Sector prioritization to inform selection process, assessing key manufacturing sectors using country-level, sector-specific data, combined with qualitative assessment of each sector’s performance on key competitiveness measures.

1. Tanzania manufacturing sector scan
Prioritizing a second focus sector
Draft document for stakeholder consultation and input
February 2019

2. Contents
2
Overview
01 02 03
Sector opportunities
• Edible oil
• Food products
• Beverages
• Plastics
• Pharmaceuticals
Conclusion
04
Annexes

3. Overview
Findings from first stage sector scan
3
• Following analytical work on sector performance and consultations with the public
and private sectors, textile and apparel was selected as a first sector of focus.
• Textile and apparel exhibits strong value addition potential and employment attributes,
and is bolstered by good global demand (market size and recent growth trends).
• Importantly, it is has long-been a priority sector, and continues to be so. As a result,
there is institutional traction to build on, embodied by the government’s cotton-to-
clothing strategy and the activities of the Textile Development Unit.
• However, implementation of the strategy has lagged behind expectations, therefore
considerable work remains to be done to build the sector’s competitiveness.
• The next five sectors that emerge as high potential focus sectors fall into two
broad clusters:
• Food, beverages and edible oil products – large, commodity sectors – which surface
as strong potential focus sectors in terms of their economic impact, yet they have a
low ceiling in terms of future value addition development opportunities.
• Plastics and pharmaceuticals present substantial value addition and expansion
opportunities; however, the learning curve for Tanzania will be very steep.
Relative feasibility and desirability
Manufacturing sectors’ performance on 1-5 scale
against a number of sector attributes*
Food products
Beverages
Edible oils
Chemicals
Soap
Fertilizer
Cement
Iron and steel
Paper and
paperboard
Cotton, textile,
apparel
Leather and
related products
Plastics
Furniture and
wood
Glass
Pharmaceutical
1.5
2.0
2.5
3.0
1.0 1.5 2.0 2.5 3.0 3.5
Feasibility
Desirability
Sources: WBG internal documents, Atlas of Economic Complexity.
* Note: A group of more capital intensive industries cluster in the bottom left (and are excluded), driven by their limited
employment affects, below average domestic value addition and high energy consumption. Some score well in terms of
product complexity, but this is countered by Tanzania’s very limited global market share.
Placement in the ‘product space’
• The product space is a network connecting products that are likely to be co-
exported and can be used to predict the evolution of a country’s export structure.
• The majority of products exported by Tanzania – such as vegetable oils,
beverages, flour, and plastic houseware – are on the periphery of the product
space network, which slows down Tanzania’s ability to move to more complex
products.
• Developing more interconnected sectors such as pharmaceuticals and more
complex, value-added plastic products – as well as textile and apparel – can help
to hasten Tanzania’s growth into a more complex economy.

4. Overview
Comparative rating
4
• Given the opportunities and challenges in each of the shortlisted sectors, the five sectors can be further assessed by their potential
to drive structural transformation and to create quality and equitable employment, focusing on a limited but most directly relevant set
of data points from the preceding sector prioritization analysis. These focus on two key themes of the ability of the sectors to
contribute to the structural transformation of Tanzania’s economy, and their potential employment contribution.
• Below is a summary of how the sectors compare to each other on this more focused set of measures. Further analysis of each
sector follows, focusing on a high-level situation analysis, ideas of what a potential future growth strategy could entail, and potential
options for manufacturing competitiveness support interventions.
Sources: Industrial census data
* Note: Additional weight assigned to product complexity at the expense of revealed advantage so as to reflect the
importance of Tanzania’s movement from its current product mix into more complex products. Additional weight
assigned to female employment from value-added per worker to emphasize the importance of the effect on female
employment and skills development of the focus sectors.
Structural transformation
• Future potential: Products that are manufactured by highly
diversified and sophisticated economies and require significant
knowledge to produce. The acquired knowledge also enables
economies to transition to other related products (product
complexity index score)
• Existing traction: Relative strength of a sector compared to other
countries in relation to other countries trading in the same product
(revealed comparative advantage)
Inclusion and jobs
• Employment: The potential of a sector to create direct jobs (in
absolute terms)
• Skills: Additional accumulation in workers’ capabilities or productive
knowledge as a result of sector expansion (value-added $ per
worker)
• Inclusion and gender: The ratio of jobs in an industry held by
women versus men.
Weighting*
Structural
transformation
Product complexity index score -1.1 -0.4 -0.3 0.5 0.8 30%
Revealed comparative advantage 0.7 0.4 0.4 0.2 0.01 10%
Inclusion and
jobs
Value-added per worker ($) 490 20 1100 400 40 10%
Direct jobs 6100 72000 7000 4200 800 20%
Female to male ratio 0.4 0.2 0.4 0.3 0.8 30%
Average

