PRIVATE SECTOR DEVELOPMENT STRATEGY FOR TANZANIA Prepared by

PRIVATE SECTOR DEVELOPMENT STRATEGY FOR TANZANIA Prepared by ESRF

Outline • • • Introduction Objectives Conceptual framework Diagnostic analysis Drivers and strategic challenges PSD Strategy

Introduction • Private started from a very low base and 1967 socialist policies were hostile to PSD • Reforms of mid-1980 s recognised the private sector as a major player • Recognition of PS reinforced in Vision 2025 and MKUKUTA- growth and poverty reduction • PSDS not formulated- gap to be filled

Objectives • PSDS will diagnose the private sector and propose the strategy for its development • PSD to achieve a diversified, robust and competitive private sector which can generate broad based growth, employment and poverty reduction

4 3 Strategies and instruments to realize the desired private sector and its vision including measures to transform its comparative advantage into competitive advantage enabling local firms to prosper Organizatio nal, institutional capacities, human and financial requirement 2 s and plan Concept of the for PSDS desired Private implementat OF sector in Tanzania ion TANZ including vision ANIA that is linked to the findings (internal and external requirements) of the diagnostic study that is demand driven responding to market requirements Conceptual framework 1 Diagnostic Analysis of Private Sector Strengths, weaknesses, opportunities and threats as well as policies, programmes showing gaps and internal and external dimensions

Conceptual framework-2 • • Diagnosis of the private sector SWOT Analysis Vision and mission of the private sector Proposed strategic interventions

Diagnosis • Overview of the private sector in Tanzania – Def. as a basic organising principle of economic activity where private ownership, markets and competition drive production and private initiative and risk taking drive economic activities – Private sector recovering from two decades of hostility – Reforms changed the position of the PS but transition not complete

Diagnosis- 2 • Status- diverse (multinationals, privatised parastatals and MSMEs). MSMEs are dominant in terms of number of enterprises and employment • Large informal economic activities • FDI $300 -400 million per year with the 65% in mining, 19% in services and 16% in manufacturing

Diagnosis- 3 • Factors influencing PSD – Macroeconomic environment • recent improvements acknowledged, • rationalization of taxes incomplete • Cost of doing business still high – Legal and regulatory framework conditions • BRELA has improved • special courts like the commercial court have improved the situation – but still too narrow • Enforcement of property rights is inadequate • Capacity to regulate still weak

Diagnosis- 4 – Governance and institutions • • • Corruption Safety Government institutions- low capacity and attitudes Private sector organizations growing but still weak PPP dialogue improving – Quality of microeconomic business environment • • Access to reliable and cost effective Infrastructure Access to financial services Access to human skills Access to land

Diagnosis- 5 – Capability of enterprises • Technological –low tech and low value added • competitiveness • Organizational- informality and household or individual dominated – Linkages and networks • Low linkages between large and SMEs, foreign and local, • low community participation, • weak networks and clusters.

Diagnosis- 6 • Economic empowerment – Political economy challenges of exclusion • dominance of alien groups, • low position of the indigenous, women, youth and other vulnerable groups in society, • Informality is widespread and most actors are disadvantaged- challenge of MKURABITA programme – Challenge of implementing the Economic empowerment policy (2004) and EE Act, 2004.

Diagnosis- 7 • Strengths • § Positive and enabling macro- and sectoral policy reforms • § Hardworking and Fast-learning entrepreneurs § High levels of FDI has been attracted § The institutional foundations for regulating private sector development have been laid down e. g. Fair Competition Commission, TCRA, EWURA, SUMATRA, TCAA, etc). • § Improved aid relationships

Diagnosis- 8 • Weaknesses – § The legacy of socialist attitudes and hostility § Legal and regulatory framework is not sufficiently facilitative – § High levels of poverty, large income inequalities and thinly spread markets – § Narrow tax base; – § Government institutions not fully reoriented towards PSD – § Poor, unreliable and high cost infrastructure services especially power. – § Large low productivity agricultural sector dominated

