Published on Africa Can End Poverty

For shared prosperity Tanzania needs a universal strategy

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ImageThe 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.  Likewise, the expected real impact of the Government’s investment in infrastructure (primarily roads) over the past decade will be delayed because it takes time to build a road, energy plant or pipeline.
More recently, a new line of thinking has emerged. Cross-cutting initiatives, as described above, need to be completed by specific actions aimed at promoting job creation. Indeed, the most effective means of reducing poverty is to employ people since labor income is their main source of revenue. This argument has been incorporated in recent national strategies building on the works of influential players such as the World Bank, the African Development Bank, and the well known private international consulting firm, McKinsey & Co.

Those players say that Africa's future lies in the development of its (light) manufacturing industry. The success of many emerging countries, such as China and Malaysia, is used as reference. Further, the development of this labor intensive sector would rely on Africa’s main comparative advantage today, which is its relatively cheap and abundant labor force. There is also a special opportunity to attract the increasing number of manufacturing firms moving out of industrial and emerging countries (including China) heading for more competitive markets. As a result, Tanzania has entered into a new race, competing with the likes of Ethiopia, Kenya, Uganda, and Mozambique. All these countries are or have been  on designing specific ’industrial‘ strategies aimed at attracting and developing agro, leather and wood processing, textile or tourism industries.

A twist in the strategy

For Tanzania, however, the forthcoming World Bank's Second Economic Update argues that such an approach needs to be adjusted. The vast majority of manufacturing jobs will be in urban areas, while most of its people still live in rural areas. About two out of three Tanzanians are located outside of an urban center, and 80 percent of the poor are concentrated in the countryside.
Tanzanian policymakers can get inspired by the experience of emerging countries that had a similar profile in their earlier stages of development. Forty and thirty years ago, Malaysia and Vietnam had both a large unproductive subsistence agriculture sector, little diversification of production activities in their rural areas, and a relatively low level of urbanization. Today, these two countries report a per capita income that is 14 and 2.5 times that of Tanzania. What have they done right?

Three transformational forces at play

There is a vast body of literature dissecting what successful countries have done. Our take is that Malaysia and Vietnam have been able to address the spatial dichotomy between their rural and urban development by managing three transformational forces. First, they promoted agriculture commercialization, bringing financial incentives to their farmers. Second they encouraged their farmers to think beyond traditional crops by moving toward high value products (avocados, flowers) and non-farm activities (mining, retail, tourism). These moves were critical to generate additional income as well as more protection to farmers in case of climatic shocks. Lastly, these countries managed rural-urban migration, accepting that many rural households will move to cities in search of productive jobs, better salaries and improved living conditions.
These three forces are only emerging in rural Tanzania. Many rural households have started to look for markets to sell their agricultural products, while others are attempting to diversify outside of their farm gates.  The most visible sign is perhaps the accelerated urbanization phenomenon. Dar es Salaam today is the ninth fastest growing city in the world.  The Government has also launched a number of initiatives, especially promoting agricultural commercialization through the construction of new rural roads as well as the highly debated SAGCOT.

Each force is vital but their combination is what really matters for the country's harmonized development. Gains in agricultural productivity will not only feed the growing urban population but also promote the development of agro-processing industries that will be vital for creating enough jobs in urban areas. In turn, successful rural migrants will generate new market opportunities for farmers. Their remittances can also help finance farms' modernization and the development of collective infrastructure projects in rural areas. Diversification of income sources by farmers will help regulate the influx of migrants and the risks associated with congestion in cities.

The Tanzanian authorities need to act on these synergies. If agricultural productivity, rural diversification and urbanization have caught their attention, this has occurred through a set of piecemeal approaches with no real attempt to link those three forces together. For example, many experts, including some donors, continue to ignore urbanization as an important element of rural development. Similarly, sustainable urban growth will not happen without the emergence of productive farmers connected to cities. It is time for Tanzania to adopt a universal strategy that cuts across sectors and locations.
Tanzania in tomorrow's world

Let's pretend that we are in 2050. According to UN projections, Tanzania's population will be over 150 million, with Dar es Salaam one of the megacities of the African continent. Most likely, large secondary cities will have also emerged around growth poles such as natural gas in the South or tourism as well as agribusiness in the Arusha region. But what will have happened to the rural poor? Will they have moved to cities to be employed in manufacturing and service sectors like in China today? Will rural Tanzania be more like Thailand with its vibrant smallholder farms?  The response will greatly depend on the Government‘s capacity to stimulate and, above all, manage these three transformational forces of agricultural productivity, rural diversification, and urbanization.



Jacques Morisset

Lead Economist and Program Leader, World Bank

Jacques Morisset

Lead Economist and Program Leader, World Bank

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