Tanzania - Economy

Overview: Tanzania came to independence in 1961 with a severely underdeveloped economy and extremely limited infrastructure. In an effort to bring about rapid yet socially equitable development, it became an early proponent of African socialism, launched in 1967 with nationalisation of banking, finance, industry and marketing boards; and the resettlement of peasants in communal ujamaa villages, created out of large estates.

However, after an initial boom, the formal economic base shrank, production fell and the parallel economy became a way of life. The Ugandan war, falls in commodity prices and failures of the policy itself brought the country to the verge of bankruptcy by the mid-1980s. Though agriculture contributes 44% of GDP (2002), only 4.5% of land is arable and 1.2% permanent cropland.

Since 1986, new policy directions and IMF-backed structural adjustment programmes have, at considerable cost to social programmes, helped integrate the parallel economy and stimulate growth, which for the most part has been ahead of population growth since the policy change. From the mid-1990s the government embarked on a programme of economic liberalisation and diversification.

The Dar es Salaam Stock Exchange was opened in March 1998. The government has encouraged foreign investment in industry, and especially mining where investments have been made in gold, nickel and cobalt mining. Hundreds of public enterprises were privatised during the 1990s and the programme was continuing in the 2000s, with privatisation of Air Tanzania and Tanzania Railways Corporation.

In July 2001, an immense new gold mine was commissioned near Mwanza, with the potential to make the country the world’s third largest producer of gold. In 2004, natural gas began to flow from the island of Songosongo, in southern Tanzania, via pipeline to a power station in Dar es Salaam; it is used by other industrial plants.

Improvements in production and exports contributed to continuing, steady growth through the 1990s. In the 2000s sound economic management led to strong growth in a climate of generally modest inflation. Growth of at least 6% p.a. was sustained during 2001–07, while inflation was about 5% p.a.

Trade: Exports of goods and services account for 19% of GDP and manufactured exports for 20% of total merchandise exports (2004). The principal exports are gold, diamonds and other gemstones (more than 40% of total exports), manufactured goods, coffee, cotton, cashew nuts, tea and tobacco; the main imports are machinery, transport equipment, consumer goods, industrial raw materials, fuels and food. Main export partners are Japan, India and the Netherlands. Main import partners are South Africa, China, Japan, India, Russia, the United Arab Emirates, the UK, Kenya and the USA.

United Republic of Tanzania was a member (with Kenya and Uganda) of the East African Community, which from 1967 had a common market and many shared services, but collapsed in 1977. The three countries again embarked on developing regional co-operation in 1993, bringing about progressive harmonisation of standards and policies across a wide range of activities, and launching a new East African Community in January 2001 and East African Customs Union in January 2005.