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Project ID:00079844Description:Economic Growth
Tanzania One UN Fund
Start Date *: 14 Sep 2011
C1: Econ Growth & Poverty Red
End Date*: 31 Dec 2016
Country: Tanzania Project Status: Operationally Closed
  Participating Organization:   Multiple

Economic Growth

Despite healthy economic growth, income poverty declined only marginally from 35.7 percent in 2000/1 to 33.6 percent in 2007.With a population growth rate of 2.9 percent (based on the 2002 census), the number of poor Tanzanians increased by 1.3 million over the last decade, reaching 12.9 million on the Mainland with vast geographical disparities in the incidence and depth of poverty. Such rapid population growth and limited accrual of benefits from growth for the poor poses challenges for achieving all the MDGs. Growth occurred in sectors where employment generation is low, whilst employment for the half a million people entering the labour market each year was in the poorly remunerated agricultural and the informal sectors, further pressurising poverty levels. Notwithstanding, amidst the mismatch between growth and poverty reduction, income equity - measured by the Gini Coefficient – remained unchanged between 1990 and 2007 at 0.35.

At 80 percent, the employment to population ratio is relatively high when compared to other countries in the region. By global standards, the unemployment rate in Tanzania is not abnormally steep, but a vast number (36 percent of those employed) live below the nationally defined poverty line, a further indication of low productivity and deficits in availability of decent work. Overall, the rate of unemployment is higher among young people (14.9 percent in 2006), and amongst women 12.6 percent in 2006): amongst men, it was 10.7 percent. Average monthly incomes amongst employed men are 1.67 times higher than that of female workers.

One of the most striking features of the labour market and employment is the existence of a large informal sector estimated to be more than 90 percent of the economy. The sector is characterized by poor working conditions.

Tanzania's fast growing industrial sector is still one of the smallest in Africa (22.6 percent by GDP contribution) and adds little to employment creation. Agriculture, the largest sector, accounts for one-quarter of GDP, 85 percent of exports, and employs 80 percent of the country's workforce (90 percent women). While some structural changes in the Tanzanian economy are visible, these shifts have not benefited the labour-intensive sectors, such as agriculture, fishing, services all of which experienced a decline in GDP growth rates from 2007. Global experience has shown that gains in agriculture productivity in particular can disproportionally benefit the poor and play a key role in reducing poverty.

Low rural sector productivity arises mainly from inadequate infrastructure investment, access to farm-inputs, extension services and credit, application of modern technology, trade and marketing support plus heavy dependency on rain-fed agriculture and unsustainable use of natural resources. Despite reform efforts, lasting structural change has proven elusive. Off-farm employment in the poorly paid informal sector is rising. Rural private sector and community institutions are undeveloped, further compounding inefficiencies and service gaps.

Productivity in agriculture as an enabler for poverty reduction cannot be overstated, however sustainable poverty reduction requires the economy to have an adequately developed non-agriculture sector to ease pressure on agriculture. The structural move towards manufacturing and services requires capital investments, human skills, and technological improvements all of which are in short supply in Tanzania. Without greater productivity gains and sound investments in physical and human capital, the country will remain vulnerable to economic shocks and the goal of achieving major poverty cuts will remain elusive. Thus, national and sub-national initiatives that provide support to enterprise creation and enhance productivity in agriculture and agro-industries including sustainable access to markets will enable more producer households and small businesses to enter the economic mainstream and broaden the base of economic participation.

Poor people are disproportionally concentrated in agriculture, micro and small enterprises, and the informal sector in Tanzania. In each sector young men and women) to benefit from economic growth, the country needs more coherent national policies and strategies for creating decent jobs in agriculture, industrial/small business sector, and social enterprises. Culture is a fundamental component of sustainable development. Pro-poor policies are also required in cultural and creative industries to boost their role in economic growth. Trade policies need harmonisation: they currently provide insufficient space for integration and promotion of small local producers and proto industrial enterprises, undermining their potential to provide economic opportunities for the poor. Moreover, Government's technical capacity for implementing pro-gender sensitive economic policies is particularly weak and requires significant support.

Broadening socio-economic development and effectively implementing the country's poverty reduction strategies continue to be serious challenges in Tanzania. Creating actionable plans has been constrained by key capacity deficits, limited financing, and the challenge of prioritizing pro-poor expenditure. Tanzania requires support in accessing large-scale infrastructure development finance in addition to managing ODA and general budget support. Technical assistance and knowledge sharing is also required to enable the GoT to manage the economy for more effective pro-poor growth and promote equity enhancing policies, productivity growth, and decent work outcomes.

Tanzania has made little progress towards reducing extreme hunger and malnutrition. The 2010 Hunger Index ranks the situation as 'alarming'. Children in rural areas suffer substantially higher rates of malnutrition and chronic hunger, although urban-rural disparities narrowed for both stunting and underweight. Food poverty declined from 21.6 percent in 1991 to 16.6 percent in 2007. Nationally, the percentage of underweight children (under 5's) hardly dropped from 22 percent in 2004/5 to 21 percent in 2010, whilst the absolute number of people affected by chronic hunger remains high: food consumption of 4.1 percent of households in rural Mainland Tanzania is 'poor' and 18.9 percent 'borderline poor.

While on a national level Tanzania regularly produces sufficient food for its requirements, many regions particularly in central, south east and north east Tanzania are vulnerable to hunger and food insecurity. Food insecurity is mainly a result of insufficient access to food at the household level leading to use of adverse coping strategies to respond to recurrent shocks such as high food prices, drought, pests and diseases. Environmental management and climate change adaptation amongst rural producers is inadequate as are the safety nets for mitigation of such reoccurring livelihood shocks that differentially affect women and men.

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If you have questions about this programme you may wish to contact the RC office in Tanzania or the lead agency for the programme.

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