5. Overview
Sector introduction
5
Below is a high-level review of the five focus sectors that emerged from the first stage sector scan:
• The cluster of food, beverages and edible oil products surface as strong potential focus sectors in terms of their economic impact,
yet they face a low ceiling in terms of future value addition development opportunities.
• In contrast, pharmaceuticals present enormous value addition and expansion opportunities; however the learning curve for
Tanzania will be very steep.
• Plastics present variety in terms of product opportunities, from relatively simple manufactures to industry 4.0 applications.
Opportunities Challenges
Edible oil • A large industry, so good source of value addition and jobs
• Clear link to farmers and Tanzania’s agricultural potential
• Natural barriers to entry as a result of product bulkiness
• Limited depth of value chain, with competitive differentiation lying
less in production and more distribution and retail
• Still quite import dependent for inputs, particularly palm oil
Food products • As one of the country’s largest industries, it is a good
source of value addition and jobs
• Clear link to farmers and Tanzania’s agricultural potential
• Natural barriers to entry as a result of bulk and/or
perishability
• Limited depth of value chain, with competitive differentiation lying
less in production and more distribution and retail
• Still quite import dependent for inputs, particularly grains and sugar
• Flour is dominated by a few large firms, limiting public
interventions’ spillover advantages
• Oftentimes politicized products, constraining scope for market-
driven competitiveness interventions
Beverages • A large industry, so good source of value addition and jobs
• Links to other large manufacturing supply sectors,
including glass and plastics
• Natural barriers to entry as a result of bulk
• Limited depth of value chain, with competitive differentiation lying
less in production and more distribution and retail
• Dominated by a few large firms, limiting spillover advantages of
public interventions
Plastics • Diverse range of product opportunities, including future
industry 4.0 applications
• Natural barriers to entry as a result voluminous products
• Relatively easy access to inputs
• Regulatory pressures due to negative environmental impacts
• Complexity of developing circular economy value chains
• Aside from recycled plastics, no domestic source of inputs
Pharmaceuticals • Large import substitution opportunity
• Strong global growth
• GoT priority
• Regulatory barriers to entry, particularly in export markets
• High value, low volume product presents few natural barriers to
imports
• Skills and R&D intensive

6. Market size and growth
• Tanzania’s edible oil market is worth about $500m.
• Demand for edible oils is growing at 5% driven by population growth,
increased incomes and changing tastes.
Sector structure
Palm oil and sunflower oil make up over 90% of consumption in Tanzania:
• 65% is refined palm oil, which is nearly all imported and the only true mass
market oil product. Therefore, Tanzania has sizeable edible oil imports of
$270m.
• 22% is crude sunflower oil sold informally in regions close to production in
ad hoc packaging. Crude sunflower oil is price competitive with palm oil
imports (both selling at TZS 3500/litre). Consumers consider crude
sunflower oil to be healthier than palm oil.
• 8% is refined sunflower oil, sold in mid-to-high end supermarkets.
• 5% is made up of cotton seed oil and other niche oils.
Sector trends: Sunflower oil
Expanding the edible oil industry Tanzania will mainly focus on the sunflower
value chain given:
• Only 2% of the palm oil consumed is locally produced and ramping this up
will require significant land access and patient capital.
• Sunflower oil has high local production (relative to demand) via a large
smallholder base which has potential to improve yields.
• Sunflower oil is perceived to be healthier than palm oil.
• The local crude market can be expanded by supporting small crushers,
while refined oil production can be expanded by encouraging refiners to
invest in solvent extraction technology which lowers cost of production.
Edible oil pricing
Tanzania edible oil supply and demand
Metric tonnes, thousands
Tanzania’s edible oil market is dominated by cheap palm oil imports (65% of total). After imported palm oil, local sunflower oil is the highest consumed oil
(30% of total). Sunflower oil has high potential because of its perceived health advantages versus palm oil. Most sunflower oil is consumed as crude oil
today given its price competitiveness with imported palm oil. However, refined sunflower oil (25% of local sunflower oil consumption) can become more
price competitive by upgrading technology, expanding its market share.
Edible oil
Overview
-
50
100
150
200
250
300
350
400
Palm oil Sunflower oil Cotton seed
Metrictonnes,thousands
Supply Demand
High production
relative to demand
makes this most
promising product
for supply expansion
Land access and
patient capital
required to ramp
up production
75% of sunflower oil is
consumed as crude
sunflower oil (which is sold
informally in areas close to
production sites). Crude
sunflower oil is considered
healthier than palm oil.
Sources: Dalberg 2018 Edible Oil Study
6
Category Type of oil
Market
share
Price/liter
(TZS)
Key aspects
Premium
oils
Refined
sunflower
8% 5000
Sold mainly in higher end supermarkets.
Limited by high costs leading to high
retail prices.
Other
refined
<5% 5000
Sold mainly to wealthier Tanzanians and
expatriates
Economy
oils
Crude
sunflower
22% 3600
Not TFDA approved but sales unaffected
as it is considered healthier than refined
palm oil
Refined
palm
65% 3000-3900
True mass market product but
considered unhealthy due to saturated
fat content
Other crude <5%
Varies/
cheapest
Not TFDA approved and may contain
toxins

