Tanzania manufacturing: Sector opportunity scan - Part I (2018)

Tanzania manufacturing sector scan
A summary of key sectors
Draft document for stakeholder consultation and input
June 2018

Outline
2
Manufacturing sectors
overview
01 02 03
The business environment Public interventions
04
Sector prioritization
05
Annexes

3
Manufacturing sectors overview01
• Overview
• Food products
• Beverages
• Edible oil
• Plastics
• Cement
• Cotton, textile and
apparel
• Chemicals
• Wood and furniture
• Iron and steel
• Soap
• Glass
• Paper and
paperboard
• Leather and related
products
• Pharmaceuticals
• Fertilizer
• Twine and cordage
• Jute
• Summary

Overview
4
• Compared to the region’s economies, Tanzania’s
manufacturing value added remains low at only
6% of GDP, which has been declining in recent
years.
• According to 2013 industrial census data,
Tanzania’s top manufacturing sectors by output
are: food products, beverages, edible oils,
plastics, chemicals, cement and cotton, textile &
apparel (CTA).
• In some of these sectors Tanzania also has
substantial imports, which in the cases of edible
oils, plastics and CTA comprise a mix of both
inputs into its own domestic industry as well as
finished goods that are in direct competition with
these same industries.
• These sectors are also among its top exports.
• Imports of iron & steel, pharmaceuticals and
fertilizers are notably high relative to the local
production base.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%ofGDP
Ethiopia
Kenya
Mozambique
Tanzania
Uganda
Vietnam
Manufacturing value added
Share of manufacturing as a percent of GDP, compared to select countries
Top manufactures by production and export value
Value in $ millions; 2013 industrial census and ITC data
Sources: Trade Map, International Trade Centre: http://www.trademap.org/; Census of Industrial Production, 2013.
- 200 400 600 800 1,000 1,200
Fertilizer
Pharmaceuticals
Leather
Paper
Glass
Soap
Iron & steel
Wood & furniture
Chemicals
CTA
Cement
Plastics
Edible oils
Beverages
Food products
Domestic production (IC)
Imports (ITC)
Exports (ITC)
1800

Overview: Imports
5
• China, India and South Africa dominate Tanzania’s manufacturing-related imports, accounting for over two thirds of their
value (with a share of 35%, 13% and 10% respectively). They are also the top 3 importers into Tanzania across a number
of different products, with all three dominant in iron and steel.
• Saudi Arabia is a key supplier of inputs for Tanzania’s plastics industry, while Malaysia and Indonesia supply into edible oil
processing.
• Pharmaceutical imports are dominated by India, followed by France and Kenya.
• Though not so dominant in terms of value, Kenya has a notable presence across a number of different products in
addition to pharmaceuticals, including soap, edible oil, cement and glass products.
Top 3 importers into Tanzania by product
Value in $ millions and CAGR, both 10-year average, except food products 2015 values
Top 10 importers into Tanzania for key manufactures
Value in $ millions, 10-year average; count of products in which the
country features as a top 3 importer into Tanzania
Sources: Trade Map, International Trade Centre: http://www.trademap.org/
0
2
4
6
8
10
12
-
50
100
150
200
250
300
350
No.productsintop3
$,millions
Value No. products in top 3
0%
5%
10%
15%
20%
25%
-
100
200
300
400
500
600
700
$,millions
Singapore Netherlands Belgium Russia Finland
Pakistan France Japan UAE Saudi Arabia
Kenya Malaysia Indonesia South Africa India
China ROW 10-yr CAGR

CTA
Cement
Plastics
Glass
Paper
Iron and steel
Tanning
extracts
Soap
Leather
Fertilizers Edible oils
Pharmaceuticals
Wood and
furniture
Chemicals
Food products
-1%
1%
3%
5%
7%
9%
-20% 0% 20% 40% 60%
GlboalGrowth
Tanzania Growth
Overview: Exports
• Extractive and agriculture-based products account for over 70% of Tanzania’s exports.
• Key manufacturing sector exports include: edible oils, CTA, food products, plastics, glass and cement.
• Certain industries chosen as focal points of the government’s industrialization strategy – leather, pharmaceuticals, and CTA
– exhibit low or declining export growth.
Source: Trade Map, International Trade Centre: http://www.trademap.org/
Selected manufactures: Tanzania vs. global growth
10-yr avg. values, 10-yr CAGR; export data only
Manufactures within Tanzania’s top 20 exports
Other includes remaining products
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
$,millions
Other
Wood and articles of wood; wood charcoal
Other vegetable textile fibres
Salt; plastering materials, cement, etc.
Glass and glassware
Other made-up textile articles
Iron and steel
Mineral fuels, mineral oils, etc.
Oil seeds and oleaginous fruits, etc.
Wadding, special yarns; twine, etc.
Coffee, tea, maté and spices
Fish and crustaceans, molluscs
Edible fruit and nuts
Residues and waste from food industries
Tobacco and manufactured tobacco
Animal or vegetable fats and oils
Electrical machinery and equipment
Edible vegetables, roots and tubers
Ores, slag and ash
Natural or cultured pearls
6

Food products
7
• In 2013, Tanzania produced $1.75 billion of food products and imported
$167 million. Most of this local production is comprised of flour, baked
goods and sugar.
• Sugar and flour comprise the majority of food product imports, growing
at 10% annually. Tanzania is a sugar deficit country, producing only 60%
of its demand; therefore, the government is focusing on increasing local
production.
• Tanzania imported $400 million in wheat and maize grain in 2013, used
mainly as inputs into baked goods production.
• Tanzania’s food product exports, comprising mainly of flour, have been
growing at 3% annually from 2006-2015 (except for brief spikes in 2013
and 2014 as a result of temporary surges in sugar re-exports).
Sources: Trade Map, International Trade Centre: http://www.trademap.org/; Census of Industrial Production, 2013;
Rabobank industry note #386.
Note: See annex on food products data estimation approach.
Food market composition
2013 values. Estimate based on industrial census and trade data.
Product share estimated using various data sources.
Food product exports
10-yr growth: 3%; 5-yr growth: -14%
-
500
1,000
1,500
2,000
Local Production Imports
$,millions
Baked goods
Flour
Sugar
Other
Sugar
Baked goods
Flour
55%
12%
11%
14% Congo
Kenya
India
Rwanda
Burundi
ROW
Export destinations
10 years, 2006-2015; based on ITC trade data
-
50
100
150
200
250
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$,millions
Sugar Flour Baked goods
Food product imports
-
50
100
150
200
250
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$,millions
Sugar Flour Baked goods

Beverages
8
• Tanzania produced $1.1 billion of beverage products in
2013 mostly comprised of beer and sodas.
• International companies – Coca Cola and SAB Miller –
participate in this sector through joint ventures with
local companies. Larger local firms include Tanzania
Breweries, SS Bakhresa and METL.
• Exports have grown at 10% annually. Soda exports are
the main driver of growth at 28% annually, with an
explosion in growth over the five years from 2011-2015
of 72% annually.
• Key export countries for beverages include Kenya and
Tanzania’s land locked neighbors.
Sources: Trade Map, International Trade Centre: http://www.trademap.org/; Census of Industrial Production, 2013, BMI
Research, “Tanzania: Food and Drink Report Q4 2016”
Beverage export growth
10-yr growth: 10%; 5-yr growth: 13%
10-yr
CAGR
6%
28%
Top export destinations
2015 values. Size $12 million
-
5
10
15
20
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$,millions
Alcohol Soda Water
Overview:
• Major food and beverage producer with operations in Tanzania
and other countries in the region
• Produces Azam Cola, Coca Cola’s largest local competitor
• Fruit juice pulp sourced locally for mango, orange and pineapple
• Distribution network with both formal retail outlets and kiosks is
key competitive strength.
Top concerns:
• Generally positive view: “We are now more bullish on Tanzania
– especially for manufacturers.”
• Access to skilled labor.
28%
17%
13%
8%
34%
Kenya Congo Uganda Rwanda ROW
Rise in soda exports
Beverages market composition
2013 values. Size: $1.1 billion. Estimate based on
industrial census and trade data.
0
200
400
600
800
1000
1200
Local production Imports
$,millions
Beverages Alcohol Soda Water

