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Alleviating Poverty through Public Investment in Tanzania

Over the past decade Tanzania recorded remarkable economic growth and poverty rate is slowly decreasing in Tanzania. At the national level, governments have adopted poverty reduction measures that target multi-dimensional aspects of poverty like access to basic services and income.There have been small improvements since 2012, but poverty is still an obvious issue. Building rural infrastructure to boost economic opportunities and improve access to social services will thereby eradicate poverty in Tanzania.

Tanzania’s strategic location, its rich and diverse resources, its sociopolitical stability, and its economic reforms over the past four decades contributed to its economic success and serve as a foundation for further building up the economy. Continued government efforts to improve living conditions have resulted in a sustained increase in access to basic services and improvement in human capital outcomes (though from a low base), which helped to reduce poverty.

The country is one of the least-developed countries in the world. The country has a current population of 55.57 million people. Over the past decade, Tanzania has made progress in reducing poverty.The modest reduction in poverty illustrates that economic growth has not been sufficiently broad-based. Growth is concentrated in telecommunications, financial services, retail trade, mining, tourism, construction and manufacturing. While growth was formerly driven largely by public spending and international aid, this is no longer the case.

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Growth today is generated mainly by the private sector, but the sectors with the highest rates of growth are predominantly capital-intensive and concentrated in large urban areas. Growth has largely failed to affect the great challenges, generating more employment and additional jobs in all parts of society and improving incomes for the vast majority of the population. Although the country’s economy is growing, it has had little impact on widespread poverty in Tanzania. Growth resulting in gold production and tourism has increased Tanzania’s wealth per capita by 92% over the last 20 years.

Currently, around 34 percent of Tanzanians live below the basic needs poverty line, meaning they lack the minimum resources that people need to be physically healthy. About 26 million Tanzanians, almost half of the total population live on less than $1.90 per day. This figure is an improvement over 2007’s report indicating a poverty rate of 55.1%. Tanzania has seen annual GDP gains of 7% since 2010 and this economic growth is attributed to this positive trends for poverty alleviation in Tanzania. After plateauing between 2001 and 2007, in 2018 the poverty rate fell from 34.4 to 26.4 percent.The 2019 Tanzania Mainland Poverty Assessment by World Bank notes that poverty decreased by eight percentage points in 10 years.

St. Francis Referral Hospital – Ifakara, Tanzania. Image: St. Francis Referral Hospital

Poverty can be conceptualised and measured in different ways. The conventional economic approach focuses on the quantifiable poverty lines based solely on consumption and expenditure patterns. While the poverty line is an important measure of poverty in a country over time, poverty goes beyond income level: it includes lack of access to health and education, respect, isolation from the community, and a feeling of powerlessness and hopelessness. Poverty is actually multi-dimensional, and many of its dimensions are often hidden. People whose main source of income is their farm, are five-times more likely to be poor than their counterparts who receive a wage from the public or private sector

Labour and capital are the main inputs used for production which result in economic growth. The short run and long run economic growth lead to improvement in job opportunities for the poor, general improvement in living standards and increase in government resources and tax revenue – all essential for developmental projects. It is this indirect relationship that makes economic growth important for poverty reduction.

Image: UNICEF/Holt

Although a small segment of Tanzanians with secure access to employment in the public and business sectors enjoy a relatively high standard of living, the vast majority of Tanzanians live in poverty. Indeed, the United Nations Development Programme ‘s (UNDP) human development index (HDI) listings, which arranges countries according to their overall level of human development, ranks Tanzania 156th out of a total of 174 nations. According to the Human Development Index, urban areas Dar es Salaam and Arusha are classified as having Medium levels of HDI, while the remainder of Tanzania has Low HDI. HDI indicators also show the life expectancy is on the rise, as well as declines in infant mortality.

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After many years of relatively slow growth, the Tanzanian government has launched a number of programs to tackle this challenge, including social safety net initiatives.
Poverty-reduction policies that have been implemented in Tanzania can be categorized into three policy clusters. The first cluster covers policies that reduce income poverty and increase economic growth. The second cluster focuses on poverty alleviation policies that increase access to basic services such as education, health, water and sanitation, and social protection. The third cluster covers institutional capacity building, accountability and governance issues. Despite all the policies that have been implemented, Tanzania like other emerging economies still faces a number of challenges related to reducing poverty.

Strengthening food security

The split between rural and urban poverty is most extreme in terms of food insecurity. With most of Tanzania’s population living in rural areas, there is a heavy dependency on rain-fed agriculture. 76% of Tanzanian’s rely on agriculture or on access to natural resources for their livelihood. The reliance on agriculture leaves Tanzanian’s especially susceptible to economic shocks due to climate change.However 40% of the total Tanzanian land area being marked for parks and forests, deforestation is still a major concern in Tanzania. Deforestation rates have increased significantly since 2000. For instance, a gold mine left 2,000 tons of toxic waste out in the surrounding environment without any regard for the communities living there in 2009.