7. 7
Sources: Dalberg 2018 Edible Oil Study
Opportunities
• Moderate growth sector. The sunflower oil market in Tanzania
is forecast to grow at 5% over the next few years driven by
population growth, rising incomes, and perceived health benefits.
• Tanzanian producers are well positioned to capture regional
demand. Regional demand for crude and refined sunflower is an
additional 240,000 MT and regional imports of palm oil are an
additional 1m MT.
• Potential to lower retail price of refined sunflower oil
through investment in solvent extraction technology. Solvent
extraction technology can improve yields and lower costs of
refined sunflower oil to TZS 3500/litre (which is price competitive
with palm oil).
• Potential to grow informal crude sunflower market. Crude
sunflower oil is price competitive and perceived to be healthier
than palm oil. It is currently sold in small catchment areas around
production zones. Supporting crushers to secure supply and
improve distribution can help grow this market further.
• Large smallholder base of sunflower unlike palm oil.
Opportunity to work with farmers to increase production. Clear
link to Tanzania’s agricultural potential.
Challenges
• Large investment value to start a solvent extraction plant that
make affordable refined sunflower oil. Solvent extraction
technology can lower the price of refined sunflower oil to TSh
3,500/litre to compete with palm oil. A standard 12,000 MT capacity
plant requires a $11m investment. Mount Meru is the only major
solvent extraction refinery but produces sunflower oil for the high-end
market. Tanzania needs to attract investors with an interest in refining
local sunflower oil for low-income consumers.
• Local sunflower oil production hampered by low-yielding seeds
and poor agricultural methods thus driving up costs and limiting
production. Crude sunflower oil and the regional export market is
limited by supply at the moment. While donor programs are focused
on building farmer skills and capacity, this is a long term improvement
plan.
• Crude sunflower oil is not Tanzania Food and Drug Authority
(TFDA) approved. It is mostly produced by small processors and sold
in ad hoc packaging close to the production site. Certification could
help further grow the domestic crude market.
• Large number of small-scale crushers operating below capacity.
The downstream value chain is sub optimal with a lack of integration in
the value chain, processing over-capacity and fragmented supply
chains and markets. This is driving up the competition for seed and
increasing production costs.
Edible oils
Diagnosis
Refined sunflower oil is a high-end product in Tanzania because of its high cost of production and price point. Refiners have the opportunity to invest in
new technology to increase oil yields and lower production costs to make the product more competitive. Further opportunities exist to support the
informal crude oil market by helping crushers secure supply, increase utilisation, and improve distribution. Improved agricultural methods and seed
supply will help the sector but is a long-term play.

8. Sources: Summary derived from Dalberg 2018 Edible Oil Study
* Note: Potential initiatives focus mainly downstream on edible oil, and not upstream on input supply, though many edible
oil sector competitiveness constraints may reside upstream in supply. Where these are binding, linkages to initiatives
from partner institutions will be required.
8
Edible oils
Potential interventions
Biggest opportunity lies in assisting existing refiners and new fast-moving consumer goods (FMCG) companies raise funding and hire talent to invest
in and run solvent extraction plants to lower retail price and affordability of refined sunflower oil. A few policy changes can support this strategy
further. Crude sunflower crushers can be supported by encouraging Tanzania Food and Drug Authority (TFDA) regulation and improve efficiency.
Donor intervention on improving agricultural practices is already happening and a longer term play.
Outcome Intervention Lead
Improved price competitiveness of refined
sunflower oil
• Assist large FMCG companies and existing refiners to raise funding to invest in solvent
extraction technology; build capacity to operate a cost efficient solvent extraction plant
• Assess VAT exemption opportunities to motivate on agricultural processing equipment
upgrading (specifically covering solvent extraction and refining equipment)
Private
• Assess VAT exemption opportunities for sunflower seed cake and domestically sourced
sunflower oil and sunflower oil to make it price-competitive in domestic and export markets
Public
Increased supply and reach of crude
sunflower oil
• Work with mid-sized crushers of crude oil to increase efficiency, secure supply and improve
distribution to grow crude oil sales
Private
• Regulate and TFDA certify crude sunflower oil to grow domestic consumer market Public
Industry supportive policies
• Assess Tanzania’s 10% import tariff on crude palm oil to increase competitiveness of local
sunflower oil
• Tax exports of oily seedcake to incentivize local aggregation and processing
Public
Improved input supply base*
• Link to agricultural support initiatives that include support in areas such as land allocation,
seed registration, contract farming, farmer training, etc.
Public

9. 9
Market size and growth
• Tanzania’s flour market is dominated by two main products:
• Maize flour: Tanzania consumes 5.3 mn MT of maize per year (nearly all
locally produced), providing 80% of dietary calories to the population. The
majority of smallholder farmers produce maize for their personal
consumption and sell excess to the market as a source of income. About
40% of maize production is sold into the market.
• Wheat flour: Domestic consumption is estimated to be about 1 mn MT per
year, requiring Tanzania to import about 90% of its wheat (mainly from
Russia, Canada, Australia, and Brazil). The wheat milling industry is
dominated by two large companies, however, other medium-sized wheat
millers also play in the industry. As a more expensive staple, wheat is
disproportionately consumed by higher income households.
Sector structure and trends
• The milling sector in Tanzania is composed of two different sections: large scale
mills and very small-scale mills at village level. There are few medium size mills
that are usually functioning below their installed capacity.
• The large-scale milling sector is controlled by two main companies: Salim
Bakhresa and Azania. Their activities are mainly oriented towards wheat, though
they offer diversified products.
• Small-scale millers are present all over the country. The majority of Tanzania’s
population use these ‘hammer mills’ for the household consumption. Some mill
and produce locally branded products, however, without any HACCP systems in
place.
2018 Production and consumption of maize and
wheat
Metric tonnes
Food products: Flour
Overview
Maize flour is the main staple consumed in Tanzania. The market is mostly informal with small holder farmers producing maize flour for their own
consumption and selling excess into the market. The supply chain has many intermediaries, reducing the cost competitiveness of the end product.
Wheat flour is disproportionately consumed by wealthier consumers. The market is largely dominated by two large players.
0
1000
2000
3000
4000
5000
6000
Corn Wheat
Metrictonnes
Consumption Production
Mostly produced
by smallholder
farmers for own
consumption;
excess sold to
market
Consumed mostly
by higher income,
urban households.
90% wheat grain
imported from
abroad
Sources: WFP Milling Assessment report, 2016, USDA Grain and Feed 2018 Annual Wheat and Corn Report; FAO
Maize Value Chain in Tanzania Report
Notes: Food products entails a wide range of products. The focus of the analysis is on flour, the most dominant.