Edible oil
9
• Tanzania produced $487 million in edible oil in 2013 and imported $233 million mainly from Malaysia, Indonesia, and
Kenya, to comprise a total estimated market of $870 million. Import growth has declined 5% annually in the last five
years.
• Exports spiked in 2014 to $277 million from a previous average of $37 million. Annual growth was steady at 18%
during the pre-spike period after which growth accelerated to 211% from 2013 to 2015, fueled mostly by exports.
Preliminary 2016 data indicates exports may have dropped back to $22 million.
• The top two exports are sesame oil (64% of 2015 exports to China) and palm oil (30% of 2015 exports to Congo).
• Tanzania has comparative advantages due to its sizeable arable area and favorable climate, but exports are
constrained by low productivity, lack of investment in the industry, and deforestation concerns.
Sources: Trade Map, International Trade Centre: http://www.trademap.org/; Census on Industrial Production (2013).
Seed Change Tanzania: https://www.seedchangetanzania.org/wp-content/uploads/2017/08/Seed-Change-Palm-Oil-
Value-Chain-Report.pdf, last accessed 12 Jan 18
2015 values. Size: $342 million
66%
30%
4%
China Congo Other
Edible oil import and export growth
Exports consist mostly of mostly palm and sesame oil; imports
mostly palm oil
Edible oil market composition
2013 values. Size: $720 million. Estimate based on industrial
census and trade data.
-
100
200
300
400
500
$,millions
Other
Palm oil
Local
production
-
100
200
300
400
500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$,millions
Imports Exports
18%
CAGR
211%
Sesame oil

Plastics market composition
2013 values. Size: $870 million. Estimate based on
industrial census and trade data
Plastics
10
• In 2013, Tanzania produced $390 million in plastics but imported
$480 million. However, approximately 75% of imports are inputs into
Tanzania’s plastics industry.
• Other imports are finished articles that include tubes, pipes, and
various plastics articles, primarily sold into the construction industry
and the retail sector.
• In the 9-year period from 2006 to 2014, imports grew at 16% before
dropping substantially in 2015.
• Exports are a small fraction of the industry’s output, and have
declined 3% in the last 10 years with this decline accelerating in the
last 5 years to 17%.
• Exports of $33 million in 2015 went predominantly to regional
neighbors (Kenya, Zambia and Mozambique), although one third
was plastic waste shipped to China.
Sources: Trade Map, International Trade Centre: http://www.trademap.org/;
Census of Industrial Production 2013, Tanzania Mainland Statistical Report
Plastics exports by product
5-yr avg. Size: $48 million
Plastics imports by product
-
100
200
300
400
500
600
$,millions
Articles of plastic
Tubes, pipes,
hoses
Polymers, resins,
silicones
Local production
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
-
10
20
30
40
50
CAGR
$,millions
5-yr Avg 5-yr CAGR
Overview:
• Plasco is a medium-sized Tanzanian company
started in 1992 that provides high quality,
custom pipes largely for infrastructure projects.
• Roughly 90% of Plasco’s products are supplied
to the domestic market.
Top concerns:
• Shortage of skilled labor; invests significantly in
training current staff and augments it with
expatriates.
• Work permits difficult to acquire and retain yet
high need for technical staff persists.
• Competition from companies originating from
donor countries who receive preferential
treatment in procurement.
-
100
200
300
400
500
600
700
2006200720082009201020112012201320142015
$,millions
Polymers, resins, silicones Tubes, pipes, hoses
Articles of plastic
16%

Cement
11
• In 2014, Tanzania consumed and imported 5 million tons of cement,
representing an estimated market size of $450-550 million. About 60% of
cement is produced locally (est. $330 million) while the rest (est. $220 million)
is imported. The sector has grown 10.5% annually, driven largely by a boom in
real estate construction and government investment in infrastructure projects.
• Similarly to plastics, despite a sustained period of import growth, imports have
recently dramatically declined due to a slow down in the construction sector.
• Tanzania exported $54 million in cement and related products primarily to
regional neighbors in 2015 (DRC, Burundi and Malawi). Cement comprised
almost 60% of exports in 2015.
• Tanzania is now the dominant cement supplier to the DRC, passing South
Africa. At 73% and 17% growth respectively, Rwanda and China are also
making gains in this market.
Sources: Trade Map, International Trade Centre: http://www.trademap.org/, Standard Investment Bank, East Africa
Cement Sector, http://sib.co.ke/media/docs/East-African-Cement-Sector-VU-(Jan%202016).pdf, last accessed 12 Feb
18
Top suppliers of cement to the DRC
5-yr CAGR
-22%
-7%
27%
18%
3%
73%
Declining
leaders
Growing
competition
58%
18%
11%
9%
4%
Congo (DRC)
Burundi
Malawi
Kenya
Zambia
61%
39%
Local production
Imports
Cement market composition
2014 values, measured by quantity.
Total 5 million tons
-
20
40
60
80
100
120
140
160
180
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$,millions
Cement Gypsum Salt Other
Cement import growth
0
10
20
30
40
50
60
2006200720082009201020112012201320142015
$,millions
South Africa Uganda
Tanzania Namibia
Rwanda China

Overview:
• $1 billion local conglomerate with operations across
entire CTA value chain, from spinning to manufacturing
garments
• Exports regionally – with South Africa as a new growth
market – and exploring entering the US under AGOA.
Top concerns:
• Inconsistent tariff enforcement
• Excess capacity reduces advantages from economies
of scale
• Ad hoc government policies create uncertainty
• Influx of second-hand clothing limits domestic market
opportunities.
Cotton, textile and apparel
12
• In 2013, Tanzania’s cotton, textile & apparel (CTA) output was
$316 million, of which about 60% was sold locally while the rest
was exported.
• Over the last five years, cotton (largely unprocessed)
accounted for almost half (44%) of CTA exports, although this
has been declining rapidly in recent years. This decline
generally follows a worldwide decline in cotton prices.
• Though from a small base, apparel exports are growing well,
particularly knit apparel at 26%. But this still pales in
comparison to Ethiopia.
• The majority of apparel exports are to the US (50% in 2013)
and South Africa (22%) as well as regional markets (Kenya
10% and Uganda 7%).
Sources: Trade Map, International Trade Centre: http://www.trademap.org/; Census of Industrial Production 2013, Tanzania
Mainland Statistical Report. Notes: There is a large export data discrepancy between Trademap and Industrial census data
for 2013. Tanzania exports a significant amount of second hand clothing as well as sacks/bags; these are not included in this
analysis
Market composition
2013 values. Size: $316 million.
Textiles likely includes basic processed
cotton
CTA export growth overview
10-years; including raw cotton
10-yr CAGR
-9%
16%
-7%
26%
13%
-
20
40
60
80
100
120
140
160
180
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$,millions
Cotton Yarn/Sewing Thread
Woven Fabrics Apparel - Knit
Apparel - Not Knit
80%
20%
Textiles Apparel
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
-
20
40
60
80
100
120
140
160
Apparel -
Knit
Apparel -
Not Knit
Apparel -
Knit
Apparel -
Not Knit
Apparel -
Knit
Apparel -
Not Knit
Tanzania Tanzania Ethiopia Ethiopia Kenya Kenya
$,millions
10-yr Avg 10-yr CAGR
Comparison of Tanzania with selected neighbors
Tanzania has the lowest base with growth in the middle of the pack

Cotton, textile and apparel: WBG analysis
13
A study by the World Bank on light manufacturing in Tanzania reviewed the
opportunities and challenges of the CTA sector, also suggesting areas for action.
Country advantages
• As the fifth largest cotton producer in Africa and fourth largest organic cotton producer
in the world, Tanzania has a significant natural competitive advantage and ability to
participate across the entire CTA value chain.
• Tanzania has cheaper labor than China and a large base of potential workers given
high unemployment rates.
• With direct port access and duty free access to EU and US markets, Tanzania has a
marketing advantage it can leverage to get into global supply chains.
Challenges
• Despite low cost of labor, production costs relative to China are still high (see chart)
partially due to low availability of skilled workers.
• Cotton yields are low, quality variable and supply unreliable, leading local garment
producers to import inputs.
• Limited integration to global supply chains limits Tanzania’s ability to fully utilize its
duty-free access.
• Inadequate access to industrial land has limited the number of foreign investors able
to move into Tanzania.
Priority focus areas
• Reduce production costs and delivery times to become more internationally
competitive.
• Improve local skill base to increase productivity and reduce reliance on expatriate
workers to reduce overall costs.
• Increase integration with global supply chains to raise exports and improve
penetration to EU and US markets.
Source: Dinh, H. T. and Monga, C. 2013. Light Manufacturing in Tanzania: A Reform Agenda for Job Creation and
Prosperity. WBG
Structure of Tanzania textile & apparel sector
Number of firms; 2010 data
0
2
4
6
8
10
12
Numberofcompanies
Make up of cost differential to produce a polo
shirt: Tanzania relative to China

