Home ADVANCED LEVEL TOPIC 19: STRUCTURE OF TANZANIA ECONOMY ~ ECONOMICS FORM 6

TOPIC 19: STRUCTURE OF TANZANIA ECONOMY ~ ECONOMICS FORM 6

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TOPIC 19: STRUCTURE OF TANZANIA ECONOMY ~ ECONOMICS FORM 6

INTRODUCTION

The economic structure of Tanzania is the topic/ concept which explain and analyze economic aspects which form Tanzania economy and features of Tanzania economy.

The structure of Tanzania economy deal with analyzing economic sector which form Tanzania economy and an ownership system available in Tanzania basing on characteristics, contributions, problems and solutions to the problems facing economic components/ sector as the way of creating sound economic situation.

COMPONENTS/ PATTERNS OF TANZANIA ECONOMY

The structure of Tanzania economy divided into two main patterns/ components. These are

sectoral pattern
ownership pattern

SECTORAL PATTERN

This is the pattern aspect of Tanzania economy which analyze economic sector in Tanzania in terms of contribution, problem and solutions of the problems facing economic sector. All economic sectors in Tanzania economy are divided grouped into three (3) sectors.

Primary sector
Secondary sector
Tertiary sector

PRIMARY SECTOR

This is an economic sector which deals with production of goods from origin or sources. Most of primary sector deal with production of raw materials which may used for further production especially in industrial sector so as to get final goods and services, primary sector includes activities/ sectors such as agriculture, mining, fishing and considered as a main economic sector in Tanzania economy.

AGRICULTURAL SECTOR

This is an economic sector which deals with crop production (cultivation) and livestock keeping.

Agriculture sector is the main primary sector and considered as a leading Economic sector in Tanzania because it contribute large percent of gross national product (GNP) and provide employment opportunities to many people in Tanzania.

Agriculture plays a great role in development of other economic sector such as trading and manufacturing sector. Therefore agriculture is the backbone of Tanzania economy.

ECONOMIC ROLES/ IMPORTANCE OF AGRICULTURE SECTOR IN TANZANIA

Agriculture sector provide employment opportunities too many people that lead to decline in unemployment problem i.e. large percent of Tanzania employment is based in agriculture sector compare to other sectors.
Agricultural sector stimulate increase in GNP and economic growth because it contribute large percent of GDP in Tanzania
Agriculture sector assist development of other economic sector such as manufacture sector because it provides raw materials and market for that sectors.
It helps country to get foreign currencies due to the export of agriculture products abroad.
Agriculture sector increase supply of food product that assists satisfaction of human wants
Agriculture sector assist reduction of income inequality because it improve development and income to the people in rural areas that reduce personal and territorial income inequality
Agricultural sector assist in improvement of economic infrastructural in transport and communication system especially in rural areas.

PROBLEMS FACING AGRICULTURE SECTOR IN TANZANIA

The development of agricultural sector in Tanzania is limited/affected by the following problems;

Unfavorable climate conditional i.e. unfavorable temperature and rainfall for agricultural production. This reduces scale of production and gain from agricultural sector because most of Tanzanian’s depends on natural climate.
Shortage of market. Agricultural sector in Tanzania limited by small extent of domestic market due to the poverty and international foreign markets due to the competition and low quality of products.
Low prices and price fluctuations. Most of agricultural products act as raw materials; therefore they are sold at low price and experience price fluctuation which affect gain/ profit to farmers
Pests and disease affect agricultural production and limit scale of production and yields from production and some of diseases affect farms which reduce farmer’s participation in production which lead to low volume of production and agricultural development.
Low level of technology. Tanzania has low development of technology and most of farmers use poor tools and old technique of production this hinder quality and quantity of output produced.
Poor/ lack of workable government policies and structure. Tanzania government lack a workable agriculture policies and strategies for improving production, government created many policies but they are not actually implemented effectively in practices and there is not well established continuous follow up for evaluating failure and success of policies.
Low level of education and training among farmers. Most of famous Tanzania farmers have no relevant knowledge relating with agricultural provided, they use normal practices sector.
Shortage of capital. Most of people has no sufficient capital for investing in agricultural sector which cause small scale production and employment of local tools (low technology) which result to low agriculture production
Low development of economic infrastructures such as transport and communication system especially in rural areas which hinder development of agriculture sector.

