Tanzania

Chart 1 is a political map of Tanzania.

At 947 303 km2, the United Republic of Tanzania is the 13th largest country in Africa, with the 11th largest economy and 5th largest population. Still, it ranks at only 31st when comparing GDP per capita in PPP. It borders Uganda to the north, Kenya to the north-east, Comoros and the Indian Ocean to the east, Mozambique and Malawi to the south, Zambia to the south-west, and Rwanda, Burundi, and the Democratic Republic of the Congo (DR Congo) to the west. The official capital is Dodoma, which is located 309 km west of Dar es Salaam, which is the country's commercial capital major seaport. Other big urban centres include Arusha, Moshi, Tanga, Mwanza, Morogoro, Mbeya, Iringa, Tabora, Kigoma, Shinyanga and Zanzibar.

Tanzania has an Indian Ocean coastline of approximately 1 424 km, and its territory includes the semi-autonomous region of Zanzibar. Mount Kilimanjaro, Africa's highest mountain, is in the mountainous and densely forested north-east of Tanzania. Three of Africa's Great Lakes are partly within Tanzania: Lake Victoria, Africa’s largest lake; Lake Tanganyika, the continent's deepest lake; and Lake Malawi. Tanzania’s eastern shore is hot and humid, and the Zanzibar Archipelago is just offshore. 

After two decades of sustained economic growth, Tanzania graduated from low- to low-middle-income country status in July 2020. Given that its GDP per capita is still amongst the lowest of Africa’s low-middle-income countries, higher than only Lesotho and Zimbabwe, it will likely remain at the lower end of the group in various development indicators on the Current Path forecast. It also has one of the largest informal sectors in Africa, second only to Zimbabwe as a per cent of GDP. On the Current Path forecast, Tanzania would only graduate to upper-middle income status at around 2054, mainly because of the drag from its substantial informal sector on productivity improvements.

Tanzania is a member of the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA). Its level of engagement with the latter has declined in recent years, with attention shifting to the EAC which has been more succesful in liberalising agricultural trade which is important for the country. The EAC has negotiated an Economic Partnership Agreement with the European Union, a comprehensive trade agreement that aims to promote economic cooperation and development between the two regions. The Agreement was finalised in October 2014 but has not been fully implemented due to concerns (and disagreements) by some EAC member states about the economic impact of the agreement. As a result Tanzania, Uganda, Rwanda, and Burundi, have not yet ratified.

Tanzania maintains a trade relationship with the EU under the Everything-But-Arms scheme that removes tariffs and quotas for all imports of goods (except arms and ammunition), coming into the EU from least developing countries. It also benefits from the preferential access to the USA market through the African Growth and Opportunity Act (AGOA). However, it is trade relations with Asia that is growing more rapidly, facilitated by the China-Africa Forum, the TICAD process led by Japan, and the Africa-India Partnership Forum.

Recent years have seen the discovery of large gas reserves that could transform the Tanzanian energy sector. Two fields (Songo Songo and Mnazi Bay) produce gas since 2004/05 that is used for power generation at the Ubungo power plant in Dar es Salaam and for industrial use, including for cement production. The majority of Tanzania's larger and more recent discoveries of gas reserves were between 2010 and 2015 in deep-water blocks off the coast of Lindi and Mtwara by Shell Exploration and Production Tanzania LTD (Shell) and its partners Ophir and Pavilion. Tanzania's proven natural gas reserves are estimated to be around 57 trillion cubic feet (TCF), with at least 49.5 TCF of those reserves located far offshore. Its proven gas reserves are comparable to Libya and the largest in East Africa.

As part of the National Development Plan lll (2021/22 - 2025/26) (see below) the government envisages a multi-billion investment in an LNG plant and the associated infrastructure. Talks on developing the plant have been held intermittently since 2017, nearing conclusion in 2023 with construction due to begin around 2026 and the first exports forecast for 2028. 

The Current Path forecast within IFs on gas production in Tanzania already includes substantial growth to 127 MBOE in 2043 and has been adjusted upward in the expectation of gas production commencing as from 2028. In 2043 Tanzania is now forecast to produce 154 MBOE, most likely for export. The forecast also includes the completion of the 2 100 MW Rufiji hydroelectric scheme in 2027. Tanzania is now forecast to produce 11 MBOE of hydropower in 2040. The extent to which the benefits from these projects will trickle down to citizens will require appropriate government policies and determined implementation.

Tanzania generally exports commodities. Gold was Tanzania’s most significant export product by value in 2021, accounting for 37% of exports by value, followed by raw copper, dried legumes, rice, refined copper, nuts, and coffee, mainly exported to India (22%), the United Arab Emirates (UAE) (16%), South Africa, Switzerland and Kenya.

Tanzania’s top imports are refined petroleum (16% of imports), palm oil, packaged medicaments,  coated flat-rolled iron, and hot-rolled, importing mainly from China (34% of imports), India (11%), UAE (10%), Saudi Arabia, and South Africa.

Tanzania could be a significant food-exporting country but currently struggles to meet its food requirements due to low productivity and the predominance of subsistence farming. The result, amongst others, is high levels of stunting in the population, particularly among children below five years of age, at 30% in 2023, declining to 17% in 2043.