Chemicals
14
• In 2013, Tanzania’s chemical industry produced $315 million and imported $166 million in organic and inorganic
chemicals. The majority of local production is comprised of agrochemicals (excluding fertilizers), pesticides and soap.
• Tanzania’s imports, mostly from China, India, Kenya, Korea and Australia, have been growing at 13% annually, although
in recent years growth slowed to 9%.
• Tanzania’s exports are negligible at approximately $7 million annually over the last 10 years, facing an 18% annual
decline over the period.
• While local production comprises a sizeable part of the industry, imports still play a major role in meeting market demand.
Sources: Trade Map, International Trade Centre: http://www.trademap.org/; Census of Industrial Production, 2013
Notes: Industrial census data for chemicals mainly consists of fertilizers and ‘other chemicals’. Only other chemical is
included in the data above because fertilizers are covered separately. ‘Other chemicals’ also includes soap, despite
being covered separately cannot be extracted form the ‘other chemicals’ data above. Industrial census data includes
other products not included in the ITC trade data, potentially understating total chemicals trade.
Top suppliers of chemicals to Tanzania
10-year avg. values. Size: $168 million
Chemicals market composition
2013 values. Estimate based on industrial census
and trade data.
Chemicals imports vs. exports
ITC data for organic chemicals and inorganic chemicals only
-
50
100
150
200
250
300
350
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$,millions
Exports Imports
18%
13%
12%
12%
9%
36%
China
India
Kenya
Korea, Republic of
Australia
ROW
0
50
100
150
200
250
300
350
$,millions
Local production
Organic chemicals
Inorganic chemicals

Wood and furniture
15
• Tanzania produced $290 million of wood and furniture products in 2013 and
imported $114 million.
• Imports mainly consist of furniture from China, South Africa, and Kenya,
growing at 12% annually for the past 10 years.
• Exports of wood and related products grew 16% annually over the same
period, while furniture exports exploded at almost 40% annually.
• Wood exports consist mainly of chipped and sawn wood to India, Kenya and
China, while furniture is mainly exported to more immediate neighbors (and
may also include re-exports).
• While Tanzania’s furniture sector benefits from easy access to inputs, it
looses out against competitors as a result of production inefficiencies, with
production of a basic chair costing $30 in Tanzania compared to $13 in China
for the equivalent product.
Sources: Trade Map, International Trade Centre: http://www.trademap.org/; Census of Industrial Production, 2013,
Tanzania Mainland Statistical Report. Dinh, H. T. and Monga, C. 2013. Light Manufacturing in Tanzania: A Reform
Agenda for Job Creation and Prosperity. WBG
Top export destinations by product
10-yr avg. values. These products are exported to very
different markets
Wood and furniture export growth
10-years. Furniture exports have exploded in recent years
10-yr
CAGR
16%
39%
Wood and furniture market composition
2013 values. Size: $404 million. Estimate based on industrial census
and trade data.
-
10
20
30
40
50
60
70
80
90
$,millions
Wood Furniture
-
5
10
15
20
25
30
Wood Furniture
$,millions
Congo
Burundi
Mozambique
Comoros
Congo DRC
United Arab Emirates
Italy
China
Kenya
India
CAGR 39%
CAGR 16%
Furniture production cost penalties
Wooden chair production. China vs. Tanzania, 2010
-
50
100
150
200
250
300
350
$,millions
Other furniture
Prefabricated
buildings
Furniture (excl. seats)
Wood imports
Wood production
Furniture
0
1
2
3
4
5
6
Inefficiencies Absenteeism Rejects Materials
waste
$/woodenchair
China Tanzania

Iron and steel
16
• In 2013, Tanzania produced about $100 million of iron and steel
but imported $522 million, mainly flat iron steel and bars, rods,
and ingots from China, South Africa, Japan, and India.
• Imports have grown strongly at 17% over the past 8 years, but
have declined recently. This is likely a result of the recent slow
down of the Tanzania construction industry. Imports include both
inputs into its own production, as well as end products that
compete directly with the local industry.
• Exports account for a fair share of local production at between $6
- $30 million, going mainly to regional markets: Comoros 67%
and DRC 18% in 2015. (Export data may also include re-
exports).
• Tanzania has over 126 million metric tons of proven iron ore
reserves, estimated at $50 billion. Despite plans to launch the
Liganga mining project, production is not fully underway.
Construction Review: https://constructionreviewonline.com/2016/05/coal-and-iron-ore-projects-in-tanzania-to-commence-
early-2017; WBG analysis.
Overview:
• Kamal Steel is a leading producer of high-quality steel
in Tanzania.
• Kamal exports about 20% of production to neighboring
countries.
• Optimistic about local market given upcoming
infrastructure projects.
• Kamal sources inputs by importing steel billets
primarily from South Africa and melting local scrap.
• Kamal has also ventured into the development of an
industrial park after encountering difficulty in access to
land early in their tenure.
Top concerns:
• Access to finance due to conservative lenders.
• Competition from new companies.
Iron and steel imports
0
100
200
300
400
500
600
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$,millions
Other articles
Tubes and pipes
Tanks, drums, and
similar containers
Other iron/steel
products
Waste
Bars, rods, ingots
Flat-rolled iron/steel
-22%
CAGR
Iron and steel exports
-
20
40
60
80
100
120
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$,millions
Tubes and pipes
Tanks, drums, and similar
containers
Other articles
Other
Waste
Bars, rods, ingots
Flat-rolled iron/steel
17%
CAGR

Soap
17
• Local soap production was estimated at $87 million in 2009, with
imports of $18 million.
• Most manufacturers produce for the local market, where competition
is intense due to:
o Imported products, which have been growing at 18% over 10 years, mostly
come from Kenya, China, and India
o Competition from the local food processing industry for which soap is a
byproduct from oil
o Reliance on imported palm oil as an input, raising the cost of production and
reducing competitiveness against finished imports.
• Tanzania exported $20 million in soap in 2015. Although exports have
grown 9% annually in the last ten years, they slowed to 1% over the
last five years.
• Top export destinations are primarily to regional neighbors, mainly to
DRC (74% of exports in 2015) but also Uganda (14%).
Sources: Trade Map, International Trade Centre: http://www.trademap.org/; local production data derived from 2009
data from UNIDO International Yearbook of Industrial Statistics, 2012, page 789; WBG analysis.
Overview:
• Established 110 years ago, Tarmal Industries is
one of the oldest soap manufacturers, producing
soap primarily for the domestic market
• It was also an early technology adopter with
among the first automated lines in the country.
Top concerns:
• Cheap imports intensify competition
• Consumer trends towards cheaper soaps
• Current political uncertainty has delayed potential
investments to upgrade equipment
• Infrastructure underdeveloped making it more
expensive to source local inputs such as palm oil
• Competition from the edible oil industry
• Skills shortages require hiring expensive
expatriate workers.
Soap imports vs. exports Top export destinations
74%
14%
8% Congo (DRC)
Uganda
Malawi
Rwanda
Burundi
10-yr CAGR
18%
9%
-
20
40
60
80
$,millions
Imports Exports
Soap industry
-
20
40
60
80
100
$,millions
Other
Soap
Organic surface-
active agents
Local production

Glass and glassware
18
• In 2013, Tanzania’s glass industry produced $72 million and
imported $36 million, appearing to meet much domestic demand
from local production (which is twice the size of imports).
• Tanzania’s imports are from are China, the United Arab Emirates,
and Kenya.
• Tanzania exported $54 million of glass and glass products in 2015,
mainly to regional neighbors (Malawi, Congo, Rwanda), providing
Tanzania an opportunity to leverage its natural resources to
become a major regional player – especially in light of declining
growth in its closest regional competitors. 2016 data indicates an
increase in exports of 273% over 2015, comprising of bottles and
carboys to the DRC although further validation of this data is
required.
• A recent Chinese investment of $80 million in 2016 to build a float
glass factory in Tanzania, with a daily capacity to produce 600 tons
should further increase the prominence of this sector domestically
and regionally.
http://www.tanzaniainvest.com/industry/giga-tanzanian-announces-usd-80-million-investment-to-setup-float-glass-factory
Glass exports by product
Tanzania compared to select glass exporters
Bottle and carboys exports
-
10
20
30
40
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$,millions
Bottles and carboys Float glass
Sheet glass Other
Glass market composition
and trade data.
-40%
-30%
-20%
-10%
0%
10%
20%
30%
-
100
200
300
400
Egypt South
Africa
Tanzania Kenya Uganda
CAGR
$,millions
5-yr Avg 5-yr CAGR
-
20
40
60
80
$,millions
Other
Sheet glass
Bottles and carboys
Safety glass and mirrors
Float glass
Local production
-
50
100
150
200
250
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$,millions
Exports
Imports
4 times
Glass imports vs. exports
10-yr CAGR
21%
104%
31%
21%

