Form 6 Economics – STRUCTURE OF TANZANIA ECONOMY

SECONDARY SECTOR/ INDUSTRIAL SECTOR

This is economic activities/ sector which deal with converting inputs into output, secondary sector deal with production of final goods and services from raw materials manifesting and construction activities are two main aspect which from industrial/ secondary sector.

Industrial   sector mostly take raw materials from primary sector then modifying/ convert into final goods and services. Secondary / industrial sector contribute about / over 20% GDP (22.6%) and over 20% employment in Tanzania economy.

THE ROLES OF INDUSTRIAL SECTOR IN TANZANIA

1. Industrial sector increase government revenue become industrial and activities pay tax to the government
   
2. Industrial sector provide employment opportunities to many people this reduce the problem of unemployment.
   
3. Industrial sector provide input to other sectors such as agricultural sector like fertilizes, tractors which assist agriculture activities.
   
4. Industrial sector provide market for other economic sector like agricultural sector since agricultural sector supply product which act as a raw materials in industrial sector such as sisal e.t.c.
   
5. It facilitates improvement of other economic sectors like tertiary sector i.e. Transport and communication system.
   
6. Assisting in supplying food product which used to satisfy human wants.
   
7. Industrial sector facilitate growth of town and cities for example Tanga, Dar es Salaam.
   

edu.uptymez.com

PROBLEMS FACING INDUSTRIAL SECTOR IN TANZANIA ECONOMY

1. Shortage of raw materials/ input used in production of final goods and services. This may be caused by low development of other economic sector like Agricultural sector.
   
2. Shortage of skilled and efficient labor and management. This contributes to the decline in production and low development of industrial sector.
   
3. Lack of reliable enough market for industrial product both domestic and international market
   
4. Lack of reliable power and water supply for industrial use i.e. frequently electricity cut off this limit industrial development
   
5. Low government support (policy) government has no workable policy of providing subsidies and tax reduction for industrial development
   
6. Shortage of capital. This limit large investment and production and failure to enjoy economies of scale.
   
7. High initial and operational cost , this problem arise due to the shortage of inputs and some of them imported abroad that lead to increase in cost (price) of input and lead to low profit
   
8. Low development of technology. This problem reduce efficiency of industrial that cause low quality of products and low output produced
   
9. Low development of economic infrastructure such as transport and communication this limit movement of either raw materials from different place to produce area or final goods and services from production area to the market place.
   

edu.uptymez.com

INDUSTRIAL DEVELOPMENT STRATEGIES IN TANZANIA

Since independence Tanzania government adopted two main strategies of improving industrial activities

1. Import substitution activities strategy(1961-1975)
   
2. Basic industrialization industry strategy (1975-1995)
   

   THE IMPORT SUBSTITUTION INDUSTRIES STRATEGY
   

edu.uptymez.com

This was the policy adopted by Tanzania government which aimed at producing goods and services formerly imported from other countries. That means government decided to established domestic industries of producing goods or service which satisfy domestic human wants in order to reduce the deficit in the balance of payment made abroad so as to reduce deficit in the balance of payment . Import substation industry strategy started on 1961 to 1975 as industrial development strategy since independence

OBJECTIVES/ IMPORTANCE OF IMPORT SUBSTITUTION INDUSTRIES STRATEGY

1. To serve the foreign currency reserve formerly used to import goods and services
   
2. To increase the level of employment of factors of production i.e. labour employment
   
3. To earn foreign currency from export action of goods and services produced by domestic industries
   
4. To rise government revenue because industrial will increase tax base and amount of tax revenue collected by government.
   
5. To stimulate improvement of technology due to technique of production
   
6. Increase in market for domestic raw materials for example agricultural raw materials
   
7. Reduction in deficit in the balance of payment because industries increase export while reduce volume of import
   

   DISADVANTAGES OF IMPORT SUBSTITUTION INDUSTRY STRAGETY
   

edu.uptymez.com

The import substitution industries have the following disadvantages in an economy.

1. Import substitution industries require protection this goes against the principle of international trade and reduce gain in international trade and retaliation.
   
2. Increase in payment abroad due to the increase in import of capital goods used to develop import substitution industries like machines and other inputs (raw materials)
   
3. Industries increase supply of low quality product and low consumer’s satisfaction due to the use of low technology in production process.
   
