Tanzania has significant potential to participate in global value chains (GVCs) due to its strategic location, natural resources, and membership in regional trade agreements. However, its economy remains heavily reliant on agriculture which contributes 24.5% of GDP. To broaden GVC participation, Tanzania is taking steps like promoting investment in agro-processing, improving market infrastructure, and strengthening agricultural research. Key challenges include inadequate investment in agriculture and constraints in marketing. Tanzania also needs policies to reduce overregulation hindering exports, incentivize domestic production, and promote trade without risking food security.

1. Tanzania and Global Value Chains: Prioritizing
Agriculture in the Industrialization Agenda

2. Overview
Tanzania’s participation in
global value chains (GVCs)
remains low, mainly on
account of its economic
structure.
Industry: accounts for about 28.6% of
GDP, and the most important industrial
sub-sectors are manufacturing, whose
share in GDP is around 8%, and
construction, with a share of about
12.2% in GDP. (BoT, 2019)
Population: 59,7
million (2020
estimates)
Total area:
947,303 square
kilometres
(364,900 mi²)
Currency:
Tanzania shillings
(TZS)
The economy of Tanzania
is heavily reliant on
agriculture which
contributes approximately
24.5% of the country's
GDP, 77.5 % of
employment; provides
livelihood to more than 70
% of population; 30% of
exports and 65% of inputs
to the industrial sector.
(URT 2019)
Tanzania continues to enjoy
strong export growth and
diversification from traditional
markets and products, but it
remains significantly reliant on
primary commodity exports
Global Value
Chains

3. Evidence
 However, due to participation in GVCs, manufacturing exports have grown
significantly over the past decade, and export markets have been diversified.
 The average growth rate for the agriculture sector during the period 2006–2017
was 3.5% per annum, and that of the industry was 7.8% for the same period
(ASDP II, 2018)
 From 2006 to 2018, the share of the agriculture sector in total GDP decreased
from 27.7% to 24.5%, while the share of industry sector increased from 20% to
28.6% (URT, 2019)
 From 2007 to 2018, the total value of exports (FOB) increased from $2,139
million to $3,669 million, while imports (CIF) increased from $5,919 million to
$8,554 million (URT, 2019), about 90% and 70% growth in imports and exports
respectively
 At the same time, total number of exported products increased from 2,125 to
2,200 while number of imports reduced from 4,085 to 3,891 (BOT, WB, 2019).

4.  Tanzania remains a major FDI destination in East Africa, with mostly green field
investments in the extractive, manufacturing and the primary agricultural
products sector
 Over the past 10 years, FDI inflow to Tanzania exceeded $13 billion, with
mining and manufacturing sectors accounting for almost by 60% (BOT, 2019).
 The country's primary investors are China, India, Kenya, United Kingdom,
Mauritius, Oman, the United Arab Emirates, Canada, the United States, the
Netherlands, South Africa, and Germany.
 Cumulative figure show that between 1990 & 2017 China was leading with
investments worth $5.6 billion, UK come second with $5.5 billion, while US,
Mauritius and India completed top 5 with investments worth $4.5, $4.3 and $2.2
billions respectively
 Investors are drawn to Tanzania’s commitment to implement sound
macroeconomic policies, its efficient privatization program and abundant natural
resources

5. Potential
 Tanzania potential to integrate into GVCs lies in the successful exploitation of
trade linkages with regional trading partners, excellent geographical location, as
well as careful exploration of natural resources, including minerals and natural
gas, to ensure economic spinoffs and employment creation.
 Tanzania is connected directly to the Indian Ocean giving it trade links to
Asia and sits in between the ocean and 6 landlocked countries (Uganda,
DRC, Rwanda, Burundi, Zambia and Malawi) that rely on Tanzania for
passage of goods
 Furthermore, its membership to the SADC Free Trade Area and EAC Common
Market, with developed rail and road networks, makes Tanzania a natural
transportation gateway for East and Central Africa.
 Tanzania’s internal production capabilities, driven by rich natural resources,
abundant and inexpensive labour, and a suitable market policy orientation make
it a natural hub for economic activity in the East African Region.