Paper and paperboard
19
• Tanzania produced $60 million of paper and related products in 2013
and imported $102 million.
• Imports were mainly from South Africa, India, China, Korea, and Spain,
consisting of uncoated kraft paper and paperboard products, and
newsprint and packaging materials. Imports have grown at 7% annually
for the last 10 years although this growth shifted into an annual 2%
decline in the last 5 years.
• Exports were $40 million in 2015, growing 19% annually over ten
years, although this growth has slowed to 3% in the last five years.
• Within the larger product category, uncoated kraft paper accounts for
about 60% of exports, mostly to Kenya. This represents roughly 5% of
Kenya’s paper imports.
Sources: Trade Map, International Trade Centre: http://www.trademap.org/; Census of Industrial Production, 2013,
Tanzania Mainland Statistical Report.
76%
7%
6%
6%
5%
Kenya
Uganda
Malawi
Burundi
Congo (DRC)
Top 10 suppliers of paper to Kenya
18%
22%
11%11%
6%
9%
10%
6%
3% 4%
India
Egypt
China
Sweden
USA
United Kingdom
Tanzania
Russia
Finland
Indonesia
Paper and paperboard export growth
-
5
10
15
20
25
30
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$,millions
Uncoated Kraft Labels
Registers Other
10-yr
CAGR
15%
87%
30%
29%
Paper and paperboard market composition
and trade data.
0
20
40
60
80
100
120
US$,millions
Other
Registers and labels
Newsprint
Cartons, boxes, and
packing
Paper and paperboard
Uncoated kraft
Local production

Leather and related products
• Despite having the third largest livestock population in Africa, Tanzania produced only $40 million of leather and related
products in 2013, comprising of leather hides, footwear, and tanning extracts (a leather sector input – see next page).
Tanzania imported $12 million in mostly finished leather goods.
• Furthermore, of Tanzania’s 2015 exports of $37 million of leather and related products, the majority is in tanning extracts.
Leather hides amounted to only $11 million, the majority being semi-processed wet blue, exported mainly to China and Italy.
• In the last ten years, exports have grown at only 1%, with growth declining by 8% annually over the last five years.
However, due to a 40% export tax on raw hides, official data may not capture a significant portion of leather being informally
exported.
Sources: Trade Map, International Trade Centre: http://www.trademap.org/;
Census of Industrial Production 2013, Tanzania Mainland Statistical Report
38%
28%
18%
9%
7% China
Hong Kong
Italy
Pakistan
India
5-yr avg. Size: $8 million. Leather and related products
0
2
4
6
8
10
12
2006 2015
Other
Trunks, various cases
and other goods
Raw hides and skins
Tanned or crust hides
Exports of leather and leather products
10-yr industry transformation into wet-blue
Leather products industry size
2013 values. Size: $48 million. Estimated based on
government and trade data. Excludes tanning extracts.
-
5
10
15
20
25
30
35
40
$,millions
Leather articles
Trunks and cases
Leather footwear
Tanning and leather
products
20

-
10
20
30
40
50
60
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$,millions
Leather and related products: Tanning and dyeing extracts
21
• Tanzania exported $33 million of tanning and dyeing extracts in 2015. In the last ten years, exports have grown 31% with
growth accelerating to 79% over the last five years.
• The primary product in this segment is tanning extract (from wattle), which in 2015, which comprised 78% of exports or $25
million, growing at almost 100% annually over the last five years. Tanzania has rapidly become the world’s third largest
producer of wattle extract, accounting for 21% of global production in 2015, behind Brazil (36%) and South Africa (31%).
• Tanzania’s exports go to Bangladesh (88%) and India (9%).
Source: Trade Map, International Trade Centre: http://www.trademap.org/
Tanning, dyeing extracts growth Top three global producers of wattle
Data for last five years
0
10
20
30
40
50
60
70
2011 2012 2013 2014 2015
$,millions
South Africa Brazil Tanzania
Leather and related exports
2015 values. Size: $37 million.
30%
70%
Leather and
related products
Tanning extracts

Pharmaceuticals
22
• In 2013, Tanzania produced $37 million of pharmaceuticals but imported
$313 million. Imports have grown 18% annually over the last 10 years
• Most local production is focused on generics or antiretroviral therapy
drugs, although the industry is in decline due to stiff import competition
and business constraints that include poor infrastructure and lack of
reliable access to clean water.
• Compared to other countries in the region, Tanzania’s pharmaceutical
export industry is negligible, with less than $1 million in exports in 2015.
• The government of Tanzania is planning to support local manufacturing
capacity by focusing on diversifying production, supporting R&D and
improving quality.
Sources: Trade Map, International Trade Centre: http://www.trademap.org/; Census of Industrial Production 2013,
Tanzania Mainland Statistical Report. REPOA brief No. 43 (July 2014), “Reversing Pharmaceutical Manufacturing
Decline in Tanzania: Policy Options and Constraints”; Tanzania’s Second Five Year Development Plan 2016/17–
2020/21: Summary of proposed actions and financing plans for implementation, ODI-SET.
Key imports
2015 values. 10-yr CAGR
Top 5 import sources
56%
12%
12%
10%
10%
India
Kenya
USA
Denmark
France
Pharmaceutical industry
2013 values. Size: $350 million. Estimate based on industrial
census and trade data.
Exports of regional pharmaceutical producers
5-yr avg. and CAGR
-30%
-20%
-10%
0%
10%
20%
30%
40%
-
100
200
300
400
500
South Africa Kenya Uganda Tanzania
CAGR
$,millions
5-yr Avg 5-yr CAGR
0%
5%
10%
15%
20%
25%
30%
0
50
100
150
200
250
300
350
Medicaments Blood Other
CAGR
$,millions
2015 10-yr CAGR
0
50
100
150
200
250
300
350
$,millions
Local production Medicaments
Blood Other

Fertilizer
23
• Tanzania’s local production of fertilizer was less than $29 million. The country imported $176 million of mostly nitrogen-
based fertilizer making the total market an estimated total of $205 million.
• In 2015, Tanzania exported $12 million in fertilizer, dramatically lower than a 2010 peak of $99 million. In the last ten
years, this industry has grown only 2% with its dramatic decline beginning in 2011 at a rate of 30% annually.
• Top export destinations are Tanzania’s neighbors, primarily Burundi, Rwanda and Zambia.
https://www.reuters.com/article/tanzania-investment/tanzania-to-begin-building-3-bln-fertiliser-plant-this-year-
idUSL5N18H192.
Note: Local production data represents an upper limit as it includes non-fertilizer products.
Rebound opportunity?
• Tanzania has 57 trillion cubic feet of
natural gas, a hydrocarbon source
of ammonia, one of the most
common fertilizer inputs.
• The Tanzania Petroleum
Development Corporation signed
an agreement with a consortium of
investors to build a $3 billion
fertilizer.
• The status of this project is currently
unknown, although project was
slated to commence in 2016.
Fertilizer industry
2013 values. Size: $205 million. Estimate based
on industrial census and trade data.
Fertilizer imports vs. exports
-
50
100
150
200
250
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$,millions
Imports Exports
38% -30%
-
50
100
150
200
$,millions
Potassic/phosphate and animal/vegetable based
Nitrogen-based
Local production
10-yr CAGR
12%
2%

Food products
• At close to $2 billion, Tanzania’s food products industry is one of the country’s largest. Primary food
products include flour, sugar, and baked goods (which includes bread). Imports are a significant amount of
the country’s inputs, in particular sugar and grain.
Beverages
• At $1 billion, Tanzania’s beverage industry meets much of the country’s demand. Beer and soda make up
the bulk of production, although other alcoholic and non-alcoholic drinks also account for local production.
Prospects for growth include organic in-country growth and increased regional exports.
Edible oil
• Estimated at well over $0.5 billion, Tanzania’s edible oil market is large. Local production is partly
dependent on imported inputs, mainly from Indonesia and Malaysia. There is potential for growing an
export market to regional neighbors and China (mainly sesame oil).
Plastics
• The plastics sectors is wholly dependent on imported inputs, but with Tanzania’s limited imports of plastic
articles, it appears that the industry is largely able to meet domestic demand, with some extra production
being exported to the immediate region. There could be prospects for increased use of recycled inputs.
Cement
• Tanzania’s cement industry has seen recent increases in installed capacity, responding to high demand
that spurred annual import growth of 22%. The country is beginning to expand its regional export footprint,
particularly to neighboring countries without the same local supply base.
CTA
• As one of the world’s largest growers of cotton, the country has an opportunity to participate across the
entire CTA value chain. However, cotton exports have recently dramatically fallen, and though apparel
exports are fast rising, though from a small base and not as fast as competitor countries such as Ethiopia.
Chemicals
• Local production of agrochemicals, paints and varnishes, and soap amount to $315 million, with additional
imports of about half as much in value. Most of the country’s production is consumed locally with negligible
exports.
Sector summaries
24

Wood and furniture
• Tanzania produces wood and furniture products although it still relies heavily on imports, which amount to
about half of local production. Furniture exports have risen fast, mainly to regional markets. However, if
Tanzania is to be able to capitalize on it inputs endowment, it will have to address cost disadvantage
issues in furniture manufacturing.
Iron and steel
• While Tanzania produces iron and steel, the large majority of its domestic needs are met through imports,
used as both inputs into its own domestic production and as finished goods for construction and other
industrial uses.
Soap
• Focused on mass-market products, Tanzania’s soap industry meets most local demand, with limited
imports. However, it is facing increased competition from new entrants from the edible oil sector for which
soap is a byproduct.
Glass
• Tanzania’s glass industry appears to meet most domestic demand for bottles, replying on imports for
most other glass products. Recent investments in local glass production could dramatically increase
Tanzania’s exports, making it a dominant regional player.
Paper
• Tanzania’s paper industry is largely served by imports, although Tanzania exports about as much paper
as it produces annually. Additional research is required to determine the composition of local production
and imports, but it is likely that Tanzania exports packaging materials while imports meet the diversity of
domestic paper demand.
Leather
• Tanzania’s leather industry appears to be undergoing moderate structural change from exporting mostly
raw leather to semi-processed wet blue. But export values remain low, despite having one of Africa’s
largest input bases.
Pharmaceuticals
• Tanzania relies primarily on imports to meet its domestic needs and evidence suggests that its local
industry is in decline.
Fertilizer
• Tanzania meets its fertilizer needs through imports, although until recently it even had sizable fertilizer
exports. This may change should the Tanzania Petroleum Development Corporation plans to build a
sizeable fertilizer plant materialize.
25
Sector summaries (cont’d.)

