The ideological appeal for industrialisation is very clear, built on the need to transform Tanzania and accelerate realization of Vision 2025.
The Tanzania of 2025 is a country imbued with a competitive economy of substantial industrial sectors capable of producing sustainable growth that translates into improved livelihood.
It is true that the government has already justified and exercised its industrial ideology. In addition, most of us by now know that Tanzania needs industrialisation to achieve sustainable economic growth (GDP), generation of employment and transitioning to a middle -income economy. Nevertheless, is this knowledge and appreciation justification enough to realize industrialisation? Could one argue that the government has already done its part by advocating the ideology and the rest is up to the enterprises and entrepreneurs to implement?
The answer to these questions is a no. Government can and should play a larger role to ignite the process of industrialisation and transform the country’s economy from being over reliant on agriculture towards a diversified and enterprises-led economy that is based on the manufacturing of goods. To put it differently, now that the government has already appealed its industrialisation ideology, it must defend its position through complimentary and deliberately targeted fiscal and non-fiscal instruments. Particularly at its infancy, industrialisation and industrial development require serious parental care to nurture it in the manner that enterprises will grow healthy to deliver the desired economic impact.
First and foremost, a very important prerequisite for igniting a government driven industrialisation is the stimulation of demand for new products that is an important ingredient to promote the propagation and growth of enterprises. Here, for example, the government should deliberately develop practical and stable fiscal policies that drive economic activities, necessary to create minimum market size and stimuli for enterprise development in the country.
Such measures could include tax and policy incentives that encourage businesses to build beneficial relationships between government and the private sector, which will drive economic activities, and introduce fiscal policies that increase disposable income as a main proxy of markets for the enterprises. With rising levels of disposable income, Tanzania’s growing middle class is poised to shift from buying only essential products such as food and beverages and increase its spending on a wider range of goods and services, hence encouraging enterprises and innovations to thrive in the country.
Second, any government driven industrialisation ideology will need policies that shelter infant enterprises and industries, particularly those that bring high spillover effects to other industries. Sheltering is important to support specific industries to gain the scale needed to support the growth of other industries and to compete internationally.
The sheltering will thus encourage enterprises and foreign investors to take risk and enable the growth of industries. Some methods to shelter infant enterprises and industries include reducing the cost of doing business by providing accelerated depreciation, tax rebates and access to finance below market rates.
The aim of these measures is to ensure that basic inputs for core industries can be sourced at lower cost than elsewhere. This point, therefore, highlights the need for the government to clearly state its priority industries and effectively channel its limited resources, and preferential fiscal policies, where it is believed to offer better prospects and catalyze crowding in other industries.
There are several other action theories that the government must take if it is to realize the industrialisation of the economy. There is a need for sound macroeconomic policies, regulations and fiscal measures to encourage high individual savings with the aim of ensuring the financial services sector has ample supply of low-cost capital.
If this succeeds, then, the government would have provided a shelter to nurture and support the enterprises that drive industrialisation. Other action theories that remain a responsibility of the government to drive industrialisation is to enforce standards that trigger innovation and the development of intellectual capital. In any industrialisation process, one cannot discount the importance of stringent but fair standards and stable supply of talents in engineering, business development and finance.
In conclusion, the government’s intent and philosophy on industrialisation is already understood.
What remains is defending this ideology by addressing the implementation strategies highlighted above. This is what it will take the government to actually ignite thriving enterprises and transform the primary agricultural economy to an industrial economy. As we draw near to this year’s Budget, the expectation is to see new measures, policies and rigorous investments by the government towards encouraging early demands and spend growth by citizens, sheltering of strategic and infant industries, and growth of financial intermediation.
These measures are the primary prescription to ignite enterprises and industrialisation. If the above is not addressed in the coming year fiscal policies and regulations, the government may either delay or fail to achieve the desired goals of sustained economic development based on factory production (industrialisation).
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