Chart 2 presents the population structure for 2043 in the Current Path.

Tanzania has a young (median age 18.5 years) and rapidly growing population reflected in a population pyramid that is very broad at the bottom and still several decades away from entering a potential demographic window of opportunity. At independence in 1963, its population was estimated at 11 million. By 2000, it had increased to 34.5 million and, by 2023, to 65.8 million, growing at a rate of 2.4% per annum. In the Current Path, Tanzania will have 102 million people in 2043. Total fertility rates are coming down, but slowly. In 2023, it was 4.7 children per fertile woman, and by 2043, it will have declined to 3.3 - consistently above the average for lower-middle-income countries. In fact, in its immediate region, Tanzania’s fertility rate is above rates in Mozambique, Uganda, South Sudan and Sudan.

Various factors contribute to Tanzania’s high fertility and rapid population growth, including its large informal economy (45% of GDP in 2023) with low levels of urbanisation (37% in 2023) and education (adults above 15 years of age have 6.6 years of schooling), as well as the fact that the average age of first marriage is two years below that of its peer group. In all these indices, Tanzania trails below the average for Africa's lower-middle-income countries.

These structural characteristics are such that they outweigh the fact that Tanzania has slightly higher access to modern contraceptives (at 41% in 2023) than the average for lower-middle-income Africa (at 38%). 

Because Tanzania has a larger cohort of children (aged 15 and below) at 42% of its total population compared to 38% of its peers in 2023, Tanzania’s working-age population (aged 15 to 64) constituted 55% of its total population. The latter is three percentage points lower than the average for Africa’s lower-middle-income countries, translating into a comparatively smaller potential labour force with a commensurate reduction in the contribution that labour could make to economic growth.

Chart 3 presents a population density map.

An estimated 63% of Tanzania’s population was considered rural in 2023, comparable to Sudan, Zimbabwe, Guinea and Mozambique. Technically, Tanzania will become urban in 2040, at which point more than 50% of its population will be classified as urban. Overall population density is average for Africa, but it is vastly different between its 31 administrative regions. 

The Dar es Salaam, the Mwanza and the Arusha Regions are the most densely populated areas, home to Tanzania’s major cities and commercial centres. The least densely populated areas are the Singida Region, the Manyara Region and the Tabora Region. These regions are primarily rural and contain large semi-arid and arid land areas.

The uneven population distribution in Tanzania is due to several factors, including climate, geography and economic development. The northern border and eastern coast regions have more favourable temperatures and are more fertile than the interior regions. They are also home to more infrastructure and economic opportunities.

Chart 4 presents the size of Tanzania’s economy from 1990 and includes a forecast for 2043, including the associated growth rate. 

Tanzania has experienced strong economic growth for several decades, primarily driven by its growing population. Still, it has long struggled with competitiveness, reflected in its poor ranking by various indices such as the World Economic Forum Global Competitiveness Index (2019), where it is ranked 117 out of 141 countries. 

Despite various efforts to strengthen the competitiveness of the economy, improve the business and investment environment, and reduce the cost of regulatory compliance, the World Bank's Global Competitiveness Report 2022-2023 ranked Tanzania 147th out of 180 countries, scoring below the average for sub-Saharan Africa and the world average. According to the Bank, one of the main challenges to Tanzania’s competitiveness is its high infrastructure costs, including its extensive and underdeveloped road network and unreliable electricity supply. 

The World Bank's ease of doing business^{[1The ease of doing business is a measure of how easy or difficult it is for a business to operate in a particular country. It is calculated by the World Bank Group and takes into account a number of factors, including the time and cost required to start a business, obtain construction permits, register property, get credit, and pay taxes.]} (2020 data) ranks Tanzania 141 out of 190 countries. The extent to which the country trails in the region is evident, considering that neighbouring Kenya is at 56, Uganda at 116 and Rwanda at 38. 

In Transparency International’s corruption perception index (2023), Tanzania is considered moderately corrupt and ranked 103 out of 180 countries. 

In the Global Innovation Index (2023), Tanzania is ranked 103 out of 132 countries. Its most positive aspects relate to the strength of its institutions. 

According to the Economic Freedom Index by the Fraser Institute (2024), Tanzania is the 86th freest economy out of 165, considered ‘mostly unfree’ and ranked towards the bottom end of the index, doing particularly poorly on judicial effectiveness.

Chart 5 presents the size of the informal economy as a percentage of GDP and, in absolute terms, as well as the percentage of total non-agriculture labour involved in the informal economy. Chart 33  presents the impact of the Combined scenario on the informal sector.

Estimations and data on the informal sector are often unreliable and must be treated carefully. Researchers generally distinguish between the shadow and informal economy. According to the International Labour Organization (ILO): ‘The informal economy refers to all economic activities by workers and economic units that are – in law or practice – not covered or insufficiently covered by formal arrangements. Where data is not available, our modelling estimate the size. The ILO definition of employment in the informal economy excludes the agricultural sector.

Much work has been done to understand Tanzania’s informal sector. 

