Tanzania stands at a pivotal moment in its economic evolution, with the employment landscape undergoing a gradual transformation from a predominantly informal workforce toward increased formalization. This shift promises enhanced economic stability, improved social welfare, and better tax revenue collection for national development.

Current Employment Dynamics

As of 2024, Tanzania’s workforce reflects a striking division:

• Formal Sector: 10.17 million workers (28% of the workforce), primarily in private companies (91.75% of formal jobs).
• Informal Sector: 25.95 million workers (72%), dominated by agriculture and fishing (65–70%), retail and commerce (10–15%), and manufacturing (5–8%).

The unemployment rate, measured at 8.9% in 2022, represents a slight decline from 9% in 2021 and is projected to improve further, reaching 8.1% by 2030.

Formalization’s Role in Economic Development

The drive to increase formal employment, targeting a rise from 28% in 2024 to 38% by 2030, is accompanied by several advantages:

1. Tax Revenue Growth: Formal sector taxes already contribute over TZS 27.64 trillion annually, fueling public services and infrastructure development.
2. Social Protections: Expansion in formal employment ensures broader access to pensions, health insurance, and job security.
3. Economic Planning: A formal workforce aids accurate economic monitoring, investment planning, and resource allocation.

Sectoral Transformation

By 2030, formal sector employment is expected to diversify:

• Manufacturing and industry: 25% (3.95 million jobs)
• Services and tourism: 22% (3.48 million jobs)
• Modern agriculture: 20% (3.16 million jobs)

Conversely, the informal sector will remain significant, with traditional agriculture comprising 55% of informal jobs (approximately 14.18 million).

Challenges in Formalization

Tanzania faces several obstacles in its formalization journey:

• Resistance from Informal Entities: Many businesses perceive formalization as cumbersome or costly.
• Skill Gaps: Workforce readiness for formal roles remains insufficient.
• Infrastructure Deficits: Regional disparities in infrastructure limit growth opportunities.

Regional and Demographic Insights

Regions such as Dar es Salaam and Mwanza illustrate the current dichotomy. In Dar es Salaam, out of a total workforce of 5.38 million:

• 785,674 workers (14.6%) are in formal employment.
• 2.02 million (85.4%) are in informal jobs.

Policy Recommendations

1. Streamlining Business Registration: Simplified procedures can incentivize formalization.
2. Agricultural Modernization: Integrating rural workers into formal value chains can foster productivity.
3. Skill Development: Aligning educational programs with formal sector needs is vital.
4. Digital Transformation: Investments in digital tools for SMEs can create pathways from informal to formal business practices.

Future Projections

Future Projections Summary:

Tanzania's employment landscape is projected to shift significantly between 2024 and 2030, emphasizing formalization:

1. Current Employment (2024):
   • Formal Employment: 28%
   • Informal Employment: 71.8%
2. Target for 2030:
   • Formal Employment: 38%
   • Informal Employment: 62%

Conclusion

Tanzania’s transition to a formalized workforce marks a significant step in its economic development strategy. Achieving inclusive growth, however, will require targeted investments, infrastructural improvements, and effective policy execution. By addressing challenges and leveraging opportunities, the nation can secure sustainable development and improved living standards for its citizens.