by Ben Taylor
Rising growth, no fall in poverty

In its recent Country Economic Memorandum for Tanzania, the World Bank concluded that Tanzania’s economic growth model is not sufficiently inclusive and as a result is continuing to trap many in poverty. The report, entitled Privatizing Growth, stated that while many Tanzanians have come out of poverty in recent years, many others have fallen into it as well: “more than half of those in the lowest quintile of the wealth distribution in 2021 had fallen back from a higher quintile.”

The Bank said many Tanzanians are “exposed to frequent income shocks” and that they are “highly sensitive to such shocks as they tend to own few assets and have limited access to social protection”. Median consumption per adult in 2021 was more than 10% lower than in 2014 due to overlapping shocks that occurred after 2019, according to the report.

The report found that between 2012 and 2018, poverty in Tanzania – measured against the national basic-needs poverty line – only decreased by 1.8 percentage points. Alongside relatively high GDP growth rates in this period, “the near-zero growth elasticity of poverty in Tanzania was one of the lowest in the world,” and “the number of poor Tanzanians rose by 1.3 million over the same period”.

Nevertheless, the report also pointed to Tanzania’s impressive rate of GDP growth in recent years, which has averaged 6.1% per year since 2000, raising Tanzania to Lower Middle-Income Country (LMIC) status in 2020. And this was accompanied by a lot of progress on broader human development: between 2000 and 2020, life expectancy rose from 52 years to 67 years and the average duration of school attendance from 3.8 years to 6.4 years, while in just the last decade the share of Tanzanians with access to electricity has increased from 5.6% to 39.9%.

This contrast – rapid growth without similar rates of poverty reduction – was the focus of much of the report. In particular, the report unpacked different elements that had contributed to the growth, most notably the changing role of exports. Between 2000 and 2012, Tanzanian exports grew by a massive 6.5 times, but more recently were stagnant afterwards, such that the exports-to-GDP ratio increased from 9.6% in 2000 to 20.9% in 2012, but fell back to 14.3% by 2021. The composition of exports changed too, from over 50% agricultural produce in the 2000s, to a very different situation in 2021, where extractives (mostly gold) made up more than half of all merchandise exports.

The report also found that the agriculture sector’s role in the economy had shifted in recent years. Between 2000 and 2014, the percentage of the labour force employed in agriculture fell from 76% to 67%, but more recently the figure has been rising again. The report points to economic shocks and policy factors forcing many who had previously earned a living in other ways to return to agriculture as a backup livelihood mechanism.

Earlier, speaking at the 27th Annual Research Workshop held in Dar es Salaam, the World Bank Africa Region Chief Economist, Andrew Debalen, emphasised that African countries should invest more in human capital. “To attain real transformation in Africa, the organisation of production has to change. Economies of skills are lacking. Large firms have to augment labour with innovation and technology to reach larger markets,” he says.

Speaking at the same event, the Minister for State in the Prime Minister Office, Professor Joyce Ndalichako said that the government has taken bold steps to strengthen the workforce by investing in education from early ages. “The government has increased the education budget and stepped-up enrolment to ensure that all children have access to education. We have built more classrooms, hired more teachers, and allocated more funds to the Higher Education Student Loans Board to enable more students to pursue higher education,” she said.
The former Chief Secretary, Ambassador Ombeni Sefue argued that despite Tanzania’s move towards the market economy, some Tanzanians still hanker for an outdated model that should be consigned to the past.

“Our entering into the market economy notwithstanding, we are still embracing the past economic model. We forget that our economy can grow through cooperation between the private and public sectors. This is where we should be heading,” he said.

“If the government doesn’t trust the private sector and vice versa, there can never be a conducive environment to build collaborations. We’ve always said that there ought to be channels for each party to listen to the other,” Ambassador Sefue emphasised.