For example, the 2002 Roadmap Study on the Informal Sector in Mainland Tanzania reflects the regulatory and policy environment as an apparent handicap to the growth of small and medium-sized businesses. The study identified numerous regulatory constraints, including legal leftovers from colonial times or the previous socialist economic model, which only envisaged large enterprises. The Roadmap found that smaller business operators could broadly fit into two categories: survivalists and entrepreneurs. Survivalists tended to want to remain small and invisible and to avoid compliance. Entrepreneurs were split again into broadly two types: those who managed to comply to prevent harassment and be free to pursue their growth, and those who, while pursuing their growth, refused to comply with the demands of a corrupt bureaucracy. 

At 45% of GDP in 2023, Tanzania has the second largest informal sector among Africa's lower-middle-income countries a portion of its total economy. Only Zimbabwe’s informal sector is larger. This means that a significant portion of Tanzania's economic activity occurs outside the formal economy, where businesses are not registered or taxed. By 2043, the contribution from Tanzania’s substantial informal sector will decline to 37%, which is still very large.  As a portion of the total economy, it will be the largest amongst Africa’s 24 lower-middle-income countries, followed by Nigeria, Benin and Zimbabwe. As a result, Tanzania has the lowest labour productivity amongst its peers.

At 76%, the percentage of Tanzania’s informal labour is more significant in 2023 than any lower-middle-income country and modestly declines to 67% in 2043. Benin had the second-largest informal labour share at 74%. Casual labour in Zimbabwe, which had a more significant informal sector than Tanzania in 2023, only constituted 41% of its labour force. By implication, not only is Tanzania’s informal sector huge but it also reflects very low levels of productivity. The informal sector in Tanzania is survivalist in nature. Although it provides a means of subsistence and survival for a large portion of the population, many are trapped in poverty.

Chart 6 presents the average GDP per capita from 1990, including the Current Path to 2043.

Until 1989, the GDP per capita for Tanzania was below the average of Africa’s low-income countries, although the gap had been slowly closing. After that, more rapid growth in Tanzania meant that the World Bank upgraded the country to lower-middle-income status in 2020, reflecting the extent to which the country was growing more rapidly than most other low-income countries in Africa.  

In 2023, the GDP per capita of Tanzania, at US$2 668, was 56% of the average for Africa’s lower-middle-income countries, third lowest amongst its peer grouping of lower-middle-income countries, but improving. The two lower-middle-income countries that, in 2023, had a lower GDP per capita than Tanzania were Lesotho and Zimbabwe.  

On the Current Path, Tanzania will grow its GDP per capita to US$4 890 or 43% of the group average by 2043, reflecting steady progress. Whereas it had the third lowest GDP per capita in the group in 2023, by 2043, it will improve its ranking by one position, doing better than Comoros, Zimbabwe and Lesotho. The long-term growth prospects for Tanzania are positive.

Chart 7 presents the number of people living in extreme poverty, also expressed as a percentage of the population. 

In 2015, the World Bank adopted US$1.90 per person per day (in 2011 prices using GNI), also used to measure progress towards achieving Sustainable Development Goal (SDG) 1 of eradicating extreme poverty.

In 2022, the World Bank updated the poverty lines to 2017 constant dollar values as follows: 

• The previous US$1.90 extreme poverty line is now set at US$2.15 for use in low-income countries.
• US$3.20 for lower-middle-income countries, now US$3.65 in 2017 values.
• US$5.50 for upper-middle-income countries, now US$6.85 in 2017 values.
• US$22.70 for high-income countries. The Bank has not yet announced the new poverty line in 2017 US$ prices for high-income countries.

Monetary poverty only tells part of the story. In addition, the global Multidimensional Poverty Index (MPI) measures acute multidimensional poverty by measuring each person’s overlapping deprivations across ten indicators in three equally weighted dimensions: health, education and standard of living. The MPI complements the international US$2.15 a day poverty rate by identifying who is multidimensionally poor and also shows the composition of multidimensional poverty. The headcount or incidence of multidimensional poverty is often several percentage points higher than that of monetary poverty. This implies that individuals living above the monetary poverty line may still suffer health, education and standard of living deprivations. 

Starting with monetary poverty. Using US$2.15, 50.3% of Tanzania’s population was considered extremely poor in 2023, equivalent to 33.1 million people. As a percentage of its total population, only Zambia and Angola had higher monetary poverty rates among Africa’s 24 lower-middle-income countries in 2023. On the Current Path, Tanzania’s extreme poverty rate will decline to 18.9% (or 19.1 million people) in 2043. Then Tanzania will still have a sizeable extreme poverty burden but rank 7th instead of third in the portion of extremely poor people among Africa’s 24 lower-middle-income countries.

While the US$2.15 extreme poverty line is used to monitor progress towards achieving goal 1 of the SDGs towards eliminating the extreme poverty line by 2030, Tanzania is now categorised as a lower-middle-income country. The World Bank and others consider US$3.65 a more appropriate monetary poverty line than US$2.15 for these countries. 

