Agro-processing central to industrialisation efforts in Tanzania

Already a dominant segment of the manufacturing sector, Tanzania’s agro-processing industry holds tremendous potential for future expansion. The country benefits from abundant agricultural resources, leaving it well positioned to grow its textile and leather production segments, while rising domestic demand for processed food should boost production of bread, sugar products and meat. Although the agro-processing industry still remains in its early stages, the government’s mid-term development agenda, FiveYear Development Plan II 2016/17-2020/21 (FYDP II), has targeted a significant increase in agro-processing output, with new policy interventions and rising global demand for Tanzanian products expected to support rising future investment inflows.

Growth Potential

As is common throughout sub-Saharan Africa, the majority of crops in Tanzania are marketed and sold unprocessed. Although agricultural value addition recorded a 61% gain between 2009 and 2014, from $8.6bn to $13.8bn, agro-processing activities remain limited and are concentrated in small-scale production units, barring the tobacco and alcoholic beverage industries (see overview).

Accounting for 66.9% of employment in the country, agriculture is slated to play an important role in the government’s industrialisation efforts, with President John Magufuli’s administration targeting an increase in the manufacturing sector’s share of GDP from 5.1% in 2016 to 18% of GDP by 2025, in addition to boosting its share of employment from 3.1% in 2014 to 12.8%.

The FYDP II includes specific agro-processing targets, including revitalising the textile, garment and clothing industries, establishing leather industries in Dodoma and Singida, and increasing edible oil production from 100,000 tonnes in 2015 to 250,000 tonnes by FY 2020/21, and 600,000 tonnes by FY 2025/26.

Leather

The Ministry of Finance and Planning (MoFP) reported that Tanzania’s tanneries industry is capable of processing 3.6m hides and 12.8m skins annually, equivalent to 9.7m sq metres a year, with capacity utilisation at 86% for hides and 61% for skins as of 2016.

Wet blue leather is the country’s primary tannery product, while crust and finished leather are also produced, though no tanneries are yet able to produce high-fashion finished leather. An estimated 1000 people work in tannery production, although this should grow in the future, with international and domestic demand for leather and leather products, particularly in the US and China, expected to support growth.

The government is also targeting emerging market consumers in Brazil, Russia, India, China and South Africa to sustain export demand, although the sector remains constrained by supply chain difficulties, low-quality raw hides and skins, and rising environmental compliance standards.

Textiles

Although many of Africa’s textile sectors have struggled in the wake of the end of the multi-fibre agreements, Tanzania’s textiles production also holds significant growth potential, with cotton crops providing a livelihood for up to 40% of the population, and the MoFP reporting that textile production rose from 103.2m sq metres in 2010 to 119.5m sq metres in 2014 (see Agriculture chapter). According to the National Bureau of Statistics, knitted fabric production rose from 6.3m sq metres in 2011 to 20.3m sq metres in 2015, while knitted garment production increased from 369,000 garments in 2011 to hit 5.5m in 2015.

The MoFP noted that the textile industry is one of the most labour-intensive in the country, with 8000 direct employees in 2015, of which 5000 were working in the garment manufacturing sector.

Under FYDP II targets the sector is currently forecast to expand to create up to 10,000 new jobs and $1bn of annual exports in FY 2025/26, even as producers continue to grapple with challenges including power shortages, illegal textile imports and a lack of semi-processed goods like yarn and fabric, along with broader hurdles such as limited availability of skilled personnel.