the country’s electricity generation capacity by an additional 2,115 megawatts.
Note: This is not a legal opinion and the contents hereof are not meant to be relied upon by any recipient unless our written consent is sought and explicitly obtained in writing.