Using US$3.65, 74.1% (or 48.7 million) Tanzanians will be considered poor, a ratio that will decline to 39.8% (40.5 million) in 2043 on the Current Path. These are large numbers, with only Nigeria, and Sao Tomé and Princípe having more significant portions of their populations classified as such. Tanzania will, however, make steady progress within the 24-country lower-middle-income group and improve its ranking to the extent that, in 2043, it will have dropped from the country with the third-highest poverty rate to seventh.

Poverty has many dimensions. For example, the number of children under 15 in poor households in Tanzania is almost double that in non-poor households. Poor households also have significantly higher dependency ratios. About 44% of households with five or more children under 15 are poor, 18 percentage points higher than the national average and 28 percentage points more than the poverty rate for households with just one or two children. Furthermore, poverty is more prevalent among women. In urban areas, more women-headed households are poor than men-headed ones, and single and divorced women are poorer than men. The gap is high in rural and urban areas, particularly in the latter. Urban widows are also poorer than urban widowers. Ownership of assets, especially mobility and communication equipment, is also significantly lower among women-headed households, indicating women's limited access to productive assets.

Using MPI, the Tanzania Human Development Report 2019-2022 estimated that the poverty rate in Tanzania was higher than the monetary measure of US$2.15, at 57.1% in 2021, while an additional 23.4% of the population was classified as vulnerable to multidimensional poverty.  The contributions to overall poverty by the MPI dimensions were as follows:

• Health: 39.8%
• Education: 34.2%
• Standard of living: 26.0%

Nationally, the poor are defined as those whose consumption is below Tanzania’s national poverty line and who, therefore, were not able to meet their basic consumption needs; the extreme poor were not able to afford enough food to meet the minimum nutritional requirements of 2 200 kilocalories (Kcal) per adult per day. The national basic needs poverty line in 2018 was TZS 49 320 per adult per month, and the food poverty line was TZS 33 748.

In response to its high poverty burden, the government has instituted numerous programs that range from investments in education, health, economic growth and social welfare that have helped the poorest Tanzanians, without which poverty rates would have been much higher. The potential income from its enormous gas resources would, if appropriately managed, allow the government to expand these efforts significantly by ringfencing profits for social grants.

The effects of such widespread and deep poverty mean that many Tanzanians are unable to afford enough food to eat, resulting in high levels of malnutrition and stunted growth. Nor can parents afford to send their children to school, and many citizens do not have access to quality healthcare and suffer from limited economic opportunities.

Poverty in Tanzania has been widely studied and is well understood, reflected in extensive reporting such as the 2020 Tanzania Mainland Poverty Assessment Report published by the World Bank and the Tanzania National Bureau of Statistics.

Tanzania has a long history of national development plans, dating back to the country's independence in 1961. The first five-year development plan was launched in 1964, and it was followed by a series of plans, each of which has been informed by the country's changing development priorities.

The early development plans in Tanzania were focused on achieving economic growth and self-reliance. The Arusha Declaration of 1967, a policy statement issued by the ruling party at the time, enshrined the principles of ujamaa (socialism) and self-reliance as the basis for the country's development. The development plans of the 1970s and 1980s focused on implementing these principles through policies such as the collectivisation of agriculture and the promotion of village industries.

In the early 1990s, Tanzania started to move towards a more market-oriented approach to development. The development plans of this period were therefore focused on promoting economic growth through private-sector investment and trade liberalisation. The National Development Vision 2025, launched in 1999, set a long-term goal for Tanzania to become a middle-income country by 2025. The three principle objects are achieving quality and good life for all, good governance and the rule of law, and building a strong and resilient economy that can effectively withstand global competition.

The current Five Year Development Plan lll (2021/22 - 2025/26) is the third in a series of plans to achieve the National Development Vision 2025 goals. The plan focuses on increasing the country's capacity for production, building a competitive economy and stimulating human development.

FYDP III also aims to implement sectoral strategic plans, agreements and regional and international strategic plans, including implementing the Sustainable Development Goals (SDGs) to accelerate economic growth and social development.

The specific objectives of the FYDP III are:

(i) To build on achievements realised towards the attainment of the National Development Vision 2025 to make Tanzania a semi-industrialised, middle-income country by 2025;

(ii) To strengthen capacity building in the areas of science, technology and innovation to enhance competitiveness and productivity in all sectors, especially the productive, manufacturing and services sectors, to enable Tanzanians to benefit from the opportunities available within the country;

(iii) To strengthen the industrial economy as a basis for export-driven growth, including investing in new products and markets and enabling Tanzania to become a production hub in the countries of East, Central and Southern Africa and, thus increasing the country’s contribution to international trade;

(iv) To enhance the scope of Tanzania’s benefits from strategic geographical opportunities by enabling improved business environments and strengthening the country’s regional position as a hub for production, trade, supply and transportation;

(v) To facilitate increased business start-up and private sector involvement to find the best way to promote the growth of the sector in tandem with job creation and make the sector a strong and reliable partner in development;

(vi) To promote exports of services, including tourism, banking services, insurance and entertainment;

(vii) To strengthen the implementation of FYDP III, including prioritisation, planning, integration and alignment of implementation interventions;

(viii) To accelerate inclusive economic growth through poverty reduction and social development strategies as well as productive capacity for youth, women and people with disabilities;

(ix) To ensure that regional and global agreements and commitments are fully integrated into national development for the benefit of the country;

(x) To strengthen the relationship between the sectors that are endowed with natural wealth and resources with other economic and social sectors;

(xi) To strengthen the role of Local Government Authorities (LGAs) in bringing about development and increasing income at the community level; and

(xii) To strengthen the country’s capacity to finance development by ensuring access to domestic revenue and effective management of public expenditure.