4. Industrial produce more consumer’s goods rather than industries development product ( capital/ capital goods) because capital goods assist further industries development
   
5. Some of industries produce surplus commodities to the domestic market this may regarded as wastage of resources and loss to the companies/ industries. 
   

edu.uptymez.com

DIFFICULTIES/ PROBLEMS IN IMPLEMENTING IMPORT SUBSTITUTION INDUSTRY STRATEGY

1. Shortage of foreign currencies for importing capital goods and technology used in production.
   
2. Shortage / lack of reliable raw materials which limit production and increase cost of importing of some of raw materials
   
3. Shortage of skilled and trained labor of producing goods and services in an established industries
   
4. Lack of reliable power supply this cause rise in cost of production and sometimes failure of production
   
5. Low management skills among managers and government intervention in industrial activities and decisions
   
6. Shortage of capital fund for large scale investment this cause small scale production and failure of most of industries to enjoy economies of scale                                                                                                 
   

   BASIC INDUSTRIALIZATION STRATEGY (1975-1995)
   

edu.uptymez.com

This was industries development strategy aimed at establishing and development industries which produce capital goods rather than final goods and services.

Basic industrialization strategy started in 1975 to 1975.In implementing this strategy Tanzania government established many industries such as Tanga Fertilizers Company, Wazo cement, making factor; Kilimanjaro machine tools, kibaha sub- scania car assembly UFI, ZZK- mbeya SPM- mogololo- iringa and other industries.

Basic industrialization strategy promote production of capital goods for further investment and industries development reduce deficit in the balance of payment, through reduction of importing capital goods, promote development of technology, reducing dependence on foreign capital and creating strong economic base, saving foreign currency reserve used for importing capital goods.

                  TERTIARY SECTOR

This is an economic sector which deals with service provision to other economic sector or people in an economy. This sector does not deal with physics production of goods but provide services which assist production, competition, exchange, nglish-swahili/distribution” target=”_blank”>distribution and consumption activities. Tertiary sector includes activities such as banking, insurance, communication, transport, warehouse and other aids to trades tertiary sector also called services sector. 

THE ROLES/ IMPORTANCE OF TERTIARY SECTOR

1. It helps movement of goods and service or raw materials from one place to another i.e. production area to the market place for exchange this done by transport services.
   
2. It help to make goods available in the markets at the right time when they are needed this done by storage transport and communication service
   
3. Tertiary sector protect loss in production either on product or firm in general this facilitated by warehouse and insurance services
   
4. It facilitates trade transaction and saving activities through banking service.
   
5. It helps to expand the size of market and sales volume through market research which is facilitated by transport and communication system
   
6. Provide employment opportunity to many people in difference activities done in tertiary sector this reduce the problem unemployment
   
7. Facilitates increase in government revenue through tax revenue collected in tertiary activities.
   

edu.uptymez.com

                   OWNERSHIP PATTERN

This is the structure aspect of Tanzania economy based on system of ownership of major means of production in Tanzania economy. The system of ownership in Tanzania divided into three (3) main systems

1. Public ownership
   
2. Private ownership
   
3. Cooperation ownership
   

edu.uptymez.com

             PUBLIC OWNERSHIP

This refer to the system of ownership where by major means of production (resources) are collectively owned by government and major means and economic decisions made by government through central government authorities on behalf of society.

ADVANTAGES OF PUBLIC OWNERSHIP

1. Public ownership is preferable and assist in smooth provision of basic/important service in an economy in order to avoid competitive supply e.g. elect trial water supply
   
2. Public ownership reduce the problem of income inequality in the society because of absence of private ownership of major means of production
   
3. Public ownership facilities/assist provision of goods since private sector fails to afford while government may afford.
   
4. Public ownership facilitates supply of goods and services which are not profitable but essentials in an economy for example defense and security, public goods like roads
   
5. Public ownership reduce resources useful competition and utilization of economic resources because government plan on effective and efficient way of utilizing resources
   
6. Reduce economic instability(crises) such as inflation because government control resources and other problems/instability
   
7. Playing important role in providing employment to the people i.e. reduce unemployment problem.
   

edu.uptymez.com

DISADVANTAGES OF PUBLIC OWNERSHIP

1. Most of public ownership firm and companies are not efficient in providing goods and services e.g. TANESCO in supplying electricity this is due to the absence of competition
   
2. Public ownership may lead to public monopoly and all problems of monopoly markets
   
3. It may cause resources misallocation of resources due to political and social reasons
   
4. Public ownership cause low production and supply of goods and services of low quality this cause failure of public firm to enjoy economies of scale. This caused by lack personal commitment and poor management
   
5. It increase government burden in terms of cost and of operating public enterprises
   
6. Public ownership reduce consumer’s choice and satisfaction of human wants due to the shortage/lack of varieties of output
   

   COOPERATIVE OWNERSHIP
   

edu.uptymez.com

This is the system of ownership where by economic resources are owned by two or few people for the group benefits. That means resources or business enterprises are collectively owned by two or more people or between people and government for joint benefits.