10. 10
Sources: WFP Milling Assessment report, 2016; FAO Maize Value Chain in Tanzania Report
* Note: Potential initiatives focus mainly downstream on flour, and not upstream on input supply, though many binding
flour sector competitiveness constraints reside upstream in supply.
Food products: Flour
Diagnosis and potential interventions
Flour is a staple product in Tanzanian households and demand is expected to grow with population growth and rising incomes. The crux of strategic
change in the maize flour market requires reducing the number of intermediaries to increase value chain efficiency. However, this is a complex issue
with political implications, therefore presenting few medium-term solutions. The wheat market is dominated by large conglomerates with deep pockets,
therefore requiring limited external support
Outcome Intervention Lead
Improve market access
• Assist millers in improving distribution of product to gain market share though improved
logistics and use of technology/data
Private
Industry supportive policies • Support policy consistency to increase regional exports Public
Improved input supply base*
• Link to agricultural support initiatives that include support in areas such as improving yields
and farming techniques, access to finance and inputs for smaller farmers, better storage
and market information solutions, warehouse receipt systems, etc.
Public
Opportunities
• Moderate growth sector. The flour market in
Tanzania is forecast to grow over the next few
years driven by population growth and rising
incomes.
• Staple product with fairly inelastic demand.
Maize flour makes up over 80% of the calorie
intake in Tanzania and is therefore a necessity.
Demand is likely to be steady
Challenges
• Profitability is heavily linked to fluctuating commodity prices, leading to
business uncertainty and risk.
• Maize market is largely informal with numerous hammer mills producing flour
for personal consumption and selling excess flour without TFDA approval. The
market has many intermediary buyers and processors between the farm gate
and the consumer, each taking a margin and reducing financial efficiency.
• High barriers to entry to build a commercial wheat mill due to capital
intensity, leading to market concentration.
• Trade spats between Kenya and Tanzania affecting manufacturers.
Bakhresa Group suspended Kenya flour exports in 2018 due to changing rules
for exporting goods into the country. This leads to unpredictability.

11. 11
Market size and growth
• Tanzania’s beverage market is $1bn in size with 80% accounted for by
beer and carbonated drinks:
• Beer: 800 m litres per year, growing 11%
• Carbonated drinks: 200 m litres per year, growing 13%
Sector structure
• Beer: Industry is dominated by two large players:
• Tanzania Breweries, the largest beer producer in Tanzania.
Tanzania Breweries is listed on the Tanzania stock exchange and
controls 80% of the beer market in Tanzania.
• Serengeti Breweries (East African Breweries Limited) is the second
largest producer and controls 15% of the market.
• Carbonated Drinks: Industry is dominated by three large players:
Coca-Cola, 40% market share; Bakhresa Group’s Azam-Cola, 15%
market share; MeTL’s Mo-Cola, 5% market share
Sector trends
• Consumption per capita still lags global averages despite strong
growth. Tanzanians consume under 10 litres of beer per capita vs.
South Africa at 60 litres per capita
• Sector has been attracting investment:
o Bakhresa launched Azam Cola after investing $30 m in 2011
o MeTL launched Mo-Cola in 2014, investing $48 m
o AB Inbev announced a $100 m beer plant in 2018.
Sources: Wesgro Tanzania Food & Beverage Research Report 2015; miscellaneous news articles.
Tanzania beverage volumes
Litres mn
Beverages
Overview
Tanzania’s beverage industry is $1bn in size with beer and carbonated drinks making up 80% of the market. Both are growing above 10% per annum
driven by a low current consumption per capita base relative to global peers, and rising incomes. Beer and carbonated drinks are both controlled by
several large, sophisticated international and local players. Barriers to entry are high because the industry is highly capitally intensive.
0
100
200
300
400
500
600
700
800
900
1000
2012 2013 2014 2015 2016f 2017f 2018f 2019f 2020f
Volumes(mnoflitres)
Beer Carbonated drinks
11%
13%
Beer consumption per capita
Litres mn, 2011 data

12. 12
Opportunities
• High growth sector. Beer and carbonated drink volumes are growing
10-15% per annum driven by a large youth population, urbanization,
and rising incomes.
• Low per capita beer consumption compared to other markets
suggests that the beverage industry still has growth potential.
• Carbonated drinks appeal to low income consumers because they
are often cheaper than bottled water and prices rarely rise with
inflation.
• Good source of jobs. Beer and carbonated soft drink plants are a
good source of employment
• Links to other substantial manufacturing sectors such as glass
and plastics.
Beverages
Diagnosis and potential interventions
Beverages is a fast growing industry due to urbanisation, rising incomes, a large youth population and a low consumption starting base. However,
the industry is dominated by a few large players and barriers to entry are high. Competitive advantage is more in distribution and retail than
manufacturing, with large players already deploying advanced distribution systems.
Outcome Intervention Lead
Improved reach of product to gain share
• Work with companies on improving distribution through use of technology, data, and
related processes.
Private
Increased upstream linkages and spillovers
to other manufacturing sectors
• Backward integrate into inputs or packaging Private
Challenges
• Industry is dominated by several large players limiting
spillover advantages of any public intervention.
• Large investment values of beverage plants are a
barrier to entry. Volume/scale needed to compete with
international players such as Coca-Cola.
• Distribution to retailers remains a challenge hampered
by poor infrastructure. Tanzania’s mass grocery retail
market is still dominated by informal trading channels and
lacks centralized distribution mechanisms. Therefore,
competitive advantage lies more in distribution and retail
versus production or manufacturing.
• Limited obvious public good derived from products,
weakening case for deployment of public resources.
Sources: Wesgro Tanzania Food & Beverage Research Report 2015; miscellaneous news articles.