GENERAL SOLUTIONS TO THE PROBLEMS FACING AGRICULTURE SECTOR IN TANZANIA

The following strategies may used to improve agriculture sector in Tanzania

Government and NGO’s should provide cheap loans to the people in order to invest in large scale for agriculture development
Government and NGO’s should adopt different strategies of improving agricultural sector through improving technology especially agricultural related technology
Government should improve economic infrastructures such as transport and communication system, government should increase budget of improving infrastructures in order to facilitate movement of agriculture inputs or final goods (agricultural product) to the market
Government should adopt price control policy to the agriculture products in domestic market i.e. price floor in order to promote farmers income and agricultural production.
Formation of workable policies and strategies. Government should create a workable and strict implemented and followed agricultural policies and strategies in order to improve agricultural production e.g. tax reduction increase in subsidies
Government through different authorities such as crop marketing boards cooperation should conduct research both market research and production research in order to improve agriculture production.
The use of irrigation schemes rather than depending on natural climate which is unpredictable.
Government and NGO’s should provide relevant agricultural knowledge through school, seminars and short training to farmers.

SPECIAL STRATEGIES ADOPTED BY TANZANIA FOR IMPROVING AGRICULTURAL SECTOR

All strategies of improving agricultural sector adopted by Tanzania economy may grouped into two main approaches

i.) Improvement approach

ii) Transformation approach

IMPROVEMENT APPROACH

This is the strategies of improving small scale peasant/ production which deals with improving productivity in agricultural production. These strategies emphasize on small scale production which has high productivity done by using modern method of production rather than local method so as to improve land and labor productivity (efficiency) in order to produce more goods of higher quality. It emphasizes measures aimed at primarily at individual produces.

Basic ingredients/ methods/ objective/ strategies of an improvement approach in Tanzania are:

It emphasize small scale production of improved method of production
Changing from the use of hand hoe to the use of simple labor saving devices such as ox- plough in production
Biological innovations such as the use of better seeds and breed etc.
The use of modern fertilizers in production process i.e. industrial fertilizers in order to improve land fertility
Provision of production incentives e.g. high price of agricultural products.
Research and development in order to find solutions of farming problems. etc.

Basically improvement approach aimed at improving production efficiently and increase in supply. This strategies succeed in increase in employment by enough people to participate, encourage innovations, production cost increase production/ supply of quality and quantity etc.

TRANSFORMATION APPROACH

These are the strategies of improving agricultural sector which dial with changing from small scale to large scale production of both food and cash crop. This method deals with large scale mechanized agriculture.

Under transformation approach government emphasize the use of modern technique of production in order to improve productivity of factors of production.

Transformation approach emphasize on the following strategies /objective/ methods of production

Large scale production which includes establishment of plantation or reopening of existed large scale farm.
The use of modern tools like tractors rather than or instead of using hand hoe etc.
Improvement of economic infrastructures and storage facilities especially in rural areas.
Establishment of authorities and organization together with employment of expertise for improving production and market such as crop marketing boards and cooperation.
Applying industrial fertilizers and use of modern seeds in production and irrigation scheme.

Therefore: transformation approach aimed at production in large scale for domestic and international trade in order to get foreign scale increasing employment reducing deficit in the balance of payment increase government revenue and GNP and other benefits of large scale mechanized production

However it limited by the shortage / absence of sufficient capital, low development of technology, shortage of large portion of fertile land, lack of educated and trained farmers (unskilled) labor, shortage of market and price fluctuation.

FLUCTUATIONS OF PRICE OF AGRICULTURAL PRODUCTS IN TANZANIA

The economic analysis proved that there is no stability of price to agriculture products. These products experience rise and fall in price which much differ from other products such as industrial product. Therefore price of agricultural product fluctuates more than the price of industrial product.

FACTORS/ REASONS FOR LARGE FLUCTUATIONS OF PRICE OF AGRICULTURAL PRODUCTS

Perish ability of agricultural products. Most of agricultural products are perishable they cannot be stored for future use therefore they highly supplied when harvested which lead to large fall in price, then there will be series shortage in the future which lead to large increase in price.
Agricultural product has long gestation period. During harvesting supply increase that lead to large fall in price but due to long production gestation period supply will fall or remain constant that lead to large increase in price
Agricultural product has derived demand. Since they have derived demand fluctuations of price of final goods produced by agricultural product cause large fluctuation of price agricultural products
Bargaining power of producing countries /frames most of ago- based economic has low bargaining power which leads to sale of agricultural products at low price and price fluctuations according to the market situation / environment.
Agricultural products depend on natural factors such as temperature and rainfall. therefore favorable climate condition will influence increase in production and supply which lead to price fall but unfavorable climate condition discourage production and supply which lead to large increase in price when other factors remain constant.
Competition among countries and industrial use of raw materials. Due to competition among countries and use of industrial raw materials like synthetic fibers, or use of raw material saving technique which affect demand for agricultural products and fluctuation of price
UN unpredictable production and supply i.e. over production and supply cause fall in price while under production and supply cause rise in price of agricultural production