Diagnosis- 9 • Opportunities – § Peaceful, stable and growing economy – § New Government with new zeal § Empowerment Policy and Act in place. – § Young population – § Large regional investment and trade area § Good potential to become regional trade and § Diversified

Diagnosis- 10 • Threats – § Deteriorating safety and security situation – § Aid dependence – § slow implementation – § Regional Integration / Globalization in an unprepared domestic environment – § Poor urban planning

Drivers and Strategic challenges • Drivers of PSD • • • A conducive and supportive political, social and macroeconomic environment; Effective public and private sector institutions to manage, regulate and facilitate the functioning of markets for private sector development; A competitive market environment Domestic investments catalyzed by cross-border investments and FDI A reliable and cost effective infrastructure; Easy access to financial services Availability of an appropriate mix of skills Easy access to land for agriculture and business premises; Supportive business development services.

Drivers and Strategic challenges 2 The strategic challenge is to: · Have in place a conducive macroeconomic, political and social environment for private sector development; · Put in place a supportive and facilitative legal and regulatory framework; · Build public institutions which have the capacity to manage and provide regulatory function to the market to facilitate private sector development;

Drivers and Strategic challenges 3 Put up a cost effective and reliable infrastructure for private sector development; · To facilitate easy access to financial services for the private sector; · Invest in human resource development that is commensurate with the needs of private sector development. Manage land use planning: easy access to land for agriculture and business premises; Facilitate the growth of the market for supportive business development services.

Private Sector Dev Strategy • Vision • To have an inclusive, diversified, competitive and vibrant private sector that effectively contributes to the national development goals. • Mission • To create a conducive macro and micro economic business environment for the desired private sector to develop the capacity to grow and become competitive.

Private Sector Dev Strategy-2 • Strategic objectives: – Increase space for the private sector to participate in the development of the national economy. – Focus on enhancing access to the market and stimulating markets to function more efficiently – Value addition is to be promoted with focus on the analysis of supply chains – Promote competitiveness: start with comparative advantage and transform into competitive advantages over time. – Ensure implementation.

Private Sector Dev Strategy-3 • (i) Broad development context for the private sector • (ii) Microeconomic business environment with a view to reducing the cost of doing business • (iii) Enterprise level organization and capacities. • (iv) Economic empowerment of vulnerable groups in the private sector. • (v) Identifying priorities. • (vi)Institutional arrangements and

Private Sector Dev Strategy-4 • The Macro Context for Private Sector Development – Incentives to create broad based PS – Reduce risk and vulnerability – Cut down on bureaucracy – Overcome market failures and support markets to develop

Private Sector Dev Strategy-5 • Quality of the Microeconomic Business Environment – Access to infrastructure- promote PPP – Access to finance- • • deepen financial sector reform, reduce risk, savings mobilisation and promote linkages among levels of financial institutions from SACCOs to national banks

Private Sector Dev Strategy-6 • Quality of labour and skill mix – Incentives for PS to invest in education and training – Promoting complementarity of foreign skills – Training in entrepreneurship – Health standards observed for productive labour

Private Sector Dev Strategy-7 • Access to land- for agric and businesses • Access to markets- – creating an environment of functioning markets – Market information – Building Regulatory capacity

Private Sector Dev Strategy-8 • Enterprise development – Facilitate development of BDS market – Facilitate networking and cluster • Economic empowerment – Unbundle large government contracts into smaller lots for MSMEs to participate – Promoter large-SME linkages – Implement EEP

Private Sector Dev Strategy-9 • • Priorities will be selected on the basis of: potential for accelerating growth and job creation, productivity increase and innovation, value addition, synergy, spillover effects, cluster development and market intelligence consistent with MKUKUTA and • amenability to developing the capacity to compete.

Private Sector Dev Strategy-10 • Implemetation Strategy and Action Plan – Institutional arrangements Participatory invloving Government and public institutions, Private sector organizations and firms, Non-state sector institutions such NGOs, Religious organisations, Civil society and the development partners. – Financing arrangements (private sector and public funds (govt and DPs) and – Monitoring and evaluation (who is to do what by when and indicators developed)

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