Chart 29 presents a stacked area graph of the contribution of each scenario to GDP per capita. The cumulative impact of better education, health, infrastructure, leapfrogging, etc., means an additional benefit in our modelling that we refer to as the synergistic effect.

In 2023, Tanzania’s GDP per capita of US$2 668 was amongst the lowest of Africa’s 24 lower-middle-income countries and 50% lower than the average GDP per capita of the group, which was US$6 112. Only Comoros, Zimbabwe, Guinea and Lesotho were below Tanzania. By 2043, Tanzania’s GDP per capita will increase to US$4 890 in the Current Path, and it will then have a higher GDP per capita than Comoros, Zimbabwe, Guinea and Lesotho, having slightly improved its ranking within its peer group.

The Combined scenario will increase Tanzania’s GDP per capita by 38% or an additional US$1 855 above the Current Path in 2043. Among the sectoral interventions, the Large Infrastructure and Leapfrogging scenario will have the most significant positive impact on the GDP per capita, with an increase of US$356 above the Current Path in 2043. The scenario includes an intervention that reflects how modern technology allows for the more rapid formalisation of Tanzania’s large informal sector. The second and third most significant impact on the GDP per capita will be achieved in the AfCFTA and the Agriculture scenarios. Because of its small formal sector and low average income levels, the Financial Flows and the Manufacturing scenarios are the least impactful in GDP per capita terms by 2043.

The findings reflect the challenge identified in the 2020 World Bank report that low human capital and limited access to essential services limit opportunities for the poor to access productive jobs. Poverty rates are lowest among households whose head works in trade and services. It is also reflected in the analysis accompanying Chart 10, pointing to the low levels of labour productivity in Tanzania compared to its peers.

In the Combined scenario, by 2043, Tanzania’s GDP per capita will be US$6 745 instead of US$4 890 on the Current Path. In other words, Tanzania’s GDP per capita will increase to 78% of the average for the group. On the Current Path, it will only be 57% of the group average. In 2023, the GDP per capita of Tanzania was only 44% of the group average.

On the Current Path, Tanzania will cross the upper-middle income threshold of US$4 046 (using MER) in 2054. In the aggressive Combined scenario, it will do so a decade earlier, in 2044.

Chart 30 presents the impact of each scenario on extreme poverty by 2043. The user can select the number of extremely poor people or the population percentage. 

Poverty in Tanzania is stubborn, with limited responsiveness to growth. In its 2020 extensive report on Tanzania Mainland Poverty Assessment, the World Bank found that a 10% increase in GDP growth per capita can be expected to produce only a 4.5% decrease in the proportion of the poor. This is very low. On average, poverty will drop by over 20% when per capita GDP rises by 10% in developing countries. The result is that poor people benefit less from economic growth in Tanzania, whilst the beneficial effects of economic growth are partially offset by rising inequality. As a result, the impact of various scenarios in this report all have disappointing effects on poverty reduction.

In 2023, 48.7 million Tanzanians lived below the US$3.65 poverty line for lower-middle-income countries, equivalent to 75.2% of the population. On the Current Path, that number will decline to 40.5 million (43.2%). In the Combined scenario, extreme poverty in Tanzania will decrease significantly. By 2043, only 28.1% of the population will live below the US$3.65 extreme poverty line, translating to 26.3 million people.

The positive impact of the interventions in the Agriculture, Demographics and Health and Education scenarios on poverty are most significant. 

Chart 31 compares the size of the economy in the Current Path with the Combined Agenda 2063 scenario at market exchange rates (MER).

Economic growth accelerated after Tanzania adopted multiparty democracy and market-based reforms in the 1990s. Between 1990 and 2019, Tanzania’s GDP increased more than fourfold. The economy has not, however, undergone a structural transformation to higher productivity. In recent years, most employment growth occurred in the construction sector as the government invested in the capital city of Dodoma. The manufacturing sector, generally associated with more and better jobs, is small, and employment is growing slowly.

These concerns aside, the country’s GDP will increase substantially from US$69.7 billion in 2023 to US$246.6 billion in 2043 in the Current Path and to US$370 billion in the Combined scenario. Instead of its current ranking as the 11th largest African economy, it will be sixth by 2043.

Chart 32 presents the change in the economy's structure, comparing the Current Path with the Combined Agenda 2063 scenario from 2019 to 2043.

Our modelling uses data from GTAP to classify economic activity into six sectors: agriculture, energy, materials (including mining), manufacturing, services and information and communication technologies (ICT). Most other sources use a threefold distinction between agriculture, industry and services, with the result that data may differ.

