Factors Contributing to Tanzania's Economic Lag Despite High GDP from Manufacturing

Despite Tanzania leading Africa in GDP from manufacturing, its overall economy remains smaller compared to countries like Nigeria, South Africa, Egypt, and Kenya. This highlights a discrepancy where Tanzania excels in a specific sector but does not translate this success into a broader economic dominance.

Recent Trends in Manufacturing GDP

In the fourth quarter of 2023, Tanzania's GDP from manufacturing decreased to 3,209,649.95 TZS million from 3,258,719.89 TZS million in the third quarter of 2023. Despite this slight decline, the historical data shows significant growth over the years. Since 2005, the GDP from manufacturing in Tanzania has averaged 1,716,435.69 TZS million, with the highest recorded at 3,258,719.89 TZS million in the third quarter of 2023 and the lowest at 373,896.38 TZS million in the first quarter of 2005.

Future Projections

According to TICGL Economics macro models and analyst expectations, Tanzania's GDP from manufacturing is expected to be 3,042,570.00 TZS million by the end of the current quarter. In the long term, projections indicate that this figure will rise to approximately 3,668,406.00 TZS million in 2025 and 3,892,179.00 TZS million in 2026. These projections suggest a continued upward trend, indicating a robust growth trajectory for Tanzania's manufacturing sector.

Comparative GDP from Manufacturing

Comparing Tanzania's GDP from manufacturing with other African countries provides a clearer perspective on its economic standing:

• Nigeria: Recorded 1,824,139 NGN million in March 2024, showcasing significant industrial output but in a different currency, making direct comparisons complex without conversion.
• South Africa: Reported 527,645 ZAR million in December 2023, indicating a strong manufacturing base.
• Egypt: Registered 466,361 EGP million in December 2023, reflecting its established manufacturing sector.
• Kenya: Recorded 220,028 KES million in December 2023, showing steady growth in its manufacturing sector.
• Other countries like Malawi, Gambia, Morocco, Djibouti, and Mauritius report lower figures in their respective currencies, indicating smaller manufacturing sectors compared to Tanzania.

Economic Context and Implications

Tanzania's leading position in GDP from manufacturing within Africa underscores its potential as a manufacturing hub on the continent. However, the overall smaller economy compared to larger African nations indicates that there is room for broader economic development. The manufacturing sector's growth could serve as a catalyst for more diversified economic growth, potentially enhancing Tanzania's overall economic standing in the future.

While Tanzania boasts a high GDP from manufacturing, its overall economy still lags behind other African countries, despite its significant natural resource wealth, particularly in mining. Factors contributing to Tanzania's economic lag compared to other African nations:

1. Diversification of Economy: Tanzania's economy heavily relies on a few sectors, such as agriculture, mining, and manufacturing. While the GDP from manufacturing is notable, a lack of diversification exposes the economy to vulnerabilities. Countries like South Africa and Nigeria have more diversified economies, with strong financial, service, and industrial sectors, which provide resilience against economic shocks.
2. Infrastructure and Logistics: Inadequate infrastructure, including transportation, energy, and telecommunications, hampers Tanzania's economic growth. Efficient infrastructure is crucial for facilitating trade, attracting investments, and fostering economic development. Countries like South Africa and Egypt have relatively better infrastructure networks, which support their economic activities.
3. Investment Climate: Tanzania's investment climate may not be as conducive compared to other African countries. Issues such as bureaucracy, corruption, and inconsistent policies can deter both domestic and foreign investments. Nigeria and Kenya, for example, have been actively improving their business environments to attract more investments, thus stimulating economic growth.
4. Human Capital Development: Tanzania faces challenges in human capital development, including education, healthcare, and skills training. Investing in human capital is essential for fostering innovation, productivity, and overall economic development. Countries like Mauritius and Kenya have prioritized education and skills development, which contribute to their economic competitiveness.
5. Regional Integration and Trade: Tanzania's integration into regional and global markets may not be as robust compared to its counterparts. Enhanced regional integration and participation in trade agreements can boost economic growth by expanding market access and promoting cross-border investments. Countries like Kenya and South Africa benefit from stronger regional trade networks and integration initiatives.
6. Macroeconomic Stability: Maintaining macroeconomic stability is crucial for sustainable economic growth. Factors such as inflation, fiscal deficits, and currency stability influence investor confidence and economic performance. Tanzania needs to ensure sound macroeconomic policies and institutions to support long-term growth, similar to what countries like Egypt and Morocco have been striving to achieve.