13. 13
Market size and growth
• Plastics are everywhere. Their use has increased twenty-fold in the past half-century
globally and is expected to double again in the next 20 years.
• Plastics are used across industries from aerospace to furniture to packaging.
• The largest global exports of plastics are: packaging, tubes/pipes, plates/sheets,
tableware/kitchenware and builder’s ware. Tanzania still lags far behind both South
Africa and Kenya in most of these products
• In 2013, Tanzania produced $390 million in plastics but imported $480 million.
However, approximately 75% of imports are inputs into Tanzania’s plastics industry.
Sector structure and trends
• Despite a large growth opportunity, plastics have a negative environmental impact
and governments are becoming increasingly inclined to shifting policy away from
plastics use, though this mainly focuses on single-use products.
Sources: Ellen McArthur New Plastics Economy Report, Trademap data, Industrial Census data
Plastics exporters
Exports by product category, $ mn
-
100
200
300
400
500
600
Local
production
Imports
$mn
Articles of plastic
Tubes, pipes,
hoses
Polymers, resins,
silicones
Local production
Plastics market composition
$ mn, 2013 values based on industrial census and trade data
Plastics
Overview
The use of plastics has increased twenty times in the last 50 years globally and is expected to double in the next 20 years. Plastics are used across
varied industries from packaging to aerospace to furniture. Tanzania lags other countries in the wider region in its exportsof key plastics products,
suggesting room for growth. However, increasing public focus on the negative environmental impact of plastics is a challengefor the industry.
-
50
100
150
200
$mn
South Africa Kenya Tanzania
1960 1970 1980 1990 2000 2010
Global plastics production
Metric tonnes, mn
Plastic use examples

14. 14
Sources: Ellen McArthur New Plastics Economy Report, Trademap data, Industrial census data
Plastics
Diagnosis and potential interventions
Plastics producers in Tanzania have the opportunity to diversify their product range to better supply the local market. This is a large opportunity in
construction, packaging and other consumer sectors. However, growth is also limited by the fact that a number of the end-markets that use plastics do
not exist in Tanzania such as automotive and electronics. There is an opportunity to offset the growing attention towards the negative environmental
impact of the sector by increasing the capture and recycling of plastic products.
Outcome Intervention Lead
Increased diversity of products produced in
Tanzania
• Identify opportunities to diversify into new product ranges and assist companies to expand Private
Robust circular plastics economy
• Support the growth of a circular economy, increasing the capture and recycling of plastic
products
Public
Opportunities
• High growth sector. Use of plastics is expected to double in
the next 20 years globally and Tanzania lags regional peers
like South Africa and Kenya in plastics exports.
• Diverse range of product opportunities. Plastic is used in
almost all industries. Tanzania has opportunity to move into
new products for both the local and regional markets.
• Natural barriers to imports as a result of being a voluminous
product.
• Relatively easy access to inputs. Plastic polymers are a
commodity product and easily imported.
Challenges
• Public pressures due to negative environmental impact, leading to
increasingly regulatory responses to curb plastic usage. Rwanda and
Kenya have already banned the use of plastic bags and Tanzania has
announced plans to follow suit.
• All raw materials are imported. Plastic polymers are all imported and
unavailable locally, offering virtually no wider industry development
opportunities.
• Many large industries that use plastics do not exist in Tanzania,
negating one of the large potential advantages of a plastics sector (with
the exception of construction, and relatedly agricultural supply). This
restricts the sector’s growth in the near term to simple consumer-facing
products.

15. 15
Market size and growth
• Tanzania’s pharmaceutical sector is a $500 mn industry growing at 5% per
annum, underpinned by a growing population, urbanization, and a rising
disease burden.
• However, Tanzanian producers’ share of this market is only 10%. Local
producers are losing share (market share was closer to 30% in 2006) driven
by low cost Asian imports.
Sector structure
• There are three main buyers of pharmaceuticals in Tanzania: the state –
56%; donors – 29%; private hospitals and individuals – 15%.
• Like many sub-Saharan African countries, Tanzania uses a central medicine
procurement system, the Medicine Stores Department (MSD), to procure and
distribute drugs to government clinics.
• Donors are a big buyer but require companies to meet international quality
standards to participate in tenders.
• Tanzania currently has 5 active local producers of pharmaceuticals.
Sector trends
• The domestic sector has been in retreat:
o In 2009, 75% of amoxicillin tablets were locally produced compared to
13% in 2012
o A private wholesaler reported buying local medicines worth Tsh 1.5-2 bn
in 2010-11 compared to now buying “almost nothing, a few syrups”
• Driven by ‘responsible sourcing,’ the donor market is sufficiently large to offer
viable business opportunities according to a WHO report. However,
producers need to invest in meeting international quality standards.
Sources: REPOA Research Report, 2014; Business Monitor International Q3 2016 Report; 2007 WHO Report; firm
Interviews
Decline in medicines made in Tanzania
Percent of sample medicines available, by country of origin
Tanzania pharmaceutical sales
USD mn
Pharmaceuticals
Overview
Tanzania’s pharmaceutical industry has been losing market share and is dominated by imports (90% of medicines supplied into the market) because of
competition from cheaper Asian medicine, despite a favourable tax environment. However, according to the WHO, “the donor market alone is sufficiently
big to accommodate Tanzanian producers and offer viable business opportunities”. To participate in this market, producers need to invest in and meet
international quality standards.
0
100
200
300
400
500
600
700
2013 2014 2015 2016f 2017f 2018f 2019f 2020f
$mn
Year
5%
0
10
20
30
40
50
60
70
80
90
Tanzania Kenya Other
%ofsamplemedicines
available
2006 2009 2012