THE EFFECTS OF PRICE FLUCTUATIONS OF AGRICULTURAL PRODUCTS

The up and down / rise and fall of price of agriculture /product may have the following effect in an economy.

fluctuations of government revenue in an economy spinally ago – based economy like Tanzania
Fluctuations of farmers people income because price fluctuations cause fluctuations of sales revenue and income to formers/ people
Fluctuation of level of employment i.e. Increase in unemployment i.e. fluctuations of agricultural price affect revenue and agricultural production that lead to fluctuation of employment.
It may cause failure of government plans in different economic activities
It discourage peoples investment in agricultural production and decline in agricultural sectors due to the loss obtained as a result of price fluctuations
THE ROLES OF AGRICULTURE SECTOR TO THE DEVELOPMENT OF INDUSTRIAL SECTOR

Agricultural sector and industrial sector should be developed simultaneously because development of one sector can be used as a catalyst for development of another sector. The following are the way agricultural sector may stimulate development of industrial sector.

Agricultural sector help people/country to earn currency that used for investing in development of industrial sector like purchasing /importing machine and other inputs for industrial production and development.
Agricultural sector provide inputs raw materials to industrial sector such as cotton is raw materials for manufacturing clothes: This help to develop industrial development.
Agricultural sector provide market for industrial products that stimulate industrial development for example industrial fertilizers purchased by agricultural sector/producers
Agricultural sector provide labour reserve for industrial use and industrial development
Agricultural sector facilitate improvement of economic infrastructures such as transport and communication system which facilitates industrial development
Agricultural sector sometimes facilitate development of technology which may facilitate industrial development when reemployed in industrial sector.

Note: the explanation above May used/ provide a framework in explaining the way industrial sector facilitate agricultural development.

SECONDARY SECTOR/ INDUSTRIAL SECTOR

This is economic activities/ sector which deal with converting inputs into output, secondary sector deal with production of final goods and services from raw materials manifesting and construction activities are two main aspect which from industrial/ secondary sector.

Industrial sector mostly take raw materials from primary sector then modifying/ convert into final goods and services. Secondary / industrial sector contribute about / over 20% GDP (22.6%) and over 20% employment in Tanzania economy.

THE ROLES OF INDUSTRIAL SECTOR IN TANZANIA

Industrial sector increase government revenue become industrial and activities pay tax to the government
Industrial sector provide employment opportunities to many people this reduce the problem of unemployment.
Industrial sector provide input to other sectors such as agricultural sector like fertilizes, tractors which assist agriculture activities.
Industrial sector provide market for other economic sector like agricultural sector since agricultural sector supply product which act as a raw materials in industrial sector such as sisal e.t.c.
It facilitates improvement of other economic sectors like tertiary sector i.e. Transport and communication system.
Assisting in supplying food product which used to satisfy human wants.
Industrial sector facilitate growth of town and cities for example Tanga, Dar es Salaam.


PROBLEMS FACING INDUSTRIAL SECTOR IN TANZANIA ECONOMY

Shortage of raw materials/ input used in production of final goods and services. This may be caused by low development of other economic sector like Agricultural sector.
Shortage of skilled and efficient labor and management. This contributes to the decline in production and low development of industrial sector.
Lack of reliable enough market for industrial product both domestic and international market
Lack of reliable power and water supply for industrial use i.e. frequently electricity cut off this limit industrial development
Low government support (policy) government has no workable policy of providing subsidies and tax reduction for industrial development
Shortage of capital. This limit large investment and production and failure to enjoy economies of scale.
High initial and operational cost , this problem arise due to the shortage of inputs and some of them imported abroad that lead to increase in cost (price) of input and lead to low profit
Low development of technology. This problem reduce efficiency of industrial that cause low quality of products and low output produced
Low development of economic infrastructure such as transport and communication this limit movement of either raw materials from different place to produce area or final goods and services from production area to the market place.