26
The business environment02
• Overview
• Access to finance
• Electricity and water provision
• Tax rates and technology use
• Trade logistics

Source: World Bank Enterprise Surveys, http://www.enterprisesurveys.org/
Top business obstacles, manufacturing firms
Percent of firms identifying the problem as the main obstacle, 2006 and 2013
Manuf. firms 2013 All firms 2013
Access to finance 42% 38%
Electricity 32% 25%
Tax rates 8% 8%
27
Business environment
Overview: Challenges for Tanzania’s manufacturers
• Tanzania’s manufacturers perceive electricity, access to
finance and tax rates as the top problems to their
operations. While an overwhelming 75% of them identified
electricity as the main obstacle in 2006, in 2013 access to
finance surpassed electricity as the top constraint.
• However, differences between sectors emerge:
o Food processing and textiles sector firms electricity remains
the top constraint.
o Access to finance was identified as the main problem by
64% of furniture firms.
o 14% of food processing firms identified transportation as the
top constraint, compared to 8% for all manufacturing firms.
75
6
5
32
42
8
3 4
Electricity Access to
finance
Tax rates Transportation Acces to land
TZ 2006
TZ 2013
Top business obstacles per manufacturing subsector
Percent of firms identifying the problem as the main obstacle, 2006 and 2013
14
7
10
10
8
27
29
64
42
44
37
16
32
Food
Textiles & garments
Furniture
TZ, all mfg. firms
Electricity Access to finance Tax Rates Transportation

Access to finance
28
• The percentage of manufacturing firms with credit lines and working capital finance declined from 2006 to 2013.
Only 19% of manufacturing firms reported having either in 2013, which is several percentage points below the SSA
average and significantly below the benchmark for all countries. The problem is worse for furniture manufacturers,
where only 7% and 11% had a loan or working capital finance, respectively.
• During the same period, the value of collateral needed for a loan nearly doubled, jumping from 143% to 272%. The
latter is comparable to the level required from all Tanzanian firms (240%), suggesting that lending risk increased
throughout the economy. Nevertheless, it is quite high compared to the SSA average of 215%. Lenders regard
loans to textile and garments firms with as a higher risk, requiring nearly double collateral value compared to other
manufacturing sector firms (517%).
Use of financial services, selected indicators
Percent of Firms
Collateral requirements
Value of collateral needed for a loan, % of loan amount
146
272
517
240
215
206
TZ 2006
TZ 2013
TZ txt. & garments
TZ all firms, 2013
SSA
All countries
22
25
19 19
7
11
22 23
34
30
Firms with a bank loan/line of credit Firms using banks to finance working capital
%offirms
TZ 2006 TZ 2013 TZ furniture SSA All countries
Note: The value of collateral required for loans to furniture firms was not available.
As noted, very few of these firms have loans, which may explain why the collateral
value requirement is not known.
Source: World Bank Enterprise Surveys, http://www.enterprisesurveys.org/

Electricity and water provision
29
Electricity provision
Number of outages per month, hours and losses as % of annual sales
Water provision
Percent of firms experiencing insufficiencies and number per month
• Inadequate electricity provision increases costs, disrupts
production and reduces profitability for manufacturing
firms.
• In Tanzania, while the number of electrical outages per
month are below the SSA average, manufacturing firms
report higher duration (7 hours), leading to losses
equivalent to 16% of annual sales. By comparison,
outages in Kenya and in SSA average one hour less, and
reported losses amount to only 8% of sales.
• Many manufacturing subsectors depend on reliable and
efficient sources of water for their operations. Overall,
water provision has improved in Tanzania, as the share
of firms with water shortages declined from 49% to
31%, and the number of monthly shortages reduced
form 6 to 2.
• However, those improvements have yet to reach food
manufacturers – 59% of them report experiencing on
average 5 shortages a month. Between 2006 to 2013
those levels have not changed much.
8
7
16
6 6
8
9
6
8
6
5 5
Number of electrical outages
in a typical month
Average duration of a typical
electrical outage (hours)
Average losses on electrical
outages (% of annual sales)
TZ 2013 Kenya SSA All countries
49
6
31
2
59
5
24
2
15
1
Percent of firms experiencing water
insufficiencies
Number of water insufficiencies in a
typical month
TZ 2006 TZ 2013 Food mfg. SSA All countries
Sources: World Bank Enterprise Surveys, http://www.enterprisesurveys.org/ and World Bank Doing Business
2017, www.doingbusiness.org

Tax rates and technology use
30
Total tax burden, 2018
Total tax rate expressed as a % of profit as estimated by WB Doing Business, 2018
• At an estimated 45% of profits, the total tax burden in
Tanzania is just under the SSA average 46%; however,
this level is high when compared with Kenya and
Mozambique (both 37%), as well as Malawi, Rwanda
and Botswana where the tax burden is even lower.
• High labour taxes of 18% exceeds all benchmarks.
Likewise, taxes other than on profit and labor, while
lower than the SSA average, are higher in comparison
to neighboring countries.
22
30
20
31
26
21 18
2
12
5
6 18
14
4
5 2
1 2
6
14
Botswana Kenya Malawi Mozambique Rwanda Tanzania SSA
Profit tax (%) Labor tax and contributions (%) Other taxes (%)
Technology adoption and use, selected Indicators
Percent of firms, 2013 or latest year available
• Tanzanian firms are lagging behind Kenyan firms in terms
of investing in international quality certifications, licensing
the latest technology from abroad, and on-line presence.
• A significant higher share of Tanzania’s food
manufacturers report having invested in obtaining quality
certifications, foreign technology license and online
presence when compared to textiles and garment and
furniture manufacturers.
21
18
26
12
9
13
5
2
9
16
11
23
33
20
50
11
15
31
Percent of firms with an
internationally-recognized quality
certification
Percent of firms using technology
licensed from foreign companies
Percent of firms having their own
web site
TZ food
TZ textiles & garments
TZ furniture
TZ mfg., all firms
Kenya mfg. firms
SSA

31
• Timely and cost efficient access to imported inputs and markets are of vital importance for a competitive
manufacturing sector. Cumbersome regulations are placing Tanzania-based manufacturers at a disadvantage when
sourcing inputs and selling abroad.
• Clearing exports and imports through customs are headed in the wrong direction, more than doubling from 2006 to
2013, reaching 12 and 32 days. This is significantly longer than the SSA average of 10 and 16 days.
• Likewise, complying with export and import border regulations costs nearly twice as much in Tanzania when
compared to the SSA average.
Clearing exports and imports, manufacturing firms
Days to clear exports and imports through customs, 2006 and 2013
Border compliance costs
USD to comply with regulations to export and import a shipments, 2018
5
14
12
32
10
16
10
20
8
12
Days to clear exports through
customs
Days to clear imports through
customs
TZ 2006 TZ 2013 SSA Kenya All countries
1160
143
592
150
1350
833
687
112
Tanzania Kenya SSA OECD high-income
Exports Imports
Trade logistics