6. Challenges and constraints of agricultural
transformation
 Main Sectoral Constraints
 Inadequate policy environment and uneven policy implementation for
achieving sustained and inclusive agricultural growth targets
 Inadequate prioritized and quality public investments and low level of
private sector investments in infrastructure
 Constraints to efficient and competitive agricultural marketing and
agroprocessing, including limited value chain development
 Limited access to sustainable rural finance
 Weak delivery of agricultural support services for crops, livestock,
fisheries, for improved technologies, crop and animal health services,
regulatory services

7. What can be done to broaden GVCs participation?
 Building competitive commodity value chains through:
 Promoting investment in agro-processing, agricultural financing, and
encourage smallholder participation in supply chain
 Increase the size and quality of public investment in agriculture
 Tax relief on agriculture production and storage technologies
 Ensure predictability and coherence in trade and marketing policy; Temporary
tariff increase on some food imports
 Establish a legal framework to enable SMEs leverage movable assets as
collateral for accessing credit; Remove service levy on empowerment funds
 Reduction of statutory payments for agriculture agro-processors workforce
 Promoting and strengthening internal and external trade under the Tanzania
Trade Development Authority (TANTRADE)
 Promoting and enhancing involvement of private sector in the commodity
value chain

8.  Improving and development of market infrastructure for accessing
domestic and export markets
 Strengthening and development of agro processing industries for value
addition for all priority commodities
 Improving Postharvest Management Along Food Supply Chain for
sustainable food security and nutrition
 Promoting campaigns to use “Made in Tanzania” products
 Strengthening agricultural research capacity for technologies
development, industrial linkages and transfer of results (all sub-sectors)

9. Policy reforms that have been taken to promote GVCs in the
agrifood sector
 Tanzania has undertaken a wide range of social and economic reforms aimed
at promoting agricultural investments and trade. These include:
 Promoting regional integration through tariff reduction
 Offering generous fiscal incentives under the Export Processing
Zone/Special Economic Zone (EPZ/SEZ) schemes to attract Foreign
Direct Investments (FDIs) and Domestic Direct Investments (DDIs)
 Enabling investors to access a number of preferential trade markets such
as the Africa Growth Opportunity Act (AGOA) of the United States, the
European Union's Everything But Arms (EBA) program, the East Africa
Community (EAC), and the Southern African Development Community
(SADC).
 Promoting and facilitating investment through Tanzania Investment Center
 Zero-rated VAT on exports

10.  Access to lands for investment purposes whereby land may be leased
for up to 99 years, but the law does not allow individual Tanzanians to
sell land to foreigners.
 Zero percent (0%) Import Duty on Project Capital Goods, Raw
Materials and Replacement Parts for Agriculture, Animal Husbandry
and Fishing, Human and Livestock Pharmaceuticals and Medicaments
 Pre-profit tax at farm gate (“cess”) on crops removed or reduced
 VAT on spare part for farm machinery and equipment removed or
reduced
 Secure certificates of land rights (granted or customary) for
smallholder and investors (2014 – on going)
 Exemption of VAT on additives for livestock and poultry feed

11.  Corporate tax reduced from 30% to 10% during the first 5 years of
assemblers of vehicles, tractors and fishing boats
 Tax exemptions – VAT
 On capital goods on machines and plants in production of edible oil,
textiles, leather and pharmaceuticals (including vet.)
 Fertilized eggs for incubation
 Locally produced animal fees
 Import duty reduced on wheat from 35% to 10%; Escrow account established
to easy refund of import duty on industrial sugar
 Excise duty increased on carbonated drinks, mineral water, juice, beer, etc.
 Increased import duty on beef, sausages, offals, etc. from 25% to 35%
 Fighting corruption. Giving or receiving a bribe is a criminal offense in
Tanzania

12. Key policy issues to be addressed – Agrifood sector in Tanzania
How to reduce
Multiple taxation and
overregulation within
the horticulture
subsector
(subjected to nearly
45 different taxes,
levies and fees and
the businesses are
regulated by over 15
bodies)
Trade policy for non-
traditional exports,
especially maize is
characterized by ad
hoc restrictions on
exports and
unpredictable import
regulation
How to incentivize
domestic production
taking into consideration
policy tools such as export
levy
How can Tanzania
participate in intra-
regional food trade
without risking food
insecurity?
What policy options to attract more
FDI in the agricultural sector?

13. How could the
country mitigate
dumping of
subsidized exports
goods from the
country of origin?
What is the best
policy option for
managing imports
with policy tools
such as import
tariffs and trade
restrictions?
What is the best policy
option(s) to incentivize
domestic import
substitution industry
(export levy, licensing,
processing zone, etc.)?
What policy would
promote domestic
industry without
restricting trade?
What is the best policy and
model for agricultural financing?

14. Policy options to
manage imports of
livestock and livestock
products (dairy, poultry,
etc.)
Alternative policy options to
enhance access to farm
input without dependency on
input subsidy
Regulatory reforms to
enhance competition and
efficiency in farm input value
chain
How to enhance the
competitiveness of
import substitutes
Extension policy to ensure farmers
access to knowledge for appropriate
agronomy and livestock husbandry

15. THANK YOU!