PARTICIPANTS at a high level workshop on the country’s future have noted that while the movement of some section of the rural population from agriculture into the service sectors is commendable, it may not necessarily be a positive development since agriculture gives jobs to more people across the country than anything else.
During a national workshop on shaping economic transformation in Tanzania: Challenges and potential solutions for agriculture, industrialization and their financing, participants felt that the service sector tends to bring the much needed returns but that the economy remains in the hands of few people.
Speaking at the event in Dar es Salaam, the Bank of Tanzania Governor, Prof Benno Ndullu, said agriculture’s contribution to GDP had decreased because the aspect of rural people engaging in agriculture was changing as a section of them move into the service sector especially financial services.
He said the five key factors driving the country’s economic transformation include minerals and natural resources creating a foundation for resource based industrialization, the country’s geographical location to inland destinations and its focus on ICT with the national backbone fibre for growth.
He said that with tourism currently leading in terms of contribution to GDP, the service sector could have bigger impact in terms of poverty reduction than agriculture. He said agriculture’s contribution to GDP went down to 21 per cent in 2014 from 30 per cent in 1998.
The contribution of industry went up from 17.7 per cent in 1998 to 22 per cent in 2014. On the other hand, the services sector’s contribution to GDP had grown from 45 per cent to 59 per cent.
Currently, Prof Ndullu said the country’s major sources of growth included services (59 per cent) and industries (at 24 per cent). On foreign exchange earnings, 90 per cent came from non-traditional exports while the other 10 per cent came from traditional exports. The contribution of manufacturing to exports also increased from $35.7m in 1998 to $1.3bn in 2014.
The contribution of transit trade increased from $42m in 1998 to $850m in 2014. The leading contributors to GDP are tourism at $2bn, gold was $2.7bn but now gone down to $1.7bn and agriculture at $830m.
However, Kigoma North Member of Parliament Zitto Kabwe argued that for statistics showing that the economy is growing but moving away from agriculture as a major contributor is not necessarily a positive thing.
“This is the sector that employs majority of the local people, so if sectors like service sectors grow more than agriculture, it means the economy is progressively being taken away from the hands of the ordinary people,” he said.
Mr Zitto Kabwe, who is also Chairman of Parliamentary Public Accounts Committee (PAC) said it was more important to boost the growth of industries on grounds that they provide more jobs to local people.
“For example, all mines in Tanzania combined, give only 13,000 jobs to local people yet one large scale company alone in this country can provide more than 50,000 jobs,” he said, adding: “For tourism, even if its contribution is high, the leading tourism town is Arusha which has a small population.”
This contention is supported by a recent World Bank study which says that the country’s tourism is concentrated at about 90 per cent in the northern circuit and Zanzibar’s beaches.
On Monday, Mr Zitto noted that agriculture has been growing at less than four per cent per year with the rate of adding value to raw materials growing at merely six per cent per year.
“Much of this can change with easier access of financial services and value addition infrastructure by farmers,” said Mr Zitto Kabwe.
Research for Poverty Alleviation (REPOA) Executive Director Prof Sammuel Wangwe said that usually, people who enter the agriculture sector, increase production and subsequently move into the sub sectors to add value where they earn more money.
“So such people move away from agriculture not because they don’t like it but because they feel they can earn more returns from the service sectors,” he said.
He called for more development in value addition infrastructure and therefore add jobs in the agriculture sector. Prof Ibrahim Lipumba, a respected economist, said the highlight that services sector is contributing more to GDP more than agriculture does should not be interpreted as the latter needing less focus.
Recently, the World Bank said in its latest study on Tanzania that the country can earn an average of $16 billion (over 27 trillion/-) a year in the next decade if the government takes serious measures to reform the sector.
That amount is nearly eight times the current tourism earnings and more than the current financial year’s budget estimated at 19.8 trillion/-.
Last year, the industry generated a total of $1.9 billion by the end of November. This represented 22 per cent of the value of all exports during that period.