A previous section has expanded on the slow reduction in poverty compared to Tanzania’s robust economic growth rates. According to the Tanzania Mainland Poverty Assessment report, the World Bank finds that growth was driven by sectors with limited employment, particularly the poor. The fastest-growing sectors were construction, information and communication technology (ICT), real estate, nonmarket services (e.g., education, health, and public administration), and, to a lesser extent, mining, transport and trade. Within agriculture, which contributed 26% to GDP in 2023 and where most poor Tanzanians work, the crops and livestock subsectors grew relatively fast at about 5%. However, even there, only a small number of small-scale farmers produce market-oriented crops and livestock. Thus, Tanzanians with more education and skills were better positioned to benefit from fast-growing sectors. They generally continued to work in the informal rather than the formal sector as they actively avoided engagement in the formal sector.

Manufacturing in Tanzania peaked in 2008, and future growth requires more capital accumulation, but machinery and equipment are relatively expensive. While services are growing in Tanzania, they are non-tradeable (education and labour). However, relative to most other African countries, domestic savings in Tanzania are high and offer an opportunity to fund investment.

Compared to the average for the group of 24 lower-middle-income countries in Africa, Tanzania appears to have a less productive economic structure, namely: 

• a more significant but low-productivity agricultural and services sector (by 9.4 and 2.1 percentage points respectively),
• a much smaller energy (-5.3 percentage points) and manufacturing (by -4.5 percentage points) sectors, and
• a smaller materials (-0.6 percentage points) and ICTech (by -1.1 percentage points) sectors.

In 2023, Tanzania’s service sector accounted for more than half of the country’s GDP (US$35.84 billion), followed by the agriculture sector, which accounted for 26% (US$18.1 billion). The ICT sector contributed 4.2% (US$3 billion). The energy sector is tiny, contributing less than 2% to GDP in 2023 (US$1.3 billion), translating, among other issues, into low levels of electricity access and inhibiting growth in the manufacturing sector. The service sector will remain the most significant contributor to Tanzania’s GDP. On the Current Path, its share is set to grow to 63% (US$156.4 billion) by 2043. At the same time, the agriculture sector's contribution will decline from 26% (US$18.13 billion) in 2023 to just over 9.2% of GDP (but increase in value to US$23.02 billion) in 2043. The manufacturing sector, at 14.7% in 2023 (US$10.27 billion), constituted the third largest contributor to Tanzania’s GDP. Instead of 17.4% in 2043 (US$43.5 billion) on the Current Path, manufacturing will contribute 21.5% to GDP (US$79.41 billion) in the Combined scenario.

The evolution of Tanzania’s economy roughly mirrors that of its lower-middle-income peer group, with the service sector representing both the current and future lion’s share of contribution to GDP and a relatively small agriculture sector compared to other countries in similar circumstances. Tanzania’s manufacturing sector is also one of the smallest among its lower-middle-income peers on the continent and contributed 5.5 percentage points less to GDP than the average for the group in 2023. With its sizeable informal service sector, low-productivity agricultural sector, and relatively small manufacturing sector, Tanzania should invest in improvements in agriculture and grow its ICT sector to improve productivity and enhance livelihoods in other sectors, particularly manufacturing. 

In the Combined scenario, the manufacturing sector will increase its contribution to GDP by four percentage points by 2043 and agriculture by one percentage point. All other sectors will decline in the contribution that they make to GDP, namely materials (-0.07 percentage points), energy (-0.45 percentage points), ICTech (-1.08 percentage points), and services (-3.57 percentage points).  

Compared to the Current Path in 2043, the Combined scenario would see the following changes in the structure of Tanzania’s economy:

• the agriculture sector will be 1.1 percentage points of GDP larger (equivalent to +US$15.3 billion),
• energy will be -0.45 percentage points smaller (+US$0.590 billion),
• materials will be -0.73 percentage points smaller (+US$2.440 billion),
• manufacturers will be +4 percentage points larger (+US$35.91 billion),
• services will be -3.7 percentage points smaller (+US$62,28 billion), and
• ICTech will be -1,08 percentage points smaller (+US$3.91 billion).

Chart 33 presents the size of the informal sector as a share of GDP and the size of the informal labour force. Data on the informal sector's contribution is often estimated and should be treated with care.

In 2023, Tanzania’s informal sector accounted for approximately 45% of GDP. Tanzania had the second-largest informal sector in Africa. Only Zimbabwe’s informal sector accounted for a higher share of GDP. The average value for Africa’s 24 lower-middle-income economies was 29%. 

Tanzania’s large informal sector is an inevitable burden on the formal economy because of low contributions to tax revenues, low productivity and the subsequent negative impact on expenditure on public utilities. By 2043, the informal sector's contribution to the country’s GDP will decline to 37% in the Current Path and 28.5% in the Combined scenario. Whereas Tanzania’s informal sector will be the second largest in Africa by contribution to GDP in the 2043 Current Path, it will improve to 20th position in the Combined scenario.

In 2023, 76% of Tanzania’s labour force, or 32.2 million people, worked in the informal sector (excluding agriculture). Of this total, around 31% were informal workers in the formal sector and 69% in the informal sector. The majority are male. The informal sector work is expected to remain the dominant way of economic survival in Tanzania. In the Current Path, informal labour will constitute 67.1% of total labour in 2043 and 51.1% in the Combined scenario.  It is the largest share among Africa’s 24 lower-middle-income countries (even more significant than in Zimbabwe) and is set to remain thus until 2043.