INDUSTRIAL DEVELOPMENT STRATEGIES IN TANZANIA

Since independence Tanzania government adopted two main strategies of improving industrial activities

Import substitution activities strategy(1961-1975)
Basic industrialization industry strategy (1975-1995)

THE IMPORT SUBSTITUTION INDUSTRIES STRATEGY

This was the policy adopted by Tanzania government which aimed at producing goods and services formerly imported from other countries. That means government decided to established domestic industries of producing goods or service which satisfy domestic human wants in order to reduce the deficit in the balance of payment made abroad so as to reduce deficit in the balance of payment . Import substation industry strategy started on 1961 to 1975 as industrial development strategy since independence

OBJECTIVES/ IMPORTANCE OF IMPORT SUBSTITUTION INDUSTRIES STRATEGY

To serve the foreign currency reserve formerly used to import goods and services
To increase the level of employment of factors of production i.e. labour employment
To earn foreign currency from export action of goods and services produced by domestic industries
To rise government revenue because industrial will increase tax base and amount of tax revenue collected by government.
To stimulate improvement of technology due to technique of production
Increase in market for domestic raw materials for example agricultural raw materials
Reduction in deficit in the balance of payment because industries increase export while reduce volume of import

DISADVANTAGES OF IMPORT SUBSTITUTION INDUSTRY STRAGETY

The import substitution industries have the following disadvantages in an economy.

Import substitution industries require protection this goes against the principle of international trade and reduce gain in international trade and retaliation.
Increase in payment abroad due to the increase in import of capital goods used to develop import substitution industries like machines and other inputs (raw materials)
Industries increase supply of low quality product and low consumer’s satisfaction due to the use of low technology in production process.
Industrial produce more consumer’s goods rather than industries development product ( capital/ capital goods) because capital goods assist further industries development
Some of industries produce surplus commodities to the domestic market this may regarded as wastage of resources and loss to the companies/ industries.


DIFFICULTIES/ PROBLEMS IN IMPLEMENTING IMPORT SUBSTITUTION INDUSTRY STRATEGY

Shortage of foreign currencies for importing capital goods and technology used in production.
Shortage / lack of reliable raw materials which limit production and increase cost of importing of some of raw materials
Shortage of skilled and trained labor of producing goods and services in an established industries
Lack of reliable power supply this cause rise in cost of production and sometimes failure of production
Low management skills among managers and government intervention in industrial activities and decisions
Shortage of capital fund for large scale investment this cause small scale production and failure of most of industries to enjoy economies of scale

BASIC INDUSTRIALIZATION STRATEGY (1975-1995)

This was industries development strategy aimed at establishing and development industries which produce capital goods rather than final goods and services.

Basic industrialization strategy started in 1975 to 1975.In implementing this strategy Tanzania government established many industries such as Tanga Fertilizers Company, Wazo cement, making factor; Kilimanjaro machine tools, kibaha sub- scania car assembly UFI, ZZK- mbeya SPM- mogololo- iringa and other industries.

Basic industrialization strategy promote production of capital goods for further investment and industries development reduce deficit in the balance of payment, through reduction of importing capital goods, promote development of technology, reducing dependence on foreign capital and creating strong economic base, saving foreign currency reserve used for importing capital goods.

TERTIARY SECTOR

This is an economic sector which deals with service provision to other economic sector or people in an economy. This sector does not deal with physics production of goods but provide services which assist production, competition, exchange, distribution and consumption activities. Tertiary sector includes activities such as banking, insurance, communication, transport, warehouse and other aids to trades tertiary sector also called services sector.

THE ROLES/ IMPORTANCE OF TERTIARY SECTOR

It helps movement of goods and service or raw materials from one place to another i.e. production area to the market place for exchange this done by transport services.
It help to make goods available in the markets at the right time when they are needed this done by storage transport and communication service
Tertiary sector protect loss in production either on product or firm in general this facilitated by warehouse and insurance services
It facilitates trade transaction and saving activities through banking service.
It helps to expand the size of market and sales volume through market research which is facilitated by transport and communication system
Provide employment opportunity to many people in difference activities done in tertiary sector this reduce the problem unemployment
Facilitates increase in government revenue through tax revenue collected in tertiary activities.

OWNERSHIP PATTERN

This is the structure aspect of Tanzania economy based on system of ownership of major means of production in Tanzania economy. The system of ownership in Tanzania divided into three (3) main systems

Public ownership
Private ownership
Cooperation ownership

PUBLIC OWNERSHIP

This refer to the system of ownership where by major means of production (resources) are collectively owned by government and major means and economic decisions made by government through central government authorities on behalf of society.