16. 16
Sources: REPOA Research Report (2014), Business Monitor International Q3 2016 Report, 2007 WHO Report, Firm
Interviews
Pharmaceuticals
Diagnosis
Despite a 15% cost advantage for Tanzanian producers in government tenders and favourable tax policies, Tanzanian producers have lost market
share due to competition from low cost Asian imports. The situation is not helped by regulatory bottlenecks, delayed government payment and a
limited local skills pool. However, the donor market alone is large enough to sustain producers and their growth if they meet international quality
standards.
Opportunities
• Moderate growth sector: The pharmaceuticals market in Tanzania
is forecast to grow 5% in dollar terms driven by:
• High rate of population growth and urbanization
• Large and increasing burden of disease creating a significant
unmet demand for pharmaceuticals.
• Government incentives to promote local production include:
• Local firms get a 15% cost advantage in MSD tenders
• Raw materials are VAT and duty free
• Packaging for pharma products are duty free (still pay VAT)
• Machinery for plants is duty free.
• Government is interested in supporting the sector further: “Our
target is to produce 50 per cent of hospital drugs and medical
equipment in the next few years. We want to remove all trade
barriers and fast-track health industry investment in Tanzania.” –
Charles Mwigaje, former Minister of Industry, Trade and Investment.
• Opportunity to tap into a large donor market, that accounts for
almost 30% of the market and has a special focus on local sourcing.
But they maintain stringent quality standards.
• 3 new investments in the sector corroborate growth potential.
Challenges
• Competition from low cost Asian imports is challenging despite
a favorable tax environment. Imports make up 90% of the market
given Asian producers benefit from economies of scale.
• Government/MSD is the biggest customer leading to late
payments, lack of clarity on delivery dates, failure to complete
contracted purchases, and a low probability of winning tenders.
• Regulatory delays. Tanzania Food and Drug Administration
reportedly can delay testing and registrations by 1.5-2 years,
impacting profitability.
• Local skills gap is worsened by tough work permit regulations for
expatriates.
• Constant power outages and higher power prices have
reduced profitability, damaged machinery and led to output losses.
• Tax hurdles despite favorable environment. VAT on inputs
(with slow reimbursement), combined with difficulties experienced
in obtaining exemption from duties for some imported inputs,
undermines local competitiveness.

17. Sources: Derived from REPOA Research Report (2014), Business Monitor International Q3 2016 Report, 2007 WHO
Report, Firm interviews
17
Pharmaceuticals
Potential interventions
Outcome Intervention Lead
Increased access to donor programs to
expand market share and increase efficiency
• Support uptake of standard operating procedures to comply with WHO certification
• Support access to donor program procurement in Tanzania and the wider region
Private
Streamlined MSD procurement • Assess and improve procurement processes Public
Improved regulatory effectiveness
• TFDA fast-tracking of tests and registrations of local products
• Improved identification, and potential exemption from duties, of inputs for pharmaceuticals
Public
Rationalized local preference regime • Assess opportunities to leverage incentive regime to build producer competitiveness Public
Improved access to technical skills
• Supporting technical assistance and staff retraining
• Facilitating temporary hiring of expatriate staff
• Facilitating JVs to bring technical expertise
Public
The policy environment is already largely favourable and making an impact through further policy change is unlikely. However, the biggest opportunity
lies in helping local producers obtain international quality accreditations to tap into the large donor market. This can be used a spring board to drive
operational efficiencies to better compete with Asian imports in the govt and private market.

18. 18
Conclusion
Relative ranking: Strategic options and mid-term interventions
Strategy Interventions
Edible oils • Dual strategy focused on technology adoption by larger scale
producers, as well as processing and distribution advancement for
small to mid-sized crushers.
• Further demand growth depends on an input supply response from the
agricultural sector, which introduces higher uncertainty and risk.
• Numerous interventions
options with a variety of
actors.
• An agricultural supply
response will be critical.
Food products • The core of the strategy focuses on the maize market, which is
politically sensitive. Few business interventions can be shielded from
their political ramifications.
• The wheat flour market is dominated by large conglomerates with deep
pockets, making a weak case for public support.
• Few obvious entry points for
tangible, near to mid-term
change.
Beverages • Competitive advantage is about distribution and retail rather than
manufacturing, and most large players already have advanced systems
in place.
• Few ways to impact large
industry players.
Plastics • Potential product opportunities are enormous, but hindered by limited
industry demand in Tanzania or the immediate region.
• However, packaging, construction and consumer goods present initial
growth opportunities, serving as a foundation for movement into more
complex products.
• But much depends on developing circular economy structures to reduce
the sector’s negative environmental footprint and related reputation.
• Main focus on product
diversification and quality.
• Includes public interventions
linked to recycling-related
regulations.
Pharmaceuticals • Success hinges on public procurement, whether government or donor-
driven.
• This can act as a potential spring board for improved quality and
efficiency, and competitiveness in the private market.
• Most policy opportunities
have been deployed.
• The balance hinges on firm-
level quality and efficiency
changes.
Due to the dominance of food products (mainly flour) and beverages by a few large players, both sectors offer limited intervention
opportunities. The highly political nature of food products is particularly problematic. Edible oils, pharmaceuticals and plastics are more
attractive, with a variety of intervention possibilities. The latter two present both challenges and opportunities in terms of high levels of
complexity, and therefore interesting potential future growth trajectories.