Tanzania’s large informal sector cushions the effects of widespread poverty but constrains structural transition and improvements in productivity.

Chart 34 compares life expectancy in the Current Path with the Combined Agenda 2063 scenario. 

In 2023, the life expectancy at birth for the average Tanzanian was 65.3 years, with women having almost four years higher life expectancy than men. At 67.5 years, the average life expectancy for Africa’s lower-middle-income economies is about 2.7 years higher than Tanzania’s. On the Current Path, average life expectancy in Tanzania will increase to 70.8 years in 2043, with female life expectancy 4.3 years above men.

Tanzania’s lower life expectancy is attributed to a relatively high disease burden for both communicable and non--communicable diseases as well as high levels of stunting.

According to the 2018 SMART survey, 32% of children under five years in Tanzania were stunted. This means that they are shorter than they should be for their age, due to chronic malnutrition. This is a significant decrease from 35% in 2014, but it is still a high stunting rate. In the Current Path, the under-five stunting rate in Tanzania declines from 29.6% in 2023 to 16.5% in 2043. In the combined scenario, stunting rates drop to 14.9% in 2043.

Many factors contribute to stunting in Tanzania, including poverty, food insecurity and inadequate access to healthcare and sanitation. Stunting can have severe consequences for children's health and development, including impaired cognitive function, reduced immune function and increased risk of chronic diseases later in life. In response, the government and various agencies are implementing several programs, including:

• Expanding access to nutrition services for pregnant women and young children,
• Promoting breastfeeding and complementary feeding practices,
• Improving food security and household incomes, and
• Providing access to clean water and sanitation.

These efforts are making a difference, but more must be done to reduce stunting and ensure that all Tanzanian children reach their full potential.

Life expectancy in Tanzania will increase to 72.6 years in the Combined scenario by 2043, almost 1.8 years above the 2043 Current Path. Female life expectancy will continue to be 4.6 years longer than men’s in 2043. 

The Combined scenario will see the gap between Tanzania and its reference group reduce but not close. By 2043, the average life expectancy for Africa’s lower-middle-income economies will be 72.3 years compared to 71.3 for Tanzania.

In 2043, deaths from infectious diseases will be 65 000 lower in the Combined scenario compared to the Current Path. Those from non-communicable diseases that typically affect more elderly people will be 21 000 fewer.

Chart 35 compares the Gini coefficient in the Current Path with the Combined Agenda 2063 scenario. 

Tanzania is, on average, more unequal than the average for the 24 lower-middle-income countries in Africa. Using the Gini coefficient, Tanzania’s score in 2023 is comparable to Djibouti and Kenya. In 2023, the Gini coefficient for Tanzania was 0.404 compared to 0.379, the average for the group, a 7% difference. In the Current Path, Tanzania’s Gini remains mainly unchanged to 2043 but declines to 0.365 in the Combined scenario, which will be 2% below the 2043 average for the group. The effect of the Combined scenario is, therefore, to reduce inequality. By 2043, Tanzania would be doing about 3% better than its peer group.

Chart 36 compares carbon emissions in the Current Path with the Combined Agenda 2063 scenario.

Since carbon dioxide (CO²), carbon monoxide (CO) and methane (CH⁴) have different molecular weights, our modelling uses carbon. Many other sites and calculations use CO₂ equivalent.

Tanzania emitted only 6.4 million tons of carbon from fossil fuels in 2023, making it the 12th largest emitter in Africa with the 11th largest economy. In the Current Path, emissions will increase more than fourfold to 28.5 million tons of carbon by 2043.

Among the sectoral interventions, the Manufacturing scenario will release significantly more carbon than any other. 

In the Combined scenario, due to fast economic growth and increased energy demand, carbon emissions from fossil fuels will increase to 35.9 million tons by 2043, with the seventh most significant emissions from fossil fuels among African countries. In that scenario, the economy of Tanzania will be the sixth largest in Africa. The difference in projected carbon emissions between the Combined scenario and the Current Path is almost 74 million tons in 2043 as Tanzania’s economy grows.

Tanzania has emerged as a leading player in the global carbon credit trade. In 2023 Tanzania signed two large carbon credit projects, covering 10.2 million hectares, roughly 21% of its forest resources. The projects with Blue Carbon, based in UAE, and Carbon Tanzania, a locally based company, allows a polluter to buy a credit which is worth one ton of carbon dioxide with the funds intended to go towards carbon-lowering schemes, thus offsetting the CO₂ that was emitted.

Chart 37 compares energy production in the Current Path with the Combined Agenda 2063 scenario in six types: oil, gas, coal, hydro, nuclear and other renewables. The data is converted into billion or million barrels of oil equivalent (BBOE or MBOE) to allow for comparisons between different sources. Note that energy production could be for domestic use or export. The Current Path for Tanzania already includes the completion of the 2 115MW Rufiji hydroelectric scheme and assumes a positive investment decision on the exploitation of Tanzania's substantial natural gas endowment.