ADVANTAGES OF PUBLIC OWNERSHIP

Public ownership is preferable and assist in smooth provision of basic/important service in an economy in order to avoid competitive supply e.g. elect trial water supply
Public ownership reduce the problem of income inequality in the society because of absence of private ownership of major means of production
Public ownership facilities/assist provision of goods since private sector fails to afford while government may afford.
Public ownership facilitates supply of goods and services which are not profitable but essentials in an economy for example defense and security, public goods like roads
Public ownership reduce resources useful competition and utilization of economic resources because government plan on effective and efficient way of utilizing resources
Reduce economic instability(crises) such as inflation because government control resources and other problems/instability
Playing important role in providing employment to the people i.e. reduce unemployment problem.

DISADVANTAGES OF PUBLIC OWNERSHIP

Most of public ownership firm and companies are not efficient in providing goods and services e.g. TANESCO in supplying electricity this is due to the absence of competition
Public ownership may lead to public monopoly and all problems of monopoly markets
It may cause resources misallocation of resources due to political and social reasons
Public ownership cause low production and supply of goods and services of low quality this cause failure of public firm to enjoy economies of scale. This caused by lack personal commitment and poor management
It increase government burden in terms of cost and of operating public enterprises
Public ownership reduce consumer’s choice and satisfaction of human wants due to the shortage/lack of varieties of output

COOPERATIVE OWNERSHIP

This is the system of ownership where by economic resources are owned by two or few people for the group benefits. That means resources or business enterprises are collectively owned by two or more people or between people and government for joint benefits.

Cooperative ownership which occurs between government and private enterprises also know as joint venture. And cooperative societies/union which discussed more the topic of marking and distribution.

PRIVATE OWNERSHIP

This refer to the system of ownership where by major means of production are owned privately and decision made by private enterprises for private benefits i.e. profit maximization

Most of private enterprise which emerge as a result of private ownership make private decision without interference from government such as what to produce, where to produce ,when to produce and how to produce for profit maximization.

ROLES/ ADVANTAGES OF PRIVATAGE SECTOR OWNERSHIP / NON-GOVERNMENTAL ORGANIZATION (NGO’S)

Private sector increase job opportunities and better payment to many people compare to public sector ownership
Most of private sector (firms) are efficient and lead to increase in supply and quality of goods and services.
Private ownership /sector facilitate transfer and improvement of technology from one country (MDC’S) to another (LDC’S) like Tanzania
Private sector/ ownership help to increase government revenue because they pay tax to the government
Private sector stimulate competition which discourage occurrence of monopoly and negative effect of monopoly, also it stimulate efficiency in production.
Facilitate effective and efficient utilization of resources in an economy
Reduce government burden in control and finance public firms

DISADVANTAGES OF PRIVATE SECTOR/ OWNERSHIP

Private ownership sector/cause wasteful competition and utilization of economic resources
Private sector increase the problem of income inequality and economic/ regional imbalance
It may cause increase in price and cost of living this increase hard ship in people’s life and poor living standards.
It may cause failure of government plan because of presence of large private sector which are efficient enough to operate against government will and plans.
It may cause cutthroat competition which lead to decline weak firms and unemployment problems.

TYPES OF PRIVATE SECTOR

There are two main types of private sector

Formal private sector
Informal private sector

FORMAL SECTOR

These are private sector established and operated by following government rules and regulations laid down by government for controlling private sector. Most of formal sector are large sector

INFORMAL SECTOR

These private sector established and operated without following strict rules and regulation laid down by the government for under taking such activities in the country example of informal sector are street vendors

CHARACTERISTICS OF INFORMAL SECTOR IN AN ECONOMY

They use small initial and running capital in production
They produce in small scale. This is because of using small initial and running capital
They use low level of technology and local tools in production
Most of them has no permanent places i.e. business unit has no specific and permanent place for their activities

ROLES/IMPORTANCE OF INFORMAL SECTOR IN TANZANIA ECONOMY

Provide employment to many people. This is sector employ many people because Tanzania has large number of less/ uneducated and low income earner. Who has no sufficient fund, so they decided to participate in different work such as tailoring, cookers, carpentry etc.
Increase supply of cheap goods and services in the market which lead to increase in consumer’s choice and satisfaction
Reduce social evil/ problems in an economy since informal sector provide employment to many people, social evils such as robbery are reduced in an economy
Some of informal sector pay tax to the government and other deductions which increase government revenue
Reduce income inequality because informal sector improve income to low income earner
Stimulate competition with formal and public sector which lead to increase efficient in production and distribution of commodities
Increase resources utilization. Since they participate in land utilization and of their natural resources in production process.
Stimulate innovation and invention which leads to improvement of technology in production.

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