32
Public interventions03
• Overview
• Government of Tanzania
• World Bank Group
• UNIDO & ODI
• Summary

Public interventions
Overview of key manufacturing-focused inititaves
33
• Several organizations have been working on industrialization in Tanzania including the government, private sector,
development organizations, and research institutions. This list provides a high-level, non-exhaustive summary of key
stakeholders who are involved in Tanzania’s industrialization effort.
Government Private sector
Development
organizations
Think tanks &
academia
Ministry of Finance and Planning
• Prepared the National Five
Year Development Plan
2016/17 – 2020/21 (FYDP II)
Ministry of Industry, Trade and
Investment
• Integrated Industrial
Development Strategy, 2010-
2025
Planning Commission
• Commissioned study by ODI
and SET supporting
preparation of FYDP II
Confederation of Tanzania Industries
• Business membership organization
that speaks on behalf of its members
to government. Has a diverse
representation from manufacturing
sector
Tanzania Private Sector Foundation
• Designed to advocate and seek
change in public policy in order to
promote a better business
environment
Tanzania National Business Council
• A business advisory council formed
by presidential circular providing a
forum for public and private sector
dialogue
World Bank Group
• Authored Light Manufacturing
in Tanzania Report
• Designing lending support
project focused on support for
Tanzania’s industrialization
over the next four years
UNIDO
• Co-authored Tanzania’s
Industrial Competitiveness
Report 2012
ODI
• Supported GoT in preparing
report on FYDP II
commissioned by the Planning
Commission
REPOA
• Supported ODI in the
preparation of Tanzania’s
FDYP II
Economic and Social
Research Foundation
• Research organization
that has also contributed
to key analyses of
Tanzania’s development
agenda

Key Objectives
1. Build a base for transforming Tanzania into a semi-
industrialized nation by 2025
2. Foster development of sustainable productive and export
capacities
3. Consolidate Tanzania’s strategic geographical location
through improving the environment for doing business
and positioning the country as a regional production,
trade and logistic hub
4. Promote availability of requisite industrial skills
(production and trade management, operations, quality
assurance, etc.) and skills for other production and
services delivery
5. Foster and strengthen implementation effectiveness,
including prioritization, sequencing, integration and
alignment of interventions
6. Intensify and strengthen the role of local actors in
planning and implementation
7. Ensure global and regional agreements (e.g. Africa
Agenda 2063 and SDGs) are adequately mainstreamed
into national development planning and implementation
frameworks for the benefit of the country.
Government of Tanzania: Overview of FYDP II
34
Sources: National Five Year Development Plan 2016/17-2020/21; ODI-SET, Tanzania’s Second Five Year Development
Plan 2016/17–2020/21: Summary of proposed actions and key action points
34
Priority areas for action
• There are four priority areas for action: (i) fostering economic growth
and industrialization; (ii) fostering human development and social
transformation; (iii) improving the environment for business and
enterprise development; and (iv) strengthening implementation
effectiveness.
• The Plan emphasizes interventions to promote industrialization,
including establishing special economic zones SEZs)/EPZs and
industrial parks, strengthening research and development (R&D),
promoting local content and developing capacity.
• Second Five Year Development Plan (FYDP II 2016/17-2020/21) places particular emphasis on the role of industrialization
as a driver of growth, transformation and poverty reduction in Tanzania, themed as “Nurturing Industrialization for
Economic Transformation and Human Development.”
Priority sectors and actions
• Petrol, gas and chemicals; pharmaceuticals; building and
construction; agriculture and agro-processing (cotton to clothing,
textiles and garments, leather); coal; and iron and steel.
• The Plan supports value addition in metal and minerals industries,
and looks to improve agricultural productivity and deepen agricultural
value chains.
• FYDP II envisages an important role for the private sector in leading
investments to drive industrialization. The government is expected to
provide a conducive policy and regulatory framework, as well as land
and supportive infrastructure.

Government of Tanzania: FYDP II’s priority sectors
Sources: Tanzania’s Second Five Year Development Plan 2016/17–2020/21: Summary of proposed actions and
financing plans for implementation. ODI-SET
35
CTA Leather Pharmaceuticals
• Expand and improve the production,
pricing and distribution of quality seed
cotton
• Improve cotton farmers’ access to
operating capital
• Revamp cotton production and attract
new investment into the textile and
garment industries
• Support marketing and SME
promotion initiatives
• Improve the policy environment to
raise the efficiency and
competitiveness of the cotton-to-
clothing value chain.
• Improve the quality and quantity of hides
and skins
• Enhance the sustainability of the leather
sector
• Strengthen the policy and institutional
framework for the development of the
sector.
• Promote domestic pharmaceutical
production and diversification of
supplies to meet domestic demand
• Revitalize R&D to enable faster
technological catch up
• Improve the quality of locally
manufactured pharmaceuticals
• Improve the general business
environment and marketability of locally
manufactured pharmaceuticals
• Raise the number of pharmaceutical
products produced in Tanzania.
• The government is implementing Tanzania’s Second Five-Year Development Plan (FYDP II) in stages, focusing on
key sectors each stage. The first stage focuses on three value chains: cotton to textiles, leather to leather products,
and pharmaceuticals.
• Key interventions along these value chains focus mostly on supply-side interventions such as improving cotton seed
quality, improving the supply and quality of hides, and diversifying domestic production of pharmaceuticals. In
addition to upgrading infrastructure, the government will also seek to catalyze R&D and enhance access to credit
for farmers while attracting new investors into planned economic zones.

Light Manufacturing in Tanzania
P4R focus (draft) Intervention areas
World Bank Group
3636
• Identifies “four sectors as representative examples of labor-intensive light manufacturing industries that have
a history of production in developing economies”: agro-processing; textile and apparel; leather and related
products; and wood and wood products
• Policy prescriptions focus on both sector-specific interventions as well as cross-cutting constraints. These
include access to credit, skills shortage, poor infrastructure, and weak institutional capacities.
• Recognizing the intimidating nature of previous to-do lists, this analysis limits its policy prescriptions to three
areas: 1) industrial and sectoral strategies; 2) vocation and technical skills training; and 3) institutional
support and coordination. Within each of these areas, specific policy recommendations are given organized
by short, medium, and long-term actions.
A strategy based on the two pillars of structural transformation and job
creation that focuses on:
• Integrated spatial development solutions supporting local and cross-
border value chains in competitive sectors (e.g. agro-processing,
basic manufacturing, services and tourism, oil and gas)
• Inclusive growth focusing on youth and women empowerment
• High-growth MSMEs and non-farm household enterprises
• Trade and regional integration.
1. Strengthening Tanzania’s industrialization
infrastructure and attracting anchor
investors in selected priority sectors
2. Strengthening of small industries (MSMEs)
in priority sectors within industrial estates
(clusters, parks and/or SEZ)
3. Improving access to regional markets by
removing barriers to regional integration,
and improving trade logistics.
• A pipeline $100 million Program for Results (P4R) financing project will focus on improving the investment climate and
supporting industrial growth through facilitating increased domestic value addition in more inclusive and sustainable
industrial estates.
• A 2013 WBG study, “Light Manufacturing in Tanzania: A Reform Agenda for Job Creation and Prosperity” proposed a
number of interventions for catalyzing industrialization.
Sources: Internal WBG resources; Dinh, H. T. and Monga, C. 2013. Light Manufacturing in Tanzania: A Reform Agenda
for Job Creation and Prosperity. WBG

UNIDO & ODI
37
Sources: UNIDO & GoT, Tanzania Industrial Competitiveness Report 2012
ODI-SET, Preparation of Tanzania’s Second Five Year Development Plan (FYDPII) 2016/17 – 2020/21
37
• After a comprehensive analysis of Tanzania’s industrial prospects, UNIDO provides policy prescriptions along nine broad
thematic areas: 1. Prioritizing industrial policy; 2. Consensus, ownership and leadership for industrial development; 3. Bringing
industrial development initiatives to the local level; 4. Thinking of industrial policy both in the short and long term; 5. Fostering
industrial diversification; 6. Regular industrial reports and data collection for industrial intelligence; 7. Reviewing the regional
integration agenda for industrial policy; 8. Science, technology and innovation for industrial development; 9. Skills development
for industry.
• These recommendations are generally consistent with both the government’s own objectives and recommendations from other
development partners.
• UNIDO and the Overseas Development Institute (ODI) have provided the government with technical assistance.
UNIDO contributed to several versions of the Tanzania Industrial Competitiveness Report, including a seminal 2012
report. In 2015, ODI authored the “Preparation of Tanzania’s Second Five Year Development Plan (FYDP II)
2016/17 – 2020/21” report commissioned by the Planning Commission through their Supporting Economic
Transformation (SET) program.
• Both UNIDO and ODI have close working relationships with the government of Tanzania and have the capacity to
provide additional technical support across a range of thematic areas.
UNIDO
• ODI’s SET program focused on the following set of priorities:
o Combining public/private coordination with accountability to ensure effective implementation (especially in SEZs and with
PPPs);
o Institutional building and especially providing a public agency with the capacity and power to manage coordination
challenges in its drive to industrialization;
o Investment climate improvement through policy improvements targeted especially towards infrastructure, technology
transfer and innovation, human capital development, improving the fiscal and regulatory burden, improved public financing
of key industries, and domestic private sector development.
ODI-SET

Summary
38
Rank
Govt.
FYDPII
ODI
SET
UNIDO
TCR ‘12
WBG
P4R
WBG
Dinh, Monga
Total
1 Sectoral diversification 4 5 5 5 4 23
2 Institutional coordination 5 5 5 3 4 22
3
Improving business climate / policy
harmonization
3 4 5 3 5 20
4 Strengthening SEZs / clustering 3 4 3 5 5 20
5 Infrastructure development 5 2 3 5 4 19
6 Skills development 4 4 5 3 3 19
7 Regional trade 3 3.5 4 4 4 18.5
8
Strengthening domestic firms /
improving linkages
5 3 3 4 2 17
9 Improving access to finance 5 2.5 2 4 2 15.5
10 Investment promotion / one stop shops 4 3 2 2 2 13
[Scale: 5 – Dedicated focus; 4 – High level of focus; 3 – Some focus as part of other work streams; 2 – Negligible focus; 1 – No focus]
• In general, the government of Tanzania and development organizations converge on three major priorities: 1) sector
diversification to develop Tanzania’s industrial sectors; 2) institutional coordination which includes undertaking capacity
building; and 3) improving the business climate through a drive towards regulatory improvements.
• The WBG places additional emphasis on strengthening SEZs and increasing skills development while the government
emphasizes improving access to finance and strengthening domestic firms.
Sources: High-level interim/draft team assessment.