Tanzania implemented the Food Security Act in 1991, which was designed to deal with local food shortages and enforce food security on a national level. But it has not alleviated the problems with food security and malnutrition. In 2009, the Ministry of Agriculture estimated that in the Chamwino district, one of many in the country, more than 17,000 people were unable to afford daily food. On a country-wide scale, the inability to buy food coupled with food shortages has dangerous and deadly consequences for many. As of 2012 only 1% of Tanzanian’s in Dar es Salaam experience food poverty as compared to 11.3% of Tanzania’s living in rural areas. The Productive Social Safety Net (PSSN) 2015 report stated that most households engage in agricultural activities (69%). The labor force participation rate is low (49%), most jobs are unstable. Less than 2% of PSSN beneficiaries with a job are in wage employment and only 13% of workers have a contract. One in four households consume food items from two or less food groups and 73% have low diet diversity. About one-third of households suffered a shock, most of which caused income or asset losses (60%). Similarly, agricultural policy in Tanzania stands in the way of its growth. Though Tanzania’s growth depends a lot on agriculture, its lack of education, infrastructure and market access also cripples the country. However, the government is taking the necessary steps to address this conflicting policy problem in the hopes of improving food security in Tanzania in the future.

Improving household incomes

Income from employment includes cash emoluments and the value of benefits in kind. In Tanzania, most smallholder farmers are located in the rural areas, where both physical and institutional infrastructure limits their development and expansion. Generally, smallholder farmers lack access to proper roads and this in turn limits their ability to transport inputs and produce and gain access to information. Remittances contribute to both investment and consumption. Substantial number of households received remittances, through formal and informal channels are well off compared to non-recipient households. However, a small proportion were used for investment, whereas significant amount used for consumption.

As Tanzania approaches middle-income status, rapid population growth, growing urbanization and the increase in the absolute number of poor people in the country are causes for concern. The lack of access to social protection constitutes a major obstacle to economic and social development. Inadequate or absent social protection coverage is associated with high and persistent levels of poverty and economic insecurity, growing levels of inequality, insufficient investments in human capital and human capabilities, and weak aggregate demand in a time of recession and slow growth. In pursuit of social protection as one of the policies for poverty reduction, the mainland government launched the Tanzania Social Action Fund (TASAF) in 2000.

In Zanzibar, social protection is carried out on a limited basis with small scale cash transfers to vulnerable groups including children; means tested support to elderly; and fee waivers to the poor and vulnerable in health and education according to the United Nations International Children’s Emergency Fund (UNICEF). Inequities in education, health, water, sanitation and protection from violence exist at multiple levels, including a child’s place of residence, gender and family socioeconomic status. As long as these remain, Tanzania’s efforts to build a strong foundation for sustained growth will be hampered.

Accessibility to social amenities

The Tanzanian government also made a concerted effort to improve another basic service, health, as one of the steps towards poverty reduction. The provision of health services is spearheaded by the Ministry of Health and Social Welfare in Tanzania mainland. The poor healthcare system in Tanzania is largely the fault of unequal distribution of finances within the system. About 85 percent of healthcare spending goes to central urban hospitals, but only about 10 percent of the population has access to these hospitals. This means that 90 percent of the population has to rely on 15 percent of the country’s healthcare funding.

This leads to a severe lack of resources, resulting in many people being inadequately or improperly treated. This small amount of resources also fails to treat many of the diseases common to those in poverty, including tuberculosis, malaria, HIV, diarrhea, and cholera. Thousands of people, many of them children under the age of five, die of these illnesses every day. Productive Social Safety Net 2015 findings reveals that, only 23% of under-5s visit a health provider and 90% visiting one are sick. Main barrier is cost. Sick under-5s don’t attend health visits due to costs (58%). Social norms also play a role (32%). Most (79%) use public health facilities, so supply sides issues could emerge.

Inadequate education system is another one of the causes of poverty in Tanzania. Ever since obtaining its independence, Tanzania has prioritized education. However, millions of children are still barred from secondary and post-secondary schooling. Only three out of every five Tanzanian children are enrolled in secondary school.

For many, further education is not even an option.Education is too expensive for many families.Tanzania’s Productive Social Safety Net 2015 indicated that; 42% ages 15+ are illiterate and 48% ages 15+ completed primary. About half or less are enrolled at age of school entry (7) and at ages 14 to 17. The main barriers to enrollment are financial constraints (39%) and distance (11%). 92% of the enrolled regularly attend. 18% of those 5 to 19 enrolled in school repeat at least one grade.

The country needs to invest in human capital and skills development of its current and future workforce while increasing the job generation by key sectors that drive growth. Developing infrastructure for education, health, water, agriculture and transportation, and create income-generating activities in animal husbandry and vegetable growing, in addition to employment opportunities. These will strengthening food security and household incomes, and improving access to social amenities.

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