According to the IMF, a site for the onshore LNG plant has been identified in the Lindi region and the state-owned Tanzanian Petroleum Development Corporation (TPDC), which is responsible for the acquisition of the LNG site, commenced with the associated compensation processes in 2020. Several steps, including amending relevant laws, preparing the project blueprints, and environmental assessment are required before a final investment decision on the project is made, possibly in 2025 or thereafter. The investment decision will be followed by a development and construction phase, expected to last four to five years.

Tanzania should experience increasing FDI during the project's implementation period of 2026-30 and mid-life investment period of 2038-2043, and gas exports and consumption during 2030-2059 (Stanbic, 2022). According to the IMF: 'The large investment during the construction and development phase will likely have consequences to economic activity and the current account. Production of gas will also have impact on GDP, exports, and fiscal revenue. More importantly, if well-managed and invested, the fiscal revenue from gas exports will enable the government to build the human and physical capital of Tanzania and raise its growth potential.' The government would have to borrow about US$3.2 bn to US$4.8 bn, depending on its equity share, increasing public sector debt by the same amount. During the production and exports phase, however, the government will benefit from substantial amounts of revenue from its share in production, royalties and taxes. 

Tanzania's total energy production was 77 MBOE in 2023, while demand was equivalent to 102 MBOE, reflecting a substantial energy import dependence. By 2043, production will exceed 205 MBOE in the Current Path, but energy demand will increase to 333 MBOE. In the Combined scenario, production will increase to 223 MBOE and demand to 403 MBOE since Tanzania's economy is 48% larger. Whereas, in 2023, Tanzania imported roughly 30% of its domestic energy demand, by 2043, that will increase to 41% in the Current Path and increase further to 46% in the Combined scenario.

The country’s energy production mix heavily relies on fossil fuels, with 48% from oil, 26% from gas, 18% from coal, 6% from hydro and 2% from other renewables in 2023. 

Growth in renewable energy sources will be moderate from 8% in 2023 to 8% in 2043 (Combined scenario), significantly below most African countries.  

The preceding analysis of Tanzania's developmental trajectory analysis identifies several key challenges and opportunities that will shape its future economic landscape and societal well-being. Challenges include its large low-end services sector, substantial subsistence agriculture sector, poorly educated and youthful population structure in addition to an above average sized informal sector, translating into low economic productivity generally. Our investigation into eight sectoral scenarios illustrates the profound impact that targeted policies can have on accelerating development beyond the current baseline.

• Among the sectoral interventions, the Infrastructure and Leapfrogging scenario will have the most significant positive impact on the GDP per capita, followed by the AfCFTA and the Agriculture scenarios.
• The positive impact of the interventions in the Agriculture, Demographics/Health and Education scenarios on poverty are most significant.

Tanzania can be a significant agriculture exporter but needs to invest in the transition of its large subsistence agriculture sector into the formal economy, as well as invest in appropriate education for its large youthful population. Poor health and malnutrition is a significant constraint on development in Tanzania. Tanzania also does poorly on various indices of basic infrastructure, such as persons dependent on unimproved water supply. Improvements in educational access, quality, and relevance to labour market needs are essential for equipping the workforce with the necessary skills to drive economic innovation and competitiveness. Large-scale provision of modern contraceptives and female education will, in time, advance the point at which Tanzania enters a potential demographic window of opportunity. Its below average ratio of government revenues to GDP reflect the potential of improvements in government effectiveness and better tax revenues to increase government capacity.

Our exploration of the Combined Agenda 2063 scenario underscores the synergistic effects of simultaneous investments across multiple sectors. This integrated approach could significantly enhance shared growth and prosperity in Tanzania, with a large increase in GDP compared to the Current Path forecast by 2043. This scenario also suggests a dramatic reduction in poverty, with 10% of the population expected to live in extreme poverty (using US$2.10) by 2043, demonstrating the profound impact of holistic development strategies.

This report recommends that policymakers in Tanzania prioritise a holistic development strategy that integrates improvements across the eight sectors, as discussed above. Such an approach not only aligns with the African Union’s Agenda 2063 but also sets a strategic framework for sustainable growth and shared prosperity in Tanzania. Commitment from all levels of government and cooperation with international partners will be crucial in transforming these opportunities into tangible outcomes for all its citizens.

The Government of Tanzania should:

• Lower the barriers of entry into the formal economy to crowd in the large informal sector.
• Roll our modern contraceptives and associated education to hasten Tanzania’s entry into a potential demographic window of opportunity.
• Invest in rural road infrastructure to link the hinterland up with towns and cities and allow for agricultural produce to get to market.
• Invest in the provision of mobile and fixed broad-band access across the land.
• Prioritize the agricultural sector to ensure food security and invest in agro-processing.
• Speed up investments in renewables and off-grid electrification system to provide electricity to all households.
• Grow the ICT sector as a means to improve productivity in the large informal service and relatively small manufacturing sector. 
• Redouble efforts to reduce high levels of stunting by ensuring food security, access to healthcare and improved sanitation.
• Focus on improved education access and completion at lower-secondary level
• Increase government revenues by broadening the tax base, reduce loopholes and increase FDI.
• Improved government effectiveness and reduce administration.