39
Sector prioritization04
• Why prioritize and how?
• Findings for key manufacturing sectors
• Process and next steps

Why prioritize and how?
40
• Tanzania’s industrialization challenge is substantial: the country has a
lower level of manufacturing compared to other countries in SSA, a
region that itself trails other developing and emerging market
economies in terms of their ability to leverage manufacturing as an
engine of employment and growth. However, the government is eager
to address this, and impatient to make gains in addressing the
country’s industrialization deficit.
• In light of the size of the challenge, the limited progress made to date,
and the usual constraints on resources, it is necessary to develop a
clear strategic focus, so as to make real gains in a limited number of
areas, and then use these gains and the experience gathered to scale
up the effort.
• Developing such strategic focus begins with identifying manufacturing
sector growth and investment opportunities, and ranking the
opportunities relative to each other. However, such a prioritization
process must be careful and deliberative, ensuring that it is inclusive,
transparent, and well informed, avoiding the mistakes of closed-door
processes of ‘picking winners’ that lack private sector buy-in and risk
subsequently wasting time and resources.
• This decision-making process puts into practice the idea of
coordination or deliberation councils, advanced by Rodrik and others.
While this effort is particularly important when focus sectors are
prioritized, such a coordination and deliberation process is also
required over the course of implementation of sector support
interventions to both guide and advocate for a manufacturing
competitiveness effort, and discuss course adjustment should
decisions initially taken prove to not meet expectations.
• Sources: Rodrik, D. “Industrial Policy for the Twenty-First Century.” November 2004; internal WBG document on
Country Private Sector Diagnostics.
Public-private coordination mechanisms
• Writing about institutional structures for
addressing information and coordination
externalities, Rodrik advocates for strategic
collaboration between public and private
sectors “to elicit information about objectives,
distribute responsibilities for solutions, and
evaluate outcomes as they appear.”
• Elaborating on the function of such coordination
and deliberation councils, Rodrik says:
• “They would be the setting in which private-
sector interests would communicate their
requests for assistance to the government,
and the latter would goad the former into
new investment efforts.
• These councils would seek out and gather
information … on investment ideas, achieve
coordination among different state agencies
when needed, push for changes in
legislation and regulation to eliminate
unnecessary transaction costs or other
impediments, generate subsidies and
financial backing for new activities when
needed, and credibly bundle these different
elements of support along with appropriate
conditionalities.
• … Preferably, the larger of these councils
would have their staff of technocrats.”

Why prioritize and how? (contd.)
41
• This process of sector prioritization centers on assessing key manufacturing sectors considering four questions along two
dimensions of desirability and feasibility. Each is assessed using country-level, sector-specific data where available, or
where there is no clear data then a qualitative assessment of each sector’s performance on that measure is used.
Sources: WBG internal documents.
Inclusion & jobs
• Value-added per worker ($)
• Direct jobs
• Female to male ratio
Economic growth • Domestic value addition ($ millions)
Competitiveness
• Gains in world market share
• Product complexity index score
Integration & connectivity
• Exports ($ millions, 2011-2015 avg)
• 5 year export growth (2011-2015)
Resilience & stability
• Assessment of independence of natural
resources
Environmental sustainability • Million metric tons of CO2 equivalent
Demand
• World market size (2015)
• World market growth
Production
factors
Labor skills
• Ratio of non-skilled to skilled
workers
Revealed comparative
advantage index (RCI)
• Export share relative to global
trade share (2015)
Key inputs
Energy
• BTU usage per sector (based on
US data)
Transport • Value to weight ratio
Finance • FDI investment into sector
Institutions
Regulatory barriers
• Assessment of regulatory impact
on sector
Rule of law and property
rights
• Assessment of comparative
investment mobility and
investment depth/intensity
Desirability
• What is the desirability of the sector in terms of the potential
impact from the sector’s output growth on the country’s
development objectives?
• What is the sector’s current performance and how does it
contribute to development impact? How fast is it growing in
terms of output quantity and quality?
Feasibility
• Under current conditions in the country, is profitable and
transformative private sector activity in the sector feasible? If not,
where are the constraints?
• To what extent can conditions in the country be improved – within
a limited time horizon – to bring about profitable and
transformative private sector activity in the sector?

Findings for key manufacturing sectors
The application of this framework to the manufacturing sectors
reviewed above finds a number of emerging clusters:
• CTA and wood and furniture emerge as front-running sectors, with
both exhibiting strong value addition and employment attributes, and
bolstered by good global demand in terms of absolute market size
and recent growth trends. Exports for wood and furniture have grown
well recently.
• Food products, beverages and edibles oils score well as a result of
their size in Tanzania, and therefore a source of value addition and
employment – both vital metrics. Beverages scores particularly well
in terms of value-addition per worker and edible oils on exports (size
and growth). All three also do relatively well on measures of
environmental sustainability.
• Pharmaceuticals and plastics score well on desirability due to
comparatively high product complexity and lower than average
natural resource dependence scores, and on feasibility as a result of
strong global demand and growth. However, this potential market
opportunity is not met by Tanzania’s sectors, which do not perform
particularly well on export measures. Both face higher than average
regulatory pressures – health and safety for pharmaceutical and
environmental for plastics.
Sources: Rodrik, D. “Industrial Policy for the Twenty-First Century.” November 2004; internal WBG document on Country
Private Sector Diagnostics. * Note: CTA domestic manufacturing value-added data likely includes basic processing of
cotton, which while it moves processing beyond a raw form of cotton, is also not substantially a manufacture. In this
case, CTA would achieve a lower relative positioning on feasibility.
• A group of more capital intensive industries generally cluster in the bottom left, driven mainly by their limited
employment affects, below average domestic value addition and high energy consumption (which effects both feasibility
and desirability through power use and their environmental footprint). They score well in terms of product complexity,
but this is countered by Tanzania’s limited global market share.
Relative feasibility and desirability
Manufacturing sectors’ performance on 1-5 scale against a number
of sector attributes
Food products
Beverages
Edible oils
Chemicals
Soap
Fertilizer
Cement
Iron and steel
Paper and
paperboard
Cotton, textile,
apparel
Leather and
related products
Plastics
Furniture and
wood
Glass
Pharmaceutical
1.5
2.0
2.5
3.0
1.0 1.5 2.0 2.5 3.0 3.5
Feasibility
Desirability

CTA
• Potential to capture substantial part of value chain in-
country (only for cotton products)
• Good global growth
• Apparel is low-skilled, labor intensive
• Existing support from development agencies to build on
• GoT priority
• Majority of sector size is in cotton
• Limited traction to date in apparel despite over a decade of
preferential export market access
• Increasing value chain pressures to reduce lead times, combined with
heightened focus on environmental and social compliance
Wood and
furniture
• Potential to capture substantial part of value chain in-
country
• Broad spectrum of skills development options
• Good global growth
• Most wood is exported with limited processing
• Limited historical traction in furniture (though recent signs of growth)
• Consumer concerns with sustainability will require stringent
environmental safeguards
Food products
• As one of the country’s largest industries, it is a good
source of value addition and jobs
• Clear link to farmers and Tanzania’s agricultural
potential
• Natural barriers to entry as a result of bulk and/or
perishability
• Limited depth of value chain, with competitive differentiation lying less
in production and more distribution and retail
• Still quite import dependent for inputs, particularly grains and sugar
• Dominated by a few large firms, limiting public interventions’ spillover
advantages
• Oftentimes politicized products, potentially constraining scope of
competitiveness interventions
Beverages
• A large industry, so good source of value addition and
jobs
• Links to other large manufacturing supply sectors,
including glass and plastics
• Natural barriers to entry as a result of bulk
• Limited depth of value chain, with competitive differentiation lying less
in production and more distribution and retail
• Dominated by a few large firms, limiting spillover advantages of public
interventions
Findings from desirability-feasibility analysis (contd.)
43
Opportunities Challenges
• The cluster of food, beverages and edible oil products surface as strong potential focus sectors in terms of their
economic impact, yet they face a low ceiling in terms of future value addition development opportunities.
• In contrast, pharmaceuticals presents enormous value addition and expansion opportunities; however the learning
curve for Tanzania will be very steep.
• Plastics presents great variety in terms of product opportunities, from relatively simple manufactures to industry 4.0
applications.
• CTA and wood and furniture present a broad spectrum of processing opportunities, yet Tanzania has not truly seized
them to date.