19. Contents
19
Overview
01 02 03
Sector opportunities
• Edible oil
• Food products
• Beverages
• Plastics
• Pharmaceuticals
Conclusion
04
Annexes

20. Annex 1
Sector scan and prioritization approach
20
• The process of sector prioritization undertaken in the first stage of the analysis assessed key manufacturing sectors considering four
questions along two dimensions of desirability and feasibility. Each is assessed using country-level, sector-specific data where
available, or where there is no clear data then a qualitative assessment of each sector’s performance on that measure is used.
Sources: WBG internal documents.
Inclusion & jobs
• Value-added per worker ($)
• Direct jobs
• Female to male ratio
Economic growth • Domestic value addition ($ millions)
Competitiveness
• Gains in world market share
• Product complexity index score
Integration & connectivity
• Exports ($ millions, 2011-2015 avg)
• 5 year export growth (2011-2015)
Resilience & stability
• Assessment of independence of natural
resources
Environmental sustainability • Million metric tons of CO2 equivalent
Demand
• World market size (2015)
• World market growth
Production
factors
Labor skills
• Ratio of non-skilled to skilled
workers
Revealed comparative
advantage index (RCI)
• Export share relative to global
trade share (2015)
Key inputs
Energy
• BTU usage per sector (based on
US data)
Transport • Value to weight ratio
Finance • FDI investment into sector
Institutions
Regulatory barriers
• Assessment of regulatory impact
on sector
Rule of law and property
rights
• Assessment of comparative
investment mobility and
investment depth/intensity
Desirability
• What is the desirability of the sector in terms of the potential
impact from the sector’s output growth on the country’s
development objectives?
• What is the sector’s current performance and how does it
contribute to development impact? How fast is it growing in
terms of output quantity and quality?
Feasibility
• Under current conditions in the country, is profitable and
transformative private sector activity in the sector feasible? If not,
where are the constraints?
• To what extent can conditions in the country be improved – within
a limited time horizon – to bring about profitable and
transformative private sector activity in the sector?

21. Annex 2
Sector complexity analysis
21
• All of the sectors analyzed above vary in the degree to which they contribute to building to
Tanzania’s economic complexity and its productive know-how, in particular specialized know-
how to produce a diversity of sophisticated products.
• Each is assessed in terms of the degree to which it enhances economic complexity along the
following measures:
• Value chain complexity: Number of activities it takes to deliver a product to market in a
specific industry
• Process complexity: Number of tasks in a process through which a product is made
• Product complexity: Number of components in a product.
Source: Framework from WBG Country Private Sector Diagnostics.
Value chain complexity Process complexity Product complexity
Strategic opportunities to
increase economic complexity
Edible oil • Low: Few activities in value
chain from oil seed to final
product for super-market
shelves. Main focus on input
supply.
• Low: Main manufacturing
tasks entail pressing and
packaging. More complex
tasks lie at the farm level in
the agricultural product.
• Low: Not a
component-based
product.
• Low: Growth strategy focused on
import substitution measures for an
existing product range
Food
products
• Medium: Limited activities in
value chain from seed to flour
to final product for super-
market shelves.
• Considerable complexity in
distribution and retail for low
cost items to wide areas.
• Medium: For the dominant
product – flour – this is
minimal, but it increases
downstream for baked
goods and similar.
• Logistics and distribution
are pivotal, and complex to
manage.
• Medium: For the
dominant product –
flour – this is minimal,
but increases for
downstream products
with multiple
ingredients.
• Medium: There are opportunities to
move into more complex
downstream products for local and
regional markets, following a
similar trajectory to some Kenyan
food producers, but driven by
consumer trends which are difficult
to influence.
Beverages • Medium-low: Limited activities
in value chain from inputs to
final product. Main focus on
input supply.
• Considerable complexity in
distribution and retail.
• Medium: More complex for
brewery products than soft
drinks.
• Logistics and distribution
processes are pivotal, and
complex to manage.
• Medium-Low: Not a
component-based
product. Packaging is
more important than
for other products.
• Low: Growth strategy focused on
regional market expansion for
existing products. Some movement
into new products is possible,
though likely piecemeal/limited.

22. Annex 2
Sector complexity analysis (contd.)
22
Source: Framework from WBG Country Private Sector Diagnostics.
Value chain complexity Process complexity Product complexity
Strategic opportunities to
increase economic
complexity
Plastics • Medium: Varies
considerably by product,
from simple packaging to
complex parts that are key
components for industries
with highly fragmented value
chains, such a automotive
and electronics.
• High: Production of
inputs for production is
complex and capital-
intensive.
• End product complexity
varies considerably by
product and use.
• High: End product
complexity varies
considerably by product and
use, though Tanzania’s
industry is generally in less
complex products (with
some exceptions).
• High: With plastics permeating
all major products, and
increasingly so with industry 4.0
applications, potential growth
trajectories into complex
industries are numerous.
Pharmaceut-
icals
• High: Main complexity lies in
R&D but also in
manufacturing and
distribution.
• Low: Tanzania’s sector is
in a limited and relatively
simple set of processes.
• High: Highly complex
products, in particular at API
level, though Tanzania’s
sector largely imports these.
• High: Tanzania’s potential
growth trajectory is long,
beginning with improving
practices for WHO certification.

