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Tanzania economic update

For shared prosperity Tanzania needs a universal strategy

Jacques Morisset's picture

The figures don’t lie. Today, about 11 million Tanzanians live in poverty. This is too much. Equally worrisome is that since 2001 the national poverty rate appears to be stuck at approximately a third of the total population despite rapid and stable economic growth.

People need jobs

For a long time, the Tanzanian Government has defended itself: poverty reduction will catch up thanks to the massive public investment made in social and infrastructure sectors over the past decade. More children, including girls, are going to school, and the efforts to reduce infant mortality have registered spectacular achievements. However, it is estimated that those improvements will take one generation to translate into actual productivity gains and higher incomes.

Tanzania can benefit from natural gas by empowering people

Jacques Morisset's picture

If you are looking for a house in Dar es Salaam, hurry up. With the recent discovery of massive natural gas reserves, affordable houses will soon become a rarity. The cost of living in African countries with abundant natural resources (Angola, Gabon, etc) is among the highest in the world. Today Tanzania sits on about 15 trillion cubic feet of proven natural gas reserves, equivalent to approximately US$150 billion at current prices, or 6 times Tanzania's current GDP.

These proved and potential reserves can be a game changer for Tanzania. Yet, extracting and producing is not a simple affair. Massive up-front investments (larger than the country’s current GDP of US$22 billion) and new technologies are necessary, while benefits will typically spread over 25 to 30 years. Short of cash and expertise, Tanzania will have to partner with global companies. Potential candidates (British Gas, Statoil) are already knocking on the door.

Tanzania’s Steep Learning Curve

Stevan Lee's picture

Tanzania has shown massive achievements in education – well known progress in primary enrolment plus less well known, but in some ways even more spectacular, growth in post-primary education. 

Yet, Tanzania needs to improve learning outcomes if a virtuous cycle of growth and human capital investment is to be sustained. This is “The Steep Learning Curve” which Tanzania needs to get onto with modest fiscal resources but a rapidly growing number of new students, and therefore with a keen eye for value. This should be possible.

Tanzania: Building bridges through education and small businesses

Jacques Morisset's picture

Stevan Lee, Senior World Bank Economist, is co-author of this post.

Attracted by the prospects of large unexploited natural gas reserves in the south of Tanzania, big players are in town. The British Gas Group has publicly announced that it may invest over US$35 billion in the next 25 years – 1.5 times Tanzania’s current GDP. Policymakers and donors are jockeying to position themselves and understand what is at stake.

Tanzania: Building bridges through education and small businesses

Jacques Morisset's picture

Attracted by the prospects of large unexploited natural gas reserves in the south of Tanzania, big players are in town. The British Gas Group has publicly announced that it may invest over US$35 billion in the next 25 years – 1.5 times Tanzania’s current GDP. Policymakers and donors are jockeying to position themselves and understand what is at stake.

The excitement is well founded but perhaps a little bit premature. According to the most optimistic projections, revenues from natural gas will not materialize for 5-7 years. Moreover, international experience shows that commodity-driven growth does not guarantee success. The Tanzanian authorities are therefore right to prepare for the future by setting up the fiscal and financial rules required for future transparent and rational use of these funds now. They should not forget also to focus on the coming 5-7 years because the economy is facing a number of challenges.