19 February 2013

Tanzania: Value Addition Seen Key to Tanzania's Export Growth

IMPROVED agricultural productivity and value addition are key factors for the country's export driven economic growth and deeper penetration of international markets.

Manufacturing value added (MVA) is key to capturing deeper exports and industry specific capabilities at the firm level. Over the last few decades, the rules of the global economy have changed considerably with trade liberalisation and the integration of national economies being the main characteristics.

Trade in manufactured goods has grown faster than MVA in recent years due to the fragmentation and internationalisation of industrial activity. It is therefore necessary to complement MVA analysis with some indicators of international competitiveness.

According to the Tanzania Industrial Competitive Report 2012, Tanzania has recorded the highest growth rate in manufactured exports (31 per cent per annum) among the competitors from 2000-2010, growing to 1,904 million US dollars (about 3.05tri/-) from 129 million US dollars (about 206.4bn/-). Despite the good performance of the country's manufactured exports, it is to be noted that nearly half of the country's manufactured exports in 2010 were resource-based products mostly base and precious, particularly gold.

The current reliance of industrial growth on a few products that have low value addition and high price fluctuation calls for measures to diversify the export basket to lower the economy's vulnerability. Notwithstanding, the country has also witnessed an increase in exports to neighbouring countries for products like cement, textile apparels, edible oil, plastic items, iron and steel products, wheat flour and paper goods.

During the period ending December, last year, the monthly economic review by the Bank of Tanzania (BoT) shows that the value of export of goods and services increased to 8,683.8 million US dollars (about 13.89tri/-) compared with 7,398 million US dollars (about 11.82tri/-) recorded a year earlier. The development was driven by an increase in receipts from travel, traditional and non-traditional exports.

The value of traditional exports during the period under review was 956.7 million US dollars (about 1.53tri/-) compared to 685.5 million US dollars (about 1.09tri/-) recorded in the year ending December 2011. "The development was to a large extent associated with an increase in export volumes. The increase in export volumes was on account of improved production for most of the agricultural commodities following favourable weather conditions," stated the report.

The value of non-traditional exports was 4,242.9 million US dollars (about 6.78tri/-), which is 13.2 per cent higher than the level recorded during the year to December 2011. The development was driven by an increase in exports of manufactured goods, fish and fish products, horticultural products and re-exports. The value of gold exports recorded a marginal decline of 2.4 per cent to 2,170.1 million US dollars (about 3.47tri/-) in 2012 due to fall in export volumes as prices of the metal in the world market remained high.

The increase in volumes for most traditional exports helped in pulling down current account deficit to 3,438 million US dollars (about 5.5tri/-) in the year ending December compared to 3,977.1 million US dollars (about 6.36tri/-) of the corresponding period in 2011. Some of the crops which contributed to outstanding export performance included coffee, cotton and tobacco, improved export of manufactured goods, fish and fish products, horticultural products and re-exports.

Similarly, the overall balance of payments recorded a surplus of 327.3 million US dollars, compared with a deficit of 202 million US dollars recorded in previous year, reflecting a continued net increase in inflows in the form of capital grants, foreign direct investments and foreign borrowing.

According to the Bank of Tanzania (BoT) monthly economic review for December last year, the performance resulted to an increase in gross official reserves to 4,069.1 million US dollars (about 6.51 tri/-) from 3,761.2 US dollars (about 6.02tri/-) of the previous period. "This level of reserves was sufficient to cover about four months of imports of goods and services," stated the report.

However, in the period under review, the value of import of goods and services was 12,675.7 million US dollars (about 20.28tri/-) or 5.3 per cent above the level recorded in the corresponding period in 2011. The increase was largely attributed to oil imports following a rise in oil prices in the world market.

It is therefore vital for the state and non-state actors to enhance the potential for skills learning, technology transfer, innovation and employment absorption of mineral extraction-based exports as an important consideration as Tanzania becomes a more established exporter. Furthermore, it is high time to identify the opportunities for the country's industrial sector in more detail and also argue how resource-based exports can be utilised to support further industrialisation.

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