23. Sources: Porter, M. E. “How Competitive Forces Shape Strategy.” Harvard Business Review. March 1979. Team
analysis.
23
Supplier power
- Poor agricultural techniques and seed
quality mean there is lack of supply of
seeds, pushing prices up
+ However ability to easily shift input
sources to globally traded imported
products
Competitive rivalry
− Many small crushers means there is
high competitiveness for seed, driving
costs up
− Cheap palm oil imports are the main oil
consumed in the market and compete
with crude sunflower oil
Buyer power
+ Necessity product and demand for
edible oil is generally inelastic (even
though consumers may change between
types/brands of oil)
Threat of new entrants
− Many small informal crushers in the
market using basic machinery
+ Setting up a commercial refining and
crushing facility is capitally intensive
especially with solvent extraction
technology
Threat of substitutes
− Mass market consumer is price sensitive
and will consume cheapest oil. Imported
palm oil is currently cheapest
+ Locally produced crude sunflower oil is
price competitive and perceived to be
healthier (TFDA approval of crude
sunflower oil will grow market further)
✓
✗
Favorable
Unfavorable
✗
✗
✗
✓
Key:
✓
Annex 3
Porter’s five forces industry analysis: Edible oil
The edible oil industry is Tanzania is highly competitive due to cheap palm oil imports and margins are low due to high supplier power.
✗✓

24. 24
Supplier power
+ Wheat is a global commodity market and
inputs are fairly easy to procure
− Maize is a volatile market with numerous
intermediaries all taking a margin and
lack of price transparency
Competitive rivalry
+ Wheat is dominated by two large players
with limited competition
− Maize is mostly milled by local hammer
mills for own consumption with excess
sold into the market. Competition is high
from a large number of informal mills
Buyer power
− Large supermarkets and retailers have
moderate power as few retailers
dominate the formal sector
+ However, majority of retail is informal
kiosks and small supermarkets
Threat of new entrants
+ Commercial wheat mill is capitally
intensive with high barriers to entry
− Setting up a simple maize hammer mill
is not capital intensive and relatively
easy
Threat of substitutes
+ Staple product crucial to the daily
nutrition of the majority of Tanzanians
with few substitutes ✓
✗
Favorable
Unfavorable
✗
✓
Key:
✓ ✗
✓
✗
✓ ✓✗
Annex 3
Porter’s five forces industry analysis: Food products
Wheat and maize are completely different markets. The wheat market is dominated by two large players with higher barriers to entry,
while the maize flour market is a staple product with very little threat of substitution, dominated by numerous informal household mills
and high competition.
Sources: Porter, M. E. “How Competitive Forces Shape Strategy.” Harvard Business Review. March 1979. Team
analysis.

25. Supplier power
+ Inputs for beverage products are easily
available and suppliers have limited
power
+ Manufacturers for beverages in
Tanzania are large scale players who
are price takers
Competitive rivalry
− Few players but highly competitive
industry. Branding and distribution are
key to gaining market share
Buyer power
− Large supermarkets and retailers have
moderate power as few companies
dominate the formal sector
+ However, majority of retail is informal
kiosks and small supermarkets
Threat of new entrants
+ Highly capitally intensive industry with
large investment values, creating high
barriers to entry
Threat of substitutes
− Consumers can easily substitute
carbonated drinks for juices and other
sweet items ✓
✗
Favorable
Unfavorable
✗
✗
✓
Key:
✓✓ ✗
Annex 3
Porter’s five forces industry analysis: Beverages
The beverage industry in Tanzania is capitally intensive and dominated by few large players with entrenched distribution networks,
creating high barriers to entry. However the industry is highly competitive and market share is determined by branding and distribution.
Sources: Porter, M. E. “How Competitive Forces Shape Strategy.” Harvard Business Review. March 1979. Team
analysis.
25

26. 26
Supplier power
+ Inputs for plastics products are all
imported but easily available (global
commodity market)
Competitive rivalry
− High competition from low cost Asian
imports
+ But product bulkiness presents a natural
barrier to external competition
Buyer power
+ Buyer power varies depending on
product, however products are
customized to meet unique buyer
requirements, limiting buyer power
Threat of new entrants
− Growing sector, with numerous product
opportunities so likely to gain interest,
both from new entrants and backward
integration of non-plastics firms
+ Moderately capita intensive, offering
some entry barriers
Threat of substitutes
+ Plastics are deeply imbedded in the way
we live and offer low cost/high degree of
functionality
− But government and consumer focus on
negative environmental impacts is
focusing a search for natural product
substitutes
✓
✗
Favorable
Unfavorable
Key:
✓
✓
✗
The plastics industry in Tanzania is growing as plastics is increasingly substituting out other products in the global marketplace.
Buyers will push local manufacturers on quality with the option of cheap Asian imports. Rising government attention on the negative
environmental impact is a threat to the industry.
Sources: Porter, M. E. “How Competitive Forces Shape Strategy.” Harvard Business Review. March 1979. Team
analysis.
Annex 3
Porter’s five forces industry analysis: Plastics
✓✗ ✓

27. 27
Supplier power
+ APIs are globally available and imported
duty free
Competitive rivalry
− While there are only 5 local producers,
competitiveness is high given low cost
imports from India and China
− 3 new players are starting local plants
further increasing local competition
Buyer power
− Over half of the market is a single buyer,
the MSD
− MSD is reportedly unreliable in terms of
delivery dates and fulfilling purchase
commitments
+ Preference given to local producers in
public tendering (government or donor)
Threat of new entrants
Threat of substitutes
+ With rising incomes the demand for
modern medicines is rising
− Counterfeit medicines are prevalent in
Tanzania
✓
✗
Favorable
Unfavorable
✗✗
✓
Key:
✓
Annex 3
Porter’s five forces industry analysis: Pharmaceuticals
− 3 new players have announced
investments in pharmaceutical plants
+ But capital intensity limits new entrants
+ Entry requires time to develop GMP
compliant plant and obtain medicine
licenses and registrations
The pharmaceutical industry is Tanzania is highly competitive due to cheap imports.
Sources: Porter, M. E. “How Competitive Forces Shape Strategy.” Harvard Business Review. March 1979. Team
analysis.
✓