Edible oil
• A large industry, so good source of value addition and jobs
• Clear link to farmers and Tanzania’s agricultural potential
• Natural barriers to entry as a result of bulk
• Interesting niche opportunity in sesame oil
• Limited depth of value chain, with competitive differentiation lying
less in production and more distribution and retail
• Still quite import dependent for inputs, particularly palm oil
Plastics
• Diverse range of product opportunities, including industry
4.0 applications
• Natural barriers to entry as a result voluminous products
• Relatively easy access to inputs
• Regulatory pressures due to negative environmental impacts
• Complexity of developing circular economy value chain
• Aside from recycled plastics, no domestic source of inputs
Pharmaceuticals
• Large import substitution opportunity
• Strong global growth
• GoT priority
• Regulatory barriers to entry, particularly in export markets
• High value, low volume product presents few natural barriers to
imports
• Skills and R&D intensive
Findings from desirability-feasibility analysis (contd.)
44
Opportunities Challenges

Process and next steps
45
• The manufacturing competitiveness project’s implementation efforts are targeted on a limited number of manufacturing
sectors so as to ensure that limited resources are deployed to address specific constraints, thereby improving the
possibility of achieving tangible and business-relevant gains.
• The choice of which sectors the project should focus on will be undertaken through a consensus-driven, joint public-
private process. This will entail convening a group of industry and public sector representatives – from business leaders
to budding entrepreneurs, government officials to representatives of think-tanks – to contribute to a decision-making
process in which quantitative and qualitative data are combined to drive a decision on which two sectors to initially
focus the project’s efforts.
• The decision will most likely focus on the short-list of food products, CTA, beverages, edible oil, plastics and
pharmaceuticals, but it can also include any of the sectors profiled above.
Finalizing prioritization:
1. Solicit input from public-private manufacturing stakeholders
2. Confirm initial focus sector decision
3. Agree on next steps
(Timeframe: August-September 2018)
Note: See annex for more project details.

Facilitate investment and growth in
high potential manufacturing sectors
Objective
Project activities
Approach
Technical and executional
support for implementation
of prioritized initiatives
Technical expert input, investment promotion, market and
technology access and linkages, capacity building, institutional
strengthening, public-private dialogue
Sector strategic roadmap
and action plan
Annex 1
Project background: Manufacturing competitiveness overview
47
• Challenge: Tanzania is predominantly an agriculture and services-
based economy, with a low manufacturing footprint. Tanzania’s
manufacturing sector represents less than 10% of GDP with an
overall declining trend from a high of 13% of GDP in the 1970s. This
compares poorly to other countries in the region, and lags far behind
East Asian countries that have proven to be successful in harnessing
manufacturing as an engine of growth and employment.
Addressing Tanzania’s relative underperformance in manufacturing
has therefore become a focus of the Government. In its Second Five-
Year Development Plan, the Government has prioritized
manufacturing as a key contributor in its drive to become a semi-
industrialized country.
• Objective: The objective of the manufacturing component of the
Tanzania Business Enabling Environment Support project is to
support Tanzania's growth in manufacturing value addition and
related employment in high priority manufacturing sectors
• Implementation: The project will be implemented over a period of four years in three phases:
1. Assessment and prioritization: Assess Tanzania’s manufacturing competitiveness; identification and prioritization of high-
potential value opportunities for manufacturing growth; identification of a limited set of sectors on which to focus the project’s
support (currently two sectors at this stage).
2. Development of sector strategy roadmaps: Engage industry sector groups to develop sector strategy roadmaps; design and
sequence intervention support required, clarifying roles for the government, private sector and supporting institutions.
3. Implementation of prioritized activities: Lead execution of key multi-year, competitiveness initiatives ( - this is the main focus of
the project’s efforts). Includes support in technical capacity building, market and technology linkages, export and investment
promotion, institutional strengthening; underpinned by public-private dialogue process to ensure jointly owned and
implemented solutions.
Note: The manufacturing competitiveness activities are a component a larger Tanzania Business Enabling Environment
Support project (BEE). The objective of BEE is to build inclusive and sustainable private sector-led growth,
competitiveness and investment in Tanzania. This is achieved through a focus on: Cross-cutting economy-wide reforms,
that include streamlining business regulation and tax administration, regional integration and enhancing trade logistics;
Unlocking investment in key sectors, focused on agribusiness, manufacturing and tourism. The project is implemented
by the World Bank Group and funded by the Government of Canada.

Annex 2
Food products parameters and data estimations
48
• According to 2013 industrial census data, Tanzania produced $2.7 billion of food and related products (ISC Rev 4 code 10).
This includes a range of food-related items, ranging from fresh fruit and vegetables to processed food products.
• The main focus in the manufacturing context is on processed foods, therefore mainly on edible oil ($500 million), flour ($750
million) and ‘other’ food products ($1 billion).
• To get an estimation the relative share of products within the ‘other’ category of the census data, food products data from the
Global Consumption Database (2010) was drawn on. This shows that over three-quarters of these other products are
covered by two products: baked goods (largely bread) and sugar.
• These products were then used for analyzing trade data for food products, assessing imports and exports of flour, baked
goods and sugar.
Sources: Trade Map, International Trade Centre: http://www.trademap.org/, UN Statistics Division, World Bank Group
Global Consumption Database: http://datatopics.worldbank.org/consumption/country/Tanzania
101 - Processing and preserving of meat
102 - Processing and preserving of seafood
103 - Processing and preserving of fruit and vegetables
104 - Manufacture of vegetable and animal oils and fats
105 - Manufacture of dairy products
106 - Manufacture of grain mill products and starches
107 - Manufacture of other food products
1071 - Manufacture of bakery products
1072 - Manufacture of sugar
1073 - Manufacture of cocoa, chocolate and confectionery
1074 - Manufacture of pasta products
1075 - Manufacture of prepared meals and dishes
1079 - Manufacture of other food products
- Coffee, tea, spices
- Vinegar and
- Special foods (e.g. baby food, infant formula)
- Miscellaneous foods (e.g. yeast, extracts, egg prod.)
Food products codes
ISIC Rev 4 code 10
Tanzania’s food products
2013 values. Size: $2.7 billion.
41%
35%
11%
10%
Baked goods
Sugar
Coffee, tea, cocoa
Special food products
Confectionary, chocolate
Jams, marmalades, honey
Pasta
‘Other’ food products
Share based on consumption data
- 200 400 600 800 1,000
Other food products
Meat
Dairy products
Fruits/vegetables
Seafood
Vegetable/animal oils
Milled grains and starches
$, millions

Annex 4
Sector prioritization: Definitions of desirability and feasibility
49
Source: WBG internal documents.
Note: This methodology was developed by the WBG for Country Private Sector Diagnostics.
49
• Each sector’s desirability in terms of its contribution to development objectives is measured across six categories:
inclusion and jobs, economic growth, competitiveness and productivity, integration and connectivity, resilience and
stability, and environmental sustainability.
• Reform feasibility is assessed across four categories: demand, production factors, key inputs and institutions. Some
of these categories contain further subcategories. For instance, key inputs are broken down into energy, transport,
and finance. The four categories of feasibility also correspond to a simple demand-supply market failures
assessment of a sector. The first category measures demand for the sector’s output. The second category,
production factors, measures supply capacity in the country, including labor, land, and natural resources, and
pertinent capital, approximated by existing capabilities. The third category, key inputs, assesses market failures in
secondary markets that are of importance to the sector and might prevent market creation, while the fourth
category, institutions, deals with issues that might create market failures in the sector itself.
• Desirability and feasibility dimensions can be roughly equated to measurements of the social returns (desirability)
versus the risk-adjusted private returns (feasibility) of investment in each sector. A sector needs to score high on
both criteria for the private sector to be able to make a meaningful contribution to development objectives—even if
social returns are high, the private sector will not step in unless a sufficient share of the returns can be appropriated
by the investing firm to generate a profit.

Tanzania manufacturing: Sector opportunity scan - Part I (2018)

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