Cooperative ownership which occurs between government and private enterprises also know as joint venture. And cooperative societies/union which discussed more the topic of marking and nglish-swahili/distribution” target=”_blank”>distribution.

PRIVATE OWNERSHIP

This refer to the system of ownership where by major means of production are owned privately and decision made by private enterprises for private benefits i.e. profit maximization

Most of private enterprise which emerge as a result of private ownership make private decision without interference from government such as what to produce, where to produce ,when to produce and how to produce for profit maximization.

ROLES/ ADVANTAGES OF PRIVATAGE SECTOR OWNERSHIP / NON-GOVERNMENTAL ORGANIZATION (NGO’S)

1. Private sector increase job opportunities and better payment to many people compare to public sector ownership
   
2. Most of private sector (firms) are efficient and lead to increase in supply and quality of goods and services.
   
3. Private ownership /sector facilitate transfer and improvement of technology from one country (MDC’S) to another (LDC’S) like Tanzania
   
4. Private sector/ ownership help to increase government revenue because they pay tax to the government
   
5. Private sector stimulate competition which disnglish-swahili/courage” target=”_blank”>courage occurrence of monopoly and negative effect of monopoly, also it stimulate efficiency in production.
   
6. Facilitate effective and efficient utilization of resources in an economy
   
7. Reduce government burden in control and finance public firms 
   

edu.uptymez.com

DISADVANTAGES OF PRIVATE SECTOR/ OWNERSHIP

1. Private ownership sector/cause wasteful competition and utilization of economic resources
   
2. Private sector increase the problem of income inequality and economic/ regional imbalance
   
3. It may cause increase in price and cost of living this increase hard ship in people‘s life and poor living standards.
   
4. It may cause failure of government plan because of presence of large private sector   which are efficient enough to operate against government will and plans.
   
5. It may cause cutthroat competition which lead to decline weak firms and unemployment problems.
   

   TYPES OF PRIVATE SECTOR
   

edu.uptymez.com

There are two main types of private sector

1. Formal private sector
   
2. Informal private sector
   

   FORMAL SECTOR
   

edu.uptymez.com

These are private sector established and operated by following government rules and regulations laid down by government for controlling private sector. Most of formal sector are large sector

INFORMAL   SECTOR

These private sector established and operated without following strict rules and regulation laid down by the government for under taking such activities in the country example of informal sector are street vendors

CHARACTERISTICS OF INFORMAL SECTOR IN AN ECONOMY

1. They use small initial and running capital in production
   
2. They produce in small scale. This is because of using small initial and running capital
   
3. They use low level of technology and local tools in production
   
4. Most of them has no permanent places i.e. business unit has no specific and permanent place for their activities
   

edu.uptymez.com

ROLES/IMPORTANCE OF INFORMAL SECTOR IN TANZANIA ECONOMY

1. Provide employment to many people. This is sector employ many people because Tanzania has large number of less/ uneducated and low income earner. Who has no sufficient fund, so they decided to participate in different work such as tailoring, cookers, carpentry etc.
   
2. Increase supply of cheap goods and services in the market which lead to increase in consumer’s choice and satisfaction
   
3. Reduce social evil/ problems in an economy since informal sector provide employment to many people, social evils such as robbery are reduced in an economy
   
4. Some of informal sector pay tax to the government and other deductions which increase government revenue
   
5. Reduce income inequality because informal sector improve income to low income earner
   
6. Stimulate competition with formal and public sector which lead to increase efficient in production and nglish-swahili/distribution” target=”_blank”>distribution of commodities
   
7. Increase resources utilization. Since they participate in land utilization and of their natural resources in production process.
   
8. Stimulate innovation and invention which leads to improvement of technology in production.  
   

edu.uptymez.com